Document of The World Bank Report No: 72872 v1 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ARGENTINA RENEWABLE ENERGY IN THE RURAL MARKET PROJECT ADDITIONAL FINANCING, IBRD 76170-AR DATED NOVEMBER 11, 2008 IBRD LOAN IN THE AMOUNT OF US$50 MILLION TO THE ARGENTINE REPUBLIC September 12, 2012 Latin American and Caribbean Energy Sector Sustainable Development Network This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 1 OFF-GRID RURAL ELECTRIFICATION CONTENTS Page A. SUMMARY ........................................................................................................................... 1 B. PROJECT STATUS .............................................................................................................. 1 C. PROPOSED CHANGES ...................................................................................................... 2 ANNEX 1: REALLOCATION OF PROCEEDS ......................................................................... 3 2 Argentina Renewable Energy in the Rural Market Project Additional Financing (AF), IBRD 76170-AR PROJECT DATA SHEET PERMER (Original) Restructuring Status: Draft Restructuring Type: Last modified on date : 07/25/2012 1. Basic Information Project ID & Name P006043: AR RENEW.ENERGY R.MKTS Country Argentina Task Team Leader Xiaoping Wang Sector Manager/Director Malcolm Cosgrove-Davies/ Ede Jorge Ijjasz-Vasquez Country Director Penelope J. Brook Original Board Approval Date 03/30/1999 Original Closing Date: 09/30/2005 Current Closing Date 12/31/2011 Proposed Closing Date [if applicable] EA Category B Revised EA Category EA Completion Date 09/17/1997 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 0.00 10.30 GEFU 0.00 10.00 IBRD 30.00 30.00 ZPCO 0.00 10.20 Total 30.00 60.50 3. Borrower Organization Department Location The Argentine Republic Argentina 4. Implementing Agency Organization Department Location Secretariat of Energy Argentina 3 5. Disbursement Estimates (US$m) Actual amount disbursed as of 07/20/2012 30.00 Fiscal Year Annual Cumulative 2012 0.00 30.00 Total 30.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured project trigger any new safeguard policies? If yes, please select from N the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The objectives of the Project are to: (a) provide the rural areas of the Participating Provinces with reliable electric supply in a sustainable manner through the use of renewable energy; (b) support the carrying out of studies on critical energy issues by the Borrower; (c) support the Borrower’s strategy to strengthen the participation of the private sector in the provision of electricity in the rural areas of the Participating Provinces, as well as strengthen the capacity of Participating Provinces to regulate such participation; and (d) support the creation of sustainable business operations for rural energy in Argentina. 7b. Revised Project Development Objectives/Outcomes [if applicable] 4 PROJECT DATA SHEET PERMER AF Restructuring Status: Draft Restructuring Type: Last modified on date : 07/25/2012 1. Basic Information Project ID & Name P006043: AR RENEW.ENERGY R.MKTS Country Argentina Task Team Leader Xiaoping Wang Sector Manager/Director Malcolm Cosgrove-Davies/ Ede Jorge Ijjasz-Vasquez Country Director Penelope J. Brook Original Board Approval Date 11/11/2008 Original Closing Date: 12/31/2011 Current Closing Date 12/31/2012 Proposed Closing Date [if applicable] EA Category B Revised EA Category EA Completion Date Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original BORR 0.00 GEFU 0.00 IBRD 50.00 ZPCO 0.00 Total 50.00 3. Borrower Organization Department Location The Argentine Republic Argentina 4. Implementing Agency Organization Department Location Secretariat of Energy Argentina 5 5. Disbursement Estimates (US$m) Actual amount disbursed as of 07/20/2012 40.26 Fiscal Year Annual Cumulative 2012 22.02 38.51 2013 9.76 50.00 Total 50.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured project trigger any new safeguard policies? If yes, please select from N the checklist below and update ISDS accordingly before submitting the package. Safeguard Policy Rating Environmental Assessment (OD 4.01) YES Natural Habitats (OP 4.04) Forestry (OP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) Indigenous Peoples (OD 4.20) YES Involuntary Resettlement (OP 4.12) Safety of Dams (OP 4.37) Projects in International Waters (OP 7.50) Projects in Disputed Areas (OP 7.60) 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The objectives of the Project are to: (a) provide the rural areas of the Participating Provinces with reliable electric supply in a sustainable manner through the use of renewable energy; (b) support the carrying out of studies on critical energy issues by the Borrower; (c) support the Borrower’s strategy to strengthen the participation of the private sector in the provision of electricity in the rural areas of the Participating Provinces, as well as strengthen the capacity of Participating Provinces to regulate such participation; and (d) support the creation of sustainable business operations for rural energy in Argentina. 7b. Revised Project Development Objectives/Outcomes [if applicable] 6 Argentina Renewable Energy in the Rural Market Project Additional Financing IBRD 76170-AR Restructuring Paper A. SUMMARY 1. This restructuring package seeks your approval for a Level II restructuring of the Renewable Energy in the Rural Market Project Additional Financing – PERMER AF project (Loan No. IBRD-76170-AR), referred to as the “Project�, which would entail a reallocation of loan proceeds. The proposed changes would maximize the Project’s impact by responding to the high demand from the provinces for solar home systems, lack of demand for wind home systems, and the difficulty in identifying eligible mini- grid subprojects and allow a full disbursement of the remaining IBRD loan. The Development Objective of the Project would remain the same. B. PROJECT STATUS 2. The Project’s Development Objective (PDO) is to (a) provide the rural areas of the Participating Provinces with reliable electric supply in a sustainable manner using renewable energy technologies, when feasible; (b) support studies by the borrower of critical energy sector issues; (c) support the creation of sustainable business operations for rural energy in Argentina; and (d) support the strengthening of the private sector in the provision of electricity in the rural areas of the participating provinces and the corresponding strengthening of provincial government capacities to regulate private sector participation. 3. The achievement of PDO is rated moderately unsatisfactory because approximately 9,000 solar home systems (half of the total) remain to be installed within five months and before the project is closed. All equipment has been purchased but the installations have been slower than expected due to changes in potential beneficiaries and limited access to some areas during rainy seasons. It is expected that the installations increase exponentially in the next three months and be completed by the closing date. The PDO rating is expected to be upgraded around November 2012. 4. The Overall Implementation Progress is rated moderately satisfactory. Although disbursements of the loan have been slower than originally expected, the implementation is on track to achieve the Project’s objectives. As of July 20, 2012, US$ 40.3 million of the US$ 50 million loan were disbursed. This leaves approximately US$9.7 million of the loan remaining to be disbursed. 1 C. PROPOSED CHANGES Financing 5. The restructuring proposes to move unused project funds from various components and corresponding disbursement categories (inclusive of technical assistance and investment activities) to finance the purchase and installation of additional residential solar home systems under Component 1.a. The reallocation is proposed to maximize the Project’s impact, responding to the high demand from the provinces for solar home systems, lack of demand for wind home systems, and the difficulty in identifying eligible mini-grid subprojects. 6. The proposed reallocations do not introduce significant changes to the Project. It represents a minor change in line with BP 13.05 (Project Supervision). Most of the changes involve moving funds from Components 2, 3, and 4 to Component 1 and between the sub-components within Component 1 as a result of the high demand for solar home systems. 7. The level of financing for various project components as a result of the proposed reallocations are illustrated in the following table: (in US$ million) Difference Original Proposed Components due to Allocation Allocation Reallocation 1. Electricity Generating Equipment for Rural 43.50 48.82 5.32 Markets 2. Wind home systems 0.50 0.00 -0.50 3. Capacity building and 5.18 0.58 -4.60 4. Project Administration 5. Solar Thermal Energy 0.70 0.48 -0.22 Systems Front-end fee 0.13 0.13 0 Total 50.00 50.00 0 8. The detailed reallocations by category of expenditure are shown in Annex 1. 2 ANNEX 1: Reallocation of Proceeds Argentina Renewable Energy in the Rural Market Project (PERMER) Additional Financing (AF) P006043 IBRD 76170-AR Category of Expenditure Allocation % of Financing (US$) Current Revised Current Revised Current Revised Goods and installation if needed No under component 1a) – SHS (Part 1a 27,500,000 42,550,000 100% 100% Changes under the LA) Goods and installation if needed under component 1b) – Photovoltaic No 9,000,000 6,137,000 80% 80% systems for rural schools and public Changes services (Part 1b under the LA) Goods and installation if needed No under component 1c) – Mini-grids 7,000,000 134,400 75% 75% Changes (Part 1c under the LA) Goods and installation if needed No under component 2) – Wind Home 500,000 0 100% 100% Changes systems (Part 2 under the LA) Goods and installation if needed under component 1d) – Solar No 700,000 476,000 100% 100% Thermal and 1e) Water Pumping Changes (Part 5 under the LA) Goods, Consultant and non- consultant services; Training and/or operating costs under components 3 No 100% 100% and 4 – Capacity Building and Changes 5,200,000 577,600 Project Management (Part 3 and 4 under the LA) No Front End Fee 125,000 125,000 100% 100% Changes Total 50,000,000 50,000,000 1. The Project’s PDO is rated moderately unsatisfactory because approximately 9,000 solar home systems (half of the total) remain to be installed within five months and before the project is closed. All equipment has been purchased but the installations have been slower than expected due to changes in potential beneficiaries and limited access to some areas during rainy seasons. It is expected that the installations increase exponentially in the next three months and be completed by the closing date. The PDO rating is expected to be upgraded around November 2012. As of July 2012, US$49.1 million of the US$50 million additional financing loans have been committed. A total of US$40.3 million had been disbursed as of July 20 2012, a significant increase over the previous twelve months (disbursement was $14.4 million in June 2011). All funds are expected to be disbursed when the project closes in December 2012. 3