Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD2462 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT IN THE AMOUNT OF US$8.5 MILLION FROM THE ADVANCING REGIONAL ENERGY PROJECTS IN SOUTHERN AND EASTERN AFRICA MULTI-DONOR TRUST FUND TO THE SOUTHERN AFRICAN POWER POOL FOR THE SOUTHERN AFRICAN POWER POOL (SAPP) - PROGRAM FOR ACCELERATING TRANSFORMATIONAL ENERGY PROJECTS June 10, 2019 Energy and Extractives Global Practice Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 31, 2019) Currency Unit = U.S. Dollar (US$) US$1 = SDR 0.72 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing AfDB African Development Bank AREP Advancing Regional Energy Transformational Project CC Coordination Center CTA Chief Transaction Adviser DBSA Development Bank of Southern Africa EA Environmental Assessment EAC East African Community EAPP Eastern Africa Power Pool ENTSO European Network of Transmission System Operators for Electricity ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework GDP Gross Domestic Product GRS Grievance Redress Service IPPF Infrastructure Project Preparation Facility KfW Kreditanstalt für Wiederaufbau (German Development Bank) MDTF Multi-Donor Trust Fund NEPAD New Partnership for Africa’s Development NORAD Norwegian Agency for Development PAT Projects Acceleration Team PAU Project Advisory Unit PDO Project Development Objective PDRA Project Development Readiness Assessment PM Project Manager RAP Resettlement Action Plan REC Regional Economic Community RICAS Regional Integration and Cooperation Strategy for Sub-Saharan Africa RSA Republic of South Africa RTIFF Regional Transmission Infrastructure Financing Facility SADC Southern African Development Community SAPP Southern African Power Pool Sida Swedish International Development Cooperation Authority TA Technical Assistance UNECA United Nations Economic Commission for Africa VRE Variable Renewable Energy ZIZABONA Zimbabwe, Zambia, Botswana, and Namibia 2 Vice President: Hafez M. H. Ghanem Regional Integration Director: Deborah L. Wetzel Senior Global Practice Director: Riccardo Puliti Practice Manager: Wendy Hughes Task Team Leaders: Mirlan Aldayarov, Arsh Sharma 3 SOUTHERN AFRICAN POWER POOL ADDITIONAL FINANCING FOR THE SOUTHERN AFRICAN POWER POOL (SAPP) - PROGRAM FOR ACCELERATING TRANSFORMATIONAL ENERGY PROJECTS CONTENTS I. Introduction ............................................................................................................................................. 10 II. Background and Rationale for Additional Financing............................................................................... 11 III. Proposed Changes.................................................................................................................................. 23 IV. Appraisal Summary ................................................................................................................................ 32 V. Risks ........................................................................................................................................................ 37 VI. World Bank Grievance Redress.............................................................................................................. 39 VII. Revised Results Framework and Monitoring Indicators ....................................................................... 40 4 ADDITIONAL FINANCING DATA SHEET Southern Africa Additional Financing for SAPP AREP Program - MDTF (P163545) AFRICA REGION ENERGY AND EXTRACTIVES GLOBAL PRACTICE . Basic Information - Parent Parent Project ID: P126661 Original EA Category: A - Full Assessment Current Closing Date: 30-Nov-2019 Basic Information - Additional Financing (AF) Additional Financing Project ID: P163545 Scale Up Type (from AUS): Regional Vice Hafez M. H. Ghanem Proposed EA Category: A – Full Assessment President: Expected Effectiveness Country Director: Deborah L. Wetzel August 30, 2019 Date: Senior Global Practice Riccardo Puliti Expected Closing Date: November 30, 2022 Director: Practice Wendy E. Hughes Report No: PAD2462 Manager/Manager: Mirlan Aldayarov, Arsh Team Leader(s): Sharma Approval Authority Approval Authority Board/AOB Decision Please explain The Project Development Objective of the US$20 million IDA grant parent project—the Southern African Power Pool’s Program for Advancing Regional Energy Transformational Projects (SAPP AREP, P126661)—is to advance the preparation of selected priority regional energy projects in the Southern African Power Pool (SAPP) participating countries. The IDA funds from the parent project can be used to finance preparatory activities for only those regional energy projects that would be carried out on the territories of at least one IDA country (in good standing with IDA). However, some of the identified regional priority projects include projects that would be carried out on the territories of only IBRD countries and/or Zimbabwe (currently in arrears with IDA), even though the SAPP as a whole and other IDA member countries of the region would benefit from these projects as well. Therefore, the use of IDA funds from, and achieving fully the PDO of, the parent project is constrained. Given this constraint and based on the interest and need for further scaling up of the SAPP AREP activities, as well as the available financing from several development partners and their strong interest to utilize the SAPP AREP implementation framework (benefitting from its well-established technical and 5 fiduciary capacity and the World Bank supervision), a Multi-Donor Trust Fund (MDTF) was established to complement the existing IDA funds in advancing preparation of the regional projects. The MDTF has both World Bank-executed and Recipient-executed portions. The proposed Additional Financing will utilize the Recipient-executed portion of the MDTF in the amount of US$8.5 million to finance a scale up of SAPP AREP activities, including expenditures and activities for the regional projects not eligible for IDA financing. Board approval of the additional financing (AF) from MDTF is therefore sought given that the proposed AF will scale-up SAPP AREP activities, including financing expenditures for the preparation of regional projects not eligible for available IDA resources. Borrower Organization Name Contact Title Telephone Email Southern African Power Stephen +263 242 SAPP CC Manager Steve.dihwa@sapp.co.zw Pool Dihwa 308071 Project Financing Data - Parent (AFCC2/RI-SAPP-Program for Accelerating Regional Energy/Transformational Projects-P126661) (US$, millions) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P12666 IDA- 11-Nov- Effective 16-Jan-2015 13-Nov-2015 30-Nov-2019 30-Nov-2022 1 H9890 2014 Disbursements Disb Undisb % Project Ln/Cr/TF Status Currency Original Revised Cancelled urse ursed Disbursed d P12666 IDA- Effective XDR 13.20 13.20 0.00 5.06 8.14 38.32 1 H9890 Project Financing Data - Additional Financing Additional Financing for SAPP AREP Program - MDTF (P163545) (US$, millions) [ ] Loan [X] Grant [ ] IDA Grant [ ] Credit [ ] Guarantee [ ] Other Total Project Cost: 8.50 Total Bank Financing: 0.00 Financing Gap: 0.00 Financing Source - Additional Financing (AF) Amount Free-standing TFs AFRVP 8.50 6 Total 8.50 Policy Waivers Does the project depart from the CAS in content or in other significant No respects? Explanation Does the project require any policy waiver(s)? No Explanation Team Composition Bank Staff Name Role Title Specialization Unit Mirlan Aldayarov Team Leader Senior Energy Energy Specialist GEE08 (ADM Specialist Responsible) Arsh Sharma Team Leader Financial Analyst Energy Specialist GEE08 Chitambala John Procurement Senior Procurement Procurement GGOPA Sikazwe Specialist (ADM Specialist Responsible) Tandile Gugu Zizile Financial Sr Financial Financial GGOAS Msiwa Management Management Management Specialist (ADM Specialist Responsible) Abdelaziz Lagnaoui Environmental Lead Environmental Safeguards GENA2 Specialist (ADM Specialist Responsible) Aki Tsuda Social Specialist Senior Social Safeguards OPSES (ADM Development Responsible) Specialist Clarisse Torrens Environmental Senior Safeguards GEN01 Borges Dall Acqua Safeguards Environmental Specialist Safeguards Specialist Reynold Duncan Team Member Lead Energy Energy Specialist GEE08 Specialist Joseph Kapika Team Member Senior Energy Energy Specialist GEE08 Specialist 7 Samuel Kwesi Ewuah Team Member Senior Energy Energy Specialist GEEES Oguah Specialist Juliana Chinyeaka Team Member Senior Operations Operations GEE08 Victor Officer Inka Ivette Schomer Team Member Operations Officer Gender Specialist GEEES China Chhun Team Member Program Assistant Operations GEE08 Farah Team Member Consultant Operations GEE08 Mohammadzadeh Jean Owino Team Member Finance Officer Financial WFACS Management Jorge Luis Alva- Counsel Senior Counsel Legal LEGAM Luperdi Lucila Arboleya Team Member Consultant Energy Specialist GEE08 Sarazola Extended Team Name Title Location Locations Country First Location Planned Actual Comments Administrative Division Tanzania United Republic of Tanzania X X DRC Democratic Republic of Congo X X Zimbabwe Republic of Zimbabwe X Zambia Republic of Zambia X X Malawi Republic of Malawi X X Lesotho Kingdom of Lesotho X Botswana Republic of Botswana X Eswatini Kingdom of Eswatini X South Africa Republic of South Africa X Mozambique Republic of Mozambique X X Angola Republic of Angola X Namibia Republic of Namibia X 8 Institutional Data Parent (AFCC2/RI-SAPP-Program for Accelerating Regional Energy/Transformational Projects- P126661) Practice Area (Lead) Energy and Extractives Contributing Practice Areas Additional Financing Additional Financing for SAPP AREP Program - MDTF (P163545) Practice Area (Lead) Energy and Extractives Contributing Practice Areas Consultants (Will be disclosed in the Monthly Operational Summary) Consultants Required? Consultants will be required. 9 I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide Additional Financing for the Southern African Power Pool’s Program for Advancing Regional Energy Transformational Projects (SAPP AREP, P126661) in the form of an additional grant in the amount of US$8.5 million to the Southern African Power Pool (SAPP). The parent project (SAPP AREP), financed through an IDA grant in the amount of SDR 13.2 million (US$20 million equivalent), was approved by the Board on November 11, 2014, and became effective on November 13, 2015. The proposed Additional Financing (AF, P163545) will be financed from the grant resources of the Multi-Donor Trust Fund for Advancing Regional Energy Projects (MDTF AREP, TF072636) and, therefore, will complement the available IDA financing. This would be the first AF for the project. The project would be restructured to (i) extend the closing date by three years to allow sufficient time to implement the scaled up activities; (ii) update the disbursement categories to reflect the new financing; and (iii) revise the results indicators to reflect the scale up. Given the implementation experience of the parent project and the established clarity on the types of regional projects SAPP AREP is expected to support, respective safeguard policies were triggered. 2. The Project Development Objective (PDO) of the parent project, SAPP AREP, is to advance the preparation of selected priority regional energy projects in the SAPP participating countries.1 The program was designed to address the lack of project preparation capacity within the SAPP to design and deliver transformational regional energy projects in Southern Africa. 3. The parent project has three components. Component 1 (Part A) involves establishment of an advisory unit (referred to as the Projects Acceleration Team [PAT] or Project Advisory Unit [PAU]) and staffing it with technical, financial, and legal transaction experience to spearhead the preparation of regional projects identified as priority projects by the SAPP. Component 2 (Part B) supports preparation of these priority projects through technical, economic, and financial feasibility studies; environmental and social assessments; preparation of legal documentation; and financial transaction advisory services. Component 3 (Part C) helps the SAPP support its member utilities and regional stakeholders (for example, Southern African Development Community [SADC] and Regional Energy Regulatory Association) on regional planning and integration issues (such as renewable energy integration and advancement of regional power trading) and to carry out critical analytical work important for advancing preparation of priority regional projects (such as the Regional Electricity Master Plan). 4. The funds from the parent project (US$20 million IDA grant) can be used to finance preparatory activities only for those regional energy projects that would be carried out on the territories of at least one IDA country (in good standing2 with IDA). Some of the identified regional priority projects, which preparation is to be supported by SAPP AREP, include projects that would be carried out on the territories of only IBRD countries3 and/or Zimbabwe (currently in arrears with IDA), even though the SAPP as a whole and other IDA member countries of the region would benefit from these projects as well. Therefore, the use of IDA funds from, and achieving fully the PDOs of, the parent project is significantly constrained. Given this constraint, the available financing from several development partners for advancing regional integration in the SAPP region, and their strong interest to utilize the SAPP AREP implementation framework (benefitting from its well-established technical and fiduciary capacity and the World Bank 1 SAPP member countries include Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mozambique, Namibia, the Republic of South Africa, Eswatini, Tanzania, Zambia, and Zimbabwe. 2 Currently, Zimbabwe remains in arrears with IDA and is therefore, not in good standing. 3 These include IBRD-only countries such as Angola, Botswana, Namibia, and the Republic of South Africa. 10 implementation support), a Multi-Donor Trust Fund (MDTF) was established to complement the existing IDA funds in advancing preparation of the regional projects. 5. The MDTF AREP was set up on October 14, 2016, for the benefit of the SAPP and Eastern Africa Power Pool (EAPP), to be administered by the World Bank. The objectives of the MDTF are aligned with the parent project objectives. An initial funding for the SAPP-focused activities was provided by Swedish International Development Cooperation Authority (Sida), through two windows: one executed by the World Bank (US$2.5 million) and another to be executed by the Recipient (SAPP) (US$8.5 million). This proposed AF is to process the Recipient-executed portion of the MDTF. 6. The proposed AF would maximize the development impact of the SAPP AREP by supporting scaling up of the activities under all three parts of the project. Specifically, the AF would finance (a) staffing and scaled-up operations of the restructured PAU of the SAPP Coordination Center (SAPP CC) under Part A of the project to support the increased number of regional priority projects supported by the SAPP; (b) preparation studies and analyses of an increased number of SAPP priority regional energy projects under Part B of the project, including those projects where the available IDA funding under the parent project cannot be utilized due to the constraints described in paragraph 4; and (c) analytical studies and analyses aimed at developing innovative regional solutions, technical assistance (TA), and capacity-building activities under Part C of the project to further augment the capacity of the SAPP and other regional institutions. 7. The proposed AF activities are fully consistent with the PDO of the SAPP AREP, which is to advance the preparation of selected priority regional energy projects in the SAPP participating countries. The PDO would therefore remain unchanged. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING A. Regional Context 8. The 15 countries comprising the SADC cover a large and diverse region with substantial growth potential but also major development needs. The Southern Africa region spans a vast geographical area of over 9 million km2 and is home to nearly 300 million people. The SADC was established in 1992 to promote socioeconomic integration as well as political and security cooperation among its members. A challenging economic geography poses major constraints to expanding growth and shared prosperity in the region. Out of its fifteen countries, six are landlocked, eight have populations below 15 million people, six have economies smaller than US$10 billion per year, and several rely on transnational river basins for their water resources. Among other African regional economic communities (RECs),4 the SADC presents the largest concentration of middle-income countries but also a striking disparity in the level of development of its members. The Republic of South Africa is the economic engine of the region, driving demand and market opportunities in Southern Africa and beyond. Angola, Botswana, Namibia, Mauritius, Seychelles, and South Africa have a gross domestic product (GDP) per capita well in excess of US$5,000. On the opposite side of the spectrum, there are a handful of low-income countries with a GDP per capita below US$1,000 and poverty rates among the highest in Africa. However, most of these low-income countries, including the Democratic Republic of Congo, Mozambique, Tanzania, Zambia, and Zimbabwe 4 The Economic Community of West African States (ECOWAS) in the west, the East African Community (EAC) in the east, the Common Market for Eastern and Southern Africa (COMESA) in the southeast. 11 are large or potentially large economies. Knitting these emerging economies more closely together would help create a larger market and greater economic opportunities in the region. 9. Amid continuing global uncertainty and prospects for modest growth in Africa,5 greater regional integration remains an untapped driver of growth. The SADC region (and Sub-Saharan Africa in general) needs to transform from the ‘first stage of development’6 where economies are factor driven and their competitiveness is based on factor endowments (unskilled labor and natural resources) to the second ‘efficiency-driven’ stage, where the competitiveness depends on higher education, frictionless labor markets, better-developed financial markets, adoption of new technology, and larger-size markets being available to firms. The potential benefits of regional integration run through each of these themes, by making markets bigger and addressing diseconomies of scale. Quality of governance, rule of law, a harmonized business environment, and policy consistency are also critical for the private sector to be a driver of regional integration. It is remarkable that regional integration has been constantly receiving broad-based political and public support, yet in the sectors such as infrastructure and energy despite some progress with building up regional infrastructure, significant gaps remain in providing affordable, reliable, and sustainable energy supply, limiting economic growth potential. 10. The 2016 Regional Integration Index for Africa7 ranks the SADC as one of the highest scoring RECs in Africa. This index provides a composite picture of the relative levels of integration across five dimensions: (a) productive integration (share of intra-regional intermediate goods exports and imports); (b) trade integration (levels of customs duties and share of intra-regional goods imports and exports); (c) regional infrastructure (Infrastructure Development Index, intra-regional flights, regional electricity trade, and average cost of roaming); (d) financial and macroeconomic integration (convertibility of currencies and inflation rate differential); and (e) free movement of people (visa on arrival for REC nationals, ratification of protocol on free movement, and REC nationals who do not require visa for entry). The average relative score for the Sub-Saharan African RECs, on a scale of 0 to 1, is 0.484. The EAC and SADC score the highest relative scores among the RECs in terms of the levels of integration. According to the 2016 index, South Africa from the Southern African region is unsurprisingly the most ‘deeply and broadly’ integrated country. However, there is strong, yet unrealized, potential for the following countries in the region to integrate more by steering their economies toward the region—Angola, the Democratic Republic of Congo, and Tanzania. B. Sector Context 11. Significant economic growth potential of the region remains largely unrealized, considerably constrained by the lack of reliable, affordable, and sustainable energy supply. Inability to provide affordable and sustainable power service to households and businesses is a key constraint to industrial development, economic growth, and efforts toward reducing poverty and inequality. Despite the abundance of energy resources in the region, inadequate power supply and lack of cross-border interconnections present a major constraint to the region’s ability to meet its power needs. In addition to rich thermal resources, the region has substantial hydro potential, located in the Democratic Republic of Congo on the Congo River; the Zambezi Basin countries of Zambia, Zimbabwe, Mozambique, and Malawi; 5 Regional Integration Strategy Progress Report, World Bank, 2018. 6 Africa Competitiveness Report, World Bank, 2015. 7 Prepared by the African Union, African Development Bank, and United Nations Economic Commission for Africa (UNECA) in 2016. 12 Central Angola; Northern Namibia; and Tanzania. There is a large unutilized potential for solar and wind power across the Southern African region. Many of the SAPP countries do not have sufficient generation capacity, translating into eight of the 12 SAPP countries having a shortfall in meeting their current demand. Furthermore, in the medium to long term, the demand (see Figure 1) is expected to pick up and is projected to increase by 2.5 times8 by 2040, driven primarily by industry (mining and manufacturing sectors), as well as through households (active electrification efforts ongoing in many of the countries in the region). With higher demand growth expected in low-electricity access countries (Angola, Malawi, Mozambique, and Tanzania), without action to unlock new generation and greater power trade, the region may lose up to 4 percent of GDP annually because of unmet power demand and higher costs of power supply, reducing economic investment, productivity, and employment.9 Figure 1. Peak Demand Projections of the SAPP Source: SAPP Pool Plan 2017. Figure 2. Access to electricity (% of population) 12. Inadequate electricity access poses a major challenge to SADC member countries in ECA 100% realizing their development aspirations. It also North America 100% impedes the progress toward achievement of MENA 98% the World Bank’s twin goals of ending extreme LAC 98% poverty and boosting shared prosperity in World 87% Southern Africa. Electricity access rates in the South Asia 86% region, on average, are among the lowest in the Sub Saharan Africa 43% world and lower that the average for sub- SAPP 37% Saharan Africa, with only 37 percent of SAPP, excluding RSA 27% population having access to electricity (see Figure 2). Excluding Republic of South Africa (RSA), average access rate in the region falls to 27 percent. Progress towards increasing access has also been slow. Almost 200 million out of the 315 million in the region are not electrified; the Democratic Republic of Congo and Malawi report rates below 15 percent.2 In all these countries, expanding electricity access is critical to complement poverty reduction efforts and thus is at the core of their national development plans. Making the power supply more affordable would facilitate efforts to increase access 8 In base case scenario, SAPP Pool Plan 2017. 9 Bacon, R., and M. Kojima. 2016. “Energy, Economic Growth, and Poverty Reduction.” Working Paper, World Bank, Washington, DC. 13 to electricity as lower-income population would be able to pay for modern electricity services and make industry more competitive, promoting industrial and economic development. While there are various off- grid electricity access solutions being planned and implemented, there is a significant proportion of the population who will need on-grid power supply for productive uses, and industry will almost exclusively rely on the on-grid supply or self-supply. 13. Regional integration is an untapped driver of growth and increasing regional integration in the power sector can help improve security of supply and enable lower cost generation, supporting the regional effort towards increasing electrification. The regional integration of power systems and regional electricity trade can provide opportunities for countries to access lower-cost power supply options due to the diversity of resources and differences of supply and demand patterns in various parts of the Southern Africa region. Increases in connections to households and businesses require more electricity flowing into transmission and distributions systems uninterrupted. Cross-border interconnections are critical to allow countries to access more reliable and cost-efficient supply from neighboring countries. In the past years, deficient power infrastructure has affected poverty reduction and economic development in the SADC region more than in other African regions. 14. Furthermore, the full integration of the SAPP countries’ power systems and the development of power trade could bring cumulative savings of over US$42 billion in investment and operating costs for the region till 2040 and have a transformative impact. The integration of power systems can substantially complement the national level efforts by helping countries to access lower-cost generation and achieve increased security of electricity supply. Increasing access will require more electricity flowing into transmission and distributions systems uninterruptedly. Cross-border interconnections are, in many countries, key contributors to allow countries to access to a diversified pool of resources, mitigate risks and access to potentially more reliable and cost-efficient supply from neighbors – especially during periods of supply interruptions due to technical and climate factors. Regional-level initiatives – those focused on increasing regional integration – can be designed to complement the national-level ones. Regional integration in the power sector still requires substantial investments from national governments, but planning, investment and coordination at a regional level can help attain and amplify country-level socio-economic benefits. The latest estimates from SAPP Pool Plan 2017 reveal that full integration would result in cumulative savings of over US$42 billion in investment and operating costs for the region till 2040 over the business-as-usual case of each country implementing their national plans.10 15. SADC member countries created the SAPP to achieve their vision of full integration in the power sector by providing common power grid (hard infrastructure) and a common market for electricity (soft infrastructure) for their member countries. To better facilitate this integration, the SADC passed its Protocol on Energy in 1996. This protocol11 (being updated currently) acts as a policy framework for effective use and development of energy in the region, including in the electricity sector. The SAPP was created in August 1995 at the SADC Summit through signing of an Intergovernmental Memorandum of Understanding (IGMOU). The utilities of 12 Southern African countries were the original members of the 10 Source: SAPP Electricity Master Plan (Pool Plan 2017). 11 The Protocol on Energy advises SADC member states to cooperate on electricity usage and development by (a) promoting power pooling and trade; (b) promoting integrated resource planning, taking advantage of economies of scale to optimize investment and benefits; (c) coordinating a Regional Electricity Master Plan; (d) promoting regional standards, rules, and procedures that relate to electricity generation, transmission, and distribution; (e) developing and using electricity in an environmentally sound manner, with projects following basic environmental standards; (f) emphasizing universal access to electricity for all citizens of SADC member states; and (g) encouraging agreements, both inside and outside the region, on regional electricity development and trade. 14 SAPP. Currently there are 17 members in the SAPP with three private sector entities (Copperbelt Energy Corporation, Lunsemfwa Hydro, and Ndola Energy Corporation) and two special purpose vehicles formed for regional generation and interconnection (Hidroeléctrica de Cahora Bassa [HCB] and the Mozambique Transmission Company [MOTRACO]) as members. The main grid systems of Botswana, the Democratic Republic of Congo, Lesotho, Mozambique, Namibia, the Republic of South Africa, Eswatini, Zambia, and Zimbabwe form the existing regional network. Angola, Malawi, and Tanzania are not yet connected to the common grid and are therefore not able to benefit from the regional trade. For those that are connected, there are two market mechanisms used to promote regional trade across the SAPP: medium-to-long-term bilateral power purchase agreements and the SAPP competitive electricity trading platforms where intra- day, day-ahead, weekly, and monthly contracts are actively traded. 16. Over time, the SAPP has made substantial progress toward a well-established and credible regional institution pursuing SADC regional integration agenda in the electricity sector. The SAPP is the most advanced power pool in Africa12 and is uniquely positioned to drive regional energy projects. As a regional organization created by the SADC, the SAPP enjoys the same legal status of a regional institution. The SAPP has strong convening authority among its members and can play a key catalytic role in bringing together national and regional stakeholders. It is becoming heavily involved in the coordination of subregional power planning and now has an established role in supporting the development of regional projects and especially interconnections between its members’ respective networks. The SAPP has a sound governance structure, with its key establishing agreements and operating guidelines signed by both members’ governments and utilities. The SAPP CC is headquartered in Harare, Zimbabwe, and monitors operations and transactions within the pool, controlling dispatching operations and serving as a trading center for electricity auctions and, as such, has become a credible and trusted partner to the utilities in the region. 17. However, there is an appreciation that, despite notable progress, there is still a substantial unfinished agenda in regional integration both in transmission and generation. The priority areas include (i) unlocking regional transmission infrastructure constraints; (ii) scaling up competitively priced renewable energy generation; and (iii) fast-track development and capacity building in the regional institutional and regulatory environment. To address the capacity constraints, the SADC, SAPP, and World Bank designed a specific program to handle the bottlenecks of project preparation capacity in delivering hard and soft infrastructure for the region. Regional energy projects generally require large financial and technical support from the public sector to make them bankable and able to attract private sector participation. On November 11, 2014, responding to a request from the SADC Secretariat and SAPP, the World Bank approved the SAPP AREP Program, with the objective to advance the preparation of selected priority regional energy projects in the SAPP participating countries. The SAPP AREP Program established a regional platform for project preparation, leveraging, and coordinating financing by multiple donors. In the SAPP region, grant funding for preparation, brought on by the AREP Program at a regional scale, was therefore critically important to support the SAPP and the utilities of the SAPP member countries for early- stage preparation of priority regional projects, which tend to be complex in their design. The AREP has also supported the SAPP in building its capacity to continue developing the regional competitive market. By supporting preparation of regional projects at the regional level, the AREP is a more efficient form of deployment of IDA than replicating efforts at the level of individual projects and countries. 12 The SAPP has the largest volume of power traded among other African Pools and the existence of a working competitive market to trade power for short-to-medium-term durations. 15 18. The World Bank supported capacity at SAPP, through the AREP Program, has established a suitable regional coordination ‘platform’ and attracted interest from development partners to channel funding from multiple donors through the MDTF. The implementation structure envisaged under the parent AREP included the establishment of a professional team within the SAPP CC, ownership by the region, clear procedures for identifying and approving investments eligible for preparatory support, established fiduciary capacity in financial management (FM), procurement, and safeguards procedures, and the due diligence carried out by the World Bank. The ‘platform’ modality is more efficient than other options as the experience of cross-border projects suggests that trying to arrange cofinancing or parallel financing by different sources on a project-by-project basis may impose prohibitive transaction costs and insurmountable coordination hurdles. Additionally, this AREP platform structure allows the SAPP to work more flexibly with a number of development partners (Norway, Sweden, the European Union [EU], German Development Bank [Kreditanstalt für Wiederaufbau, KfW], Development Bank of South Africa [DBSA], the African Development Bank [AfDB], and the U.S.13), benefitting from the capacity built that is expected to last beyond the duration of this project. 19. In addition, and to complement the AREP Program, the World Bank is also financing transmission and interconnection projects that establish cross-border transmission infrastructure to promote power trade within the SAPP and countries between the SAPP and EAPP. These include the recently completed Tanzania - Backbone Transmission Investment Project (P111598) and Kafue-Muzuma- Victoria Falls Regional Transmission Line Reinforcement Project (P124351) in Zambia and the recently approved AFCC2/RI-3A Tanzania-Zambia Transmission Interconnector (P163752), the first of the proposed series of projects. More transmission interconnection projects are under preparation, including the Zambian portion of the series of projects (Zambia-Tanzania Interconnector, P166099) and the Mozambique-Malawi Regional Interconnector Project (P164354). C. Performance of the Parent Project 20. The SAPP AREP PDO is to advance the preparation of selected priority regional energy projects in the SAPP participating countries.14 The PDO is measured by the number of priority regional energy projects whose preparation is advanced.15 21. Intermediate outcome indicators for the parent project are (a) Projects Acceleration Team staff recruited and operational; (b) Preparatory studies/activities for priority regional energy projects completed; and (c) Regional analytical studies completed. 22. The SAPP AREP Program has the following three components: (a) Part A: Setting up the Projects Acceleration Team (US$7 million). This component finances the establishment of the PAU that spearheads the preparation of the regional projects covering all the key functions (including technical and financial analysis, legal and transaction advice, environmental and social management, procurement, FM; and so on). As part of its 13 SAEP: Southern African Energy Program 14 The project does not finance any infrastructure construction. 15 The project is considered advanced when its development progresses from one preparation stage to another, through the development process stages, including concept, pre-feasibility, feasibility, financial close, and further to construction and operation. 16 functions, the PAU assesses and adjusts to the type of role it needs to play on a specific project, which may range from taking the lead on selected or all preparation activities to providing support to the concerned agencies and ensuring that preparation effectively serves the needs of project stakeholders. (b) Part B: Project Preparation Funds (US$10 million). This component finances project preparation support activities, including technical, economic, and financial feasibility studies; environmental and social assessments; preparation of legal documentation and financial transaction advisory services, especially related to commercial negotiations; stakeholder consultations; and so on. Depending on the stage of the process, the funds are used independently or jointly with the funds of a project sponsor to advance project preparation. (c) Part C: Regional Analytical Support (US$3 million). The funds in this component are to allow the SAPP to engage with its members on regional planning issues and to support critical analytical work for advancing preparation of critical projects, including building a solid knowledge base for investment decisions and helping ensure long-term sustainability of investments. A key task is the preparation of the Regional Electricity Master Plan (SAPP Pool Plan) with a view to adjust investment decisions to the changing conditions of the regional power market and identify projects that remain high priority under all likely circumstances. Outputs of such studies and TA activities are provided to the SADC Secretariat as part of the information flow to SADC ministers with a view to informing policy decisions. 23. The overall progress of the SAPP AREP toward the achievement of PDO has been consistently rated Satisfactory over its implementation. Despite the initial delays16 and long start-up time typical in regional projects, coupled with challenges of fully staffing the PAU, all three components have advanced considerably and satisfactorily. The SAPP has established a functioning and staffed PAU. Significant progress is made to advance preparation of five priority regional projects, with three of them ready for implementation (refer to Table 1). The SAPP Pool Plan is completed, endorsed by SAPP and member utilities, adopted by the SADC Ministerial Meeting in June 2018, and officially launched in November 2018. A regional Environmental and Social Management Framework (ESMF), which includes the Resettlement Policy Framework (RPF) and the Indigenous Peoples Planning Framework (IPPF), is developed, consulted, endorsed, and disclosed. The SAPP-EAPP Interconnection Study is completed, following the final workshop attended by over 30 utilities, and is published, with the detailed implementation workplan. The SAPP is working on several innovative regional market development instruments (e.g. power capacity market, energy balancing market), aiming at increasing regional power trade through better functioning regional markets and overcoming the current obstacles to scale it up. Under the AREP Program, the SAPP is also developing a concept of the Regional Transmission Infrastructure Financing Facility (RTIFF), an innovative solution to holistically address the regional transmission constraints by developing a mechanism of equitably sharing costs and benefits of regional infrastructure and channeling pooled financing from public resources, development partners, and private sector. 24. The SAPP AREP Program has had substantial impact in consolidating the efforts of advancing regional energy projects and building capacity at the SAPP. The program serves as a coordination platform for various development financial institutions, and as it is increasingly serving a coordinating role 16 12-month implementation delay due to an 18-month leadership vacuum (due to sudden passing of the then SAPP CC manager). 17 for major interconnection projects, it has received grant funding for preparation and packaging of specific projects from several development institutions such as the DBSA, AfDB, and the Governments of Norway and Sweden, among others. The SAPP is now leading the design and development of several regional projects, utilizing funds from the World Bank and other cofinancing development partners. 25. The implementation progress is currently rated Moderately Satisfactory due to the lower-than- planned disbursement of funds, originating from the delayed effectiveness of the project and slow disbursement in initial years of the project post effectiveness as the Projects Acceleration Team was being set up. While the cumulative disbursement currently stands at 39 percent, disbursement is ramping up as the pace of project execution continues to increase. With the established PAU, progress in project development, finalization of several key analytical reports, and the utilization levels are expected to increase substantially. 26. Part A: Setting up the Projects Acceleration Team. The PAU, as was originally envisioned, has been operational since August 2015 and is fully staffed with a senior transaction adviser (also the head of unit), transaction adviser, procurement specialist, an environmental and social development specialist, and an FM specialist. For ease of logistics among the SAPP participating countries and utilities and to facilitate access to the region’s financial hub, it was originally decided that the PAU would be based in Johannesburg. To ensure the PAU’s long-term sustainability, a decision was made by SADC Council of Ministers and endorsed by SAPP Executive Committee (EXCO) in July 2017 to co-locate the PAU function with the SAPP CC in Harare while still maintaining the “satellite office” in Johannesburg to allow it to access the proximity to regional financial institutions and utilize as the logistical hub. Also, to better handle the increasing list of priority regional projects it was decided to revamp the PAU structure and add more transaction staff. 27. Part B: Project Preparation Funds. This component supports financing of the requisite technical, economic, and financial feasibility studies, including environmental and social impact assessments for priority regional energy projects. The current pipeline of regional projects in the SAPP consists of twelve priority regional energy projects. To overcome restrictions on the use of the IDA grant, the SAPP has undertaken efforts to mobilize funding from other development partners to support preparatory studies, but a significant gap remains that can be supported by this AF. Table 1 reflects the regional priority projects, in which the IDA resources from the parent project are utilized for the preparatory studies, along with other co-financiers. Table 2 shows projects where the AF from the MDTF can provide much-needed funding for preparatory studies currently being sourced on a project-by-project basis from development institutions other than IDA. Table 1. Project Pipeline to Utilize IDA Resources Status at Current Status Preparation Funding Name Effectiveness Countries (June 2019) Source (November 2015) The Democratic Luapula Hydro 1 Concept Pre-feasibility IDA/KfW/DBSA Republic of Power Project Congo and Zambia Mozambique- Mozambique 2 Zambia Concept Feasibility AfDB/USTDA/IDA and Zambia Interconnector 18 Status at Current Status Preparation Funding Name Effectiveness Countries (June 2019) Source (November 2015) Commercial agreements Mozambique- signed in April 2019. Malawi and 3 Malawi Feasibility IDA/Norway Expected IDA financing Mozambique Interconnector approval in Q4, FY19 Final design studies Zambia- ongoing. Financing Tanzania-Kenya approved for Tanzanian Tanzania and 4 Feasibility IDA/EU (ZTK) portion; Zambian Zambia Interconnector portion is expected to be delivered in FY20 Temane Regional Expected IDA financing IDA/AfDB/Norway/ 5 Feasibility Mozambique Electricity approval in Q4, FY19 Private sector Project Table 2: Projects Pipeline not Utilizing IDA Resources Status at Preparation Name Current Status Countries Effectiveness Funding Source 1 Zimbabwe, Funding obtained ZIZABONA Zambia, Feasibility for Zimbabwe- AfDB Interconnector Botswana, and Zambia portion Namibia The Democratic Kolwezi-Solwezi 2 Concept Feasibility NEPAD IPPF/AfDB Republic of Interconnector Congo and Zambia 3 Mozambique, MOZISA Transmission Zimbabwe, Concept Feasibility DBSA/IIPSA Interconnector and South Africa 4 Botswana-South Africa Botswana and (BOSA) Transmission Concept Feasibility DBSA/EU PPDF South Africa Interconnector 5 Angola-Namibia DBSA/EU PPDF/ Angola and (ANNA) Transmission Concept Feasibility NORAD/Sida Namibia Interconnector 6 Mozambique-Tanzania Mozambique Concept Concept NEPAD IPPF/AfDB Interconnector and Tanzania 7 Central Transmission Corridor (Alaska- Pre-Feasibility Feasibility NEPAD IPPF Zimbabwe Sherwood) 28. Given that a number of pipeline projects have progressed from concept stage to feasibility and/or pre-appraisal stage, the SAPP is initiating establishment of two panels of experts—environmental/social and technical—to assist in better preparation of these projects by receiving overall guidance related to technical and social/environmental safeguards-related issues. 19 29. Part C: Regional Analytical Studies. This component supports regional planning undertakings and the analytical work necessary to advance the priority regional energy projects. A key task under this component was the finalization of the SAPP Pool Plan, leading to more sustainable and harmonized planning practices in the region informing prioritization of the national plans of the member countries. It has been completed following extensive consultations with a broader set of stakeholders (for example, SADC, member countries’ governments, respective energy ministries, development partners, and civil society) and its findings endorsed by the SADC Ministerial Meeting in June 2018. The SAPP Pool Plan was publicly disclosed and disseminated at a well-attended workshop in November 2018. Further, the Project Development Readiness Assessment (PDRA) tool, to enable utilities to assess their own projects, has been completed and disseminated among the SAPP utilities and is being rolled out. The SAPP/EAPP Interconnection Impact Assessment Study mapping out steps to connect the power systems of Southern and East Africa has been completed as well. A number of other regional studies, aiming to facilitate development of regional projects by exploring innovative solutions—Regional Renewable Energy Integration Study, Regional Transmission Financing Study—are under implementation. Finally, the SAPP regional ESMF, which includes the RPF and IPPF, has been developed, approved, and disclosed on the SAPP website on September 20, 2018 and on the World Bank website on October 1, 2018. Due to completion of high impact studies and TA activities, achieving the intended results, the implementation of the component is rated Highly Satisfactory. 30. Project fiduciary assessment. In view of the newly approved PAU structure for which staffing is currently under way, a project fiduciary assessment was carried out in July 2018, and the fiduciary functions were found to be adequate to support the project. The project’s audit was undertaken as part of the SAPP’s overall financial statements audit for the period ending March 31, 2017. Both procurement and FM risk ratings are Moderate and their performance ratings are Satisfactory. 31. Reporting, monitoring, and evaluation. The SAPP CC has the overall responsibility for monitoring and evaluating project components/activities in accordance with the indicators included in the Results Framework and Monitoring attached as Annex 1. The monitoring and evaluation arrangements under the project are satisfactory. Project monitoring reports have been submitted on time according to the Financing Agreement requirements and are of adequate quality. 32. Legal covenants. The SAPP is in compliance with all legal covenants. Specifically, the SAPP complied with an appointment of external and internal auditors and that of an environmental and social safeguards specialist for the Project Acceleration Team in accordance with the conditions stated in the Financing Agreement. 33. Safeguards. A safeguards capacity assessment was carried out in June 2018, with the safeguards performance rated Satisfactory. Given the potential impact of the regional projects being supported by the AREP Program, the safeguards risk is rated Substantial. While the parent project does not finance any physical structures or activities that would have direct environmental or social footprints on the ground, it includes development of feasibility studies and technical designs for potential new generation and transmission projects that may have significant potential environmental or social impacts should these investments materialize. Therefore, it triggered OP/BP 4.01- Environmental Assessment (EA) and was classified as safeguards category ‘A’ (full assessment). As outlined above, the ESMF was finalized under Part C of the project. The proposed AF will retain the same EA category. 20 D. Rationale for Additional Financing 34. The proposed AF aims to expand and scale up the activities under all three parts of the AREP Program and maximize its development impact and intended results. Specifically, the AF would support (a) increased staffing of the restructured PAU of the SAPP CC under Part A of the project, to enable preparation support for the increased number of regional priority projects now supported by the SAPP; (b) preparation of an increased number of priority regional energy projects under Part B of the project, including the projects that cannot utilize the available IDA funding (refer to Table 2) under the parent project due to the constraints outlined earlier; and (c) supplementing of the analytical studies, TA, and capacity-building activities under Part C of the project to further augment the capacity of the SAPP and other regional institutions in progressing toward regional integration in the power sector. 35. The SAPP’s operating environment has been going through substantial changes recently with rapidly increasing regional power competitive trading volumes and bolstered market confidence in the regional market. Compared to 2013/14, when the AREP Program was approved, the amount of competitively traded energy in 2017/18 increased fourfold (exceeding 2,000 GWh and amounting to over 25 percent of the overall power trade in the region). However, important impediments to regional power trade persist, including constraints in ‘hard’ (transmission) and ‘soft’ (legal/regulatory/institutional capacity) infrastructure. Last year, about 1,800 GWh of energy was matched (that is, was available for trade) but could not be traded due to transmission constraints in the SAPP network. This is significantly higher than 20 percent recorded in the previous year 2015/16 (see Figure 3). These developments have led to a renewed realization of the importance of addressing existing impediments to promote regional power trade, both in ‘hard’ (physical) infrastructure and ‘soft’ infrastructure (for example, legal/regulatory framework and competitive trading platforms). Additionally, there is clarity now on the pipeline of priority projects being supported by the SAPP as opposed to when the parent project was approved. A number of these priority projects face the constraints of not being able to utilize the available funding under the parent project, thus delaying preparation. The AF can help progress the preparation of these projects to accelerate removal of transmission bottlenecks. Figure 3. SAPP Competitive Market Supply and Demand Trends Source: SAPP. 21 36. The parent project—SAPP AREP Program—has been and remains a successful intervention in supporting the SADC vision of full integration by providing common power grid (hard infrastructure) and a common market for electricity (soft infrastructure) for their member countries. This activity remains highly relevant and crucial for the SADC and SAPP, as the SADC institution, in expanding the SAPP’s role of the anchor for regional energy integration and continuing developing the regional competitive market. The PDOs are fully supported by the SADC and SAPP, as reflected in the concluding decisions of the annual SADC Energy Ministerial Meetings and the meetings of the SAPP Executive Committee. The program implementation has been mainly satisfactory and the implementation progress, despite the initial delays, has picked up. The program was also successful in establishing a widely accepted regional platform for project preparation, capable of leveraging and coordinating financing by multiple donors. 37. To complement the IDA funding and to channel the financing from several multilateral and bilateral development partners interested in utilizing the SAPP AREP platform, the MDTF has been established. The implementation structure under the AREP (including the establishment of a functioning and effective PAU and clear and adequate FM and procurement procedures) presents an effective and convenient recipient-owned ‘platform’ for interested development partners. E. Links to Country Partnership Strategy 38. The proposed AF is fully aligned with the SADC vision, reflected in its Protocol on Energy and supports its long-term development strategies, such as the SADC Regional Indicative Strategic Development Plan and the SADC Industrialization Strategy.17 The current SAPP interconnected system will not be able to fully support the SADC Industrialization Strategy, which aims for its members to (a) increase public investment in energy provision both for domestic use and export to regional partners through the SAPP; (b) step up the involvement of independent power producers to ease the burden on government investment spending; (c) address reliability, efficiency, and cost-effectiveness of energy supply; (d) exploit alternative sources of energy with a focus on renewables; (e) pay attention to energy pricing efficiency within the context of deeper regional cooperation by drawing on lower-cost regional supplies where practicable, rather than focusing on national self-sufficiency; and (f) fast-track new generation and transmission projects. With the AF, the AREP Program remains aligned with the goals and strategies of relevant regional and sub regional organizations including the New Partnership for Africa’s Development (NEPAD). The SAPP AREP is consistent with NEPAD’s development strategy for regional integration of infrastructure and notably in the energy sector, recognizing the SAPP as a framework for integration. 39. As with the parent project, the AF is designed to contribute to the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity. In most of the Southern African countries, low electricity access at the household level is a main factor in their inability to improve their livelihood. The lack of electricity constrains the delivery of the most basic social services and causes inequality and exclusion within the society, especially among the poorer groups. At present, insufficient and unreliable electricity supply is also affecting productivity and investment climate in Southern African economies, reducing opportunities for attracting investments, expanding production, and creating jobs in the process. By advancing preparation of priority regional energy projects, the proposed project will ultimately contribute to unlocking the region’s energy potential and ensure expanded, reliable, and sustainable electricity services to the benefit of Southern African people and firms. It will support and contribute toward achievement of the World Bank twin goals of ending extreme poverty and boosting shared 17 SADC Documents and Publications, http://www.sadc.int/documents-publications/key-strategies. 22 prosperity. The project is fully aligned with the 10-year vision in the World Bank Group Africa Regional Strategy (Report No. 121912-AFR) and the Energy Sector Directions Paper (Report No. 79597). By increasing the bankability of regional projects, the AREP Program will enable larger private investments in energy and is, therefore, consistent with the World Bank’s Maximizing Financing for Development approach by supporting and facilitating participation of the private sector. 40. The project is also consistent and aligned with the World Bank’s Regional Integration and Cooperation Strategy for Sub-Saharan Africa (RICAS).18 The project is aligned with the RICAS Strategic Priority 2 of the World Bank Group Support for Regional Integration to ‘develop functioning regional markets in identified priority sector’. As identified, some sectors are ripe for adopting a sector-wide approach to integration such as the energy sector, among others, where opportunities for deepening integration exists. This priority also builds on the World Bank Group’s ongoing support and the priorities of the REC and private sector. Unless there are functioning regional markets, some of the regional infrastructure investments and commitments made by countries would be sub-optimally utilized. To illustrate, currently there are pending payment obligations by power purchasing countries to power selling countries, which, if left unaddressed, could undermine the confidence in regional power pools. Furthermore, RICAS also advocates working with partners and mobilizing a coordinated donor support to client countries, which is exactly one of the objectives of the regional MDTF platform for projects preparation envisaged under the AREP Program, expecting to leverage and coordinate financing by multiple donors. III. PROPOSED CHANGES Summary of Proposed Changes The proposed AF would expand and maximize the development impact of the SAPP AREP by supporting scaling up of the activities under all three components of the project. Specifically, the AF would support (a) staffing and scaled-up operations of the restructured PAU of the SAPP CC under Part A of the project; (b) preparation studies and analyses of an increased number of SAPP priority regional energy projects under Part B of the project, including those on the territories of the SAPP participating countries that are not eligible to receive IDA resources; and (c) analytical studies and analyses aimed at developing innovative regional solutions, additional TA and capacity-building activities of the current Part C of the project to further support the capacity of the SAPP and other regional institutions. Correspondingly, the disbursement estimates, and costs of various components are updated. An Eligible Expenditure category for the MDTF Additional Financing will be utilized for the activities supported by the proposed AF – so that the existing IDA funds under the parent project do not get used to support preparation of priority regional energy projects on the territories of the SAPP participating countries that are not eligible to receive IDA resources. The contracts to be financed by AF will utilize the new Procurement Regulations (2017), while all contracts that were initiated before the AF will continue to follow the older procurement guidelines. The Recipient and Implementing Agency (SAPP) has prepared 18 Supporting Africa’s Transformation: Regional Integration and Cooperation Assistance Strategy, World Bank Report No. 121912. 23 the Project Procurement Strategy Document (PPSD) and the Procurement Plan for the AF. At the time of preparation of the parent project, the pipeline and nature of supported regional projects had not yet been established, so the parent project only triggered OP4.01 – Environmental Assessment. Given the implementation experience of the parent project so far, the established clarity on the types of regional projects SAPP AREP is expected to support, and the completion of the ESMF, the list of triggered safeguard policies is updated as well. The results framework is updated with scaled up original target indicators to reflect the project’s increased scope. Additionally, an opportunity has been identified to assess the project-relevant gaps between males and females related to the staff footprint associated with the SAPP and the preparation of priority regional energy projects. To initiate this work a mapping will be conducted of the opportunities to address occupational sex segregation, and also opportunities identified to enhance women’s participation in the capacity building activities, study tours and other activities being funded by the project activities across the SAPP. Therefore, in the Results Framework, an indicator on “Number of staff from SAPP and regional institutions trained” is gender disaggregated to report on how many women attended/were trained. A target of just below 50 percent of women obtaining training has been set to enhance the opportunities for female staff to develop relevant skills and advance in their careers. Finally, the closing date is extended by three years (from November 30, 2019 to November 30, 2022) to accommodate implementation of the scaled-up activities. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ X ] No [ ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ X ] No [ ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] 24 Change in Procurement Yes [ X ] No [ ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Development Objective/Results PHHHDO Project’s Development Objectives Original PDO The Project Development Objective is to advance the preparation of selected priority regional energy projects in the Southern African Power Pool participating countries. Change in Results Framework PHHCRF Explanation: The proposed AF would maximize the development impact of the SAPP AREP by supporting scaling up of the activities under all three components of the project. Therefore, the end targets for the existing indicators have been updated as follows: • The number of priority project being prepared increased from 3 to 6; • Number of PAU staff increased from originally targeted 7 staff to 8 to accommodate the staff recruited under the revised structure of the PAU; • Number of preparatory studies/activities for priority regional energy projects increased from 10 to 15 to include the additional priority projects being prepared; and • Number of regional analytical studies increased from 2 to 4. Additionally, a new gender-disaggregated results indicator is added, measuring the number of staff from regional institutions receiving capacity-building support under the AREP (including the percentage of which are women). Compliance Change in Safeguard Policies Triggered PHHCSPT Explanation: The proposed AF will finance the same type of activities as under the parent project and does not introduce new social and environmental risks. As a TA project it will not finance any physical structures or activities that could have direct environment or social footprints on the ground. However, it will include developing feasibility studies and technical designs for potential new power generation and transmission projects that may have significant potential environmental or social impacts, if these investments materialize. Therefore, no change in the safeguards classification is proposed and it will remain category “A” (full assessment). Given that, at the time of preparation of the parent project, the pipeline and nature of supported regional projects had yet to be established, the parent project only triggered OP4.01 – Environmental Assessment. It was expected that, once the nature and types of the projects to be supported by the AREP Program were established and the regional ESMF developed, the respective safeguards policies would be triggered. Implementation experience during the parent project has now provided greater clarity on the types of power projects, whose development the AREP Program is expected to support that includes transmission interconnection projects and renewable energy and 25 hydropower generation projects. Furthermore, a detailed regional ESMF was prepared, consulted and adopted. Therefore, the proposed AF will trigger the following relevant safeguards policies. Current and Proposed Safeguard Policies Current (from Current Proposed (from Additional Triggered: Parent ISDS) Financing ISDS) Environmental Assessment (OP) (BP 4.01) Yes Yes Natural Habitats (OP) (BP 4.04) No Yes Forests (OP) (BP 4.36) No Yes Pest Management (OP 4.09) No Yes Physical Cultural Resources (OP) (BP 4.11) No Yes Indigenous Peoples (OP) (BP 4.10) No Yes Involuntary Resettlement (OP) (BP 4.12) No Yes Safety of Dams (OP) (BP 4.37) No Yes Projects on International Waterways (OP) (BP No Yes 7.50) Projects in Disputed Areas (OP) (BP 7.60) No No Performance Standards for Private Sector No No Activities OP/BP 4.03 Covenants - Additional Financing (Additional Financing for SAPP AREP Program - MDTF - P163545) Source of Finance Description of Funds Agreement Date Due Recurrent Frequency Action Covenants Reference The Recipient shall ensure that the carrying out of technical design studies for hydropower generation sub- Schedule 2, projects FSAF New Section I.4 involving international waterways under the Project are financed out of the proceeds of the Grant only after such 26 studies have been notified to the other riparians in accordance with the World Bank’s Policy on International Waterways. By no later than three (3) months after the Effective Date, the Recipient shall establish, and thereafter maintain throughout the period of Schedule 2, implementation FSAF New Section I.5 of the Project, a SAPP panel of experts for Project-related technical/dam safety/environm ental/social matters in a manner satisfactory to the World Bank. The Recipient shall ensure that a financial management system is Schedule 2, FSAF maintained in New Section II.B.1 accordance with the provisions of Section 2.07 of the Standard Conditions. 27 The Recipient shall ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank not Schedule 2, FSAF later than forty- Quarterly New Section II.B.2 five (45) days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the World Bank. The Recipient shall have its Financial Statements for the Project audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each Schedule 2, audit of the FSAF Yearly New Section II.B.3 Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the WB not later 28 than six (6) months after the end of such period. The Recipient shall maintain the existing external auditor and an internal Schedule 2, auditor, all with FSAF New Section II.B.4 qualifications and experience and under terms of reference acceptable to the World Bank. Conditions Source Of Fund Name Type FSAF Duly authorization or Effectiveness ratification of the Agreement execution and delivery. Description of Condition The execution and delivery of this Agreement on behalf of the Recipient have been duly authorized or ratified by all necessary governmental and corporate action. Source of Fund Name Type FSAF Updating of Project Effectiveness Implementation Manual. Description of Condition The Project Implementation Manual has been updated by the Recipient in a manner acceptable to the World Bank. Risk PHHHRISKS Risk Category Rating (H, S, M, L) 1. Political and Governance Moderate 2. Macroeconomic Substantial 3. Sector Strategies and Policies Substantial 4. Technical Design of Project or Program Substantial 5. Institutional Capacity for Implementation and Sustainability Substantial 29 6. Fiduciary Moderate 7. Environment and Social Substantial 8. Stakeholders Substantial 9. Other Substantial OVERALL Substantial Finance Loan Closing Date - Additional Financing (Additional Financing for SAPP AREP Program - MDTF - P163545) Source of Funds Proposed Additional Financing Loan Closing Date 30-Nov-2022 Loan Closing Date(s) - Parent (AFR RI-SAPP-Program for Accelerating Regional PHHCLCD Energy/Transformational Projects - P126661) Explanation: The closing date proposed to be extended by 36 months (from current closing date of November 30, 2019 to proposed revised closing date of November 30, 2022) to allow implementation of the scaled up activities and to attain the PDO indicators, as reflected in the updated Results Framework. Status Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Date Date Date Date(s) IDA-H9890 Effective 30-Nov-2019 30-Nov-2019 30-Nov-2022 Change in Disbursement Arrangements PHHCDA Explanation: The proposed AF would expand and maximize the development impact of the SAPP AREP by supporting scaling up of the activities under all three components of the project. Hence, an Eligible Expenditure category for the activities supported by the proposed AF is created – so that the existing IDA funds under the parent project do not get used to support preparation of priority regional energy projects on the territories of the SAPP participating countries that are not eligible to receive IDA resources. Change in Disbursement Estimates (including all sources of Financing) Explanation: The disbursement estimates changed due to change in the closing date and the additional financing amount considered. The estimates reflect the Additional Financing and the remaining balance of the parent project. Expected Disbursements (in USD Million) (including all Sources of Financing) Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Annual 0.80 1.70 2.30 2.80 5.50 6.80 5.60 3.00 0.00 0.00 Cumulative 0.80 2.50 4.80 7.60 13.10 19.90 25.50 28.50 0.00 0.00 30 Allocations - Additional Financing (Additional Financing for SAPP AREP Program - MDTF - P163545) Disbursement % (Type Source of Allocation Currency Category of Expenditure Total) Fund Proposed Proposed Category 1 (AF) Goods, consultants’ services, non-consulting services, FSAF USD 8.50 100.00 Training and Incremental Operating Costs under the Project. Total: 8.50 Components Change to Components and Cost PHHCCC Explanation: No changes in components are envisioned, although the components’ funding allocations will increase. The proposed AF will complement existing financing under the AREP’s three existing components with an increased funding in proportion to the revised results framework. The Part C is renamed as Regional Analytical Studies and Capacity Building and will include the following additional activities: Provision of support to carry out regional analytical studies and build regional capabilities, including, inter alia : (a) carrying out further studies and implementation of recommendations of the SAPP regional master plan (pool plan); (b) institutionalize the Project development readiness assessment; (c) carrying out further studies and analysis originated out of the on-going transmission integration study along with related workshops; (d) carrying out a regional variable renewable energy integration study; (e) update of the SAPP website and regional institutions; (f) develop a SAPP financing mechanism/guarantee facility; (g) implementation of the recommendations originated out of the SAPP/European Network of Transmission System Operations for Electricity twining arrangements and others with similar regional and international organizations; and (h) building capacities within SAPP and other regional organizations, including, developing strategic plans, mission and vision statements. Current Component Proposed Component Current Cost Proposed Cost Action Name Name (US$M) (US$M) Setting up the Project Setting up the Project 7.00 8.50 Revised Acceleration Team Acceleration Team Project Preparation Project Preparation 10.00 15.00 Revised Funds Funds 31 Regional Analytical Analytical support to Studies and Capacity 3.00 5.00 Revised SAPP Building Total: 20.00 28.50 Other Change(s) PHImpleme Del Implementing Agency Name Type Action South Africa Power Pool Implementing Agency No Change Change in Procurement Explanation: The contracts to be financed by the AF will utilize the new procurement guidelines, updated in August 2018, and a procurement plan for the AF is provided. All the contracts that were initiated before the AF will continue to follow the older procurement guidelines. The Recipient and Implementing Agency (SAPP) has prepared a Project Procurement Strategy Document (PPSD) and a Procurement Plan for the AF. Change in Implementation Schedule Explanation: Closing date proposed to be extended by 36 months (from current closing date of November 30, 2019 to proposed revised closing date of November 30, 2022). IV. APPRAISAL SUMMARY Economic and Financial Analysis 41. Supporting SAPP in preparation of priority regional energy projects will enable substantial regional power integration. Increased power sector integration and trade can bring significant potential gains for the Southern Africa region, including: (i) significant economic and financial savings through better use of the available resources and lowering required generation investments, allowing to focus the scarce public resources on other priorities such as electrification; (ii) better management of hydrological imbalances, improved system resilience and more effective response to short- and medium-term shocks; and (iii) benefits from a dynamic nature of regional power trade in an interconnected system where countries can both import and export, depending on the year, season, month or hour of the day. Nevertheless, despite the expected benefits, investment in regional energy projects in the SAPP region has been low in the past, due to various factors, including the lack of capacity in SAPP and member utilities. By addressing the existing capacity gaps this TA therefore is a key to supporting and enabling SAPP to unlock the benefits from regional power trade. 42. The economic analysis has been carried, following the same rationale and methodology used during the parent project appraisal, but reflects estimates of benefits based on the updated data. The economic benefits are divided into direct and indirect benefits: a. The direct benefits are the cost savings derived from the regional energy projects, with cost reductions expected to come from both better coordination among utilities and within SAPP, access to lower cost supply options, as well as better and faster preparation of regional projects. 32 b. The indirect benefits result from least cost optimizations prepared at a regional level. Doing so would lead to saving on generation costs, reduced reliance on expensive emergency power generation, reduced need for reserve generation capacity, and ability to optimize the generation mix by comparing costs between installing new generation on the national system versus importing power from other SAPP member countries. 43. SAPP recently updated a regional master plan (SAPP Pool Plan) with 2017-2040 planning horizon. The Pool Plan is endorsed by SADC Ministerial meeting and is agreed by all utilities in SAPP. The Pool Plan “identifies a set of generation and transmission investments to provide electricity supply in an efficient and economically, environmentally and socially sustainable manner.” It analyzed various scenarios, including (i) a “benchmark” case which was a combination of country-by-country expansion plans based on the national master plans extended (where necessary) to 2040 and (ii) a “realistic” case envisaging a generation and transmission expansion plan optimized on a regional basis but including a security criterion. This criterion requires for each country to have a sufficient installed capacity to meet its maximum demand by 2040. 44. Optimizing the generation and transmission investments at a regional level, including from the investments being prepared under this project, would lead to considerable savings for the overall SAPP region, translating into savings estimated at US$37 billion, or about 5 percent of SAPP’s current annual GDP. These savings represent a 13 percent reduction compared to the cost of optimizing on a county-by- country basis (benchmark case) and derive primarily from lower infrastructure investment needs (US$118 billion compared to US$154 billion). Short-term operational costs are also lower, though less significant. Forecasted electricity exports under regional coordination are estimated to be almost 80 percent higher than those in the benchmark case (1,034,503 GWh compared to 582,081 GWh). Technical Analysis 45. Part A: Setting up the Projects Acceleration Team (PAT). The PAT, also called PAU, has been operational since August 2015. For ease of logistics among the SAPP participating countries and utilities and to facilitate access to the region’s financial hub, it was originally decided that the PAU would be located in Johannesburg. In 2017, however, to ensure the PAU’s long-term sustainability, a decision was made to co-locate the PAU function with the SAPP CC in Harare, Zimbabwe. It was also decided to revamp the PAU structure by more clearly defining the transaction and fiduciary functions to further improve internal efficiency and reporting, better integrate with the SAPP CC, and enable hiring of global experts for the increased list of priority regional projects. The revised structure was approved by the SAPP Executive Committee. In this approved structure, the PAU will be headed by a program coordinator (PC) and would be functionally split in fiduciary functions headed by the PC and the transaction advisory functions headed by a chief transaction adviser (CTA). Two project managers (PMs) will report to the CTA and will be responsible for developing the priority projects in the SAPP pipeline. The PMs will receive support in the fiduciary functions such as FM, procurement, and environmental and social safeguards from the respective specialists. The procurement of additional staff is ongoing and is expected to be completed by November 2019. 46. Part B: Project Preparation Funds. Currently, the project pipeline comprises several potential priority regional energy projects. To overcome restrictions on the use of the IDA financing and crowd-in further resources, the SAPP has undertaken activities to mobilize the cooperating partner community. Table 1 reflects the regional priority projects with specifics of where the IDA resources are utilized for the preparatory studies. Several projects listed there have been moved from the conceptual stage to the pre- 33 feasibility stage and, in some cases, to the feasibility, appraisal, and pre-funding stages through the use of the project preparation funds under the AREP. 47. Part C: Regional Analytical Support. This will be renamed as ‘Regional Analytical Studies and Capacity Building’ to better reflect the scaled-up activities, complementing and scaling up the IDA financing and filling the existing gaps in IDA support, including the following specific activities: a. Further studies and implementation of recommendations of the SAPP Regional Master Plan (Pool Plan). b. Institutionalization of the PDRA. The project development readiness tool, to enable utilities to assess their projects, has been developed and is being rolled out. c. Further detailed studies and analyses stemming from the SAPP-EAPP Interconnection Impact Assessment Study along with a series of workshops for the joint operating and markets subcommittee representatives from the two power pools and all participating utilities was concluded and its recommendations will be implemented. d. Regional Variable Renewable Energy (VRE) Integration Studies aim at supporting the SAPP in preparing its interconnected system for the integration of VRE generation in a secure, reliable, and economic manner. The studies will analyze gaps in current regulations, existing infrastructure, institutional capacity, and operating procedures and propose changes to regulations, grid code, and operating procedures to facilitate successful integration of VRE. These are expected to lead to a program aimed at accelerating the development of renewable energy generation in the SAPP participating countries. e. Update of the websites for the SAPP and regional institutions to make them up-to-date and interactive. f. Developing Regional Transmission Infrastructure Financing Facility (RTIFF) and carrying out relevant studies, analyses and consultations. The objective of the proposed consultancy assignment is to help the SAPP develop a financing mechanism/guarantee facility as appropriate, which leads to accelerated development of key regional transmission projects through the support of a regional entity. The key output of the consultancy assignment is the development of a conceptual framework and establishment of such a regional facility with a structure approved and mandated by the SAPP and agreed to by all other key stakeholders. Additional studies would need to be carried out to identify specific requirements and measures for the region to implement for the RTIFF concept to be feasible, that includes regional regulatory procedures such as open access to transmission grid and update transmission pricing. g. Implementation of recommendations stemming from the SAPP/European Network of Transmission System Operators for Electricity (ENTSO-E) Twinning Arrangement. This will help build technical capacity at the SAPP through the recently signed twinning arrangement between the SAPP and ENTSO-E and, potentially, with other similar regional organizations, with capacity building courses arranged by ENTSOE for the SAPP members. h. Capacity building and study tours. Various study tours are under different stages of implementation. Various consultancy services will be acquired to assist in developing the strategic plans and documents for the SADC, SAPP, and other regional institutions. The AREP Program is 34 expected to continue being utilized for further developing and implementing the strategy, mission and vision statements, and implementation plans. Fiduciary Assessment 48. The Financial management arrangements under the Additional Financing will remain the same as those for the parent project. The SAPP Coordination Center, through the Projects Acceleration Team, will remain responsible for the financial management of the proposed AF. The SAPP Coordination Center has satisfactory accounting arrangements and the existing Finance Manual provides adequate guidance for financial management under the Project. The overall FM risk rating, taking into account the mitigation measures, was assessed to be moderate. 49. Given the experience with the project, robust governance, and FM/auditing arrangements, the implementation risks are Moderate. Risks related to implementation capacity within the SAPP also remain Moderate. However, the risk for long-term sustainability of the SAPP capacity-building activities remains Substantial. To mitigate this risk, a proposed colocation of the PAU function with the SAPP CC and the triggered commitment from the SAPP members to scaled-up support, coupled with the extended implementation period of the AREP Program, would substantially reduce and/or mitigate the risks. Staff loss risk associated with the relocation if the PAU office to Zimbabwe is Moderate. To mitigate this risk, positions are being advertised requiring similar qualifications and experience as with the current staff. Risk Description Description of Mitigation Risk Owner Project Implementing Unit capacity The SAPP is in the recruitment process to SAPP strengthen the unit SAPP PAU sustainability SAPP has proposed colocation of the PAU SAPP function with the SAPP CC Staff loss risk associated with the Positions are being advertised requiring SAPP relocation if the PAU office similar qualifications and experience as with the current staff. Contract management The SAPP-PAU Procurement Specialist has SAPP PAU experience in Contract Management. Project management The SAPP-PAU work closely with the Utility SAPP PAU technical staff to project manage the studies. Social Analysis 50. The proposed AF will finance the same type of activities as under the parent project and does not introduce new social risks. As a TA project it will not finance any physical structures or activities that could have direct social footprints on the ground. However, it will include developing feasibility studies and technical designs for potential new power generation and transmission projects that may have significant potential social impacts, if these investments materialize. Therefore, no change in the safeguards classification is proposed and it will remain category “A” (full assessment). 51. Implementation experience during the parent project indicated several types of power projects, whose development the AREP Program is expected to support, and so far, includes transmission interconnection projects and renewable energy and hydropower generation projects Subsequently, the 35 proposed AF will trigger the following safeguards policies (The parent project triggered OP/BP4.01- Environmental Assessment only): • OP/BP 4.10 – Indigenous Peoples • OP/BP 4.11 – Physical Cultural Resources • OP/BP 4.12 - Involuntary Resettlement 52. Part of the project objective and activities is to introduce and strengthen social assessment and management systems within the SAPP and the participating utilities, which comply with international good practice including World Bank’s safeguard policies and would result in an appropriate range of safeguards instruments. The first of such instruments to be produced during project implementation is an overall Environmental and Social Management Framework (ESMF). The ESMF provides strategic guidance and detailed requirements to the SAPP on the assessment and management of environmental and social risks and impacts to be carried out during preparation and implementation of the specific investments selected under SAPP AREP Program. The ESMF prepared under the parent project has been updated to incorporate the aspects of newly triggered safeguard policies. The updated ESMF has been reviewed, cleared by the World Bank and disclosed in country on September 20, 2018 and on the World Bank website on October 1, 2018. 53. Once the techno-economic planning and design process initiated for specific investments, appropriate safeguards instruments such as ESIAs, RAPs and other specific studies will be prepared in compliance with the ESMF requirements. The World Bank will review and clear relevant specific safeguards instruments of individual investment projects when (i) the preparation of such safeguards instruments utilize IDA and MDTF resources or (ii) the investment project will be funded by the World Bank. For the preparation of projects not utilizing IDA/MDTF resources, while the World Bank will not review and clear the safeguards instruments of such individual projects, SAPP and the funding agency of such projects are expected to comply with the ESMF. While the future civil work for investment projects prepared under the AF may require temporary labor from outside the project area, the ESMF and project- specific instruments will address the adverse risks and impacts from such labor influx, including gender- based violence, referring to the World Banks’ guidance note on “Managing the Risks of Adverse Impacts on Communities from Temporary Project Induced Labor Influx (OPCS, December 2016)”. 54. Grievance mechanism. The AF will maintain the grievance mechanism established under the parent project to respond to concerns and grievances of stakeholders related to social performance of the program. The grievance mechanism will be managed in a transparent, inclusive and accessible manner. The project will report periodically information related to grievances received and treated by the project. Environmental Analysis 55. The proposed AF will finance the same type of activities as under the parent project and does not introduce new environmental risks. As a TA project it will not finance any physical structures or activities that could have direct environment footprints on the ground. However, it will include developing feasibility studies and technical designs for potential new power generation and transmission projects that may have significant potential environmental, if these investments materialize. Therefore, no change in the safeguards classification is proposed and it will remain category “A” (full assessment). 36 56. Implementation experience during the parent project provided clarity on the types of energy projects, whose preparation the AREP Program is expected to support, and so far, includes transmission interconnection projects and renewable energy and hydropower generation projects. Furthermore, the updated ESMF provided details of the potential impact of such projects. Subsequently, while the parent project triggered only OP/BP 4.01- Environmental Assessment, the proposed AF will trigger the following relevant safeguards policies: • OP/BP 4.04 – Natural Habitat • OP 4.09 – Pest Management • OP/BP 4.36 – Forests • OP/BP 4.37 - Safety of Dams • OP/BP 7.50 - Projects on International Waterways 57. Part of the project objective and activities is to introduce and strengthen environmental assessment and management systems within the SAPP and the participating utilities, which comply with international good practice including World Bank’s safeguard policies and would result in an appropriate range of safeguards instruments. The first of such instruments to be produced during project implementation is an overall ESMF, which provides strategic guidance and detailed requirements to the SAPP on the assessment and management of environmental and social risks and impacts to be carried out during preparation and implementation of the specific investments selected under SAPP AREP Program. The ESMF prepared under the parent project has been updated to incorporate the aspects of newly triggered safeguard policies. The updated ESMF has been reviewed and cleared by the World Bank and disclosed in country on September 20, 2018 and on the World Bank website on October 1, 2018. 58. Once the techno-economic planning and design process is initiated for specific projects, which preparation had been supported by the AREEP Program, appropriate safeguards instruments such as project-specific ESIAs, RAPs and other specific studies will be prepared in compliance with the ESMF requirements. The World Bank will review and clear relevant specific safeguards instruments of individual investment projects when (i) the preparation of such safeguards instruments utilize IDA and MDTF resources or (ii) the investment project will be funded by the World Bank. For the preparation of projects not utilizing IDA/MDTF resources, while the World Bank will not review and clear the safeguards instruments of such individual projects, SAPP and the funding agency of such projects are expected to comply with the ESMF. The selection of projects to be supported and their progress to subsequent stages of preparation can be done only following the World Bank’s explicit No Objection, allowing the due diligence regarding potential safeguards and integrity issues. V. RISKS 59. Overall. The proposed AF maintains the overall risk of Substantial due to the following factors: (i) multiplicity of involved national and regional stakeholders in the AREP Program implementation; (ii) the complexities, including environmental and social, of the regional priority projects likely to be supported under the proposed operation; (iii) macroeconomic risks of the countries in the region prone to exogenous shocks; and (iv) weak operational and financial performance of many of the national utilities. Furthermore, preparation of the regional projects may be derailed by a number of factors – especially risks inherent to the concerned countries – that are beyond the control of the project. 60. Macroeconomic. Threats to the region’s macro-fiscal framework stem from external factors, such as the terms of trade and other exogenous shocks, including shortfalls in donor support. Risk of export 37 related shocks remains, given the limited sources in several SADC countries of foreign exchange and reliance on rain-fed agriculture. Additional risks include the loosening of policies as a response to the decline in the volume of donor support, which could further erode donor confidence and jeopardize the resumption of aid. Risks of negative financing shocks in the form of delayed or lower donor support, or lower than expected tax revenue in several countries may require additional fiscal restraint, but should not compromise the sustainability of the region. Mitigation: The IMF and the World Bank are maintaining an on-going dialogue with the authorities on macro-fiscal policy issues in key countries in the region, which will help detect potential threats early on. 61. Institutional Capacity for Implementation and Sustainability. Given the past experience, robust governance and financial management/auditing arrangements, and implementation capacity built within SAPP the implementation risks are moderate. However, the risk for long term sustainability of the SAPP- capacity-building activities remains Substantial and, therefore, the overall risk is rated Substantial. Mitigation: Proposed co-location of the PAU function with the SAPP CC, and the triggered commitment from the SAPP members to scaled up financing, coupled with the extended implementation period of the AREP Program would substantially reduce and/or mitigate the risks. Additionally, SAPP has started work on expanding office space for PAU members relocating to Harare utilizing their own funds with a commitment to also ensure that Project Coordinator and PM, PMA are kept on board post the development partner support ends. 62. Environmental and Social (E&S). While the project is limited to TA activities, the pipeline projects, if materialized, would likely have significant environmental and social impacts and, as such, the E&S risk remains substantial. Mitigation: The World Bank team will work closely with the SAPP and monitor implementation of the AREP Program, including review and clearance of the key safeguard documents, such as the sub-regional ESMF prepared under the parent project and relevant environmental and social instruments to be prepared for individual investment projects. The World Bank team will closely liaise with the SAPP and provide advice and capacity building to ensure that the SAPP will implement the ESMF and that the specific safeguards instruments are in line with international good practice and the World Bank’s safeguards policies, as well as take into consideration national environmental legislation as applicable. Further, the SAPP CC seeks a no-objection from the World Bank when they make key decisions. This no objection is required for the PAU to commence project activities, which enables the World Bank to reasonably withhold such activities where there are concerns (including, but not limited to safeguards issues) about the project. The World Bank team will also strictly follow other World Bank strategy (for instance, regarding coal projects) that will have environmental and social aspects. 63. Stakeholders. The project and its design are accepted by the key energy sector stakeholders including the SADC, SAPP Management and Executive Committees, and utilities. The SAPP member utilities have a good understanding of the PAU and the support the project may be able to provide. The workplan of the PAU has become an integral part of the SAPP workplan. Nevertheless, continued buy-in is required for the success of the SAPP Coordination Center and the PAU and concerns – especially on the part of individual countries regarding fear of losing authority in selecting and implementing projects – remain. This may be especially the case for generation investments, which countries are keen to keep under control at national level. Additionally, there needs to be more effort made to reach out to broader policy maker -level stakeholders in SADC and individual countries to properly inform them of SAPP’s ongoing vision and work. Therefore, the overall Stakeholders Risk is rated Substantial. Mitigation: The SAPP has been attributed a mandate to champion preparation of regional priority energy projects by SADC Energy Ministers. SAPP countries share an understanding on the critical energy projects that need to be moved forward. The PAU, which was developed in a transparent manner, will work together with and 38 support member utilities. The extent of its role will be at the discretion of the member utilities involved (and their political leadership). Additionally, AREP program will support SAPP’s ongoing efforts with the pool plan and ensure future support on developing a communication strategy and sourcing communication advisors to ensure SAPP’s work and vision reaches the broader stakeholders. 64. The project is intended as a platform for a number of development partners to coalesce around – to offer consistent and coordinated support to the region on Project preparation. While the initial efforts have resulted in aligned views and SAPP AREP becoming a coordinating platform for various development partners, the progress is still moderate. There is a risk that other multi-lateral and bilateral institutions continue to provide uncoordinated support. Mitigation: SAPP has been building its reputation of the trusted and capable partner able to champion development of regional energy projects. Establishment of MDTF, timely delivery of the AF and implementation of its activities, reflected in increased disbursement, would provide increased confidence of the development institutions in SAPP and PAU. VI. WORLD BANK GRIEVANCE REDRESS 65. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. 39 VII. REVISED RESULTS FRAMEWORK AND MONITORING INDICATORS . Project Development Objectives Original Project Development Objective - Parent: The Project Development Objective is to advance the preparation of selected priority regional energy projects in the Southern African Power Pool participating countries. Proposed Project Development Objective - Additional Financing (AF): Results Core sector indicators are considered: Yes Results reporting level: Project Level . Project Development Objective Indicators Corpor Status Indicator Name Unit of Measure Baseline Actual (Current) End Target ate Revised Priority regional energy Number Value 0.00 4.00 6.00 projects whose preparation is Date 17-Feb-2015 7-Dec-2018 30-Nov-2022 advanced19 Comment Target increased from 3 to 6 Intermediate Results Indicators Corpor Status Indicator Name Unit of Measure Baseline Actual (Current) End Target ate Revised Projects Acceleration Team Number Value 0.00 6.00 8.00 staff recruited and operational Date 17-Feb-2015 7-Dec-2018 30-Nov-2019 Comment Target adjusted from 7 to 8 19 The project is considered advanced when its development progresses from one preparation stage to another, through the development process stages, including concept, pre-feasibility, feasibility, financial close, and further to construction and operation. 40 Revised Preparatory studies/activities Number Value 0.00 4.00 15.00 for priority regional energy Date 17-Feb-2015 7-Dec-2018 30-Nov-2022 projects completed Comment Target increased from 10 to 15 Revised Regional analytical studies Number Value 0.00 3.00 4.00 completed Date 17-Feb-2015 7-Dec-2018 30-Nov-2022 Comment Target increased from 2 to 4 New Number of staff from SAPP and Number Value 0.00 30.00 64.00 regional institutions trained Date 17-Feb-2015 7-Dec-2018 30-Nov-2022 Comment New Number of staff from SAPP and Number Value 0.00 10.00 30.00 regional institutions trained of Sub Type Date 17-Feb-2015 7-Dec-2018 30-Nov-2022 which women Breakdown Comment . 41