Islamic Republic of Afghanistan: Supporting the Inter-Ministerial Commission for Energy

Transcription

1 Technical Assistance Report Project Number: Policy and Advisory Technical Assistance (PATA) February 2013 Islamic Republic of Afghanistan: Supporting the Inter-Ministerial Commission for Energy (Financed by the Afghanistan Infrastructure Trust Fund) The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature.

2 CURRENCY EQUIVALENTS (as of 21 February 2013) Currency unit Afghani (AF) AF1.00 = $ $1.00 = AF52.75 ABBREVIATIONS ADB Asian Development Bank AITF Afghanistan Infrastructure Trust Fund DABS Da Afghanistan Breshna Sherkat (Afghan power utility) ICE Inter-Ministerial Commission for Energy MEW Ministry of Energy and Water MOEC Ministry of Economy NPP National Priority Program TA technical assistance Type Targeting classification Sector (subsectors) Themes (subthemes) Location (impact) Partnership TECHNICAL ASSISTANCE CLASSIFICATION Policy and advisory technical assistance (PATA) General intervention Energy (energy sector development, electricity transmission and distribution) Capacity development (institutional development), economic growth (promoting economic efficiency and enabling business environment), regional cooperation and integration (cross-border infrastructure), private sector development (policy reforms) National (high), urban (medium), rural (low), regional (low) Afghanistan Infrastructure Trust Fund NOTE In this report, "$" refers to US dollars. Vice-President X. Zhao, Operations 1 Director General K. Gerhaeusser, Central and West Asia Department (CWRD) Director R. Stroem, Energy Division, CWRD Team leader Team member A. Aleem, Energy Specialist, CWRD J. Chenoweth, Counsel, Office of the General Counsel D. Garcia, Project Officer, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 I. INTRODUCTION 1. Since 2002, the Government of Afghanistan has increased its electrification rate fivefold and is committed to connect more than 50% of the country s population to the power grid by The government, in May 2012, requested the assistance of the Asian Development Bank (ADB) to support an energy sector coordination mechanism that will underpin (i) sector discussions, (ii) sector planning and harmonization, (iii) investment sequencing, and (iv) analytical work related to Afghanistan s energy sector. 2. A consultation mission was fielded in August 2012, where the government and the ADB mission agreed on the scope, implementation arrangements, cost, financing arrangements, and the consultants' terms of reference for the policy and advisory technical assistance (TA). 1 The design and monitoring framework is in Appendix 1. II. ISSUES 3. Persistent conflict and security challenges have inhibited development of energy infrastructure and human capacity in Afghanistan. The sector experiences technical, financial, and governance deficits and has begun to develop integrated energy planning systems. The lack of integrated planning so far has caused more than 65% of sector investments to bypass the government s core budget and planning systems, leaving sector ministries and agencies with limited information on donors funded projects, plans, and activities. There is also a diversity of stakeholders in the country s emerging energy sector five ministries, 10 key development partners, and several private sector participants and civil society organizations. Thus, harmonizing and sequencing investment plans remain very difficult. In the past, the Inter- Ministerial Commission for Energy (ICE) has proved to be the most effective and coherent mechanism to brainstorm and agree on an investment and governance agenda. However, it has ceased to exist in June 2012 due to funding constraints. 4. It is estimated that nearly $5 billion of grant assistance and private sector investments will go into the Afghanistan energy sector during Although the government has taken charge of strategic and operational planning in the energy sector and donor coordination to harmonize investment plans since 2002, there remains a critical need to institutionalize ICE and ensure its sustainability. The TA will help bridge this gap. 5. The TA-assisted monthly ICE meetings will be chaired by the head of the Ministry of Economy (MOEC) and will be attended by more than 30 participants, including the chief executive officer of Da Afghanistan Breshna Sherkat (DABS), the Afghanistan power utility; the Ministry of Energy and Water (MEW); the Ministry of Mines; the Ministry of Finance; the Ministry of Rural Rehabilitation and Development; and senior representatives from other government agencies and key development agencies active in the Afghanistan energy sector. ICE consultants and secretariat officials will ensure regular follow-ups by keeping meeting minutes, preparing quarterly status reports, and holding meetings of technical working groups. Staff from MOEC, which is a crosscutting ministry for planning donor-assisted projects, will be seconded to ICE for sustainability. The agenda of each ICE meeting will be set in agreement with all stakeholders, and the government and donors will make presentations on the progress of their plans and programs, and aid-programming issues. 1 The TA first appeared in the business opportunities section of ADB s website on 11 December 2012.

4 2 6. ICE will monitor implementation progress of the energy-related National Priority Program (NPP) of the government the National Energy Supply Program one of the 22 NPPs endorsed by the government and donors to implement investment projects. In addition, the TA will assist in (i) institutionalizing the power sector master plan; (ii) updating energy policy and sector plans, including the operation and maintenance strategy; and (iii) preparing technical reports and working papers through the formation of working groups or subcommittees (e.g., renewable energy, development of unified grid, and synchronization with neighboring countries) supported by consultants to debate and conclude operational issues in the sector. Most importantly, the TA will ensure that capacity support to sustain ICE beyond 2014 is factored into the program. 7. ADB is the largest on-budget development partner of Afghanistan in the energy sector with an approved cumulative commitment of nearly $700 million since Additional grant financing ($650 million) funded by both ADB and the Afghanistan Infrastructure Trust Fund (AITF) is programmed during to meet the energy security needs of the country. Afghanistan is an energy resource corridor and a transit country linking Central Asia with South Asia and is envisaged to play a critical link in promoting regional trade and cooperation. The country partnership strategy has prioritized energy as one of the key sectors for ADB assistance in Afghanistan. 2 ADB has led recent efforts to formulate the Afghanistan Energy NPP, acting as donors focal point in the energy sector. There is a continued need to harmonize and sequence assistance of development partners as identified and confirmed in the ongoing Afghanistan and regional power sector master plan studies (also assisted by ADB). 8. ICE has earlier been supported by ADB ( ) and subsequently by the United States Agency for International Development during It has produced desired results through effective coordination in meeting Afghanistan s energy sector investment requirements. There is a critical need to strengthen and sustain this effort and forum for integrated sector planning, implementation, monitoring, and oversight of nearly $1 billion annual investments into the Afghanistan energy sector. AITF contributors aim to ensure a high level of coordination and harmonization in energy sector investment programs funded by development partners. III. THE TECHNICAL ASSISTANCE A. Impact and Outcome 9. The TA will support coordination, harmonization, and collaboration between development partners and energy sector ministries and agencies in Afghanistan for a coherent strategy and implementation of investment plans, as well as provide capacity and analytical support to strengthen energy sector investments in Afghanistan. 10. The impact will be effective coordination between energy sector stakeholders in Afghanistan to boost the grid-connected electrification ratio from less than 25% in 2012 to 50% by The outcome will be greater capacity of energy managers to support sector coordination, integrated policy and planning, governance, and implementation through (i) annual updating of the power sector master plan and a 20-year Afghanistan energy investment program beginning in 2014; (ii) approval of the Afghanistan Electricity Law (including clear definition of roles of stakeholders, private sector participation, and regulatory regime) by December 2014; (iii) approval by the joint monitoring and coordination board of the Afghanistan National Energy Supply Program (Energy NPP) by December 2014; and (iv) institutionalization of the power sector master plan and establishment of a secretariat in MEW by December ADB Country Partnership Strategy: Afghanistan, Manila.

5 3 B. Methodology and Key Activities 11. The TA will reestablish the ICE secretariat to coordinate energy reforms, investments, and plans to unify Afghanistan s energy sector. It is targeted that, by 2014, an ICE database is established, a comprehensive energy sector strategy is prepared, and working groups for energy planning are set up. For this purpose, the TA will help prepare the annual status and state of industry report with lessons, recommendations, and conclusions (31 January 2014 and 31 January 2015); define technical issues (e.g., synchronization, power trade, gas development, private sector participation, tariff structure); and form working groups to formulate issues papers, the way forward, and conclusions. Likewise, it will help prepare a methodology to increase sector capacity, establish social safeguards, and institutionalize a mitigation or compensation mechanism in the government system. 12. It is a major assumption that ownership and sustainability of sector reforms will continue in Afghanistan, and that the interest of development partners in the sector will remain high. Major risks include erosion of political stability and security after 2014, once the international security assistance forces leave Afghanistan, and lack of interest from consultants and contractors in implementing energy sector projects in Afghanistan. C. Cost and Financing 13. The TA is estimated to cost $1.6 million equivalent, of which $1.5 million equivalent will be financed on a grant basis by the Afghanistan Infrastructure Trust Fund (AITF) 3 and administered by ADB. The Government of Afghanistan will (i) provide in-kind contribution comprising counterpart support in the form of security, office space, transportation, and counterpart staff; (ii) facilitate meetings; and (iii) provide access to requisite data. The cost estimates and financing plan are in Appendix 2. D. Implementation Arrangements 14. ADB will be the executing agency for the TA. MOEC will be the implementing agency because (i) it houses the ICE secretariat and has been convening monthly ICE meetings during 2009 to mid-2012; (ii) it serves, through the Afghanistan National Reconstruction Services, as the focal ministry of the government to approve and award all infrastructure contracts; and (iii) it provides, as a member of the Economic Committee, due diligence and approves capital projects in Afghanistan. 15. The TA will be implemented over 24 months from March It will require 32 personmonths (two experts) of international and 66 person-months (four experts) of national consultants. Required positions include a senior energy specialist (team leader), hydrocarbon sector expert, energy specialist (deputy team leader), office and logistics manager and two project coordinators. The team will drive the ICE coordination meetings, engage with all stakeholders, lead technical group meetings, and formulate requisite documentation as and when required. It is expected that national consultants will be retained by the ICE secretariat to ensure continuity and sustainability of ICE after TA completion in The terms of reference for consultants are in Appendix 3. ADB will engage individual consultants following its Guidelines on the Use of Consultants (2010, as amended from time to time). Based on ADB s experience in TA implementation in Afghanistan and the lessons from recent ICE interventions, recruiting a consulting firm would not be appropriate for this coordination assignment, which is 3 Contributors: the governments of Japan and the United Kingdom.

6 4 primarily to liaise with all energy stakeholders of Afghanistan. All disbursements under the TA will be in accordance with ADB s Technical Assistance Disbursement Handbook (2010, as amended from time to time). The output of the TA, as well as presentations made during monthly ICE meetings, will be disseminated through quarterly and annual reports and the websites of DABS, MEW, MOEC, and the Afghanistan Energy Information Center. IV. THE PRESIDENT'S DECISION 16. The President, acting under the authority delegated by the Board, has approved ADB administering technical assistance not exceeding the equivalent of $1,500,000 to the Government of Afghanistan to be financed on a grant basis by the Afghanistan Infrastructure Trust Fund for Supporting the Inter-Ministerial Commission for Energy, and hereby reports this action to the Board.

7 Appendix 1 5 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Performance Targets and Indicators with Baselines Data Sources and Reporting Mechanisms Assumptions and Risks Assumption Effective coordination between energy sector stakeholders in Afghanistan Grid-connected electrification ratio increased to 50% in 2020 (2012 baseline: less than 25%) Central Statistics Organization publications Inter-Ministerial Commission for Energy (ICE) quarterly reports Da Afghanistan Breshna Sherkat (DABS) annual reports Government's and donors commitment to energy sector reforms and investments Risks Political stability and security deteriorate. Limited interest of contractors and consultants to implement power projects in Afghanistan Outcome Assumptions Greater capacity of energy managers to support sector coordination, integrated policy and planning, governance, and implementation Annual updating of power sector master plan and 20- year Afghan energy investment program beginning in 2014 Approval of the Electricity Law (including clear definition of roles of stakeholders, private sector participation and regulatory regime) by December 2014 Approval by the joint monitoring and coordination board of the Afghanistan National Energy Supply Program (Energy National Priority Program) by December 2014 Power sector master plan institutionalized and secretariat established in the Ministry of Energy and Water by December 2014 ICE quarterly reports DABS annual reports Power sector master plan reports ICE quarterly reports DABS annual reports ICE quarterly reports DABS annual reports ICE quarterly reports DABS annual reports Power sector master plan reports Strong political will to make ICE work Stakeholder actively participating and providing input to ICE meetings Risks Other capacity development programs and initiatives in sector are discontinued Energy does not remain a priority investment sector for the government The joint coordination and monitoring board and Parliament may not pass the intended policy and legislations in time.

8 6 Appendix 1 Design Summary Output Performance Targets and Indicators with Baselines Data Sources and Reporting Mechanisms Assumptions and Risks Assumptions ICE secretariat reestablished to serve as the point of contact for energy reform and to unify energy sector in Afghanistan ICE database established by 2014 Comprehensive energy sector strategies prepared by 2014 Working groups for energy planning established by 2014 ICE annual reports DABS annual reports ICE quarterly reports ICE Minutes of Meeting Government s ownership and sustainability of sector reforms continue. Interest of development partners in sector remains high Risk Government unable to retain qualified staff in ICE secretariat Activities with Milestones 1. Selection and recruitment of international and national consultants (30 June 2013) 2. Convening of regular monthly meetings, and technical working group meetings as and when necessary (from 1 July 2013 to 31 December 2014) 3. Formulation of meetings minutes and quarterly progress and status reports on Afghanistan energy sector (quarterly from 1 September 2013 onward) 4. Preparation of annual status or state of industry report with lessons, recommendations, and conclusions (31 January 2014 and 31 January 2015) 5. Definition of technical issues (e.g., synchronization, power trade, gas development, private sector participation, tariff structure) and formation of working groups to formulate issues papers, way forward and conclusions (30 June 2013) 6. Preparation of a methodology to increase sector capacity, establish social safeguards, and institutionalize a mitigation or compensation mechanism in the government system (31 December 2014) Inputs Afghanistan Infrastructure Trust Fund: $1,500,000 The Government of Afghanistan will (i) provide counterpart support in the form of security, office space, transportation and counterpart staff; (ii) facilitate meetings; and (iii) provide access to requisite data. Sources: Afghanistan Energy Information Center, Ministry of Economy, Ministry of Energy and Water, and ADB publications.

9 Appendix 2 7 COST ESTIMATES AND FINANCING PLAN ($'000) Item Amount Afghanistan Infrastructure Trust Fund a 1. Consultants a. Remuneration and per diem i. International consultants ii. National consultants b. International and local travel 40.0 c. Reports and communications Equipment b Training, seminars, and conferences a. Facilitators 15.0 b. Training program Miscellaneous administration and support costs Contingencies 60.0 Total 1,500.0 Note: The technical assistance (TA) is estimated to cost $1.6 million, of which contributions from the Afghanistan Infrastructure Trust Fund are presented in the table above. The government will provide counterpart support in the form of security, office space, transportation and support staff, the value of which is estimated to account for 6% of the total TA cost. a Contributors: the governments of Japan and the United Kingdom. Administered by the Asian Development Bank. b Includes four laptop computers and two printers for use by consultants in the Inter-Ministerial Commission for Energy secretariat. All equipment will be handed over to the Ministry of Economy upon completion of the TA. Source: Asian Development Bank estimates.

10 8 Appendix 3 A. Scope of Work OUTLINE TERMS OF REFERENCE FOR CONSULTANTS 1. Energy specialist team leader (international, 16 person-months). The team leader will be a senior energy economist and/or engineer and/or manager with a degree in engineering, economics or management and preferably have 10 years of relevant international experience covering studies, planning, programming, and managing energy sector projects in various countries, including power (transmission, distribution, and hydropower development). The team leader will preferably have at least 5 years of relevant experience in developing countries. The team leader will (i) oversee management of the Inter-Ministerial Commission for Energy (ICE) secretariat and day-to-day management of all ICE operations; interaction with the government, donors, sector investors, and other stakeholders; (ii) as a power sector expert, advise ICE on matters related to power generation, transmission, and distribution and lead technical working groups in power sector issues in Afghanistan; (iii) support and develop ICE to become the focal point for energy strategy and information by working with regional energy working groups, donor and government leaders, sector managers, media, and the public; (iv) lead the development of a quantitative and qualitative set of indicators that monitor and evaluate the variety of issues associated with energy development for Afghanistan; (v) coordinate and consolidate the outputs of all individual consultants; oversee preparation and submission of reports; (vi) help build the professional capacity of sector managers for energy-related strategic planning and monitoring of strategic implementation; and for regulatory functions, contracting, licensing, project design, finance, and monitoring; (vii) assist government in finalizing plans in power sector development, including cross-border imports, contractual arrangements, power-import agreement reviews, a market-based legal and regulatory framework that supports affordable private power, and collaboration with the government and ministries on improving use of indigenous fuels and renewable resources for power; (viii) establish and coordinate ministry and technical working groups, including institutionalizing the power sector master plan in the Ministry of Energy and Water (MEW), which will become part of the strategic planning and project oversight processes in the coming years; (ix) establish working groups to include the Da Afghanistan Breshna Sherkat (DABS), MEW, Ministry of Mines, and Rural Rehabilitation and Development to liaise with the ICE secretariat to exchange information, provide ideas and current development plans, and supply data where necessary; (x) maintain effective coordination with donors' assistance database unit in the Ministry of Finance to ensure updating of energy sector investment, plans, and programs in the database; and (xi) prepare an agreed and realistic transition plan for sustainability of ICE and train local staff seconded by the executing agency to ensure continuity and sustainability of ICE after TA closing in March Hydrocarbon sector expert (international, 16 person-months). The expert will be a senior energy economist and/or engineer and/or manager with a degree engineering,

11 Appendix 3 9 economics or management and preferably with at least 5 years of relevant experience covering studies, planning, programming, and managing hydrocarbon sector projects in various countries, including upstream and downstream oil, gas including compressed natural gas. The expert will preferably have at least 3 years of experience in developing countries. The expert will (i) assist the team leader in efficient coordination of ICE operations; (ii) review ongoing policy reforms in the hydrocarbon sector and assist in integrating the policy matrix into the ensuing sector development program; (iii) as the hydrocarbon expert, advise ICE on matters related to oil and gas generation, transmission, and distribution and lead technical working groups in dealing with hydrocarbon sector issues in Afghanistan; (iv) support and develop ICE to become the focal point for hydrocarbon strategy and information by working with regional energy working groups, donor and government leaders, sector managers, media, and the public; and (v) advise energy sector managers on development issues related to hydrocarbon in Afghanistan. 3. Energy specialist deputy team leader (national, 18 person-months). The specialist should have a bachelor s degree in engineering and preferably at least 5 years of work experience in the energy sector in Afghanistan. The specialist should have strong communication skills in English and Dari, and be able to interact and engage in sector discussions with government agencies, development partners, and other stakeholders. The specialist will (i) (ii) (iii) (iv) (v) assist the team leader in the management of the ICE secretariat and day-to-day management of all ICE operations, and interact with the government, donors, sector investors, and other stakeholders; as a local power sector expert and country specialist, assist the team leader in matters related to country issues in power generation, transmission, and distribution, and provide assistance to technical working groups in dealing with power sector issues in Afghanistan; liaise with major stakeholders and, in partnership with them, develop key information links, institutional support, and data gathering; assist the team leader in preparation of an agreed and realistic transition plan for sustainability of ICE and train local staff seconded by the executing agency to ensure continuity and sustainability of ICE once the TA closes in March 2015; and undertake other related tasks to assist the team leader to meet ICE objectives; lead the TA during the team leader s absence. 4. Office and logistics manager (national, 18 person-months). The manager should have a bachelor s degree and preferably at least 3 years of work experience in the public sector or a donor agency. The manager should have good communication skills in English and Dari, and be able to run day-to-day logistical operations of the ICE secretariat, including scheduling of meetings and preparation of reports. The manager will (i) assist the ICE secretariat in coordination and day-to-day management of ICE operations, including interaction with the government, donors, sector investors, and other stakeholders; (ii) follow up with all stakeholders on gathering and documentation of data; (iii) (iv) ensure that monthly ICE meetings are scheduled and all stakeholders are invited; take minutes of ICE meetings and technical working groups meetings, and ensure adequate and timely dissemination;

12 10 Appendix 3 (v) (vi) prepare a database of all queries and correspondence with all stakeholders, and ensure adequate disposal of queries and issues through documentation; and undertake other related tasks to assist the ICE secretariat to meet ICE objectives. 5. Project Coordinators (2, national, 30 person-months) The consultants will assist the ICE team in their analytical work related to technical working groups, preparation of issues papers and technical studies, as and when required. They will acquire hand-on experience of the job and will be absorbed by the executing agency from January 2015 to ensure sustainability of ICE. They must possess a bachelor s degree from a recognized university and have a minimum of 3 years relevant experience in Afghanistan. The project coordinators will: (i) assist international and national consultants in interaction with the government, and other local stakeholders; (ii) gradually take leadership role and learn to independently manage ICE operations and conduct of meetings once the TA closes; (iii) follow up with all stakeholders on gathering and documentation of data; (iv) ensure that the agenda of monthly ICE meetings remains relevant and all stakeholders are invited; (v) record proceedings of ICE meetings and technical working groups meetings, and ensure adequate and timely dissemination; B. Reports 6. The consultants, including members of the technical working groups, will be an essential part of its operations based on regularized systems for information exchange, dialogue with ICE members and stakeholders, and assessment of existing data. The following reports, all in the English language (some reports will also require translation into Dari and Pashtu), will be submitted by the consultants to the government and the Asian Development Bank (ADB): (i) Inception report. Within 1 month of startup of ICE operations, the consultants will prepare a report that includes the proposed work plan until December 2014, priority actions, key stakeholders to participate in ICE activities, methodology for promoting regional participation, and cost-effective consultant scheduling to meet terms of reference. (ii) Monthly progress reports. These should be submitted within the first 15 days of the following month. The reports will (a) show the progress based on the consultants terms of reference, work plan, and other initiatives; and (b) identify barriers to implementation, suggestions for enhancing the program, and opportunities to improve the cost-effectiveness of implementation. These reports will be submitted to MEW, the Ministry of Economy, DABS, and ADB. (iii) Quarterly and annual reports. These should be submitted and disseminated within the first 30 days of the following quarter (quarterly reports) and the first 60 days of the following year (annual reports). The reports will analyze the status of Afghanistan's energy sector, investments, and implementation progress, highlighting key issues and recommending future course of action. An annual state of the industry report should also be prepared providing a snapshot of achievements during the year and critical evaluation efficacy of investments made or planned during the year, with suggestions or recommendations based on best international practice. These reports will be widely disseminated and shared with all stakeholders and posted on the websites of the Afghan Energy Information Center, DABS, MEW, and Ministry of Economy.

13 Appendix 3 11 (iv) (v) (vi) (vii) (viii) Technical issues papers. In accordance with the ICE work plan and issues identified during ICE meetings, the consultants will prepare issues papers. The ICE secretariat will determine the dissemination of these papers, which may include ICE members, stakeholders, donors, private sector, and the media. Energy sector strategies. Compilation of sector-specific strategies prepared by ICE and the ministry staff for each line ministry and agency engaged in the energy sector. ICE sustainability action plan. A brief report comprising a realistic action plan on how to strengthen and sustain ICE in the long term. The report should advise on the next steps to be implemented by the government, beyond Draft TA evaluation report. To be submitted 1 month before TA completion and to list all activities undertaken by ICE, development and exchange of information and other resources, stakeholder participant information, training provided, and final outcomes of implementing the TA. Final TA evaluation report. To be submitted on CD-ROM within 1 month of comments from the government and ADB.