The World Bank Kenya Infrastructure Finance/PPP project (P121019) REPORT NO.: RES29875 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF KENYA INFRASTRUCTURE FINANCE/PPP PROJECT APPROVED ON NOVEMBER 15, 2012 TO MINISTRY OF FINANCE FINANCE, COMPETITIVENESS AND INNOVATION AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Carlos Felipe Jaramillo Practice Director: Sebastian Molineus Practice Manager/Manager: Niraj Verma Task Team Leader: Shyamala Shukla, Hadija Rahama Diba Kamayo The World Bank Kenya Infrastructure Finance/PPP project (P121019) ABBREVIATIONS AND ACRONYMS APL Adaptable Lending Program CBK Central Bank of Kenya CD Country Director CMA Capital Markets Authority FSSP Financial Sector Support Project GoK Government of Kenya IPF Investment Project Financing MTR Mid Term Review NT National Treasury PDO Project Development Objective PIU Project Implementation Unit PPF Project Preparation Fund PPP Public-Private Partnership IP Implementation progress The World Bank Kenya Infrastructure Finance/PPP project (P121019) 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 P121019 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 15-Nov-2012 31-Oct-2022 Organizations Borrower Responsible Agency MINISTRY OF FINANCE National Treasury PPP Unit Project Development Objective (PDO) Original PDO The overall objective of this two-phased Adaptable Lending Program (APL) Program is to increase private investment in the Kenya infrastructure market across sectors and to sustain this participation over an extended period of time. This involves three key areas of development: (i) enabling environment; (ii) pipeline; (iii) financing. The specific objective of the APL 1 project is to improve the enabling environment to generate a pipeline of bankable Public-Private Partnership (PPP) projects. Current PDO The overall objective of this project is to increase private investment in the Kenya infrastructure market across sectors and to sustain this participation over an extended period of time. OPS_TABLE_PDO_CURRENTPDO The World Bank Kenya Infrastructure Finance/PPP project (P121019) Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-61210 05-Jul-2017 07-Aug-2017 21-Dec-2017 31-Oct-2022 50.00 11.94 41.70 IDA-51570 15-Nov-2012 05-Dec-2012 11-Feb-2013 31-Oct-2022 40.00 31.71 5.46 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 Background 1. The Infrastructure Finance Public-Private Partnership (IFPPP) project became effective in February 2013 and was originally scheduled to close in December 2017 but this was extended to October 2022 to coincide with the closing date for the IFPPP Additional Financing that was approved in July 2017. The Project has been catalytic in framing an approach to maximizing finance for developing Kenya’s infrastructure through the creation of an enabling environment and providing technical assistance for the preparation of projects. The project seeks to mobilize US$ 1.25 billion in private financing through Public- Private Partnership (PPP) by the project closing date of October 2022. 2. The current PDO, IP, and fiduciary ratings for the project are satisfactory with the safeguards rating being moderately satisfactory. The original credit (IDA 51570) is almost fully disbursed, currently at 84 percent with US$5.9M undisbursed but fully committed. The combined disbursement for the original credit and additional financing is 48%. The project is proposed for restructuring on account of two factors i) category reallocation ii) revision of indicators, which are discussed further below. Category reallocation 3. The project has incurred expenditures and disbursements beyond the allocated amount under the Civil works, Operating costs and Consultant categories, while the other categories have disbursed below the allocated amounts. To provide operational flexibility, a single disbursement category will be introduced, and the remaining undisbursed amount of about US$ 5.46M will be reallocated to this category. Revision of Results Indicators 4. Two intermediate results indicators i) Capital Markets Bill 2011 approved by Cabinet for submission to Parliament and ii) Securities and Investments Bill 2011 approved by Cabinet for submission to Parliament are directly related to the financial The World Bank Kenya Infrastructure Finance/PPP project (P121019) sector work and no longer fit in the IFPPP project. Another Bank supported project, the Financial Sector Support Project (FSSP) is now handling all financial sector related work. For this reason, the mentioned indicators are proposed for dropping as part of this restructuring. 5. Some of the baseline figures, End target figures and End dates for results indicators are not aligned to the original credit PAD and to the Additional Financing project paper. These are being corrected with this restructuring With these changes, the Bank task team is confident that the PDO remains achievable within the current timeframe. The World Bank Kenya Infrastructure Finance/PPP project (P121019) II. DESCRIPTION OF PROPOSED CHANGES Category reallocation: Provide a one- line category to cater for all activities for the remaining balance under the old credit as broken down in the’ reallocation between categories section’ below Revision of Intermediate Indicators (see table below): Action Indicator Rationale 1 Drop Intermediate Indicator - Capital Government institutions responsible for activities that were intended to Markets Bill 2011 approved by help achieve the indicators are the National Treasury, Central Bank of Cabinet for submission to Kenya and Capital Markets Authority. These institutions had been Parliament receiving technical assistance from the Bank since January 2011 through direct advisory services, hands-on-training, workshops and market sensitization support. The IFPPP project provided supplemental support through the Capital Markets Advisor who was directly under the project. The Advisor’s contract lapsed in October 2015 coinciding with commencement of the FSSP project in April 2015 where the institutions mentioned above are beneficiaries. Subsequently, most of the financial sector activities with similar results indicators are handled under the FSSP. Consequently, no financial sector related activities have been approved for implementation under IFPPP since 2015. Hence this indicator is being dropped under IFPPP. 2 Drop Intermediate Indicator - Same as above Securities and Investments Bill 2011 approved by Cabinet for submission to Parliament 3 Drop Intermediate Indicator – Five This is a duplication of Intermediate indicator -No. of feasibility studies feasibility studies completed and approved by the PPP Committee. submission by contracting authorities to the PPP Committee acceptable to the Association, including Safeguards 4 Revise PDO indicator - Mobilize at least There is a typo on US$1.25 billion which in numbers is misrepresented as US$1.25 billion private capital 125,000,000,000 instead of 1,250,000,000. This is simply being corrected. 5 Results Alignment of some baseline figures, End target figures, End target dates framework and DLI amounts to match the PAD and project paper. There are no cleanup changes in the DLI matrix from that in the Project Paper. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. The World Bank Kenya Infrastructure Finance/PPP project (P121019) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES The World Bank Kenya Infrastructure Finance/PPP project (P121019) Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-51570-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: DISB - GOODS 600,000.00 184,769.05 184,769.05 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: DISB - CIVIL WORKS 330,000.00 281,729.45 281,729.45 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: DISB - CONSULTING 18,500,000.00 16,624,451.50 16,624,451.50 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: DISB - TRAINING 3,500,000.00 2,145,886.86 2,145,886.86 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: Non Consulting services 60,000.00 6,914.78 6,914.78 100.00 100.00 iLap Category Sequence No: 6 Current Expenditure Category: DISB - OPERATING COSTS 800,000.00 867,131.30 867,131.30 100.00 100.00 iLap Category Sequence No: 7 Current Expenditure Category: PPF REFINANCING 1,350,000.00 0.00 0.00 iLap Category Sequence No: 8 Current Expenditure Category: UNALLOCATED 1,260,000.00 0.00 0.00 Current Expenditure Category: Goods, Civil works, Consulting, Training, Non- iLap Category Sequence No: 9 consulting services, Operating costs The World Bank Kenya Infrastructure Finance/PPP project (P121019) 0.00 0.00 6,289,117.06 100 Total 26,400,000.00 20,110,882.94 26,400,000.00 . The World Bank Kenya Infrastructure Finance/PPP project (P121019) . Results framework COUNTRY: Kenya Kenya Infrastructure Finance/PPP project Project Development Objectives(s) The overall objective of this project is to increase private investment in the Kenya infrastructure market across sectors and to sustain this participation over an extended period of time. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Institutional Development and Regulatory Reform Regular issuance of Government benchmark bonds in medium and long term maturities up to 7/10 year tenures (Number, No Yes custom) (Yes/No) Action: This indicator has been Revised PPP Regulations associated with the new Law agreed to with No Yes MoF (Yes/No) Action: This indicator has been Revised Private Capital Mobilized (Amount(USD)) 0.00 1,250,000,000.00 Action: This indicator has been Revised Pipeline of PPP transactions No. of PPP Projects that reached financial close (Number) 0.00 3.00 Expression of Interests (EOIs) issued to prospective sponsors for 0.00 3.00 three targeted PPP transactions (Number) Action: This indicator has been Revised The World Bank Kenya Infrastructure Finance/PPP project (P121019) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Improvement of FCCL framework PPP Fiscal Commitment and Contingent Liability Framework operationalized as measured by: upstream DMO due diligence No Yes on prospective (feasibility stage) transactions completed in line with Law (Yes/No) Action: This indicator has been Revised PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Institutional Development and Regulatory Reform No. of Government officials with PPP certification from 10.00 50.00 recognized institutions* (Number) Line Ministries and Agencies ?Nodes? for First Mover 0.00 2.00 Transactions established and operational (Number) Action: This indicator has been Revised Regular issuance of Government benchmark bonds in medium No Yes and long term maturities up to 7/10 year tenures (Yes/No) Action: This indicator has been Marked for Deletion Capital Markets Authority Bil 2011 approved by cabinet for Yes Yes submission to parliament (Yes/No) Action: This indicator has been Marked for Deletion The World Bank Kenya Infrastructure Finance/PPP project (P121019) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Securities and Investments Bill 2011 approved by cabinet for No Yes submission to Parliament (Yes/No) Action: This indicator has been Marked for Deletion Preparation of a pipeline of PPP transactions Report drafted on project stakeholder engagement survey No Yes (Yes/No) No. of EOIs/RFQ/RFP issued to prospective PPP private partners 8.00 20.00 (Number) No. of Feasibility Studies approved by the PPP Committee 10.00 25.00 (Number) Action: This indicator has been Revised Curriculum developed and approved, implementation of PPP Training Curriculum Developed and Implemented (Text) No Curriculum curriculum commenced Improvement of FCCL Framework PPP FCCL approved by National Treasury Cabinet Secretary (Text) No Yes Action: This indicator has been Revised IO Table SPACE The World Bank Kenya Infrastructure Finance/PPP project (P121019) Disbursement Linked Indicators Matrix DLI IN00656055 ACTION DLI 1 PFF Regulations gazzeted Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome No Date 930,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 930,000.00 Action: This DLI has been Revised. See below. DLI IN00665712 ACTION DLI 1 PFF Regulations gazzeted Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome No Date 1,000,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 1,000,000.00 DLI IN00656060 ACTION DLI 2 PFF governance and operations manual approved and implemented Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 930,000.00 0.00 Period Value Allocated Amount (USD) Formula The World Bank Kenya Infrastructure Finance/PPP project (P121019) Baseline 29-Jun-2018 FY 18 930,000.00 Action: This DLI has been Revised. See below. DLI IN00665713 ACTION DLI 2 PFF governance and operations manual approved and implemented Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 1,000,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 1,000,000.00 DLI IN00656064 ACTION DLI 3 PFF Seed money provided Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 930,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 930,000.00 Action: This DLI has been Revised. See below. The World Bank Kenya Infrastructure Finance/PPP project (P121019) DLI IN00665714 ACTION DLI 3 PFF Seed money provided Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 1,000,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 1,000,000.00 DLI IN00656066 ACTION DLI 4 At least 3 PFF Funding Agreements signed Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 4,700,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 29-Jun-2018 FY 18 4,700,000.00 Action: This DLI has been Revised. See below. DLI IN00665715 ACTION DLI 4 At least 3 PFF Funding Agreements signed Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 5,000,000.00 0.00 Period Value Allocated Amount (USD) Formula The World Bank Kenya Infrastructure Finance/PPP project (P121019) Baseline 29-Jun-2018 FY 18 5,000,000.00 DLI IN00656068 ACTION DLI 5 Baseline circular to county government on PFF issued Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 1,400,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 28-Jun-2019 FY 18 1,400,000.00 Action: This DLI has been Marked for Deletion DLI IN00656070 ACTION DLI 6 Baseline circular to county governments of FCCL framework issued Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 1,400,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 28-Jun-2019 FY 18 1,400,000.00 Action: This DLI has been Marked for Deletion The World Bank Kenya Infrastructure Finance/PPP project (P121019) DLI IN00656071 ACTION DLI 7 At least 3 additional PFF Funding agreements signed Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Output No Date 9,400,000.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 28-Jun-2019 FY 18 9,400,000.00 Action: This DLI has been Marked for Deletion Verification Protocol Table: Disbursement Linked Indicators DLI_TBL_VERIFICATION DLI 1 PFF Regulations gazzeted Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 1 PFF Regulations gazzeted Description Data source/ Agency Verification Entity The World Bank Kenya Infrastructure Finance/PPP project (P121019) Procedure DLI_TBL_VERIFICATION DLI 2 PFF governance and operations manual approved and implemented Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 2 PFF governance and operations manual approved and implemented Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 3 PFF Seed money provided Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 3 PFF Seed money provided Description Data source/ Agency Verification Entity The World Bank Kenya Infrastructure Finance/PPP project (P121019) Procedure DLI_TBL_VERIFICATION DLI 4 At least 3 PFF Funding Agreements signed Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 4 At least 3 PFF Funding Agreements signed Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 5 Baseline circular to county government on PFF issued Description Data source/ Agency Verification Entity Procedure DLI_TBL_VERIFICATION DLI 6 Baseline circular to county governments of FCCL framework issued Description Data source/ Agency Verification Entity The World Bank Kenya Infrastructure Finance/PPP project (P121019) Procedure DLI_TBL_VERIFICATION DLI 7 At least 3 additional PFF Funding agreements signed Description Data source/ Agency Verification Entity Procedure The World Bank Kenya Infrastructure Finance/PPP project (P121019) Note to Task Teams: End of system generated content, document is editable from here. 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