The World Bank Sustainable Energy Finance Project (P098423) REPORT NO.: RES30613 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUSTAINABLE ENERGY FINANCE PROJECT APPROVED ON JUNE 12, 2007 TO REPUBLIC OF FIJI,ANZ ENERGY & EXTRACTIVES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Jie Tang Task Team Leader: Kamleshwar Prasad Khelawan The World Bank Sustainable Energy Finance Project (P098423) I. BASIC DATA Product Information Project ID Financing Instrument P098423 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 12-Jun-2007 31-Dec-2017 Organizations Borrower Responsible Agency Republic of Fiji,ANZ Department of Energy Project Development Objective (PDO) Original PDO The project aims to significantly increase the adoption and use of renewable energy technologies in participating Pacific Island states through a package of incentives to encourage local financial institutions to participate in sustainable energy finance in support of equipment purchase. Current PDO The project aims to (i) significantly increase the adoption and use of renewable energy technologies and the more efficient use ofenergy through a package of incentives to encourage local financial institutions to participate in sustainable energy finance in the Recipient's Territory (Fiji) and (ii) support knowledge sharing and capacity building on renewable energy and energy efficiencytechnologies in the Participating Island States. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-58282 17-Aug-2007 17-Aug-2007 29-Oct-2007 31-Dec-2017 5.20 5.20 0 TF-58284 09-Jul-2007 09-Jul-2007 09-Jul-2007 31-Dec-2017 1.99 .25 1.74 TF-90429 09-Jul-2007 09-Jul-2007 09-Jul-2007 31-Dec-2017 .56 .51 .05 The World Bank Sustainable Energy Finance Project (P098423) TF-90430 05-Jul-2007 05-Jul-2007 28-Sep-2007 23-Jul-2014 .19 .19 0 TF-90431 21-Jun-2007 21-Jun-2007 02-Nov-2007 07-Jul-2014 .51 .51 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The Sustainable Energy Financing Project (SEFP) commenced in August 2007 as a joint operation by the World Bank and the International Finance Corporation (IFC), supported by a USD 9.48 million Global Environmental Facility (GEF) grant. Its objective was to facilitate the uptake of renewable energy technologies and energy efficiency in Fiji, Papua New Guinea (PNG), Solomon Islands (SI), Republic of Marshall Islands (RMI) and Vanuatu. The World Bank commenced implementation of the project in Fiji, PNG and SI. The IFC was to implement the program in RMI and Vanuatu but chose not to proceed, based on its conclusion that there were insufficient opportunities and potential partner banks willing to commit to the program in these regions at that time. The core component of the SEFP is a Risk Sharing Fund (RSF), which is managed by the Australia and New Zealand (ANZ) Banking Group Limited (acting as the Fund Manager) under agreement with the International Bank for Reconstruction and Development (IBRD). The RSF incentivizes local Participating Financial Institutions (PFIs) to lend to businesses and households to support installation of renewable energy equipment and energy efficiency measures. The incentive is provided through a 50 percent partial guarantee for loans provided by the PFIs to individuals and small businesses for renewable energy and energy efficiency equipment. The RSF involves a USD5.2 million grant to support loan guarantees. The other component of the SEFP is USD 2.552 million for funding technical assistance, provision of market incentives, communications and management and evaluation of the results of the program. An initial mid-term review (MTR) of project progress was completed in January 2011. The MTR recommended that the project be modified to: (i) close the project and limit support under the project to knowledge-sharing and capacity building in the Pacific Island Countries (PICs); and (ii) utilize the proceeds under the project to accelerate the successful implementation of the project in Fiji and to share lessons learned from Fiji with the originally participating PICs and other PICs as agreed with the World Bank, where conditions appeared conducive for successful implementation of similar programs in future. A level 2 restructuring was undertaken in 2012 to extend the project Commitment Period to allow additional time for implementation of the project in Fiji due to the delayed practical commencement. The level 1 restructuring of the project to close implementation in PNG and SI was delayed due to outstanding financial audits in PNG. The level 1 restructuring of SEFP was approved in March 2014 and the project implementation was consolidated in Fiji. A second MTR of the project in 2016 found the project had continued to progress well in Fiji with all targets for the project met or exceeded. The review also identified an emerging need and an increased level of readiness of other PICs for such a product. The review recommended that the project be expanded and be relaunched as a regional risk The World Bank Sustainable Energy Finance Project (P098423) facility to support electrification in countries like Vanuatu (access 30%), SI (access 20%) and PNG (access 12%) and others, building on the lessons learned from the implementation of the project in Fiji. The task team’s initial intention was to close the current project and use the remaining funds to relaunch a regional risk sharing fund jointly with the IFC. However, further discussions with GEF Coordination Unit indicated that the GEF Program Financial Procedures Memorandum requires that any funds received by the Bank the closure of the project are to be returned to the GEF Trust Fund. For this reason, in early September 2017 the Bank processed an amendment (through a level 2 restructuring) to the Grant Agreement between the IBRD and the Fund Manager to defer the return of uncommitted funds in the RSF from September 30, 2017 to December 31, 2017. In parallel the task team secured an “in principle” approval from the Regional Vice President to relaunch the project as a regional risk facility and to extend the project by 5 years, with a new closing date of December 31, 2022, subject to: 1. No objection from GEF Council; 2. Sound justification for the new regionalised risk facility as set out in the level 1 restructuring; 3. Confirmation of resources for Bank supervision; and 4. Consideration of other resources e.g. IDA for a follow on regional operation to sustain the successful operational model from Fiji. The GEF Coordination Unit has indicated that the GEF Council is likely to support the restructure. The team has confirmed that there is sufficient supervision budget comprising USD169, 000 of GEF supervision funds under current operation and additional funds available under the Bank-Executed Pacific Region Infrastructure Facility (PRIF) trust funds to support the extension of the Project to Vanuatu. Following discussions between the Global Practice, the Country Management Unit, and the GEF Coordination Unit, it has been agreed that the extension to the project be given effect in two stages: 1. An immediate Level 2 restructuring to extend the Closing Date of the current project from 31 December 2017 to 30 June 2018 and to extend the deadline for the return the uncommitted GEF funds by the Fund Manager to the Bank from 31 December 2017 to 30 June 2018. This extension will allow time for consultations and for approvals to be secured for the longer-term extension of the project; and 2. In parallel, preparation of a Level 1 restructuring to relaunch the project as a regional fund on 1 July 2018 or earlier with a new closing date of December 31, 2022. The team is seeking the approval of the level 2 restructuring described in item 1 above. The latest ISR, dated June 2017, has rated progress towards achievement of the Project Development Objective (PDO) as satisfactory. The PFIs have lent approximately USD 22 million to individuals and small businesses to support investments in renewable energy and energy efficiency of over USD 40 million. The low non-performing loan ratio (approximately 1%) means that most of the initial USD5.2 allocated to the RSF is largely available for further use, demonstrating the success of the program, The second Mid Term in 2016 (the Review) established an ongoing need for a RSF in Fiji and in the Pacific region and recommended an extension and relaunch of the project as a regional RSF. The client(s) sees a need for such a facility and supports an extension or a relaunch because it increases access to finance for small businesses and individuals The World Bank Sustainable Energy Finance Project (P098423) (mainly low income rural consumers with seasonal incomes who do not have a credit history) who are not seen as creditworthy by the commercial banks. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-58282 Effective 31-Dec-2017 30-Jun-2018 30-Oct-2018 TF-58284 Effective 31-Dec-2017 30-Jun-2018 30-Oct-2018 TF-90429 Effective 31-Dec-2017 30-Jun-2018 30-Oct-2018 23-Jul-2014, 28-Aug- TF-90430 Closed 31-Dec-2017 2014 07-Jul-2014, 02-Feb- TF-90431 Closed 31-Dec-2017 2015