The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) REPORT NO.: RES35740 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT (ENREP) AND ENREP (AF) APPROVED ON MAY 29, 2012 AND MAY 27, 2016 TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA ENERGY AND EXTRACTIVES GLOBAL PRACTICE AFRICA REGION Regional Vice President: Hafez M. H. Ghanem Country Director: Carolyn Turk Senior Global Practice Director: Riccardo Puliti Practice Manager: Sudeshna Ghosh Banerjee Task Team Leaders: Karen Bazex, Rahul Kitchlu The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) ABBREVIATIONS AND ACRONYMS AF Additional Financing Ci-Dev Carbon Initiative for Development DBE Development Bank of Ethiopia DDO Deferred Drawdown Option EA Environmental Assessment EEP Ethiopian Electric Power EEPCO Ethiopian Electric Power Cooperation EEU Ethiopian Electric Utility ELEAP Ethiopian Electrification Program ENREP Electricity Network Reinforcement and Expansion Project ERP Enterprise Resource Planning ESME Energy Small and Medium Enterprises Trust Fund FM Financial Management FY Fiscal Year GIS Geographic Information System GoE Government of Ethiopia GWh Gigawatt Hour HH Households IDA International Development Association IFRS International Financial reporting Standards IPF Investment Project Financing IPP Independent Power Purchase km Kilometer kV Kilovolt kWh Kilowatt Hour LV Low Voltage MFI Micro finance Institution MoF Ministry of Finance MoWIE Ministry of Water, Irrigation and Energy MV Medium Voltage MW Megawatt NEP National Electrification Program NPV Net Present Value O&M Operations and Maintenance OHS Occupational and Health Safety PDO Project Development Objective PPE Personal Protective Equipment PSE Private Sector Enterprise RAP Resettlement Action Plan RPP Revenue Protection Program SAIDI System Average Interruption Duration Index, SAIFI System Average Interruption Frequency Index SDR Special Drawing Rights SHS Solar Home System SoE Statements of Expenditure TF Trust Fund ToR Terms of Reference The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) UEAP Universal Electricity Access Program US$/USD United States Dollar WFA WBG Finance and Accounting The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Click here to enter text. BASIC DATA Product Information Project ID Financing Instrument P119893 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-May-2012 30-Jun-2019 Organizations Borrower Responsible Agency Federal Democratic Republic of Ethiopia Development Bank of Ethiopia,Ethiopia Electric Power Project Development Objective (PDO) Original PDO The Development Objectives of the Electricity Network Reinforcement and Expansion Project are to improve reliability of the electricity network and to increase access to electricity services in Ethiopia. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-58140 27-May-2016 15-Jun-2016 31-Aug-2016 30-Jun-2019 200.00 35.03 162.22 IDA-51260 29-May-2012 12-Jun-2012 04-Jan-2013 30-Jun-2019 200.00 180.93 2.71 TF-A2302 27-May-2016 15-Jun-2016 31-Aug-2016 30-Apr-2019 5.00 5.00 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Click here to enter text. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Background and Rationale for Restructuring 1. The Electricity Network Reinforcement and Expansion Project (ENREP, P119893) in the amount of IDA Credit SDR 129.2 million (US$200 million equivalent) (Cr. Num. 5126) was approved by the World Bank Board on May 29, 2012, with an original closing date of December 31, 2017 and became effective on January 4, 2013. An Additional Financing (AF) to ENREP (P155563), in the amount of IDA Credit SDR 142 million (US$200 million equivalent) (Cr. Num. 5814) was approved on May 27, 2016 and became effective on August 31, 2016, extending the closing date of the original credit until June 30, 2019. In addition, under Part 3 of the ENREP AF, the Government of Ethiopia received a US$5 million Grant (“the Grant”) from the Small and Medium Enterprise Energy Support in Sub-Saharan Africa Grant (ESME, TF0A2302) which is fully disbursed. The Project Development Objectives (PDO) are to improve reliability of the electricity network and to increase access to electricity services in Ethiopia. The project progress towards achievement of PDO has been rated Satisfactory, and implementation progress Moderately Satisfactory for the past 12 months. 2. The project is strategically important for Ethiopia, as it contributes to improving the delivery of electricity services in the country and expanding access in on- and off-grid areas, in line with the Government’s National Electrification Program (NEP 2018-2022). The project is also key for the Government’s energy sector reform program as it provides capacity building and tools to improve the performance of the two utilities, Ethiopian Electric Power (EEP) and Ethiopian Electric Utility (EEU). Since its effectiveness, the project has contributed to a significant decrease in frequency of service interruptions with EEP (as demonstrated by the corresponding indicator – see values in results framework), through grid rehabilitation and expansion investments. It has also supported the expansion of clean energy access to more than 1 million households through the establishment of an innovative credit line which promotes the distribution of off-grid energy products, with the participation of micro finance institutions and private sector enterprises, including female headed entities. 3. The project is implemented by the EEP, the EEU and the Development Bank of Ethiopia (DBE), through the following four components: (a) Component 1: Reinforcement and expansion of electricity networks (US$190 million, out of which US$100 million under original credit, US$90 million AF). (b) Component 2: Access scale up (US$120 million, out of which US$50 million under original credit, US$70 million AF). (c) Component 3: Market development for renewable energy and energy efficient products (US$45 million, out of which US$20 million under original credit, US$20 million AF, US$5 million TF0A2302). (d) Component 4: Modernization support (US$30 million, out of which US$10 million under original credit, US$20 million AF). (e) US$20million were set aside for contingencies under the original credit. 4. The proposed restructuring is the second restructuring for this project. The first one, approved in April 2014, intended to reflect the unbundling of the national power sector by adjusting the Project Implementing Entity and fiduciary arrangements. The proposed restructuring would (i) extend the closing date of ENREP and AF (Cr. Num. 5126 and 5814) by two and half years (until December 31, 2021) to allow for implementation of key activities – this proposed first restructuring of the project would increase the total duration of the project to approximately nine years and a half; (ii) adjust costs between components and reallocate funds between categories; and (iii) modify results indicators, by streamlining indicators related to the credit line activities and adjusting end targets to reflect implementation progress, The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) and in particular the very good performance of the credit line. The extension will allow for the completion of ongoing activities, with the view to achieving the project’s higher objectives of strengthening of the grid (an essential condition for grid extension and densification), expansion of access to additional households on and off the grid, and improvement of operational and commercial performance of both the utilities, thus contributing to the sustainability of the electricity sector in Ethiopia. Management teams at EEU, EEP and DBE have shown strong commitment to the project, mobilizing teams and resources to address bottlenecks and speed up implementation, with constant support from the sector Ministry (Ministry of Water, Irrigation and Energy, (MoWIE)) and the Ministry of Finance (MoF). The team has developed an action plan with the Government, to ensure complete implementation of activities during the period of the proposed extension. B. Implementation status 5. All activities under the original credit (P119893) are substantially completed, with 94 percent of funds disbursed. Under the AF (P155563), 18 per cent of funds have been disbursed. All major procurement activities are almost completed, and disbursements should therefore start picking up. Delays in completion of bidding processes, difficulties in supervising large contracts and lack of coordination between EEP and EEU following their unbundling, which adversely affected project implementation, are now addressed. Going forward, remaining activities are supported by owners’ engineers and/or technical assistance, with no major new procurement process to be launched. Recent improvements in the utilities’ supervision of environmental and social (E&S) safeguards and financial management (FM) need to be sustained through capacity building support provided under ENREP and monitored very closely (see details in section below). In particular, the utility, with World Bank support, is providing training to staff and conducting safety audits regularly. 6. Progress on covenants. The project Interim Financial Reports (IFRs) and audited project financial statements have been submitted on time with acceptable quality by both DBE and EEP. EEP has shown progress in addressing entity audit findings and issues emanated from the split of the former bundled utility; it consequently obtained a clean audit opinion for its FY 2017 statements. In addition, internal audit units of both DBE and EEP audit the project at least once in a year. However, there have been delays in implementing the recommendation of the Just in time (JIT) study and in submitting entity audit reports to the World Bank, due to operational challenges. Status of FM Covenants 7. Below is the status of FM covenants: Covenant for FM Status Financing agreement dated June 12, 2012 - Schedule II Section II B 1 - Partially met (ongoing). The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions Financing agreement dated June 12, 2012 - Schedule II Section II B 2 - Partially met (EEP sending reports Without limitation on the provisions of Part A of this Section, the Recipient with some delays). shall prepare and furnish to the Association not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association Financing agreement dated June 12, 2012 - Schedule II Section II B 2 - The Partially met - EEP-Project audit Recipient shall have the Financial Statements audited or cause to be audited reports are sent on time. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Covenant for FM Status in accordance with the provisions of Section 4.09(b) of the General However, Entity audit reports are Conditions. Each audit of the Financial Statements shall cover the period of delayed. Overdue entity audit one Fiscal Year of the Recipient. The audited Financial Statements for each report still exists from EEP (delay such period shall be furnished to the Association not later than six (6) in the submission of entity audit months after the end of such period. reports existed in the past, and currently as well). DBE- The DBE cleared all overdue audit. Financing agreement dated June 12, 2012 as amended in August 28 2014 - Partially met Schedule II Section V B 1 “Other Fiduciary Undertakings” – The Recipient (a) Recruitment process shall cause EEP to : (a) recruit, by October 31 2014, a consulting firm in accordance with the terms of reference and with qualification and cancelled (JIT part excluded); experience satisfactory to the Association to advise EEP and EEU on the (b) Internal auditor assigned. setting up their opening balances resulting from EEP restructuring in a manner that addresses the past audit issues and recommendation of the study on EEPCo’s fiduciary accountability systems and corporate governance undertaken in January 2013; and (b) assign to the Project not later than September 30, 2014, an internal auditor in accordance with the terms of reference and with qualification and experience satisfactory to the Association. Financing agreement dated June 12, 2012 as amended in August 28, 2014 Partially met – Although delayed - Schedule II Section V B 2 “Other Fiduciary Undertakings” – The Recipient recommendations about system shall cause EEP to address the findings of the study referred to in paragraph are being implemented. 1 above with the assistance of the consulting firm to be employed pursuant to paragraph 1 above. Financing agreement dated June 15, 2016 -Schedule II Section V B 1 “Other Partially met from EEP Fiduciary Undertakings” - The Recipient shall cause EEP to: (a) recruit (a) No action taken – recruitment individual consultant(s), within three months of the Effective Date, in accordance with the terms of reference and with qualifications and process not yet started; experience satisfactory to the Association, to advise EEP and EEU on (b) Internal auditor assigned. financial management matters including addressing the past audit issues and the recommendations of the study on EEP's fiduciary accountability system and corporate governance undertaken in January 2013; and (b) assign to, and maintain for, the Project an internal auditor in accordance with terms of reference and with qualifications and experience satisfactory to the Association. Financing agreement dated June 15, 2016 -Schedule II Section V B 2 Partially met – Although delayed “Other Fiduciary Undertakings” - The Recipient shall cause EEP to recommendations about system address the findings of the study referred to in paragraph l above with are being implemented. the assistance of the consultant(s) to be employed pursuant to paragraph l above, in a manner satisfactory to the Association. Financing agreement dated June 15, 2016 -Schedule II Section V B 3 Partially met – Both DBE and EEP “Other Fiduciary Undertakings” - The Recipient shall cause EEP's and internal auditors audit the The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Covenant for FM Status DBE's Internal Audit units to conduct an internal audit of Project activities project activities at least once in at least once per year. The Recipient shall cause EEP and DBE to provide a year. said audit report to the management of EEP and DBE and to the Association. Financing agreement dated June 15 2016 -Schedule II Section V B 4 Partially met – task force is “Other Fiduciary Undertakings” - The Recipient shall ensure that the task following the implementation of force (composed of representatives from MoFEC, MoWIE, EEP and EEU the action plan although on management and Board) established to follow up on financial irregular basis. management aspects of EEP and EEU under the Original Project shall continue to operate and meet regularly until the key financial management issues are resolved in a manner satisfactory to the Association. 8. Details of implementation by component is as follows: (a) Component 1: Reinforcement and expansion of electricity networks (US$100 million original credit, US$90 million AF, total US$190 million). All works related to the reinforcement and expansion of the transmission network are completed and commissioned. The contract for the construction of three single circuit 230 kV lines and substations is scheduled was launched on April 26, 2019, following the approval of the Resettlement Action Plan, and will be completed in 18 months, by the end of October 2020. Improvements in the reliability of the network in the project areas have been observed, with frequency of service interruption decreasing significantly in the country (the System Average Interruption Frequency Index (SAIFI) for EEP fell from 178 at the beginning of the project to 101 at the end of December 2018). (b) Component 2: Access scale up (US$50 million original credit, US$70 million AF, total US$120 million). This component has suffered major delays, due to EEU’s difficulties in procuring and supervising contracts. The component is now on track, with a major focus put on strengthening the utility’s capacity to supervise contract implementation. The eight-town project, for the upgrading and expansion of medium voltage (MV) and low voltage (LV) distribution networks in eight towns (Addis Ababa, Mekele, Bahir Dar, Dessie, Adama, Dire Dawa, Hawassa, and Jimma), was completed (only minor corrections are now taking place), after delays due to the need for frequent power interruption to carry out the project activities, issues with clearance of the rights of way in certain cities and EEU’s difficulties with supervising the contractor. The procurement process for the six-town project, which took more than a year due to disagreements between the evaluation committee, EEU technical staff and the World Bank on deviations in the technical offers of the bidders - is being finalized as the World Bank provided it’s no objection to the revised evaluation report on April 9, 2019. Works should start on June 15, 2019. An owner’s engineer was contracted by EEU to help the utility supervise the contract more efficiently and EEU teams, who worked on eight-town project, will support the six-town project team, to help capture lessons learnt from the implementation of that project. The bidding package for 150,000 new connections in cities covered under the eight-town and six-town contracts (Adama, Dire Dawa, Hawassa, Jima, Bahir Dar, Dessie, Makele, Gonder, Adigrat, Debre Markos, Harar, Shashamane and Wolayta Sodo) was completed and procurement process was launched on March 14, 2019. (c) Component 3: Market development for renewable energy and energy efficient products (US$20 million original credit, US$20 million AF, US$5 million TF0A2302, total US$45 million). This component has achieved The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) major success. More than one million households have been positively affected by increasing access to modern energy services. The credit line is now fully subscribed, and 1,051,691 solar lanterns and solar home systems have been procured. Participation of women in the credit line has exceeded expectations, resulting in a proposed adjustment of end targets. Sale of cookstoves, however, has been lackluster as micro finance institutions have not been interested in providing loans due to high transaction costs. Under this component, the project is linked to a US$5 million grant from the Small and Medium Enterprise Energy Support in Sub- Saharan Africa Grant (ESME, TF0A2302), which finances technical assistance to help support activities as well as a collateral support facility for private sector enterprises. Under ESME, training of micro-finance institutions (MFI) and private sector enterprises (PSE) and the procurement of the warrantee tracking system is completed. DBE has approved US$3.9 million in collateral support for 11 companies, and applications of two more companies are under process. (d) Component 4: Modernization support (US$10 million original credit, US$20 million AF, total US$30 million). The component is financing capacity building activities for EEU and EEP to improve their operational and financial performance. The component finances a new enterprise resource planning (ERP) system for EEU, whose implementation was delayed due to the restructuring of EEU and EEU’s difficulties in supervising the contract. An outside expert has since been hired to help EEU. The system is expected to be fully installed by end June 2019. The component is also providing technical support to EEP and EEU to progressively improve commercial performance, financial management and governance, through: (i) financial advice; (ii) legal and safeguards support to EEP for development of a pipeline of independent power producers (IPPs) contracts; and (iii) implementation of a geographic information system (GIS) in EEU in the framework of the Government’s Universal Access Program. 9. Occupational Health and Safety (OHS). The fatal incidents that occurred on March 16, 2018 in Dessie town on one of the sub-projects managed by EEU (eight-town project) highlighted deficiencies in management of OHS within EEU1. Since the accident, EEU, with the support of the World Bank, has been implementing measures to strengthen OHS for the project as well as improve its overall OHS system. These include: (a) At the project level: safety audits on ENREP sites, training of EEU OHS staff and contractor at headquarters and on sites (with safety materials), provision of sufficient personal protective equipment (PPE) on sites, awareness raising workshops with contractors and EEU/EEP before launching of new activities, strengthening of OHS clauses in World Bank-financed contracts. (b) At corporate level (EEU): training of OHS staff, revision of OHS procedures (with World Bank inputs), and dissemination of revised procedures to management and staff (updated procedures were approved by management in April 2019 and was circulated among EEU directors on May 24, 2019); preparation of terms of reference for review of EEU OHS system (to be financed under the IDA Ethiopia Electrification Program, (ELEAP), P160395). 10. Financial Management. EEP financial audit report for FY2017 (due on January 8, 2018) was submitted on February 15, 2019, with more than 12 months of delay, while FY2018 audit report has been due since January 7, 2019. Submission of timely financial audits is a covenant under the project’s financing agreement. While financial management of EEP requires strengthening, improvements have been noted on the following key aspects: (i) improved audit opinion of EEP financial accounts (clean opinion); (ii) contract signed to address revenue issues (bulk meters to measure energy supplied to EEU); (iii) recruitment of international firm to perform fixed asset valuation and start implementation of Internationally Financial Reporting Standards (IFRS); and (iv) progress noted on implementation of automation, with installation of 1The Environmental and Social Incident Reporting (ESIRT) case was closed in March 2019, as compensation was provided the victims. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) network and information technology infrastructure completed. Based on this progress, the World Bank provided a one- time exception to the obligation of EEP to submit the audited financial statement for FY2018 by January 7, 2019 and it has established August 31, 2019 as the new deadline date. This exception to the provisions of the World Bank’s procedure and clearance to proceed with the restructuring was approved by both Financial Management and WBG Finance and Accounting managers. EEP has prepared a time bound action plan to address the remaining FM issues (please see attached annexes). 11. The World Bank is continually monitoring the OHS aspects and the implementation of the aforementioned FM actions. II. DESCRIPTION OF PROPOSED CHANGES A. Extension of the project closing date by two and half years, until December 31, 2021 12. The extension would allow for the implementation of remaining activities, specifically: (i) the rehabilitation and expansion of distribution network in six towns; (ii) the connection of 150,000 households in the thirteen towns (except Addis Ababa); and (iii) the completion of construction of the three single circuits and substations. The revised implementation schedule is included in the table below. 13. The proposed extension will meet the requirements of World Bank Investment Project Financing (IPF) Policy regarding extension of closing dates have been met, specifically: (i) the project objectives will be achieved; (ii) the performance of the Borrower remains satisfactory; (iii) the World Bank and the Borrower agree on actions that will be undertaken by the Borrower to complete project critical activities. However, there is an outstanding audit, and clearance to proceed with the restructuring was approved by both FM and WFA managers. Table 1: Implementation Schedule Next step(s) Timeline Date of expected completion Component 1: Reinforcement and expansion of electricity networks Construction of Bokoji Finalize Resettlement Action Plan (RAP) End June 2019 End June 2019 and Debre Tabor Launch bidding process End July 2019 End September 2019 substations Construction October 2019 March 2020 Component 2: Access scale up Six-town sub project Signing of the contract June 15, 2019 Implementation July 15, 2019 End June 2021 150,000 new connections Proposals and finalization of bidding process May 24, 2019 (received) Implementation End July 2019 End May 2021 Component 3: Market development for renewable energy and energy efficient products Loans to PSEs Continue processing applications Ongoing End June 2021 Revolving MFI credit line Process applications Ongoing End June 2021 Component 4: Modernization support Enterprise resource Implementation of commercial system: 10 June 28, 2019 End June 2019 planning system regions outside Addis Revenue protection Preparation of bidding documents Mid-June 2019 program (RPP) Bidding process May-June 2019 Launch of RPP and implementation End July 2019 End January 2020 Masterplan Preparation of selection package End June 2019 Selection process finalized End October 2019 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) B. Cost adjustments of components 14. The proposed restructuring would adjust costs of components: (a) Budget for component 1 decreases by US$23 million. Significant savings were achieved under the contract for the rehabilitation of three transmission lines and substations. This is being offset by: (i) allocating funds to finance the construction of Bokoji and Debre Tabor substations along with a connection with the existing 230 kV transmission lines passing near the two towns, under goods supply contract estimated worth US$11 million, in line with the objective of Component 1, (ii) leaving contingency costs for the contracts still to be implemented. (b) Component 2 sees an increase of US$4 million of its budget, mainly due quantity variations on the 8-town contracts. (c) Component 3 sees a US$2 million in its costs, mainly due to the impact of US$/SDR fluctuations on the credit line. (d) Under Component 4, an increase in costs of US$38 million due to: (i) The implementation of the ERP in EEU, for a total of US$46 million, following a request from the Government in October 2016 to increase IDA budget for this activity by US$23 million to cover the full cost of the system. (ii) Expansion of Technical Assistance activities (approximately US$15 million) in support of EEU and EEP for financial advisory support to EEP, update of EEU and EEP masterplans, and increase in budget for the implementation of EEU RPP, which is necessary to monitor consumption of and guaranteeing billing from the largest customers of the utility. (e) Unallocated funds2 (US$20 million) are used to finance the balance of those changes. 15. Overall project costs (which include Government’s contribution) decrease from US$498 million to US$478 million, due to a US$20 million exchange rate loss; the US$23 million reduction in Government of Ethiopia (GoE) contribution to ERP is covered through the World Bank financing. C. Reallocation between categories 16. The proposed restructuring would reallocate funds under the original credit from the unallocated category to Category 1 (to finance changes described above) and Categories 2-3 managed by DBE, which requested an increase to its allocation to compensate for the variation in the US$/SDR exchange rate. The reallocation consists of: (a) Under Category 1 (components 1,2 and 4.1) led by EEP and EEU): increase by 12 percent of SDR allocation (SDR 12.7 million/US$18 million) (b) Under Category 2 (component 3): increase by 8 percent of SDR allocation (SDR 1.0 million/US$2 million) (c) Under Category 3 (component 4.2): increase by 8 percent of SDR allocation (SDR 26,000/US$38,000) A) Change in performance indicators: 17. EEP and EEU have faced challenges in monitoring project performance indicators related to quality of service (interruptions), in particular due to lack of adequate monitoring systems. The implementation of SCADA and the commercial modules of ERP will enhance better tracking of indicators and overall performance by the utilities. However, the SCADA and ERP will not be completed before the end of June 2019. The proposed changes outlined below seek to 2Please note that the Project Appraisal Document for the project and the Project Paper of the AF included US$40 million for the credit line under the original credit. However, in fact, only US$20 million were assigned to this activity in the grant agreement, and US$20 million were included in an unallocated category. As result, cost for the component in the table should have been US$55 million, not US$75 million. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) streamline indicators and adjust some end targets based on progress achieved. All other indicators have been revised to match the end target date with the newly established closing date: (a) PDO indicators: i. Beneficiaries: Number of direct project beneficiaries (of which percentage of female) - The end target is reduced to 7,552,500 from 9,675,000, to reflect decrease in expected number of households with access to modern energy services due to higher number of (more expensive) SHS systems sold vs solar lanterns, for a same budget resulting in lower number of overall households reached, as explained in iii (calculation is more conservative as it only includes households who acquire access to solar home systems, lanterns and cookstoves). ii. Access: Number of households (HH) with access to modern energy services (off-grid) - The end target would be reduced from 2 million to 1.5 million. With the objective of increasing penetration of larger systems, under the credit line, the Government decided that 75 percent of the credit line would be used for Solar Home Systems (SHS) (vs. less than 15 percent originally). Since SHS are more expensive than solar lanterns, the total number of systems procured will be less than the total target. (b) Intermediate results indicators: i. Number of biogas plants installed: the target is doubled to 10,000. ii. Number of solar lanterns and solar home systems sold. Both indicators will be eliminated, as there are already two very similar indicators: “number of solar lanterns and solar home systems procured”. iii. Number of solar lanterns procured - End target is reduced from 1.5 million to 1.3 million due to the increased allocation of SHS in the credit line. iv. Number of SHS procured - End target is increased from 10,000 to 200,000 to reflect Government’s decision to allocate a larger portion of the credit line to SHS. v. Number of efficient cook stoves installed - The target is significantly reduced, from 100,000 to 500. Costs of standard improved stoves (Birr 300) is affordable, and as a result does not require MFI support. MFIs are not interested in providing loans for Injera stoves (costing on average Birr 800), as they consider transaction costs too high. vi. Number of loans given to households: End target increased to 200,000 from 40,000 originally. vii. Loans given to female applicants (as percentages of amount and number) - The target for both indicators is raised to 50 percent from 35 percent and 40 percent, respectively, to account for significant progress in female participation. viii. Number of partner MFIs - The end target is raised to 25, from 15. ix. Number of loans given to PSEs: The end target is raised to 30, from 12. Click here to enter text. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Legal Covenants ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Reinforcement and Expansion of Reinforcement and Expansion 220.00 Revised 197.00 Electricity Network of Electricity Network Access Scale-Up 150.00 Revised Access Scale-Up 154.00 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Market Development for Market Development for Renewable Energy and Energy 75.00 Revised Renewable Energy and Energy 59.00 Efficient Products Efficient Products Modernization Support 53.00 Revised Modernization Support 68.00 TOTAL 498.00 478.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-51260 Effective 31-Dec-2017 30-Jun-2019 31-Dec-2021 30-Apr-2022 IDA-58140 Effective 30-Jun-2019 31-Dec-2021 30-Apr-2022 31-Aug-2018, 30- TF-A2302 Closed 31-Aug-2017 Apr-2019 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-51260-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Parts 1,2,4.1 102,000,000.00 110,727,569.28 114,691,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Parts 3.1,3.2 13,000,000.00 13,297,200.79 14,033,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Part 4.2 320,000.00 236,060.38 346,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Part 4.3 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) 130,000.00 114,026.82 130,000.00 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: UNALLOCATED 13,750,000.00 0.00 0.00 Total 129,200,000.00 124,374,857.27 129,200,000.00 IDA-58140-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Parts 1,2,4.1 127,800,000.00 12,553,488.50 127,800,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,WKS, NCS,CS,OP. Parts 3.1,3.2 14,200,000.00 3,885,167.47 14,200,000.00 100.00 100.00 Total 142,000,000.00 16,438,655.97 142,000,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2012 0.00 0.00 2013 5,000,000.00 0.00 2014 20,000,000.00 17,343,620.79 2015 25,000,000.00 57,298,443.99 2016 50,000,000.00 45,547,760.89 2017 60,000,000.00 31,674,677.71 2018 40,000,000.00 47,975,715.20 2019 0.00 29,230,466.98 2020 0.00 0.00 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement: EEPCO Financial Viability Plan | Description :GOE to submit to the Bank a plan designed After delay complied IDA-51260 No Change to ensure financial viability of EEPCO. | Due Date :10- with Oct-2012 Finance Agreement :Subsidiary Loan Agreements | Description :The EEPCO subsidiary agreement has been entered into between the Recipient and EEPCO. IDA-51260 Complied with No Change The DBE subsidiary agreement has been enteredinto between the Recipient and DBE. | Due Date :10-Oct- 2012 Finance Agreement :Retroactive Financing | Description :Retroactive financing up to USD 10,000,000 for eligible expenditures for the parts of the project implemented IDA-51260 Complied with No Change by EEPCO, incurred between April 1, 2012 and the date of signing of the Financing Agreement. | Due Date :28- Feb-2013 Finance Agreement :DBE Manual | Description :DBE to submit to the Bank a manual which will include eligibility criteria for selecting financial institutions and After delay complied IDA-51260 No Change final beneficiaries (PSEs, individuals or households), and with templates for sub-credit agreements. | Due Date :28- Feb-2013 Finance Agreement :EEPCO Auditor | Description :Within 3 months of effectiveness, EEPCO to assign a After delay complied IDA-51260 qualified and experienced internal auditor for the No Change with project to strengthen the monitoring of internal control systems for the project | Due Date :03-Apr-2013 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Finance Agreement :EEPCO Financial Advisor/Specialist | Description :Within 3 months of effectiveness, EEPCO to recruit a qualified and experienced Financial Partially complied IDA-51260 Advisor/Specialist who will coordinate accounting Revised with functions between EEPCO and the PIU on terms of reference acceptable to the Bank. | Due Date :03-Apr- 2013 The Recipient shall cause EEP to : (a) recruit a consulting firm to advise EEP and EEU on the setting up their opening balances resulting from EEP restructuring in a manner that addresses the past audit issues and Proposed CP recommendation of the study on EEPCo’s fiduciary accountability systems and corporate governance undertaken in January 2013; and (b) assign to the Project an internal auditor. Finance Agreement :EEPCO Accounting/Billing Interface | Description :EEPCO to conduct a review to identify issues related to the Agresso accounting software and IDA-51260 Not complied with Revised the billing interface, and resolve the issues identified withing 24 months after effectiveness. | Due Date :03- Jan-2015 Finance Agreement :EEPCO Accounting/Billing Interface | Description :EEPCO to conduct a review to identify issues related to the Agresso accounting software and Proposed Complied with the billing interface, and resolve the issues identified withing 24 months after effectiveness. | Due Date :03- Jan-2015 Finance Agreement :DBE Institutional Development Plan Partially complied IDA-51260 | Description :DBE to implement its Institutional No Change with Development Plan | Due Date :03-Jul-2014 Finance Agreement :Addressing Audit Issues identified | Description :The Recipient shall cause EEP to address the findings of the study referred to in paragraph above IDA-51260 Not complied with Revised with the assistance of the consulting firm to be employed pursuant to paragraph above.” | Due Date :31-Dec-2014 Proposed Finance Agreement :Addressing Audit Issues identified | Partially complied Description :The Recipient shall cause EEP to address with the findings of the study referred to in paragraph above The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) with the assistance of the consulting firm to be employed pursuant to paragraph above.” | Due Date :31-Dec-2014 Finance Agreement :Consulting firm for Auditing | Description :The Recipient shall cause EEP to: (a) recruit, by October 31, 2014, a consulting firm, in accordance with the terms of reference and with qualifications and experience satisfactory to the Association, to advise EEP Marked for IDA-51260 Not complied with and EEU on the setting up their opening balances Deletion resulting from EEPCo restructuring in a manner that addresses the past audit issues and the recommendations of the study on EEPCo. | Due Date :31-Oct-2014 Finance Agreement :EEP Financial Viability Plan Review | Description :No later than May 15 of each year during Project implementation, starting in calendar year 2015, the Recipient shall prepare and furnish to the Partially complied IDA-51260 Association an annual progress report on the No Change with implementation and update of the Financial Viability Plan, including measures recommended to ensure the continued financial viability of the Recipient's Power Sector. | Frequency :Yearly Finance Agreement :Schedule 2 Section V.A.1 | Description :The Recipient shall implement the plan furnished to the Association under the original project Partially complied IDA-58140 No Change which is designed to ensure the financial viability of EEP with and EEU, during the next three years (Financial Viability Plan). | Frequency :Yearly Finance Agreement :Schedule 2 Section V.A.2 | Description :No later than May 15 of each year during the Project implementation, the Recipient shall prepare and furnish to the Association an annual progress report Partially complied IDA-58140 on the implementation and update of the Financial No Change with Viability Plan including measures recommended to ensure the continued financial viability of the Recipient's Power Sector, particularly in light of the restructuring of the EEPCo. | Frequency :Yearly The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Finance Agreement :Schedule 2 Section V.B.1 (a) | Description :The Recipient shall cause EEP to: recruit individual consultant(s), within three months of the effective date, in accordance with the terms of reference and with qualifications and experience IDA-58140 Not yet due Revised satisfactory to the Association, to advise EEP and EEU on financial management matters including addressing the past audit issues and the recommendations of the study on EEP's fiduciary accountability system. | Due Date :31-Dec-2016 The Recipient shall cause EEP to: (a) recruit individual consultant(s) to advise EEP and EEU on financial management matters including addressing the past Partially complied Proposed audit issues and the recommendations of the study on with EEP's fiduciary accountability system and corporate governance undertaken in January 2013; and (b) assign to, and maintain for, the Project an internal auditor. The Project Implementing Entity shall ensure that the audited financial statements for each period shall be: (a) furnished to the Recipient and the Association not later than six (6) months after the end of the period IDA-51260 Not yet due New with the exception of the audited financial statements ending fiscal year 2018, which shall be furnished to the Recipient and the Association by August 31, 2019; and (b) made public. The Project Implementing Entity shall ensure that the audited financial statements for each period shall be: (a) furnished to the Recipient and the Association not later than six (6) months after the end of the period IDA-58140 Not yet due New with the exception of the audited financial statements ending fiscal year 2018, which shall be furnished to the Recipient and the Association by August 31, 2019; and (b) made public. Financing agreement dated June 12, 2012 - Schedule II Section II B 1 - The Recipient shall maintain or cause to Partially complied IDA-51260 be maintained a financial management system in New with accordance with the provisions of Section 4.09 of the General Conditions The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) Financing agreement dated June 15, 2016 -Schedule II Section V B 2 “Other Fiduciary Undertakings” - The Recipient shall cause EEP to address the findings of the Partially complied IDA-58140 study referred to in paragraph l above with the New with assistance of the consultant(s) to be employed pursuant to paragraph l above, in a manner satisfactory to the Association. The Recipient shall cause EEP's and DBE's Internal Audit units to conduct an internal audit of Project activities at Partially complied IDA-58140 least once per year. The Recipient shall cause EEP and New with DBE to provide said audit report to the management of EEP and DBE and to the Association. Financing agreement dated June 15, 2016 -Schedule II Section V B 3 “Other Fiduciary Undertakings” - The Recipient shall cause EEP's and DBE's Internal Audit Partially complied IDA-58140 units to conduct an internal audit of Project activities at New with least once per year. The Recipient shall cause EEP and DBE to provide said audit report to the management of EEP and DBE and to the Association. Financing agreement dated June 12, 2012 - Schedule II Section II B 2 - Without limitation on the provisions of Part A of this Section, the Recipient shall prepare and furnish to the Association not later than forty-five (45) Partially complied IDA-51260 New days after the end of each calendar quarter, interim with unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. Financing agreement dated 12-Jun-2012-Schedule II Section II B 2 - The Recipient shall have the Financial Statements audited or cause to be audited. Each audit of the Financial Statements shall cover the period of Partially complied IDA-51260 New one Fiscal Year of the Recipient. The audited Financial with Statements for each such period shall be furnished to the Association not later than six (6) months after the . end of such period. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) . Results framework COUNTRY: Ethiopia Electricity Network Reinforcement and Expansion Project (ENREP) Project Development Objectives(s) The Development Objectives of the Electricity Network Reinforcement and Expansion Project are to improve reliability of the electricity network and to increase access to electricity services in Ethiopia. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Increase access to electricity services in Ethiopia Direct project beneficiaries (Number) 0.00 7,552,700.00 Action: This indicator has been Revised Female beneficiaries (Percentage) 0.00 50.00 Action: This indicator has been Revised Access: Number of HHs connected to the grid (Number) 0.00 150,000.00 Action: This indicator has been Revised Access: Number of HHs with access to modern energy services 0.00 1,500,000.00 (off-grid) (Number) Action: This indicator has been Revised Improve reliability of the electricity network Reliability: System Average Interruption Frequency Index, SAIFI, 178.00 in the project areas. (Number) Action: This indicator has been Revised SAIFI - Project Area 1 (7 towns) (Number) 196.00 98.00 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Action: This indicator has been Revised SAIFI - Project Area 2 (6 towns) (Number) 157.00 78.00 Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Reinforcement and Expansion of Electricity Network Reliability: System Average Interruption Duration Index, SAIDI, in 258.00 129.00 the project areas (Hours) Action: This indicator has been Revised Project Area 1 (7 towns) (Hours) 224.00 112.00 Action: This indicator has been Revised Project Area 2 (6 towns) (Hours) 298.00 149.00 Action: This indicator has been Revised Segments of transmission lines constructed, upgraded or 0.00 609.00 rehabilitated (km) (Kilometers) Action: This indicator has been Revised Number of Substations constructed or upgraded under the 0.00 30.00 project (Number) Action: This indicator has been Revised The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Time to complete EEP entity audit report (Months) 7.00 6.00 Action: This indicator has been Revised Number of EEP retained procurement staff (Number) 1.00 4.00 Action: This indicator has been Revised Number of EEP/EEU Staff Trained (Number) 0.00 90.00 Action: This indicator has been Revised Access Scale-Up Total Energy Sales in the project areas (Gigawatt-hour (GWh)) 0.00 2,240.00 Action: This indicator has been Revised Segments of distribution lines constructed, upgraded or 0.00 3,338.00 rehabilitated (Kilometers) Action: This indicator has been Revised Market Development for Renewable Energy and Energy Efficient Products Number of biogas plants installed (Number) 0.00 10,000.00 Action: This indicator has been Revised Number of Solar Lanterns Sold (Number) 0.00 1,500,000.00 Action: This indicator has been Marked for Deletion Number of Solar Home Systems Sold (Number) 0.00 10,000.00 Action: This indicator has been Marked for Deletion Number of Solar Lanterns Procured (Number) 0.00 1,300,000.00 Action: This indicator has been Revised Number of Solar Home Systems Procured (Number) 0.00 200,000.00 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Action: This indicator has been Revised Number of energy savings lamps imported and distributed 245,424.00 500,000.00 (Number) Action: This indicator has been Revised Number of efficient cookstoves installed (Number) 0.00 500.00 Action: This indicator has been Revised Total amount of loans given to HHs (Amount(USD)) 0.00 11,000,000.00 Action: This indicator has been Revised Total amount of loans given to female applicants (%) 28.66 50.00 (Amount(USD)) Action: This indicator has been Revised Number of loans given to HHs (Number) 0.00 200,000.00 Action: This indicator has been Revised Number of loans given to female applicants (Number) 34.45 50.00 Action: This indicator has been Revised NPL Ratio of HH Loan Portfolio (Percentage) 0.00 5.00 Action: This indicator has been Revised Number of Partner MFIs (Number) 0.00 25.00 Action: This indicator has been Revised Woreda covered by credit line (Number) 0.00 150.00 Action: This indicator has been Revised Total amount of loans given to PSEs (Amount(USD)) 0.00 29,000,000.00 The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Action: This indicator has been Revised Number of loans given to PSEs (Number) 0.00 30.00 Action: This indicator has been Revised NPL Ratio of the PSE Loan Portfolio (Percentage) 0.00 5.00 Action: This indicator has been Revised Modernization Support Number of gender informed awareness events held (Number) 0.00 9.00 Action: This indicator has been Revised EEP publishes annual report on citizen engagement (Yes/No) No Yes Action: This indicator has been Revised IO Table SPACE Click here to enter text. The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893) The World Bank Electricity Network Reinforcement and Expansion Project (ENREP) (P119893)