Mozambique-And-Malawi-Regional
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FOR OFFICIAL USE ONLY Report No: PAD3035 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED IDA GRANT IN THE AMOUNT OF SDR 30.6 MILLION (US$42.0 MILLION EQUIVALENT) AND A PROPOSED GRANT Public Disclosure Authorized IN THE AMOUNT OF US$24.0 MILLION EQUIVALENT FROM THE NORWAY’S SUPPORT TO THE REGIONAL POWER INFRASTRUCTURE PROJECTS IN SOUTHERN AFRICA SINGLE DONOR TRUST FUND TO THE REPUBLIC OF MOZAMBIQUE AND A PROPOSED IDA CREDIT IN THE AMOUNT OF SDR 11.0 MILLION (US$15.0 MILLION EQUIVALENT) Public Disclosure Authorized TO THE REPUBLIC OF MALAWI FOR THE MOZAMBIQUE - MALAWI REGIONAL INTERCONNECTOR PROJECT August 26, 2019 Energy and Extractives Global Practice Africa Region Public Disclosure Authorized 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. CURRENCY EQUIVALENTS (Exchange Rate Effective {July 31, 2019}) New Mozambican Metical (MZN) and Currency Unit = Malawian Kwacha (MWK) US$1 = MZN 61.3499 US$1 MWK 744.9788 US$1 = SDR 0.72705065 FISCAL YEAR Government of the Republic of Mozambique: January 1 - December 31 Government of the Republic of Malawi: July 1 – June 30 Regional Vice President: Hafez M. H. Ghanem Regional Integration Director: Deborah L. Wetzel Country Directors: Mark R. Lundell, Bella Bird Senior Global Practice Director: Riccardo Puliti Practice Manager: Sudeshna Ghosh Banerjee Task Team Leaders: Dhruva Sahai, Zayra Romo, Claudio Miguel Jamisse Buque ABBREVIATIONS AND ACRONYMS AACSR Aluminum Alloy Conductor, Steel Reinforced ACSR Aluminium Core, Steel Reinforced AfDB African Development Bank CAGR Compound Annual Growth Rate CAPEX Capital Expenditure CAPP Central African Power Pool CAS Country Assistance Strategy CPF Country Partnership Framework CTRG Central Térmica de Ressano Garcia (Ressano Garcia Thermal Power Plant) CTT Central Térmica de Temane (Temane Thermal Power Plant) DA Designated Account DRC Democratic Republic of Congo DSCR Debt Service Coverage Ratio EAPP East African Power Pool EBIT Earnings Before Interest and Tax EBITDA Earnings Before Interest, Taxes, Depreciation, and Amortization EDM Electricidade de Moçambique, E.P. (Electricity Company of Mozambique) EGENCO Electricity Generation Company Malawi (Ltd) EIRR Economic Internal Rate of Return EPC Engineering, Procurement and Construction ESCOM Electricity Supply Corporation of Malawi, Ltd. ESIA Environmental and Social Impact Assessment ESKOM Electric Power Utility of Republic of South Africa ESMP Environmental and Social Management Plan ESMS Environmental and Social Management System ESSP Energy Sector Support Project EU European Union FCF Free Cash Flow FM Financial Management FMR Financial Monitoring Reports FSP Financial Strengthening Plan FUNAE Fundo de Energia (Energy Fund) FY Fiscal Year GBV Gender-based Violence GDP Gross Domestic Product GIAF Gestão Integrada de Administração e Finanças (Integrated Financial Management System) GoMA Government of Malawi GoMO Government of Mozambique GRM Grievance Redress Mechanism GRS Grievance Redress Service HCB Hidroeléctrica de Cahora Bassa (Cahora Bassa Hydropower Plant) HVDC High Voltage Direct Current ICR Interest Coverage Ratio IFC International Finance Corporation IFR Interim Financial Report IPF Investment Project Financing IPP Independent Power Producer IRP Integrated Resource Plan IRR Internal Rate of Return JPCC Joint Project Coordination Committee JPSC Joint Project Steering Committee KfW Kreditanstalt fur Wiederaufbau (German Reconstruction Credit Institute) M&E Monitoring and Evaluation MCC Millennium Challenge Corporation MERA Malawi Energy Regulatory Authority MGDS Malawi Growth and Development Strategy MIGA Multilateral Investment Guarantee Agency MIREME Ministry of Mineral Resources and Energy MIS Management Information System MOTRACO Mozambique Transmission Company MoU Memorandum of Understanding MWK Malawian Kwacha MZN New Mozambican Metical NES National Electrification Strategy NLDC National Load Dispatch Center NPV Net Present Value NTF Norwegian Trust Fund O&M Operations and Maintenance OPEX Operating Expenditure PAP Project-affected Person PDO Project Development Objective PERIP Power Efficiency and Reliability Improvement Project PIM Project Implementation Manual PIU Project Implementation Unit PPA Power Purchase Agreement PPSD Project Procurement Strategy for Development RAP Resettlement Action Plan ROA Return on Assets ROCE Return on Capital Employed ROE Return on Equity ROI Return on Investment ROIC Return on Invested Capital ROW Right of Way RPF Resettlement Policy Framework SADC Southern African Development Community SAPP Southern African Power Pool SCADA Supervisory Control and Data Acquisition SCMS Substation Control and Monitoring System SDG Sustainable Development Goal SEA Sexual Exploitation and Abuse STE Sociedade Naçional de Transporte de Energia (National Enterprise for Electricity Transmission T&D Transmission and Distribution TA Technical Assistance TREP Temane Regional Electricity Project TTP Temane Transmission Project WACC Weighted Average Cost of Capital WAPP West African Power Pool ZESCO Zambia Electricity Supply Company Limited The World Bank Mozambique - Malawi Regional Interconnector Project (P164354) TABLE OF CONTENTS DATASHEET ........................................................................................................................... 1 I. STRATEGIC CONTEXT ...................................................................................................... 8 A. Regional Context .............................................................................................................................. 8 B. Country Context .............................................................................................................................. 10 C. Sectoral and Institutional Context .................................................................................................. 12 D. Relevance to Higher Level Objectives ............................................................................................ 17 II. PROJECT DESCRIPTION .................................................................................................. 18 A. Project Development Objective ..................................................................................................... 18 B. Project Components ....................................................................................................................... 19 C. Project Beneficiaries ....................................................................................................................... 21 D. Results Chain .................................................................................................................................. 22 E. Rationale for World Bank Involvement and Role of Partners......................................................... 22 F. Lessons Learned and Reflected in the Project Design .................................................................... 24 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 26 A. Institutional and Implementation Arrangements .......................................................................... 26 B. Results Monitoring and Evaluation Arrangements......................................................................... 27 C. Sustainability ................................................................................................................................... 27 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 28 A. Technical, Economic and Financial Analysis ................................................................................... 28 B. Fiduciary .......................................................................................................................................... 31 C. Safeguards ...................................................................................................................................... 33 V. KEY RISKS ..................................................................................................................... 38 VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 42 ANNEX 1: Southern African Power Pool ......................................................................... 47 ANNEX 2: Detailed Project Description .......................................................................... 51 ANNEX 3: Implementation Arrangements ..................................................................... 57 ANNEX 4: Implementation Support Plan ....................................................................... 76 ANNEX 5: Economic and Financial Analysis .................................................................... 79 ANNEX 6: Project Map ................................................................................................ 110 The World Bank Mozambique - Malawi Regional Interconnector Project (P164354) DATASHEET BASIC INFORMATION BASIC INFO TABLE Country(ies) Project Name Malawi, Mozambique Mozambique - Malawi Regional Interconnector Project Project ID Financing Instrument Environmental Assessment Category Investment Project P164354 A-Full Assessment Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach