The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) REPORT NO.: RES49597 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MG-ELECTRICITY SEC OPERATIONS & GOVERNANCE IMPROVEMENT PROJECT(ESOGIP) APPROVED ON MARCH 22, 2016 TO MINISTRY OF ECONOMY AND FINANCE ENERGY & EXTRACTIVES AFRICA EAST Regional Vice President: Hafez M. H. Ghanem Country Director: Zviripayi Idah Pswarayi Riddihough Regional Director: Ashish Khanna Practice Manager/Manager: Erik Magnus Fernstrom Task Team Leader(s): Massan Elise Akitani, Tsiry Andriantahina The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) I. BASIC DATA Product Information Project ID Financing Instrument P151785 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 22-Mar-2016 31-Dec-2021 Organizations Borrower Responsible Agency Ministry of Economy and Finance JIRAMA,Ministry of Water Energy and Hydrocarbons Project Development Objective (PDO) Original PDO The Project Development Objective is to improve the operational performance of the national electricity utility (JIRAMA) and improve the reliability of electricity supply in the project area and, in the event of an eligible crisis or emergency, to provide immediate and effective response to said eligible crisis or emergency. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-62800 14-Jun-2018 05-Oct-2018 29-Apr-2019 31-Dec-2021 40.00 15.27 23.84 IDA-57730 22-Mar-2016 08-Apr-2016 24-Aug-2016 31-Dec-2021 65.00 53.95 11.82 The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES ELECTRICITY SECTOR OPERATIONS AND GOVERNANCE IMPROVEMENT PROJECT Project’s objectives The ESOGIP project provides support to (i) rehabilitate and upgrade T&D networks for reliability, quality of supply, and to handle future RE supply additions; (ii) support the regulator in implementing a tariff review based on a tariff study; and (iii) promote the financial recovery of the utility and the fiscal sustainability of the energy sector by supporting revenue protection program including the introduction of state-of-the art smart/remote metering technology and targeted loss/theft reduction programs. The project Development Objective is to improve the operational performance of the national electricity utility (JIRAMA) and improve the reliability of electricity supply in the project area and, in the event of an eligible crisis or emergency, to provide immediate and effective response to said eligible crisis or emergency. Project’s data and components Project amount $105 million Disbursement rate 65% Effective date August 2016 Estimated closing date December 2021 Regions concerned 22 regions Direct beneficiaries 350,000 Component 1 Improve power sector planning and financial sustainability Component 2 Reinforce the operational performance and governance of JIRAMA Component 3 Invest in increased reliability of electricity Component 4 Project management Component 5 Emergency response to contingency Project’s activities The completed activities are as follows: 1. Component 1: Improving electricity sector planning and financial sustainability Strategic assessments were completed under this component, (a) Least Cost Development Plan (LCDP) providing the roadmap for the development of least cost generation projects and associated transmission networks; (b) National Electrification Strategies (NES) defining the technical, institutional, and financial arrangements to scale-up sustainable provision of electricity services; (c) development of a tariff study to address sector financial viability; (d) strengthening capacity of public agencies responsible for least-cost planning and electrification (Ministry of Energy, Electricity Regulation Authority [ARELEC], Rural Electrification Development Agency [ADER], and JIRAMA ; (e) provision of technical assistance, capacity building, and consultancy service for the development of ten (10) small hydro” to prepare tenders for high-priority small hydropower plants (assessed under the ESMAP funded TA). This includes reviewing of pre-feasibility works for sites, finance detailed engineering, environmental and social studies, preparation of feasibility studies. The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) 2. Component 2: Strengthening operational performance and governance of JIRAMA: the activities completed under component 2 are: (i)implementation of integrated management and geographic information system MATSELAKA; (ii) implementation of the Income Protection Program; (iii) the preparation of the performance improvement program for JIRAMA. (i) Implementation of the integrated management and geographic information system for GIS management called MATSELAKA (initial budget US$ 9 million) (IF) In line with the Governance Improvement Program (GIP), this component supported the procurement and installation of the GIS system, which include a Commercial Management System (CMS), an Integrated Distribution Management System (IDMS) and an Enterprise Resource Planning (ERP) system, to improve the efficiency, transparency and accountability of processes and development activities in all business areas. This includes operation and maintenance (O&M) of electricity supply assets, customers’ complaint handling, commercial functions and enterprise resource management. The installation and use of the GIS system was complemented at end 2019 with two years maintenance period of 2020 and 2021. (ii) RPP (Revenue Protection Program) project (IF) (US$ 3 million) This activity identified in the ESOGIP Initial Financing’s (IF) PAD consists of implementing the program for the sustainable reduction of non-technical losses in supply (off-meter consumption) through the systematic remote recording and monitoring of consumption of large users, as foreseen in the GIP. The initial phase of the RPP included a "high value" segment of about 8,500 meters, which accounts for 50 percent of total physical sales (kilowatt-hours) in 2014. This segment is composed of all 1300 HV/MV customers and the 7200 users connected to LV grids with a monthly demand higher than 500 kWh or with doubtful consumption situations. The contract was awarded to ZTE as an EPC with the supply, installation and commissioning of 8500 smart meters. The contract was completed in July 2021. As a reminder, 40% of the revenue from electricity activities is generated by HV/MV customers. The revenue from HV/MV customers increased by 21% and 24% in 2018 and 2019 respectively. These values prove that clear improvements were made in these resources just after the meters were commissioned. (iii) The Performance Based Compensation: JIRAMA introduced in 2020 a performance-based compensation program. The goal of this program is to enhance the performance of 36 directors by setting customized concrete goal to be reached at the end of the year. Another part of the bonus is linked to JIRAMA’s general progress on key indicators, which shall allow alignment of management’s interests and remuneration with the company’s success. Bonus payments are made twice a year after an evaluation of the progress towards the objectives set. The program was extended to 209 employees in 2021. In October 2021 an external auditor was mandated to audit the performance-based program, evaluate the quality and pertinence of the individual objectives set and assess the evaluation process and linked disbursements. The audit report is expected by the December 2021. 3. Component 3: Investing in enhanced reliability of electricity The completed activities are: Andekaleka screening machine and the rehabilitation of production plants auxiliaries. (i) ANDEKALEKA screening machine (IF) The mobile automatic screening machine has been installed at the 96 MW Andekaleka Hydroelectric Plant. Functional and operational tests were successfully carried out with the operating teams during the month of June-July 2021. It should be noted that this installation will solve the problems of clogging of the dam’s grid of the power station during the periods of intense rain and cyclones leading to the reduction or even the stop of the production of the power station for a few days and which leads each time to load shedding at the level of the RIA with minimum losses of 600 KUS$ for each occurrence of clogging. The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) The ongoing activities are the following ones: 1. RIA 90kV looping transmission line including upgrade of substations(US$ 16M) The project concerns the supply and installation of equipment, reinforcement and extension works of the RIA source substations, adaptation of the medium voltage parts to allow the passage in 20 kV in the regions; and the supply and installation of equipment and extension works of a part of the Antananarivo interconnected network by the construction of two 90 kV lines (with a variant in 63 kV) connecting respectively: the Tana North substation to the Ambodivona substation, and the Tana North substation to the Tana South substation. This project makes it possible to cope with changes in the demand for electrical energy in Tana and above all to avoid problems of load shedding in half of the city in the event that one of the two existing HV transmission lines serving the city of Antananarivo is unavailable. It should be noted that these two existing lines are already reaching their saturation level. Status of implementation: The evaluation report is currently being revised following the Bank's observations after the 1st No Objection Notice before issuing the letter of intent of procurement, then procurement and contracts’ signing. 2. Dispatching and BCC project (US$ 11.5 M) (AF) This project allows for the centralised management of generation, transmission and distribution networks, in particular to reduce energy production costs and intervention times on the electricity networks throughout Madagascar. For this activity, EDF/SEURECA, which is in charge of carrying out the studies, is expected to send the tender documents of the priority equipment, notably the IAT and SCADA phase 1. It is planned that these tender documents phase 1 will be launched before the end of 2021. The execution of the works and services of all these dispatching and BCC works are also expected to be realised at least before the end of 2022, thus requiring the extension of the PAGOSE project. Main challenges Below are the main challenges: (i) The reinforcement of the existing 138/63 kV substation, construction and rehabilitation of 63 kV transmission lines (looping of the interconnected network of Antananarivo RIA): Successful completion of the Resettlement Action Plan (RAP) is binding for the start of works. RAP completion is estimated in June 2022. Main challenges and the other ongoing activities are expected to be successfully implemented before the new proposed closing date as a good pace is being kept. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications The World Bank MG-Electricity Sec Operations & Governance Improvement Project(ESOGIP) (P151785) IDA-57730 Effective 30-Jun-2020 31-Dec-2021 30-Jun-2023 30-Oct-2023 IDA-62800 Effective 31-Dec-2021 30-Jun-2023 30-Oct-2023