The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) REPORT NO.: RES32619 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF UGANDA CLEAN COOKING SUPPLY CHAIN EXPANSION PROJECT APPROVED ON MARCH 5, 2016 TO THE GOVERNMENT OF THE REPUBLIC OF UGANDA ENERGY & EXTRACTIVES GLOBAL PRACTICE AFRICA REGION Regional Vice President: Makhtar Diop Country Director: Diarietou Gaye Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Sudeshna Ghosh Banerjee Task Team Leader: Richard H. Hosier, Besnik Hyseni The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) ABBREVIATIONS AND ACRONYMS PDO Project Development Objective PSFU Private Sector Foundation Uganda (PSFU). DCF Distribution Challenge Fund (Component 1) MoFPED Ministry of Finance, Planning and Economic Development ESMAP Energy Sector Management Assistance Program SACCO Savings and Credit Cooperative Organization MFI Microfinance Institution WB The World Bank RETF Recipient Executed Trust Fund MEMD Ministry of Energy and Mineral Development IVA Independent Verification Agency TA Technical Assistance The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) BASIC DATA Product Information Project ID Financing Instrument P153679 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 05-Mar-2016 30-Jun-2018 Organizations Borrower Responsible Agency Ministry of Finance, Planning and Economic Development Ministry of Energy and Mineral Development,Private (MoFPED) Sector Foundation Uganda (PSFU) Project Development Objective (PDO) Original PDO The Project Development Objective is to reduce both (i) the economic burden on households and (ii) the negative impacts on the environment, of the inefficient use of solid biomass fuels for cooking by fostering sales and adoption of cleaner and more efficient cooking technologies. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A2295 29-Jun-2016 29-Jun-2016 28-Oct-2016 30-Jun-2018 2.20 .88 1.32 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Project Development Objective (PDO) is to reduce both (i) the economic burden on households and (ii) the negative impacts on the environment, of the inefficient use of solid biomass fuels for cooking by fostering sales and adoption of cleaner and more efficient cooking technologies. The PDO remains unchanged. The project was approved on March 5, 2016. 2. Effectiveness was declared on October, 28 2016 but the project has only been under actual implementation since mid-June 2017. in spite of enduring some early challenges, the project is now implementing well. Currently, four out of five of the selected consortia (manufacturer-distributor partnerships) are active in the program with cumulative sales of over 10,000 stoves as of end March 2018. 3. The implementation delays occurred for the following reasons: a. the contracting of the Independent Verifying Agency (IVA), a first disbursement condition, as a result of contracting requirements and clearances of the bid document by the contracts committee and subsequent protracted negotiations period between the vendor and Private Sector Foundation Uganda (PSFU). b. the withdrawal of a key distributor from the program presented a setback for several manufacturers who had signed MoUs with them as their primary distributor and thus were forced to begin looking for new distribution partnerships. Since then the manufacturers have created new partnerships with new distributor entrants such as solar pay-as-you-go companies. c. market building activities e.g. sales and marketing, which are supported through a grant line in the Distribution Challenge Fund (DCF), take time to materialize into sales especially since many of the participating stove models represent a new product category in Uganda. Therefore, the consortia require more time to see the impact of these activities on the ground. Given the unexpected delays in the beginning of the project, most of the consortia have only recently received their first shipments in country and / or beginning to sell products on the market. The extension would thus provide the time necessary for the ongoing efforts to materialize and continue building the market. 4. This restructuring request seeks to (i) extend the project closing date for a period of 18 months, from the current end date of June 30, 2018 to the new project closing date of December 31, 2019 to allow more time to the implementing entity to complete the activities and (ii) reorganize the allocation across components to provide more targeted support to areas with higher impact and (iii) revise the results framework to more accurately reflect the likely impact of this project by the new end date as tracked by the results indicators. II. DESCRIPTION OF PROPOSED CHANGES 5. Closing date extension. The new closing date is December 31, 2019 from original closing date of June 30. The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) 6. Reallocation of funds across components. A cost reallocation is necessary in order to (i) allocating sufficient funds to continue to support existing activities until the new project closing date; and (ii) to undertake new activities in order to further address demand-side intervention aspect based on the lessons learned from the implementation to date by reallocating funds from activities with limited traction to date. Table 1. Original vs. current allocations across cost categories Components Original Allocation After reallocation 1. Distribution Challenge $1,750,000 $1,300,000 Fund 2. Public Sector Outreach and Demonstration of $140,000 - Institutional Stoves 3. Quality Assurance & $223,480 $751,101 Technical Assistance Operating Costs $86,520 $148,899 Total $2,200,000 $2,200,000 (a) Component 2: Public Sector Outreach and Demonstration of Institutional Stoves: During the last mission (May 2018), it was agreed that due to the modest amount originally allocated and lack of progress to date with implementation, more time is needed in order to identify a superior but suitable technology for the Ugandan institutional context. It was agreed that MEMD would establish a more ambitious and comprehensive program that will look at the market and suitable technologies for both public and private institutions including schools, restaurants, hotels, and other businesses that can benefit from improvements in cooking technology. This strategy would then be integrated in the future, together with other clean cooking activities, in the Bank’s support to the country’s energy access agenda. Hence, the original component “Public Sector Outreach and Demonstration of Institutional Stoves” with $140,000 allocated will no longer remain part of the project and instead will be reallocated to fund the technical assistance activities to support the demand side equation of the Distribution Challenge Fund. (b) Component 3. Quality Assurance & Technical Support. Continuation of (i) existing activities and (ii) additional technical assistance activities to be prepared through cost reallocation. (i) Allocating sufficient funds to continue to support existing activities:  Continuation of the contract for the Independent Verification Agency. Continuing to verify the sales and eligible expenditures under the DCF is crucial for the accountability of the results-based finance aspects of the project.  Top up for the operating expenses of PSFU – similarly the project implementing entity will require additional funds to continue to implement the project until the new project closing date. The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) (ii) Undertaking demand side interventions to further stimulate demand in the stoves introduced in the market. To date, significant work has been done on the value chain integration as demonstrated through the establishment of four consortia consisting of a manufacturer and one or more distributors. However, as the supply side has begun to grow, one of the areas where further support is needed is in stimulating demand. In consultation with PSFU and the participating consortia, the Task Team agreed on the following changes:  Rapid behavioral diagnostic with consumers - the assessment is ongoing and funded directly by the Energy Sector Management Assistance Program - ESMAP. The recommended interventions will be informed by the insights gathered from this study. The study will compare survey results from households that have purchased an efficient stove vs. those that have not, to understand the underlying reasons behind household decisions. This behavioral diagnostic model is frequently utilized in social surveys going beyond the typical awareness, affordability and accessibility issues.  Awareness and market activation - One of the key areas for more effective utilization of the marketing/consumer engagement line of support by the participating consortia is facilitation around market activation and awareness raising. The specific scope, messaging and of the intervention will be informed by the behavioral assessment; however, it is envisaged that certain activities related to market activation and awareness creation would include such as stove demonstrations in marketing hotspots around the country for the products participating under the program. These activities will be designed to complement the below-the-line marketing that the consortia themselves continue to support to create more awareness and interest in the products.  Facilitation for provision of consumer finance - Lessons so far in the project indicate that when consumers are offered payment plans based on the rate of their financial savings, they are much more likely to purchase a stove instead of buying it upfront in a single cash transaction. The specific strategy will be informed by the behavioral diagnostic, but it is envisaged that facilitation around working with MFIs, Savings and Credit Cooperatives Organizations (SACCOs), and pay-as-you-go companies distributing other goods or services on credit. The objective of this intervention will be to complement the existing efforts of the participating consortia by creating links among these different actors to facilitate collaboration.  Facilitation and Communications consultant - The Task Team has learned that in addition to the grants management function much more facilitation is needed with the consortia given the tight timeline of delivery. The Task Team and PSFU agreed that an individual local consultant should be engaged to focus on stakeholder communication and local supervision. Tasks would include: enforcing deadlines, guiding the consortia through the claims process, explain eligibility of expenses and claims, working with the above firms conducting the awareness and consumer finance interventions, etc. Procurement advice will be sought from the project Procurement Specialist on whether the consultant will be paid by the WB as part of the technical assistance to the project or from the project RETF funds managed by PSFU. 7. Changes in the Results Framework Due to the delays with the kick-off of activities under the DCF and the limited time remaining under the project, the Task Team is proposing to revise the overall target to 45,000 efficient stove units sold to households attributable to this project. The revision was based on data from the sales of the last two quarters and consultation with the consortia as well as on the assumption that some consortia will perform better than others over the course of the project period. A proposed updated results framework has been included as Annex 2. The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) Annex 1. Projected sales and disbursement schedule Table 2. Projected Sales of Cookstoves to Households Over the Remaining Project Period FY18 FY19 FY20 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Total (units) ECOZOOM 1000 1000 1500 2000 2000 2000 2000 12114 UGASTOVE 1000 1000 1000 1000 1000 1500 1500 8811 BIOLITE 100 100 100 - - - - 400 ENVIROFIT 300 500 500 1000 1000 1000 1000 11708 GREEN BIO - - 500 1000 2000 3000 3000 9500 TOTAL 2400 2600 3600 5000 6000 7500 7500 42533 Table 3. Projected Disbursement (USD) FY19 FY20 Q1 Q2 Q3 Q4 Q1 Q2 IVA 25,000 25,000 25,000 25,000 25,000 25,000 DCF 47,332 94,664 141,996 141,996 236,660 283,992 PSFU 19,500 19,500 19,500 19,500 19,500 19,500 MEMD - 50,000 - - - - TA 19,000 47,500 47,500 38,000 19,000 19,000 Total 110,832 236,664 233,996 224,496 300,160 347,492 The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in Project's Development Objectives ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE People that gained access to more energy-efficient cooking and/or heating facilities Unit of Measure: Number The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 10000.00 45000.00 Revised Date 28-Oct-2016 30-Mar-2018 31-Dec-2019 Household expenditure reduction on cooking fuels Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 20.00 No Change Date 28-Oct-2016 28-Jul-2017 30-Jun-2018 Climate impact reduction of household emissions from inefficient combustion of biomass Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 20.00 No Change Date 28-Oct-2016 28-Jul-2017 30-Jun-2018 Intermediate Indicators IO_IND_TABLE Number of new enterprises in the clean cooking sector Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 11.00 7.00 No Change Date 28-Oct-2016 28-Jul-2017 30-Jun-2018 OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Distribution Challenge Fund 1.85 Revised Distribution Challenge Fund 1.30 The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679) Quality Assurance & Technical 0.14 Revised Technical Assistance 0.69 Support Public Sector Outreach and Marked for Public Sector Outreach and 0.14 0.14 Demonstration Deletion Demonstration TOTAL 2.13 2.13 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A2295 Effective 30-Jun-2018 31-Dec-2019 30-Apr-2020 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed TF-A2295-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Gds,Non CS,CS,Trg&OC Pts 1&2 310,000.00 258,722.00 850,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Competitive Grants 1,750,000.00 119,231.00 1,300,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: Gds,Non CS,CS,Trg&OC Pt 3 140,000.00 4,312.00 50,000.00 100.00 100.00 Total 2,200,000.00 382,265.00 2,200,000.00 Note to Task Teams: End of system generated content, document is editable from here. The World Bank Uganda Clean Cooking Supply Chain Expansion Project (P153679)