The first phase would have four investment components:

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1 <Note: the TOR is for consultant services to develop business opportunities arising from both the project investments in rural electrification and the improved environment brought about by the availability of electricity supply in the subject areas> Business Development Assistance for Rural Electrification Project Terms of Reference Background <Brief description of objectives and scope of Bank project. > The first phase would have four investment components: Main grid. Private sector distribution concessions will be facilitated and encouraged, with bulk supply from the utility, third party generators, or self-generators; Isolated grid systems, which would be private sector led, for relatively concentrated areas with a potential for productive uses; Individual/institutional solar photovoltaic (PV) systems, which would also be private sector led, for relatively dispersed areas; and Renewable energy power generation by the private sector, for sale to the main grid and for mini-grids. On the supply side, the key businesses opportunities during Phase I are expected to be: 3 Development and operation of mini-grids serving rural trading centers; 3 Development and operation of existing isolated grids, also most likely by private public sector partnerships, which would be spun off by the Uganda Electricity Board; 3 Co-generation investments based on independent major agro-processing centers, such as tea and sugar estates, and other relatively large scale suppliers, such as some mission hospitals, 3 Development and operation of distribution networks in communities close to the relatively large scale independent suppliers, 3 Generation, transmission and distribution operations in new areas based on renewable resources, 3 Solar photovoltaic systems distribution and sales to dispersed rural households and communities and to institutional markets for health centers and other specialized applications. Local private and community partnerships are expected to be a main organizing principle for service delivery in most locations. For instance, the investments in mini-grids serving rural trading centers may have community ownership of the poles and wires of the distribution network and small enterprise ownership of the generation capacity. The largest number of business opportunities will be those for increased employment, income and profits by rural micro enterprises through the increased productive uses of

2 modern energy in heretofore underserved rural areas. In terms of participants and transactions, the largest number of business opportunities created may be those in related services, including those for microfinance organizations in funding purchases of productive equipment, additional working capital and other requirements by micro enterprises and, possibly, purchases of solar PV systems by rural households. There will also be opportunities for local NGOs and local consultants advising micro and small enterprises on productive uses applications and assisting the private public partnerships to organize network development and service delivery. The largest cost investments are expected to those for selected renewable energy generation and co-generation investments. There will be additional business opportunities on the supply side in distribution concession areas linked to the grid during Phase II. The capacities to respond to these new opportunities would be established during Phase I. There are few local businesses available now with the capacity to fully respond to these opportunities. With the exception of solar PV sales and distribution, these are new business areas. The solar PV market is at an early stage of development, and the present companies operate at a very small scale. Objectives The consultants will provide business development and technical advisory services to catalyze rural electrification business opportunities and strengthen local capacities. The services will: remove information and awareness barriers among potential local private sector and community participants through workshops and other promotional activities; remove human capacity barriers among potential service delivery participants by providing customized business planning and best practices technology and implementation training and advice ; remove consumer and community confidence barriers by advising on appropriate technology standards, certification and other consumer protection measures; remove perceived market risk barriers by training and advising on firm-level market surveys and providing information on low cost certified equipment and delivery options, so as to increase affordability; and contribute to the removal of financing barriers by providing information and advice to financial institutions, including microfinance organizations, on vendor and consumer financing strategies for rural energy services and developing business plan and financial models which demonstrate the sustainability of the investments The services also will include promoting the opportunities to specific potential service providers and users, assisting to prepare a number of investments for start-up during Phase I, providing financial planning and management assistance to enhance the sustainability of the investments, designing a productive uses enhancement program to be conducted during Phase I including where appropriate in commercial traditional fuel

3 usage, and assessing the capacity building necessary to be conducted during Phase I in preparation for Phase II. These upstream capacity building and pipeline development activities are critical to the removal of barriers to implementation and to ensuring that Phase I of the Project is a success. Scope of work There are two sets of consulting services required. One set comprises Packages A G, focused on the different types of business opportunities in terms of supply modalities and other characteristics. The second set is a unified group of services for the overall promotion of the program and the coordination and support of the business development efforts. The consultants in conducting their activities would build on existing organizations, institutions, programs, and entrepreneurial capabilities while working to promote the emergence of new capabilities. Consulting services for capacity building for the different service delivery models The types of tasks for developing local capacities and the initial pipeline are similar across the full range of service delivery business models. However, they will vary tremendously with the different scale, supply modality and other characteristics of the investments, and it is expected that different consultants may be responsible for achieving the targets for different business models, for example the consultants assisting to develop the capacities for a renewable energy co-generation investment most likely will not be the same as those assisting with the development of business capabilities for the solar PV market segment.

4 The types of specific tasks are: Capacity building and pipeline development: 01. Promote rural energy business opportunities to stimulate the interest and inputs of local business groups, associations, financial institutions, microfinance institutions, local governments, enterprise development and energy related NGOs. 0. Provide information and feedback services on the business opportunities to define in more detail for the potential service providers the scope of these business opportunities 03. Develop and provide guidance and assistance with customized financial models for micro-grid and solar PV businesses which can be used in developing business financial projections and which will be acceptable to financing institutions and investors 04. Collaborate with task groups working on regulatory framework development and broader regional promotion activities 05. Provide human capacities development assistance (training, other) to groups of business and community groups who are anticipating operating rural energy services delivery businesses 06. Conduct consumer awareness and market promotion activities in areas in which specific business are expected to be starting up 07. Facilitate linkages with international suppliers and funding sources 08. Promote business opportunities to specific businesses (including the private community partnerships), investors, financial institutions 09. Provide business planning assistance to specific businesses, e.g., firm level micro market surveys financial planning technical planning alliance building and investor seeking technology and supplier information and connections business plan preparation links with financing sources 10. Provide assistance to specific businesses for some pre-start up requirements training, prototype development and demonstrations, pilot sourcing, distribution or marketing efforts 11. Monitor and report on rural electricity market development and progress of specific businesses; project short and medium term future market development Related services capacity building: 1. Develop capacities of NGOs with rural capabilities to promote productive uses 13. Develop capacities of microfinance organizations to finance end-user initial connection and wiring costs and purchases of productive electrical equipment; this would include market survey of microfinance customers conducted by the main microfinance institutions

5 It is anticipated that different consultants would be selected to assist with developing the capacities and pipeline for the different types of business models. These have been batched in packages (below), but it is possible that the components in the packages could be shifted depending upon review of further information, including inputs from proposals from potential consultants. The consultants would be supported by the Bank and donors with (i) guidance on best practices, (ii) technology information and links to equipment suppliers and, (iii) for minigrids, representative technical designs and costings. Targets A key result of these services will be that the capacities are in place for the initial investments to go forward successfully under Phase I in September, 000. For the service delivery businesses these capacities would be represented by business plans ready for financing: that is, the technical design and costs are complete, the community and private legal and other arrangements for the network and generation investments are complete, the operating business model for service delivery is defined and its sustainability established, the anchor customers are identified and committed, a market development plan, including for increasing productive uses, is in place, the key personnel are trained and on board and the financing arrangements are agreed by the main investors and creditors.

6 The targets numbers for business plans ready for financing are set out in the following table: Service delivery business model categories Private community partnerships for development and operation of mini-grids serving rural trading centers Private community partnerships for the development and operation of existing isolated grids Co-generation investments based on independent major agro-processing centers, such as tea and sugar estates, and other relatively large scale suppliers, such as some mission hospitals Private community partnerships for development and operation of distribution networks in communities close to the relatively large scale independent suppliers Private community partnerships for development of generation, transmission and distribution operations in new areas based on renewable resources Solar photovoltaic systems distribution and sales companies serving dispersed rural households and communities and to institutional markets for health, education and other community and specialized applications Targets for Bankable Business plans Related services businesses NGOs providing micro enterprise productive uses (PU) marketing services for mini-grids Micro enterprise financing organizations funding productive equipment purchases, working capital and solar PV purchases Micro financing organizations funding consumer level connections

7 The business plans would balance affordability and sustainability, using low cost technical and organizational low-cost designs and smart subsidies made available through the program. The roles of businesses and communities would be specified as well as the expected area development impacts, including the expected productive uses by micro and small enterprises and community uses, such as schools, health centers, street lighting. The business plan development is expected to be a process of counseling on all key management and financial areas, stimulating the participants to address the normal type of business planning issues, customized for a business based on rural energy services and, in many cases, on a private community partnership. This will include particular emphasis on marketing (including productive uses), distribution and service networks, and arrangements for managing the accounts receivable, including credit decision making and collections. The process shall be conducted in a manner which strengthens the capacities of the business. The expected outcome is a series of successive drafts of business plans, consistent with the program concept of sustainable rural energy services contributing to rural transformation, eventually resulting, in the successful cases, in a plan ready for financing. An important aspect of the business planning process will be assistance in achieving financial closure with investors and financial institutions. The consultants will ascertain clearly the requirements of the financing institution and, on the other hand, guide the businesses in meeting these requirements. A bankable business plan is a complete package of documents which the financing institution requires to close a transaction, which is acceptable to the financing institution in form and content. For the package of services to develop the capacities of two NGOs to promote productive uses, it is expected that the consultants will review the constraints (e.g., technology, capital, knowledge, costs, market) and opportunities to increase productive uses of electricity in rural trading centers and recommend actions to be taken by the NGOs and the service providers. The consultants are also expected to design a program of support for the promotion of productive uses which would be conducted during Phase I.

8 The estimates of the anticipated level of effort in terms of professional services required for each package are set out in the following table. Service delivery business models and targets Package A 10 mini-grids serving rural trading centers Package B existing isolated grids converted to independent operation by private community partnerships Package C 5 co-generation investments based on independent relatively large scale suppliers, such as some mission hospitals Package D distribution networks for communities close to relatively large scale independent suppliers Package E generation, transmission and distribution operations in new areas based on renewable resources Package F 3 solar photovoltaic systems distribution and sales companies Related services businesses Package G NGOs for providing micro enterprise productive uses marketing services for mini-grids and traditional fuels businesses Package H micro enterprise financing organizations funding productive equipment purchases, working capital and solar PV purchases Package I micro finance organizations providing financing for consumer connections Estimated professional services P/M Expertise required s Financial Enterprise dev Best practices Productive uses Rural development Rural energy Microfinance Rural energy Consulting services for promotion and coordination of capacity building and financing In addition to the services described above, consulting services are also

9 required to broadly promote the business opportunities to private sector and community groups, to stimulate the awareness of potential participants and channel those who are interested to the appropriate capacity building services described above, and to assist in the development of financing channels. The consultants would: develop public information materials, conduct promotion activities at central and decentralized levels (it is anticipated that the promotional activities would include workshops in the capital and up to ten districts, in association with existing organizations linked to the local communities and private sector) respond to information requests, monitor and report on progress, serve as a central coordination and support point for business development preparation activities, liaise with the government s technical team for project preparation, monitor and report legal, regulatory and contractual issues for the potential service collaborate and share assistance provision with local resources/projects such as - BUDS, Presto, bilateral business partnership programs, the UNDP photovoltaic project, other donor projects and resources, assist in the introduction of the decentralized regulatory system providing information to officials and consumers and facilitating, if necessary, the training of regulators and advisors to regulators, assist in developing financial intermediation channels for the programs credits and smart subsidies, including assessing availability of financial services for the different types of service delivery businesses, and conduct activities to develop the capacities of finance institutions to assess rural energy investments The targets for these services would be defined in terms of direct outputs (e.g., promotional packages prepared and distributed, workshops conducted, participants assisted) and results in terms of business plans ready for financing, for which the promotion and coordination consultants will be partially responsible. The level of effort in terms of professional person months for these services is expected to be two full-time professionals, with skills in business promotion, development and financing for 1 months each and a financial specialist for six months. Arrangements Deliverables for all the services would include information materials, financial models, training manuals, progress reports, business plans. Payments would be against deliverables and targets. The consultants would be supervised by a Bank designated person.

10 Budget and Schedule The assignment is estimated to take 6 months to complete. The total budget is $100,000.