The World Bank Sustainable Energy Financing Program (P098423) REPORT NO.: RES31591 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUSTAINABLE ENERGY FINANCE PROGRAM GLOBAL ENVIRONMENT FACILITY (GEF) GRANT TO THE REPUBLIC OF FIJI, AUSTRALIA NEW ZEALAND BANKING GROUP LTD May 2018 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 Financing Program (P098423) ABBREVIATIONS AND ACRONYMS ANZ Australia New Zealand Banking Group Limited CNO Coconut oil DOE Department of Energy EA Executing Agency EE Energy Efficiency ESSF Environmental and Social Safeguards Framework FJD Fijian Dollar GEF Global Environmental Facility GEO Global Environmental Objective GoF Government of Fiji IFC International Finance Corporation KWh Kilowatt Hour MSE Micro and Small Enterprise MTR Mid Term Review PAD Project Appraisal Document PDO Project Development Objective PFI Participating Financial Institution PNG Papua New Guinea PV Photovoltaic RBF Reserve Bank of Fiji RE Renewable Energy RMI Republic of Marshall Islands RSF Risk Sharing Fund SEFP Sustainable Energy Finance Project SI Solomon Islands SME Small and Medium Enterprise TA Technical Assistance USD United States Dollars WB World Bank The World Bank Sustainable Energy Financing Program (P098423) 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 30-Jun-2018 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. OPS_TABLE_PDO_CURRENTPDO 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 30-Jun-2018 5.20 5.20 0 TF-58284 09-Jul-2007 09-Jul-2007 09-Jul-2007 30-Jun-2018 1.99 .28 1.71 The World Bank Sustainable Energy Financing Program (P098423) TF-90429 09-Jul-2007 09-Jul-2007 09-Jul-2007 30-Jun-2018 .56 .51 .05 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 The World Bank Sustainable Energy Finance Project (P098423) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring seeks to extend the closing date of the Sustainable Energy Financing Project (SEFP) by three (3) months (cumulative nine (9) months from the original closing date) to finalize approvals for an extension to the SEFP and its relaunch as a regional risk facility. 2. The 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. 3. The core component of the SEFP is a Risk Sharing Fund (RSF), which is managed by the Australia and New Zealand Banking Group Limited (ANZ) (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 USD 5.2 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. 4. The first mid-term review (MTR) of project progress in 2011 recommended that the project be modified to: (i) close the project in PNG and SI 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 1 restructuring of the project was undertaken in 2014 to close implementation in PNG and SI and consolidate the operations in Fiji. 5. A second MTR of the project in 2016 found the project in Fiji had been successful with all targets for the project met or exceeded. 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 benefiting over 40,000 households. The low non- performing loan ratio (approximately 1%) means that most of the initial USD 5.2 allocated to the RSF is largely available for further use, demonstrating the success of the program. The MTR 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 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. 6. At present 79% of the project funds have been disbursed (100% of the RSF which has been released for redeployment and 31% of technical assistance funds, which ensures sufficient funds for an ongoing operation). There are no outstanding compliance (legal, fiduciary, or safeguards) issues in relation to the project. This restructuring does not involve any substantive changes such as revisions to the Project Development Objective, The World Bank Sustainable Energy Finance Project (P098423) additional financing or changes to implementation arrangements. The upcoming longer-term extension will be accompanied by relevant project adjustments needed to relaunch the project as regional operation. 7. The project is being restructured in two stages. A Level 2 restructuring was undertaken prior to the original closing date of 31 December 2017 to extend the project by six months to 30 June 2018 to allow for a longer-term extension (to December 31, 2022) and relaunch of the project as a regional risk facility. However, the process and dialog with the clients has taken longer than anticipated. It is unlikely that the approvals will be secured and the legal agreements signed by the current project closing date of June 30, 2018. The closing date for the project is being extended by a by further three (3) months (cumulative nine (9) months from the original closing date) to allow sufficient time. The World Bank Sustainable Energy Finance Project (P098423) II. DESCRIPTION OF PROPOSED CHANGES Grant Agreement between the International Bank for Reconstruction and Development and the Australia and New Zealand Banking Group Limited.  Amend the Agreement so as extend the closing date of the GEF grant from June 30, 2018 to September 30, 2018  Amend the Agreement to extend the deadline for which the Fund Manager is required to return the uncommitted GEF funds to the Bank from June 30, 2018 to September 30, 2018. Grant Agreement between the International Bank for Reconstruction and Development and the Republic of Fiji.  Amend the Agreement so as extend the closing date of the GEF grant from June 30, 2018 to September 30, 2018. III. SUMMARY OF CHANGES Changed Not Changed Change in Loan Closing Date(s) ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ The World Bank Sustainable Energy Finance Project (P098423) 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 ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) 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-58282 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019 TF-58284 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019 TF-90429 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019 28-Aug-2014, 23-Jul- TF-90430 Closed 31-Dec-2017 2014 02-Feb-2015, 07-Jul- TF-90431 Closed 31-Dec-2017 2014 Note to Task Teams: End of system generated content, document is editable from here. The World Bank Sustainable Energy Finance Project (P098423)