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Mekele-Dallol and Semera-Afdera Power Supply for Industrial Development and Access Scale-Up Project (Mdsapiap)

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AFRICAN DEVELOPMENT BANK Public Disclosure Authorized Public Disclosure ETHIOPIA MEKELE-DALLOL AND SEMERA-AFDERA POWER SUPPLY FOR INDUSTRIAL DEVELOPMENT AND ACCESS SCALE-UP PROJECT (MDSAPIAP) APPRAISAL REPORT Public Disclosure Authorized Public Disclosure ONEC DEPARTMENT July 2016 Table of Contents 1. STRATEGIC THRUST & RATIONALE 1 1.1. Project linkages with country strategy and objectives ............................................... 1 1.2. Rationale for Bank’s involvement ............................................................................. 2 1.3. Donor Coordination ................................................................................................... 3 2. PROJECT DESCRIPTION 3 2.1 Project components .................................................................................................... 3 2.2 Technical solution retained and other alternatives explored ...................................... 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 process for project identification, design & implementation ............... 6 2.7 Bank Group experience, lessons reflected in project design ..................................... 6 2.8 Key performance indicators ....................................................................................... 7 3. PROJECT FEASIBILITY 8 3.1 Economic and Financial Performance ....................................................................... 8 3.2 Environmental and Social Impacts ............................................................................ 8 3.2.1 Environment ............................................................................................................... 8 3.2.2 Climate Change .......................................................................................................... 9 3.2.3 Gender ...................................................................................................................... 10 3.2.4 Social........................................................................................................................ 10 3.2.5 Involuntary resettlement .......................................................................................... 11 3.2.6 Stakeholders ............................................................................................................. 11 4. IMPLEMENTATION 11 4.1 Implementation arrangements .................................................................................. 11 4.2 Procurement Arrangement ....................................................................................... 12 4.3 Financial Management ............................................................................................. 12 4.4 Monitoring and Evaluation ...................................................................................... 13 4.5 Governance .............................................................................................................. 15 4.6 Sustainability............................................................................................................ 15 4.7 Risk management ..................................................................................................... 16 4.8 Knowledge building ................................................................................................. 17 5. LEGAL INSTRUMENTS AND AUTHORITY 17 5.1 Conditions associated with Bank’s intervention ...................................................... 17 A. Condition Precedent to Entry into Force of the Loan Agreement ........................... 17 B. Conditions Precedent to First Disbursement of the Loan in Respect of Consultancy Services for an amount not exceeding 3.35 million USD : ...................................... 18 C. Conditions Precedent to Subsequent Disbursement of the Loan ............................... 18 6. RECOMMENDATION 18 Appendix I: Comparative socioeconomic Indicator I Appendix II: Table of ADF Portfolio in the Country II Appendix III: Table of Key Projects Financed By the Bank and other Development Partners in the Country IV Appendix-IV: Project Location Map V Appendix V: Justifiction For Financing More Than 50% Of Cost By AFDB VI Currency Equivalents As of May2016 1 UA = 1.4173 USD 1 UA = 30.5843 ETB 1 USD = 21.5788 ETB 1 ETB = 100 (Ethiopian cents) Financial Year for EEP July 8th – July 7th Weights and Measures 1 metric ton = 2204 pounds (lbs) 1 metre (m) = 3.28 feet (ft) 1 kilometre (km) = 0.62 mile 1 hectare (ha) = 2.471 acres 1 kilovolt (kV) = 1000 volts 1 kilowatt (kW) = 1000 watts 1 megawatt (MW) = 1000 kW 1 gigawatt (GW) = 1000 MW 1 kilowatt hour (kWh) = 1000 watt hour 1 gigawatt hour (GWh) = 1000 kWh ABBREVIATIONS ADB = African Development Bank Group ADF = African Development Fund AFD = Agence Française de Développement BADEA = Arab Bank for Economic Development for Africa? CAGR = Compounded Annual Growth Rate CIDA = Canadian International Development Agency CSP = Country Strategy Paper CSO = Civil Society Organization DC = Direct Current DFID = Department for International Development DSCR = Debt Service Coverage Ratio EEPCO = Ethiopian Electric Power (Corporation) EIB = European Investment Bank EC = European Commission EEA = Ethiopia Electric Agency EEP = Ethiopia Electric Power EEU = Ethiopia Electric Utility ENPV = Economic Net Present Value EMU = Environmental Monitoring Unit EIRR = Economic Internal Rate of Return ENPV = Economic Net Present Value ESI = Electricity Supply Industry ESIA = Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan ETB = Ethiopian ETB ETFO = Ethiopia Field Office FE = Foreign Exchange FIRR = Financial Internal Rate of Return FNPV = Financial Net Present Value FY = Financial Year GoE = Government of Federal Democratic Republic of Ethiopia GEP = Generation Expansion Plan GDP = Gross Domestic Product GTP = Growth & Transformation Plan GWh = Gigawatt hour HV = High Voltage HVTL = High Voltage Transmission Line ICB = International Competitive Bidding ICS = Interconnected System IPP = Independent Power Producer ISS = Integrated Safeguards System IDA = International Development Association JICA = Japanese International Co-operation Agency KFW = Kreditanstalt fur Wiederanfbaw km = Kilo meters kV = Kilo volt LC = Local Cost i LRMCS = Long Run Marginal Cost of Supply LV = Low Voltage MCM = Million Cubic Meters MoFEC = Ministry of Finance & Economic Cooperation MIS = Management Information System MW = Megawatt MV = Medium Voltage NDF = Nordic Development Fund NEPTP = Northern Ethiopia Power Transmission Project NGO = Non-Governmental Organization O&M = Operation and Maintenance p.a. = Per Annum PA = Project Area PAPs = Project Affected Persons PASDEP = Plan for Accelerated and Sustainable Development to End Poverty PCBs = Polychlorinated Biphenyls PCR = Project Completion Report PIT = Project Implementation Team PPA = Power Purchase Agreement PPER = Project Performance Evaluation Report PSNP = Productive Safety Net Program PSP = Private Sector Participation QPR = Quarterly Progress Report RAP = Resettlement Action Plan SCS = Self Contained System SIDA = Swedish International Development Agency SMEs = Small and Medium Enterprises SNNPR = Southern, Nations and Nationalities People’s Region TPP = Thermal Power Plant TVET = Technical, Vocational Education and Training UA = Unit of Account UEAP = Universal Electricity Access Program UNDB = United Nations Development Business UNECA = United Nations Economic Commission for Africa USAID = United States Agency for International Development USD = United States Dollars VCT = Voluntary Counselling and Testing TPP = Thermal Power Plant ii Loan Information Client’s information BORROWER: The Government of the Federal Democratic Republic of Ethiopia (GoE) EXECUTING AGENCY: The Ethiopian Electric Power (EEP) Indicative Financing Plan Sources of financing Amount Instrument (USD million) ADB 104.61 Loan ADF - EEPCO/ GoE 17.91 Counterpart contribution Total project cost 122.52 ADB’s key financing information Loan currency United States Dollar (USD) Interest type Fully Flexible Loan Interest rate spread Funding margin+60 bps lending spread Commitment fee None Other fees None Repayment Semi-Annual Tenor 20 Years Grace period 5 Years FIRR 14.38% FNPV (@10%) US$ 64.52 million EIRR 29.13% ENPV (@12%) US$ 293.42 million Timeframe - Main Milestones (expected) Concept Note approval September 2015 Project approval July 2016 Effectiveness October 2016 Completion July 2019 Closing date December 2020 Last repayment July 2046 iii PROJECT SUMMARY 1.1 The Mekele-Dallol & Semera-Afdera Power Transmission Supply for Industrial Development and Access Scale-up Project (MSPIAP) (with the associated Transmission lines, Substations and Rural Electrification components) aims to improve the socio-economic development and livelihood of the population of beneficiary regions through increased access to affordable & sustainable electricity supply and improvement in service delivery. The two beneficiary regions are Tigray & Afar Regional States of Ethiopia. 1.2 The Program’s main outcomes include (i) provision of adequate & reliable electricity supply to industries and small businesses by adding 250 MVA capacity and making available
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