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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 49183-BW PROJECT APPRAISAL DOCUMENT ON A PROPOSED IBRD PARTIAL CREDIT GUARANTEE IN THE AMOUNT OF US$242.7 MILLION Public Disclosure Authorized AND A PROPOSED IBRD LOAN IN THE AMOUNT OF US$136.4 MILLION TO THE REPUBLIC OF BOTSWANA FOR A MORUPULE B GENERATION AND TRANSMISSION PROJECT Public Disclosure Authorized October 2, 2009 Energy Group Sustainable Development Department Africa Region Finance, Economics, and Urban Department Sustainable Development Vice-Presidency This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY CURRENCY EQUIVALENTS (Exchange Rate Effective August 28, 2009) Currency Unit = Botswana Pula (BWP) 1 US$ = BWP 6.95 100 Thebe = 1 BWP FISCAL YEAR April 1 – March 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank EIA Environmental and Social Impact AGC Automatic generation control Assessment BPC Botswana Power Corporation EMP Environmental Management Plan BWP Botswana Pula EPC Engineering, procurement, and CBM Coal-bed methane construction CCS Carbon capture and storage ERR Economic rate of return CDM Clean Development Mechanism FGD Flue gas desulfurization CEDIF Clean Energy for Development FM Financial management Investment Framework FS Financial statements CFB Circulating fluidized bed GABS Government Accounting and CFL Compact florescent lamp Budgeting System CMM Coal-mine methane GDP Gross domestic product CNEEC China National Electric GEF Global Environment Facility Equipment Corporation GHG Greenhouse gas CO2 Carbon dioxide GJ Gigajoule CPS Country Partnership Strategy GWh Gigawatt-hour CSP Concentrating solar power ICB International competitive bidding CV Calorific value ICBC Industrial and Commercial Bank DCCSF Development and Climate of China Limited Change, A Strategic Framework IFR Interim financial report for the World Bank Group IMF International Monetary Fund DEA Department of Environmental IPP Independent power producer Affairs of MEWT kg/kWh Kilograms per kilowatt-hour DGS Department of Geological Survey kg/sec Kilograms per second of MMEWR kJ Kilo joule DNA Designated National Authority km Km DNI Direct normal irradiation kV Kilovolt DSCR Debt service coverage ratio kW Kilowatt DSM Demand-side management kWh Kilowatt-hour DWMPC Department of Waste Management MCL Morupule Colliery Ltd and Pollution Control of MEWT EE Energy efficiency FOR OFFICIAL USE ONLY MEWT Ministry of Environment, PPIAF Public-Private Infrastructure Wildlife, and Tourism Advisory Facility MFDP Ministry of Finance and PPP Public-private partnership Development Planning RAP Resettlement Action Plan 3 µg/m Micrograms per cubic meter RESA Regional Environmental and mg/Nm3 Milligrams per normal cubic meter Social Assessment MJ/kg Mega joules per kilogram RFP Request for Proposals MMEWR Ministry of Minerals, Energy, and RPF Resettlement Policy Framework Water Resources SADC Southern African Development MW Megawatt Community MWh Megawatt-hour SAPP Southern Africa Power Pool NCB National competitive bidding SBD Standard Bidding Document NDP National Development Plan SBW Shenyang Blower Works NGO Nongovernmental organization SC Supercritical NOx Nitrogen oxides SIA Social Impact Assessment NPV Net present value Sinosure China Export & Credit Insurance NSC North-South Carrier Corporation O&M Operation and maintenance SO2 Sulfur dioxide OECD Organization for Economic Co- SOx Sulfur oxides operation and Development SSA Sub-Saharan Africa OPGW Optical ground wire cable TA Technical assistance PC Pulverized coal TCF Trillion cubic feet PCG Partial credit guarantee UNFCCC United Nations Framework PMU Project Management Unit Convention on Climate Change PPA Power Purchase Agreement US$ US dollar WUC Water Utility Corporation Vice President: Obiageli K. Ezekwesili Country Director: Ruth Kagia Sector Director: Inger Andersen Sector Manager: Subramaniam V. Iyer Task Team Leader: Varadarajan Atur This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. BOTSWANA MORUPULE B GENERATION AND TRANSMISSION PROJECT CONTENTS Page Data Sheet ....................................................................................................................................... i I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 A. Country and sector issues.................................................................................................... 1 B. Rationale for Bank involvement ....................................................................................... 10 C. Higher level objectives to which the project contributes .................................................. 13 II. PROJECT DESCRIPTION ............................................................................................... 14 A. Lending instrument ........................................................................................................... 14 B. Project development objective and key indicators ............................................................ 14 C. Project components ........................................................................................................... 15 D. Lessons learned and reflected in the project design .......................................................... 17 E. Alternatives considered and reasons for rejection ............................................................ 17 III. IMPLEMENTATION .................................................................................................... 18 A. Partnership arrangements (if applicable) .......................................................................... 18 B. Institutional and implementation arrangements ................................................................ 18 C. Monitoring and evaluation of outcomes/results ................................................................ 19 D. Sustainability..................................................................................................................... 19 E. Critical risks and possible controversial aspects ............................................................... 21 F. Guarantee and Loan conditions and covenants ................................................................. 23 IV. APPRAISAL SUMMARY ............................................................................................. 25 A. Economic and financial analyses ...................................................................................... 25 B. Technical ........................................................................................................................... 28 C. Fiduciary ........................................................................................................................... 29 D. Social................................................................................................................................. 31 E. Environment ...................................................................................................................... 32 F. Safeguard policies ............................................................................................................. 35 G. Policy exceptions and readiness ........................................................................................ 35 Annex 1: Country and Sector Background .............................................................................. 36 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 62 Annex 3: Results Framework and Monitoring ........................................................................ 63 Annex 4: Detailed Project Description ...................................................................................... 65 Annex 5: Project Costs ............................................................................................................... 96 Annex 6: Implementation Arrangements ................................................................................. 98 Annex 7: Financial Management and Disbursement Arrangements ................................... 105 Annex 8: Procurement Arrangements .................................................................................... 117 Annex 9: Economic Analysis .................................................................................................... 127 Annex 10: Financial Analysis ................................................................................................... 142 Annex 11: IBRD Partial Credit Guarantee ............................................................................ 145 Annex 12: Safeguard Policy Issues .......................................................................................... 151 Annex 13: Project Preparation and Supervision ................................................................... 161 Annex 14: Documents in the Project File ............................................................................... 163 Annex 15: Statement of Loans and Credits ............................................................................ 164 Annex 16: Country at a Glance ..............................................................................................