The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) REPORT NO.: RES37761 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF REP. OF CONGO - WATER, ELECTRICITY & URBAN DEVELOPMENT SIL (LEN) APPROVED ON MARCH 25, 2010 TO REPUBLIC OF CONGO ENERGY AND EXTRACTIVES GLOBAL PRACTICE AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Jean-Christophe Carret Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Wendy E. Hughes Task Team Leader: Affouda Leon Biaou, Patrice Joachim Nirina Rakotoniaina The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) ABBREVIATIONS AND ACRONYMS DA Designated Account E2C Energie Electrique du Congo IBRD International Bank for Reconstruction and Development IDA International Development Association FEF Front End Fee GDP Gross Domestic Product MEH Ministry of Energy and Hydraulics MIS Management Information System MTR Mid Term Review PEEDU Water, Electricity and Urban Development Project (Projet Eau, Électricité et Développement Urbain) PDO Project Development Objective PIU Project Implementation Unit RPP Revenue Protection Program SNE National Electricity Utility (Société Nationale d’Electricité) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) BASIC DATA Product Information Project ID Financing Instrument P106975 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 25-Mar-2010 31-Dec-2020 Organizations Borrower Responsible Agency Republic of Congo Ministry of Finance, Budget and Public Portfolio Project Development Objective (PDO) Original PDO To increase sustainable access to basic infrastructure and safe drinking water for the inhabitants of Brazzaville and Pointe Noire. Current PDO To increase access to basic infrastructure services, safe drinking water and electricity to the inhabitants of targeted areas in the cities of Brazzaville and Pointe Noire. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-84450 16-Sep-2014 10-Oct-2014 15-Dec-2015 31-Dec-2020 45.00 25.79 19.21 IDA-55410 16-Sep-2014 10-Oct-2014 15-Dec-2015 31-Dec-2020 15.00 10.19 3.56 IDA-47010 25-Mar-2010 25-May-2010 27-Oct-2010 31-Dec-2019 25.50 24.84 0 The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Project Status 1. The Congo Water, Electricity and Urban Development Project (P106975) was approved by the World Bank Board of Directors on March 25, 2010 with a total amount of US$125.5 million (IDA: US$25.5 million equivalent and Government: US$100 million). The project was topped up with an Additional Financing (P147456) which was approved on September 16, 2014 and jointly financed by IDA (US$15 million), IBRD (US$45 million) and the Government (US$90 million). The original project was dedicated mainly to finance urban infrastructure and water supply and sector reform while the Additional Financing aimed at upgrading of the electricity distribution and transmission system and improving the operational performance of the utility to restore the system’s reliability and viability. The Bank’s total financing is US$85.5 million. 2. If approved, this would be the fourth restructuring of the Project. The first restructuring was approved in 2014 as part of the processing of the Additional Financing to, inter alia, align the original PDO and description of activities with the changes introduced through the Additional Financing and extend the closing date. The second restructuring was approved in April 2017 and amended the financing agreements (IBRD-84450, IDA-47010, and IDA-55410) to allow the front-loading of Bank resources in the absence of the counterpart funding disbursement. The third restructuring was approved in April 2018 and eliminated the counterpart funding which was the main constraint the project has faced since its effectiveness by: (i) downscaling the Project and reallocating IDA/IBRD resources and already disbursed funds from the Government to finance priority activities for the achievement of the Project Development Objective (PDO); allowing resources of IDA/IBRD (IBRD-84450, IDA-55410) in the Additional Financing to be used to cover expenses already contracted and executed in the original Financing, (iii) allowing to use the Bank's resources to cover 100 percent of eligible expenditures to be financed by the Project; (iv) extending the closing date to December 31, 2020 to address delays caused by the lack of counterpart funding. 3. Given the withdrawal of the Recipient’s contribution, the remaining Bank resources were allocated to finance priority activities that contribute the most to the achievement of the PDO including: (i) upgrading of the distribution network (feeders, transformers), (ii) improving the operational and commercial performance of the national electric utility, and (iii) assistance to the reform of power and water sectors. The results framework was also updated accordingly. 4. Component A (Urban infrastructure and services) is fully completed and most of activities under Component B (Urban Water Supply) are completed with a disbursement rate of 97.2 percent. The remaining activities are expected to be completed by end December 2019. The current restructuring targets Component C which supports Sector Reform, Commercial and Electricity Supply Systems Upgrade. The implementation of Upgrading of the National Electricity Company (SNE) Electricity Distribution and Transmission System Upgrade (Subcomponent C.3) continued to progress satisfactorily as per the last Implementation Status and Results Report (ISR) on June 14, 2019. All physical works are planned to be completed no later than March 2020. Subcomponent C.4 was designed for Improvement of The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) Operational Performance of SNE in Key Business Areas. The implementation of the two remaining activities under Subcomponent C.4 after the third restructuring, namely, the revenue protection plan (RPP) (Subcomponent C.4(b)) and management information system (MIS) (Subcomponent C.4(c)) has not yet started due to the decision of the Ministry of Energy and Hydraulics (MEH) to not use the resources of the Project to finance the implementation of the RPP. Activities related to Institutional Strengthening and Capacity Development of SNE (Subcomponent 3.5) are still at the procurement stage and are planned to be completed within the next nine to twelve months. 5. As per the last ISR, the Project was rated Moderately Satisfactory (MS) for overall implementation progress and MS for progress towards achievement of PDO. The Project is in compliance with all legal covenants and all external audit reports and Interim Financial Reports are up to date and satisfactory. There is no overdue audit report. As of July 30, 2019, total disbursement of Bank financing was 70.5 percent; and 85.4 percent of IDA funds and 57.1 percent of IBRD funds have been disbursed. Rationale for restructuring 6. This restructuring paper seeks approval to amend the current financing agreements (IBRD-84450, IDA55410 and IDA- 47010) to: (i) cancel activities under subcomponent C.4, except for the environmental and social studies for the rehabilitation and construction works for SNE customer service offices (but excluding the rehabilitation works which will not be financed under the Project) ; (ii) as a result of (i), reduce the amount of Loan Number 84450 from US$ 45 million to US$ 35 million, the difference being equal to the budget allocated to activities that are cancelled (MIS and RPP); (iii) update the results framework. The PDO is to increase access to basic infrastructure services, safe drinking water and electricity for the inhabitants of targeted areas in the cities of Brazzaville and Pointe-Noire. The PDO will remain unchanged. 7. The proposed restructuring results from the Government's letter N⁰244-19/MPSIR-CAB, dated 5 April 2019, requesting the cancellation of the RPP and MIS, which the MEH decided to drop from the Project. These activities are supposed to be financed by the utility as part of the ongoing reform of the power sector. This is in line with the Aide- memoire dated November 21, 2018 here attached. II. DESCRIPTION OF PROPOSED CHANGES Modification of the scope of the project 8. Under the last restructuring, many activities were canceled due to lack of counterpart funding, including the procurement and installation of 100,000 electricity meters, rehabilitation of existing and construction of new SNE customer service offices and provision of low-cost connections to approximately 50,000 eligible households. In April 2019, the Government requested a restructuring of the Project to cancel the two remaining activities consisting of RPP and MIS. The request followed the decision of the Ministry of Energy and Hydraulics (MEH) to not use the proceeds to fund these two activities during the mission in September 2018. As a result, the proposed restructuring will cancel RPP and MIS under Sub-Component C.4. Improving the Operational Performance of SNE in Key Business Areas. Revision of the Results Framework 9. As part of the proposed restructuring, many results indicators are no more relevant. These indicators will be revised to fit in with the activities actually implemented by the Project and their contribution to achieving the PDO. New The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) indicators will be added to better reflect the impact of investments on the quality of electricity supplied, such as the load factor of feeders and substations in the project areas. All indicators related to ongoing reform of the power sector in which the Bank has not been associated will be removed. This includes: (i) Assistance to MEH on budget implementation and investment planning completed; (ii) Legal framework for the ARSEL1 has been reviewed and updated; and (iii) Operationalization of the Planning and Study Unit in SNE. The indicator Number of meters installed under the project will be removed as the Project is not financing procurement of meters. 10. Because of the cancellation of the meters and the RPP, the target for the indicators on bill Collection rate per year in the project area and Total distribution losses per year in the project area will be revised. The project is no more supporting activities that reduce non-technical losses and increase metering. The target for collection rate will be reduce to 75% instead of 90% as all activities (metering, RPP, MIS) designed to improve the collection rate were all cancelled as per the decision of the Ministry of Energy. Similarly, total losses will be reduced to 48% instead of 40% which are reasonable target due to scale down of activities (cancellation of the RPP and metering, less investments in network upgrade). 11. Finally, a new indicator on the load factor of feeders and substations in the project areas will be introduced. The baseline is 105% of load and target is set at 75%. Loan Cancelation 12. The total amount of the Additional Financing of US$60 million is reduced to US$50 million. The difference with the amount at the approval of the AF, i.e. US$10 million from the Loan will be returned to the country portfolio. As a result, the disbursement table in Section IV.A.2 of Schedule 2 to the Loan Agreement is amended to read as the table below: Amount of Loan Number 8445-CG Percentage of Expenditures to be financed Category Allocated (inclusive of Taxes) (expressed in USD) (1) Goods, works, non-consulting services, consultants’ services, 34,887,500 100% Training and Operating Costs for Parts C.3, C.4 and C.5 of the Project (2) Front-end Fee Amount payable pursuant to section 2.03 of 112,500 this Agreement in accordance with Section 2.07(b) of the General Conditions (3) Interest Rate Cap Amount due pursuant to Section 2.08(c) of 0 the Agreement TOTAL AMOUNT 35,000,000 13. The new budget reallocation is summarized below. The provision for contingencies will help mitigate risks cost overruns, exchanges rate and will also finance any government study for new projects. 1 Electricity Sector Regulatory Agency (Agence de Régulation du Secteur de l’Electricité) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) Gove rnme nt - World Bank- Funds Proje ct costs Gove rnme nt World Bank Funds available available Compone nts Comme nts Initial Initial FA Initial FA Initial FA Initial (1) FA FA (2) A. Urban Infrastructure s and se rvice s 70.5 0 57 0 13.5 0 41.8 0 13.5 2.09 A.1 Urban Infrastructures 62 0 50.1 0 11.9 0 39.7 0 11.9 2.09 A.2 Support to the cities of Brazzaville and Pointe Noire and to the 8.5 0 6.9 0 1.6 0 2.1 1.6 Ministry of Housing and Urban Development B. Urban Wate r Supply 45.5 0 36.7 0 8.8 0 34.3 0 8.8 1.35 B.1 Improve and Expand Water Supply Services in Brazzaville and Any new works planned, this provision aims to cover the 26.2 0 21.1 0 5.1 0 23.2 0 5.1 0 Pointe Noire payment of the counterpart funds part due to Veolia B.2 Support to Water Sector Reform 19.3 0 15.6 0 3.7 0 11.1 3.7 1.35 C. Se ctor Re form, Comme rcial and Ele ctricity Supply Syste m 3.4 145.8 2.7 87 0.7 58.8 0.7 0 0.7 40.89 Upgrade C.1 Support to MEH for the reform of the electricity sector and the 1.1 0 0.9 0 0.2 0 0.2 0 0.2 0 SNE C.2 Support to MEH on key actions needed for the reform 2.3 0 1.8 0 0.5 0 0.5 0 0.5 0 T he budgets for the Revenue protection program and the management information system are cancelled C.3 Upgrading of th SNE Electricity Distribution and T ransmission 0 86 0 51 0 35 0 0 0 37.21 System C.4 Improving key Operational Performance of SNE in key business 0 50 0 30 0 20 0 0 0 0.04 areas C.5 Institutional Strengthening and Capacity Development of SNE 0 9.8 0 6 3.8 0 0 0 3.64 O pe rating Costs 3.6 3.4 2.9 2.4 0.7 1 2.6 0 0.7 3.04 Audits 0.9 0.8 0.7 0.6 0.2 0.2 0.2 0 0.2 0.75 PPA Re financing 1.6 0 0 0 1.6 0 0 0 1.6 Continge ncie s (e xchange s rate , contracts) 1.88 Total 125.5 150 100 90 25.5 60 79.6 0 25.5 50.00 $10 million will be re turne d to the country portfolio (1) T hese are about counterpart funds already disbursed during implementation of the initial financing (2) 97% of the IDA initial credit has already been disbursed I. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) DDO Status ✔ Project's Development Objectives ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Urban Infrastructure and Urban Infrastructure and 15.76 No Change 15.76 Services Services Urban Water Supply 10.13 No Change Urban Water Supply 10.13 Electricity Sector Reform, Electricity Sector Reform, Commercial and Electricity 57.11 Revised Commercial and Electricity 57.11 Supply Systems Upgrade. Supply Systems Upgrade. TOTAL 83.00 83.00 The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' S REQUEST IBRD- Disburs USD 45,000,000.00 10,000,000.00 31-Jul-2019 35,000,000.00 FOR 84450-001 ing COUNTRY REASONS BORROWER' S REQUEST IDA-47010- Disburs XDR 16,500,000.00 0.00 31-Jul-2019 16,500,000.00 FOR 001 ing COUNTRY REASONS BORROWER' S REQUEST IDA-55410- Disburs XDR 9,800,000.00 0.00 31-Jul-2019 9,800,000.00 FOR 001 ing COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-84450-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GDS WRK NON-CN CONS TRN OP c3 c4 c5 44,887,500.00 21,947,264.09 34,887,500.00 100.00 100.00 Total 44,887,500.00 21,947,264.09 34,887,500.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2010 0.00 0.00 The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) 2011 4,000,000.00 4,000,000.00 2012 7,000,000.00 7,000,000.00 2013 7,000,000.00 7,000,000.00 2014 5,500,000.00 5,500,000.00 2015 2,000,000.00 2,000,000.00 2016 5,000,000.00 5,000,000.00 2017 2,000,000.00 2,000,000.00 2018 18,000,000.00 18,000,000.00 2019 20,000,000.00 14,000,000.00 2020 13,000,000.00 9,000,000.00 2021 2,000,000.00 2,000,000.00 2022 0.00 0.00 . The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) . Results framework COUNTRY: Congo, Republic of Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) Project Development Objectives(s) To increase access to basic infrastructure services, safe drinking water and electricity to the inhabitants of targeted areas in the cities of Brazzaville and Pointe Noire. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 To increase access to basic infrastructure services, safe drinking water and electricity People benefitting from improved drainage in areas 0.00 0.00 50,000.00 90,000.00 147,000.00 200,000.00 served by the project (Number) Number of people in urban areas provided with access to all-season roads within a 0.00 0.00 50,000.00 90,000.00 147,000.00 200,000.00 500 meter range under the project (Number) Number of people in urban areas provided with access 0.00 25,744.00 101,532.00 184,187.00 267,112.00 259,340.00 to Improved Water Sources under the project (Number) Direct project beneficiaries 0.00 0.00 600,000.00 762,000.00 967,000.00 1,200,000.00 (Number) Female beneficiaries 0.00 1,890.00 6,420.00 10,940.00 15,470.00 636,000.00 (Percentage) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Additional people provided with access to electricity under the project by 0.00 112,000.00 household connections (number) (Number) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Urban Infrastructure and Services Annual expenditures on infrastructure maintenance 0.00 6.00 in Brazzaville and Pointe Noire (Percentage) Annual increase in towns' own resources (municipal taxes and return on 0.00 0.00 5.00 15.00 20.00 20.00 municipal assets) (Percentage) Pupils with access to improved school facilities in 0.00 7,200.00 targeted areas (Number) Surface area of eroded areas treated (Square 0.00 0.00 0.00 0.00 0.00 6,000.00 Meter(m2)) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Health facilities constructed, renovated, 0.00 0.00 19.00 44.00 111.00 7.00 and/or equipped (number) (Number) People with access to improved health facilities in 0.00 90,000.00 targeted areas (Number) Drainage network constructed / rehabilitated 0.00 0.00 0.00 0.00 0.00 34.00 (Kilometers) Roads rehabilitated, Non- 0.00 0.00 0.00 0.00 0.00 32.00 rural (Kilometers) Urban Water Supply Timely certified accounts and financial statements No No Yes Yes Yes Yes (Yes/No) Submission of previous year's audit reports to No No Yes Yes Yes Yes clients by May 15 of each year. (Yes/No) Revised SNDE HR management system in No No No Yes Yes Yes place and operational (Yes/No) Collection ratio (cash income/billed revenue) 47.00 50.00 60.00 70.00 75.00 75.00 (Percentage) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Connections with operating 0.00 30,000.00 water meter (Number) New water legal and regulatory framework fully No Yes No Yes Yes Yes defined and enforced (Yes/No) New tariff system designed No Yes No No Yes Yes and enforced (Yes/No) Boreholes constructed 0.00 2.00 0.00 2.00 2.00 2.00 under the project (Number) Length of secondary and tertiary water supply 0.00 204.00 network built in each city (Kilometers) Brazzaville (Kilometers) 0.00 172.00 Pointe-Noire 0.00 32.00 (Kilometers) Length of primary water supply network built in 0.00 0.00 0.00 0.00 0.00 40.00 Pointe Noire (Kilometers) New piped household water connections that are 0.00 5,000.00 17,000.00 29,000.00 41,000.00 30,000.00 resulting from the project intervention (Number) Improved community water points constructed or 0.00 0.00 35.00 84.00 133.00 40.00 rehabilitated under the project (Number) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Electricity Sector Reform, Commercial and Electricity Supply Systems Upgrade. Improvement of transit capacity of network 430,000.00 482,000.00 distribution (Kilovolt- Amphere(KVA)) Assistance to MEH on budget implementation and No No No Yes Yes Yes investment planning completed (Yes/No) Rationale: Action: This indicator has The ongoing reform of the power sector has modified the context of the design of the project. The Government is pursuing a reform in which the Bank is not been Marked for Deletion fully associated and activities are not implemented as initially designed. Legal framework for the ARSEL has been reviewed No No No Yes Yes Yes and updated (Yes/No) Rationale: Action: This indicator has The ongoing reform of the power sector has modified the context of the design of the project. The Government is pursuing a reform in which the Bank is not been Marked for Deletion fully associated and activities are not implemented as initially designed. Tariff study has been No No No Yes Yes Yes completed (Yes/No) Reform plan for the electricity sector has been Yes No Yes Yes Yes Yes prepared (Yes/No) The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Total distribution losses per year in the project area 54.00 48.00 (percentage) (Percentage) Rationale: Action: This indicator has The target was revised to account for the cancellation of the revenue protection program and the management information system which support non technical been Revised losses reduction. Also, investments in network upgrade are limited to Bank resources. Operationalization of the Planning and Study Unit in No Yes SNE (Yes/No) Rationale: The ongoing reform of the power sector has modified the context of the design of the project. From a vertically integrated utility, the Government has decided Action: This indicator has to separate the segment with the aim to privatize generation and distribution segment. SNE was dissolved and a new asset company was created, making this been Marked for Deletion activity irrelevant. Transmission lines constructed or rehabilitated 0.00 500.00 under the project (Kilometers) Collection rate per year in the project area 70.00 75.00 (percentage) (Percentage) Rationale: Action: This indicator has The target was revised downward as activities designed to improvement the bill collection rate such as installation of meters and the revenue protection been Revised program and the construction of customer services centers were all cancelled as per the decision of the Ministry of Energy. The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Number of meters installed 0.00 0.00 under the project (Number) Rationale: Action: This indicator has The Ministry of energy requested to cancel the procurement of meters. been Marked for Deletion Feeders load factor 105.00 75.00 (Percentage) Rationale: Action: This indicator is The investments aimed to improve the supply reliability by reducing the load on feeders in the project areas. New IO Table SPACE The World Bank Rep. of Congo - Water, Electricity & Urban Development SIL (LEN) (P106975)