The World Bank Rural Electrification Project (P150908) REPORT NO.: RES32649 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF RURAL ELECTRIFICATION PROJECT APPROVED ON NOVEMBER 7, 2014 TO REPUBLIC OF VANUATU ENERGY & EXTRACTIVES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Jie Tang Task Team Leader: Kamleshwar Prasad Khelawan The World Bank Rural Electrification Project (P150908) ABBREVIATIONS AND ACRONYMS DOE Department of Energy MTR Mid Term Review PDO Project Development Objective RSF Risk Sharing Fund SEFP Sustainable Energy Financing Program VREP Vanuatu Rural Electrification Project The World Bank Rural Electrification Project (P150908) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P150908 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 07-Nov-2014 31-Dec-2019 Organizations Borrower Responsible Agency Department of Energy, Ministry of Climate Change and Republic of Vanuatu Natural Disaster Project Development Objective (PDO) Original PDO The project development objective (PDO) is to scale up access to electricity services for rural households, aid posts and communityhalls located in dispersed off-grid areas. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-18003 04-Dec-2014 04-Dec-2014 04-Dec-2014 31-Dec-2019 4.70 1.34 3.36 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Rural Electrification Project (P150908) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The project has realized satisfactory progress towards the achievement of the project development objective. Following the longer than forecast establishment period, VREP customer numbers have increased steadily to a level that demonstrates a significant interest in and willingness to purchase the products. Once the project establishment arrangements were in place, sales of subsidized products grew at an acceptable rate, having steadily increased since that time demonstrating substantial demand for the solar systems. The processes of vendor and product registration and subsidy verification and reimbursement are operating effectively. A Mid-Term Review (MTR) was conducted June 2017. Status of Project Components 2. Component 1: Electrification of off-grid households, aid posts and community halls. The project targets 85 percent of the 20,470 disbursed off-grid households in Vanuatu, which equates approximately 17,500 households, 230 aid posts and 2,000 not-for-profit community halls. The project has subsidized a total 6,372 solar photovoltaic (PV) systems across 51 islands. The project has subsidized solar PV systems for 6,034 households (35 percent), 10 aid posts (4 percent) and 328 not-for-profit community halls (16 percent). 3. Component 2: Technical assistance and project management. The project established vendor and product registration agreements. The project has registered 5 local retailers as approved product vendors and registered 19 PV systems available in the product catalogue. There are 3 institutions providing microfinance products for the purchase of PV systems. The project implementing agency has undertaken communication campaigns in 173 rural villages and 5 consultations with women’s groups. The Independent Verification Agent is in place and is performing satisfactorily. B. Rationale for Restructuring 4. This restructuring seeks to amend the grant agreement of the project to reflect its newly established association with the Sustainable Energy Financing Program (SEFP – P098423). The extension of SEFP to Vanuatu will support both the Vanuatu Rural Electrification Project Stage I (VREP I) and the Vanuatu Rural Electrification Project Stage II (VREP II - P160658). The relaunched risk facility under SEFP will address a key issue identified during the MTR of VREP I, which is access to finance for the consumers (households and small businesses) for their cost contribution and to finance working capital for suppliers. The beneficiaries of the relaunched program will be the households and businesses who qualify to participate in VREP I and VREP II. The products that are eligible for loans will be those on the VREP-approved product catalog; the individual and business borrowers will be those that are approved for participation; and the products and participants will need to meet the safeguards requirements of VREP I and VREP II in order for them to be eligible to participate in the relaunched Risk Sharing Fund (RSF) in Vanuatu. The Implementation Agency for VREP I and VREP II is Vanuatu’s Department of Energy (DOE). 5. The financing/grant agreements with Vanuatu for the VREP I and VREP II projects (TF018003, IDA Credit 6072-VU/Grant D1930-VU, TFA4979, TFA5406) will be amended to link the RSF to VREP I and II by including a provision in the VREP I and II agreements with the World Bank that the failure by Vanuatu to perform its obligations under the proposed Project The World Bank Rural Electrification Project (P150908) agreement between Vanuatu and the World Bank for the SEFP RSF will be an additional event of suspension under the VREP I and II agreements. II. DESCRIPTION OF PROPOSED CHANGES C. Description of Proposed Changes 6. The grant agreement will be amended to link the SEFP to VREP I and II by including a provision in the grant agreements that the failure by Vanuatu to perform its obligations under the proposed Project agreement between Vanuatu and the World Bank for the SEFP RSF will be an additional event of suspension under the VREP I and VREP II grant agreements. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Other Change(s) ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ The World Bank Rural Electrification Project (P150908) Procurement ✔ Implementation Schedule ✔ IV. DETAILED CHANGE(S) Note to Task Teams: End of system generated content, document is editable from here. 7. The grant agreement will be amended to link the SEFP to VREP I and II by including a provision in the grant agreements that the failure by Vanuatu to perform its obligations under the proposed Project agreement between Vanuatu and the World Bank for the SEFP RSF will be an additional event of suspension under the VREP I and VREP II grant agreements. No other changes to the project are proposed.