The World Bank Regional Sustainable Energy Industry Development Project (P152653) REPORT NO.: RES29628 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF REGIONAL SUSTAINABLE ENERGY INDUSTRY DEVELOPMENT PROJECT APPROVED ON SEPTEMBER 29, 2015 TO PACIFIC POWER ASSOCIATION 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: Leopold Sedogo The World Bank Regional Sustainable Energy Industry Development Project (P152653) ABBREVIATIONS AND ACRONYMS EA Environmental Assessment ESMAP Energy Sector Management Assistance Program ESMF Environmental and Social Management Framework GFDRR Global Facility for Disaster Reduction and Recovery MDTF Multi-donor Trust Fund PDO Project Development Objective PIC Pacific Island Country PMU Project Management Unit PNG Papua New Guinea PPA Pacific Power Association SIDS DOCK Small Island Developing States Initiative SIEDP Sustainable Energy Industry Development Project SREP Scaling Up Renewable Energy Program TAG Technical Advisory Group USD United States Dollar The World Bank Regional Sustainable Energy Industry Development Project (P152653) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P152653 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-Sep-2015 31-Aug-2020 Organizations Borrower Responsible Agency Pacific Power Association Pacific Power Association Project Development Objective (PDO) Original PDO The project development objective (PDO) is to increase the data availability and capacity of power utilities of the Pacific IslandCountries and Papua New Guinea (PNG) to enhance their ability to incorporate and manage renewable energy technologies and long-termdisaster risk planning. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A1235 03-Dec-2015 03-Dec-2015 23-Mar-2016 31-Aug-2020 1.92 .33 1.59 TF-A1342 03-Dec-2015 03-Dec-2015 23-Mar-2016 31-Dec-2017 3.47 .27 3.20 TF-A1505 03-Dec-2015 03-Dec-2015 23-Mar-2016 30-Jun-2020 .27 0 .27 The World Bank Regional Sustainable Energy Industry Development Project (P152653) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Previous Project restructuring. This is the first restructuring of this project. 2. Project performance and overall status. Project performance is currently rated Satisfactory for progress towards achievement of the PDO and Moderately Satisfactory for Overall Implementation Progress. The Project is funded by three grants: Strategic Climate Fund-Scaling Up Renewable Energy Program (SREP) grant in the amount of USD 1.92 million (TF0A1235); a Small Island Development States Initiative (SIDS DOCK) grant in the amount of USD 3.47 million (TF0A1342); and Global Facility for Disaster Reduction and Recovery (GFDRR) grant in the amount of USD 0.27 million (TF0A1505). The Project was approved in December 2015 and became effective in March 2016. Implementation has experienced delays due to slowness in the procurement of key contracts for the following reasons: this is the first time that the Pacific Power Authority (PPA) has implemented a World Bank project and it has taken time for the agency to become familiar with the procurement procedures; difficulties in recruiting key staff to the project team linked to overall difficulties in recruiting appropriately skilled people in the Pacific due to limited human resources; and adjustments to major procurement packages including changes to the procurement methods and changes to the scope of Component 1 activities to be procured by the recipient. These issues have now been resolved and the procurement of major contracts over fiscal year 2018 is expected to improve significantly. This should have a positive impact on the disbursement of funds as well as implementation progress. 3. Progress by component. The Projects three components and status are outlined below: a. Component 1: Renewable Energy Resource Mapping Phase 1 – 3 (USD 2.27 million). This component is implemented by PPA and financed by the SIDS DOCK grant. The main activities under this component are: i. Resource Mapping Phase 1: In July 2016 it was decided that the Energy Sector Management Assistance Program (ESMAP) would finance and execute this work as part of its global contract arrangements (rather than under the project-level grant) in order to provide for consistent solar and wind maps using identical methodologies across the world as well as saving significant time in obtaining these maps due the contracts already underway with ESMAP. This was conveyed formally to PPA in a letter dated July 7, 2016 and freed up project funds allocated to Phase 1 to be allocated to Phase 2 and therefore allow for more solar and wind measurement sites. The solar The World Bank Regional Sustainable Energy Industry Development Project (P152653) maps for Pacific Island Countries (PICs) were launched at the PPA Conference in Apia, Samoa on July 31, 2017. The solar maps for all World Bank Pacific island member countries are available at: http://globalsolaratlas.info/. The associated media release regarding the launch of the maps at the PPA Conference is available at: http://www.worldbank.org/en/news/press- release/2017/07/31/new-tool-maps-the-potential-for-solar-energy-in-the-pacific. The wind maps are expected to be completed by the end of 2017. ii. Resource Mapping Phase 2: PPA is procuring this work under an internationally competitive bid. Following receipt of the expressions of interest, six firms were shortlisted for the request for proposals stage, and the bidding documents were submitted to the World Bank for no objection in September 2017. The bid is expected to be issued before the end of September 2017 with the contract expected to be signed by December 2017. Work under this contract is expected to commence in December 2017 and be completed by December 2019. iii. Resource Mapping Phase 3: In August 2017 it was decided that ESMAP would finance and execute this work as part of its global contract as well. The work will be completed by August 2020. b. Component 2: Technical Assistance (USD 2.57 million). This component is implemented by PPA and financed by all three grants (SIDS DOCK USD 0.7 million, SREP USD 1.6 million, GFDRR USD 0.27 million). This component includes a range of activities designed to increase capacity within the utilities in PICs and PNG on planning for and management of the integration of renewable energy in their systems, data collection and management, and knowledge sharing across jurisdictions. This program of activities includes: (i) acquisition of modeling software and consultancy services for renewable energy integration and capacity building (software purchased and training delivered to PPA with training to PICs scheduled for October 2017); (ii) development of an online power benchmarking platform (review of expressions of interest underway); (iii) development of industry guidelines and competency standards (evaluation of requests for proposals underway with the contract expected to be awarded before the end of September 2017); (iv) training/workshops (first training activity on “Grid Integration of Renewable Energy Technologies in Pacific Island Countries” held in Nadi from March 27 – 31, 2017 for Southern Pacific utilities and in Guam from June 12 - 16, 2017 for Northern Pacific utilities); (v) power utilities’ career development assessment plan (Training Needs Assessment and Career Development Initiatives Study completed in August 2017); and (vi) disaster-recovery and risk-reduction activities (terms of reference being drafted). c. Component 3: Project Implementation Support (USD 0.82 million). This component is implemented by PPA and is financed by SIDS DOCK (USD 0.5 million) and SREP (USD 0.32 million) grants. VC equipment has been purchased and the upgrade of the PPA website has been completed to allow for the integration of the new tools to be procured under the project, including the online benchmarking tool and the power system modelling tool. The inaugural meeting of the Technical Advisory Group (TAG) was held in Nadi Fiji on March 29-30,2017. The role of the TAG is to provide leadership and advice to the project management unit. The TAG consists of Chief Executive Officers from three utilities (Tuvalu Electric Company, Micronesia’s Chuuk Public Utility Company, and Samoa’s Electric Power Corporation) as well as the Project Coordinator and Project Implementation Officer. The World Bank is represented on the TAG by the Project Task Team Leader (or alternate) as an observer and was present at the second TAG meeting in Samoa on July 30, 2017. 4. Safeguards. The Project was approved as a category B project for environmental and social safeguard purposes. It is focused on building capacity and providing support to power utilities in PICs in respect to the development of renewable energy, namely through technical advisory studies, training, and the provision of validated solar and The World Bank Regional Sustainable Energy Industry Development Project (P152653) wind maps. An Environmental and Social Management Framework (ESMF) has been developed to inform site selection and the mitigation measures required at each solar and wind monitoring site. PPA is responsible for the implementation of the ESMF as well as ensuring that all terms of reference for any technical assistance or studies carried out under the project are consistent with the World Bank’s environmental and social safeguards policies and requirements. Project activities carried out so far have complied with the ESMF (dated August 2015 following consultations with utilities and government energy officials). The installation of monitoring equipment is expected to be carried out in late 2017. Safeguards aspects have been included in the terms of reference for recruiting consultants for the project as appropriate. 5. Fiduciary capacity and support. Financial Management rating is Satisfactory and Procurement rating is Moderately Satisfactory. The project Interim Financial Reports are up to date and the Project Audit for October 2015 to December 2016 was submitted to the Bank in June 2017 with no issues. Procurement progress has been slow with concerns around the ability of the Procurement Advisor hired by PPA to provide the necessary level of support. Procurements have moved slowly and have required significant support from the Bank team. Procurement has progressed recently. The Bank will continue to work with the Procurement Advisor to continue to build capacity in this area. B. Rationale for restructuring 6. The objectives of the Project continue to be relevant and achievable. SIDS DOCK funds represent over 60 percent of total project funding, and the closing date of the wider SIDS DOCK multi-donor trust fund (MDTF), administered by the World Bank, was recently revised from December 31, 2017 to December 31, 2020. As only 7.8 percent of the SIDS DOCK funds under the project have been disbursed to date, the purpose of this restructuring is to extend the closing date of the project-level SIDS DOCK grant, from December 31, 2017 to December 30, 2019, to allow key project activities to be completed and therefore achieve the PDO. This restructuring also includes changes to the funding source and execution arrangements for Phases 1 and 3 of Component 1, as well as the inclusion of a new World Bank Pacific Island member country under the Project. II. DESCRIPTION OF PROPOSED CHANGES C. Summary of proposed changes 7. The proposed changes that are part of this level 2 restructuring are: (i) an extension of the closing date for the SIDS DOCK Grant (TF0A1342); (ii) a change in the funding source and execution arrangements for Phases 1 and 3 of Component 1, which are to be financed and executed by ESMAP; (iii) an amendment to the definition of ‘member country’ in the Grant Agreement to allow for the inclusion of Nauru and the Nauru Utilities Corporation to be formally included in the planned project activities since Nauru joined the World Bank after the project was approved; and (iv) updated disbursement estimates. The World Bank Regional Sustainable Energy Industry Development Project (P152653) D. Detailed description of the proposed changes 8. Extension of SIDS DOCK trust fund closing date. The SIDS DOCK funds under this project (TF0A1342) are linked to the SIDS DOCK MDTF (TF071728). The closing date for the MDTF was December 31, 2017 and it was always anticipated that the MDTF would be extended as the initial closing date would not have allowed for the completion of the work. As expected, the closing date of the MDTF was recently revised to December 31, 2020. As the SIDS DOCK funds under this Project are expected to be disbursed over the next two years, it is proposed to extend the project-level SIDS DOCK grant closing date (TF0A1342) from December 31, 2017 to December 30, 2019. This will require an amendment to Section IV, B of the Project Grant Agreement. 9. Changes to Component 1. Whilst the specific phases of Component 1, Resource Mapping, are not included in the Grant Agreement, this restructuring serves as an opportunity to clarify and document the fact that Phases 1 and 3 will now be undertaken by the World Bank under Bank-executed ESMAP funds, whilst PPA will still manage Phase 2 using recipient-executed funds. As described above, Phases 1 and 3 are to be completed by ESMAP as part of their global contracts for solar and wind resource mapping. All funds originally allocated to Phases 1 and 3 will now be allocated to Phase 2 hence no change to component costs required. The title of Component 1 is to be updated in the project documents and on the Portal through this restructuring to reflect the wording in the Grant Agreement, that being “Component 1: Renewable Energy Resource Mapping”. 10. Inclusion of Nauru as a Member Country. Since the Project commenced, Nauru has become a World Bank member country and a formal request was received from the Government of Nauru on 2 November 2017, seeking World Bank approval to participate in this Project and be eligible for all technical assistance under the Project as per all other World Bank member PICs. This will be the first Bank-supported project in Nauru. The Grant Agreement will be amended to include Nauru as an eligible PIC for project activities. This will allow the Government of Nauru and theNauru Utilities Corporation to be formally included in the planned Project activities. This will require an amendment to the Appendix of the Grant Agreement, definition of “Pacific Island Countries” and “Member Country” which currently include The Federated States of Micronesia, Republic of Fiji, Republic of Kiribati, Republic Marshall Islands, Republic of Palau, Independent State of Papua New Guinea (PNG), Independent State of Samoa, Solomon Islands, Kingdom of Tonga, Tuvalu and Republic of Vanuatu, which are members of the World Bank in whose respective territories the Project is carried out. 11. Change in Disbursement Estimates: Disbursement estimates have been updated as part of this restructuring based on the past disbursements made and future disbursements projected according to the procurement plan and implementation plan for the remaining project activities. A specific action plan is not needed as the project is still on track with adjustments to disbursements as reflected in the table below. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. The World Bank Regional Sustainable Energy Industry Development Project (P152653) III. SUMMARY OF CHANGES Changed Not Changed Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ 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 ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank Regional Sustainable Energy Industry Development Project (P152653) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Renewable Energy Resource Renewable Energy Resource 2.27 Revised 2.27 Mapping Phase 1 to 3 Mapping Technical Assistance 2.57 No Change Technical Assistance 2.57 Project Implementation Project Implementation Support 0.82 No Change 0.82 Support TOTAL 5.66 5.66 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A1235 Effective 31-Aug-2020 TF-A1342 Effective 31-Dec-2017 30-Dec-2019 30-Apr-2020 TF-A1505 Effective 30-Jun-2020 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2016 2,190,000.00 100,000.00 2017 2,210,000.00 180,000.00 2018 540,000.00 2,500,000.00 2019 500,000.00 2,500,000.00 2020 200,000.00 660,000.00 2021 20,000.00 20,000.00 The World Bank Regional Sustainable Energy Industry Development Project (P152653) Note to Task Teams: End of system generated content, document is editable from here.