african development fund · 33/11kv substations in bo and kenema, (ii) the rehabilitation and...
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AFRICAN DEVELOPMENT FUND
SIERRA LEONE
REHABILITATION AND EXTENSION BO-KENEMA
DISTRIBUTION SYSTEM
APPRAISAL REPORT
ONEC/GECL DEPARTMENTS
December 2016
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TABLE OF CONTENTS
1. STRATEGIC THRUST & RATIONALE .......................................................................... 1
1.1. Project linkages with country strategy and objectives ................................................ 1
1.2. Rationale for Bank’s involvement............................................................................... 2
1.3. Donors coordination .................................................................................................... 3
2. PROJECT DESCRIPTION ................................................................................................ 4
2.1. Project Components .................................................................................................... 4
2.2. Technical solution retained and other alternatives explored ....................................... 5
2.3. Project type .................................................................................................................. 5
2.4. Project cost and financing arrangements ..................................................................... 6
2.5. Project’s target area and population ............................................................................ 7
2.6. Participatory process for project identification, design and implementation .............. 8
2.7. Bank Group experience, lessons reflected in project design ....................................... 8
2.8. Key performance indicators ........................................................................................ 9
3. PROJECT FEASIBILITY .................................................................................................. 9
3.1. Economic and financial performance .......................................................................... 9
3.2. Environmental and Social impacts Environment ...................................................... 10
4. IMPLEMENTATION ...................................................................................................... 12
4.1. Implementation arrangements ................................................................................... 12
4.2. Monitoring ................................................................................................................. 14
4.3. Governance................................................................................................................ 15
4.4. Sustainability ............................................................................................................. 15
4.5. Risk management ...................................................................................................... 15
4.6. Knowledge building .................................................................................................. 16
5. LEGAL INSTRUMENTS AND AUTHORITY .............................................................. 17
5.1. Legal instrument ........................................................................................................ 17
5.2. Conditions associated with Bank’s intervention ....................................................... 17
5.3. Compliance with Bank Policies ................................................................................ 18
6. RECOMMENDATION .................................................................................................... 18
Appendix I: Country’s comparative socio-economic indicators ................................................I
Appendix II: Table of ADF’s portfolio in the country ............................................................. II
Appendix III: Key Projects Financed By the Bank and other Development Partners ............. IV
Appendix IV: Map of the Project Area ..................................................................................... V
Appendix V: Justification below 10% of project cost financing by the Government ............. VI
i
Currency Equivalents November 2016
1 UA = 1.39434 USD
1 UA = 8761.9001 SLL
Fiscal Year
1st January – 31st December
Weights and Measures
1 metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres
ii
Acronyms and Abbreviations
AfDB African Development Bank
ADF
ARAP
African Development Fund
Abbreviated Resettlement Action Plan
CLSG Cote D'Ivoire, Liberia, Sierra Leone & Guinea
CSI Core Sector Indicator
CSP
DACO
DFID
Country Strategy Paper
Development Assistance Coordination Office
Department for International Development
DPs
E&S
ECOWAS
Development partners
Environmental and Social
Economic Community of West African States
EDSA
EGTC
Electricity Distribution and Supply Authority
Electricity Generation and Transmission Company
EIB
EIRR
European Investment Bank
Economic rate of return
ESAP Environmental and Social Assessment Procedures
EVD
EWRC
FIRR
FNPV
Ebola Virus Disease
Electricity and Water Regulatory Commission
Financial internal rate of return
Financial Net Present Value
GoSL Government of Sierra Leone
GDP
IsDB
Gross Domestic Product
Islamic Development Bank
ISS AfDB’s Integrated Safeguards System Policy of 2013
JICA Japanese International Cooperation Agency
km Kilometer
kV Kilovolt
LV
MAF
MoE
MoFEC
Low Voltage
Mutual Accountability Framework
Ministry of Energy
Ministry of Finance and Economic Development
MoU Memorandum of Understanding
MV
MW
Medium Voltage
Megawatt
NPA National Power Authority
OHL Overhead Line
O&M
PAP
PERP
PPE
Operations and Maintenance
Project Affected Persons
Post Ebola Recovery Program
Personal protective equipment
PPP Public Private Partnerships
PIU Project Implementation Unit
PRSP Poverty Reduction Strategy Paper
RAP Resettlement Action Plan
RMC
RoW
SA
SME
Regional Member Countries
Right of Way
Special Account
Small and Medium Enterprise
UA Units of Account
UNIDO United Nations Industrial Development Organization
USD
WB
United States Dollar
World Bank
iii
Loan Information
Client’s information
COUNTRY: Sierra Leone
BORROWER: Republic of Sierra Leone
EXECUTING AGENCY: Ministry of Energy
IMPLEMENTING AGENCY: Electricity Distribution and Supply Authority
Financing plan
Source Amount (UA
million)
Instrument
ADF
4.621
Loan
ADF
4.688
Grant
Government of Sierra Leone* 0.93 Equity
DFID 27.84 Grant
TOTAL COST 38.08
ADF’s key financing information
Loan / grant currency
Unit of Account
Interest type* Not Applicable
Interest rate spread* Not Applicable
Commitment fee* 0.5% per annum on the un-disbursed loan balance
Service Charge 0.75% on the amount disbursed and outstanding
Other fees* Not Applicable
Tenor 40 years
Grace period 10 years
FIRR, NPV (base case) (9.3%, USD 1.3 million )
EIRR (base case) (20.4%%)
*if applicable
Timeframe - Main Milestones (expected)
Concept Note approval ADF
August 2016 DFID
Project approval December 2016 December 2016
Effectiveness January 2017
Disbursement Closing Date March 2020
Last Disbursement Date June 2020
Completion January 2020
Last repayment December 2056
iv
Project Summary
Project Overview
The proposed project aims at upgrading and extending the Bo and Kenema
distribution network in order to increase its power transfer capacity and increase the
reliability and availability of power supply within the Bo-Kenema area of Sierra
Leone. More specifically, the project will enable (i) the upgrade and construction of
a 70 kilometre (km) overhead 33 kilovolt (kV) line between Bo and Kenema along
with the construction of two primary substations and rehabilitation of 2 city centres
33/11kV substations in Bo and Kenema, (ii) the rehabilitation and expansion of
Medium Voltage (MV) and Low Voltage (LV) distribution networks within the two
cities, (iii) the implementation of a end-user connection campaign with the objective
to connect 37,000 additional households to the grid (iv) the provision of service for
preparation of designs and bid documents (v) the provision of capacity building to
the Electricity Distribution and Supply Authority (EDSA) relevant stakeholder,
and (vi) the provision of temporary generation during the construction works.
The total project cost is estimated at UA 38.08 million of which, the Bank will
contribute UA 9.309 million, the Department for International Development
(DFID) UA 27.84 million and the Government of Sierra Leone (GoSL) UA 0.93
million. The Bo and Kenema area population, particularly those in rural areas and
low income groups, will benefit from this project as well as small businesses.
Through the provision of increased electricity access, the project will contribute to
improving targeted households’ standards of living in terms of education, health
and access to information. In addition, the project will help increase the
competitiveness of small businesses and expand their activities.
Needs Assessment
In the Bo-Kenema area as in other parts of the country, the limited and dilapidated
power infrastructure base continues to be one of the major constraints to expansion
of electricity access (15%) in the country. The distribution networks supply power
to 10,509 customers in Bo and 6,762 customers in Kenema including Blama’s 250
customers, leaving more than 75% of the population area without access to
electricity. The current peak demand is estimated to be around 7.5 Megawatt (MW), being supplied by a 4 MW diesel generator located in Bo and a 3 MW hydro
power plant in Goma which is however available only during the wet season. This
distribution system is severely constrained due to obsolete equipment, lack of
maintenance coupled with high losses that reach over 38 percent. The components
for the distribution networks were installed in the mid-1980s and many parts of the
system are currently in a very poor state from a health and safety perspective. At
the same time, the Cote D'Ivoire, Liberia, Sierra Leone & Guinea (CLSG)
interconnection is expected to be commissioned in 2018, providing more than 40
MW of firm and relatively low priced electricity to the insulated network. Increasing
the transfer capacity and reliability of the network will be necessary to make profit
from this new supply.
The proposed project is aimed at supporting the Government’s Post Ebola Recovery
Program (PERP) which cited unreliable and limited energy services in urban areas
and the near absence of energy services in rural areas as one of the major obstacles
that adversely impact the rapid response to the EVD crisis.
Bank’s Added Value
The national electricity access rate is 15% and per capita electricity consumption of
130 kWh against 550 kWh on average for Sub-Saharan Africa. The Bank has
extensive experience in conducting the implementation of infrastructure projects in
the region including National and regional Transmission Projects, as well as last
mile connectivity programs. In addition, the Bank is directly involved in the CLSG
project, and will play an instrumental role in adequately phasing the two projects to
leverage economic returns in the area.
v
Knowledge
Management
The project will include a capacity-building component which includes training for
technical staff of PIU of EDSA and relevant stakeholders in operating and
maintaining the distribution system. The project will provide technical assistance
for the revamping and rehabilitation of the Joint EDSA/Electricity Generation and
Transmission Company (EGTC) training center that trains 20 Electrical Engineers
and 20 Mechanical Engineers at any given academic year. The graduates are
expected to strengthen the planning and operations departments of the respective
utilities and address the shortage of skilled capacity in the energy sector.
vi
African Development Bank – RESULTS-BASED LOGICAL FRAMEWORK
Country and project name: Sierra Leone – Rehabilitation and Extension of Bo-Kenema Distribution System
Purpose of the project : Ensure reliability of electricity supply and increase access to electricity
RESULTS CHAIN
PERFORMANCE INDICATORS
MEANS OF VERIFICATION RISKS/MITIGATION MEASURES Indicator
(including CSI)
Baseline
(2015)
Target
(2019)
IMP
AC
T
Contribution to socio-economic
growth through improved access
to reliable and quality electricity
services
- # of non-
manufacturing SMEs
Established
- # of
manufacturing units
established
NIL
NIL
200
50
- National Economic Statistics
- EDSA’s Annual Statistical
Reports
OU
TC
OM
ES
Outcome 1:
Improved availability and
reliability of power supply
Average System Power
interruption duration
3 hrs.
2 hrs.
- Ministry Energy
- EDSA’s Annual Statistical
Reports
- Project progress and
completion report
- Project monitoring and post-
evaluation reports
- The risk of failure to achieve operational efficiency
that contributes to sector financial sustainability risk
will be mitigated through implementation of ,state-of-
art smart meters as a commercial management system
(metering and billing collection) and revenue
protection program to reduce the non-technical losses.
Outcome 2:
Reduced power losses and
improved revenue collection of
power utility
Distribution Losses
Bill Collection rate
40%
88%
20%
90%
vii
OU
TP
UT
S
Component A
New distribution lines constructed
Distribution lines rehabilitated
New substations constructed
New transformers installed
Employment Created
Increased electricity access
- Length of new 33 kV
lines
- Length of new 11 kV
lines
- Length of new 0.4 kV
lines
- Length of 11 kV
rehabilitated
- # of new 33/11 kV
substations
- # of 33/11 kV
substations rehabilitated
- # of new 33/11 kV
transformers
- # of new 11/0.4 kV
transformers
- # of direct and indirect
jobs created during
construction
- # of additional
customers
NIL
35
NIL
2
NIL
NIL
NIL
NIL
- 70 km
- 115 km
- 150 km
35 km
2
2
4
93
- 200 (175 semi/low-
skilled), of which 60
women (30%)
Urban 36,000
Rural 1000
Progress reports from the
EDSA and project supervision
consultant
Bank’s supervision mission
reports
Disbursement and financial
reports from EDSA
Project completion report
- The sector’s technical sustainability risks will be
mitigated though the support of development partners
for the required capacity building program and
recruiting technical staffs for the operation &
maintenance activities.
- Risk of project completion delay will be mitigated by
selecting of well-experienced and reputable contractors
on the basis of EPC contract as well as the involvement
of the supervision consultant to augment project staff as
needed in order to ensure delivery efficiency.
- Risks of delay in procurement process, long approval
processes and contract management will be mitigated
by procuring the supervision consultant to assist
EDSA’s team. Risk: Timely selection of the consultant
-
- Risk of CLSG implementation delay will be Mitigated
through selecting of well-experienced and reputable
contractors on the basis of EPC contract as well as the
involvement of the supervision consultant to augment
project staff as needed in order to ensure delivery
efficiency
- Risk of Co-Financing being cancelled Mitigated by an
Administration Agreement/ Memorandum of
Understanding with clear milestones and disbursement
schedule on DFID contribution
viii
Component B
Project Administration and
Management enhanced
- # of project progress
reports and
environmental and social
compliance reports
submitted
- # of financial audit
report
- # of environmental audit
reports
- # HIV/AIDS awareness
and prevention and
Health & Safety sessions
conducted
- 4 progress reports / year
including E&S
compliance reporting
- 1 financial report within
6 months after end of
each fiscal year and
- 1 environmental
report/year
- Monthly sessions held for
contractor workers
(100% participation) and
affected communities
Component C
Technical Assistance and
Capacity Building
- #of school rehabilitated
- #of engineers and
technicians trained
- # Sex-disaggregated
impact monitoring
indicators set up and
incorporated in EDSA
studies/reports
- Gender sensitive project
documents developed
using in-house capacity
1
NIL
1
40
Implemented sex-
disaggregated impact
monitoring indicators in
EDSA reports
All EDSA project
documents are
developed using a
gender sensitive
approach with in-house
capacity
Component D
Temporary Generation
Installed capacity
NIL
3.2MW
KE
Y A
CT
IVIT
IES
COMPONENTS INPUTS
A. Rehabilitation and Extension of Distribution Networks (Bo and Kenema)
B. Project Management & Engineering supervision services
C. Technical assistance and Capacity building
D. Temporary generation
Budget (UA Million)
Component A. 30.41
Component B. 1.79
Component C. 2.15
Component D. 3.73
Total 38.08
Financing Plan (UA Million)
ADF 9.309
DFID 27.84
GoSL 0.93
Total 38.08
ix
Project Timeframe
Year
Quarters 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
1
2
3
4
5
6
7
8
9
10
11
Operational acceptance
Last Disbursement date
Description
Appraisal
Project approval
Effectiveness
Selection of consultants
Bid preparation
No
Bidding period
Evaluation, Contract
award and mobilization
Construction
Commissionning
2016 2017 2018 2019 2020
1
REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE ADF GROUP
TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN/GRANT TO [SIERRA
LEONE] FOR THE [BO KENEMA DISTRIBUTION SYSTEM REHABILITATION AND
EXTENSION]
Management submits the following Report and Recommendation on a proposed ADF Loan
and ADF Grant of UA 4.621 million and 4.688 million respectively to finance the Bo Kenema
Distribution System Rehabilitation and Extension project in Sierra Leone.
1. STRATEGIC THRUST & RATIONALE
1.1. Project linkages with country strategy and objectives
1.1.1. The proposed project, through the rehabilitation, construction and expansion of the
distribution system, is in line with one of the two pillars of the Bank’s Country Strategy Paper
(CSP) for Sierra Leone’s (2013-17), which seeks to support transformational and sustainable
infrastructure development. The project is also aligned with Sierra Leone’s Agenda for
Prosperity (2013-2018) and the Energy Sector Strategy (2014-2017) which articulate that
energy access is a top priority.
1.1.2. The project is identified as a key deliverable of the Government’s Post Ebola
Recovery Program (PERP) a refocusing of A4P. The PERP cited unreliable and limited energy
services in urban areas and the near absence of energy services in rural areas as some of the
major obstacles to the rapid response during the Ebola crisis. It recognises that improved energy
services in targeting health centres will not only be required for the containment of any future
disease outbreak, but also for the strong economic growth and infrastructure development in
the country.
1.1.3. The project is directly aligned with the Bank’s ‘High 5s’1 goals, in particular
Lighting Up and Powering Africa and indirectly with Industrializing, Feed Africa, Integrating
Africa and Improving the Quality of Life of Africans. In addition, it is consistent with the Bank’s
New Deal on Energy for Africa, that relate to which focuses on tackling the energy shortages,
high cost and poor access that are impeding Africa’s continued social and economic progress.
The strategy’s flagships programs will support respective countries in developing an energy
value chain that is available, reliable, affordable and sustainable. In particular, the project aligns
to the Power Utility Transformation, Bottom of the Pyramid and Energy Efficiency flagships.
The Project is also well aligned with the inclusive growth objective of the Bank’s Ten Year
Strategy (“TYS”) which has core priorities areas, such as infrastructure development and
universal access to electricity in Africa by 2025. It will also help to implement the Bank’s
Energy Sector Policy approved in 2012, which has a two-fold objective: (i) support efforts of
Regional Member Countries (RMC) to improve access for the population and production
sectors to modern, reliable and affordable energy infrastructure and services; and (ii) assist
RMCs to develop an energy sector that is viable at the social, economic and environmental
levels. Lastly, the project is also in line with the Bank Group’s Strategy on addressing Fragility
and Building Resilience in Africa. A key focus of the strategy is strengthening state capacity,
establishing effective institutions and promotion of inclusiveness to build resilient societies
11 The High-5, an emphasis within the Ten Year Strategy framework intended to scale up investments in some
key areas of the TYS, are: Light Up and Power Africa, Integrate Africa, Industrialize Africa, Feed Africa and
Improve the Quality of Life for African.
2
1.1.4. The proposed project is aligned with the vision and goals of the sector which is to
ensure a reliable supply of electricity to contribute to poverty alleviation through economic
development.
1.2. Rationale for Bank’s involvement
1.2.1. Sierra Leone experienced a decade long civil war (1991-2001) that damaged
physical infrastructure, particularly electricity, water, and sanitation. Despite peace and strong
economic growth since 2002 (end of civil conflict), the Ebola Virus Disease (EVD) outbreak
in 2014 proved a major setback to commendable progress towards reconstruction and national
development in the country. As of 2015, Sierra Leone ranked 181 out of 188 countries in the
United Nations (UN) Human Development Index and had an estimated gross national income
per capita of US$1,780 (current prices), placing it in the bottom third of countries in Sub-
Saharan Africa.
1.2.2. Electricity access and consumption in Sierra Leone are among the lowest in Africa
at less than 15% against an average rate of 40% in 2013 for the continent. The limited and
dilapidated power infrastructure base continues to be a major constraint to expand electricity
access in the country. Tariffs are high at US$ 0.22 per kWh (estimated for 2015), generating
capacity is insufficient, electricity services are of poor quality, and sector management is weak
which leads to inefficient operations. The main distribution network extends to Freetown and
the surrounding Western Area, covering only about 40% of the residents. Isolated systems (Bo-
Kenema, Lungi, Lunsar, Kono, and Makeni) provide limited services in delimited areas in other
parts of the country. In rural areas, where the bulk of the population resides, electricity access
is practically non-existent. During the dry season, when the available hydropower drops to
extremely low levels, the use of captive power generation is widespread and imposes high cost
of production. The industrial and commercial business sector has to rely on expensive captive
diesel-fired generators.
1.2.3. The electricity sector is undergoing a fundamental change. The National Electricity
Act, 2011 (the Electricity Act) repealed the National Power Authority Act, 1982, and
unbundled the National Power Authority (NPA) into (i) the Electricity Generation and
Transmission Company (EGTC); and (ii) the Electricity Distribution and Supply Authority
(EDSA). Implementation of the unbundling was delayed until January 2015 when EGTC and
EDSA became operational. EGTC is in charge of electricity generation and transmission at
high voltage levels (66kv and above) whilst EDSA is responsible for sub-transmission and
electricity distribution (33kV and below). EDSA supplies about 75,000 customers mainly
located in the Western Area (around Freetown).The majority of the staff has been transferred
from NPA to EDSA and EGTC but the transfer of assets and obligations, while ongoing, is yet
to be completed. Oversight of the sector falls under the Ministry of Energy (MoE). Tariff
setting is governed by the Electricity and Water Regulatory Commission Act 2011 that also
established the regulatory authority, the Electricity and Water Regulatory Commission
(EWRC) with the mandate to determine and review tariffs.
1.2.4. Current power generation capacity is inadequate to meet power demand. The
installed system’s capacity serving the Freetown Capital totals 84 MW, predominantly
hydroelectric in nature. This includes the Bumbuna hydroelectric power plant (50 MW), the
two thermal power plants at Kingtom (10 MW) and Blackhall Road (16.5 MW) and
containerized generation units installed at Kingtom. An additional 35 MW feeds the isolated
Bo-Kenema, Lungi, Lunsar, Kono, and Makeni systems. The mining sector and large industrial
3
companies relies entirely on captive generation estimated at 76MW and 83MW respectively to
meet their power needs. Hydropower from Bumbuna is highly seasonal with production
fluctuations from about 15 MW in the dry season to 30-40 MW in the rainy season. Most
commercial and industrial customers are currently not connected to the grid because of
inadequate and unreliable electricity supply. Electricity demand growth, which is mainly driven
by the development of new industrial and residential areas, is projected to reach 350 MW and
934MW for the domestic and mining sector by 2020.
1.2.5. More specifically, in the project target area around Bo and Kenema towns, an
insulated power system covers an area populated by slightly more than 500,000 inhabitants.
The distribution networks supply power to 10,509 customers in Bo and 6,762 customers in
Kenema, and 250 customers in Blama leaving more than 75% of the population area without
access to electricity. The current peak demand is estimated to be around 7.5 MW, being
supplied by a 4 MW diesel generator located in Bo and a 3 MW hydro power plant in Goma
connected to Kenema which is however available only during the wet season. This distribution
system is severely constrained due to obsolete equipment, lack of maintenance coupled with
high losses of over 40%. A single circuit 33kV interconnector allows the load to flow from Bo
to Kenema during the dry season when Goma is not producing, but any fault in this line leaves
Kenema in the dark. The components for the distribution networks were installed around the
mid-1980s and many parts of the system are now in a very poor state from a health and safety
perspective.
1.2.6. The proposed project is expected to upgrade the Bo – Kenema interconnector into
a 33 kV double circuit 70 km overhead line within the existing Right of Way (RoW) that will
increase the transfer capacity between the two towns. The project also intends to construct new
substations located on the outskirts of Bo and Kenema to help manage voltage issues and help
improve load growth. System availability will be further increased through the construction of
11kV ring distribution lines that will feed the low voltage transformers to supply both domestic
and commercial customers.
1.3. Donors coordination
1.3.1. Sierra Leone is highly dependent on foreign aid with transfers approaching 6% of
the national GDP in 2015. Within the context of the Busan New Deal, the aid framework is
structured around the Mutual Accountability Framework (MAF)2 adopted in 2014 between
Government of Sierra Leone (GoSL) and the Development Partners (DPs). The Development
Assistance Coordination Office (DACO) in the Ministry of Finance and Economic
Development (MoFED) spearheads the formulation of aid policy3. The most active DPs in the
energy sector in Sierra Leone are the AfDB, World Bank (WB), Department for International
Development (DFID), Islamic Development Bank (IsDB), Japan International Cooperation
Agency (JICA), European Investment Bank (EIB), Millennium Challenge Corporation and
Economic Community of West African States ECOWAS. The Bank jointly with these
development partners is supporting the sector in the region. In Sierra Leone for example, the
Bank, the WB and the EU are financing the Cote d’Ivoire – Liberia – Sierra Leone – Guinea
2 It sets out the partnership required for the successful implementation of the Agenda for Prosperity (2013-
2018), including the formulation of steps towards enhanced alignment and harmonization and increased use of
country systems. 3 Dialogue with the DPs is conducted through the Development Partnership Committee (DEPAC), co-chaired by
the Minister of Finance and Economic Development and by the United Nations and the World Bank. DEPAC
convenes on quarterly basis, and once a year the Presidential DEPAC is held which is chaired by the President
of the Republic. Coordination and collaboration of development partners in Sierra Leone continues to be strong.
4
Interconnection Project; The Bank’s comparative advantage lies in its vast experience in the
infrastructure sectors. (Appendix II).
2. PROJECT DESCRIPTION
2.1. Project Components
2.1.1. The project’s ultimate development objective is to provide reliable electricity
supply and access through the complete rehabilitation, upgrade and expansion of the Bo and
Kenema distribution network expected to cater for the newly developed communities who do
not have access to electricity. More specifically, the project will enable construction of
distribution lines, substations and end user connection campaign in Bo and Kenema. It will also
include (i) the upgrade and construction of a 70 km overhead 33kV line between Bo and
Kenema along with the construction of primary substations and rehabilitations in each city (ii)
the rehabilitation and expansion of MV and LV distribution networks within the two cities (iii)
the implementation of a end-user connection campaign with the objective to connect 37,000
additional households to the grid (iv) the provision of service for preparation of designs and
bid documents (v) the provision of capacity building to EDSA relevant stakeholder and (vi) the
provision of temporary generation during the construction works
Table 2.1: Project Components
Project Components
Estimated
cost (million
UA)
Component Description
A
Rehabilitation and
Extension of Distribution
Networks
30.40
Distribution lines : (i) the upgrade and construction of a 70 km
overhead 33kV line between Bo and Kenema (ii) the construction
of 115 km of 11 kV line and the rehabilitation of 35km of 11 kV line
(iii) the construction of 150 km LV 0,4kV distribution line in Bo and
Kenema.
Substations : (i) the construction of 2 new 33/11kV substations in
Bo an in Kenema, the rehabilitation of 2 city centres 33/11kV
substations in Bo and Kenema; the construction of 4 new 33/11kV
transformers between the two cities and (ii) installation of 93 new
11/0,4kV transformers in the distribution system.
End-user connections : Launching awareness campaigns about
access to energy and providing funding for 37,000 end-user
connections to the network
B
Project Management &
Engineering supervision
services
1.79
Provision of service for preparation of bidding documents, assisting
the client in the bidding process, supervision of construction
activities and project management.
Provision of Capacity building to EDSA Project Implementation
Unit and relevant stakeholder to enhance project implementation
effectiveness
C Technical assistance and
Capacity building 2.15
.Capacity and Skill Enhancement Program
Assisting EDSA and EGTC to revamp the joint training centre to
improve technical operations in the long run.
D Temporary generation4 3.73 Providing temporary generation in the city of Kenema during the
construction works of the 33kV line occurring in dry season.
Total 38.08
4 Temporary generation is required to support the power supply during the overhead line rebuild. It is estimated
that 3.2MW will be required for a period of approximately six months in accordance with the project construction
programme
5
2.2. Technical solution retained and other alternatives explored
2.2.1. Constructing a 33kV double circuit overhead line between Bo and Kenema along
the route of the existing 33kV single circuit was chosen as the preferred option. This option
would require the disconnection of the 33kV supplies between Kenema and Bo during the
construction works. Building the new double circuit within the existing wayleave allows for
new structures to be built on line. The construction of the overhead line will require
disconnecting the power supply between Bo and Kenema. This will need temporary generation
to ensure Kenema dependent on Bo for power supply, shall not be without electricity. The
option was chosen due to; (i) availability of existing data for the existing overhead line profile
sheets and route plans for the complete route; (ii) an existing way leave is in place for the route;
(iii) this route will minimise environmental and social impacts and will facilitated the access
to the line for maintenance; (iv) overhead line design to allow future upgrading to 66kV; (v) a
33kV ring can be developed in future years when the demand necessitates additional growth.
2.2.2. Several project alternatives were considered, however, the reasons for their
subsequent rejection as provided in Table 2.2 below.
Table 2.2: Project Alternatives Considered and Reason for Rejection
Alternative name Brief description
Reasons for rejection
1 Single-circuit 66kV Construction of a single circuit 66 kV
overhead line, enabling to increase the
transfer capacity between Bo and
Kenema
• Technical studies
highlighted that a 33kV double
circuit OHL is suitable for the
predicted demand/load flows
• A 33kV double circuit
OHL is a more resilient design in
case of fault of one circuit; and
• A 66kV single circuit
has an estimated cost 60% higher.
2 33kV Offline build new route Development of a new overhead line
following a corridor running parallel
with the Bo–Kenema highway,
therefore reducing the need for
temporary generation to be located in
Kenema during the rebuild of the
existing overhead line.
• By taking a new
overheard line, this will result in
more environmental and in
particular social impacts (such as
resettlement). The project will
require a full RAP which could
impact the project
implementation from a timeline
and costs basis as a result of new
wayleaves.
3 33kV Underground Cable Construction of a new 70km 33kV
express circuit underground
• It will create switchgear
rating issues associated with
capacitive switching.
• It will be difficult to
upgrade at a later date and would
levy a greater capital cost.
2.3. Project type
2.3.1. The proposed intervention is a standalone investment project. The project is
intended to benefit 17,521 customers (10,509 in Bo, 6,762 in Kenema including 250 in Blama)
and provide 37,000 additional connections to the grid network. Other villages and communities
6
along the project corridor notably Baoma, Yamandu, Gerehun, Mano Junction and Panguma
shall be connected to the distribution line.
2.4. Project cost and financing arrangements
2.4.1. The project costs, including a physical contingency of 10% and a price contingency
of 15% but excluding customs and duties, is estimated at UA 38.08 Million (approximately
equivalent to USD 53.08 Million). The project is financed at 24% by the Bank, 74% by DFID
and 2% by the GoSL5. The total costs incurred in foreign and local currency amount to UA
32.22 Million and UA 5.85 Million respectively, which accounts for 84.60% and 15.40% of
the project costs. Project cost estimates by component, category and by source of financing are
shown in the tables below.
Table 2.3: Project cost estimates by component [amounts in million UA equivalents]
Project Components FC LC Total % foreign
A Rehabilitation and Expanding Distribution Networks 20.67 3.65 24.32 85.0%
B Project Management & Engineering supervision services 1.26 0.17 1.43 88.0%
C Technical assistance and Capacity building 1.31 0.41 1.72 76.0%
D Temporary generation 2.54 0.45 2.98 85.0%
Base cost 25.78 4.68 30.46 84.6%
Physical contingency (10%) 2.58 0.47 3.05 84.6%
Price contingency (15%) 3.87 0.70 4.57 84.6%
Total project cost 32.22 5.85 38.08 84.6%
Table 2.4: Source of financing [amounts in million UA equivalents]
Project Components AfDB DFID GoSL Amount (UA M)
A Rehabilitation and Expanding Distribution Networks 7.53 21.95 0.93 30,41
B Project Management & Engineering supervision services 1.79 - - 1,79
C Technical assistance and Capacity building - 2.15 - 2,15
D Temporary generation - 3.73 - 3,73
Total 9.309 27.84 0.93 38.08
Note: Exchange rates are provided in the introduction of this report - page (i).
Table 2.4: Sources of financing [amounts in million UA equivalents]
Sources of funding FC LC Total % foreign
ADF 7.94 1.34 9.28 85.6%
DFID 23.50 4.37 27.87 84.3%
GoSL 0.79 0.14 0.93 85.0%
Total project cost 32.22 5.85 38.08 84.6%
Table 2.5: Project cost by category of expenditure [amounts in million UA equivalents]
Categories FC LC Total % foreign
Works 29.01 5.12 34.13 85.0%
Services 3.21 0.73 3.94 81.5%
Total project cost 32.22 5.85 38.08 84.6%
5 Appendix V - Justification to finance 10% of project cost financing by the Government
7
Table 2.6: Expenditure schedule by component [amounts in million UA equivalents]
Project Components 2017 2018 2019 2020 Total
A Rehabilitation and Expanding Distribution Networks - 9.12 15.20 6.08 30,40
B Project Management & Engineering supervision services 0.45 0.45 0.45 0.45 1,79
C Technical assistance and Capacity building 0.54 0.54 0.54 0.54 2,15
D Temporary generation - 2.24 - 1.49 - 3,73
Total 0.99 10.11 18.42 8.56 38.08
Table 2.7: Project cost by category of expenditure ADF Loan [amounts in million UA
equivalents]
Categories FC LC Total % foreign
Works 3.928 0.693 4.621 85.0%
Services - - - 0.0%
Total project cost 3.93 0.69 4.621 85.0%
Table B.2.8: Project cost by category of expenditure ADF Grant [amounts in million UA
equivalents]
Categories FC LC Total % foreign
Works 2.461 0.434 2.895 85.0%
Services 1.524 0.269 1.793 85.0%
Total project cost 3.985 0.703 4.688 85.0%
2.4.2. The Bank’s financing, representing 24% of the total project cost estimates, will be
sourced from Sierra Leone’s Performance Based Allocation (PBA) under ADF-13. The GoSL
counterpart financing for the project is applied on the Bank’s financing component.
Justification to finance more than 90% is based on the country’s commitment to implement its
overall development program; (ii) the financing allocated by the country sectors targeted by
Bank assistance; (iii) the country’s budget situation and debt level (see Appendix V)
2.5. Project’s target area and population
2.5.1. The project will cover the population living in the towns of Bo and Kenema and the
villages in the area between the two towns. The project area is populated by slightly more than
500,000 inhabitants who will benefit from enhanced electricity supplies in a variety of ways
more generally. The proposed project seeks to enhance reliability of supply for existing
consumer connections approximately 17,521 customers (10,509 in Bo, 6,762 in Kenema
including 250 in Blama6) and provide 37,000 additional connections to the grid network. The
direct beneficiaries of the project are households, small businesses and manufacturing units
located in the towns of Bo-Kenema as well as Blama.
6 Blama is a town located between Bo and Kenema expected to benefit from the project.
8
2.6. Participatory process for project identification, design and
implementation
2.6.1. Bank’s Identification, Preparation and Appraisal missions consulted widely with
the stakeholders, at national and local levels. Development Partners who are active in the
energy sector were also consulted, resulting in the co-financing from DFID. During the
identification, preparation and appraisal phases, the Bank’s objective was to ensure that all
stakeholders and interested parties, are fully informed of the proposed project consultations
were held with relevant stakeholders and their concerns were documented. The stakeholders
consulted included; Bo and Kenema District Local Government Officials such as the Chief
Administration Officers, District Environment Officers (DEOs), District Development Officers
(DDOs) and the district engineers amongst others. Meetings were also held with statutory
agencies which included; Environment Protection Agency (EPA-SL), HIV/AIDS Secretariat
and Electricity Generation and Transmission Company (EGTC).
2.6.2. In addition, meetings were held with staff of Ministry of Finance and Economic
Development (MoFED), Ministry of Energy (MoE), Ministry of Tourism and Cultural Affairs
(MoTCA), Ministry of Agriculture, Forestry and Food Security (MoAF&FS) Ministry of
Health and Sanitation(MoHS) and Ministry of Gender, Social Welfare and Children Affairs
(MoGSWCA). The consultant also met and held discussions with the paramount chiefs of
Kakua and Gerihum chiefdoms. Other meetings were held with women conducting roadside
trading in the areas of Bandajuma, Gerenum, Boama, and Blama areas along the Bo-Kenema
highway.
2.7. Bank Group experience, lessons reflected in project design
2.7.1. As of 10 October 2016, the Bank portfolio is comprised of 12 national operations
for a total commitment of UA 111.22 million. This includes 10 ADF/Transitional States Fund
(TSF) funded operations for the total sum of UA 88.71 million and 2 ADB funded operations
totalling UA 22.51 million representing respectively 79.76% and 20.24% of the ongoing
portfolio. Investments represent 92.20% of the total commitment, the rest being institutional
support (7.80%). 4 operations are co-financed with Global Environment Fund (GEF), DfID,
OPEC Fund for International Development (OFID) and Rural Water Supply and Sanitation
Initiative (RWSSI) to the tune of UA 49.97 million.. Infrastructure accounts for 90.22% of total
operations - with energy, transport and water and sanitation sharing respectively 21.71%,
28.84% and 49.45% of total commitments in Infrastructure. The remaining investment include
governance and finance (7.15%) and social including gender (2.63%). (see Appendix II).
2.7.2. In October 2016, cumulative disbursement reached UA 21.14 million, representing
a disbursement ratio of 19.01%. This significant drop compared to 36.48% in January 2016
which was due to the fast-tracked disbursement of Ebola related operations, signifies the
normalization of activities in Sierra Leone. The portfolio is on average 2.63 years old with no
ageing projects and no projects at risk. It is globally deemed satisfactory with average
Development Outcome (DO) and Implementation Progress (IP) ratings are 2.75 and 3.05,
respectively.
2.7.3. Lessons Learnt: In the energy sector, important lessons can be drawn from the
Bank’s past interventions in Sierra Leone mainly the Bumbuna Hydro project. The project was
successfully implemented after a civil war, however, the long lead times in finalizing contracts
9
led to supplementary financing to address the cost overruns. For improved fiduciary
compliance, closer Bank staff monitoring and support was required during implementation,
and where compliance is not achieved, the Bank may need to invoke sanctions such as
withholding additional disbursements to ensure compliance with financial reporting and audit
requirements. Subsequently, it was noted that weak implementation capacity due to limited
expertise and insufficient staffing to implement projects; ensuring participatory approach of
community involving elected local councils, Paramount Chiefs and communities; ensuring
effective communication with all relevant stakeholders; providing technical support to the
Project Implementation Unit (PIU) is key in ensuring sustainable implementation of Bank
projects.
2.8. Key performance indicators
2.8.1. The project will result in (i) improving availability and reliability of power supply
thus resulting in an increase in economic activities which are currently impaired by the lack of
reliable electricity supply; and (ii) reduced power losses and improved revenue collection of
power utility. The project also includes a technical assistance to revamp and rehabilitate the
EGTC training school and capacity building enhancement program. The Result Based
Logframe of the project reflects the performance indicators for the project at input, output and
outcome levels. Key among them are :(i) for the outputs: number of switching gears
rehabilitated; kms of 33kV constructed, 0.4Kv, 11kV and 33kV line rehabilitated; number of
substations upgraded and rehabilitated ; (ii) for the outcomes: reduced average power
interruption duration per year on distribution network and reduced distribution loses,
HIV/AIDS awareness and prevention and Health & Safety sessions conducted, # Sex-
disaggregated impact monitoring indicators set up and incorporated in EDSA studies/reports,
Gender sensitive project documents developed using in-house capacity
3. PROJECT FEASIBILITY
3.1. Economic and financial performance
3.1.1. Following project implementation, it is expected that the power transfer capacity
will be significantly increased enabling 37,000 residential consumers to be connected to the
Bo-Kenema grid by 2020 and improving the reliability for the 16,000 existing consumers. This
translates into electricity access to approximatively additional 215,000 people, and an increase
in supply of 80 GWh in the area.
3.1.2. The financial benefits for the company will accrue from increased revenues from
electricity consumption charges, whilst the financial costs include mainly power purchase costs
and operating costs. The average weighted power purchase cost is very high in the insulated
Bo and Kenema network (more than 0.26 USD/kWh, more than current tariff averaging 0.22
USD/kWh) due to reliance on very expensive diesel engines, with a variable cost of 0.35
USD/kWh. However, new supplies from CLSG and solar farm are expected to replace diesel-
based generation and dramatically decline the average weighted power purchase cost to 0.15
USD/kWh by 2020.
3.1.3. The financial and economic assessment of the project is undertaken over an
operating period of twenty years starting in 2020. The investment is carried out over three years
(2017 to 2020). The financial assessment of the proposed project estimated a financial internal
rate of return (FIRR) and a financial net present value (FNPV) of 9.3% and USD 1.3 million
(at a 5% real discount rate) respectively, showing that the project is financially viable. This,
10
however, relies on an increase of average step - tariff of 25% before 2020 when the project is
fully operational based on data from the project technical feasibility studies conducted by the
consultants and completed in August 2016. The regulator has approved the tariff adjustment.
3.1.4. The project will further enable a rehabilitation and upgrade of the MV and LV
distribution system. The bulk of the benefits are expected to derive from more reliable and
expanded electricity supply to the benefit of end-consumers. The benefits of extended access
to consumers is generally assessed through their willingness to pay (WTP) which is estimated
to be 0.30 USD / kWh in Sierra Leone. The economic assessment of the project reflected an
economic rate of return (EIRR) of 20.4% and economic net present value (ENPV) of USD 13.4
million (discounted at 12%, real).
3.1.5. Table 3.1 summarizes up the main financial and economic indicators of the project.
The complete analysis and assumptions are detailed in the Technical Annex B.6.
FIRR, NPV (base case) 9.3%, USD 1.3
million
EIRR (base case) 20.4%
NB: detailed calculations are available in Annex B7
3.1.6. The financial and economic returns of the project have been tested against the
possible risk parameters during the construction and operation phases. The identified key risks
include investment costs overrun, a delay in CLSG in-feed to the network, the failure to align
tariff with the cost structure of EDSA leading to a reduction in revenues, and the number of
additional households connected. The sensitivity analyses show that the financial and economic
returns are robust under identified adverse conditions concerning cost overruns. The analyses
also reveal that the economic and financial performance deeply relies on the timely
construction of the CLSG interconnection, or the availability of any cheaper supply than current
diesel engines. A two year- delay in CLSG construction would reduce the EIRR to 11.8%
(below the hurdle rate of 12%) and the FIRR to 1.7%. This highlights that the project makes
economic and financial sense only if closely phased with the CLSG investment. Financial
sustainability of the project relies on an increase of step-tariff of at least 25% to enable a
financial return above zero. The details of the sensitivity analysis are shown in the Technical
Annex B.7.
3.2. Environmental and Social impacts Environment
3.2.1. Environment: The project is a category 2 type since its infrastructure works will be
undertaken within the existing 33kV RoW whose vegetation is routinely cleared to allowable
heights while densification works will be undertaken along existing roads within the towns. The
2 new sub-stations will be on vacant lands without any vegetation and about twenty two (22)
housing structures, one (1) makeshift blacksmith workshop and twenty (20) trees will be lost
with an estimated one hundred and fifteen (115) Project Affected Persons (PAPs) to be
impacted. In line with the Bank’s Integrated Safeguard System requirements an Environmental
and Social Management Plan (ESMP) as well as an Abbreviated Resettlement Action Plan
(ARAP) were prepared for the project and finalized in October 2016. The E&S reports were
further submitted to the Compliance Division for review, approved and disclosed on the Bank’s
website on November 8th, 2016. The approval was undertaken and the license granted in
November 2016.
11
3.2.2. The positive outcomes of the project include an increase in the number of people
connected to the electricity supply, creation of employment opportunities, improved local
socio-economic conditions through value addition on agricultural products, development of
SMEs, and improved delivery of health services especially ante-natal services as well as
improved security in the trading centers. The negative impacts of the project will include
mainly, loss of vegetation, soil erosion arising from excavations of pole foundations to be
mitigated through compaction of loose soil surfaces, management of construction waste, site
restoration, and safety concerns to be addressed through use of personal protective equipment
(PPE).
3.2.3. Mitigation Measures such as integration of the project Bill of Quantities,
monitoring by the EPA-SL, supervision missions by the Bank, conducting environmental
audits, and continued awareness on safety by EDSA alongside building capacity of the utility’s
Environmental Unit and the PIU, will support enhancement of mitigation measures.
3.2.4. Climate change: Lighting, storm impacts and temperature fluctuations constitute
some of the likely risks of climate change on electricity distribution infrastructure. These
impacts will be mitigated through installation of aluminum types of lightning arresters on
electricity facilities; routine clearance of vegetation along the RoW thereby eliminating risks
of tall trees falling on the power lines and use of approved steel poles which will be sunk 1.0-
2.0m deep for stability against impacts of storms and spaced at 50-60m apart to avoid sagging
of conductor cables during expansion and contraction without breakages. Changes in rainfall
patterns which triggers use of thermal generation resulting into carbon emissions is to be
mitigated through tree planting around thermal power plants and use of technologies which
reduce acoustic impacts from the plants.
3.2.5. Gender: In accordance with Bank Group Policies the project will ensure inclusion
of women, marginalized people and develop their communities. The Bo and Kenema
Distribution System Rehabilitation and Expansion Project aims to minimize the power supply
crisis in these towns and country as a whole. The project will maintain security of electricity
supply, satisfy short-term demand and improve electricity access, reliability, and quality of
supply to consumers. The main socio-economic impact of the proposed project is to supply
adequate and reliable power for customers, industrial development and businesses in the Bo
and Kenema area and strengthening of power supply to the surrounding cities (Goma) where
the lack of supply and frequent power interruption has significantly affected the provision of
vital social services, including health delivery and water supply.
3.2.6. During project implementation about 30% of the workers on the project will be
women alongside men which is in line with the national gender affirmative action. Along the
road in the project areas, women are involved in small-scale trading and though their operations
to a large extent, are hampered by availability of affordable and reliable electricity. Most of
them claim they cannot engage in the selling of cold drinks in their retail shops due to high
energy costs of acquiring and running petrol generators. It is proposed that funds be earmarked
for women operating roadside businesses in Baoma junction, by setting up roadside market
shelter and associated facilities for storage of their produce awaiting transit to Freetown. The
improvement will include providing separate toilets for male and female and area local chiefs
are in support of this proposal and are willing to offer land for the development.
3.2.7. Social: The power project will promote the development of agro-processing
activities such as rice and maize milling and packaging, processing of palm oil, cassava and
12
kola nuts amongst others. Such interventions will lead to value addition which is likely to
translate into better incomes at household levels. These activities once enhanced will provide
means of livelihoods to both men and women and bring about growth and development in the
community on many fronts. It is also envisaged to support mining operations and a range of
cottage industries. It is further expected to create some estimated 200 jobs across its various
activities and based on the national gender laws, 30% of these jobs will be availed to the women
and this will give them alternate sources of incomes to support their households. The project
will also lead to improved delivery of social services especially ante-natal i.e. vaccination
which will improve child survival. The availability of electricity will lead to growth of small-
scale enterprises such as restaurants and salons which will provide additional sources of
livelihoods for the operators.
3.2.8. HIV/AIDS and EVD: It is reported that, though there is awareness in the country
on risks of HIV/AIDS and STIs\STDs, large part of the communities have very little knowledge
about its effects. Therefore, interactions between the project workers and the local communities
could likely lead to some sexual relationships thereby triggering infections. Furthermore,
available information indicates that, there is a lot of unknown information on EVD and it is
clear, the disease will not completely disappear from the region, as such, there will be few cases
re-occurring in a less virulent manner. In light of the above, EVD and HIV/AIDS, STI/STDs
prevention measures have been mainstreamed into the project with a focus on sensitization and
awareness of the workers and the neighboring communities as well as VCT services and
condom distribution on HIV/AIDS.
3.2.9. Involuntary resettlement: The 2 new sub-stations will be on vacant lands without
any unique vegetation and about twenty two (22) housing structures, one (1) makeshift
blacksmith workshop and twenty (20) trees will be lost with an estimated one hundred and
fifteen (115) Project Affected Persons (PAPs) to be impacted. In such circumstances, EDSA
will compensate affected persons in accordance with the Bank’s Policy of Involuntary
resettlement and by applying the principles stipulated in ARAP developed based on AfDB
guidelines
4. IMPLEMENTATION
4.1. Implementation arrangements
4.1.1. The Government of Sierra Leone shall be the Borrower of the loan and grant. The
Ministry of Energy will be the Executing Agency, and EDSA, the Implementing Agency of the
project.
4.1.2. Institutional Arrangements: A Steering Committee (SC) will be established to
provide strategic oversight on project execution and implementation through coordinated
monitoring and evaluation of major milestones. The SC shall be under the Chair of the Ministry
of Energy and consists of the Ministry of Finance and Economic Development, the Chairperson
of EPA, the Director General of EDSA and the Director General of EGTC.
13
4.1.3. EDSA has a dedicated Project Implementation Unit (PIU) established under the
WB Energy Sector Utility Reform Project7. The PIU shall have the mandate to implement the
Bo Kenema project and subsequent donor funded projects. The PIU comprises of a Project
Manager, a Procurement Officer, an Environmental Officer, a Social Officer, a Project
Engineer and a Financial Management Specialist. The PIU shall be staffed with EDSA internal
staff, however, cognisant of the lack of skilled experts, key specialists shall be recruited
competitively to enforce EDSA capacity. In particular, a project management and supervision
specialist, financial management specialist and procurement specialist shall be engaged to
assist EDSA in the preparation of bidding documents for the project; provide support in the
project supervision. The PIU shall be under the guidance of the Director of Corporate Planning
and Project within EDSA’s organization structure.
4.1.4. Implementation Schedule: Overall, the project will be implemented over a period
of 36 months. The project time frame is included and the implementation timelines are
summarised in Annex B.9.
4.1.5. Procurement Arrangements: “Procurement of works and the acquisition of
consulting services, financed by the Bank for the project, will be carried out in accordance with
the “Procurement Policy and Methodology for Bank Group Funded Operations” (BPM), dated
October 2015 and following the provisions stated in the Financing Agreement. Specifically,
Procurement would be carried out following:
4.1.6. Bank Procurement Policy and Methodology (BPM): Bank standard PMPs, using
the relevant Bank Standard Solicitation Documents (SDDs), will be used for International
Competitive Bidding (ICB) contracts for both works and Acquisition of Consulting Services
as indicated in the Technical Annex B5, Para. B.5.3.2.
4.1.7. Borrower Procurement System (BPS): The utilization of BPS will not apply to
this project as it is envisaged that large contracts will evolve from the various procurement
processes as the associated risk for the use of BPS for large contracts is high.
4.1.8. Procurement Risks and Capacity Assessment (PRCA): the assessment of
procurement risks at the Country, Sector, and Project levels and of procurement capacity at the
Executing Agency (EA), were undertaken for the project and the output have informed the
decisions on the procurement regimes (BPS and Banks PMP) being used for specific
transactions or groups of similar transactions under the project. The appropriate risks mitigation
measures have been included in the procurement PRCA action plan proposed in Annex B5.
4.1.9. Financial Management: The general observation of the latest Country Fiduciary
Risk (CFR) of Sierra Leone has shown positive transformation in regulatory framework for
Public Financial Management (PFM) including significant gains recorded in external scrutiny
and aspects of financial reporting as a result of the continued implementation and roll out of
the Integrated Financial Management Information System (IFMIS). Pervasive weaknesses
however continues with budget credibility and predictability, expenditure control (including
payroll) and continued low levels of transparency. Significant lags still exist in the development
of Internal Audit into a modern and effective unit, maintenance of adequate government fixed
assets records, and slow progress towards introduction of a necessary treasury single account.
7 The Energy Sector Utility Reform Project is supporting the GoSL in the recruitment of a management contractor for EDSA
who will be responsible for implementing a business plan for EDSA, improving collections, re-organizing the utility to focus
on commercial performance, and building capacity for a period of three years.
14
Overall, CFR was rated Substantial. EDSA is in its second year of effective operation with first
audit report expected by October 2016. The healthiness of EDSA’s financial position cannot
be determine at this stage as the financials are subject to audit currently.
4.1.10. Project accounting is manual, based on excel, along with the non-use of EDSA’s
budget and financial operating manuals for preparing, validating and executing the project’s
annual work plan and budget. EDSA is expected to develop a project implementation manual
to guide project operations, including revision and validation of the draft financial operating
manuals. Thus, it is recommended, overall responsibility for project accounting remain with
EDSA Financial Controller including absorbing standalone projects in to the Great Plains
accounting software. Submission of quarterly interim financial reports to the Bank and
quarterly coverage by EDSA’s internal audit unit would act as an ex-poste mitigation of the
existing risks.
4.1.11. Disbursement: The project is expected to consist of few major contracts, direct
payment arrangements will be used for this purpose, and if required, (condition upon a formal
request to the Bank) the use of a reimbursement guarantee method may also be used alongside
for imports. The project is expected to operate a Special Account (SA) for operational expenses,
and EDSA will open a segregated USD "Special Account” at a commercial bank acceptable to
the Bank. Management of the SA will follow EDSA’s financial operations manual with
approval signatories restricted to EDSA’s Director General, Deputy Director General, and
Financial Controller. All disbursement including replenishments of the SA will be in
accordance with the Bank’s Disbursement Handbook.
4.1.12. Audit: The Audit Service Sierra Leone (ASSL), has primary responsibility for
external audit of all government funds (including funds from donors), and has direct
involvement in the procurement and selection of firms to be engaged as auditors for projects
financed by development partners (including the Bank). The ASSL or an independent audit
firms will conduct the audit on terms of reference acceptable to the Bank. The audited financial
statements and associated management letter shall be submitted to the Bank within six months
of the end of each financial year audited.
4.1.13. Overall Conclusion: The assessment concluded that, EDSA’s FM capacity along
with the proposed mitigations, will have the capacity to ensure: (a) that project funds are used
only for the intended purposes in an efficient and economical way; (b) the preparation of
accurate, reliable and timely periodic and annual financial reports; (c) that any assets purchased
using project funds are adequately safeguarded. The detail FM assessment is attached as Annex
B
4.1.14. DFID financing shall be administered through the DFID/Technical Cooperation
Framework Arrangement as per the Template Administrative Agreement (Annex A-
Framework)
4.2. Monitoring
4.2.1. Monitoring will be based on the Project’s Results-Based Logical Framework,
including the key indicators for monitoring progress towards achievement of project outcomes.
Monitoring and Evaluation (M&E) activities will be undertaken at national and local levels as
appropriate, with EDSA shouldering the overall responsibility in line with its institutional
mandate. EDSA shall ensure consolidation and integration of the routine results monitoring
reports in the Quarterly Progress Reports to be prepared by the PIU with the assistance of the
15
project supervision and management consultant, The M&E for outcome and impact indicators
will be undertaken in liaison with Statistics Sierra Leone (SSL), Ministry of Energy and
Ministry of Finance and Economic Development.
4.2.2. The Bank will lead supervision missions jointly undertaken with DFID. Two
supervision missions will be undertaken every year. The coordination of the missions will be
done by the Ministry of Finance and Economic Development in collaboration with the Ministry
of Energy and EDSA.
4.2.3. A Project Mid-Term Review will be undertaken at the mid cycle of the project
whilst the Project Completion Report will be prepared after 85% disbursement is achieved to
evaluate progress against outputs and outcomes and draw lessons for follow-up operations
4.3. Governance
4.3.1. This project will be implemented by EDSA a State entity governed by the National
Electricity Act 2011. Moreover, the Board of Directors (BoD) appointed by the President on
the recommendation of the Minister of Energy provides strategic direction and guidance to
EDSA. The project will comply with the Government's Anti-Corruption Act 2008 and the
National Anti-Corruption Strategy (NACS). The Internal Audit Department of EDSA will
assist in monitoring and evaluating the internal controls. External audit will be provided by the
Sierra Leone Auditor General. The Bank and MoFED will provide some oversight and carry
out periodic financial management assessments of the project and other assessments to review
the controls systems of the Implementing Agency. Subsequently, the TA will be required to
strengthen systems, procedures, staff skills and capability and adequate governance.
4.4. Sustainability
4.4.1. The project is technically, economically, financially, environmentally and socially
sustainable. The technical sustainability is ensured by the use of standard state-of-the-art
technology, which will replace obsolete equipment. The commitment and cooperation
demonstrated by the Government during the preparation and appraisal of the project represents
a key underlying factor for the sustainability of this project. In addition, the Management
Contractor appointed to manage EDSA, as part of its assignments, will review and strengthen
the internal control systems of EDSA and this project. Similarly, the Contractor will strengthen
EDSA’s internal audit unit to ensure effective risk-based internal audit of all activities
including those related to this project. Subsequently, the capacity building and skill
enhancement program will ensure availability of skilled labor for the implementation of future
projects.
4.5. Risk management
4.5.1. The project overall risk is rated as moderate. Table 4.5.1 discusses the envisaged
risks and mitigation measures.
16
Table 4.5.1: Project Risks
Risk Description Mitigation
- Change in level of political support, or political
risk,
Mitigated by government support for the energy sector
rehabilitation program and the involvement of
development partners in Sierra Leone. - Sector’s technical sustainability risks
Mitigated though the support of development partners for
the required capacity building program and recruiting
technical staffs for the operation & maintenance activities. - Risk of project completion delay
Mitigated by selecting of well-experienced and reputable
contractors on the basis of EPC contract as well as the
involvement of the supervision consultant to augment
project staff as needed in order to ensure delivery
efficiency. Risk of failure to achieve operational efficiencies
that contributes to sector financial sustainability
risk
Mitigated through implementation of ongoing state-of-art
commercial management system (metering and billing
collection) and revenue protection program to reduce the
non-technical losses.
Risks of delay on procurement process, long
approval processes and contract management.
Mitigated by procuring the supervision consultant to assist
EDSA’s team in preparation of bidding documents and
contract reviews Risk of CLSG implementation delay Mitigated through selecting of well-experienced and
reputable contractors on the basis of EPC contract as well
as the involvement of the supervision consultant to
augment project staff as needed in order to ensure delivery
efficiency
Risk of Co-Financing being cancelled. Mitigated by an Administration Agreement/ Memorandum
of Understanding with clear milestones and disbursement
schedule on DFID contribution.
Risk of Disbursement Delay Mitigated by provision of quarterly advance disbursement
notifications by the PIU and disbursement indicators
considered by the Bank’s Delivery Accountability and
Process Efficiency Committee (DAPEC)
4.6. Knowledge building
4.6.1. The implementation of the project components will generate vital knowledge that
will be useful for continuous improvement of performance and execution of similar distribution
system improvement and power services to other similar socio-economic population. The
technical assistance activities will build technical capacity and rehabilitate and revamp the
EDSA/EGTC joint training centre to improve the technical capacity and operations of the MoE,
EDSA, EGTC in the long run. The NPA/GTZ Training Centre, as it was called when
established in 1985, was among the most equipped institution in Sierra Leone. Today it is
totally handicapped on tools, machines and equipment as the workshop tools, machines and
equipment are obsolete and lack of spares have made them irreparable and unserviceable. The
Training Centre is used exclusively to train young men and women in addition to the training
of young graduates and technicians in specialized skills required for generation, transmission
distribution segments. The Training Centre has the infrastructure (in terms of Classrooms,
laboratories and workshops) that can train up to a maximum of 20 Electrical Engineers and 20
Mechanical Engineers. The technical assistance co-financing from DFID will be utilized for
in-house technical skill enhancement programs that will be beneficial to in the long run. The
project implementation review, quarterly progress reports, audit, sector M&E and completion
reports will also provide information on various aspects of the project for further diagnosis.
The knowledge obtained will be shared within the Bank and other development partners as
well as with RMCs.
17
5. LEGAL INSTRUMENTS AND AUTHORITY
5.1. Legal instrument
The legal instruments used for the project are a loan and grant agreements to be entered into
between the Republic of Sierra Leone and the Bank for ADF resources; and an on-lending
agreement between GoSL and EDSA.
5.2. Conditions associated with Bank’s intervention
(A) Conditions Precedent to Entry into Force
The entry into force of the Loan Agreement shall be subject to the fulfilment by the Borrower
of the provisions of Section 12.01 of the Bank’s General Conditions Applicable to the African
Development Fund Loan Agreements and Guarantee Agreements (Sovereign Entities).
a) The entry into force of the Loan Agreement shall be subject to the fulfilment by the
Borrower of the provisions of Article XII, Section 12.01 of the General Conditions
Applicable to the African Development Fund Loan Agreements and Guarantee
Agreements (Sovereign Entities).
b) The Protocol of Agreement shall enter into force on the date of its signature by the Fund
and the grant recipient under Article X, section 10.1 of the General Conditions
Applicable to Protocols of Agreement for Grants of the African Development Fund.
(B) Conditions Precedent to First Disbursement of the Loan and the Grant
The obligation of the Bank to make the first disbursement of the Loan and the Grant shall be
conditional upon the entry into force of the Loan and the Grant Agreements, and the fulfilment,
in form and substance satisfactory to the Fund, of the following conditions:
For the Loan
i) Provide evidence that a subsidiary financing agreement with terms and conditions
acceptable to the Fund, has been executed between the Borrower and EDSA for the
purpose of on-lending the proceeds of the loan;
ii) Provide evidence to the Fund of the opening of a Special Account for the Project in a
bank acceptable to the Fund.
For the Grant
i) Provide evidence to the Fund of the opening of a Special Account for the Project in a
bank acceptable to the Fund.
(C) Undertakings
The Borrower undertakes to implement the Environmental and Social Management Plan
(ESMP) and report to the Bank on a quarterly basis, as part of the quarterly progress report.
18
5.3. Compliance with Bank Policies
This project complies with all applicable Bank policies, particularly the Public Sector Lending
Policies, Integrated Environmental and Social Assessment Guidelines, Bank’s Policy on
Resettlement and Involuntary Displacement, and Bank’s crosscutting themes of Gender and
Poverty.
6. RECOMMENDATION
Management recommends that the Board of Directors approve the proposed ADF Loan and
ADF Grant of UA 4.621 million and 4.688 million to the Government of Sierra Leone for the
purposes and subject to the conditions stipulated in this report.
I
Appendix I: Country’s comparative socio-economic indicators
II
Appendix II: Table of ADF’s portfolio in the country List of active projects (loans and grants) by Sector:
Age
6-Oct-16
1 ADF P-SL-EA0-001 Water and
sanitation
Three Towns Water Supply Project OnGo 26-Oct-10 5.95 30-Jun-18 28.50 21.36 74.94%
2 ADF P-SL-K00-006 Governance Public Financial Management & Business Enabling Support
Project
OnGo 30-Sep-11 5.02 30-Dec-16 4.00 3.37 84.17%
3 ADF P-SL-DB0-005 Transport Matotoka - Sefadu Road Rehabilitation Project OnGo 5-Apr-12 4.51 31-Dec-17 22.00 16.39 74.48%
4 ADF P-SL-E00-003 Water and
sanitation
Rural Water Supply & Sanitation Project OnGo 18-Sep-13 3.05 31-Dec-18 20.39 2.89 14.18%
5 ADF P-SL-KF0-009 Governance Technical Assistance And Capacity Building Support To
Ministry Of Energy & MCC - (TCB- ERPU & MCC)
OnGo 18-Dec-13 2.80 30-Jun-17 0.45 0.07 15.85%
6 ADF P-SL-KF0-008 Governance Technical Assistance And Capacity Building To Support
Minerals And Extractive Revenues Governance
OnGo 20-Dec-13 2.80 31-Dec-17 1.20 0.24 19.74%
7 ADF P-SL-K00-007 Governance PFM Improvement And Consolidation (PFMIC) OnGo 8-May-14 2.42 30-Sep-18 2.30 0.35 15.11%
8 ADF P-SL-IBE-003 Social Strengthening West Africa’s Public Health Systems Response
(SWAPHS)
OnGo 18-Aug-14 2.14 30-Mar-17 1.20 1.20 100.00%
9 ADB/SFR P-SL-I00-003 Social Emergency Humanitarian Relief Assistance To Flood Victims APVD 16-Nov-15 0.89 31-Dec-17 0.73 0.73 100.00%
10 ADB P-SL-F00-008 PS-Power CECASL Heavy Fuel Oil Power Project and accompanying Credit
Enhancement Facility
APVD 17-Dec-15 0.81 15-Jun-17 21.78 - 0.00%
11 ADF P-SL-DB0-010 Transport Mano River Union Rehabilitation of Bo-Bandajuma Road
Project
APVD 17-Dec-15 0.81 1-May-20 6.94 - 0.00%
12 ADF P-SL-KB0-001 PS- Social Youth Entrepreneurship and Employment Program (YEEP) APVD 4-May-16 0.42 15-Jan-19 1.73 - 0.00%
2.63 111.22 46.59 41.89%
Amount
approved (UA
million)
Cumulative
disbursement as
at 31st May
2016
Cumulative
disbursement %
as at 31st May
2016
Window ID Sector Project TitleStatus of
ProjectApproval date Completion date
III
Age
6-Oct-16
Social Post Ebola Recovery Social Investment Fund Project’ (PERSIF) APVD 21-Oct-15 0.96 31-Dec-18 9.00 - 0.00%
Social Crisis Response : TA To Fight Ebola* OnGo 1-Oct-14 2.02 31-Dec-16 1.80 1.43 79.62%
Social Ebola Fight Back Programme Sierra Leone OnGo 1-Oct-14 2.02 31-Dec-16 33.00 33.00 100.00%
Power CLSG Interconnection -Sierra Leone OnGo 6-Nov-13 2.92 31-Dec-18 16.04 - 0.00%
Power CLSG Sierra Leone- Rural Electrification OnGo 6-Nov-13 2.92 31-Dec-18 4.88 0.12 2.40%
Social Institutional Support - Mano River Union II OnGo 1-Oct-13 3.02 31-Dec-16 0.94 0.62 65.49%
2.31 65.66 35.17 53.56%
Cumulative
disbursement as
at 31st May
2016
Cumulative
disbursement % as at
31st May 2016
Sector Project TitleStatus of
ProjectApproval date Completion date
Amount
approved
(UA million)
IV
Appendix III: Key Projects Financed By the Bank and other Development Partners
Project/Framework Development
Partner
Amount Sector Contribution
Rehabilitation of T&D network in the
Western Area
JICA US$ 3.8 M Rehabilitation of the Goderich substation and extension of 11kv
network to Wilberforce
Energy Access Programme (EAP) DFID US$16 M
Rehabilitation Kingtom, Wilberforce, Black Hall Road & Wellington
Solar& Renewable Energy rollout to 14 villages and roadmap for
renewable technologies in rural areas. :Nationwide
Energy Sector Utility Reform
Project(ESURP)
World Bank US$40 M
EDSA Management Contract
Network improvements
Project implementation & generation studies
Low and Medium Voltage Network
Project
IsDB US$10.70
Network improvements restricted to Western Area Freetown
ECOWAS Emergency Electricity
Supply for Freetown
ECOWAS US$21M
T&D in Western Area
Revolving fund for fuel
Meters
Cote d’Ivoire, Liberia, Sierra Leone
and Guinea (CLSG) interconnection
WAPP,
AFDB, WB,
EU
US$489M 525Km energynetwork interconnecting Cote d’Ivoire, Liberia,
Sierra Leone and Guinea
Energy Access to 115 communities within 5 km of the line
4,700 Prepaid Meters provided to 115 communities
V
Appendix IV: Map of the Project Area
Source: Feasibility Report - Bo Kenema Distribution Network , Atkins, 2016
VI
Appendix V: Justification to finance 10% of project cost financing by the
Government
The GoSL counterpart financing for the project is applied on the Bank’s financing
component. Justification to finance more than 90% is based on the country’s commitment
to implement its overall development program; (ii) the financing allocated by the country
sectors targeted by Bank assistance; (iii) the country’s budget situation and debt level
(Refer to Annex II)
Introduction: GoSL made a request for this financing plan during appraisal of the program.
This appendix provides the justification for waiver for the Bank financing more than 90%
of the proposed operation financing as indicated in the financing plan depicted in the table
below.
Source
Total
Amount
Million UA
% Total
Million UA
ADF 9.31 24.45%
DFID 27.84 73.11%
GoSL 0.93 2.44%
Total 38.08 100%
i. Country Commitment to Overall Development: Sierra Leone's economy has
experienced boom years (2012 13), with real GDP growth reaching a peak of around
21% in 2013, were largely driven by rapid expansion in the mining sector, which
remains a key source of government revenue. A post-Ebola resumption of iron ore
mining and pick-up in investor confidence will produce real GDP growth of 4.9% in
2016. As iron ore activity is ramped up, GDP growth will accelerate to 6.8% in 2017.
Inflation will remain broadly stable in 2016, at 8.2%, as currency weakening is offset
by low oil prices. Sharply rising oil prices in 2017, along with continued currency
weakening, will push inflation up to 9.5% next year. The current-account deficit is
forecast to narrow from 36% of GDP in 2015 to 25.9% of GDP in 2016 as Ebola-
related imports fall. Despite a sharp rise in exports in 2017, the deficit will widen to
28.4% of GDP as oil prices rise. There have been significant gains in the Human
Development Index (HDI) from 0.344 in 2005 to 0.413 in 2014 (an improvement of
more than 20%), and this will most likely be reversed due to the impact of the EVD
on health (i.e. life expectancy at birth), education (years of schooling) and standard of
living (gross national income per capita). Having failed to achieve most Millennium
Development Goals (MDGs) by 2015, government authorities and development
partners on the ground are now aware of the pertinence and inseparability of the 17
Sustainable Development Goals (SDGs) which essentially means that development
work should be across all sectors. Government needs to do more on poverty reduction
using the new poverty-related data and information which will be generated by the
population and housing census conducted in December 2015.
VII
ii. Financing allocated by Sector Targeted by the Bank: The need to address
infrastructure gaps and exploit natural resources requires major and multi-year
contracts. GoSL aspiration plan laid out in the Agenda for Prosperity (A4P) is
underpinned by eight strategic pillars which would serve as the foundation for
achieving middle income country status. Through pillars 1 and 4, the authorities
envision to implement a number of large-scale projects in agriculture, energy and
transportation. The cost of the airport alone is estimated at US$312 million (6.6
percent of 2013 GDP); significant related expenses—light rail linking the airport to
the port, a port upgrade—are also planned. Energy related projects have been costed
at over US$1.2 billion. Coping with the resource implications of these will be
challenging given limited domestic resource mobilization and expenditure pressures.
The government plans to resort to external borrowing to fill the financing gap, and it
is also favorably disposed toward public private partnership (PPP) arrangements. PPP
arrangements could be less costly, both in terms of debt burden and debt service
payments. But large non-transparent concessions for PPP operators could create fiscal
risks that could outweigh the lower explicit fiscal cost. In this regard, the 2016
approved budget engulfs the target sectors of the Bank (energy, roads, basic services
and governance). The commitment in the energy sector is even stronger,
iii. Budget and Debt Situation: Sierra Leone has maintained favorable debt dynamics,
mostly due to debt reliefs in the mid-2000s provided for the Heavily Indebted Poor
Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI). International
Monetary Fund (IMF) 2016 Debt Sustainability Analysis reflected that the nominal
stock of public and publicly guaranteed external debt amounted to 32 percent of GDP
in 2016, up from 26 percent at end-2013. The creditor profile is largely favorable: most
is concessional debt. owed to multilaterals, while the remainder is non-concessional
debt at commercial and semi commercial terms. Interest on external debt remains
below 2 percent of GDP. Domestic debt, which is 14 percent of GDP, is mostly
government securities, over 90 percent of which are held by commercial banks, other
financial institutions and the pension fund.
Sierra Leone’s budget often faces both anticipated and unanticipated financing risks.
Higher than forecast revenue in some years has been more than offset by expenditures
that exceeded budget appropriations due to spending pressures and poor cash flow
planning, resulting in unplanned and unexpected financing needs. Exogenous factors,
such as commodity price declines and the Ebola epidemic outbreak interacted with
these existing limitations, thus magnifying the fiscal risk. In fiscal year 2016 for
example, wage overruns and spending pressures from subvented agencies contributed
to larger than anticipated financing gaps early in the fiscal year, which could not
readily be filled because of the low market appetite for treasury instruments.