AFRICAN DEVELOPMENT FUND

MULTINATIONAL

KENYA – TANZANIA POWER INTERCONNECTION PROJECT

APPRAISAL REPORT

REVISED VERSION

ONEC/EARC February 2015

Publi

c D

iscl

osu

re A

uth

ori

zed

Pu

bli

c D

iscl

osu

re A

uth

ori

zed

Table of Contents

FISCAL YEAR .............................................................................................................................. i

WEIGHTS AND MEASURES .......................................................................................................... i

ACRONYMS AND ABBREVIATIONS ............................................................................................ ii

LOAN INFORMATION................................................................................................................. iii

PROJECT SUMMARY ........................................................................................................... iv

1. STRATEGIC THRUST AND RATIONALE ................................................................... 1

1.1 Project Linkages with Country Strategy and Objectives ............................................ 1

1.2 Rationale for Bank Involvement ................................................................................. 2

1.3 Donor Coordination .................................................................................................... 3

2. PROJECT DESCRIPTION................................................................................................ 3

2.1 Project Objectives ....................................................................................................... 3

2.2 Technical Solution Adopted and Alternative Considered ........................................... 4

2.3 Project Type ................................................................................................................ 4

2.4 Project Cost and Financing Arrangements .................................................................. 4

2.5 Project’s target area and population ............................................................................ 6

2.6 Participatory Approach ............................................................................................... 7

2.7 Bank Group Experience and Lessons Reflected in Project Design ............................ 7

2.8 Key performance indicators ........................................................................................ 8

3. PROJECT FEASIBILITY ................................................................................................. 8

3.1 Financial and Economic Performance ........................................................................ 8

3.2 Environmental and Social Impact ............................................................................... 9

4. IMPLEMENTATION ...................................................................................................... 12

4.1 Implementation Arrangements .................................................................................. 12

4.2 Governance ............................................................................................................... 14

4.3 Sustainability ............................................................................................................. 15

4.4 Risk Management...................................................................................................... 15

4.5 Knowledge Building ................................................................................................. 16

5. LEGAL INSTRUMENTS AND AUTHORITY ............................................................. 16

5.1 Legal Instrument ....................................................................................................... 16

5.2 Conditions associated with the Fund’s proposed Financing ..................................... 16

5.3 Compliance with the Bank’s policy .......................................................................... 17

6. RECOMMENDATIONS ................................................................................................. 17

APPENDIX I: COUNTRIES COMPARATIVE SOCIO-ECONOMIC INDICATORS - KENYA ................ I

APPENDIX I: COUNTRIES COMPARATIVE SOCIO-ECONOMIC INDICATORS - TANZANIA .... II

APPENDIX II: ADB PORTFOLIO - KENYA ......................................................................... III

APPENDIX II: ADB PORTFOLIO TANZANIA ......................................................................... V

APPENDIX III: MAP OF PROJECT AREA ................................................................................ VII

i

CURRENCY EQUIVALENTS: MARCH 2014

1 UA = 1.5474 USD

1 UA = 134.62 KSH

1 UA = 2530.98 TSH

FISCAL YEAR

1 July – 30 June

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

m metre KOE kilogram of oil equivalent

cm centimetre = 0.01 metre kV kilovolt = 1,000 volts

mm millimetre = 0.001 metre KVa kilovolt ampere (1,000 Va)

km kilometre = 1,000 metres KW kilowatt = 1,000 Watts

m² square meter GW gigawatt (1,000,000 kW or 1,000 MW)

cm² square centimetre MW megawatt (1,000,000 W or 1,000 kW

km² square kilometre = 1,000,000 m² KWh kilowatt hour (1,000 Wh)

ha hectare = 10,000 m² MWh megawatt hour (1,000 KWh)

t (t) metric tonne (1,000 kg) GWh gigawatt hour (1,000,000 KWh)

ii

ACRONYMS AND ABBREVIATIONS

AC Alternating Current

ACFA Accelerated Co-financing Facility for Africa

ADB African Development Bank

ADF African Development Fund

CDM Clean Development Mechanism

CPIA Country Policy and Institutional Assessment

CSRF Corporate Social Responsibility Fund

CSP Country Strategy Paper

EAPP Eastern Africa Power Pool

EARC East African Resource Center

E&S Environment and Social

ESIA Environmental and Social Assessment

ESMP Environmental and Social management plan

EWURA Energy and Water Utilities Regulatory Authority of Tanzania

ERC Energy Regulatory Commission of Kenya

FM Financial Management

GHG Greenhouse Gas Emissions

GoK Government of Kenya

GoT Government of Tanzania

HFO

JICA

Heavy Fuel oil

Japan International Cooperation Agency

JPC Joint Project Coordinator

JSC Joint Steering Committee

KETRACO Kenya Electricity Transmission Company Limited

KPLC Kenya Power and Lighting Company

MDB Multinational Development Bank

MoF Ministry of Finance

MTP

NEMA

Medium Term Plan

National Environment Management Authority

NBI

OPGW

Nile Basin Initiative

Optical Ground Wire

PCR Project Completion Report

NELSAP Nile Equatorial countries Subsidiary Action Program

PFM

PIDA

Public Financial Management

Programme for Infrastructure Development in Africa

PIT Project Implementation Teams

ROW Right of Way

PRSP Poverty Reduction Strategy Paper

PSA Power Sales Agreement

RISP Regional Integration Strategy Paper

RAP Resettlement Action Plan

SARC

SAPP

South Africa Resource Center

South Africa Power pool

TANESCO Tanzania Electricity Supply Company

VPP Venerable People Plan

WB World Bank

iii

LOAN INFORMATION

CLIENT’S INFORMATION

Country Kenya and Tanzania

Recipient Republic of Kenya and the United Republic of Tanzania

Implementing Agency Kenya Electricity Transmission Co. Ltd and Tanzania Electric Supply

Company Ltd

Executing Agency Ministry of Energy and Petroleum of Kenya and Ministry of Energy and

Minerals of Tanzania

FINANCING PLAN

Sources Amount

(UA million)

Instrument

Kenya Tanzania Total

African Development Fund 27.50 75.29 102.79 Loan

Japan International Cooperation

Agency 0.00 63.48 63.48 Loan

Government of Kenya/Tanzania 5.10 28.49 33.58 Equity

Total Financing 32.60 167.26 199.86

KEY FINANCIAL AND ECONOMIC OUTCOMES

PROJECT

FIRR FNPV @ 10% (US$

million)

EIRR ENPV@ 12%

(US$ million)

22.03 310.96 25.21% 305.70

TIME FRAME – MAIN MILESTONES (expected)

Concept note approval December 2013

Board approval February 2015

Loan signing March 2015

Launching April 2015

Effectiveness May 2015

Project Completion Report July 2019

Last disbursement December 2019

iv

PROJECT SUMMARY

Project

Overview

The project involves the construction of a high voltage alternating

current (HVAC) 400 kV transmission line (T-line) with a total length of

507.5 km, of which about 414.4 km are located in Tanzania and 93.1 km

in Kenya. In Tanzania, the project includes the construction of a 400 kV

substation in Arusha and the extension of the existing Singida

substation. In Kenya, the project does not involve any works related to

substations. Indeed, the substation outgoing bay in Isinya is part of the

existing Nairobi Reinforcement project which is currently under

construction.

The proposed interconnection line, to be connected to the Ethiopia-

Kenya transmission system through the Isinya – Suswa 400 kV line, is

part of the Eastern Africa Electricity Highway, with a transfer capacity

of 2000 MW. As such, it will be the major link for power transfer

between the Eastern Africa Power Pool and countries in the North such

Sudan and Egypt. Completion of the line is expected in early 2017.

Needs

Assessment

The project will allow the two countries to exchange power as well as

import energy from the interconnected countries. The project fulfills the

objectives of the NEPAD in terms of regional integration and promotion

of infrastructure development through regional co-operation in key

productive sectors such as energy.

Project

Outcomes

The project will contribute to: (i) improved power supply in both

countries and in the East African region in general and; (ii) reduced

operation costs of energy production. The project will help both

countries to replace some of the high cost thermal energy production

with cheaper hydropower, hence reducing Greenhouse Gas (GHG)

emissions.

Bank’s added

value

The Bank has been playing a leading role in financing the

implementation of infrastructure projects in the region including

national transmission projects and regional power interconnections.

Indeed, the Bank, being a lead financer and coordinator, managed to

mobilize funds from other development partners such as JICA, AFD and

the WB to finance major capital intensive interconnection projects in the

like of the Ethiopia-Kenya Electricity Highway Project and the

Backbone Transmission project in Tanzania. The project is also aligned

with the climate change mitigation and adaptation strategy of the Bank,

as it presents the potential to replace part of the fossil-fuelled thermal

generation with hydropower.

Institutional

development

And knowledge

building

The project has a capacity-building component which includes training

for technical staff of the utilities on operation and maintenance of the

400kV system. It will also provide training to commercial staff of both

utilities to reinforce their management of commercial transactions. In

addition it will include a training programme for regulatory issues raised

in the context of power trade which will target experts of the regulatory

authorities in both countries.

v

Anticipated Results Based Logical Framework

Country and project name: Kenya-Tanzania Power Interconnection Project

Purpose of the project : To improve the supply, reliability and affordability of electricity in the Eastern Africa region through cross-border exchanges of cheap and cleaner surplus power from neighboring

countries, promote power trade, regional integration, and consequently contribute to Eastern Africa’s socioeconomic transformation

RESULTS CHAIN

PERFORMANCE INDICATORS

MEANS OF VERIFICATION RISKS/MITIGATION MEASURES Indicator

(including CSI) Baseline (2012-2013) Target (2022)

IMP

AC

T

Sustainable economic

growth and better

quality of life in

Eastern Africa region

1.GDP growth in %

2. Increased annual per-

capita electricity

consumption in kWh

3.a. Decrease of Kenya’s

average electricity tariff

for domestic &industrial

customers

3.b. Decrease of

Tanzania’s average

electricity tariff for

domestic &industrial

customers

1.Kenya: 5.8 %

Tanzania: 6.8%

2.Kenya : 140 kWh

Tanzania: 93kWh

3.a. Domestic: US$ 0.135

/kWh; Industries: US$

0.13/kWh

3.b. Domestic: US$ 0.14/ kWh;

Industries : US$ 0.21/kWh

1.Kenya: 10%

Tanzania: 10%

2. Kenya: 300kWh

Tanzania : 200 kWh

3.a.Domestic: US$ 0.09

USD /kWh

Industries: US$

0.10/kWh

3.b.Domestic: US$ 0.09

/kWh; Industries: US$

0.12 /kWh

- Human Development Report

- National economic statistics

- AfDB CSP

- Investment Prospectus 2013-

2016

.

Risk: Ambitious targets of 10% GDP in 2022

Mitigation: In Kenya, the government plan

5000+MW by 2016 is expected to support

numerous economic activities. Such as mining,

production of iron, large scale irrigation for food

security, operation of petroleum pipelines In

Tanzania, the project is included in the BRN

(Big Results Now) which is a priority

programme for the government. The GoT is

planning to develop new gas power plants with

a generation capacity of 400 MW.

OU

TC

OM

ES

Outcome 1

Improved power supply

and trade in East Africa

Power trade in GWh n/a 5 885.80 GWh

- National statistics

- Project post-evaluation report

- Public utility companies

statements and annual reports

Risk: efforts at the regional level are not

pursued; power trade is at risk.

Mitigation: The PPA and Wheeling

Agreements are designed to encourage regional

power trade and promote sharing benefits of

interconnections.

Outcome 2

Savings in operating

costs in both countries

operation costs in both

countries

Avoided Operating cost in

US$

n/a

US$ 109.64 million

vi

Country and project name: Kenya-Tanzania Power Interconnection Project

Purpose of the project : To improve the supply, reliability and affordability of electricity in the Eastern Africa region through cross-border exchanges of cheap and cleaner surplus power from neighboring

countries, promote power trade, regional integration, and consequently contribute to Eastern Africa’s socioeconomic transformation

RESULTS CHAIN

PERFORMANCE INDICATORS

MEANS OF VERIFICATION RISKS/MITIGATION MEASURES Indicator

(including CSI) Baseline (2012-2013) Target (2022)

OU

TP

UT

S

Component A: Transmission Lines &

ESMP Implementation

-Length ( in km) of HVAC

T-line

-Number of Elephants

tagged

-Number of jobs created

-Number of HIV/AIDs and

gender awareness sessions

conducted

n/a - 507 km of transmission

line constructed (2019);

-60 Elephants tagged and

monitored (2019);

-2000 temporary jobs and

35 permanent jobs (of

which 30% women)

(2019);

-9 HIV/AIDS and gender

awareness sessions

annually (2019)

- Reports from PIT and

supervision consultant

- Supervision reports from the

Bank

- Disbursement and financial

reports from the implementing

agency

- project completion report

Risk: Project completion delay and failure to

meet performance requirements.

Mitigation 1: close supervision by Bank ,

Supervision Consultant and respective PIT

Mitigation 2: The project will be implemented

as design, supply and installation contract which

should ensure minimum variance in costs

Component B: Substations

N° of high voltage

substations build or

extended

n/a 2 Substations in Tanzania

(2017)

Component C: Rural

Access Scale up T

N° of villages along the T-

line getting access to

electricity

n/a 16 villages in Tanzania

(128,000 people) and 5

villages in Kenya

(70,000 people) –(2019)

Component D: Project Supervision and

Management (including

Capacity Building)

N° of project

implementation &

supervision reports

n/a 8 supervision reports; 1

completion report; 2

trainings; 20 people

trained, including 5

women

Component E: Technical Assistance &

Capacity Building on

Power Sales/ wheeling

Agreements

Advisory service reports,

n° of people trained;

n/a 18 commercial staff

trained; 20 engineers

trained, including 8

women.

AC

TIV

ITIE

S

A. Transmission lines

B. Substations

C. Rural access scale-up

D. Project supervision and management

E. Technical assistance and capacity building on power sales and wheeling agreements

F. Environment and social costs

G. Wildlife Monitoring Programme

H. Total

A. 110.12 MUA

B. 24.94 MUA

C. 12.97 MUA

D. 7.63 MUA

E. 9.60 MUA

F. 33.58 MUA

G. 1.02 MUA

H. 199.86 MUA

vii

PROJECT IMPLEMENTATION SCHEDULE

KENYA-TANZANIA POWER INTERCONNECTION PROJECT

No Description Year 2014 2015 2016 2017 2018 2019

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

1 Appraisal

2 Project Approval

3 Effectiveness

4 Selection of Consultants

5 Bid Preparation

6 Bidding period

7 Evaluation and Contract Award

and

8 Mobilization and Construction

9 Commissioning

10 Operational Acceptance

11 Last Disbursement date

1

REPORT AND RECOMMENDATIONS OF MANAGEMENT TO THE BOARD OF DIRECTORS

REGARDING ON PROPOSED LOANS TO THE REPUBLIC OF KENYA AND THE UNITED

REPUBLIC OF TANZANIA FOR KENYA-TANZANIA POWER INTERCONNECTION PROJECT

Management submits the following Report and Recommendations on proposed ADF loans of UA 75.29

million and UA 27.50 million to the United Republic of Tanzania and the Republic of Kenya respectively for

the Kenya – Tanzania Power Interconnection Project.

1 STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives

1.1.1 The proposed project is in line with one of the two pillars of the Bank’s Country Strategy Paper (CSP)

in Kenya for the period (2014-2018) which focuses on enhancing physical infrastructure to unleash inclusive

growth. The project is also aligned with the country’s Vision 2030 which confirms that the expansion of

electricity infrastructure is a top priority. Furthermore, the project fits within the Investment Prospectus (2013-

2016) and Power to transform Kenya 5000+ MW by 2016, with the strategic aim to provide affordable

electricity to quickly transform the economy. The initiative to add a generation capacity of around 5000 MW

by 2016 is expected to transform the Kenyan economy through support to numerous economic activities such

as mining, production of iron, large scale irrigation for food security, operation of petroleum pipelines,

petrochemical production including fertilizer, electrification of rail lines. Therefore, increased and reliable

power supply will be critical the desired growth in Kenya.

1.1.2 In Tanzania, the Bank’s CSP (2011-2015) seeks to support the country towards greater

competitiveness and more inclusive growth under two reinforcing pillars, one of which being infrastructure

development. The CSP is aligned with the Vision 2025, the medium-term national growth and poverty

reduction strategy (MKUKUTA II and MKUZA II) as well as the Five Year Development Plan I-FYDP I-

(2011/12–2015/16) which emphasizes the importance of reliable and adequate power supply as a key driver

for socioeconomic transformation. Tanzania recently revised its Vision 2025 under the banner of Big-Results-

Now (BRN) in which the Energy Lab prioritized seven transmission line projects, including the Zambia-

Tanzania and Kenya – Tanzania interconnector.

1.1.3 The project is also consistent with the Bank’s regional integration strategy paper (RISP) for East Africa

(2011-2015) whose main pillars are articulated around regional infrastructure and capacity building. The

proposed project is included in the East Africa Power Master Plan (EAPMP) and will therefore contribute to

make Kenya and Tanzania achieve some of the regional integration objectives of the East African

Community1 in the power sector.

1.1.4 Africa’s economic and social transformation requires major investments in infrastructure as well as

upgrading and modernization of existing infrastructure, which are recognized as a top priority by the African

Union (AU) and the New Partnership for Africa’s Development (NEPAD). Through the AU and NEPAD,

African Heads of State and Government approved the Programme for Infrastructure Development in Africa

(PIDA) in Addis Ababa, in January 2012. PIDA is a global partnership to transform Africa through modern

infrastructure. It defines priority infrastructure investments required to integrate and interconnect Africa so

that Africa starts to function as a single competitive market for goods and services linked to African markets

and to the global economy. PIDA envisages investments of US$68 billion by 2020, out of which around 60%

1 Both countries are members of the EAC.

2

(US$40.3 billion) would be spent in the energy sector. Persistent power deficits are among the major

challenges to Africa’s sustained development. The energy sub-sector of PIDA has a focus on the development

of major hydroelectric projects and the construction of transmission lines to connect the continent’s power

pools and enable inter-regional energy trade and cooperation. The Kenya-Tanzania Power Interconnector

Project therefore contributes to the attainment of the objectives of PIDA.

1.1.5 This project is critical in completing the power transmission links from Ethiopia all the way to Zambia

linking the Eastern African Power Pool (EAPP) to the Southern Africa Power Pool (SAPP), thus facilitating

power trade between Eastern and Southern Africa and helping to address the critical power deficit in these

regions through smoother flow of power trade from deficit to surplus areas. The proposed Kenya-Tanzania

power interconnection is a like transformational as it will facilitate linking countries, businesses, communities

and unlocking the potential for job creation and inclusive growth in both countries.

Rationale for Bank Involvement

1.1.6 The rationale for the Bank’s involvement is fourfold: (i) the project will complement the NBI-

NELSAP regional interconnection project2, and the Ethiopia-Kenya Electricity Highway project, both under

implementation; (ii) the project will enable Tanzania to replace thermal based emergency power plants with

hydro based imports, which is in line with the Bank’s Energy sector policy (2012) aimed at encouraging the

transition to green growth path in the delivery of affordable and reliable energy supply; (iii) the project is also

aligned with the Bank’s Ten-year Strategy (2013-2022) that calls for accelerated regional integration and

support to infrastructure projects that help unlock private sector participation. Accordingly, this

interconnection project is expected to encourage the private sector investing in generation of electricity by

facilitating power transfer through the interconnector; (iv) finally, the project aligns with the pillars of the

regional integration strategy papers (RISPs) for Eastern Africa which focus on regional infrastructure and

capacity building. The project will therefore contribute to the achievement of the two overarching objectives

of the TYS, namely, inclusive growth and transitioning to green growth.

1.1.7 The project is also justified by the priority given by the NEPAD to energy as a key driver for economic

growth. The programme strives to increase energy accessibility through development of regional energy

infrastructure both on generation and grid connectivity. Indeed, regional integration is considered essential

for meeting African’s economic and development goals. As a major tool to drive regional integration, Energy

is considered to play an important role in reducing the cost of doing business and energy infrastructure

development is recognised as a priority and strategic focus area that requires special attention. The strategic

objective to be pursued is to effectively address constraints related to the improvement of energy infrastructure

in the region in order to foster physical regional energy connectivity and integration as well as enhance

competitiveness. The region recognizes that removal of supply-side constraints related to energy is an

essential pillar for improved market access and enhanced productive capacity.

1.1.8 Therefore, the Kenya-Tanzania Interconnection Project plays an important role in promoting regional

integration through power trade. The project feasibility study was completed in June 2012 and affirmed the

feasibility of the project as the least cost option, which adopts technology that is well proven and field-tested.

The project allows the two countries to exchange power and also import from the interconnected countries.

2 connecting Kenya, Uganda, Rwanda, Burundi and the Democratic Republic of Congo (DRC)

3

Donor Coordination

1.1.9 In Kenya, the Bank collaborates with other development partners (DP) through the Development

Partners Group (DPG), the Harmonization, Alignment and Coordination Group (HAC), and various sector

thematic working groups. The Ministry of Energy (MoE) in Kenya has established an Energy Sector Working

Group (ESWG) which is currently chaired by the AFD. The most active development partners in the energy

sector are; African Development Bank (AfDB,), World Bank (WB), European Investment Bank (EIB),

Agence Française de Développement (AFD), Japan International Cooperation Agency (JICA), and

Germany’s Kreditanstalt für Wiederaufbau (KfW).

1.1.10 In Tanzania, the Ministry of Finance (MoF) is responsible for coordinating donor financing activities

within the energy sector. The Bank collaborates with other donors through the Joint Energy Sector Working

Group (JESWG) composed of multilateral (AfDB, the European Union -EU and the WB) and bilateral

(Canada, Denmark, Finland, Germany, Ireland, Japan, Norway, Switzerland and the United Kingdom)

funding institutions. This group is currently chaired by the AfDB.

1.1.11 The Bank played a major role in organizing a donor coordination meeting for the financing of the

Kenya –Tanzania – Zambia interconnection project. The interconnection between Kenya – Tanzania will be

co-financed with JICA. Such cooperation is based on Japan’s strong commitment to realize the Action Plan

of the Fifth Tokyo International Conference on African Development (TICAD V) held in Yokohama, Japan,

in June 2013. The feasibility study for Tanzania - Zambia interconnection is almost completed and the project

will be financed by the WB and AFD.

2. PROJECT DESCRIPTION

2.1 Project Objectives

2.2.1 The ultimate development objective of the project is to improve the supply, reliability and affordability

of electricity in the Eastern Africa region through cross-border exchanges of cheap and cleaner surplus power

from neighboring countries. This project, through promotion of power trade at the regional level will

contribute to Eastern Africa’s socioeconomic transformation. Indeed, the project will help to improve the

supply of electricity in Tanzania in the short to medium term with imports from Ethiopia.

2.2.2 The project involves the construction of approximately 507.5 km of transmission line between Kenya

and Tanzania (about 93.1 km in Kenya and 414.4 km will be in Tanzania), with a transfer capacity of up to

2,000 MW in either direction, and associated substations in Arusha and Singida (Tanzania). There is no work

pertaining to substations in Kenya as the Isinya substation is under construction under the Nairobi Ring

Reinforcement project financed by the WB. The project also includes a capacity building component to

strengthen the implementing agencies. 2.2.3 An intergovernmental memorandum of understanding was signed in September 2003 between the

Governments of the Republic of Zambia, the Republic of Kenya and the United Republic of Tanzania on the

development of Zambia-Tanzania-Kenya (ZTK) Interconnector. Recognizing that the project is part of the

least-cost development plan, the three countries agreed jointly to develop the interconnection project. It was

expected that the planning, construction, operation and the procurement of the investment shall be inferred in

a manner that it will stabilize tariffs in the short to medium term time frames and shall lower tariffs in the

long term among the three countries. While the Kenya – Tanzania Interconnection component will be financed

by AfDB and JICA, the WB and AFD are expected to finance the Zambia – Tanzania Interconnection. The

project has also been identified as a top priority project by Tanzania in the Big Results Now initiative and will

4

help to achieve the objectives set by the Government of Kenya (GoK) in the Power to Transform Kenya

+5000 MW initiative. The project components are summarized hereunder:

Table 2.1: Project Cost Estimates by Components (in UA million equivalent)

Component Name

Estimated

Cost MUA

Component Description

Component A: Transmission

lines

110.12 Construction of a 400 kV line: 93.1 km in Kenya and 414.5 km in

Tanzania including Implementation of environmental and social

management plan

Component B :

Construction of Substations

24.94 Construction of one 400 kV substation in Arusha and expansion of

the 220 kV substation in Singida

Component C:

Rural access scale-up

12.97 Rural electrification along the transmission line route in Kenya and

Tanzania.

Component D: Project

supervision and management

7.63 A Consulting Firm will be recruited to assist the implementing

agencies in supervising the works on the transmission lines and

substations.

Component E: Technical

assistance and capacity

building on power sales and

wheeling agreements

9.60 i. This will include training for technical staff of the utilities in

operating and maintaining the 400kV system.

ii. Interconnection Tariff Study: a consultant will be recruited

to recommend a tariff structure to be applicable after

interconnection is established between Tanzania and Kenya

iii. Menengai (Rongai)-Kilgoris- Mwanza Interconnection Study

iv. Distribution Master Plan Study (Tanzania)

Component F: Environment

and social costs

33.58 This includes the environmental and social costs associated with

resettlement of project affected persons (PAPs).

Component G:Wildlife

Monitoring Programme

1.02 This component will include the supply of collars as well as the

necessary IT infrastructure to monitor elephant’s movements

Total Project Cost 199.86

2.2 Technical Solution Adopted and Alternative Considered

The optional alternatives of not interconnecting the two countries resulting in an independent national

generation and also expanding the national transmission system were rejected. Independent generation and

transmission development would deny both countries the opportunity of benefiting from the least cost option

of integrating the two power systems.

The solution considered is the construction of a 400 kV HVAC transmission line with a capacity of 2,000

MW along a route starting at Isinya substation in Kenya, passing through Namanga, crossing the border

straight to Arusha (Tanzania) and ending at Singida substation (Tanzania).

2.3 Project Type

The proposed intervention is a standalone investment project co-financed with JICA, under the framework of

the Accelerated Co-Financing Facility for Africa (ACFA) dated February 2012. JICA will finance part of the

works pertaining to the construction of the T-line and substations in Tanzania only while the Bank’s funds

will be used to finance project components in both countries.

2.4 Project Cost and Financing Arrangements

2.4.1 The total project cost, including contingencies of 10% (physical contingency of 5% and price

contingency of 5%), but excluding customs taxes and duties, is estimated at UA 199.86 million

(approximately equivalent to USD 309.26 million), split between Kenya and Tanzania as UA 32.60 million

(approximately equivalent to USD 50.45 million) and UA 167.26 million (approximately equivalent to USD

258.82 million) respectively.

5

2.4.2 Out of the total estimated project costs, UA 139.21 million will be incurred in foreign currency and

UA 60.64 million in local currency, which represents respectively 69.7% and 30.3% of the total costs. The

table 2.4.1 presents the foreign and local currency costs by component for each country.

Table 2.4.1: Project costs by Components in UA Million

2.4.3 The project cost estimates by country, category and expenditure by year are shown in the tables 2.4.2,

2.4.3 and 2.4.4. In addition, the project financing sources for foreign and local costs by country are illustrated

in the Table 2.4.5.

Table 2.4.2: Project costs by Category and country (in UA Million)

Categories Kenya Tanzania Kenya & Tanzania

FC LC Total FC LC Total FC LC Total

Works 19.41 4.32 23.73 99.34 22.74 122.08 118.75 27.06 145.81

Services 3.77 5.10 8.87 16.70 28.49 45.18 20.47 33.58 54.05

TOTAL 23.18 9.42 32.60 116.04 51.22 167.26 139.21 60.64 199.86

N° Components

Kenya Tanzania Kenya & Tanzania

FC LC Total FC LC Total FC LC Total

1 T'-line 15.60 3.90 19.50 72.50 18.12 90.62 88.10 22.02 110.12

2 Substations - - - 21.20 3.74 24.94 21.20 3.74 24.94

3 Rural Electrification 3.81 0.42 4.23 5.64 0.87 6.51 9.54 1.30 10,74

4 Resettlement action plan

costs

- 5.10 5.10 - 28.49 28.49 - 33.58 33.58

5. a Capacity Building 0.64 - 0.64 1.29 - 1.29 1.93 - 1.93

5. b Interconnection tariff

study

1.19 - 1.19 1.19 - 1.19 2.37 - 2.37

5. c Distribution Master plan

study

- - - 3.39 - 3.39 3.39 - 3.39

6. d Feasibility study for

Menengai (Rongai)-

Kilgoris- Mwanza

Interconnection Study

interconnection

0.95 - 0.95 0.95 - 0.95 1.90 - 1.90

6 Wildlife Monitoring

Programme

- - - 1.02 - 1.02 1.02 - 1.02

8 Project Supervision &

Management

0.99 - 0.99 8.86 - 8.86 9.85 - 9.85

Total Project Costs 23.18 9.42 32.60 116.04 51.22 167.26 139.22 60.64 199.86

6

Table 2.4.3: Project costs by category of expenditure with ADF financing (in UA Million)

Component FC LC Total FC LC Total FC LC Total

Kenya Tanzania Kenya and Tanzania

Works 19.41 4.32 23.73 54.89 3.70 58.59 74.30 8.02 82.33

Services 3.77 - 3.77 16.70 - 16.70 20.46 - 20.46

Total Project

Cost

23.18 4.32 27.50 71.59 3.70 75.29 94.76 8.02 102.79

Table 2.4.4: Expenditure Schedule by year (in UA Million)

Source 2015 2016 2017 2018 2019 Total

ADF 1.53 29.76 40.45 30.52 0.53 102.79

JICA 0.00 18.30 31.21 12.70 1.27 63.48

Kenya 3.06 0.51 0.51 0.51 0.51 5.10

Tanzania 17.09 2.85 2.85 2.85 2.85 28.49

Total 21.68 51.42 75.02 46.58 5.16 199.86

Table 2.4.5: Project costs by Sources of financing (in UA Million)

Source Kenya Tanzania Kenya and Tanzania

FC LC Total FC LC Total FC LC Total

ADF 23.18 4.32 27.50 71.59 3.70 75.29 88.43 14.37 102.79

JICA 0.00 0.00 0.00 50.78 12.70 63.48 50.79 12.70 63.48

GoK 0.00 5.10 5.10 0.00 0.00 0.00 0.00 5.10 5.10

GoT 0.00 0.00 0.00 0.00 28.49 28.49 0.00 28.49 28.49

TOTAL 23.18 9.42 32.60 122.37 44.89 167.26 145.55 54.31 199.86

2.4.4 The Bank’s financing, representing 51% of the total project cost estimates, will be sourced from the

countries’ Performance Based Allocation (PBA) and the Regional Operation (RO) window as shown in Table

2.4.6 below.

Table 2.4.6: ADF allocation from the PBA and RO

Component PBA RO Country

Total

Kenya 11 16.50 27.50

Tanzania 30.12 45.17 75.29

Total 41.12 61.67 102.79

Project’s target area and population

The transmission line starts at Isinya (Kenya), where the originating substation is under construction. The

Isinya substation is located 11 km to the south of the village of the same name. The line crosses the border

near Namanga and travels through several main roads thus making access easy. The topography of the line is

relatively flat.

7

2.5.2 The people along the transmission line’s route earn their livelihoods mainly from crop farming. The

direct beneficiaries of the project are households, businesses, and industries in communities located in both

countries. The line is expected to benefit countries in North, East, and Southern Africa through

interconnections between the EAPP and the SAPP hence facilitating power trade in the two sub-regions.

2.5.3 The high voltage transmission line requires the installation of ground (shield) wire to protect the line

from lightning strikes. This ground wire can also be used to install optical fibers (optical ground wire-OPGW).

Hence, in addition to energy supply, the project will provide the local populations of both countries with

access to high-speed ICT connectivity. This will be achieved through the OPGW line linked to the

transmission line, which will provide spare capacity for use by local communities.

2.5.4 The project includes a rural electrification programme which consists in providing electricity access

to about 21 villages (16 in Tanzania and 5 in Kenya) located within 20 km from the T-line and which are not

currently connected to the grid. The project will entail the connection of the targeted households to the grid

as well as the installation of pre-paid meters. This will enable a population of around 198,000 people (128,000

in Tanzania and 70,000 in Kenya) to have access to electricity and benefit from improved education and health

services. Among the villages to be electrified in Tanzania included rural area around Babati Katesh, Giting,

Endesh, Mgori and Ngimu. In Kenya, most of the villages along the line electrified with limited number of

customers. Under the project financing the existing distribution transformers shall be exploited to the

maximum through the extension of the low voltage network to reach around people located in the vicinity of

these transformers and also with installation of new distribution transformers and low voltage lines.

2.6 Participatory Approach

2.6.1 In Kenya, KETRACO had disclosed the environmental and social impact assessment (ESIA) for the

Isinya – Namanga section in accordance with the Environmental Management and Co-ordination Act in

August 2013 prior to licensing. In Tanzania, the ESIA summary and the Resettlement Action Plan (RAP)

Entitlement Matrix were written in Swahili to ensure larger diffusion and awareness among the local

population. The Venerable People Plan (VPP) written in English will be largely disclosed on the TANESCO’s

website and library but also at the district, regional and national level. TANESCO agreed to disclose the

reports until completion of the project. The disclosure of the ESIA report will be brought to the attention of

the public through announcements on the local daily newspapers in English and Swahili by TANESCO, and

through stakeholder consultations.

2.6.2 The public and stake holders in Kenya and Tanzania were consulted the potential impacts of the project

during the preparation of the Environmental and Social Impact Assessment (ESIA), Resettlement Action Plan

(RAP), and Environmental and Social Management Plan (ESMP). Stakeholder consultations were conducted

with, affected communities, national and international NGOs, civil society and relevant government ministries

2.7 Bank Group Experience and Lessons Reflected in Project Design

2.7.1 The Bank has been very active in the energy sector in Kenya and Tanzania. In Kenya, the Bank’s

energy portfolio through public sector financing is over UA 300 million which includes Nairobi-Mombasa,

(UA 50 Million) and Transmission systems improvement project (UA 46.7) etc.. In Tanzania, the Bank’s

current energy sector portfolio includes the Electricity V project (UA 28.7 million, approved in 2007) and the

Backbone Iringa – Shinyanga transmission line project for an amount of UA 45.36 million (approved in 2011).

There is no backlog in project completion report (PCR) pertaining to power projects in the two countries.

Some projects show slow disbursement due to poor performance of contractors. The Bank continues dialogue

8

with the Government to improve the performance of energy projects and to avoid delay in implementation of

future projects.

2.7.2 Important lessons can be drawn from the Bank’s past interventions in Kenya and Tanzania. These

mainly relate to: (i) project readiness and quality at entry; (ii) project start-up and implementation delays due

to ineffective institutional arrangements; (iii) delay in fulfilling conditions to first disbursement (vi) delay in

implementing the RAP due to non-availability of counterpart funds and (vii) poor performance of contractors

. Those lessons have been taken into account in the design of the proposed project notably by: (i) ensuring

that it is supported by appropriate feasibility, ESIA and RAP studies; (ii) setting up a joint project coordination

unit (JPCU) to minimize any implementation delays and ensure a close collaboration between utilities; (iii)

ensuring the counterpart funds are budgeted before construction starts and; (iv) providing capacity building

trainings in particular project management and (v) conduct dialogue with the Government and Strengthen

the qualification criteria in selection of contractors

2.8 Key performance indicators

The following indicators have been discussed with the implementing agencies and shall be applied to measure

the impact of the project. The target figures and dates for each indicator have been confirmed by TANESCO

and KETRACO. The proposed indicators are: increased annual per capita electricity consumption (kWh);

decreased in each country’s electricity tariff for domestic and industrial consumers; power trade (GWh);

avoided operating costs (Maintenance and fuel) in both countries (MW); length of the T-line; number of

elephants tagged; number of jobs created (permanent/temporary/women); number of HIV/AIDS and gender

awareness campaigns conducted; number of high voltage substations; number of villages/people located along

the T-line getting access to electricity; number of implementation and supervision reports; number of advisory

reports and, number of people trained (out of which number of women).

3. PROJECT FEASIBILITY

3.1 Financial and Economic Performance

3.1.1 The Kenya – Tanzania Interconnection Project plays an important role in promoting regional

integration through power trade. The feasibility study confirmed that the Kenya - Tanzania Power

Interconnection project is the least cost option, which adopts technology that is well proven and field-tested.

3.1.2 It was assumed that, after being interconnected, both countries would aim at being self-sufficient and

thus would not modify the generation expansion plan in isolated case. This approach is conservative. Indeed,

optimizing the combined generation expansion plan of the two countries would bring additional benefits, but

it would require a tight coordinated planning. The generation plans were built on the assumption of limited

indigenous Tanzanian gas availability. The results of the simulations undertaken to predict energy flows show

that in the first period (from 2019 to 2026), Tanzania mainly imports power from Kenya while during a second

phase (from 2028 to 2038), the exchanges vary in amplitude and come primarily from Tanzania. After 2039,

there is almost no exchange.

3.1.3 The benefits of the Kenya-Tanzania Interconnection will be determined by the difference between, on

one hand, the savings in generation costs brought to the importing country, and; on the other hand, the

additional generation cost incurred in the exporting country. The savings thus calculated represent the

economic gain in generation costs brought by the interconnection. Power plants with lower variable costs in

one country would increase their output and replace those with higher costs.

9

3.1.4 The financial and economic assessment of the project is undertaken over an operating period of twenty

years starting in 2019. The investment is carried out over five years (2015 to 2019). The financial assessment

of the proposed project results in financial internal rate of return (FIRR) and financial net present value

(FNPV) of 22.03% and US$ 310.96 million respectively, showing that the project is financially viable.

3.1.5 In the economic analysis, in addition to the savings in generation, another benefit of the

interconnection is taken into account, namely the benefit that will accrue from a reduced reserve capacity.

The interconnection between the two power systems provides the possibility for both countries to share a

certain quantity of the reserve margin and allows each one to reduce the reserve capacity it needs and import

the energy when required. The economic assessment of the project results in an economic rate of return

(EIRR) and economic net present value (ENPV) of 25.21% and US$ 305.70 million.

3.1.6 The following table sums up the main financial and economic indicators of the project. The complete

analysis and assumptions are detailed in the Technical Annex B.7.

Table 3.1: Main Financial and Economic Indicators PARAMETERS VALUES

FIRR 22.03%

FNPV (@10%) US$ 310.96 million

EIRR 25.21%

ENPV (@12%) US$ 305.70 million

3.1.7 The financial and economic rates of return 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, an increase in operating costs and a reduction in revenues. The results of the sensitivity analysis

show that the financial and economic results are robust under identified adverse conditions. They also reveal

that the metrics of the project are more sensitive to a change in revenues and capital costs than to a variation

in operating costs. The details of the sensitivity analysis are shown in the Technical Annex B.7.

3.2 Environmental and Social Impact

Environment

3.2.1 The Project has been classified as Category I in accordance with the Bank’s environmental and social

assessment procedures (ESAP). The project comprises the construction of a total of 507.6 km of 400 kV

HVAC transmission line (93.1 km of the line is in Kenya and 414.5 km in Tanzania) with a designed transfer

capacity of 2,000 MW. The associated substation works include: the extension of the existing Singida

(Tanzania) substation to include 400 kV transformers, and the construction of a new 400kV substation in

Arusha (Tanzania). In addition, the project is expected to affect 1,618 households (299 in Kenya and 1319 in

Tanzania). The Summaries of the ESIA and RAP have been posted on the Bank website on August 15th 2014.

3.2.2 The negative environmental impacts are the permanent loss of vegetation in the right of way (ROW)

and the permanent loss of small portions of land required for the construction of towers. The transmission line

crosses protected areas in Tanzania specifically some Game controlled areas and Wildlife Management Area

(WMA’s). These include three migration corridors: the Amboseli, Kilimanjaro-Lake Natron corridor, the

Manyara Ranch – Lake Natron corridor and the Tarangire-Manyara (Kwakuchinja) corridor. Other impacts,

such as dust emissions, noise, soil erosion, degradation of water quality, soil contamination by poor waste

management or accidental spill of hydrocarbons, may occur during construction, maintenance and

decommissioning works but will be very limited and of temporary nature. The negative social impacts are the

10

permanent loss of arable land due to the presence of access roads and tower bases, and the restriction of plant

species without the potential to grow beyond 5 m at maturity in the ROW. In addition, a significant impact

will be the relocation of houses and some public or private infrastructure such as schools, mosques, churches,

and shops.

3.2.3 An Environmental and Social Management Plan (ESMP) has been prepared. Mitigation measures have

been proposed to minimize or compensate for adverse impacts. These include measures to minimize

vegetation clearing; adjusting tower location and span length to minimize the need for tree removal and

trimming along forest edges; Sagging of the line in wildlife corridor should not be less than 10 meters; Mixing

of construction material should be restricted in sensitive ecological areas including corridors and dispersal

areas (material should be prepared off site); Camouflage towers/blend to environment (combat like) in

corridors to reduce reflection to migrating animals; promoting anti-poaching activities; Avoid construction of

the transmission line through wetlands and span wetlands whenever possible; Carry out activities during the

dry season to minimize disturbance of sensitive soils and problems in flood prone areas; Use existing roads

for construction and operational access whenever possible and Regular control of vehicles to prevent

introduction of invasive species. Details of roles and responsibilities for the implementation of the ESMP

have been provided in Technical Annex B8.5. The cost of the ESMP implementation is estimated at USD 1

million and the annual monitoring costs are estimated at USD 951,000.

3.2.4 The positive impacts include; the project will promote and enhance regional integration; provide

employment creation to the local communities during construction; electrification of villages along the

transmission line corridor will improve access by the locals; electrification in some of the public institutions

and villages will improve the local socio-economy.

Climate change

3.2.5 The proposed project is a clean energy project and is perfectly aligned with the climate change

mitigation and adaptation strategy of the Bank. It will contribute to the replacement of fossil-fuelled thermal

generation and improve the climate resilience of both Kenya and Tanzania. The proposed project will facilitate

importation of excess electricity produced in Tanzania into Kenya and vice versa and this will help reduce

overall GHG emissions in both countries. Besides producing electricity, importation is one of the ways Kenya

will have access to the needed power for its development, as proposed in the Least Cost Power Development

Plan (Republic of Kenya, 2011). Indeed, and as shown in the Feasibility study, Kenya would have to produce

2 320 MW of electricity mainly through coal fuel plants (52% or 1 200 MW) and geothermal (48% or 1 120

MW) to meet its power demand between 2014 and 2030. The construction and operation of these plants would

produce, especially in the case of coal power plants, a large amount of GHG (coal produces 955 g of CO2 per

kWh). Improved access to electricity for both countries will also reduce the use of firewood for cooking and

heating, which represents a significant source of deforestation, contributing to climate change. In addition,

access to electricity can reduce the use of private generators and kerosene lamps, which also produce GHG.

Gender

3.2.6 Both Kenya and Tanzania have well elaborated gender mainstreaming policies and strategies which

are grounded in their national constitutions and need to be operationalized in development projects especially

in order to economically empower women. The KETRACO Gender Policy fosters equality in contracting for

services at corporate level, training of staff and employment. While in Kenya the Central Government has

instituted performance evaluation of all public offices that include gender mainstreaming parameters, hence

performance contracts at KETRACO have specific obligations for mainstreaming gender through, among

11

others, contracting for works, goods and services; and deals with disability mainstreaming and youth and

women empowerment.

3.2.7 Similarly, the National Gender Policy for Tanzania obliges all public institutions to mainstream gender

and to appoint gender focal points. The project design has included workshops for staff to bring in gender

awareness to engender policy formulation and operational procedures which are based on gender equality.

Furthermore, employment of workers during construction shall include a quota for women (10% during

construction and 30% during operation). In the case of Tanzania, through the Corporate Social Responsibility

Fund (CSRF), TANESCO will implement a rural electrification programme for the affected communities in

16 villages which include female headed households, estimated to be 13%. Within the project, there will be a

program of HIV and AIDS prevention and awareness campaigns which will impart information to both

women and men who are at risk including school going girls and rural communities. The project has also

included a technical assistance and capacity building component for 18 commercial staff, 20 engineers, 6

economist and legal officers including 4 women. Around 30% of the permanent jobs expected to be created

through the project will be reserved for women. The workplace environment shall be tailored for both men

and women and a code of conduct will be agreed upon between employer and workers in order to curb abuses

perpetrated towards female workers.

Social

3.2.8 In Tanzania, villages located along the transmission line are not electrified. The proposed project

includes a rural electrification component which will consist of providing electricity access to 16 villages

located within a 25km distance from the 400kV transmission line route. Other direct benefits shall accrue to

these communities through creation of short-term jobs. It is anticipated that at least 400 temporary jobs and

35 permanent jobs will be created in the two countries Furthermore, indirect employment shall be created

through supply of local materials which, according to the new procurement regulations in Kenya, 30% of such

locally sourced supplies will be from enterprises owned by women, youth and people with disabilities.

3.2.9 The two countries have rural electrification programs which are connecting as many rural areas as

possible. In Kenya, the Government has embarked on a program for electrifying all government institutions

such as primary schools, clinics and local administration offices. In addition to the rural electrification

program, the utility in Tanzania has a policy of allocating 1% of the total project cost to the CSRF which will

provide energy access through solar sources to community social services such as schools, health centres and

markets that are not connected to the grid. As part of the proposed project, around 21 villages along the route

(16 in Tanzania and 5 in Kenya) have been earmarked for such a program.

3.2.10 This being an interconnection between two countries, the overarching benefits are enhanced

reliability, affordability (low cost electricity from Ethiopia), quality and adequacy of supply to productive

industries of the two countries that would be realised from the power system integration and power trade.

Additional benefits will be realized from leasing out spare capacity in the transmission line’s optical fibre

cable for data and information exchange between the two countries and the world at large.

Involuntary resettlement

3.2.11 The transmission line will pass through properties in the two countries and hence has triggered the

preparation of a RAP. The affected properties and number of households are as follows: 299 in Kenya and

1319 in Tanzania. Of these, 20 households in Kenya have their main structures affected, and 253 in Tanzania

have their primary structures affected. The rest of the affected households have secondary structures, crops

12

and trees affected. The number of households having their livestock grazing within the way leave is estimated

at 105 and 326 in Kenya and Tanzania, respectively. To ensure that the affected households shall be

adequately compensated, budgetary allocations have been set aside to the tune of USD 7. 31 million for Kenya

and USD 39.98 million for Tanzania.

4. IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 Institutional Arrangements

4.1.1.1 The Republic of Kenya, through the National Treasury, shall be the Borrower of the loan. The Ministry

of Energy will be the Executing Agency and KETRACO will be the Implementing Agency of the project.

The United Republic of Tanzania through its Ministry of Finance shall be the Borrower of the loan.

TANESCO will be the Executing and Implementing Agency of the proposed project.

4.1.1.2 KETRACO acquired the necessary technical and managerial ability to implement such complex

projects, as demonstrated by the ongoing implementation of the Mombasa-Nairobi Transmission Line,

Kenya-Uganda interconnection and the Power Transmission System Improvement Project financed by the

Bank. Similarly, TANESCO has demonstrated adequate technical and managerial ability to implement the

project as with the ongoing implementation of the Iringa - Shinyanga high-voltage transmission project jointly

financed by the AfDB/JICA, the WB and EIB. The involvement of the supervision and management

consultant to be recruited through a competitive selection process will reinforce the capabilities of both

entities.

4.1.1.3 The project will be implemented by national project implementation teams (PITs) designated within

the respective utilities, which will be supervised by a Joint Steering Committee (JSC) composed of

representatives from both countries. Each PIT will be adequately staffed and will be composed of the

following key staff: a project manager, a transmission line engineer, a substation engineer (in Tanzania), a

civil engineer, a procurement expert, an accountant, an environmental expert and a socio-economist. The team

may be supported by other relevant experts from the utility.

4.1.1.4 To address the challenges of effective implementation of the project, a Joint Project Coordinator (JPC)

will be appointed to ensure a smooth coordination and to deal with all project issues common to both

countries. Given that a substantial portion of works will be carried out in Tanzania, the two countries have

agreed that the JPC shall be appointed by TANESCO, in consultation with KETRACO. The role of the JPC

covers the coordination, joint preparation and review of bidding documents, request for proposals and bid

evaluation reports, obtaining of Bank’s approval and negotiation of contracts. The JPC shall also be

responsible for the compilation and transmission of consolidated quarterly project reports to all lenders and

to the two Governments.

4.1.1.5 To ensure effective coordination and harmonized planning of activities, a JSC will be constituted as

an overseer of the Kenya – Tanzania project implementation. The JSC will be composed of Permanent

Secretaries of the both ministries of energy, the Director of External Resources of Kenya, the Commissioner

for External Finance of Tanzania, the Executive officers of TANESCO and KETRACO, the Chief Executive

Officers and the Heads of Department responsible for Transmission from KETRACO and TANESCO. This

committee will oversee the implementation of the project and ensure an effective cooperation between the

two countries. The JSC provides a forum for arbitrating disputes arising between the two PITs that are not

13

resolved at the technical level. It will meet every six months or more often if required. Meetings of the JSC

will be chaired by the Minister of Energy of the country in which the meeting is held.

4.1.2 Procurement Arrangements

4.1.2.1 All procurement of works, and acquisition of consulting services financed by the Bank will be in

accordance with the Bank’s Rules and Procedures: “Rules and Procedures for the Procurement of Goods and

Works” dated May 2008 (revised July 2012); and “Rules and Procedures for the Use of Consultants dated

May 2008 (revised July 2012), as amended from time to time, using the relevant Bank standard bidding and

request for proposal documents, and the provisions stipulated in the Loan Agreements. Both utilities have

been deemed to have adequate capacities and will be responsible for all envisaged procurements in the project.

The procurement of works in Tanzania financed by JICA will also be processed by the Bank, following the

applicable AfDB’s rules and procedures. All the procurement decisions pertaining to the project will be

submitted to JICA for information. The procurement arrangement is detailed in Annex B5.2

4.1.2.2 The JPC, supported by procurement experts from KETRACO and TANESCO, will be responsible for

the procurement of goods, works, and services. A Joint Tender Evaluation Committee composed of

appropriate technical staff designated by each of the project owners will participate in proposal evaluations

for the selection of consultants for project supervision, as well as for the Feasibility Study for the Menengai

(Rongai)-Kilgoris- Mwanza interconnection. KETRACO and TANESCO will separately use their own

arrangements to approve all procurement and contract award decisions and the report will be submitted

through the JPC to the Bank for no-objection. The JPC will be responsible for obtaining the necessary

clearances on all procurement matters.

4.1.2.3 KETRACO and TANESCO will jointly prepare one bidding document for the construction of

transmission lines in both countries. The bidding document shall include the schedule of prices and be

comprised of one lot for Kenya and three lots for Tanzania. A separate bid Evaluation Committee composed

of sufficient senior technical staff shall be established by each country to evaluate bids covering the project

scope in their territory. Bidders will prepare separate bids for Kenya and Tanzania. The bids will be submitted

to KETRACO or TANESCO depending on the bidders’ interest to participate in one of the countries or in

both countries.

4.1.2.4 The two Borrowers have requested for the use of the advance contracting procedure for the

construction of transmission line and substations and the recruitment of the Supervision Consultant. The

project Procurement Plan has been prepared by the Executing Agencies and will be updated for Bank’s

approval before negotiations.

4.1.3 Financial Management Arrangements

4.1.3.1 Financial Management: KETRACO and TANESCO have proper structures in place as well as

adequate staff to carry out the Financial Management (FM) responsibilities of the project. Both entities will

be accountable for the project funds and financial reporting and will use their respective accounting systems

for all the project’s financial transactions. Both entities are currently implementing on-going bank projects

which are at various stages of implementation. The implementing agencies will be required to produce and

submit quarterly Interim Financial Reports to the Bank (format will be agreed with the Bank) no later than 45

days after the end of each quarter. At the end of each financial year and at the end of the project, each entity

will produce financial statements in line with International Financial Reporting Standards.

14

4.1.3.2 Disbursement: the project will use the Direct Payment as described in the Disbursement

Handbook. The Bank’s Disbursement Letter will be issued stipulating key disbursement procedures and

practices.

4.1.3.3 Audit: the internal audit units will incorporate the new project in their work program and issue periodic

reports as it is being done for the on-going projects. The annual financial statements of the project for each

entity will be audited by the respective Country’s Auditor General or a firm appointed by the Auditor General.

The annual Audit Report, complete with a Management Letter and responses, will be submitted to the Bank

no later than six months after the end of the fiscal year. The project will also be subjected to a Value for

Money (VfM) audit at mid-term or when substantial work will have been undertaken. The two governments

(or implementing agencies) are responsible for covering the expenses related to the financial and value for

money audits.

4.1.3.4 Furthermore, the Bank and JICA will conduct supervision missions at least twice every year. The

missions’ objectives will include ensuring that strong financial management systems are maintained for the

project throughout its life. Reviews will be carried out regularly to ensure that expenditures incurred by the

project remain eligible for the ADF and JICA funding.

4.1.4 Monitoring and Evaluation

4.1.4.1 The project will be implemented over a period of 48 months from loan effectiveness. Each PIT will

be responsible for the regular monitoring and reporting on the project implementation progress. The PIT will

have the responsibility to supply data against the set of agreed performance indicators: (i) on an annual basis

for project outcome indicators; (ii) on a quarterly basis for targets based on the expected outputs and propose

corrective measures; (iii) on an annual basis for audit reports; and (iv) bi-annually for ESMP compliance

reports. These reports shall cover all aspects of project implementation and disbursement schedules for all

components; implementation of environmental and social mitigation measures as well as the fulfilment of

loan conditions.

4.1.4.2 The JPC, in liaison with the project supervision and management consultant, will prepare and submit

to the Bank the project quarterly progress reports. The audit report will be submitted to the Bank within six

months after the end of every financial year. Furthermore, the supervision consultant will prepare and submit

final commissioning reports to the PITs and the Bank at the completion of its assignment. The Tanzania field

offices (TZFO) in Dar es Salaam and the Regional Resource Centre in Nairobi, with the support of the

headquarter if need be, will carry out field supervisions twice a year or on an as-needed basis.. The

coordination of the missions will be done by the Ministries of Finance of both countries in collaboration with

KETRACO and TANESCO.

4.2 Governance

4.2.1 The financial management arrangements of KETRACO and TANESCO are considered adequate to

ensure that project resources are used for the purposes for which they were granted, with due consideration

for efficiency and economy. KETRACO has an Audit & Risk Committee (which was reconstituted in 2013)

which is comprised of four non-executive directors and is chaired by a non-executive director. Whereas the

Board has overall responsibility for internal control, the systems of internal controls, certain responsibilities

such as the review of the effectiveness of internal control systems are delegated to the Audit & Risk

committee. Internal controls comprise of methods and procedures adopted by Management to provide

reasonable assurance in safeguarding assets, prevention and detection of errors, accuracy and completeness

of accounting records together with reliability of financial statements. TANESCO has an in Internal Audit

15

Department headed by the Chief Internal Auditor who reports administratively to the MD and functionally to

the Audit committee of the Board of Directors of the entity.

4.2.2 The project implementation will be guided by all existing procedures, manuals, governance and anti-

corruption policies of both countries and external oversight will be provided by the respective Auditor

General. The Bank will also provide some oversight, especially during supervision missions. The internal

audit of the authorities and that of the ministries will complement the oversight of the management. The

proposed value-for-money audit will further help in providing assurance that funds will be used for intended

purposes only with due regard to economy and efficiency.

4.3 Sustainability

4.3.1 The project is technically, economically, and financially sustainable. The technical sustainability is

guaranteed by the use of proven technology widely used in both countries. The economic and financial

sustainability of the project will be supported by the growing demand for electricity in both countries and the

region. Indeed, the regional interconnection provides an opportunity to import hydropower from Ethiopia at

a more competitive price compared to the high cost of thermal generation in both countries.

4.3.2 The realization of the GoK’s strategy for an additional 5,000 MW generation capacity between 2013

and 2017 and the potential to exploit gas reserves in Tanzania will provide further opportunities to exchange

power among countries in the region. Before the end of 2017, the GoT is planning to develop new gas power

plants with a generation capacity of 400 MW.

4.3.4 KETRACO and TANESCO commit themselves to operate the interconnector and perform the

maintenance on the part of the interconnection located on their territory. .

4.4 Risk Management

The project involves some degree of risks. The major risks and mitigation measures are summarized in the

table below. The overall project risk is rated as moderate.

Risk Description Rating Mitigations

GDP Ambitious targets of 10% GDP

in 2022

M In Kenya, the government plan 5000+MW by 2016 is

expected to support numerous economic activities.

Such as mining, production of iron, large scale

irrigation for food security, operation of petroleum

pipelines In Tanzania, the project is included in the

BRN (Big Results Now) which is a priority

programme for the government. The GoT is planning

to develop new gas power plants with a generation

capacity of 400 MW

Power trade Efforts at the regional level are

not pursued; power trade is at

risk.

L The PPA and Wheeling Agreements are designed to

encourage regional power trade and promote sharing

benefits of interconnections.

Implementat

ion delay

Project completion delay and

failure to meet performance

requirements

L Close supervision by the Bank Supervision

Consultant and respective PIT

The project will be implemented as design, supply and

installation contract which should ensure minimum

variance in costs

L: Low; M: Moderate

16

4.4 Knowledge Building

4.5.1 The construction and consulting contracts will include specific provisions to ensure the training of

KETRACO and TANESCO engineers. Specific training programs will be provided by the contractors

responsible for the construction of the transmission line and substations and will include topics related to the

operation and maintenance of the interconnector. The supervision consultant will provide training in the areas

of project management.

4.5.2 Moreover, the capacity building Programme component will cover training for technical staff of the

utilities in operating and maintaining the 400kV system. The programme will also provide training to

commercial staff of both utilities to reinforce management of commercial transactions. The programme will

also include training in conducting environmental and social impact assessment studies to NEMC and

TANESCO, and will cover issues pertaining to the regulatory environment in the context of power trade,

which will be relevant to experts from the Energy and Water Utilities Regulatory Authority (EWURA) in

Tanzania and the Energy Regulatory Commission (ERC) in Kenya.

5. LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal Instrument

5.1.1 The legal instruments for the proposed project are:

An ADF Loan Agreement with the Republic of Kenya; and

An ADF Loan Agreement with the United Republic of Tanzania.

5.1.2 The proceeds of the loans will be on-lent to KETRACO and TANESCO in Kenya and Tanzania

respectively.

5.2 Conditions associated with the Fund’s proposed Financing

A) Entry into Force Conditions

5.2.1 The entry into force of each relevant ADF Loan Agreement shall be subject to the fulfilment, as

applicable, by the Government of the Republic of Kenya and the Government of United Republic of Tanzania

(the “Borrowers”) of the provisions of Section 12.01 of the General Conditions applicable to the African

Development Fund Loan Agreements and Guarantee Agreements.

B) Conditions Precedent to First Disbursements

i. The conclusion of a Subsidiary Loan Agreement with TANESCO (for Tanzania) and Subsidiary

Financing Agreement with KETRACO for on-granting (for Kenya) the loan proceeds on terms and

conditions acceptable to the Fund;

ii. The establishment of a National Project Implementation Team whose composition, qualifications and

experience are acceptable to the Fund and the appointment of a Joint Project Coordinator, whose

qualifications and experience are acceptable to the Fund; and

iii. The Borrower’s submission to the Fund of a Works and Compensation Schedule (the “Works and

Compensation Schedule”) detailing (A) each section of civil works under the Project and (B) the time

17

frame for compensation and resettlement of all project-affected persons (as defined in the RAP or any

update of the RAP) in respect of each section.

iv. The co-financier JICA has approved its financing of the Tanzania component of the project or the

relevant Borrower has made appropriate arrangements to cover any financing gap resulting from

failure to obtain the commitment of the co-financier;

C) Other Conditions

i. Each Borrower to provide evidence, in form and substance satisfactory to the Fund, that, prior to

commencement of Transmission line construction on any section of the project, all project-affected

Persons in respect of such section of civil works have been compensated and/or resettled in accordance

with the RAP and the Works and Compensation Schedule.

D) Undertakings

5.2.2 The Government of the United Republic of Tanzania and the Government of Kenya, undertake the

following:

i. to establish not later than three months of the project approval by the Board of the African

Development Fund a Joint Steering Committee for the project whose composition, is

acceptable to the Fund;

ii. to provide to the Bank not later than six months prior to completion of the project a Power

Purchase Agreement (PPA) or a Power Exchange (PEA) or Wheeling Agreements (PWA)

confirming potential utilisation of the proposed project assets;

iii. to provide to the Bank within three months of the project approval by the Fund a Construction,

Operations and Maintenance Agreement, in form and substance acceptable to the Fund;

iv. Fully implement the Environmental and Social Impact Assessment (ESIA), Environmental and

Social Management Plan (ESMP) and the Resettlement Action Plan (RAP) of the project, and

comprehensively report to the Fund on the said implementation on a quarterly basis;

v. Submit Annual Reports approved by the relevant authorities on ESMP and Occupational Health

and Safety (OSHA) compliance.

5.3 Compliance with the Bank’s policy

5.3.1 This project complies with all applicable Bank policies. In particular, it is consistent with the Bank’s

Energy Sector Policy, approved in October 2012.

6. RECOMMENDATION

Management recommends that the Board of Directors of the African Development Fund approves the

proposed loan of UA 27.50 million and UA 75.29 million to the Republic of Kenya and to United Republic

of Tanzania respectively for the financing of the Kenya – Tanzania Power Interconnection Project.

I

APPENDIX I: COUNTRIES COMPARATIVE SOCIO-ECONOMIC INDICATORS - KENYA

Indicator Year Kenya Africa Developing

Countries

Developed

Countries

Chart

Basic Indicators

Area ('000 Km²) 580.4 30,046.4 80,976.0 54,658.4

Total Population (millions) 2013 44.4 1,109.0 5,628.5 1,068.7

Urban Population (% of Total) 2013 24.8 40.2 44.8 77.7

Population Density (per Km²) 2012 71.7 34.5 66.6 23.1

GNI per Capita (US $) 2012 860.0 1,691.5 2,780.3 39,688.1

Labor Force Participation - Total (%) 2013 36.8 37.4 0.0 0.0

Labor Force Participation - Female (%) 2013 46.3 42.5 39.8 43.3

Gender -Related Development Index Value 2007 0.5 0.5 .. 0.9

Human Develop. Index (Rank among 169

countries)

2012 145.0 .. .. ..

Propel. Living Below $ 1 a Day (% of Population) 2005 43.4 .. 25.0 ..

Demographic Indicators

Population Growth Rate - Total (%) 2013 2.7 2.5 1.4 0.7

Population Growth Rate - Urban (%) 2013 4.4 3.4 2.4 1.0

Population < 15 years (%) 2013 42.2 40.9 29.2 17.7

Population >= 65 years (%) 2013 2.7 3.5 6.0 15.3

Dependency Ratio (%) 2013 82.2 77.3 52.8 ..

Sex Ratio (per 100 female) 2013 99.6 100.0 934.9 948.3

Female Population 15-49 years (% of total

population)

2013 24.3 24.0 53.3 47.2

Life Expectancy at Birth - Total (years) 2013 61.7 59.2 65.7 79.8

Life Expectancy at Birth - Female (years) 2013 63.6 60.3 68.9 82.7

Crude Birth Rate (per 1,000) 2013 34.9 35.3 21.5 12.0

Crude Death Rate (per 1,000) 2013 8.2 10.4 8.2 8.3

Infant Mortality Rate (per 1,000) 2013 51.0 61.9 53.1 5.8

Child Mortality Rate (per 1,000) 2013 76.0 97.4 51.4 6.3

Total Fertility Rate (per woman) 2013 4.4 4.6 2.7 1.8

Maternal Mortality Rate (per 100,000) 2010 360.0 415.3 440.0 10.0

Women Using Contraception (%) 2013 50.7 34.9 61.0 75.0

Health & Nutrition Indicators

Physicians (per 100,000 people) 2011 18.1 52.6 77.0 287.0

Nurses (per 100,000 people)* 2011 79.2 .. 98.0 782.0

Births attended by Trained Health Personnel (%) 2009 43.8 .. 39.0 99.3

Access to Safe Water (% of Population) 2012 61.7 68.8 84.0 99.6

Access to Health Services (% of Population) 2000 77.0 65.2 80.0 100.0

Access to Sanitation (% of Population) 2012 29.6 39.4 54.6 99.8

Percent. of Adults (aged 15-49) Living with

HIV/AIDS

2009 6.3 3.9 161.9 14.1

Incidence of Tuberculosis (per 100,000) 2012 272.0 223.6 .. ..

Child Immunization Against Tuberculosis (%) 2012 84.0 83.1 89.0 99.0

Child Immunization Against Measles (%) 2012 93.0 74.6 76.0 92.6

Underweight Children (% of children under 5

years)

2009 16.4 .. 27.0 0.1

Daily Calorie Supply per Capita 2009 2,092.0 2,564.7 2,675.2 3,284.7

Public Expenditure on Health (as % of GDP) 2011 1.8 5.9 4.0 6.9

Education Indicators

Gross Enrolment Ratio (%) .. .. .. ..

Primary School - Total 2009 113.3 101.8 106.0 101.5

Primary School - Female 2009 112.0 97.8 104.6 101.2

Secondary School - Total 2009 60.2 45.4 62.3 100.3

Secondary School - Female 2009 57.1 41.9 60.7 100.0

Primary School Female Teaching Staff (% of Total) 2009 43.9 43.7 .. ..

Adult Literacy Rate - Total (%) 2007 72.2 .. 19.0 ..

Adult Literacy Rate - Male (%) 2007 66.9 .. .. ..

Adult Literacy Rate - Female (%) 2007 78.1 .. .. ..

Percentage of GDP Spent on Education 2010 6.7 5.3 .. 5.4

Environmental Indicators

Land Use (Arable Land as % of Total Land Area) 2011 9.7 8.4 9.9 11.6

Annual Rate of Deforestation (%) 2000 0.5 0.6 0.4 -0.2

Annual Rate of Reforestation (%) .. .. .. ..

Per Capita CO2 Emissions (metric tons) 2010 0.3 1.1 .. ..

0

20002

01

0

201

1

201

2

GNI per Capita (US $)

Kenya

2

2,5

3

201

0

201

1

201

2

201

3

Population Growth Rate -

Total (%)

Kenya

40

60

80

201

0

201

1

201

2

Access to Safe Water (% of Population)

Ke…

0

200

200

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

9

Secondary School - Total

Kenya

II

APPENDIX I: COUNTRIES COMPARATIVE SOCIO-ECONOMIC INDICATORS - TANZANIA

Indicator Year Tanzania Africa Developing Countries

Developed Countries

Charts

Basic Indicators

Area ('000 Km²) 947.3 30,046.4 80,976.0 54,658.4

Total Population (millions) 2013 49.3 1,109.0 5,628.5 1,068.7

Urban Population (% of Total) 2013 27.6 40.2 44.8 77.7

Population Density (per Km²) 2013 49.5 34.5 66.6 23.1

GNI per Capita (US $) 2012 570.0 1,691.5 2,780.3 39,688.1

Labor Force Participation - Total (%) 2013 46.8 37.4 0.0 0.0

Labor Force Participation - Female (%) 2013 49.6 42.5 39.8 43.3

Gender -Related Development Index Value 2007 0.5 0.5 .. 0.9

Human Develop. Index (Rank among 169 countries)

2012 152.0 .. .. ..

Propel. Living Below $ 1 a Day (% of Population)

2007 67.9 .. 25.0 ..

Demographic Indicators

Population Growth Rate - Total (%) 2013 3.0 2.5 1.4 0.7

Population Growth Rate - Urban (%) 2013 4.7 3.4 2.4 1.0

Population < 15 years (%) 2013 44.9 40.9 29.2 17.7

Population >= 65 years (%) 2013 3.2 3.5 6.0 15.3

Dependency Ratio (%) 2013 92.9 77.3 52.8 ..

Sex Ratio (per 100 female) 2013 100.0 100.0 934.9 948.3

Female Population 15-49 years (% of total population)

2013 22.7 24.0 53.3 47.2

Life Expectancy at Birth - Total (years) 2013 61.5 59.2 65.7 79.8

Life Expectancy at Birth - Female (years) 2013 57.4 60.3 68.9 82.7

Crude Birth Rate (per 1,000) 2013 39.2 35.3 21.5 12.0

Crude Death Rate (per 1,000) 2013 8.5 10.4 8.2 8.3

Infant Mortality Rate (per 1,000) 2013 48.0 61.9 53.1 5.8

Child Mortality Rate (per 1,000) 2013 70.7 97.4 51.4 6.3

Total Fertility Rate (per woman) 2013 5.2 4.6 2.7 1.8

Maternal Mortality Rate (per 100,000) 2010 460.0 415.3 440.0 10.0

Women Using Contraception (%) 2013 38.4 34.9 61.0 75.0

Health & Nutrition Indicators

Physicians (per 100,000 people) 2010 0.8 52.6 77.0 287.0

Nurses (per 100,000 people)* 2006 24.2 .. 98.0 782.0

Births attended by Trained Health Personnel (%)

2010 48.9 .. 39.0 99.3

Access to Safe Water (% of Population) 2012 53.2 68.8 84.0 99.6

Access to Health Services (% of Population) 2000 42.0 65.2 80.0 100.0

Access to Sanitation (% of Population) 2012 12.2 39.4 54.6 99.8

Percent. of Adults (aged 15-49) Living with HIV/AIDS

2012 5.1 3.9 161.9 14.1

Incidence of Tuberculosis (per 100,000) 2012 165.0 223.6 .. ..

Child Immunization Against Tuberculosis (%)

2012 99.0 83.1 89.0 99.0

Child Immunization Against Measles (%) 2012 97.0 74.6 76.0 92.6

Underweight Children (% of children under 5 years)

2010 16.2 .. 27.0 0.1

Daily Calorie Supply per Capita 2009 2,363.0 2,564.7 2,675.2 3,284.7

Public Expenditure on Health (as % of GDP) 2011 2.9 5.9 4.0 6.9

Education Indicators

Gross Enrolment Ratio (%) .. .. .. ..

Primary School - Total 2012 93.0 101.8 106.0 101.5

Primary School - Female 2012 94.5 97.8 104.6 101.2

Secondary School - Total 2012 35.0 45.4 62.3 100.3

Secondary School - Female 2012 32.6 41.9 60.7 100.0

Primary School Female Teaching Staff (% of Total)

2012 13.9 43.7 .. ..

Adult Literacy Rate - Total (%) 2010 67.8 .. 19.0 ..

Adult Literacy Rate - Male (%) 2010 60.8 .. .. ..

Adult Literacy Rate - Female (%) 2010 75.5 .. .. ..

Percentage of GDP Spent on Education 2010 6.2 5.3 .. 5.4

Environmental Indicators

Land Use (Arable Land as % of Total Land Area)

2011 13.1 8.4 9.9 11.6

Annual Rate of Deforestation (%) 2000 0.2 0.6 0.4 -0.2

Annual Rate of Reforestation (%) .. .. .. ..

Per Capita CO2 Emissions (metric tons) 2010 0.1 1.1 .. ..

III

APPENDIX II: ADB PORTFOLIO - KENYA

PROJECT NAME SOURCE OF

FINANCE

(INSTRUMENT)

APPROVED

AMOUNT

(UA

MILLION)

DISB RATE

(AS OF DEC.

2014)

APPROVAL

DATE

AGRICULTURE

KENYA-DRGHT RSILCE &

SUSTAIN.LIVIHOOD

ADF 37, 410,000 1.0% 19 Dec. 2012

SMALLSCALE HORTICULTURE

DEVELOPMENT PRO

ADF 17, 000,000 80.5% 5 Sep.. 2007

FINANCE

EQUITY BANK LIMITED - KENYA ADB 95, 544,280 0% 5 Nov. 2014

POWER

ADF - PRG FOR TURKANA T-LINE ADF 17, 500,000 0.0% 2 Oct. 2013

ADF - PRG FOR TURKANA T-LINE ADF 17, 500,000 0.0% 10 Feb 2013

ETHIOPIA-KENYA ELECTRICITY

HIGHWAY(KENYA

ADF 75, 000,000 1.5% 19 Sept. 2012

LAKE TURKANA WIND POWER EKF ADB 15, 982,994 1.2% 26 Apr.2013

LAKE TURKANA WIND POWER

PROJECT

ADB 91, 902,216 1.2% 26 Apr.2013

LAKE TURKANA WIND POWER SUB

DEBT

ADB 3, 995,749 0.0% 26 Apr.2013

MENENGAI GEOTHERMAL

DEVELOPMENT PROJECT

ADF 80, 000,000 62.0% 14 Dec. 2011

MENENGAI GEOTHERMAL

DEVELOPMENT PROJECT

SCF 5, 352,402 34.3% 14 Dec. 2011

MENENGAI GEOTHERMAL

DEVELOPMENT PROJECT

SCF 12, 488,938 29.4% 14 Dec. 2011

MOMBASSA NAIROBI TRANSMISSION

LINE

ADF 50, 000,000 48.9% 6 May 2009

NELSAP INTERCONNECTION PROJECT

- KENYA

ADF 39, 770,000 16.5% 16 Jun. 2010

POWER TRANSMISSION

IMPROVEMENT PROJECT

ADF 46, 700,000 40.0% 6 Dec. 2010

THIKA THERMAL POWER PROJECT ADB 22, 456,107 100.0% 7 Jul. 2011

LAST MILE CONNECTIVITY ADF 90, 000,000 0.0% 19 Nov.. 2014

SOCIAL

AFRICAN VIRTUAL UNIVERSITY

(PHASE 2)

ADF 10, 000,000 61.7% 16 Dec. 2011

COMMUNITY EMPOWERMENT

PROJECT (CEISP)

ADF 17, 000,000 77.0% 17 Dec. 2007

SUPPORT TO HEST TO ENHANCE

QUALITY

ADF 28, 000,000 11.2% 14 Nov.. 2012

EAC CENTRES OF EXCELLENCE IN

SKILLS TECHNOLOGY

ADF 10, 000,000 0.0% 3 Oct. 2014

TRANSPORT

ARUSHA - NAMANGA-ATHI RIVER

ROAD DEV PJ

ADF 49, 241,000 94.6% 13 Dec.

2006

EMERGENCY ASSISTANCE TO

ADDRESS *

ADF 713,654 0.0% 30 Sept.

ETHIOPIA - MOMBASA -NAIROBI-

ADDIS ABABA

ADF 120,

000,000

36.4% 30 Nov. 2011

IV

PROJECT NAME SOURCE OF

FINANCE

(INSTRUMENT)

APPROVED

AMOUNT

(UA

MILLION)

DISB RATE

(AS OF DEC.

2014)

APPROVAL

DATE

MOMBASA-NAIROBI-ADDIS

CORRIDOR II - KENYA

ADF 125,

000,000

57.4% 1 Jul. 2009

MULTINATIONAL: EAST AFRICA:

ARUSHA-VOI

ADF 75, 000,000 10.4% 14 Apr. 2013

NAIROBI-THIKA HIGHWAY

IMPROVEMENT PROJECT

ADF 117,

850,000

91.4% 21 Nov.. 2007

NAIROBI-THIKA HIGHWAY

IMPROVEMENT PROJECT

ADF 3, 150,000 45.8% 21 Nov.. 2007

OUTER RING ROAD IMPROVEMENT

PROJECT

ADF 77, 040,000 10.2% 13 Nov.. 2013

OUTER RING ROAD IMPROVEMENT

PROJECT

560,000 0.0% 13 Nov.. 2013

REHABILITATION OF TIMBOROA

ELDORET ROAD

ADF 35, 000,000 62.6% 24 Nov.. 2010

RIFT VALLEYKENYA-UGANDA

RAILWAYS

ADF 28, 546,145 100.0% 13 Jul. 2011

WATER SUP/SANIT

LAKE VICTORIA WATER AND

SANITATION PROG.

ADF 72, 980,000 25.3% 17 Dec. 2010

NAIROBI RIVERS BASIN

REHABILITATION

ADF 35, 000,000 55.6% 6 Dec. 2010

SCALING UP RAINWATER

MANAGEMENT

Grant AWF 551,014 100.0% 5 Jul. 2012

SMALL MED TOWNS WATER SUPPLY

& WASTE WATER

ADF 70, 000,000 46.3% 3 Nov. 2009

THWAKE MULTIPURPOSE WATER

DEVELOPMENT

ADF 61, 680,000 0.5% 30 Oct. 2013

THWAKE MULTIPURPOSE WATER

DEVELOPMENT

ADF 1, 210,000 0.0% 30 Oct. 2013

V

APPENDIX II: ADB PORTFOLIO TANZANIA

PROJECT NAME

SOURCE OF

FINANCE

(Instrument)

APPROVED

AMOUNT

(UA

million)

DISB RATE

(As of Dec.

2014)

APPROVAL

DATE

AGRICULTURE

Marketing Infrastructure, Value Addition and Rural

Finance Program (MIVARFP)

ADF Loan 40.00 25.0% 29-Jun-2011

Bagamoyo Sugar Project Standby Facility ADB Loan 77.28 0.0% 23-Apr-2014

Bagamoyo Sugar Project ADB Loan 77.28 0.0% 23-Apr-2014

TRANSPORT

Singida-Minjingu-Babati Road Upgrading ADF Loan 60.00 92.2% 17 Sep 2007

Tanzania Road Sector Support Programme I ADF Loan 152.00 54.6% 2-Dec-2009

Tanzania Road Sector Support Programme II ADF Loan 140.00 13.9% 5-Apr-2012

Dsm-Isaka-Kigali/Keza-Musongati Railway Phase2 ADF Loan 1.66 59.5% 17-Nov-2009

Arusha - Namanga - Athi River Rd Upgr. (TZ/Ken) ADF Loan 0.54 55.1% 13-Dec-2006

Arusha - Namanga - Athi River Rd Upgr. (TZ/Ken) ADF Loan 3.50 93.5% 18 Dec. 2006

East Africa Transport and Trade Facilitation (EAC) ADF Loan 6.20 53.8% 29 Nov. 2

Transit Transport Facilitation Agency (TTFA) NEPAD IPPF

Grant

0.32 59.0% 22-Dec-2010

Arusha-Holili/Taveta-Voi Road Project ADF Loan 79.90 0.0% 16-Apr-2013

The EAC Payments & Settlement Systems Integration

Project (EAC - PSSIP)

ADF Grant 15.00 5.5% 5-Dec-2012

EAC Railway Sector Enhancement Project NEPAD IPPF

Grant

0.82 0.0% 29-Jun-2012

The EAC Payments & Settlement Systems Integration

Project (EAC - PSSIP)

NEPAD IPPF

Grant

15.5 5.5% 29-Jun-2011

WATER SUPPLY/SANITATION

Rural Water Supply and Sanitation Programme II ADF Loan 59.00 90.7% 15-Sep-2010

RWSSF Grant 5.80 100.0% 15-Sep-2010

Zanzibar Water & Sanitation Project ADF Loan 25.00 87.6% 11-Nov-2008

RWSSF Grant 2.78 95.1% 11-Nov-2008

Zanzibar Urban Water & Sanitation Project ADF Loan 14.00 1.8% 19-Dec-2012

Lake Victoria Water Supply & Sanitation Programme

Phase II (LVWSSP)

ADF Grant 17.48 22.3% 17-Dec-2010

ENERGY

Electricity V Project ADF Loan 28.68 45.4% 14 Dec. 2007

ADF Grant 1.32 76.2% 14 Dec. 2007

Iringa-Shinyanga Transmission Line ADF Loan 45.36 15.3% 26-Oct-2010

Regional Rusumo Hydropower ADF Loan 22.41 0.0%

SOCIAL

Support to Maternal Mortality Reduction Project ADF Loan 40.00 86.7% 11-Oct-2006

Small Enterpreneurs Loan Facility (SELF) II ADF Loan 20.00 87.8% 10-May-2010

Alternative Learning and Skills Development (ALSD)

II

ADF Loan 15.00 8.1% 29-Jun-2011

Support to Technical Vocational Education and

Training & Teacher Education

ADF Loan 34.00 0.0% 2-Apr-2014

MULTI-SECTOR

CRDB SME Partial Credit Guarantee Facility ADB Loan 1.38 98.6% 22-Jul-2008

VI

PROJECT NAME

SOURCE OF

FINANCE

(Instrument)

APPROVED

AMOUNT

(UA

million)

DISB RATE

(As of Dec.

2014)

APPROVAL

DATE

Institutional Support for Good Governance (ISPGG) II ADF Loan 5.20 90.4% 20-Sep-2010

EFC Tanzania- Fund for Africa Private Sector

Assistance (FAPA Grant)

FAPA Grant 0.62 0.0% 1-Jun-2012

OTHER OPERATIONS:

SADC: Support to the control of communicable

diseases ( HIV/AIDS, Malaria & TB)

ADF-G 20.00 67.9% 31-May-2006

SADC: Shared Watercourses Support Project for Buzi,

Save & Ruvuma River Basins

ADF-G 9.38 86.9% 25-Jan-2006

Songwe River Basin Development Programme

(Malawi and Tanzania)

AWF-TF 0.49 51.8% 25-May-2010

AWF-TF 2.65 65.8% 25-May-2010

NB: AWF-TF denominated in EUROs; NEPAD

IPPF denominated in USD

NEPAD IPPF 1.07 57.9% 28-Apr-2010

VII

APPENDIX III: MAP OF PROJECT AREA