Document of The World Bank FOR OFFICIAL USE ONLY

Report No: 3 1844-SL Public Disclosure Authorized

PROJECT APPRAISAL DOCUMENT

ON

A PROPOSED IDA PARTIAL RISK GUARANTEE IN SUPPORT OF A LOAN IN AN AMOUNT OF UP TO US$38 MILLION IN PRINCIPAL GRANTED BY A COMMERCIAL BANK TO BUMBUNA HYDROELECTRIC COMPANY LIMITED

AND Public Disclosure Authorized A PROPOSED IDA GRANT IN THE AMOUNT OF SDR8.3 MILLION (US$12.5 MILLION EQUIVALENT) TO THE REPUBLIC OF SIERRA LEONE

FOR THE

COMPLETION OF THE BUMBUNA HYDROELECTRIC PROJECT UNDER A PUBLIC-PFWATE PARTNERSHIP (“PPP”) Public Disclosure Authorized MAY 20,2005

Energy Group Project Finance and Guarantees InfrastructureDepartment InfrastructureEconomics and Finance Africa Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its content may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS

Exchange Rate Effective: April 30, 2005

Currency Unit = Leone (SLL) SLL2835 = US$1 US$1.51209 = SDR1

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank BCA Bumbuna Conservation Area BHC Bumbuna Hydropower Company BHP Bumbuna Hydroelectric Project BOT Build-Operate-Transfer BWMA Bumbuna Watershed Management Authority BWMP Bumbuna Watershed Management Plan CAP Communication Action Plan CAS Country Assistance Strategy CDD Community-Driven Development CDM Clean Development Mechanism CFB Carbon Finance Business CFAA Country Financial Accountability Assessment cu Communication Unit DECSEC Decentralization Secretariat DGA Development Grant Agreement DP Development Partners DRP Dam Review Panel EA EnvironmentalAssessment EL4 EnvironmentalImpact Assessment EIRR Economic Internal Rate of Return EMF Electro-magneticField EMP EnvironmentalManagement Plan EO1 Expression ofInterest EPC Engineering/Procurement/Construction ERPA Emissions Reduction Purchase Agreement ESAP Environmentaland Social Advisory Panel ESKOM Electricity Company of South Africa FMR Financial Monitoring Report GDP Gross Domestic Product GoSL Government of Sierra Leone GWh Giga-watts per hour IBRD International Bank for Reconstruction and Development IDB Islamic Development Bank ICB International Competitive Bidding FOR OFFICZAL USE ONLY

IDA International Development Association IDC Interest during construction IEC International Electrotechnical Commission IEC Information, Education and Communication ISA International Standards of Auditing ISWL Insulated Shield Wire Line IUCN International Union for Conservation of Nature and Natural Resources kV Kilovolt LAIR Livelihood Assessment and Income Restoration LAWCLA The Lawyers Centre for Legal Assistance M&E Monitoring and Evaluation MDGs Millennium Development Goals MFO Marine Fuel Oil MLGCD Ministry of Local Government and Community Development MOEP Ministry of Energy and Power MOU Memorandum of Understanding MVA Megavoltampere MW Megawatt NaCSA National Commission for Social Action NCP National Commission for Privatization NCRRR National Commission on Resettlement, Rehabilitation and Reconstruction NEPPCU National Energy Policy Planning and Coordinator Unit NGO Non-Governmental Organization NPA National Power Authority NPV Net Present Value O&M Operations and Maintenance OPBP Operational Policy/Bank Procedures (World Bank) OPEC Organization of Petroleum Exporting Countries PAP Project Affected Persons PDO Project Development Objective PIP Project Implementation Plan PIU Project Implementation Unit PPA Power Purchase Agreement PPIAF Public-Private Infrastructure Advisory Facility PPP Public Private Partnership PRG Partial Risk Guarantee PRSP Poverty Reduction Strategy Paper PWP Power and Water Project RAP Resettlement Action Plan RO Resettlement Officer ROW Right of Way RU Resettlement Unit SAP Stabilized Agriculture Program SLL Sierra Leone Leone (currency) SRBDA Seli River Basin Development Authority TA Technical Assistance TL PAP Transmission Line Project Affected Persons TOR Terms of Reference TSP Total Suspended Particulates This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. USCDI Upper Seli Community Development Initiative VRC Village Resettlement Committee

Vice President: Gobind Nankani Country Managermirector: Mats Karlsson Sector Manager: Yusupha Crookes Task Team Leader: Dona1 O’Learv SIERRA LEONE COMPLETION OF THE BUMBUNA HYDROELECTRIC PROJECT

CONTENTS Page

A . STRATEGIC CONTEXT AND RATIONALE...... 10 1. Country and Sector Issues ...... 10 2 . Rationale for Bank Involvement ...... 12 3 . Higher Level Objectives to which the Project Contributes ...... 12 B. PROJECT DESCRIPTION...... 12 1. Instruments ...... 12 2 . Project Development Objective (PDO) and Key Indicators ...... 13 3 . Project Components ...... 13 4 . Lessons Learned and Reflected in the Project Design ...... 16 5 . Alternatives Considered and Reasons for Rejection ...... 17 C . IMPLEMENTATION...... 18 1. Partnership Arrangements ...... 18 2 . Institutional and Implementation Arrangements ...... -19 3 . Complementary Projects.,...... 23 4 . Communication Program ...... 24 5 . Monitoring and Evaluation of OutcomesResults ...... 25 6 . Sustainability ...... 25 7 . Critical Risks and Possible Controversial Aspects ...... 27 8 . Grant and Guarantee Conditions and Covenants ...... 29 9 . Main Features of the Proposed Financing P-ackage...... 31 10 . Project Cost Estimate ...... 32 D. APPRAISAL SUMMARY ...... 32 1. Economic and Financial Analyses ...... 32 2 . Fiduciary ...... 37 3 . Social ...... 37 4 . Environment ...... 38 5 . Safeguard Policies ...... 39 6 . Political and Other Risks ...... 42 7 . Policy Exceptions and Readiness ...... 42 Annex 1: Country and Sector or Program Background...... 44 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies ..... 48 Annex 3: Results Framework and Monitoring ...... 51 Annex 4: Detailed Project Description ...... 55 Annex 5: Project Costs ...... 64 Annex 6: Implementation Arrangements ...... 65 Annex 7: Bumbuna Communication Action Plan (Summary) ...... 71 Annex 8: Financial Summary for Revenue Earning Project Entities. BHC. and the Project Company ...... 75 Annex 9: Salini Construttori. S.p.A.: Technical and Financial Capabilities ...... 83 Annex 10: Project Implementation Schedule ...... 84 Annex 11: Financial Management and Disbursement Arrangements ...... 35 Annex 12: Contractual Arrangements ...... 91 Annex 13: Letter of Sector Policy ...... 92 Annex 14: Procurement Arrangements ...... 94 Annex 15: Economic and Financial Analysis ...... 100 Annex 16. IDA Guarantee Structure ...... 113 Annex 17: Safeguard Policy Issues...... 117 Annex 18: Information Sharing and Public Consultation...... 145 Annex 19: Dam Safety Issues...... 159 Annex 20: Project Preparation and Supervision...... 160 Annex 21: Documents in the Project File ...... 161 Annex 22: Statement of Loans and Credits ...... 162 Annex 23: Country at a Glance ...... 164

MAP IBRD 33984 MAP IBRD 33985 SIERRA LEONE

COMPLETION OF THE BUMBUNA HYDROELECTRIC PROJECT

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTEG

Date: May 21,2005 Team Leader: Dona1 O’Leary Country Director: Mats Karlsson Sectors: Energy Sector MangerDirector: Yusupha Crookes Themes: Public-private partnership in infrastructure financing Project ID’S: (P086801); (P086903) Environmental screening category: Category A Lending Instrument: Technical Assistance Grant Safeguard screening category: S2 and Partial Risk Guarantee

Project Fin ata [ ] Loan [ ] Credit [ X ] Grant [ X ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m equivalent.): 50.5 (12.5 Grant + 38.0 PRG) Proposed terms: Standard Gradstandard PRG

FACILITY OPEC DEVELOPMENT FUND 0.0 8.4 8.4 COMMERCIAL BANK (IDA Guarantee) 0.0 38.0 38.0 Total: 18.8 73.0 91.8

For IDA Guarantee: Partial Risk Guarantee (PRG) Proposed Coverage: Sierra Leone sovereign risks as defined in (i)the Concession Agreement, including

7 issuance and renewal of permits, change in law, termination events, etc.; and (ii) the guarantee of the obligations of the off-taker (“NPA”) under the Power Purchase Agreement; which result in a breach of the BHC’s obligations to repay the IDA guaranteed loan. Project Sponsor: Salini Costruttori S.p.A. (“Salcost”) Nature of the underlying financing: private commercial Euro denominated debt provided by a prime international bank. Terms of financing for IDA Guarantee: Principal amount (US$): Up to 38.00 million Final maturity: Up to 15 years Amortization profile: tailor made Financing available without guarantee: No

I Estimated disbursements (Bank FY/US$m) FY 2006 2007 2008 2009

Annual 6.0 4.0 2.0 0.5 Cumulative 6.0 10.0 12.0 12.5

Does the project depart from the CAS in content or other significant respects? ReJ [ ]Yes [XINO PAD A. 3 Does the project require any exceptions from Bank policies? ReJ PAD D. 7 [XIYes []No Have these been approved by Bank management? [XIYes []No Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$ [XIYes [ ]No PAD D. 7

Project development objective Re$ PAD B.2, TechnicalAnnex 3

The main development objective of the proposed Project is to expand the capacity of Sierra Leone to increase the supply of electricity services at least-cost, and in an efficient and environmentally and socially sustainable manner.

Project description Re$ PAD B.3.a, Technical Annex 4

The IDA PRG will facilitate commercial financing of component Al. The IDA grant will fund components B and C.

Component A - Hydroelectric and Transmission Infrastructure. This component will complete the 50 MW Bumbuna Hydropower project. Component A1 will consist of (i)an 88 m high asphalt concrete faced rock fill dam with a 440 m crest-length; (ii)a water intake structure; (iii)two “morning glory” spillways with associated tunnels; (iv) an above-ground powerhouse with two 25 MW turbo-generator units; and (v) a 30 km narrow Y-shaped reservoir with 445 million m3 storage capacity. Component A2

8 will consist of: (i)a 13.4 kV/161 kV switchyard to transmit electricity to Freetown through a single- circuit 200 km long transmission line on self-supporting steel towers; (ii)a 161/33/11 kV substation linking with the distribution system; and (iii)an energized insulated shield wire scheme to supply provincial towns along the transmission route with 5 MVA of power.

Component B - Environmental Mitigation, Resettlement, Watershed Management and Benefit Sharing. This component will fund implementation of: (a) the Dam/Reservoir Resettlement Action Plan with livelihood restoration and agriculture stabilization subcomponents and the Transmission Line Resettlement Action Plan; and (b) a comprehensive Environmental Management and Mitigation Plan (EMP). The EMP includes: (a) construction phase mitigation and monitoring activities associated with Component A, including monitoring of public health impacts on diseases such as bilharzia and malaria; (b) preparation and initiation of the Bumbuna Watershed Management Plan (BWMP) with a Land and Soil Management, Agro-forestry and Forestry, Agricultural Development and Downstream and Reservoir Fisheries Management Programs; (c) establishment and management ofthe Bumbuna Conservation Area (BCA) to preserve and protect biodiversity in the Bumbuna watershed as a Conservation offset. This component also includes the Upper Seli Community Development Initiative (USDCI), which will benefit indirectly affected communities in the project area; and (d) capacity building for relevant ministries and agencies for sustainable implementationof the project safeguard measures.

Component C - Technical Assistance. This component will fund: (i)management and supervision of the activities under Component B; (ii)support for the Bumbuna Project Implementation Unit (PIU), the Dam Review Panel (DRP), and the Environmental and Social Advisory Panel (ESAP); and (iii)support for the Communications Action Plan.

Which safeguard policies are triggered, if any? Re$ PAD D.5, Technical Annex 17 Environmental Assessment, OP 4.01 Natural Habitats OP 4.04 Involuntary Resettlement, OP 4.12 Forests OP 4.36 Safety of Dams OP 4.37

Board presentation: June 16, 2005

Loan/Grant effectiveness: August 3 1, 2005

Covenants applicable to project implementation: Ref. DGA

9 A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

1.1 The main development objective ofthe proposed Project is to expand the capacity of Sierra Leone to increase the supply of electricity services at least-cost, and in an efficient, environmentally, and socially sustainable manner. This would enable Sierra Leone to overcome one of the key constraints on growth, as well as on its ability to improve the quality and impact on social services. The Project will mobilize private capital, promote private sector involvement in management of the power sector and encourage sector reforms to underpin the efficiency and effectiveness ofthe sector.

1.2 Sierra Leone has embarked on a transition from a nation focused primarily on post-conflict needs to a nation poised for long-term growth and the implementation of a full Poverty Reduction Strategy (PRS). The civil war ended in January 2002, just over three years ago. Since then, Sierra Leone has made substantial progress in consolidating social and economic security for its people. This has been complemented by its efforts to promote transparent and inclusive governance to address the root causes of the conflict. While there is a continued need for rehabilitation and recovery, people are now increasingly looking ahead to the economic growth and public service delivery that will help them escape poverty, and for many in the project area, absolute extreme poverty.

1.3 Sierra Leone's economy contracted by 30 percent during the decade ofconflict. Since 2001, there has been substantial recovery, averaging about 7 percent per annum growth. Prospects for continuing growth beyond the immediate post-conflict recovery period are however, constrained by the absence or the poor condition of infrastructure. As a major side effect ofthe civil war, much ofthe country's infrastructure was damaged, destroyed, or neglected. Existing power infrastructure was deeply affected: projects under implementation, including a major hydropower development at Bumbuna were stopped and power sector assets fell into disrepair. In parallel to the deterioration in infrastructure, the conflict took a huge toll on the population. The 10 years of civil war and unrest resulted in 2 million of Sierra Leone's inhabitants being rendered homeless, about 500,000 people being driven into internal exile, and the estimated death of 20,000 people. Three years after the conflict and despite the tremendous gains made by the government, the 2004 Household Survey indicates that 70 percent ofSierra Leone's population lives on less than US$1 per day.

1.4 Electricity services in Sierra Lone are provided mainly by the National Power Authority @PA) within an interconnected system, centered around the capital city of Freetown, in the western part of the country. The installed generation capacity of the system is 27 MW. Much of this capacity is obsolete, and available capacity has now declined to around 11 MW. There is a number of isolated systems serving provincial centers and mining areas in the east. Available generating capacity in these centers is small and subject to erratic supplies of high cost diesel fuels. Total electricity supply in the western interconnected system was 79 GWh in 2004, and accounted for about 85 percent of electricity publicly provided in the country, Overall, total publicly delivered electricity translates to a per capita electricity consumption of around 18 kWh. This is well below the sub-Saharan average of460 kWh per capita.

1.5 Lack of electricity is a serious impediment to economic growth, particularly in the industrial and service sectors. For Sierra Leone, the economic value of lost output today as a consequence of unavailable electricity is substantial. The suppressed demand of the industrial sector has been estimated at about 29 GWh, or around 35% of 2004 electricity supply, at a base cost of unserved energy of 36 USgYkWh. Suppressed demand in the commercial sector is at about 9 GWh, or around 11% of2004 electricity supply, at a base cost of unserved energy of around 3 1 US#/kWh. Suppressed demand in the domestic sector has been

10 estimated at about 48 GWh, or 57% of 2004 electricity supply, at a cost of unserved energy of around 15 US$/kWh.

1.6 The cost of electricity is also a major issue. Sierra Leone is one of a small number of countries in West Africa with some of the highest costs of electricity generation and delivery in the world. Even with varying degrees of subsidies, these high costs translate into very high tariffs relative to regional and global benchmarks. Together with unreliable service and poor quality of supply, these tariffs translate into major competitive problems for commercial and industrial enterprises. At present, the cost ofelectricity generation, transmission, and distribution is 29 US$/kWh with average tariffs set at 22 US$/kWh. But the first phase of exploitation of the country’s hydrological resources (such as the delayed projects in Bumbuna) holds the potential to reduce underlying weighted costs of supply to between 13 US$/kWh and 16 US$/kWh, or one half ofcurrent costs.

1.7 Finally, with extremely low coverage, access confined largely to the capital city, high costs and poor cost recovery, equity issues loom large in the sector. Tariffs for residential consumers cater somewhat for the poor as a lower rate applies to those customers consuming the smallest amount. Up to a consumption level of 30 kWh, for example, residential customers only pay about 10 US$/kWh. However, for much of the few level urban poor with access, this is still largely unaffordable. More broadly, the more significant challenge is to expand access substantially beyond the 5 percent of the population, largely in the Freetown area, that now enjoy it, to the rest of the population in other urban areas and in the rural areas. In this regard, recovery of NPA’s financial position through the exploitation of sources of lower cost electricity, performance improvement measures and more appropriate sector policies and regulatory approaches and mechanisms should enable the company and the government to respond better to equity issues, without undermining NPA’s efficiency and financial objectives.

1.8 The key elements of the GoSL’s strategy for the sector seek to address the sector issues defined above (see Annex 13 for a summary of GoSL goals and strategies). First, the Government seeks to enhance the efficiency and effectiveness of the management and operations of the western interconnected system through bringing best practices into operations, including complementary systems and business processes, Second, while best practices will contribute to gains in efficiency, the system’s physical deficiencies after years of deferred maintenance are a key bottleneck to large improvements in performance. Third, beyond expertise and short-term investments, the completion ofthe project at Bumbuna, which has been delayed by conflict, needs to be resumed. In particular, this project will provide, a relatively large addition to available supplies as well as dramatically transform the structural cost of electricity supplies in the country. Finally, GoSL recognizes that the expertise on best practices and power utility management as well as a critical share of the capital needed to meet the challenges ofreviving and expanding the sector will have to come from the private sector. In concrete terms, these strategies translate into four key actions that GoSL has already embarked upon: (i)to attract donor support for key activities to stem the decline in existing power capacity and electricity output; (ii)to put in place a management contract in the utility; (iii)to step up the mobilization of public and private capital to complete the project at Bumbuna; and (iv) to accelerate the passage of legislation and the formulation of sector policies and regulatory instruments to create an enabling environment for private participation in the sector.

1.9 The Bank and Sierra Leone’s other development partners have started to support GoSL’s efforts to implement these four key actions. The Power and Water Project (PWP, Credit 3945-SL) was approved by the Board on July 1, 2004. Under this project, which is co-financed by a number of other donors, GoSL has started to implement three of the four key actions. This proposed completion of Bumbuna Hydroelectric project (BHP) responds to the request for support by GoSL for assistance in designing and mobilizing private and public capital for the completion ofthe long-delayed project at Bumbuna.

11 2. Rationale for Bank Involvement

2.1 The rationale for Bank involvement in the BHP is fourfold: (a) to act as a catalyst for resource mobilization and donor coordination; (b) to promote public-private partnerships in developing and operating infrastructure projects; (c) to develop customized risk mitigation instruments under the PRG to facilitate implementation of major infrastructure projects; and (d) to ensure application of appropriate safeguards to mitigate the impact on the population and the environment. In addition, under the power component of the Sierra Leone Power and Water Project, the Bank is bringing its experience in supporting power sector reform and utility enhancement programs.

3. Higher Level Objectives to which the Project Contributes

3.1 The GoSL’s “Sierra Leone Vision 2025” summarizes the development principles that will guide its efforts to reduce poverty and facilitate economic growth. These principles are to: (i)achieve competitive private sector-led economic development with effective indigenous participation; (ii)create a high quality of life for all Sierra Leoneans; (iii)create a well-educated, enlightened, tolerant, secure, stable, and well- managed society based on democratic values; (iv) ensure sustainable exploitation and effective utilization of the country’s natural resources while maintaining a healthy environment; and (v) become a science and technology-driven nation. One of the keys to achieving this vision is carefully targeted electrification interventions, which will facilitate the delivery of more effective education and health services and support the development of small enterprises. Also, part of the GoSL’s social sector development program focuses on increasing access to reliable least-cost electricity.

3.2 The BHP will support this vision through improved access to essential infrastructure services, particularly least-cost renewable power generation capacity. The Country Assistance Strategy (CAS), scheduled for Board presentation June 16, 2005, will focus on the Bank’s comparative advantage in supporting each of the three PRSP pillars. The project thus would contribute to achievement of CAS objectives through directly supporting the PRSP’s Economic Growth pillar. Indeed, the CAS notes that the BHP will play an essential role in responding to the urgent need for power.

3.3 The project will reduce greenhouse gas emissions by displacing the use of diesel generating power plant through hydroelectric power. This in turn contributes to the mitigation ofthe effects of climate change, a major global environmental problem.

B. PROJECT DESCRIPTION

1. Instruments

Two IDA instruments will be used to finance the BHP:

(a) A US$38 million Partial Risk Guarantee (PRG), to mobilize a commercial loan for the completion of the BHP (two major physical components of the project: (I)Contract A2/B comprising the BHP civil works and hydraulic structures; and (11) Contract C comprising the electromechanical equipment); and

(b) A technical assistance grant to finance the other project components including the Environmental Management Plan (EMP); the Resettlement Action Plans (RAPs) for the dadreservoir and the transmission line; supervision of the EMP and the RAPs; support for

12 the Bumbuna Project Implementation Unit (PIU); the Dam Review Panel (DRP) of Experts; the Environment and Social Advisory Panel (ESAP) of Experts; USCDI, the Communication Action Plan (CAP); and capacity building for relevant ministries and agencies for sustainable implementation of the project’s safeguard measures.

2. Project Development Objective (PDO) and Key Indicators’

2.1 The main development objective of the proposed Project is to expand the capacity of Sierra Leone to increase the supply of electricity services at least-cost, and in an efficient and environmentally and socially sustainable manner. This would enable Sierra Leone to overcome one of the key constraints on growth, as well as on the effective delivery of social services.

The key outcome indicators are listed below (see Annex 3 for details):

e Electricity sales (GWh) increasing from 68.9 GWh in 2003 to 230 GWh in 2008; e Percentage reduction of average electricity tariffs; e A bio-diversity index to be established under the Additional Environmental Studies, acceptable to the Association, does not reduce by the end of the Project; e Sixty percent increase of the targeted watershed area under improved agricultural conservation practice by the end of the Project; e Sustainable fishery practices in 60 percent ofthe reservoir and downstream of the dam; e One hundred percent of Affected Persons resettled as per definition in OP 4.12 by the end of the Project; e Eighty percent increase of income of involved households with new income generating activities (forestry, fisheries, agriculture, soap making, carpentry, etc.) by the end of the Project; e The Bumbuna Watershed Management Plan (BWMP) developed by March 1,2007; e Environmental and Social Management Unit in the Ministry of Energy and Power (MoEP) created and operational by December 1, 2008; e The Bumbuna Conservation Area established by October 3 1,2006 and management plan adopted by March 1,2007; and e Environmental management monitoring system developed by the date of effectiveness of the Grant.

3. Project Components

Component A - Hydroelectric and Transmission Infrastructure,

3.1 The BHP will consist of an 88 m high rockfill dam with an asphalted concrete upstream face with a crest-length of 440 meters, two “morning glory” spillway intakes leading to a spillway tunnel and combined powerlauxiliary spillway tunnel, a gated power intake incorporated in the spillway tower for the combined tunnel, and an above-ground powerhouse with two 25 MW turbo-generator units. A narrow Y-shaped reservoir between 0.2 and 1 km wide and 30 km in length will form in the river behind the dam. It will have a capacity of 445 million m3 and a surface area at the maximum operating level of 21 km2. The energy from the hydroplant will be stepped up with a 13.4 kV1161 kV switchyard and transmitted to Freetown through a single-circuit 200 km-long transmission line on self-supporting steel towers. At Freetown, the energy will be stepped down with a 161 kVI34.5 kV111 kV substation, for distribution in the Western Area. Power service to

’ This PDO assumes that all energy generated by the BHP is sold to NPA and that NPA functions properly, as described under the PWP (Cr. 3945-SL). 13 Makeni, Lunsar, and Port Loco will be provided by means of an insulated shield wire above the 161 kV line conductors that will be energized at 34.5 kV.

3.2 Although preliminary works have been undertaken as early as in the OS, construction of the project began in the early 90s. Before the inception of the civil war the major civil structures were in place (spillways, intake, tunnel, gates) and the rockfill dam had been finished. When the dam was about 85 percent complete in May 1997, construction had to be suspended as a result of civil-armed conflict. The existing pre- civil war contracts cover the completion of civil works (Contract A2), the hydraulic steel structures (Contract B), the electro-mechanicalequipment (Contract C), and the transmission line (Contract D). Contracts A2, B, and C will in the remainder of the text be referred to as the Hydroelectric Project Contracts. These contracts and contract D are to be completed under the Project.

Component B - Environmental Mitigation, Resettlement, Watershed Management and Benefit Sharing Environment Management Plan (EMP)

3.3 The Environmental Management Plan and the Resettlement Action Plans are prepared, approved and disclosed, both in-country and at the World Bank’s Inforshop. The oversight arrangement for ensuring the implementation of these plans rests with the Bumbuna Project Implementation Unit (PIU). The PIU will supervise the transmission and the main civil contractors, who will be contractually obligated to implement and report on environmental and social mitigation measures for their respective construction activities. In parallel, the PIU will also be responsible for coordinating with local government councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP studies and activities funded by the project (in particular the Environment and Agriculture Departments), and for the hiring and supervision of consultants, NGOs and contractors for their implementation. During the life of the project, this component will provide assistance to develop an Environmental and Social Management Unit, within the Ministry ofEnergy and Power to take over the oversight function from the PIU upon completion of the BHP. 3.4 The PIU will initiate all legal and administrative activities needed to establish the Bumbuna Watershed Management Authority (BWMA) and the Bumbuna Conservation Are (BCA) as a Conservation Offset. These organizations will be established shortly after the test reservoir impoundment, and will undertake implementation of the EMP. The RAPSwill be implemented by the PIU under a separate contract, 3.5 The BWMA will be responsible for the Bumbuna Watershed Management Plan (BWMP) that aims to protect the reservoir from excessive sedimentation through improving agricultural practices in the Bumbuna catchment area, improving the livelihood of farmers, and protecting the remaining animal and plant biodiversity in the catchment, which includes the chimpanzee and other primate communities (see sections on Environment and Safeguard Policies, and Annex 17). 3.6 The BWMP has several sub-programs for: (i)community awareness; (ii) land and soil management; (iii)agro-forestry and forestry; (iv) agricultural development; and (v) downstream and reservoir fisheries management. The PIU will also initiate and gradually transfer to the BWMA other EMP activities funded by the project, including actions for: (i)monitoring of public health impacts on diseases such as bilharzia and malaria; (ii)establishment ofan environmental and social amenity flow; (iii)management of water quality in the reservoir area; and (iv) preparation and implementation of a comprehensive environmental monitoring program.

3.7 All of these actions are necessary to protect the Bumbuna Reservoir from sedimentation, improve the livelihood of farmers in the catchment area, increase economic opportunities for communities in the area, protect biodiversity, ensure adequate water quality for users of the reservoir and downstream users, ensure sufficient water quantity for downstream uses, and protect the downstream environment. After

14 commissioning of the BHP, a special-purpose project company, the Bumbuna Hydropower Company will be contractually responsible for, among other obligations, and, pursuant to an O&M management contract to be entered into between BHC and an operator (“the Operator”) maintaining ongoing environment and management programs for the operation of the dam and reservoir and the transmission facilities and right-of- way. These responsibilities will be specified in the O&M management contract for the international operator for the damheservoir and the transmission facilities.

Land Acquisition, Compensation and Rehabilitation 3.8 Reservoir Area: Laser images, GPS positioning and socio-economic impact surveys have determined varying degrees of impact in the damheservoir area. The Dam/Reservoir Resettlement Action Plan includes resettlement and compensation measures for: one village, which will be physically relocated; one village, which will lose almost all its farmland; and 31 villages which will lose a substantial part of their farmland (approximately 40 percent). In addition, four villages will be compensated, through community development compensation, for losses that occurred during the construction of the dam, the camp, access roads and the quarry in the 1980’s and 1990’s. All project-affected people will receive appropriate compensation as per impact category, i.e. new houses and other structures, new farmland, assistance to move and to prepare new farmland, and compensation for other property such as shrines. 3.9 Technical assistance and funding will be provided under this project to ensure: (a) that farmers are able to reinstall themselves on their new farms and with better agricultural techniques, through the Stabilized Agriculture Program; and (b) that individual household incomes are restored to at least pre-resettlement levels through the Livelihood Assessment and Income Restoration Program. 3.10 Transmission Line: A Transmission Line Resettlement Action Plan has been developed, even though only very limited land acquisition and resettlement is required. In line with public consultations which expressed an unwillingness to resettle and conforming to accepted utility practice in many developed and developing countries, an approach will be adopted which retains existing land use and permits transmission lines to overpass existing building and houses, provided that there is a minimum clearance between structures and the lowest conductor of 7.0 meters. Otherwise houses have to be moved and people compensated and resettled. One school near Makeni needs to be moved to an area adjacent to the present building, In addition, five dwellings will need to be moved out of the right-of-way (ROW) to adjacent areas. Provisions will be made to control future building and land use in the ROW, with the guiding principle of maintaining the minimum clearance. The transmission line RAP will be implemented prior to the energizing of the transmission line.

3.11 Implementation of the Two Resettlement Action Plans (RAPS): There will be a common resettlement plan implementation arrangement for both parts of the project. The Dam/Reservoir RAP and the Transmission Line RAP will be implemented under the responsibility of the PIU, by a unit of international and national resettlement consultants. The Resettlement Unit will also provide continuous legal assistance to the project affected people and will therefore include a legal counsel in the form of a local NGO - The Lawyers Centre for Legal Assistance. The project-affected people will participate fully in the process and each village will form a Village Resettlement Committee. The overseeing and monitoring function will be ensured by a Resettlement Advisory Group in which all stakeholders at all levels will be represented, and by an independent observer in the form of a Witness NGO.

3.12 Benefit Sharing: USCDI will develop and test an innovative institutional model for the proposed Bumbuna Trust, with the aim of sharing benefits with the indirectly affected population in the area around the reservoir and downstream of the dam. It consists of two activities:

15 Ward and Community Sub-projects. Communities will receive development benefits, based on their demands for improved public services, through sub-projects implemented by them in collaboration with ward development committees and in harmony with overall district development plans. Public services could include clearing and rehabilitation of smaller access roads, hand dug community wells and construction of latrines, management of organic waste, rehabilitation of existing school buildings and health centers.

Youth Capacity Building. Young women and men will receive training in marketable trade skills as well as business and life skills, and small grants will be given to community-based youth organizations.

A Catchment Stakeholder Forum will enable a wider group of stakeholders to have a say in the formation of the Trust, and a Advisory Group will provide overall strategic direction for the Trust. USCDI will provide technical assistance for the establishment of the Bumbuna Trust, in addition to its role in helping it develop approached and processes for benefit sharing.

Component C - Technical Assistance 3.13 This component comprises management and supervision of the activities under Component B; and support for the Bumbuna Project Implementation Unit (PIU), the Dam Review Panel of Experts (DRP), the Environmental and Social Advisory Panel of Experts (ESAP), the RAP Implementation Team and the Communications Action Program. 3,14 An international and national Environmental Management Technical Assistance team will assist the PIU in implementing the EMP, in collaboration with the Department of Environment and other Sierra Leonean agencies. The PIU will also establish its own environmental management structure to oversee implementation of EMPs prepared by the contractors for the dam and transmission line. 4. Lessons Learned and Reflected in the Project Design

4.1 The design and development of this project has benefited from a rich menu of lessons learnt from: (a) hydropower operations, (b) the findings and recommendations of the Bank’s Dam Planning and Management Action Plan (DAMAP), which supported the Water Resource Sector Strategy in 2003; and (c) other similarly complex partial risk guarantee operations. Lessons from reconstruction of post-war economies and urgent restoration of economic infrastructure are also relevant and have been taken into account. The following is a summary of the key lessons, and the design features of the project that addresses them:

a. Alternative designs and options to minimize impacts: In line with prior experience, the project development has considered alternatives and design options and environmental and social mitigatiodenhancement in an integrated way with economic, technical and financial dimensions of the project. Even though the BHP was identified as the least-cost generation option in the feasibility study in the early 1980’s, this was re-validated through a retrospective options assessment carried out in 2005. While the physical design options were fixed (e.g. dam height and location, transmission line routing), project preparation evaluated alternative designs for the environment and social management components. These actions improved the overall project design, leading to a reduction in involuntary resettlement and introduction of provisions for benefit sharing. b. Impact Assessment and Mitigation Measures: Many of the implementation and mitigation strategies are directly derived from the recommendations contained in the

16 DAMAP. These include: careful identification and assessment of downstream ecology and habitat impacts, extensive formal and informal stakeholder and project-affected- persons (PAP) consultations and participation in preparation and implementation of plans, provision of external independent monitoring, mechanisms for sharing project benefits with PAPS, adequate funding for EMP implementation and clear impact mitigation indicators.

C. Mitigating Project and Country Risks: The contractual arrangements for the completion of the BHP works are based on fixed price, date specific contract, with a guarantee to deliver 90% of the nameplate capacity of the BHP generation units. This arrangement, together with the coverage of political and non-commercial risks through the Bank’s PRG, has proved to be an effective risk mitigation package in similarly complex projects implemented in challenging political-economy environments with low capacity, such as the Haripur Power Project in Bangladesh (2000) and the Azito Power Project in Cote d’Ivoire (1999), and more recently the Nam Theun 2 hydropower project in Laos. The partial risk guarantee has made it possible to raise US$38 million in commercial financing - a significant achievement for a high-risk, post-conflict country - and enabled private sector participation. The project has contractual arrangements that provide an equitable and bankable risk distribution among the various parties in a public-private sector project; and features appropriate management of sector revenues by an independent trustee, to ensure that payment obligations to different parties are met in a timely fashion. d. The importance of community participation: The project incorporates a participatory approach involving recently elected local councils, traditional leaders and communities to design and implement of mitigation, compensation and livelihood restoration packages, and introduce piloting and feedback mechanisms to enhance effectiveness of the proposed measures; all done in a post-war context. e. The project supports the establishment of a watershed management authority to introduce transformations in agriculture and land use practices in the Bumbuna watershed that will both reduce potential soil erosion and address unsustainable agriculture in a manner that advances poverty reduction in the Bumbuna catchment, the poorest region in the country. f. Protection of the Biodiversity Inheritance: The project supports a biodiversity conservation area in Bumbuna catchment to provide an environmental offset that will reduce pressure on habitat and species, particularly chimpanzees (an endangered species), which would otherwise not survive in this area with current human pressures.

g- Need for Effective Communication with Stakeholders: The project includes a significant communications and consultation component targeted to project stakeholders. The results of initial consultations during project preparation have been taken into account in the project design. An indication of broad public support for the project is that it is featured on the SLL 5000 bill.

5. Alternatives Considered and Reasons for Rejection

5.1 A number of analyses, including least cost analyses, have been carried out on the possible alternative energy sources to accommodate the suppressed demand and expected demand growth in Sierra Leone. The conclusion is that the proposed BHP is the best alternative to meet the double objectives of improving energy access and reliability in support ofeconomic growth and poverty alleviation.

5.2 The two major alternatives for power generation in Sierra Leone are limited to thermal power and hydroelectric power. Except for small non-commercial deposits of coal, Sierra Leone is not endowed with

17 fossil energy resources. The total hydroelectric potential is significant and has been estimated at 1,200 MW. Other renewable energy sources such as wind, solar and biomass do not present any large-scale potential source of electricity, although they are potentially cost-effective sources of electricity for smaller scale schemes for electricity supply in areas not currently served by the grid. Interconnection with neighboring countries will only be an option in the medium-term. The West African Power Pool (WAPP) Masterplan has studied an interconnection with Guinea, but this is not scheduled before 2015. The link with Guinea would go through BHP to Linsan in Guinea. In the end, three specific alternatives to the project were considered and rejected.

5.3 Alternative 1: The least-cost all thermal diesel generator alternative that was considered involves the construction of additional diesel power plant. Although this alternative benefits from not having to construct a transmission line (plant can be located closer to Freetown), and the capital costs of diesel generators is lower per kW installed, the lifetime O&M and fuel costs outweigh these benefits compared with BHP. The cost differential between the all thermal least cost and BHP least cost scenario is about 25% for all demand scenarios that were considered.

5.4 Alternative 2: Alternative hydropower sites or a set of small-hydroelectric sites for which the aggregate power would add up to the size of BHP could also present an alternative. In total, 22 potential hydroelectric sites have been identified in Sierra Leone. Preliminary design and cost estimates were prepared to rank the sites in their economic merit order. Bumbuna Falls, the site of BHP, offers the most attractive hydroelectric option to expand and diversify power supply on the basis of hydrology, head and other technical characteristics, and its proximity to the load center, Freetown. An alternative ofchoosing a subset of small-hydroelectric sites was discarded due to the added institutional challenges it imposes at a time when NPA faces fundamental operational problems. With the addition of revenues from carbon finance, the hydropower cost alternative is made more attractive and sustainable on its margins.

5.5 Alternative 3: A thermal coal plant that would be operated on the basis of imported coal was also found not to be least cost compared with BHP.

C. IMPLEMENTATION

1. Partnership Arrangements

1.1 In order to qualify for an IDA PRG, the Project had to be restructured as a public-private partnership (PPP). The financing of the BHP involves a number of other donors, including AfDB, the Government of Italy, and the OPEC Fund. In addition, the GoSL is providing funding toward the local cost of project completion, These arrangements were confirmed at a donors’ meeting, chaired by the Vice President of Sierra Leone, on September 11, 2003. It is estimated that 64 percent of the cost ofcompletion ofthe project will be financed by the public sector with the remaining 34 percent to be provided by the private sector.

1.2. Under the PPP, BHC, a special purpose company, will be created with Salcost and GoSL as shareholders holding 95 percent and 5 percent of the equity respectively. BHC will negotiate and obtain a commercial bank loan, and, in parallel, will be awarded a concession by the GoSL for operating, maintaining and managing the project for a period of 20 years. The BHC, through Salcost will assume: the completion risk, under a lump sum, date-certain contract. BHC by itself will assume: (a) the interest rate risk, since the commercial loan will carry a floating interest rate; (b) the operational risk, which is significant given the legacy of project implementation (e.g., potential malfunctioning of equipment, which has been lying

18 uninstalled for approximately 7 years); and (c) a substantial non-payment risk, resulting from the weak financial situation ofNPA, the offtaker. These points are further elaborated in Tables 1 and 2 below.

1.3. The completion of the construction of the BHP is not included in the concession agreement. It remains the responsibility of the GoSL and is not a risk borne by BHC. However, the GoSL will enter into a Wrap Up Agreement under which the private sector constructor will bear the construction risk.

2. Institutional and ImplementationArrangements

2.1 The institutional arrangements for government direction, cross-sector coordination and management of the BHP implementation are at three levels: (1) a special Cabinet Sub-committee to provide policy oversight; (2) a Technical Committee reporting to the Cabinet Sub-committee and providing inter-agency coordination for all aspects of the project implementation and supervision of the PIU; and (3) the Bumbuna Project Implementation Unit (PIU). All contracts related to the completion of the project, including those for construction contractors under Component A and the safeguard studies and project activities under Component B and Component C, will be administered by the PIU. The PIU will have a team ofnational and international staff led by a Sierra Leonean Director and an expatriate Manager. Annex 6 provides further details on the responsibilities and composition of the Committees and the PIU staffing. The institutional and implementation arrangements for the operation phase of the project are described below.

Component A BHP (Contracts A2/B and C)

2.2 Construction of the BHP initially began on the basis of the Hydroelectric Project Contracts. Following the restructuring of the BHP, the private sector, through BHC/Salcost, will bear the construction risk of the BHP. Salcost will enter into a Wrap Up Agreement (the “Wrap Up Agreement”) with GoSL, pursuant to which the three agreements included in the Hydroelectric Project Contracts will be complemented, by Salcost’s undertaking to complete the construction ofthe BHP for (i)a fixed cost, (ii)on a fixed date of commissioning, and (iii)with a guaranteed capacity on the date of commissioning. The completion of the construction is expected to take 24 months.

2.3 BHC will be established between Salcost, holding 95 percent of its shares, and GoSL, holding the balance 5 percent ofBHC’s shares. This new company would have a small amount ofnew equity as most of the new financing will be in the form of debt. BHC will be paid a concession fee for the operation of the BHP. It would also be the borrower ofthe new commercial debt required to complete the project.

2.4 BHC will enter into a Concession Agreement for a term longer than the term ofthe repayment ofthe debts incurred for the financing ofthe BHP. Under the Concession Agreement, BHC will operate, maintain, and manage of the BHP. The concession fee will be structured so as to enable the GoSL to comply with a number of obligations incurred for the construction of the BHP, both before and after this restructuring (including a number ofhouseholds affected during the initial construction works (See Section D paragraphs 3 to 5 and Annex 17). Through the Concession Agreement, the GoSL will assume the risk of force majeure, including political force majeure (currency convertibility and transferability) or natural force majeure,

2.5 BHC will enter into an Operating and Maintenance Agreement. Because Salcost is a hydropower plant builder and not an operator, an international operating utility will be competitively selected under Bank procurement guidelines to maintain and operate the completed project on behalf of BHC (the “Operator”). The Operator will assume part ofthe operating and maintenance risk.

19 2.6 BHC will enter into a Power Purchase Agreement (PPA) with NPA. The GoSL will guarantee NPA’s obligations under the PPA. Accordingly, the power generated will be supplied to NPA, and NPA will cover all operation and maintenance costs (including the constitution of contingency reserves) and all debt service of BHC not otherwise covered. The term of the PPA will be consistent with the terms of the debts to be repaid. Through the PPA, NPA will bear part of the operating risk related to hydrology which traditionally is taken by the utility.

2.7 The market risk will be borne by NPA and by the GoSL, through its guarantee ofNPA’s obligations under the PPAa2

2.8 Part of the GoSL’s obligations regarding safeguard measures, to be implemented in connection with the construction of the BHP, will be passed on to Salcost through the Wrap Up Agreement, and part of its obligations to be implemented in connection with the operation of the BHP will be passed on to BHC through the Concession Agreement, and to the Operator through the O&M Agreement.

2.9 BHP’s risk allocation differs from most projects for which IDA usually provides a PRG, because it must take into account the following legacy issues: (i)the project was 85% complete, when it was interrupted by the civil war; (ii)the electro- and hydro-mechanicalequipment has been stored for the past 7 years; (iii)all original supply contracts are no longer in force and all warranties or performance guarantees are void; (iv) the original construction contracts are still in force; (v) the principal contractor Salcost is owed approximately US$45 million for delayed payments and interest, which the GoSL has agreed to pay out of the project revenues; and (vi) the two main risks associated with any hydropower project investment, the geotechnical and hydrological risks, which are normally addressed through design and construction, can no longer be changed. Nevertheless the project contracts allocate the commercial, technical, and political risks among the parties best able to manage them.

* The strengthening ofNPA’s management through a management contract, under the IDA supported Power and Water Project (Cr. 3945 - SL), should result in improved operational and commercial performance. 20 Fig.1 - Contractual Structure

5% Equity /$z Ownership @

Project Cash Flow Application

2.10 It is expected that BHP’s cash flow will provide a substantial source of Project financing revenue. The tariff paid by NPA under the PPA will be determined so as to cover the operating costs and the debt service of BHC, including the constitution of the necessary contingency reserves (for maintenance and debt service) that are not financed from other sources (such as insurance indemnities). However the tariff will not enable BHC to generate distributable profits. On an annual basis BHC and NPA will agree on the correct tariff setting in order to enable BHC to operate in an efficient manner. The level of tariff payment will be synchronized with the seasonal pattern of electricity generation (dry season; rainy season). An operational risk management plan, satisfactory to IDA, will be prepared in consultation between BHC and NPA. In the event that all contingency reserves are exhausted, BHC would raise its bulk power tariff to cover incremental requirements. Because the Bumbuna generated power will be substantially less expensive than any other available alternative option it is expected that the resulting increase of the Bumbuna power price will be acceptable to the rate payers. Should BHC’s situation deteriorate significantly, BHC and NPA would also consult in order to avoid placing excessive hardship on NPA.

2.1 1 A payment waterfall mechanism, involving all interested parties, will be put in place in order to ensure that the tariff is allocated to the payment of expenditure and debts according to an agreed upon order of priority: (1) operating and maintenance fees and expenses would be paid first, prior to (2) the senior debt owed to the IDA guaranteed lender, prior to (3) the amount ofthe concession fee intended to enable to GoSL to service the debt owed to Salcost for works completed during the initial construction and not paid, and last (4) the amount of the concession fee intended to enable the GoSL to repay other debts incurred during the initial construction phase (consultants and affected persons). Category 3 and 4 are subordinated to other categories in terms of repayment and termination payments.

21 Risk Allocation under Component A

Table 1: Project Risks Allocation

Proposed IDA Guarantee Coverage

2.12 The proposed IDA PRG will guarantee the debt service of the IDA guaranteed commercial loan. It will be callable by the IDA guaranteed lender only. The IDA Guarantee will cover any outstanding scheduled payment of principal and interest (excluding default interest and breakage costs) when the borrower (BHC)’s failure to make such payment in a timely manner is a direct result of GoSL’s breach of its payment obligations under the Concession Agreement or the guarantee of NPA’s obligations under the PPA. Therefore not every default ofthe GoSL will trigger the IDA PRG, but only a default of the GoSL that causes a default by BHC towards the IDA guaranteed lender (exclusive of other creditors). The amount payable under the IDA PRG will be determined by expert or by an arbitration award rendered against Sierra Leone in accordance with the provisions of the Concession Agreement, or the government guarantee, undisputed by the GoSL. As all IDA guarantees, the proposed PRG may not be accelerated.

2.13 Reporting Requirements and Project Monitoring. Under the project contractual agreements, BHC will be required to make available the following reports and any other data that the lenders and IDA may reasonably request:

a) Quarterly operation reports; annual risk managementhnsurance reviews; and annual operating plans and maintenance programs;

b) Annual monitoring reports on compliance with applicable national and local environmental requirements; and with environmental and social policies, including: the World Bank Group’s safeguard policies; environmental, health and safety guidelines; and Environmental Action Plans; and

c) Yearly audited financial statements for BHC.

2.14 Auditing Arrangements. BHC will have its financial statements for each fiscal year audited in accordance with internationally acceptable accounting and auditing standards, by an independent auditor satisfactory to the lenders and IDA; and will ensure that IDA receives the report from the auditors and the audited financial statements.

In case of Force Majeure (and other standard exceptions) only. 22 Component A: 161 kV Transmission Line (Contract D)

2.15 It is anticipated that Contract D will be implemented by SAE Power Lines s.r.1. (formerly ABB Power Technologies S.p.A.) under a contract to be signed with the GoSLPIU. The OPEC Fund will provide financing for this component. Once this component is completed, the transmission line and substation will be added to the BHP concession.

Component B

2.16 The PIU will be responsible for managing all Component B activities and report to the Technical Committee on the progress in project implementation. The ESAP will formally comment on the Terms of Reference for all services and procurement contracts required to implement the subcomponent activities for the Resettlement Action Plans (RAPs), the Dam sitemeservoir and transmission line, the Environment Management Plan (EMP) studies and mitigatiodmonitoring activities, as well as the contractor EMPs incorporated in Contract A2/B and C. Annexes 6 and 17 provide more details on the implementation arrangements for the EMP and the RAPs.

2.17 The PIU Environmental Specialist and the PIU Environment team will supervise and monitor the implementation of, and compliance with, the Contractor EMPs that start immediately with the resumption of the construction under Component A. In parallel, the PIU will supervise teams preparing the additional baseline studies required before reservoir impoundment and initiate the other EMP activities in Component B through subcontracts and coordinating actions. Similarly, the Resettlement and Social specialist in the PIU will supervise the consultant teams implementing the RAPs.

2.18 The PIU will subsequently lead the effort to establish an administratively lean entity referred to as the Bumbuna Watershed Management Authority (BWMA). This will be a small organization responsible for implementation of the Land Management Strategy and Action Plan designed to introduce integrated watershed management practices in the Bumbuna catchments that involve agriculture transformations, together with reservoir and downstream fisheries programs and the biodiversity conservation measures. The PIU would then gradually transfer responsibilities for these startup activities funded by the project under Component Byincluding the establishment ofthe BCA. A trust, provisionally called the Bumbuna Trust, will be established before commissioning the BHP to provide a longer-term sustainable financing mechanism for continued watershed management, conservation and benefit-sharing in the basin through the mechanisms and source of funds described in Annex 2.

Component C

2.19 The Bumbuna PIU will also manage this capacity building component. The ESAP and the Dam Review Panel (DRP), which were constituted with Project Preparation Facility funds, are functional and the hydropower engineer who will also perform as the manager of the PIU has been recruited. The activities for implementing the Communications Program are defined in the Communications Action Plan (see section 4).

3. Complementary Projects

Several complementary projects will enhance the BHP implementation and performance.

23 Bumbuna Trust

3.1 Prior to commissioning of the BHP project, the Government of Sierra Leone will establish the Bumbuna Trust. It is anticipatedthat the Trust will have different windows to fund:

0 The ongoing benefit sharing with communities in the basin (Le. continuation of the USCDI activities, extended to other communities in the Bumbuna Catchment and Seli River Basin); 0 The BWMA, as identified in the EMP; 0 The BCA as identified in the EMP as a conservation offset; and 0 Potentially, the Seli River Development Authority (SRDA).

3.2 The Trust will also have a short-term window to fund legacy compensation payments to communities whose land and assets were acquired in the 1990s during construction of the transmission tower pads, as identified in the Transmission RAP. These will be paid through Project revenues into the Trust. It is anticipated that each of the programs financed by the Trust windows will be administered and managed by separate legal entities with their own governance and management teams.

3.3 Financing sources of the Trust will be: (i)a small portion of the BHP power sales, and (ii)the Bumbuna Carbon Project (see below). It is anticipated that GoSL will be able to leverage contributions from Trust Partners (such as interested international NGOs, private sector interests or bilateral donors) who are interested in supporting one or more financing windows.

Bumbuna Carbon Project

3.4 The World Bank's Carbon Finance Business has agreed to provide funds to the GoSL for the avoided thermal generation (greenhouse gas emission reductions in the power sector) that the BHP will deliver through the Netherlands. Funds from the EWA would be deposited in the Bumbuna Trust in an account to fund ongoing benefit-sharing windows.

Power and Water Project (PWP, Cr. 3945-SL)

3.5 The IDA Power and Water Credit (IDA Cr. 3945-SL: US$35 Million) is financing activities to establish the enabling policy and institutional environment and physical provisions to successfully integrate the electricity supplied by BHP into the Western Area Grid system. These are discussed in Annex 2, and include regulatory reforms and investments in the restoration of thermal capacity and transmission and distribution capacities, which are essential to enable a mixed hydro-thermal operation and to deliver power to grid consumers in an efficient and sustainable manner.

4. Communication Program

4.1 The inclusive communication process initiated during project preparation has been included in the project as a comprehensive CAP, to ensure that two-way communication with the various stakeholders - project-affected communities, traditional community leaders, town and district councils, women, youth, elders - continues, and that their concerns are promptly and transparently addressed. This communication process is key to maintaining consensus for the project and thus for ensuring its success.

24 4.2 CAP consists of the following main activities:

(a) Communication and consultations with residents of the project area, including regular interaction with local authorities and establishment ofcommunity radio;

(b) Coordination of and assistance to involved institutions, including the PIU and the relevant ministries and authorities;

(c) Relations with the mass media and NGOs, including the production of radio and television programs and the organization of workshops to share experiences and information; and

(d) Communication with the international community, particularly donors and international NGOs, to disseminate positive information and lessons about the project.

4.3 The Communications Unit (CU) will: (i) set up monthly working plans, to be discussed and approved by the Technical Committee, (ii)assess the degree of participation of the key stakeholders during implementation; and (iii)provide project updates and status reports. All of the project's public documents will be made available through a website and at suitable locations at the central and provincial levels. The CU will coordinate consultation activities with Environmental Impact Assessment (EIA) and RAP teams involved in the reservoir and transmission line areas and will sustain dialogue aimed at encouraging informed decision-making and stakeholder ownership.

5. Monitoring and Evaluation of Outcomes/Results

5.1 Carefill and comprehensive monitoring and evaluation (M&E) is essential for the success of the project. The PIU will monitor and evaluate the indicators and results for each component as outlined in Annex 3.

5.2 In addition, data from the PIU, the National Commission for Privatization (NCP), the CU, and other implementing agencies will be aggregated at the project level to give a holistic picture of progress in all areas of the project. M&E reports will be delivered in the first year of implementation on a quarterly basis (baseline confirmation). Thereafter such reports will be submitted biannually until the completion of the Project. The mid-term review will be held in November 2007.

5.3 The key performance indicators used to monitor BHF' performance will include:

0 Generation Availability, Forced Outage Rates and Duration 0 Transmission Availability, Forced Outage Rates and Duration

0 Plant Efficiency

0 Operating Budget Performance Environmental Compliance

0 Employee and Public Safety

5.4 There will also be a monitoring and (periodic) verification plan for the purposes of carbon finance.

6. Sustainability

6.1 The economic and political implications of the proposed project are considerable as it is important for redressing imbalances in the economic and social development of Sierra Leone. In addition, because it is the 25 country’s priority infrastructure project, it receives close attention at the highest decision-making levels in Freetown as well as extremely high public interest and scrutiny of its progress. Hence, the Government’s commitment to and sense ofownership ofthe BHP is extremely high.

6.2 Government commitment to power sector reform and to the completion of the BHP. The sustainability of the BHP is primarily supported by GoSL’s commitment to complete the project and let the private sector operate it until, at least it, pays back its debts. The BHC is being created solely for the purpose of being responsible for the management of the BHP’s operations, including contracting out its operations and maintenance to a very experienced international hydropower utility, so as to enable it to pay back the Commercial Loan and other project obligations. Project sustainability also rests with the implementation ofa number of policy actions and effective achievement of their respective objectives. These actions include the selection of a management contractor for NPA and the promotion of economic tariffs for sales of power to improve both the efficiency of the management of its operations and the long-term financial viability of the company .

6.3 Other important policy actions contributing to the sustainability of the project include: (a) the Amendment of the existing NPA Act to allow for a private entity to run the BHP; (b) the enactment a new 2005 Electricity Law and NPA Act and the establishment of a sector regulatory framework, which will help create an enabling environment conducive to transparent private sector participation in the energy sector; and (c) the creation of a National Energy Policy Planning and Coordinator Unit (NEPPCU) within the MoEP to better plan for the least cost development ofthe sector. Finally, the transmission and distribution investments to reduce technical losses, as well as the commercial actions taken by the new management contractor to significantly reduce technical and non-technical losses and improve collection losses, are expected to yield substantial improvements to ensure the long term viability ofthe power systems ofNPA.

6.4 Community willingness and capacity to manage and sustain services in relation to the safeguard mitigation actions: to help communities manage their services in the long-term, the institutional capacity of community-based organizations will be strengthened through hiring consultants in: operations and maintenance, financial management, hygiene, education, and effective use of electricity services, as appropriate. This will be done through sensitization sessions by teams composed of Bumbuna district level staff in association with the consultants’ sociologist and community development specialists (recruited specially for that purpose). Management of operation and maintenance of completed community facilities will be the sole responsibility of the community.

6.5 Because of the impoundment of the reservoir, people and fauna (including chimpanzees) will likely be limited to a smaller area, which will cause a habitat squeeze. This will further decrease the sustainability of the present agricultural shifting cultivation system as well as increase the pressure on the chimpanzee habitat. The project will finance the development and implementation of a Land Management Strategy and Action Plan, a Land and Soil Management Program, an Agro-forestry and Forestry Program, and an Agricultural Development Program for the Bumbuna Watershed. The potential for ecotourism development will be studied and an action plan developed. These activities will be executed by the BWMA and financed through the establishment of a Bumbuna Watershed Management Trust Fund, partly financed from the electricity tariff, to fund the activities of the Authority, including the proposed environmental offset (Bumbuna Conservation Area).

6.6 It is expected that these mitigation measures will improve the livelihood ofthe extremely poor farmer population, reduce siltation ofthe reservoir, protect the habitat for the chimpanzee population, other primates and other biodiversity, and ensure the overall sustainability of the project. Additional measures to be taken

26 under the project that will strengthen sustainability include: (a) an Emergency Preparedness Plan (EPP) will be prepared to warn and protect people downstream in case of an emergency; (b) an aerator mechanism to reduce the chance of stratification of the reservoir and improve water quality will be included in the reservoir design; and (c) a benefit-sharing mechanism will be established in the form of the USCDI (see Annex 4) through which indirectly affected communities around the reservoir can benefit from social and economic development activities. The Government’s commitment to implement all these mitigation measures constitutes another strength on which the project’s sustainability is founded.

7. Critical Risks and Possible Controversial Aspects

7.1 The country context in Sierra Leone poses four fundamental risks to the implementation and completion of the Bumbuna Hydroelectric Project. These are: (i)limited institutional capacity; (ii) weakness in governance resulting in poor service delivery; (iii)internal economic shocks that could lead to resurgence of violence in Sierra Leone, also fueled by unemployment among the youth; and (iv) escalation in regional turmoil, especially with respect to the situation in neighboring Liberia.

7.2 Bank interventions in Sierra Leone, including the PRSP, are designed to mitigate and limit exposure to these risks, Enhanced partnership and participation by civil society organizations, the private sector, other donors, and academic institutions in development programs, as well as in analytical work, are key elements in enhancing the sustainability of Bank interventions. Sierra Leone’s very impressive post-conflict reform track record has depended on strong political and participatory consensus both within and outside government.

7.3 The BHP is designed to limit the impact of these risks on the project. It is planned as a PPP, to be implemented and managed by the private sector through the BHC. As a result, the risks of weak governance and limited institutional capacity that would otherwise constitute key performance risks for a public sector entity are mitigated. The construction of the dam will bring about some economic growth in the country (see Section Dl), and thus help mitigate, to some degree, the risk of an internal economic shock. Moreover, the USCDI will provide for community development activities around the site where the hydroelectric dam is being constructed and includes among others ward and community subprojects and youth capacity building activities. This will additionally mitigate the risk of internal economic shocks. See table 2 for a detailed breakdown.

27 Table 2: Risks and Risk Mitigation Measures

Low commitment of GoSL to the project and the power sector, including the reform agenda Non-reduction of the GoSL's role in the management of sector operations BHP, upcoming management contract for NPA. Failure to create a conducive environment for sector generation and investment.

Inability of NPA to honor the PPA and thereby frustrate the BHC to service putting in place a management contract. The project debt. payment procedures (including the 'lock-box' and

Failure to provide a sustainable program of community development initiatives for the people indirectly affected by the Project.

The construction of large dams projects involving resettlement are very sensitive for their possible negative social and 1 NGOs to understand and address environmental impacts. This may make see Annex 7) This will, inter alia, getting multi-stakeholders support for the Id Bank commitment toward the introduction of fair project difficult unless disclosure of initiatives that promote high standards of social information and transparency are properly , environmental protection and poverty alleviation linked to handled. Lack of long-term sustainability of the EMP and the USCDI suoervision I Subprojects based on community demand and managed by Moderate Lack of on-eoine.I - support.. for maintenance and operation of Upper Seli subprojects. communities; links to relevant sector ministries established Limited market for youth trained in the Immediate job opportunities with subprojects and linkages to other Substantial work uroerams in the area Upper Seli Initiative rL , Risk to Component Results Ristk .\litigation Measures I RiskRating Non -completion/commissioningof the Seasoned norld-class contractors under the SuDervision an 1 Low'Modcrate civil works, the hydraulic structures of the experienced engineering consultant are undertaking these activities. In dam, the electromechanical equipment and addition, this work will be under the overall supervision ofthe BHP- the transmission line on time and within PIU, which is being assisted by a world-class hydropower utility budget (Contracts M/B,C and D). (Hydro Quebec International - HQI). The scope ofwork has been defined in condition assessments undertaken by the contractor and reviewed by the engineering consultant. In addition, HQI is undertaking an independent assessment of the scope and terms ofthe proposed contracts, on behalf of the BHP-PIU. These project components will be closely monitored by the GoSL and the donors. Unsatisfactory implementation ofthe An experienced international consultant will be hired in the BHP-PIU Environmental Management Plan (EMP). to manage the EMP, which is adequately resourced. The status ofthe EMP will be reported monthly by the BHP-PIU and will also be

Unsatisfactoly implementation ofthe RAPSincluding land acquisition, to manage implementation of the RAPS,which are adequately compensation and rehabilitation system for resourced. The status of implementation of the RAPSwill be reported the dadreservoir area and the on monthly by the BHP-PIU and will also be closely monitored by transmission line. the ESAP as well as the GoSL and the donors. Inter alia, a witness NGO will be hired to monitor activities such as compensation arrangements and signing of agreements. Overall Risk Rating Substantial

28 8. Grant and Guarantee Conditions and Covenants

8.1 Conditions for effectiveness of the Development Grant Agreement and the IDA Guarantee Agreement (beyond standard IDA guarantee conditions) are as follows:

For the IDA Grant:

The GoSL has adopted and furnished to IDA the PIP, in form and substance satisfactory to IDA;

The GoSL has opened the Project Account and credited it with the Initial Deposit;

The GoSL has enacted amendments to the National Power Authority Act, a new electricity law, and regulations setting up the GoSL’s regulatory body for the electricity sector, all acceptable to IDA;

The GoSL has established a fully operational financial management system and procedures satisfactory to IDA;

The PIU has been staffed with personnel in numbers and with qualifications and terms of reference satisfactory to IDA, and the GoSL has appointed the independent auditors; and

IDA has received a legal opinion in form and substance acceptable to IDA, from counsel acceptable to IDA that the DGA and the IDA Guarantee Documents have been validly entered into among their respective parties;

For the IDA guarantee (usual and customary conditions precedent for a financing of this type, including but not limited to the following):

BHC, with Articles of Association acceptable to IDA, has been duly established in accordance with the laws of Sierra Leone;

The Guarantee Agreement, the Indemnity Agreement and the Project Agreements (collectively the “IDA Guarantee Documents”) have been executed and delivered and all conditions precedent to their effectiveness have been fulfilled;

Execution of all Transaction Documents and Finance Documents;

Delivery of all legal opinions;

Effectiveness of insurance required by the Finance Documents to be in effect at Financial Close and the naming of finance parties as co-insured under those insurance policies and of IDA as named insured under third-party liability insurances;

Creation ofthe Security package in favor of the IDA guaranteed lender;

Award and signature of the O&M Agreement;

Completion of the contractual arrangement for the flow of funds during the construction and operation periods, including the Payment Waterfall Agreement;

Effectiveness of all required insurance (to include IDA as an additional insured on third-party liability insurance); and

29 (g) Payment of the Initiation Fee, the first installment of Processing Fee, and the first installment of Standby Fee and the Guarantee Fee.

Dated covenants and conditions for the Grant are as follows:

8.2 For environmental and social safeguard issues:

Before impoundment of the reservoir, the following should be completed: (i)one village (Matombe) that will be physically relocated to a new site should have received new land and the first crop should have been planted; (ii)one village (Waia) that will lose almost all their land should have received new land and the first crop planted; (iii)villages that will lose a substantial part of their land (in the RAP identified as losing approximately 40 percent), will have received and planted new land; Setting up of the Bumbuna Watershed Management Authority after test impoundment and before final impoundment; The gazetting of the Bumbuna Conservation Area (BCA); Satisfactory completion of the GoSL, Salcost, and BHC’s respective EMPs; The setting up of the Bumbuna Trust, using proceeds of the sales of Bumbuna for the purposes described in part 3 of this Section; and Award and signature of the O&M Agreement and satisfaction of its conditions of effectiveness.

8.3 For public expenditure and revenue management arrangements:

The GoSL shall establish and maintain a financial management system, including records, accounts, and financial statements in accordance with consistently applied accounting standards acceptable to IDA, adequate to reflect the operations, resources and expenditures related to the Project.

8.4 For financial management arrangements the GoSL shall:

Have the financial statements referred above for each fiscal year (or other period agreed to by IDA), audited, in accordance with consistently applied auditing standards acceptable to IDA, by independent auditors acceptable to IDA;

Furnish to IDA as soon as available, but in any case not later than six months after the end of each such year (or such other period agreed to by IDA), (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year (or other period agreed to by IDA), as so audited, and (B) an opinion on such statements by said auditors, in scope and detail satisfactory to IDA;

Furnish to IDA such other information concerning such records and accounts, and the audit of such financial statements, and concerning said auditors, as IDA may from time to time reasonably request; and

For all expenditures with respect to which withdrawals from the Grant Account were made on the basis of statements of expenditure, the GoSL shall:

30 (i) retain, until at least one year after IDA has received the audit report for, or covering, the fiscal year in which the last withdrawal from the Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;

(ii) Enable IDA’s representatives to examine such records; and

(iii) Ensure that such statements of expenditure are included in the audit for each fiscal year (or other period agreed to by IDA);

8.5 For implementation, monitoring and evaluation arrangements:

(a) Without limitation upon the GoSL’s progress reporting obligations, the GoSL shall prepare and furnish to IDA a financial monitoring report, in form and substance satisfactory to IDA, which:

(i) Sets forth sources and uses of funds for the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Grant, and explains variances between the actual and planned uses of such funds;

(ii) Describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and explains variances between the actual and planned Project implementation; and

(iii) Sets forth the status of procurement under the Project, as at the end of the period covered by said report.

(a) The first FMR shall be furnished to IDA not later than 45 days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Project through the end of such first calendar quarter; thereafter, each FMR shall be furnished to IDA not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter.

8.6. For operation and maintenance:

Satisfaction of the conditions of effectiveness of the O&M Agreement no later than 12 to 15 months after notice to start the works issued in accordance with the Wrap-Up-Agreement.

9. Main Features of the Proposed Financing Package

9.1 In view of the substantial amounts previously invested, the parties are reluctant to inject additional equity into the BHP. BHC’s equity will therefore remain symbolic.

9.2 The main financing of the restructured BHP consists in a new loan (the “Commercial Loan”) to be provided by a commercial bank to BHC with the support of the IDA guarantee. The terms and conditions of the Commercial Loan are yet to be finalized. The Commercial Loan will be denominated in Euro, for an amount equivalent to US$38 million, and have a final maturity comprised between 10 and 15 years. The commercial bank’s remuneration (fees and interest rate) is yet to be determined, to IDA’s satisfaction.

9.3 Additional resources needed for the financing ofthe BHP over time will be provided by its cash flow.

31 10. Project Cost Estimate

10.1 The project cost estimate to completion is set out in Annex 5. It covers all the project components described in Section B3 and Annex 4. For each component, the cost estimate is broken down into the base cost (2004 prices), physical contingencies, and price contingencies and interest during construction (IDC) for Contracts A2/B and C.

Component A -Hydroelectric and Transmission Infrastructure

10.2 The cost estimates for Contract (A2/B); Contract C and Contract D are based on the results of the condition assessments that were undertaken by the contractors (Salcost in the case of Contracts A2/B and C, and ABB - now SAE - in the case of Contract D) under the supervision of the engineering consultant. In addition, the cost estimate for Contract A2/B reflects the recommendations of the DRP in relation to an additional asphalt layer for the dam and slope stabilization above and below the dam crest access road and the test impoundment. Independent reviews of the cost estimates for Contracts A2/B and C have been undertaken on behalf ofthe BHP-PIU by their consultants, Hydro Quebec International (HQI),of Montreal.

10.3 The cost estimates for Contracts A2/B and C, prepared by the consultant, already include price contingencies. Preliminary results of the HQIreview indicate that the cost estimates for these components also include a sufficient cushion to cover physical contingencies in the range of 5-10 percent. Because the defects liability period for the electromechanical equipment has expired, a special reserve fund of US$0.97 million will be established for Contract D. In addition, an interest during construction (IDC) allowance of 10 percent has been included for Contracts A2/B and C. For Contract D, physical and price contingencies of 5 percent each have been allowed.

Component B - Environmental Mitigation, Resettlement, Watershed Management, and Benefit Sharing

10.4 The cost estimates for the physical components and implementation of the EMP and the RAPs are based on the recommendations of the EL4 and the RAP studies for the dadreservoir area and the transmission line. Physical and price contingencies of 5 percent each have been applied.

Component C - Technical Assistance

10.5 The cost estimate for the construction supervision of the Project is identical to the contract signed between the PIU and the engineering consultant. Inter alia, this contract requires the consultant to prepare an impoundment plan, an Emergency Preparedness Plan (EPP) and an O&M plan. The cost estimates for the management and supervision ofthe EMP and the RAPs are based on the EIA and RAP study estimates. The cost estimate for the support for the PIU is based on information provided in the AfDB appraisal document. The cost estimates for the DRP and the ESAP are based on the number ofmeetings to be organized (1 for the DRP and 6 for the ESAP). Physical and price contingencies of 5 percent each for the DRP and the ESAP have been applied.

D. APPRAISAL SUMMARY

1. Economic and Financial Analyses

Economic Summary

1.1 The analysis of economic justification was carried out in three steps: (a) confirmation of the need for the Project, based on assessment of the current situation of power market and its future prospects as well as the role of the existing supply infrastructure to meet demand; (b) verification of the project as the least-cost

32 means ofmeeting the projected future demand; and (c) the profitability, from the viewpoint ofthe country, of the investment in the project, as measured by the economic rate of return. The results of this analysis confirmed: (i)the existence ofa market for the BHP power; (ii)that the BHP is the least-cost project, when compared with the alternatives considered; and (iii)that the BHP has an EIRR of approximately 41 percent based on the costs to complete the project. When the full costs of implementing the project are considered, the EIRR is estimated to be approximately 15 percent. The economic analysis includes environmental mitigation costs.

1.2 The total costs of BHP as per its financing plan are US$92 million. To arrive at the economic costs, any costs of financing are deducted as the project is to be assessed according to the project's quality independent of the type of financing. Thus, the debt service reserve, interest during construction and other price contingencies need to be deducted to arrive at the project's economic costs of US$83 million. At a total economic cost for completion of US$83 million, the completion of the BHP plant (to be commissioned in 2007) is part of the least-cost expansion plan of Sierra Leone's power system. Costs incurred until the cessation of construction ahead of the civil war amount to around US$200 million. This amount can be considered as sunk. The EIRR is robust at 41%, which compares favorably with the opportunity cost of capital at 10%. Table 3 gives an overview ofthe key economic data.

1.3 The primary quantifiable economic benefits of the project include: (i)the revenue generated from the sale of electricity; and (ii)the revenue generated from the sale of carbon credits. Environmental benefits have not been quantified.

1.4 The primary quantifiable economic costs: are (i)the total investment costs to complete the hydroelectric and transmission structures; (ii)the O&M costs; (iii)costs ofenvironmental mitigation and area development, and (iv) technical assistance.

Table 3: Economic Analysis (in US$ million, NPV at 10%)

Present Value ofEconomic Flows Base Case Including pre-civil war costs (Pre-civil war costs are sunk) Benefits 517 517 Investment Costs 83 283 O&M Costs 79 79 Net Benefits 355 155 EIRR (in '30) 41 15

1.5 The major macroeconomic impacts ofthe project are expected through the reduction ofthe fuel costs for thermal power especially during the wet season. Once the hydroelectric plant is operating in 2008, the annual fuel bill will be reduced by US$12 million or 15% compared with an all-thermal scenario. By 2019 the decrease in the annual fuel bill would be even higher at US$17 million or 34% compared with an all- thermal scenario. This in turn would reduce Sierra Leone's trade deficit in 2008 by 5 to 6%. But the reduction in the use of mineral fuels will lead to a reduction in Government tax revenue of around US$0.77 million per year, which is equivalent to 1% of Sierra Leone's aggregate tax revenues in 2003.

1.6 The impact of the completion of the Bumbuna hydroelectric dam on the local economy would, however, be more limited. Total local costs of the project amount to US$18 million. OLS regression analysis for the period from 1980 to 1997 (excluding thus the civil war period) indicates that the multiplier effect of investment in Sierra Leone is about 2.29. During the two-year construction period, the (Gross Domestic Product) GDP can be expected to increase by US$22 million in each year, representing an increase in GDP of about 2% (evaluated on the basis of Sierra Leone's year 2003 GDP).

33 1.7 The annual payment to be made under the PPA are based on the annual costs that the BHC is incurring and covers debt service, payments to the debt service reserve, and O&M costs of BHP plus the Concession Fee, which will enable the GoSL to repay its debt to Salcost (for the construction works carried out under the Hydraulic Project Contracts and not paid, and funding ofthe affected persons legacy mitigation debt. The value ofthe PPA payments in the first year are US$18 million, and over time come down to about US$16 million annually. Expressed in costs per kWh generated this corresponds to approximately US$9 in the first year, and comes down over time to about US$6 from 2013. This compares with the current costs of electricity generation of US$29, and an average tariff of US$22. This not withstanding, the total fixed costs represent a substantial amount in the context of Sierra Leone‘s economy and correspond to about 2% of Sierra Leone’s 2003 GDP (in current US$).

1.8 The overall impact of the project on the achievement of the Millennium Development Goals (MDGs) in Sierra Leone is expected to be positive. Where negative impacts are likely such as the increase of the incidence of HIV/AIDS and malaria, these are expected to be minimized through the Trust Fund to be established for Bumbuna. The Trust aims at providing a stable, sustainable financing mechanism for benefit sharing and a local development plan for the project.

Financial Summary

1.9 The financial aspects of the project appraisal refer to the revenues and generating costs incurred by the BHC, as well as the financial flows ofNPA; the payment process and associated risks; and the proposed mitigation measures. In addition, the financial situation of NPA - the single buyer of the BHP power - is reviewed and an action plan to strengthen NPA’s performance is proposed.

The Project’s Revenue Requirements

1.10 An analysis ofthe project’s revenue requirements was carried out to determine the average tariff per kWh that would be required for BHPs sales to NPA. The estimated average annual output available from the BHP will be 300 GWh. Based on the ability ofthe system to absorb this new generation source, the annual generation is expected to be 195 GWh beginning in 2007 increasing to 300 kWh in accordance with load growth projections. The required tariff per kWh of sales is based on the annual fixed costs of production, which include the operating and maintenance costs ofthe BHP (BHC costs plus O&M costs); the provisions for reserve in case of equipment failure; and debt service payments associated with the completion of the BHP and the concession fee, as presented in Table 4, below.

Table 4: Base Case - Year One (2007) with Commercial Loan at 4.5%

1.11 The debt service component includes: (i)the US$38 million equivalent commercial loan, at 4.5 percent over a 10 tol5-year repayment period; (ii)the debts to the contractor and the consultant, estimated to

34 be US$49.6 million at 4.5 percent over a 15-year repayment period4; (iii)the AfDB consolidated loan of US$71.4 million at 1 percent interest rate, repayable over 40 years, including a 10 year grace period; and (iv) the long-standing debt ofUS$1.2 million owed to people affected by the transmission line component ofthe project, which is assumed to be repaid over 5 years with no interest charge: In addition, an estimated amount of US$2.3 million a year over 15 years is expected to be covered out of the revenue stream of the BHP to fund the Bumbuna Trust. Grant elements of Euro18 million from the Government of Italy (GOI), US$12.5 million from IDA, US$8.4 million from the OPEC Development Fund,’ and US$1.9 million from the AfDB are not included in the revenue requirement calculations as BHC is not required to repay them. Similarly, US$6.9 million from the GoSL has not been included in the calculation. (See Annex 8 for the detailed assumptions underlying the revenue requirement calculations and the estimated cost per kWh sold). Based on the debt service profile and increases in sales, the tariffs to NPA are projected at US$O.O873/kWh in the first year of operation (2007), gradually decreasing to US$0.0589/kWh by 2016. Sensitivity analysis was carried out to test the impact of changes in interest rates on the project’s revenue requirements. The analysis showed that a 1% increase in interest rate would result in a US$O.O038/kWh increase in the average tariff to NPA.

Financial Analysis of the National Power Authority

1.12 An assessment of the financial condition and future prospects of the NPA, the single buyer of the electricity to be produced by the BHP, was carried out during preparation of the Power and Water Project (Credit 3495-SL, approved by the Board in 2004). The assessment identified the following key constraints to NPA’s healthy financial performance: (a) increases in unscheduled outages of NPA’s generating capacity; (b) increases in the level of system losses, including generation auxiliary consumption, technical and non- technical losses (about 33 percent at end-2004); and (c) the system inefficiency resulting from the age ofthe installations, leading to high operating costs, including fuel and lube oil consumption. Additional factors exacerbating NPA’s financial situation included: (i)the historical cost accounting in an environment of high inflation, which makes inadequate provision for the replacement of NPA’s fully depreciated assets; (ii)an uneconomic tariff-setting structure; and (iii)the absence of experienced staff to manage the Kingtom power station (NPA’s only generating plant) and improve the plant’s efficiency.

1.13 Measures for addressing these issues were identified and key financial performance indicators and targets agreed as follows: (i)NPA’s total revenues should be equivalent to not less than the sum of cash operating expenses and interest and other charges on debts; (ii)an annual rate of return of approximately 4 percent on NPA’s average fixed assets in operation; and (iii)a debt service coverage ratio whereby the net revenues of NPA should be at least 1.5 times the estimated debt service requirements.

1.14 These measures and performance targets will form the basis for monitoring NPA’s financial capacity to meet the project revenue requirements as described above and in the Power Purchase Agreement, During the preparation ofthis project, analysis was carried out to determine the impact ofthe completion of the BHP on the financial performance ofNPA and, in particular, on its ability to achieve these targets. The analysis indicates that NPA will record some modest improvements in profitability in 2006 as a result of: (i)the increased generation from anticipated capacity additions (13 MW in January 2006 with ESKOM support, 10.8 MW in September with financing from BADEA); and (ii)improved availability of the units at the existing power plant. The commissioning of the BHP in 2007 is projected to substantially boost NPA’s profitability as reflected in net profit margins, returns on equity and on average historical assets, The substantial improvement in performance would arise primarily from the introduction of much lower cost energy at US$O.O873/kWh (compared to the current average cost of production of US$0.29/kWh) from Bumbuna which would account for about 70% of the total energy production. The impact ofthe operation of Bumbuna on NPA’s financial performance reflects the structure ofthe transaction under which the assets will be owned by the Government, and, therefore, not reflected in NPA’s assets base and its operating costs

The debts have been audited by the Auditor General of Sierra Leone and by an international reputable consulting firm, and accepted by the GoSL and the parties. The provision ofthis funding on a grant basis is being negotiated between the GoSL and the OPEC fund, 35 through depreciation charges. In addition the tariff at which NPA will purchase electricity from the BHC includes, debt service charges based on original and highly concessional terms on which they were extended to GoSL.

1.15 The projected strong financial returns for NPA have implications for future Government policies on electricity pricing, taxation, and dividends, and for financing of investments in the sector. The options for the Government would include reducing tariffs for final consumers, withdrawing surpluses from the sector through taxation and/or dividend policy, and/or requiring the sector to finance a share of its investment program through internal cash generation. The future arrangements should include a mechanism for the Government to claw back the large effective subsidy provided to NPA through the soft terms of the public debt passed in through in the bulk tariffs.

1.16 The projected financial performance shows that the risk ofNPA not having the capacity to meet the project’s revenue requirements is minimal, absent the occurrence of very adverse or unusual events. The effect of some such adverse events (e.g. failure of the BHP plant) is already substantially mitigated through the Project structure. There are also other factors which mitigate against these risks, namely: (i)the fuel savings from non-operation of some diesel power plants and/or reduced operation of others which exceed the estimated project revenue requirements on a per kWh basis; and (ii)the planned engagement of a management contractor for NPA who is expected to improve its operational performance.

Financial Flows of the Power Purchase: the Payment Process and Associated Risks, and Proposed Mitigation Measures

1.17 When considering the institutional arrangements for the O&M and management of the BHC and the concession to the BHP, attention will be given to the financial transaction flows to ensure that the selected arrangement is able to function effectively. This is also, of course, dependent on the uninterrupted flow of funds from consumer to producer.

1.18 The major risk inherent in the proposed arrangement is the payment risk associated with the PPA. This is not covered by the PRG, which is directed only at supporting the mobilization of commercial finance for the funding gap. The PRG provides some insurance against non-payment by NPA, to the extent that they result in the inability ofthe BHC to service the commercial debt, but the PRG does not guarantee the payment of NPA to cover ongoing operating costs for the maintenance of BHC or the payments owed to the O&M contractor. The failure or inability ofNPA to make PPA payments to the BHC has more far-reaching impacts than just the debt service. Failure to pay the BHC and therefore its O&M contractor could result in abandonment oftheir obligations and the project being left without a manager or operator. This would result not only in a loss ofgeneration, but also a potentially dangerous situation with respect to the plant equipment and dam safety.

1.19 It is therefore critical to put in place payment mechanisms that are, to the extent possible, automatic, and sheltered from any kind of interference, actions, or inactions of the bureaucracy. The payment risk can be significantly reduced by establishing a fixed remuneration schedule, with pre-agreed remittances managed by a reputable local and international bank that would maintain NPA’s revenues account.

1.20 The BHC payment schedule would be updated annually to reflect any changes in the project’s operational needs. Foreign currency-denominated components of the payments would be converted at the applicable foreign exchange rate at the time of transfer to BHC’s account. Transfers to the BHC account should be provisioned four times per month (48 installments per year). The balance after each such provisioning being transferred to NPA operating accounts to finance its ongoing operations, It is possible to use the same mechanism to allow for funding of a Special Account to collect funds required by the GoSL to service debt to the ADB and other creditors.

36 1.21 In connection with the above, the PRG will stipulate that a pre-agreed, locked-in payment process is put in place, not only to ensure against default on the commercial debt repayment, but also to ensure uninterrupted operation ofthe project.

2. Fiduciary

2.1 The PIU, which is now staffed with eight full time staff, will have responsibility for ensuring that procurement is handled under the BHP in accordance with GoSL and World Bank requirements, and will maintain a complete procurement tracking and filing system. Likewise, the Financial Comptroller who is being hired by the BHP-PIU will bear responsibility for maintaining the project accounts and preparing project reports. Procurement and Financial Management assessments of the PIU have been undertaken in the context of the Project Preparation Facility (PPF), and have noted that the PIU has the capability to adequately discharge these responsibilities. Independent consultants and auditors will perform regular reviews of the BHP’s procurement and financial management systems during BHP’s implementation.

3. Social

3.1 The project will provide power to a large population in Sierra Leone (the Western Area), comprising Freetown and the smaller towns of Makeni, Lunsar, Bumbuna, Magburaka, Port Loko, Kambia, and Lungi. The additional power supply will ensure a better willingness for investment and thereby will provide a boost to the local and national economy, improved health care by supply of electricity to hospitals and health clinics, better education by providing electricity to schools and to homes (so that children can study at night), a safer environment because of street lights, etc. The project also provides for development opportunities in the rural areas. The DamReservoir Resettlement Action Plan includes extensive agricultural programs as well as income restoration programs, which will assist the project affected communities to improve their livelihoods. In addition, the USCDI will provide benefit sharing through rural community development on a small scale to the indirectly affected communities in the Bumbuna catchment and immediately downstream of the dam.

3.2 In the dadreservoir area, 33 villages (518 households) will be affected by the impoundment. One village will need to be physically relocated, one village will lose almost all its farmland, and 3 1 villages will lose a substantial part of their farmland (approximately 40 percent). Four villages will be compensated, through community development compensation, for losses which occurred during the construction of the dam, the camp, access roads and the quarry. All project affected people will receive appropriate compensation as per impact category, i.e. new houses and other structures, new farmland, assistance to move and to prepare new farmland, and compensation for other property such as shrines. In addition, technical assistance and funding will be provided to ensure that farmers are able to reinstall themselves on their new farms and with better agricultural techniques (through the Stabilized Agriculture Program) and to ensure that individual household incomes are restored to at least pre-resettlement levels (through the Livelihood Assessment and Income RestorationProgram).

3.3 The completion of the transmission line will also cause resettlement, but on a very small scale. The original RAP, disclosed in January 2005, identified 367 households in the right-of-way of the transmission line, which would have to resettle if clearing of the 30 m right-of-way had been enforced. Alternatively, 137 households would have been affected had the alternative exclusion zone concept been adopted. However, in order to further minimize resettlement, in line with public consultations which indicated an unwillingness to resettle and accepted international practice, an approach will be adopted that retains existing land use and permits transmission lines to overpass existing building and houses, subject to a minimum clearance between structures and the lowest conductor of 7.0 meters. Thus, only 6 structures will need to be relocated, based on a field study conducted in February 2005.

37 3.4 The Dammeservoir RAP and the Transmission Line RAP will be implemented by a Resettlement Unit (RU), under the responsibility of the PIU. The RU consists of international and national resettlement consultants who will work closely with Village Resettlement Committees. A legal council will provide legal services to Project Affected Persons (PAP) throughout the process. A witness NGO and a Resettlement Advisory Group will provide the independent monitoring and oversight functions. External monitoring will also be provided by the ESAP.

3.5 Key stakeholders have been given opportunities to provide input to the project through an extensive public consultation process. The views of PAP, civil society, business, public sector, non-governmental groups, and individuals have been sought during the process of project preparation. Members of local communities in the project area have been participating in the preparation of RAPs, and will also be fully involved in implementation of the EMP and the RAPs. For example, local community members, both the people affected by loss of land and the host communities, will be involved in the selection of new land and in the physical relocation and preparation of farmland, as well as in the construction of houses and buildings through paid labor. Civil society will be providing legal services to PAP, non-governmental groups will have an important function in monitoring and evaluation, and there will be a witness NGO. With the preparation of the safeguard studies (EIA, EMP, Dammeservoir and Transmission Line RAPs) public consultation processes were initiated in communities in the reservoir area and along the transmission line. After the disclosure of the EIA, the EMP and the RAPs on January 26, 2005, a second round of public consultation took place in a total of 16 strategically located communities. This process was completed in May, 2005. A Communication Unit in the PIU, together with international consultants, not only prepared a Communication Action Plan (CAP), which provides the framework for the public consultations process, but the unit is also in charge of and leads the consultations in the field.

3.6 Potential social risks associated with the project include the potential risk of food shortage and impoverishment of PAP in the DamReservoir area, if the Resettlement Action Plan is not implemented timely and conscientiously.

4. Environment

4.1 The major environmental and social impacts, as identified in the 2005 Environmental Assessment, are summarized below. For more detail, see Annex 17 (and its Appendix 1. "Clearance and inundation of the riparian (gallery) forests along the Seli River in the reservoir area". Reservoir clearance to be completed before reservoir filling):

The 1996 EIA and the 2005 EIA both identified the presence of some chimpanzee communities in the wider reservoir area. The chimpanzee is considered an endangered species. There are no indications at present that the area to be inundated contains any other endemic or endangered plant or animal species. The area to be inundated is not considered a critical natural habitat as per the definition in the Natural Habitat Policy OP 4.04; The project will finance mitigation measures to protect the remaining chimpanzee communities, other primates, and other biodiversity in the Bumbuna catchment. Additional biodiversity studies are underway, and reservoir filling will only start when recommendations of these studies are known; Impacts on fish as a consequence of the closure ofthe dam and the impoundment of the reservoir are expected to be limited. During the preparation of the 1996 EIA and 2005 EIA, fish surveys were carried out. The results of these surveys indicate that the Seli River does not contain any

38 endemic or endangered fish species. An additional fish species study is underway. Reservoir filling will only start when the recommendations ofthis study are known; The annual filling of the reservoir will result in some changes in the hydrological regime of the Seli River downstream of the dam. Reservoir operation will regulate flow in the river, which will alter the hydrological regime downstream (see also Annex 17); An amenity or environmental flow will be maintained during all phases: pre-impoundment, impoundment, and operation. The amenity flow during the dry season will be equal to or larger than 6 m3. During the rainy season the flow will be 100 m3. The operation ofthe reservoir will result in an increase in dry season flow; Hydropower development in Africa always has public health impacts. The prevalence of bilharzia and malaria might increase. The prevalence of river blindness (onchocerciasis) will likely decrease, because ofthe inundation of a number of rapids in the reservoir area; Because of the impoundment of the reservoir, people and chimpanzees will likely be squeezed into a smaller area. This habitat squeeze will further decrease the sustainability of the present agricultural-shifting cultivation system, and will increase pressure on the chimpanzee habitat. The project’s EMP includes appropriate mitigation measures (see Annex 17), partly financed from the electricity tariff; An Emergency Preparedness Plan (EPP), to warn and protect people downstream in case of an emergency, will be prepared and operational before reservoir filling; A benefit sharing mechanism will be provided with the establishment ofthe USCDI (see Annex 4), through which indirectly affected communities around the reservoir can benefit from social and economic development activities; and The Government is committed to implementing these mitigation measures.

5. Safeguard Policies

5.1 The project has considerable environmental and social impacts. It is designated a category “A” project and has a safeguard classification of S2. The following safeguard policies are triggered by the BHP: Environmental Assessment (OPBP 4-01), Natural Habitats (OPBP 4-04), Forests (OPBP 4.36), Cultural Property (OPN 11-03), Involuntary Resettlement (OP/BP 4.12) and Safety of Dams (OPBP 4.37). The environmental impacts and resettlement issues raised by the BHP have been addressed in the 1996 and 2005 EAs, in the Dam and Reservoir Resettlement Action Plan (RAP), in the Transmission Line RAP, and by instituting a Dam Review Panel (DRP) and an Environmental and Social Advisory Panel (ESAP). The Safeguard Policy on Projects in International Waterways OPBP 7.50 has not been triggered, since the Seli River is not an international river.

39 The Safeguard Policy issues raised by the project are briefly discussed below and are detailed in Annex 17.

5.2 Environmental Assessment The Government of Sierra Leone prepared EAs in 1996 and 2005. The 2005 EIA includes a comprehensive Environmental Management Plan (EMP), which will be implemented during project construction and operation.

5.3 Analysis of Alternatives. The 2005 EL4 includes a comprehensive Retrospective Analysis of Alternatives (Options Assessment). This analysis indicates clearly that the BHP is the preferred option to provide electricity to Freetown and intermediate towns at the least cost.

5.4 Natural Habitat. The 2005 EIA, the ESAP, and qualified Bank Safeguard Policy staff concluded that the area to be inundated is not a critical natural habitat under the definition in the Bank’s Natural Habitat Policy OP 4.04 (see section Environment C). The reservoir area to be inundated falls under the definition of natural habitat in OP 4.04. The Bank can only finance projects that involve the significant conversion of natural habitat under certain conditions. In such cases, an environmental offset will be required (see Appendix 1 to Annex 17).

5.5 Cultural Property. The 1996 and 2005 EAs investigated the Cultural Property aspects of the Bumbuna reservoir area. The 2005 EIA included an archeological survey and interviews with the local population. This survey did not reveal any evidence of cultural property in the area to be inundated, An additional survey will be carried out once the reservoir area has been cleared, but before reservoir filling. A “chance find” procedure will be enforced during construction. Cultural property in the dadreservoir area also includes sacred sites (that belong to “secret societies”) and graveyards, which may disappear due to the impoundment, The dadreservoir RAP includes provision for relocation of and compensation for sacred sites.

5.6 Resettlement. Two Resettlement Action Plans (RAPs) were prepared in 2005, one for the dam and reservoir area and one for the transmission line. Both RAPs have been approved by the Bank Safeguard Policy staff and were disclosed in country and in the Infoshop in Washington DC on January 26,2005.

5.7 RAP for the Transmission Line. Practices in countries such as Canada, New Zealand, Spain, and Mexico have demonstrated that from a safety and public health point of view, it is an acceptable standard to build a high voltage power line over houses, as long as the required safety clearance is observed. An international expert has verified the acceptability of this practice in regard to safety and Electro-magnetic Field (EMF) guidelines. Therefore, the resettlement along the transmission line has been minimized to

* By supporting the proposedproject, the Bank does not intend to prejudice thefinal determination of the parties‘ claims on the disputed areas. 40 include only six structures. This is in line with the results of public consultation, which demonstrated that PAP were unwilling to relocate.

5.8 Legacy Issues (Background and Approach)

When the transmission line foundations were constructed in 1994-1995,448 households were affected by loss of land and property. The impact was documented and a resettlement plan was prepared by the construction contractor (ABB). The RAP was not implemented. The resettlement plan, which includes individual compensation contracts for each affected household, will be implemented by the PIU during a five-year period, starting in 2007. Reveneues from the project (3%) will be allocated to a special account for the purpose of RAP implementation. The total cost, including escalation, is approximately US$1.2 million.

5.9 Implementation of the RAPS. Both the RAP for the Daaeservoir and the RAP for the Transmission Line will be implemented by the RU, which is a unit under the responsibility of the PIU composed of international and national consultants. The RU will implement the RAPSin close collaboration with the Village Resettlement Committees. It will also use the services of a legal association in Sierra Leone for the purpose of providing legal assistance to the PAP. A Witness NGO will ensure independent monitoring and evaluation and the Resettlement Advisory Group, composed of representatives from all stakeholder categories, will have a general oversight function.

5.10 Forests. The riparian forest patches in the reservoir area will be cleared before the inundation of the reservoir. Riparian forest areas are under increasing human pressure in West Africa. The patches in the reservoir area were not considered critical natural habitat areas by the 2005 EM (see Appendix 1 to Annex 17). The remaining riparian forests in the Bumbuna watershed will be protected as described in the EMP (see also Annex 17).

5.11 Safety of Dams. The Government of Sierra Leone constituted a DRP in 2004 to comply with the World Bank Dam Safety Policy OP/BP 4.37. Although the findings of the DRP indicated that the dam is a safe dam, the review of the consultant's report, ("Bumbuna Falls Hydroelectric project - Phase 1, Dam Safety Program, Broad Framework, October 2004), recommends that the Emergency Preparedness Plan (EPP) needs significant improvement. The findings of this panel indicated that the dam is a safe dam. The panel also indicated that the hydrology in the Seli River had not changed in the past decades, but recommended the collection of additional hydrological data. The panel also indicated that at present the sediment loads in the Seli River do not pose a risk to the lifetime of the Bumbuna reservoir. Further information on the DRP Recommendations relating to the O&M Plan, the EPP and other issues is provided in Annex 19.

5.12 Borrower Capacity. Borrower capacity to implement the safeguard policy recommendations is at present insufficient. The project will finance environmental management and resettlement implementation as well as capacity building through technical assistance. The TA will consist of on-the-job training and capacity building in environmental management and monitoring by international consultants and national experts within the responsible Sierra Leonean institution, the Department of Environment. The TA will be handled by the PIU.

5.13 Implementation of the EMP. The TA will be financed through an IDA TA Grant and implemented in close collaboration with Sierra Leonean partners such as the Department of Environment, a team of international and national experts in the Bumbuna PIU, the future Bumbuna Watershed Management Authority (BWMA) and others satisfactory to IDA, will be engaged to monitor the implementation of the EMP, the contractors EMP, and provide legal aid to PAPS.

41 5.14 Public Consultations. The TOR for the 2005 EIA was submitted through public scoping sessions with primary and secondary stakeholders, to ensure that all relevant stakeholder concerns would be addressed in the 2005 EIA. Extensive stakeholder consultations have been carried out on the Draft Final 2005 EIA. The minutes of these public meetings have been included in the Final 2005 EL4 report. Public consultations carried out for the 1996 EIA influenced the design of the EMP, and elements from the 1996 EMP have been carried over into the 2005 EMP (See Annex 18 for an accounting of public participation related to the preparation of the EMP and the RAPS).

5.15 Disclosure of the 2005 EIA Report The Final 2005 EIA and EMP, including a budget, have been approved by the World Bank and subsequently disclosed in the project areas, nationally and in the Infoshop in Washington on January 26,2005. The main findings of the EIA are presented in Annex 17.

6. Political and Other Risks

6.1 Large dam projects involving resettlement are very sensitive due to their possible negative social and environmental impacts. This may impede multi-stakeholder support for the project if disclosure of information and transparency is not properly ensured. Given this potential risk, a communications needs assessment was carried out through extensive one-on-one meetings, interviews, and focus groups with the national media, NGOs operating in Sierra Leone, opinion leaders, and the general public. The assessment found that overall there was broad political support for the project among all groups interviewed. A smaller risk was associated with the lack of government communications, as well as adequate and timely information dissemination.

6.2 The assessment concluded that the political and other risks associated with the project could be mitigated through a communication program aimed at ensuring interaction with national and international NGOs and national media. The program would explain the project's commitment to fair, transparent, and proactive initiatives aimed at promoting the high standards of social inclusion, environmental protection, and poverty alleviation attached to the project objectives.

7. Policy Exceptions and Readiness

7.1 The Chairman of the Operations Committee has approved the exception to OP 4.12 and has also instructed that this decision be fully disclosed in the PAD. The rationale for seeking the exception to OP 4.12 was threefold:

(a) Given that the loss of property and farmland occurred when the transmission line foundations were constructed, approximately 10 years ago, during a civil war, which concluded in 2002, the situation is very different from the normal situation where involuntary resettlement occurs. The affected people have moved and are not in immediate need of compensation. (b) Given that Government is normally responsible for payment of compensation related to resettlement and the unique circumstances prevailing in Sierra Leone (post conflict), use of project revenues is appropriate to enable the compensation be paid over five years.

(c) The same procedures will be followed to pay the legacy compensation as are contemplated for the payment of compensation of people affected by the filling of the reservoir. This will include the hiring of a 'witness NGO' to verify that compensation has, in fact, been paid to the affected people. Given the unique nature of the project and country circumstances, the Region feels that an exception to OP 4.12 is justifiable and that the proposed compensation structure for the legacy issue discussed in this note will eventually meet the objectives of OP 4.12. 42 Otherwise the project is in full compliance with the requirements of all other triggered World Bank safeguards.

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44 3. The Bumbuna Amendment to the NPA Act. The NPA Act is being amended to authorize the operation of the BHP by the Bumbuna Hydropower Company (BHC). This amendment will, inter alia, authorize:

(a) the Republic of Sierra Leone to enter into a Concession Agreement with the BHC pursuant to which the BHC will be granted concessionary and exclusive rights and the responsibility for the operation, maintenance and management of the BHP (the “Concession Agreement”) subject to certain terms and conditions specified in the Concession Agreement;

(b) the Republic of Sierra Leone to participate in the share capital of the BHC whose purpose will be to operate the BHP and service the debts but not to accumulate distributable profits for its shareholders; and

(c) NPA to enter into a power purchase agreement with the BHC pursuant to which the BHC will supply the power generated to NPA, and NPA will pay to the BHC the amount required to cover the BHC’s operating costs and debts service, for a period consistent with the term of the Concession Agreement.

4. Sector Issues. The major sector issues include: (a) the high cost and very poor reliability of power supply, particularly in the Western Area of Sierra Leone; (b) the poor technical and financial performance of NPA; (c) under investment in the development of the power sector; (d) the macroeconomic impacts of the need for Government to provide financial support to the sector, when NPA is unable to cover its costs; and (e) poor coordination and oversight of the sector by the Government.

5. Policy. Current policy in the power sector is guided by a major sector study (Restructuring and Private Sector Participation in the Sierra Leone Electricity Sector) that was undertaken and published in October 2002, with the support of the World Bank administered Public-Private Infrastructure Advisory Facility (PPIAF). Among the key recommendations of the report are: (a) reform the electricity sector to increase private sector investment and participation through involvement in public-private partnerships, such as a performance-oriented management for NPA; (b) establishing a unit within the MoEP charged with improving energy sector coordination and planning; and (c) completing the Bumbuna hydroelectric project.

6. The Power and Water Project (Cr. 3495-SL) is addressing electricity policy sector issues as follows: (i)under the Power Sector Reform component, providing support for revisions of the Electricity Code/NPA Act, The first stage of this reform is the drafting of the Bumbuna Amendment to the NPA Act; and (ii) establishment of an energy regulatory function for which an organization study has been completed and secondary legislation has been drafted to set up a multi-sectoral regulatory agency (including power, telecommunications and transportation); (iii)establishment of a Policy, Planning and Coordination Unit within MoEP. A director of the Unit has been appointed and its work plan and staffing is being advanced; and (iv) instituting a four-year performance contract for NPA. Bidding documents are being issued to a short list of potential contractors, selected on the basis of expressions of interest (EOIs). These policies are expected to contribute towards an improvement in sector performance and provide the platform to assist in the implementation ofthe Bumbuna hydroelectric project.

7. The project will reduce greenhouse gas emissions by displacing the use of diesel generating power plant through hydroelectric power. This is in turn mitigates the effects of climate change, a major global environmental problem. Although methane emissions will be generated in the reservoir, their effect will be more than compensated through the reduction of carbon dioxide (COZ) emissions. For example, in the first year of BHP operation (2008) C02 emissions from diesel plant are estimated to be reduced by 136,000 tons of C02equivalent, and methane emissions are estimated to be increased by 17,000 tons of COz equivalent. The net reduction from Bumbuna is thus estimated to amount to 119,000 tons of COz equivalent in the first year, After an initial 2-3 year pulse reservoir emissions are expected to decline.

45 Sector Background Specific to the Project

8. The hydroelectric potential of Sierra Leone, now estimated at 1,200 MW, was first assessed in a report for the United Nations prepared in 1970-1971. The 1971 Report recommended three sites as warranting detailed investigation: Bumbuna Falls (72 MW), 40 km north east of Makeni; Benkongor Falls (15.2 MW) in the east 40 km west of Koidu; and Goma (18 MW) 30 km north of Kenema in the southeast of the country. Bumbuna was identified as the most attractive scheme to supply the Western Area, the major load center where much of the country’s commerce, government, light industry and non-agriculture employment is concentrated, as well as towns along the transmission route to Freetown.

9. The 1980 Feasibility Study recommended a 275 MW project to be developed in five phases, the initial development consisting of a dam at the current site with a 2.5 km pressure tunnel leading to a 72 MW powerhouse downstream of Bumbuna Falls. Subsequently, the government commenced work on Phase 1 of the project awarding contracts for the construction of camps and access roads and the main diversion tunnels; this work was completed in 1985. Meanwhile, IDA expressed reservations about the economic viability of Bumbuna at that time, against the background of the depressed Sierra Leone economy and falling international oil prices, after 198 1. Subsequently, in 1984, to minimize capital expenditure without detracting from the viability of the subsequent development, the design of Bumbuna was scaled-down to 47 MW (from 72 MW). That design was the basis for the 50 MW Project subsequently financed by AfDB and the Government ofItaly, where the main civil construction was started in 1990. At that time there was a general suspension of IDA Credits to Sierra Leone.

10. IDA has been involved in the power sector in Sierra Leone since the mid-1970s through a series of Credits. These were concerned with diesel rehabilitation and strengthening of the Western Area grid network, as well as power sector reform and capacity strengthening. IDA Credit 734 SL supported the 1980 Feasibility Study of Bumbuna and supplemental studies that led to the present project design and layout. Under the 1993 Power Rehabilitation Credit (IDA-23560) IDA financed the Project EIA, the hiring of a board of consultants and other measures to provide NPA with technical capacity to supervise Project, then under construction. However, these activities were partially completed, or not undertaken by the time the Credit was suspended due to the conflict, and later restructured to address the post-war situation.

11, In parallel with the PPF studies, the IDA Power and Water Credit (IDA Cr. 3945-SL: US35 Million) is financing activities to establish the enabling policy and institutional environment and physical provisions to successfully integrate Bumbuna supply into the Western Area Grid system. Among the physical measures are rehabilitation of the Kingtom diesel generation station in Freetown (to make 24 MW available), completion of the sub-transmission project and refurbishment of the distribution network and low voltage system in Freetown. These represent short-term measures to restore essential power services, and at the same time are essential steps to enable reliable combined hydro-thermal operation of the power system, particularly in the dry season once Bumbuna is on-line.

12. Hydropower development is well-founded in the national development policy and energy policy framework. Consistent policy themes since first nation-wide hydropower inventory completed with UNDP support in 1970-7 1, include:

0 Expanding electricity services to catalyze development, growth and job-creation in the modern sectors ofthe economy; 0 Reducing the nation’s heavy reliance on high-cost imported fossil fuels; 0 Developing and utilizing indigenous renewable energy resources, particularly to develop a hydro- based power system; 0 Improving the reliability of power supplies in the interior of the country through interconnection of provincial centers, and as a basis for widespread rural electrification.

46 13. The BHP is envisaged as the first phase of the Bumbuna-Yiben hydropower development scheme with an ultimate potential of 270 MW. The 9 main river systems (800 km) in Sierra Leone have an estimated 1,200 MW economic potential ofhydropower.

47 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

IBRDlIDA Product Status Approval Project Name ID Sector issues (US%million) Line Date Rating Power and Water PO87203 35 IDA Active 07.01.2004 S Improved, sustainable Project access to essential power, water supply and sanitation, and urban solid waste management services Power Sector PO0241 1 28.89 IDA Closed 04.21.1992 U Improved power Rehabilitation services, strengthening Project of sector institutions

European Development Fund "Western Area Emergency Rehabilitation of Transmission & Distribution Network"

A grant of€ 2.0 million to the National Power Authority for infrastructure improvement.

1. Several activities under the Power and Water Project (PWP, Cr. 3945-SL), which was presented to the Board on July 1, 2004, create an enabling environment for the BHP implementation and directly support its operation. Enabling activities that facilitate the BHP include: (i)revision of the NPA Act (1982); (ii) establishment of an independent regulatory framework for the sector, and of a Policy, Planning and Coordination Unit within the MOEP; and (iii)institution of a performance-oriented management contract for NPA. The infrastructure components of the Power and Water Credit, including the Kingtom thermal plant refurbishment and spare parts and distribution system reinforcement and rehabilitation will enhance the ability of NPA to deliver Bumbuna power to end-users, and otherwise enhance capacity for NPA to operate as a mixed hydro-thermal system, particularly in the dry season months when power from Bumbuna drops to 18 MW continuous.

2. In addition, the projects listed above, there are other planned activities. These interrelated complementary activities would enhance the success of the Project and contribute to its effectiveness and risk reduction. They are described below.

3. The Bumbuna Trust: prior to commissioning of the BHP project the Government of Sierra Leone will establish the Bumbuna Trust. The Trust is an innovative mechanism to sustainably fund the ongoing environment management and benefit sharing arrangements in the longer-term operation phase of the BHP.

4. The Trust will have different windows, specifically to fund:

0 The ongoing delivery of benefit sharing to communities in the basin (Le. continuation of the Upper Seli Community Development Initiative activities, extended to other communities in the Bumbuna catchment and Seli River Basin); 0 The Bumbuna Watershed Management Authority (BWMA); 0 The Bumbuna Wildlife Conservation Authority (BWCA); and 0 Potentially, the Seli River Development Authority (SRDA).

b 5. The Trust will also have a short-term window to finance the government's commitment to make legacy compensation payments to communities whose land and assets were acquired in the 1990's during construction of the transmission tower pads, as identified in the Transmission RAP. 48 6. The establishment of the Trust is a practical measure that recognizes the GoSL has limited budgetary capacity to fund the ongoing environmental management and social sustainability dimensions ofthe BHF, the country’s first major hydropower development. The activities that it funds involve local capacity development of Sierra Leonean professionals and practitioners as well as the Local Councils and sector agencies that have support offices in the basin who would be involved in the implementation activities as stakeholders or participants. The Trust and its activities will also be an important step to foster support for and prepare for further hydropower development in the Seli River (see section A5 on the future development of the 275 MW Bumbuna-Yiben scheme and Government hydropower development policy, Annex 1).

7. The detailed institutional arrangements for the Bumbuna Trust will be finalized during the implementation of the Upper Seli Community Development Initiative in collaborative processes with the various basin interests and stakeholders including the multi-agency Advisory Group and the Catchment Stakeholder Forum. A Trust deed will be prepared and legally registered and an independent Board of Trustees would be constituted representing different stakeholder interests including national and local government, traditional leaders, civil society and the private sector. A Stakeholder Forum would be constituted to provide wider input and dialogue on the Trust formation and operation.

8. It is anticipated that each of the programs financed by the Trust windows will be administered and managed by separate legal entities with their own governance and management teams (e.g. the BWMA and BCA). Consideration will also be given to strengthening the Seli River Development Authority to act as an umbrella organization to ensure synergy and coordination of activities where required. The Bumbuna PIU will have overall coordination responsibility for the steps to establish the Trust, working in conjunction with the USCDI Advisory Group. Component B of the grant will provide seed financing to establish the key entities that the Trust will fund, including the BWMA and the BCA, while the USCDI will fund the prototype arrangements for the delivery ofthe benefits sharing window of the Trust.

9. It is anticipated that the Trust would grant finance the administrative cost of the BWMA and BCA institutions (non-program costs), generally an amount sufficient to guarantee their existence; and beyond that to partially, or fully, finance the operational programs of these institutions. The programs that the BWMA and BCA would deliver are identified in the Environmental Management Plan (EMP). Component B of the Project will finance the initiation ofthese activities (see Annex 17).

10. The benefit sharing window of the Trust will enhance the distribution of the hydro project benefits to local communities in the form of non-power benefits. This is important given the lessons drawn from the 11- year civil war where a major contributing factor to the conflict was the marginalization of a large section of the rural population from political processes, with the result that most rural areas were deprived of social services and economic development opportunities. The benefit sharing mechanism would allow communities in the basin ranging from small, scattered subsistence agriculture settlements to larger rural towns with formative local markets, to set their own priorities for more immediate use of their monetary share of the benefits that derive from hydroelectric generation in their basin. Moreover, many ofthese communities will not receive direct power benefits until rural electrification is possible.

11. The financing for the Trust will come from two primary sources: (a) the Bumbuna Carbon Project and (b) a percentage of the BHP power sales, equivalent to a royalty that is distributed to local communities and environment agencies. There are many precedents and examples in other countries, such as in Latin America, Europe and North America. The funds from the Bumbuna Carbon Project would be “ring-fenced” for the delivery of benefits window. Conceivably it will also be possible to leverage contributions from Trust Partners (interested international NGO, private sector or bilateral donors) interested in supporting one or more financing windows under the Bumbuna Trust. Here it is anticipated that partnership approaches to development would be a strategic priority of the Trust itself. The presence of the transparent and inclusive governance, management arrangements, and accountability provisions for the Trust and the entities it supports is anticipated to reinforce donor confidence in investments in the Basin.

49 12. Bumbuna Carbon Project: the Netherlands Clean Development Facility (NCDF) has agreed to provide funds to the GoSL for the avoided thermal generation (greenhouse gas emission reductions in the power sector) that the BHP will deliver. An Emission Reduction Purchase Agreement (ERPA) will be signed between the Government and the World Bank. This ERPA will commit the CFB to purchase a part, or all, of the certified emission reduction units (tons of COZ equivalent) due to the BHP that are estimated to be 119,000 tons of COZequivalent in the first year, up to 2012, the term of the Kyoto Protocol to the Untied Nations Framework Convention on Climate Change. After 2012 new arrangements would be made with post-Kyoto mechanisms. The MOEP would be the seller ofthe emission reduction units (ERs) and the World Bank Carbon Fund would be the buyer. Funds from the ERPA would be ring-fenced in the Trust to fund ongoing benefit sharing arrangements in Basin.

50 Annex 3: Results Framework and Monitoring SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project Results Framework

This Annex assumes that all energy produced by the BHP is sold to NPA and that NPA functions properly as described in details under the PWP (Cr. 3945-SL).

PDO Outcome Indicators Use of outcome Information The PDO of the proposed Project is: Categories of Indicators

The main development objective ofthe Electricity sales (GWh) increasing From 68.9 Provide clear indication ofwhether proposed Project is to expand the' GWh in 2003 to 230 GWh in 2008. service is improved and whether capacity of Sierra Leone to increase the :orrective actions need to be taken. supply of electricity services at least- Percentage reduction of average tariffs of cost, and in an efficient and electricit)'. Use of Project monthly/quarterly environmentally and socially ,eporting system to assess the availability sustainable manner.. ifleast-cost electricity and reliable iupply ofpower to the consumers and :ake corrective actions if necessary.

Number of animal and plant species in Monitoring reports used to adjust EMP the Bumbuna Watershed remains and RAP implementation as needed. unchanged; Sustainable agriculture in use in 60 percent of Bumbuna Watershed; Sustainable fishery practices in use in 60 percent of the reservoir and downstream ofthe dam; All Project Affected People (PAP) resettled on new land which has been planted; All Resettlement Action Plan (RAP) community development projects completed; 80 percent of PAP involved in new income generating activities.

Intermediate Results Results Indicators for Each Component Use of Results Monitoring One per Component Component A : Hydroelectric and Component A : Hydroelectric and Component A : Hydroelectric and Transmission Infrastructure Transmission Infrastructure Transmission Infrastructure

Intermediate Results Categories of Indicators

Delivery of electricity at the power In kWh generated out of the substation to be Use ofProject monthly/quarterly substation in Freetown in line with delivered to NPA reporting system to assess how many PPA. kWh are delivered to NPA and take corrective actions if not meeting the target set

Operation ofa privately managed power Private Participation in the sector through a Use of PIU progress monitoring and generation company (the Special ;oncession contract to BHC to run and manage evaluation reports to assess the Purpose Company, the BHC). the BHP. effectiveness of: (a) the private companies involved in the BHP Establishment ofthe Regulatory function for operations and maintenance; and (b) the the energy sector; enactment of the 2005 New regulatory function and appropriate legal Electricity Law; Amendment ofNPA Act; environment; and take corrective actions as necessary; Intermediate Results Results Indicators for Each Component Use of Results Monitoring One per Component Comoonent B: Environmental Component B: Environmental Mitigation, Component B: Environmental Mitiiation, Resettlement, Watershed Resettlement, Watershed Management, and Mitigation, Resettlement, Watershed Management, and Benefit Sharing; Benefit Sharing; Management, and Benefit Sharing;

Intermediate Results Categories of Indicators

Environmental Management and Percentage increase in income levels of Use of the BHP progress monitoring

51 Mitigation Plan (EMP) is being farming households; report to assess whether all the targets for implemented as agreed, leading to the Number of animal and plant species in indicators set for measuring the Efficient Operation of the Bumbuna the Biodiversity in the Bumbuna efficiency ofthe management of the Watershed Management Authority Watershed; BWMA are met or whether corrective [BWMA). Percentage annual reduction in incidence actions should be taken of water-born diseases or trend (malaria, bilharzias, and onchocerciasis); Change in water quality (levels of oxygen, hydrogen sulfate, pH), and incidence of phytoplanktongrowth (algal blooms, macrophyta, such as water hyacinth and Salvinia) in the reservoir and downstream ofthe dam in both the dry and wet seasons.

Resettlement Action Plan (RAP) for the Amount ofnew land identified ; Use ofthe PIU report and other RAP Dam & Reservoir and the Rap for the Percent ofPAP resettled and engaged in implementation available reports to transmission line, are being improved farming techniques; assess compliance of the compensation implemented in accordance with RAP Number of training sessions for income for land acquisition and transmission line implementationschedules. restoration activities ; with OP 4.12. Number of RAP community projects underway.

Effective establishment and Percentage of indirectly affected Use of results monitoring reports to demonstration of the basic institutional communities benefiting from improved assess adequacy of implementation of model for the proposed Bumbuna Trust public services and youth capacity Upper Seli Initiative’s CDD activities for local resource development. building; and establishment of the Bumbuna Trust, Establishment ofthe legal entity “The and adjust strategy as needed. Bumbuna Trust”; Performance ofInitiative Advisory Stakeholders as well as independent Group and Catchment Stakeholder consultant assessments used to measure Forum. the performance and take corrective actions. Intermediate Results Results Indicators for Each Component Use of Results Monitoring One per Component Component C: Technical Assistance Component C: Technical Assistance Component C: Technical Assistance Results Indicators Adjust consultants’ staffing as Ensure satisfactory implementation of Evaluation of consultants’ performance by the appropriate the project including meeting IDA PIU safeguard policies and promoting sector Adjust communication action plan as capacity building Level of public awareness of basic information appropriate about the BHP Level of public support for the BHP

52 Arrangements for Results Monitoring

Values Data C lection and R orting Baseline YR1 YR3 YR4 Frequency Data Responsibility 2005 2006 2007 2008 and Reports Collection for Data Instruments Collection Electricity sales (GWh) 68.9 70 70 150 230 BHP PIU NPA BHP PIU increasing from 68.9 GWh in GWh quarterly periodic 2003 to 230 GWh in 2008. (in xtivity accounts 2003) reports book 0 0 10% 15% Percentage reduction of 0 average electricity tariffs.

Results Indicators for Each Component

Component A:

GWh generated out of 0 0 0 150 300 Monthly BHP PIU Bumbuna and delivered to the BHC reports NPA at the substation in Freetown. 0 0 0 BHC BHC Contract BHP PIU operational operational documents Private Participation in the sector through a concession contract to BHC to run and 0 0 Regulator Regulator Regulator BHP PIU and BHP PIU manage the Bumbuna in place in place in place NPA reports PWD imply Hydropower Project. progress reports Establishment of an independent regulatory function for the energy sector.

445 Nil Nil Nil Nil Annual BWMA and Mm’ monitoring Project reports (or Sediment operating period load entity ComponentB recommended measurement I Reduction in live storage 0 by BWMA) and capacity of reservoir due to calculations erosion and sediment. Nil Nil Nil Nil TBD~ Annual BWMA, BCA Percentage increase in the Reporting (as and level of income for farming recommended Survey I Environment households in 9 ongoing monitoring Agencies baseline procedures Percentage reduction in surveys) of habitat number of animal, fish and and species plant species in the established Biodiversity in the Bumbuna 5% 10% 10% 10% in baseline BWMA and Watershed 32% stabilize stabilize down down surveys. Ministry of rising 5 yo 10% 10% 10% Annual Health and 48% reporting Sanitation (combined impact of Statistics programs) from health Percentage annual reduction in posts and incidence of water-bom Govemment diseases or trend: TBD TBD Program Malaria (% outpatients) 2004 TBD’ TBD targeting Bilharzia (rate of none specific BWMA and disease Operator

To be established in the program of9 Biodiversity Baseline Studies underway in 2005/2006. ’ To be established in supplemental Phytoplankton Bioassay study as part of Additional Safeguard Studies before start of final reservoir impoundment. 53 Targ Values Data ( lection and R Irting Baseline YR1 YRZ YR3 YR4 Frequency Data tesponsibility 2005 2006 2007 2008 and Reports Collection for Data Instruments Collection vectors and population) improved health posts / 100% facilities.

100% Chemical Change in water quality from water quality pre-impoundment and monitoring incidence of phytoplankton and growth: bioassays 1 levels of BOD, hydrogen and nutrient sulfate, pH analysis. incidence algal blooms, macrophyta, such as water hyacinth and Trust Trust 80% Salvinia in the reservoir TBD Deed Start 3HP PIU and down stream of the BHP PIU ‘eports dam in both the dry and reports wet seasons Formed Meeting Formed in Meeting as NA as the BHP required required Trust 3HP PIU Number of affected people BHP PIU compensated (YO) reports

Number of affected people USCDI physically relocated (%) reports from DECSEC Levels of household incomes compared to before resettlementkompensation BHP PIU reports Percentage of indirectly affected communities benefiting from improved public services and youth capacity building

Establishment of the legal entity “The Bumbuna Trust”

Performance of Initiative Advisory Group and Catchment Stakeholder Forum.

Evaluation of consultants’ NA Adequate Adequate Adequate Adequate BHP PIU Consultant BHP PIU performance by the PIU reports reports

Level of public awareness of TBD +5% +IO% +20% +20% BHP PIU basic information about the BHP PIU Consultant BHP (% increase in reports reports population aware of the online TBD 0% 0 Yo +5% +5% BHP PIU date) BHP PIU Consultant Level of public support for the reports reports BHP (“YO change in proportion ofsupport from those interviewed)

54 Annex 4: Detailed Project Description SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Component A: Hydroelectric and Transmission Infrastructure

Project Location and Summary

1. The Bumbuna dam site is located on the upper reaches of the Seli (Rokel) River, in the valleys of the Sula Mountains about 200 km northeast of the capital city Freetown. The dam site is 2.5 km upstream of Bumbuna Falls close to the town of Bumbuna (population of 3,000) in Tonkolili District. The Seli (Rokel) River is the third largest of nine major river systems in Sierra Leone and has a drainage area of 10,620 km2. A regional road from Freetown that was recently upgraded provides access to Bumbuna Town and the dam site.

2. The project was to be commissioned in 1998 but due to the rebel war, work was abandoned in May 1997 when it was 85 percent completed. The completed project will consist of the 88m high asphalt faced rockfill dam now in place; two freestanding bell-mouth spillways upstream of the dam, one leading to the primary spillway tunnel on the left bank of the dam and one to a combined power and auxiliary spillway tunnel on the right bank; a single inlet tower intake; a 50 MW surface power station and associated works; and 200 km of 161 kV transmission line linking the power station to the Western Area grid network at a substation in Freetown. The shield wires above the 161 kV conductors will be energized at 35.5 kV to supply loads up to 5 MW at the provincial towns of Makeni and Lunsar along the transmission route. A narrow Y- shaped reservoir 30 km long with two upstream branches will be created at full impoundment.

Power and energy production from the Project is estimated as follows:

Installed Power 50 MW Firm Power 18 MW Total Average Annual Energy Production 315 GWh Annual Firm Energy Production 158 GWh Annual Average Secondary Energy Production 157 GWh

3. The project is envisaged as the first phase of the Bumbuna-Yiben hydropower development scheme with an ultimate potential of 270 MW. The subsequent phases of this development envisage the construction of a multi-annual regulation dam at Yiben, 28 km upstream of the existing Bumbuna dam, and the extension ofthe Bumbuna powerhouse with two additional turbine units to raise its output to 100 MW. Further options include construction of additional powerhouses at the Yiben dam and downstream of Bumbuna Falls.

Hydroelectric Component

4. Hydrology: The Bumbuna project is a run-of-river facility with a drainage area of3,240 km2(2,635 mm average annual precipitation at Bumbuna). The Seli River has its sources in the northeast of Sierra Leone. For about 100 km, it flows across the Interior Plateau in a southwestern direction. About 30 km upstream of Bumbuna near the village ofYiben, the Seli river flows out of the interior plateau cutting through the Sula Mountains. After a fall of about 40m over Bumbuna Falls and the adjoining rapids it reaches the interior lowland floodplains and subsequently flows to a second fall, about 30km upstream of the estuary north of Freetown.

5. The hydrology reflects the seasonal rainfall pattern characterized by very wet winters followed by 4-5 months of markedly dry periods. Since 1970, the stages ofthe Seli River have been recorded at Badela and

55 Bumbuna by two gauges installed under a UNDP Program. The intake flow regime of the Seli River recorded at Bumbuna for the period 1970 - 1979 shows a mean annual discharge of 122.8 m3/s, with a maximum of 331 m3/s in September and a minimum of 6.1 m3/s in March. The highest peak flows are reached between August and October and normally range between 600 and 1200 m3/s. The maximum-flow was recorded in September 1970 at 1,052 m3/s. The design flood determined in the feasibility study through analysis of precipitation records for stations south of the catchment area and by infiltration measurements corresponds to a probable maximum flood with a peak flow of 2,970 m3/s.

6. Geology and Seismicity: The Seli River runs north to south through a relatively deep, narrow valley in the Sula Mountains, cut into pre-Cambrian, crystalline basement rock. The region is characterized primarily by gneissose granite and granodiorite ofthe West African Craton. The Bumbuna dam site itself lies on the western edge of a Precambrian curvilinear greenstone belt locally referred to as the Sula Group, which is surrounded by basement granitoids and late kinematic granites. Residues of weathered granite overlie most ofthe Precambrian rock formations.

7. A comprehensive investigation was made of the geological and geotechnical conditions at the Yiben and Bumbuna dam sites from 1972 to 1973 and again from 1977 to 1979. The Bumbuna dam site has firm bedrock at the surface in the center ofthe riverbed and at depths varying to 30m in the extremes of the flanks, On the right side, the rock is mainly granite and granodorite and the overburden is weathered granite. On the left side, the rock is mainly amphibolite with a similar of overburden of weathered rock. Alluvium is nearly absent in the riverbed at the dam site, where bedrock outcrops are fresh and sound. A hard granodiorite sill crosses the river about 2 km downstream ofthe dam site forming Bumbuna Falls.

8. Most ofthe potential geotechnical risks associated with construction have been mitigated as the dam and the main civil works are in place.

9. The project area is considered to have very low natural seismicity. The crystalline rock of the West African Craton on which the Bumbuna project is located, have been geologically stable since the Pre- Cambrian, Faults identified in this basement complex are not considered to be planes of weakness that could reactivate due to seismic forces and there is no evidence of movement of any faults within the craton since the Cretaceous Period some 65 million years ago. There is a slight risk of induced seismicity. Considering experience of reservoirs impounded on Pre-Cambrian Cratons around the world an earthquake of 4.5 magnitude on the Richter scale with a hypocenter at a distance of 5 km from the site was incorporated in the Project design criteria.

10. Sedimentation: To date there has been no comprehensive, nationwide sediment survey of Sierra Leone’s river systems. Sediment loads in the Seli river at the dam site, as determined by measurements taken from 1978 to 1979 as part of the 1980 Feasibility Study activities indicated monthly suspended concentrations, at that time, varied from 1.1 milligram per liter (mg/l) in the dry season to 105.3 mg/l in the wet season. The mean annual transport was estimated at about 90,000 m3. Recent measurement (EIA Update, 2004) suggest that the amount of suspended sediment in the river may be increasing (over 100 mg/l was recorded in 2004 near the end of the wet season). The indication of higher levels in the recent survey likely reflects land use changes after 25 years a result of the slash and burn agriculture, where trees and shrubs are replaced by crops (or grasses in areas left fallow), which are shallow-rooted with little ability to retain the soil, that in turn increase sediment yield.

1 1. The analysis of the IDA-supportedDam Review Panel (2004) indicate that a conservative estimate of bed load could be about 20 percent of the suspended load, about 18,000 m3. The total sediment inflow was thus estimated at about 108,000 m3 (suspended plus bed load). As most of the suspended sediment would pass through the Dam the Review Panel (DRP) concluded that deposited sediment would be small compared to the reservoirs inactive storage of 95 million m3. To address the potential risk accelerated soil erosion, a watershed management plan has been proposed as a component of the Project to improve vegetation and land

56 management practices. The downstream channel consists of boulders, cobbles and gravel but its generally coarse superficial materials have produced a natural armored layer reducing erosion.

Key Physical Components and Technical Aspects

12. Asphalt-faced Rockfll Dam: The Bumbuna dam is an 88m high asphalt faced rockfill structure with a dam crest elevation at 244.00 m a.s.1. The total embankment volume of 2.5 million m3 consists of crushed granitic rock. The crest is 440m long and 4 m wide. The dam axis is curved and shifted to upstream at the right bank. The upstream face has a 1:1.65 slope and is covered with an impervious asphalt concrete membrane covering an area of approximately 51,000 m2, The dam is founded on sound to moderately weathered bedrock with a cut-off to sound rock at the upstream toe of the dam in the form of a reinforced concrete plinth.

13. Multipurpose Tunnels: Two diversion tunnels each 620m long and 9m in diameter are provided around the left and right flanks of the dam. During the operation ofthe Project the concrete-lined left tunnel will be utilized as the primary spillway discharge. The right tunnel will function as the combined power tunnel and auxiliary spillway. In normal operations a radial gate (7.4m high x 7.0 wide) installed at the downstream end ofthe right tunnel will be closed. Water will be diverted into the powerhouse through a left branch in the tunnel 30m from the downstream end. The headrace is designed for a total discharge of 80 m3/s feeding two, short steel penstocks. The radial gate at the end ofthe right tunnel will open automatically when incoming floods peak over 1,000 m3/s-1,500 m3/s. During these occasions there will be a short-term interruption ofpower plant operation to release the flood peaks.

14. The right tunnel is concrete-steel lined for a distance of205m upstream of the radial gate to enable it to sustain high internal pressures when the gate is closed. The right tunnel will also serve as the bottom flow outlet to drain the reservoir should that become necessary. Provisions are made for a possible future connection of Bumbuna to a powerhouse sited downstream of Bumbuna Falls. Presently both tunnels are used to divert the river around the dam, the right tunnel only during the rainy season.

15. Morning Glory Spillways: Two Morning Glory (bellmouth) spillway towers located upstream of the dam have a combined capacity of 3,000 m3/s, corresponding to the PMPRMF estimate. The bellmouths have a crest diameter of 3 1.6m and sit on 36m towers constructed of reinforced concrete. The structures continue an additional 30m as shafts until they discharge into the tunnels about 170 m downstream of the diversion portals. The spillway over the left abutment tunnel has a crest at El. 236.0 m ad., which is 2m lower that the crest ofthe right spillway (238.0 m ad) to ensure the right tunnel remains under pressure flow conditions.

16, In normal operations, floods will discharge through the left spillway until the reservoir level reaches El. 241.5 m a.s.1. corresponding to a discharge of 1,000 m3/s. As this reflects a 10-year return period, the right tunnel will not be called upon to perform as an auxiliary spillway every year. Above 1,000 m3/sthe radial gate at the end ofthe right tunnel will opened automatically to enable the facilities to discharge floods up to the PMF of 3,000 m3/s. Further studies and operational trials will determine if the 1,000 m3/svalue can be increased closer to the 1,500 m3/s design flow of the left tunnel. The release of spillages to the downstream river reach is accomplished by means of a flip bucket dissipater located at the downstream end of each tunnel. The plunge pool will develop by natural scouring in the riverbed.

17. Tower Intake Structure: The intake to the right tunnel (Le. the power tunnel) is a freestanding 93m concrete tower with an internal diameter of 7.5 m located about 22 m downstream of the diversion portal. The intake, which is essentially a single level intake, consists of six inlet openings with sill elevations at El. 182.0 m a.s.1. leading to a steel-lined elbow into the right tunnel. A removable trash rack protects each opening and a single trash rake is provided to clean debris from all the trash racks without removal. A 7.5m diameter cylindrical gate will allow closure ofthe inlet for inspection and maintenance ofthe tunnel. A 100

57 m reinforced concrete footbridge in four spans connects the operating platform on the intake tower to the service road on the right abutment of the dam.

18. Surface Power House: The surface power house is situated at the toe of the dam adjacent to the right tunnel outlet. The concrete Machine Hall is a compact arrangement with an overall length of 41.0 m, width 17.0 m, and depth 24.0 m housing the main generation equipment, galleries, draft tubes, butterfly inlet valves and auxiliary services. Penstocks and draft tubes have been installed for two generating units. A 1 15 ton gantry crane has been assembled to the right of the Power House and will be installed to assemble power house equipment and for maintenance purposes. Excavation has been made to the left of the Power House to allow future expansion for two additional units.

19. The Power House will house two vertically mounted Francis Turbines directly coupled to vertical shaft synchronous generators. The design head is 70 m and the rated power from each unit is 25 MW, operating at a discharge of40 m3/sand a speed of 333.3 revs/min. The maximum and minimum net heads of 80m and 47m have a rated power of 30 MW and 14.8 MW respectively. The synchronous generators will supply 33.7 MVA at a voltage of 13.8 kV that will be stepped up to 161 kV by two three-phase transformers of 33.7 MVA each.

20. The Control Building will be sited above the right tunnel outlet, in the area between the radial gate and the excavated slope. The 600m2 building will be a two-story reinforced concrete structure divided into areas for central operations, storage, and workshops. Control equipment will be installed for the two generation units (turbines, generators, main transformers), the MV and HV switch gear, to auxiliary diesel generation sets and the low voltage installations. A protective system and instrumentation and metering equipment will be installed to cover this equipment.

21. Switch Yard and E&M Equipment: The 161 kV Switchyard will be located just downstream of the power house. HV Switchgear including 161 kV circuit breakers, disconnectors and grounding switches, voltage and current transformers, surge arrestors, insulators, and bus work will be installed for the connections between the step-up transformers and the 16 1 kV transmission line.

22. Reservoir: The valley of the Seli where the reservoir will form is deeply cut into the crystalline bedrock of the Sula Mountains. The reservoir impounded by the dam will be Y-shaped with a total surface area of 21 km2and a volume 445 million m3at the maximum water level (241.96 m a.s.1.). The main section of the reservoir forming in the main river stem will be contained by the steep slopes of the valley and extend 30 km upstream, where it then branches in two. The two upstream branches that are 7 km and 11 km long will form in flatter land and rolling hills. The reservoir width will vary between 200 m and 1 km.

23. The maximum storage capacity ofthe reservoir will be 350 million m3, equivalent to about 50 days of full generation output. This includes a flood routing capacity of 35 million m3. The inactive active capacity (dead storage) will be 95 million m3. The maximum seasonal drawdown will be 3 lm (between the maximum operating level of 241.25 m a.s.1. and minimum operation level of 210.00 m ad.). Actual daily fluctuations from peaking operations are not expected to be greater than 0.1 m.

24. Geotechnical investigations indicate that the degree of fracturing present in the upper strata of the bedrock on which the reservoir is formed gradually reduced with depth until it is practically nil after 10 m. This combined with other factors such the high piezometric pressure in the slopes above the reservoir indicated that water tightness is assured along the bottom and sides ofthe reservoir.

25. The impoundment of the reservoir would be undertaken in two stages. The first stage would involve partial impoundment up to about 40-50 percent of the total height of the dam at the advance of the dry season (December-January) to avoid the risk of sudden flood inflows. Testing of dam seepage and deformation behavior would be carried out with provision of environmental flow releases. Once other construction elements of the project are sufficiently advanced, the reservoir will be filled to its full level and

58 commissioning trials will follow. Subsequent operation of the reservoir under normal and exceptional conditions would conform to a detailed reservoir operation plan.

Transmission Component

26. The interconnection of the Bumbuna to the Western Area grid is provided by the 200 km single- circuit 161 kV line from the switchyard to a substation in Freetown. This will enable a hydro-thermal on the grid to optimize the power available from Bumbuna on a seasonal basis with thermal generation from the Kingtom diesel station. Diesel generation will be particularly important when output from Bumbuna falls progressively to 18 MW (equivalent continuous) during the dry season, depending on whether it is a wet or dry year. At other periods of the year the full output from Bumbuna would satisfy all load demand, certainly in the initial years until further supply increments are required.

27. 161 kV Line and 34.5 kV ISWL: The 161 KV line will be equipped with 400 mm2 ACSR conductors arranged in a triangular configuration with two shield wires above the conductors stung from 560 towers. To supply Makeni with the “Insulated Shield Wire Line” (ISWL) single-phase service, the two shield wires between the Bumbuna switchyard and Makeni will be insulated and energized at 34.5 kV. Similarly, to supply Lunsar the two shield wires between the Freetown substation and Lunsar will be utilized. The shield wires along the remaining line between Makeni and Lunsar will be galvanized steel strand.

28. Transmission Towers: the Towers are standard design made of galvanized steel. Structural design was based on the basic assumptions of wind speed (112 kdhr inland and 137 kdhr near Freetown) and safety factors of 1.60 with all conductors and shields unbroken and 1.10 with one conductor or shield wire broken. The tower foundations are designed for the worst combination of the loadings relative to the soil conditions. To address potential EMF and electric field concerns in the right-of-way the existing tower were raised for critical line sections in urban areas of Freetown and Makeni.

29. Substations: The project includes the two main 161 kV substations at the end points Bumbuna and Freetown located near the existing Kingtom diesel generation station. At Freetown there will be two three- winding step down transformers 161/34.5/11kVYrated at 40/30/15 MVA. The step down transformers in Makeni and Lunsar operating off the energized shield wire will be single 34.5/11kV units, rated at 3,500 kVA.

Component B: Environmental Mitigation, Resettlement, Watershed Management, and Benefit Sharing

Environmental Management

30. The completion phase environmental mitigation, management and monitoring activities will be coordinated and supervised by the Bumbuna Project Implementation Unit (PIU). The PIU will supervise the transmission and the main civil contractor who will be contractually obligated to establish their own units to implement and report on environmental and social mitigation measures for their respective construction activities. These will be based on the Bank-approved EMP in the 2005 Environmental Assessment (EIA).

31. In parallel, the PIU will also be responsible to effect coordination actions with local government Councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP studies and activities funded by the project (in particular the Environment and Agriculture Departments), and the hiring and supervision of consultants, NGOs and contractors for their implementation.

32. Similarly the PIU will initiate all legal and administrative activities needed to establish the Bumbuna Watershed Management Authority (BWMA) and the Bumbuna Conservation Authority (Bumbuna Conservation Authority) as a Conservation Offset. These organizations will be established shortly after the test reservoir impoundment.

59 33. The BWMA will be responsible for the Bumbuna Watershed Management Plan (BWMP) that aims to protect the reservoir from excessive sedimentation through improving agricultural practices in the Bumbuna catchment area, improving the livelihood of farmers, and protecting the remaining animal and plant biodiversity in the catchment, which includes the chimpanzee and other primate communities (see sections on Environment and Safeguard Policies, and Annex 17). The BWMP has several sub-programs for: (i) community awareness; (ii)land and soil management; (iii)agro-forestry and forestry; (iv) agricultural development; and (v) downstream and reservoir fisheries management. The PIU will also initiate and gradually transfer to the BWMA other EMP activities funded by the project, including actions for: (i) monitoring of public health impacts on diseases such as bilharzia and malaria; (ii)establishment of an environmental and social amenity flow; (iii)management of water quality in the reservoir area; and (iv) preparation and implementation of a comprehensive environmental monitoring program.

34. After commissioning of the BHP, the Special Project Company (BHC) will be contractually responsible for maintaining ongoing environment and management programs for the operation ofthe dam and reservoir and the transmission facilities and right-of-way. These responsibilities will be specified in the O&M management contract for the international operator for the dadreservoir and the transmission facilities.

35. All these actions together need to result in an appropriate protection of the Bumbuna Reservoir from sedimentation, improved livelihood of farmers in the catchment area, increased economic opportunities for communities in the area, appropriate protection of biodiversity and adequate water quality for users of the reservoir and downstream users and sufficient water quantity for downstream uses, including the environment,

Social Mitigation

Implementation of Dammeservoir RAP

36. A total of 33 villages (corresponding to 518 households) will be affected by the impoundment through which they will be losing farmland and access to river and forest resources. It is estimated that only one village, Matombe, with 16 households, will need to be physically relocated. One other village, Waia, with 80 households, will lose almost all their farmland, approximately 80 percent, and depending on where their new land will be located, they may need to physically relocate also. The remaining 3 1 villages will lose less land (17 villages will lose less than 20 percent and 14 villages will lose approximately 40 percent). In addition to these 33 villages, another four villages were affected in the past when the quarry, the construction camp, the dam itself and the access roads were built. The four villages, which are situated close to the dam site and downstream, will be compensated through community development projects.

37. The PAP in the dam and reservoir area will be compensated through a resettlement program which has several components, each of which responds to the determined impact, the specific needs of the PAPS, and the mitigation measures needed in order to reduce physical and psychological discomfort. Land for land and in kind compensation is the basic rule which will be adopted. Because of the fact that the area has already reached its carrying capacity due to slash and burn cultivation and population increase), land which is already degraded or situated too far away, may not always be the best option. For this purpose, a “Stabilized Agriculture Program” (SAP) and a “Livelihood Assessment and Income Restoration Program” (LAIR) will accompany the traditional compensation package of land, housing, income rehabilitation, assistance, etc.

38. The DadReservoir RAP will be implemented through a contract with a resettlement unit, composed of international and national resettlement consultants, which will report to the PIU. The PIU will have the major and overall coordinating function while the RU will be the implementing unit in the field. The RU will have its main offices in Kafogo and Bumbuna and a coordinating office in Freetown. The two major components in the resettlement and compensation package, the SAP and the LAIR, will, although part of the RAP, be implemented by national consultant contracts and will be closely coordinated with other activities

60 within the resettlement program. A Legal Council will be provided continuously throughout the resettlement process and is included in the RU contract (through sub-contract to the “Lawyers Centre for Legal Assistance”). On the local level, Village Resettlement Committees (VRC) will represent the PAPSand will fully participate in all activities throughout the resettlement process. Internal monitoring will be carried out by the RU. External monitoring and evaluation of the process will be carried out continuously by an independent “witness NGO” as well as by the panel of experts. A Resettlement Advisory Group will be composed of and represent all stakeholders and this group will have an oversight and advisory function.

Implementation of the Transmission Line RAP

39. The existing transmission line is 255 kilometers long and includes about 550 towers. It starts at the switchyard at the project site in Bumbuna and ends at a substation in Freetown. The completion of the transmission line will also cause resettlement but on a very small scale. The original RAP, which was disclosed in January, 2005, determined 367 households in the ROW of the transmission line which would have to be resettled should the ROW have been enforced. Alternatively, 137 households would have been affected had the alternative exclusion zone concept been adopted. However, in order to further minimize resettlement, in line with the public consultations which express an unwillingness to resettle, an approach will be adopted which retains existing land use and permits transmission lines to overpass existing buildings and houses, provided there is a minimum clearance between structures and the lowest conductor of 7.0 meters. Thus, only six structures will need to be relocated, based on a field study in February 2005.

40. The Transmission Line RAP will be implemented by the same RU that will implement the Damkeservoir RAP, and the same institutional arrangements will apply.

Benefit Sharing

41. The Upper Seli Community Development Initiative (USCDI) will develop and test an innovative institutional model for the proposed Bumbuna Trust, and, in so doing, provide benefit sharing to the indirectly affected population in the reservoir area and the area immediately downstream of the dam (the directly affected area will be covered by the RAPS). It responds to growing international calls for explicit forms of local-benefit sharing to broaden the development effectiveness of water resource infrastructure projects (World Commission on Dams, Summit on Sustainable Development) and subscribes to the World Bank Water Sector Strategy 2003. The initiative will be implemented in three districts: Bombali, Tonkolili and Koinadugu, and will cover a population of approximately 150,000 people in 9 wards (each district in Sierra Leone is divided up into a number of wards).

42. It will enable benefit sharing to begin as completion of the dam is underway, and will enable mechanisms to be developed and tested for a long-term, sustainable Trust which can provide on-going benefit sharing in the area. The plan is for the Trust to provide benefit sharing to directly and indirectly affected communities in the reservoir area as well as the area downstream of the dam.

This initiative will focus on two activities:

Ward and Community Sub-projects

43. Communities will receive development benefits based on their demands for improved public services through sub-projects implemented by them in collaboration with ward development committees and in harmony with overall district development plans. An initial menu of sub-project options has been determined during the planning process through discussions with communities, wards, and districts. This menu includes the following: clearing and rehabilitation of smaller access roads, hand-dug community wells and construction of latrines, management of organic waste, rehabilitation of existing school buildings and health

61 centers. Communities will apply for sub-project funding by completing simple, sub-project application forms, based on their already revealed priorities.

44. Applications will be reviewed and approved by ward development committees, based on simple feasibility criteria, to ensure that the proposed sub-project is from the approved menu ofoptions, is viable and will not duplicate existing or planned development interventions. Wards will send their package ofapproved applications to the district council for final approval, in coordination with the district-level staff of the relevant line ministries (for example, a proposal for a school will be checked by staff of the Education Ministry, to ensure that the Ministry can provide adequate teaching staff and equipment. A similar process will be undertaken for water projects, health projects, etc.). Districts will send a consolidated list of ward packages of sub-projects to the USCDI Advisory Group, for their information and approval on a no-objection basis, as long as the sub-projects are on the approved menu ofoptions and the total estimated budget for each district does not exceed the associated ward budget envelopes.

45. Once final approval is given, project coaches (one per district) will help communities prepare sub- project plans and assist them with implementing their sub-project, in collaboration with the line Ministry staff at the district level. Communities will contribute in cash, kind, and labor. Communities will also receive training needed for sustainable operation of facilities (such as community managed water systems). Local NGOs may be contracted to provide this training. A sub-project committee will be formed of users of the prospective public services, under the supervision of the ward development committee. This sub-project or users committee will be elected by the respective communities and membership will be composed at least 30 percent female and will include at least two youth representatives (one female, one male). Each user committee will contain at least one ward development committee member on it, to facilitate coordination.

46. Overall funds flow is from a project account in the Decentralization Secretariat to accounts in the three District Councils that would be under the Chief Administrator. Funds will be released in tranches to Districts based on cash flow projections and allocations among the Districts and approved packages of sub- projects. Funds will be released from the District account in tranches to sub-projects accounts, on a performance basis, after sub-project milestones stipulated in a MOU for each sub-project are met. The MOU will typically involve the 3 parties: the User Group, the Ward and the Council. The ward development committee member on the user committee will work with the user committee to manage any sub-project contracts, purchase ofmaterials, etc. All accounts and expenditures will be subject to transparent community accountability and audit procedures and will be in accordance with the recently passed Decentralization Act and Procurement Law.

Youth Capacity Building

47. Training in marketable trade skills a local firm (possibly an NGO) will be hired to implement an outreach training program for youth in trade skills for which viable markets exist. In other words, youth will be trained in practical skills for which there is a market demand. Priority skills mentioned in community consultations have included: roads construction, tailoring, blacksmithing, carpentry, masonry, catering, petty trade and soap making. Instead of bringing large number ofyouth to a large town such as Makeni, groups of youth will be trained in ‘strategic villages’. There will be five or six strategic villages dispersed throughout the wards in the project area. Up to 25 youth from nearby villages will participate in a course. Orientation, theoretical training, and sharing of experiences will be held in the strategic village. Practical on-the-job experience will be obtained by participants through working throughout the course period with ‘mentors’ (local trades people - carpenters, masons, etc. who will take on participants as apprentices). Mentors will be provided with orientation and training to understand and be capacitated in their role as mentors. These skills should be of use in the sub-projects component, and so an initial market for these skills will be found there. At the end of the training courses, trainees will be given starter kits of tools to capacitate them for self- employment and community work.

62 48. Training in business and life skills: another local firm (possibly an NGO) will be hired to implement an outreach training program for youth in the areas of business and life skills. This will included basic skills for running a small business, literacy and numeracy, as well as ‘life’ and ‘civic’ skills such as leadership, community organization, conflict resolution, knowledge of basic health issues such as HN/AIDS, etc. This training will be held in the strategic villages in conjunction with the trade skills program, so that participants will all three skill areas during a three-month training program. (It is possible that one firm could be hired to develop and implement both programs; initial investigations have indicated that it might be difficult to find one firm skilled in all three areas, but this will be done if possible, as it would be institutionally simpler and more efficient).

49. Small grant allocation scheme targeted at community-based youth organizations: this scheme will provide a limited amount of funds to which community-based youth organizations can apply, using a simple application form. These grants would be for community-based development initiatives, to be implemented by the youth organizations. Ward development committees would review and make decisions on these applications. The compensation due to the persons affected by the original resettlements is dealt with separately, in section D.1.11, D.7.1 because, as an exception to OP 4.12, it will be financed from the proceeds ofthe BHP over 5 years after its commissioning.

Component C: Technical Assistance

50. This component comprises management and supervision of the activities under Component B; and support for the Dam Review Panel (DRP), the Environment and Social Advisory Panel of Experts (ESAP), and the Communications Action Program. 5 1, An international and national Environmental Management Technical Assistance team will assist the PIU in implementing the EMP, in collaboration with the Department of Environment and other Sierra Leonean agencies. The PIU will also establish its own environmental management structure to oversee implementation of EMPs prepared by the contractors for the dam and transmission line.

52. Project costs are presented in Annex 5.

63 Annex 5: Project Costs SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Sierra Leone: Completion of the Bumbuna Hydroelectric Project Components Project Cost Summary (including physical and price contingencies)

Total Project Project Cost, incl% Foreign % Total Local Foreian Cost IDC IDC ExchanaeBase Cost A. Hydroelectric Project Contracts Civil and Hydraulic Steel Structures (Contract A2/B) 7.274 34.011 41.285 3.979 45.264 82% 48% Electromechanical EauiDment (Contract C) 0.479 16.051 16.530 1.301 17.831 97% 19%.. Transmission LinelSubstation (Contract Dj .3 0.000 8.778 95Y 1O0o Sub-total Hvdroelectric Proiect Contracts ::% 6861757983 5.280 71.873 88; 7760 B. Environmental MitigationlArea Development 588.34; Environmental Management 2.806 0.528 3.334 0.000 3.334 16% 4% Land Acquisition, Compensation & Rehabilitation (Reservoir Area) 3.487 0.000 3.487 0,000 3.487 0% 4% Land Acquisition, Compensation & Rehabilitation (Transmission Liar75 0.000 0.175 0,000 0.175 0% 0% Upper Seli Community Development Initiative 1.225 0.075 1.300 0.000 1.300 6% 2% Sub-total Environmental Mitigation/Area Development 7.693 0.603 8.296 0.000 8.296 7% 10% C. Technical Assistance Construction Supervision for Hydroelectric Project Contracts 0.107 3.515 3.622 0.000 3.622 97% 4% Support for the Bumbuna PIU 0.600 1.210 1.810 0.000 1.810 67% 2% Dam Safety Panel of Experts 0.000 0.110 0.110 0.000 0.110 100% 0% Environment and Social Advisory Panel of Experts 0.000 0.696 0.696 0.000 0.696 100% 1% Communications Action Plan 0.147 0.017 0.164 0.000 0.164 10% 0% Project Management and Supervision - Component B 2.085 1.129 3.214 0.000 3.214 35% 4% Sub-total Technical Assistance 2.939 6.677 9.616 0.000 9.616 69% 11% Total BASELINE COSTS .4 5.280 9.785 78% 98% Repayment of PPF la8.:;0 625:% 824;%- 0.000 82.000 100% 2% Total PROJECT COST 18.824 67.681 86.505 5.280 91.785 78% 100%

64 Annex 6: Implementation Arrangements SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. The primary institutional arrangements for government direction and cross-sector coordination for management of the BHP are at three levels: a special Cabinet Sub-committee; an Inter-Departmental Technical Committee; and the Bumbuna Project Implementation Unit. The Cabinet Sub-committee established in December 2003 has a mandate to decide national energy policy with specific reference to BHP and provide oversight of a Technical Committee to help expedite decision-making. Membership consists of:

0 The Vice-president ofthe Nation 0 The Minister ofFinance 0 The Minster ofEnergy and Power 0 The Minister of Works, Housing and Technical Maintenance 0 The Minister of Lands, Country Planning and the Environment 0 The Minister ofLocal Government and Community Development

2. The Technical Committee established at the same time as the Cabinet Sub-committee has eight officials, collectively mandated to translate government approved policies into objectives and plans to be implemented by the Bumbuna PIU. It reports to the Cabinet Sub-committee on project progress including technical and financial matters and the performance of the PIU. Its mandate is to develop and promote appropriate mechanisms for all aspects of the project including those that require inter-agency coordination such as compensation issues, communications, watershed management, wildlife management and public health and safety. Membership includes:

0 The Finance Secretary 0 The Development Secretary 0 The General Manager ofNPA 0 The Professional Head, The Minister ofWorks, Housing and Technical Maintenance 0 The Chief Environment Officer, The Minister ofLands, Country Planning and the Environment 0 The Bumbuna Project PIU Head 0 A Representative from Professional Engineers Association and University

3. The Bumbuna PIU professional staff coordinating the safeguard and project preparation study teams. The PIU will be staffing up in late 2005 with AfDB financial support. It will continue to function as the focal point for communications with national, local and international stakeholders and supervise the contracts with the project contractor and consultant.

The figure at the end ofthis annex indicates the overall institutional and staffing arrangements for function of the PIU

Component A. Hydroelectric and Transmission Infrastructure Project

The implementation arrangements for Component A are set out in Section C.2 of the PAD. The GoSL, represented by the MOEP will implement the construction phase, through a series of construction contracts with private contractors, and will enter into a concession agreement to transfer the implementation of the operation phase to the concessionaire (BHC).

Component B: Environmental Mitigation, Resettlement, Watershed Management and Benefit Sharing

65 Environment Management

Implementation of the EMP:

4. When completion works resume the construction contractor and transmission line contractors will implement immediate EMP measures under the supervision and monitoring of a PIU Environmental Specialist and the PlU Environment team. In parallel the PIU will contract and supervise teams preparing the additional baseline studies required before reservoir impoundment. The PlU will then lead effort to establish an administratively lean organization institution referred to as the Bumbuna Watershed Management Authority (BWMA). The BWMA will be a small organization established after test impoundment responsible for implementation of the Land Management Strategy and Action Plan that is a key component to introduce integrated watershed management. The PIU would then gradually transfer responsibilities for watershed management activities funded by the grant including the establishment of the Bumbuna Conservation Authority.

The institutional arrangements thus include:

0 The Bumbuna PIU 0 Contractor (pursuant to the Wrap Up Agreement, Salcost will undertake to prepare and comply with an EMP under the supervision of the PIU) 0 The Bumbuna Watershed Management Authority 0 The Bumbuna Conservation Authority 0 The Seli River Development Agency

0 The Concessionaire (BHC).

5. The BWMA, will be a small and lean organization, and will be established under or with linkage to Seli River Basin Development Authority (SRBDA) an existing organization created in 1999 although it is not active at present, which itself will be revived on a modest scale initially by involving it in the Project and specifically component B and C activities.

6. It is envisaged that under the aegis ofthe MoEP (which has the pemit for water resource development in Sierra Leone), the SRDA would be positioned to oversee or implement a strategic EIA of the Seli River Basin taking into account the BHP and the planned future hydroelectric development in the basin. Eventually, the SRDA would serve as a river basin organization (RBO) in a similar manner to RBOs in other jurisdictions. It would for example, establish collaborative mechanisms for the water use interests to advise on water allocation policy and related matters, coordinate the provision of training, capacity building and institutional strengthening, and assist in the provision of funding for the local-level catchment management organizations (such as the BWMA) for the integrated land and water management at the Seli basin level.

Implementation of the Resettlement Action Plan for the Reservoir and Dam Area and the Transmission Line Area

7. Both Resettlement Action Plans (Dammeservoir RAP and the Transmission Line RAP) will be implemented by the same RU which will be composed of international and national resettlement specialists. The institutional arrangements are as follows:

a. The Project Implementation Unit (PIU) will be responsible for implementing this RAP. This unit already exists. However, it requires additional staffing and institutional strengthening, which will be provided under this component. b. The LAIR (Livelihood Assessment and Income Restoration) program, will be accompanying the RAP and will be carried out by an NGO qualified for such work. This program will be under a separate contract with the PIU.

66 c. The SAP (Stabilized Agriculture Program) will also accompany the RAP and will provide technical assistance to PAP and help introduce new farming techniques. This program will be under a separate contract with the PIU. d. Implementation will be contracted out to a Resettlement Unit (RU), staffed and equipped to carry out the work. This RU should have offices in Bumbuna and Kafogo in order to be able to deal directly and on a local basis with all issues at hand and a coordinating office in Freetown, This unit will be created and the required personnel hired. e. An estimated total of 15 Resettlement Officers (RO) will hired, each ofthem dealing with 4 to 5 villages in the project area. f. Legal counsel to PAPs will be provided continuously throughout the process. The Lawyers Centre for Legal Assistance (LAWCLA) is an organization that has been identified for this task,

g. Village Resettlement Committees (VRC), one per affected village, will be organized as a direct representation of the PAPs. It is important that representatives of vulnerable, often excluded groups (especially women and young people) are adequately represented. A VRC will be set up in each ofthe affected villages in the dadreservoir area. The villagers will choose who should be on the committee. Membership should not exceed twelve, ofwhich one third should be women. In general, the VRC will advocate for the interests of the village and its primary purpose will be to work out how the village will be included in resettlement implementation and monitoring. Most importantly, it will be involved in compensation of lost land and identification and preparation ofreplacement land. Specific duties include: (i)agreement with villagers on location site of village (if there is physical relocation); (ii)agreement with PIU on design of village; (iii) agreement on compensation of assets, crops and trees; (iv) contribution to the development of infrastructure lost (roads, paths), (v) first instance for receiving and listening to villagers’ concerns and grievances about the project; (vi) contact point with villagers on status of the resettlement; (vii) continuous monitoring ofResettlement implementation. h. The role of a Advisory Group will be assumed by the Resettlement Advisory Group, where all stakeholders will be represented. Members of the RAG include representatives from: the PIU, Government (ministry departments), NGO involved in resettlement, vulnerable groups (Women’s groups, orphans, HTV/AIDS etc), villages, and host communities. The RAG will convene once a month during implementation to ensure regular exchange ofinformation between all parties. The RAG will also review the resettlement strategy and results and advise and inform government of possible regulatory or legal actions to take. i. Monitoring will be an important part of the follow-up work. Different monitoring tasks will be carried out by different actors, including the RU itself (for routine day to day monitoring); a witness NGO for witnessing and monitoring specific activities, e.g. compensation payments or signing ofagreements; and a Panel of Experts for periodic external monitoring.

Benefit Sharing

8. The Upper Seli Community Development Initiative would have a Advisory Group which would provide: (1) overall strategic direction for the initiative; (2) coordination among the 3 Districts and Bumbuna project entities and any problem resolution required, and; (3) strategic direction on transitional planning for a longer-term Trust. The Project Advisory Group would also ensure a fair and equitable balance for allocations among the three districts and a mechanism for discussion of common interests. The coordinator for the initiative will be based in the Decentralization Secretariat (in the Ministry of Local Government and Community Development). The coordinator will work with one other person to form a team based in the Freetown office. In addition, there will be one coordinator (or ‘coach’) based in each of the three participating districts. The coaches will report to the coordinator and to their respective district administrators.

67 9. The composition of the Advisory Group would be confirmed during the project set-up. Membership would be 12-15 members and would minimally include:

a 3 District Council Chairperson and 3 Paramount Chiefs (from Koinadugu, Tonkolili and Bomboli Districts) a Director ofthe DecentralizationSecretariat; a Director ofCommunity Development (MLGCD) a A senior representative of the Ministry of Energy and Power a Director ofYouth, Ministry ofYouth and Sports a Managing Director of NaCSA; a Director ofthe PIU a Chairman ofthe Seli River Basin Development Authority; a A representation of JICA (Sierra Leone) and a World Bank Country Manager, or a designated representative

10. The Advisory Group would be co-chaired by the Director of the Decentralization Secretariat and the Director of Community Development.

11, The Directors or Head of the Bumbuna Watershed Management Authority (BWMA) and Bumbuna Conservation Authority (BCA) and a representative of the BHC would be invited to the Advisory Group, when these organizations are established (Le., the BWMA and BCA as recommended in the Bumbuna EIA Update).

12. The Catchment Stakeholder Forum would meet once a year on the day preceding a Advisory Group meeting. The Forum would consist of government, non-government and civil society stakeholders from the three districts and national stakeholders. Subject to the Advisory Group and Paramount Chiefs’ discussion on the matter, the Forum would be convened by a 3-member panel of the Chief Administrators of the 3 districts, The Forum would entertain discussion of concerns and issues on the current progress on the Project and transitional arrangements toward a Trust.

68 Organization Chart for the Upper Seli Community Development Initiative (JSDF)

I Steering Committee I ...... i Independent i...... ,...... Stakeholder i AudrforsandM&E Experts i Advisory Forum i...... ,...... i I

District Coach District Coach District Coach Based ln Based In Based In Bombali District Tonkolili Distnct Koinadugu District

Steering Committee Composition Advisory Forum Composition - 3 District Council Chairperson and 3 Paramount Chiefs Representative government, civil society and private sector * Decentralization Secretariat Director (DecSec) stakeholders 60m the three Districts in the Catchment Community Development Director (MLGCD) * Interested national stakeholders (e.g. NGOs active in the 3 Districts) - Representative of Energy and Power (MoEP) * Representatives of Community User Committees . Director ofYouth. Ministry ofYouth and Sports * Forum convened by Chief Administrators (CAS) ofthe 3 Districts Managing Director ofNaCSA Bumbuna Project Implementation Unit (PIU) Director Note: Representatives of the Bumbuna Watershed Management - Seli River Basin Development Authority Chairman Authority (BWMA), Conservation Authority (BCA) and Special JICA (Sierra Leone) representative Project Company (SPC) would be invited to the Forum or Steering * World Bank Country Manager, or a designated representative Committee when these organizations are established.

Component C

13. Borrower Capacity: Borrower capacity to implement the safeguard policy recommendations is at present insufficient. The project will finance Environmental Management and Monitoring Capacity building through Technical Assistance. The Technical Assistance will provide on the on-the-job training and capacity building in environmental management and monitoring, for the responsible Sierra Leonean institution, the Department of Environment. The Technical Assistance will be based in the PIU.

14. Capacity building will be needed to ensure those institutions with responsibilities for environment and social management are capable of executing their responsibilities both in the completion stage and for the longer term. On-job capacity building activities will be directed at:

0 The PIU (existing but not fully staffed) 0 The Department of Environment (existing) 0 The Wildlife Conservation Branch (existing) 0 The Bumbuna Watershed Management Authority (to be established) 0 The Bumbuna Conservation Authority (to be established), and 0 The Seli River Development Authority (existing but not functional)

69 Bumbuna Hydropower Project - Project Implementation Unit (PIU) - Organization and Staffing

Government of Sierra Leone

Ministry of Energy and Power

Guidance/Direction Bumbuna Hydropower Government Ministries

F-Reporting~SLiasonjProject Director Project Donors rTechnical Committee Approvals 1

b Construction Supervision Resident ’ (Studio Pietrangeli) - Hydro Quebec Hydropower Home Ofice Support 4 Project Engineer Specialists (Hydro Quebec) -3 Environment - Civil Contractor - Resettlement (Salini Costrutton) - Dam Safety I - Electrical I I 1 - Mechanical Civil E/M Contractor - (European Consortium) O&M

1 Transmission Line Contractor 4 (ABM

PIU Staff I

ResidenWisiting Specialists Local Staff

- Contracts Expert - Technical - Financial Controller/Administrator - Financial - Resettlemenffsocial Expert - Administrative - Environmental Expert - Environment - Cost and Schedule Expert - Resettlement - Stabilized Agriculture Program Expert - Communications Unit - Livelihood Assessment and Income Restoration Expert - Stabilized Agriculture Program Manager - Livelihood and Income Restoration Program Manager

70 Annex 7: Bumbuna Communication Action Plan (Summary)

SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Introduction

1 Rationale: The need for a communication program stems from the importance of the BHP project and its impact on the different stakeholders that are directly or indirectly affected by it. The development ofa communication program responds to the need for an open, transparent and inclusive dialogue among stakeholders. Developing a holistic approach to communication aims at ensuring that economic, political, social and environmental concerns related to the project are properly addressed and will help explain how the completion of the Bumbuna project is economically viable, environmentally sustainable and socially equitable.

2. Objective: The communication program shall contribute to the achievement of the project’s development objectives by setting up two-way communication mechanisms and carrying out grass roots activities in order to: a) provide adequate and timely information dissemination to all stakeholders and ensure the transparency of the process; b) ensure that opinions and concerns of all stakeholders are taken into account and raise their level of participation in the decision-making; c) ensure public acceptance and endorsement of the project and d) make certain that the development opportunities linked to the project are fully understood and exploited.

3, Communication Action Plan Design: The project has dedicated significant effort to: (i)identifying the main stakeholders affected by the project and analysing their position in relation to it; (ii)uncovering the most relevant attitudes and beliefs that influence the stakeholders perception towards the project (iii) understanding the most relevant concerns and expectations; (iv) identifying ways to effectively communicate with various stakeholders; (v) building mechanisms into the project that will sustain the dialogue among stakeholders throughout the project cycle. A communication specialist was part of the project preparation team to ensure the involvement ofkey stakeholders in all project phases.

4. A thorough qualitative and quantitative communication research phase has been carried out to design a comprehensive Communication Action Plan (CAP) in support ofthe completion ofthe BHP. The CAP has been developed into five main components tailored to address the communication needs of different audiences, In particular: (i)capacity building to support the Communication Unit of the PIU; (ii)inter- institutional coordination to ensure that involved ministries and authorities at central and regional level are regularly informed about relevant facts and decisions and have a unified approach to communication; (iii) grassroots communication to involve communities in the decision making process through a participatory approach and to support the community development plan; (iv) media relations to provide correct information to the media; (v) external communication to explain the benefits ofthe project and ensure transparency within all members ofnational and international interest groups with interests in the project.

5. Communication Action Plan Implementation: A Communication Unit (CU) responsible for the management and implementation of the communication activities described in the CAP has been created within the PIU and CAP implementation has started. The CUis supported by the World Bank’s Development Communications Division and benefits from the experience of the IEC Unit of NaCSA that has developed important experience in development communication in Sierra Leone. Extensive consultations with project affected communities, indigenous leaders, town and district councils along the reservoir and transmission line areas have been carried out in coordination with the EIA and RAP teams (see Annex 18). Two-way communication mechanisms are planned to support project completion by sustaining dialogue, information sharing and facilitating grievance procedures. At the project site community radio activities are being created to promote community discussion ofproject-related issues. Information dissemination activities through print

71 and broadcast media are ongoing. Public opinion research has been carried out to establish a baseline on the level of information and the perceptions of the general public toward the BHP and the power sector reform. This study focused on: i)perceptions of stakeholders concerning the project and private public partnership in the power sector, ii) existing communication channels and systems, and iii) communication needs at community and national level.

6. Additional communication activities will be implemented by the CU as described in the CAP throughout the life cycle ofthe project. The CU will carry out CAP implementation through monthly working plans to be discussed and approved by the Technical Committee under the supervision of the project team, Monitoring and evaluation activities are embedded in the CAP so as to assess the degree of participation of the key stakeholders during implementation and provide project updates and status reports. All project’s public documents will be made available through a project website as well as at suitable locations at the central and provincial level.

7. Monitoring and Evaluation: Adequate qualitative and quantitative communication research is embedded in the CAP implementation throughout its life to ensure informed decision making and constant monitoring and evaluation. A monitoring mechanism will identify trends in attitudes and behaviors among different groups and will assess the impact of the various communication activities. The CAP shall be regularly adapted to take into consideration changing communication needs. The public opinion research study shall be replicated during project implementationto monitor and evaluate the impact of communication activities carried out until that moment and identify the necessary adjustments and integrations to the Communication Action Plan. Additional methods to monitor the impact of communication activities are: i) the monitoring of media outputs, ii) radio phone-in programs, and iii)public consultations with the different stakeholders.

Audiences

8. Several public, private and international players are involved in the completion of the BHP, each one holding different interests and playing different roles, with different tasks and responsibilities at different levels (political, economic, and technical). The CAP will involve the strategic use of several communication approaches, techniques and tools to reach the largest possible audiences and will ensure close coordination of information flows among all the key players at all levels. Main audiences have been identified as follows.

9. Institutions Directly Involved in the Project as Partners: All institutions participating in the project will be involved in the communication program and provided with adequate and timely information to ensure good coordination and the sharing of a clear and comprehensive understanding. In addition to the Ministry of Energy and Power, these institutions include: the Office of the President; Office of the Vice President; Ministry of Finance; Ministry of Development and Economic Planning; Ministry of Land, Housing, Country Planning and Environment; Ministry of Works; Ministry of Local Government and Community Development; Ministry of Information and Broadcasting; National Power Authority; National Commission on Privatization; the BHC; operator; contractors; engineering consultants; and the donors (Government ofItaly, African Development Bank, IDA, and the OPEC Fund).

10. The CU will provide communication support and will seek coordination among all project team experts working in the different components of the project, (social, environmental, economic, and engineering).

1 1. Project Area Residents and Project Affected People: Resettlement and regional development programs involving PAP will be supported by the communication activities and by coordination between the CU and the implementationteams.

72 12. General Public: Sierra Leone citizens have heard about Bumbuna for more than 30 years, On the one hand they pin many hopes on it, but on the other hand they lack confidence in the completion of the project. Over the years much disinformation and erroneous beliefs have affected public opinion.

13. Local Authorities and Local Power Elite: these include local authorities in affected areas, Paramount Chiefs, village chiefs, local district councils, community elders and other influential people.

14. The National Media: Interaction with print and broadcast media is essential to reach the public at large (this includes newspapers, magazines, radio and TV.) Newspapers: About 20 newspapers are printed in Sierra Leone, Every day an average of ten newspapers are printed, each one producing approximately 1000 copies on average. It is estimated that each copy is read by an average of 5 persons. The printed press is therefore a limited media. However, newspapers have high circulation within ministries, business and affluent circles, and will be considered an effective tool for reaching this constituency. Radio is the most effective media to reach the general public. The majority ofthe people have radio receivers and are regular listeners. There are currently 6 FM radio stations in Freetown, two radios with a national coverage (Radio UNAMSIL and SLBS) and several community radios. Television can have a high impact but on a very limited audience as few households have TVs and power generator. TV will therefore be considered only as a medium to reach affluent citizens ofFreetown.

15. Development Agencies, International and National NGOs, Civil Society Associations: These include the development agencies working in Sierra Leone, such as UN Agencies, bilateral agencies, local NGOs, other professional and non professional civil society associations, religious groups and community leaders.

Brief Description of Components and Actions

16. Capacity Building to Support the Communication Unit: This component aims to support the Communication Unit created within the PW. Media training and technical support by the World Bank’s Development Communication Division and the IEC Unit of NaCSA will be sustained throughout the project cycle to support the CU to design and carry out all communication activities related to the BHP and act as source of information for all stakeholders while encouraging cooperation among all key members. The CU office has been established, one communication officer appointed, the furniture and equipment purchased and two media training activities have been conducted.

17. Inter-institutional coordination: The activities envisaged for this component are: a) establishing communication procedures/protocols to share information and opinions among involved institutions. This includes: mailing lists, face to face and group meetings, written briefs distributed to all involved institutions; b) developing information material (leaflets, briefs, press releases, information kits) to support the mandate and tasks of PIU member’s or of other involved institutions; c) managing PIU media relations; d) producing the BHP newsletter every trimester describing project progress; and f, organizing workshops involving different stakeholders on strategic communication, or other relevant issues.

18. Grassroots Communication: The CU will act as a link between the local communities and the decision-makers to ensure two-way communication. This component entails providing local communities with adequate and timely information on the project and on its impacts, helping the community committee, facilitating grievances procedures during resettlement, and involving communities in consultations through a participatory approach to support the regional community development plan.

19 The main activities of this component include: a) direct proximity communication through regular visits and public consultations; b) public consultations that include (i)religious leaders, (ii)paramount and village chiefs (iii)youth, (iv) women, and (v) elders. Particular attention is paid to ensure that all groups are given a chance to speak and those important differences in perspectives are captured; b) regular interaction with local authorities; c) communication activities such as community theatre, short video documentary

73 screening in support of the RAPS and the EMP, d) production of communication tools and activities in support of the Dam Safety Plan and dissemination of information related to “emergency preparedness”; and e) creation of a community radio activity in Bumbuna which will serve as a medium to foster dialogue, support regional development activities and promote community discussion of project-related issues. A committee representing all ethnic groups has already been established.

20. Media Relations: The objective ofthis component is to provide correct information to the media so as to disseminate adequate and timely information to the general public about: i)the progress of the BHP, ii) its benefits and opportunities, iii)the role ofthe different actors involved (government, donors, contractors). Media relations will also help identify and address specific misinformation and erroneous perceptions concerning the BHP. Radio programs as well as the interaction with journalists will help not only to inform and sensitize but also to listen to different audiences perceptions through a bottom-up communication approach.

2 1, Activities ofthis component include organizing information to be released officially and coordinating official spokespersons, identifying and training key staff who will be chosen to become active spokespersons and communications “champions” for Bumbuna. A focal point for media relations has been established as well as the creation of a media directory and database. Activities tailored to building good relations with journalists of the printed and broadcast media will include producing and disseminating Information Packages (press-kits) for journalists that will include: i) information notes on different aspects of the BHP (description, progress, role of involved organizations, expected benefits, social and environmental issues etc.); ii) synopsis of statements or speeches of the President and other personalities, iii) graphics, vi) audio and video material (interviews to the different stakeholders). These Information Packages will be regularly updated. In addition press conferences and field visits to Bumbuna will be carried out. Monitoring of mass media output, producing radio programs (phone-in programs, panel discussion, news reports, radio theatre, etc.) are underway together with TV programs. Production of printed material and collection of audio, photo and video documentation ofthe project will be used to develop radio and TV programs throughout the project cycle.

22. External Communication: This component aims to explain the benefits of the project and ensure transparency within all members of national and international interest groups with interests or concerns in relation to the project. Large infrastructure projects are in fact closely monitored by development agencies and NGOs that are active in the social and environmental sector in Africa. Main activities of this component include the ongoing design and managing of a project website. The website describes the BHP, highlights positive impacts on living conditions and economic development in Sierra Leone and explains the role ofthe World Bank. The website includes all relevant project documents, a “Questions and Answers” section and will be enriched with additional information, articles, interviews, photos, video etc. during the course of the project. The CU is also responsible for nurturing the relations with national NGOs working in the project areas. It is important to establish a dialogue with those NGOs and civil society organizations already active in the project area that could become partners in the development of local initiatives. These institutions can provide valuable information and feedback on project activities, and can be partners in the information dissemination process.

74 Annex 8: Financial Summary for Revenue Earning Project Entities, BEC, and the Project Company SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Bumbuna Hydropower Project Special Purpose Company (SPC) Revenues and Cost of Production

Bumbuna Phase 1 - BHC Bulk Tariff per per kWh

1. Operatlon and Maintenance Costs 4(a) Orlglnal AfDB Loan as of 01/01/07 -(mil USD)

1(a) Estimated Annual Escalation -1 4(b) Consolldated AIDE Loan ab of 01/01/07 -(mil USD) l(b) Annual OBM Costs Generation -(mil USD) 4(c) Total AfDB Debt as of 01/01/07 vl(milUSD)

1(c) Annual OBM Costa Transmlsslon vl(milUSD)

l(d) Total Annual QBM Costs 3.00 (mil USD) 6(a) 1996 Protocol Debts Value Jan. 1,2007 -1(mIl USD)

6(b) Annual Prlnolpal Repayment -1 2. SPC Annual Management Costs ((mil USD) 6(c) Interest Rate 4.6%1 6(d) %of Debt to be Repald From Revenues

-(mil USD)

Repalr Reserve 6(a) Commercial Loan Principal

Repalr Reserve -(mil USD) 6(b) Annual Prlnolple Repayment

6(c) Interest Rate

7. Debts to TL PAP and Annual Trust Fund Contr. -(mil USD)

8. Total Project Debt - January 1,2007 -1(mil USD)

7 2008 2009 2010 2011 2012 2013 2014 2016 2016 0 17.32 17.18 16.79 17.33 16.39 16.01 16.10 16.97 16.86 q n n n ? ? ? C C

75 Background:

1. The tariff per kWh of Bumbuna output to be paid by the NPA to the BHC will be based on the annual operating costs and debt service. The following assumptions form the basis of the financial model that defines (i)the expected revenues and costs for BHC; and (ii)the estimated tariff per kWh of electricity produced by the BHP. The model uses the output of a dispatch simulation based on demand projections from the BHP Economic Analysis to determine the annual output. The developed tariff model allows for sensitivity analysis related to the terms and conditions of project loans and existing debts as well as ongoing operating costs. The following assumptions guide the modeling process.

Operation and Maintenance Costs

1.1 The annual costs of operating and maintaining the Generating Station, appurtenant structures, town site, roads, transmission line and associated switchyards, includes the O&M contractor’s fixed and variable fees, and all local work force, material, expenses and spare parts. It does not include any allowance for the cost of major breakdown or repairs, which will be covered by a reserve account. (see 3 below).

1.2 Escalation Rate - The escalation rate can be adjusted for the combined local and foreign escalation. The majority of operating costs are fareign costs. The sensitivity range is presently set at 1% to 6% per annum. It is considered that 4% per annum is a reasonable assumption.

1.3 Annual O&M Costs for Generation. The sensitivity range of the model allows for a selection ranging from US$1 million to US$3 million annually. It is considered that US$2.5 million per annum is a reasonable assumption for all O&M costs including expatriate management and technical staff, which can be reduced over the first five years, as training of local staff increases local skills.

1.4 Annual O&M Costs for Transmission. The sensitivity range ofthe model allows for a selection ranging from US$0.25 million to US$1.25 million annually. It is considered that US$0.5 ’ million per annum is a reasonable assumption for annual maintenance of the line and substations. The largest proportion will be spent on annual Right of Way (ROW) vegetation clearing by local villagers.

1.5 Total O&M Costs = l(b) + l(c) adjusted annually by l(a)

2. Annual Management Costs of BHC. The sensitivity range of the model allows for a selection ranging from US$0.25 million to US$1.25 million. It is considered that US$0.5 million annually will cover the cost of BHC management labor, expenses, housing, transport, insurance, office rent, equipment, and consulting, accounting and legal fees as required. It is expected that BHC will have a professional manager, an administrative assistant and secretary.

3. Annual Contribution to CapitalMajor Repair Reserve Account.

Total Project Asset Value

3.1 The sensitivity range ofthe model allows for a selection ranging from US$lOO million to US$190 million. A base amount of US$lOO million is used for calculating the annual contribution.

3.2 The sensitivity range ofthe model allows for a selection ranging from 1% to 2.5% of the asset value for calculating the annual contribution.

76 3.3 Initially the allocation should start at about 2% or US$2 million a year for at least three years and then taper off over three years to US$1 million a year. A minimum reserve of about US$6 million should be maintained in order to cover the cost of repairs due to at least two major equipment failures in one year, and to support senior debt servicing during repairs.

4. African Development Bank Loans

4.1 Original AfDB Loan. The original 1991 AfDB loan No. F/SIL/H-ELC/91/8 for UA32 million or US$43 million, is currently being serviced by the GoSL. This Loan will have an outstanding principle of approximately US$43 million at the start of Bumbuna operations. The model assumes that this debt will be serviced by Bumbuna revenues after January 1,2007.

4.2 Loan Consolidation Agreement. This is a consolidation of five existing loans (Loan No F/SIL/LCA/HYD-ELC/95/15 - Loan Consolidation Agreement - October 7, 1995) amounting to about UA18 million or US$28.4 million in 1995. This Loan will have an outstanding principle of approximately US$28.4 million at the start of Bumbuna operations. The model assumes that this debt will be serviced by Bumbuna revenues after January 1,2007.

4.3 Total AfDB Loans = 4(a) + 4(b), or US%71.4million

5. Contractor and the Consultant Debts.

5.1 Based on the Protocol of Agreement (1995) between the GoSL and the Civil Contractor and the Project Engineer, outstanding certified payments were to be rescheduled for repayment during commercial operations. These combined debts will be US$49.6 million as of December 3 1, 2006, based on the current methods ofcalculating interest and compounding intervals.

Annual Principle Repayment

5.2 It is anticipated that the principle will be repaid over a period of fifteen years, coincidental with the repayment of the commercial debt.

Interest Rate

5.3 It is considered that the interest rate payable should reflect the Contractor’s cost of capital, represented by the rate established for its commercial financing of the project completion. The rate is expected to be 4.5%.

Amount to be Repaid from Project Revenues

5.4 Provision is made in the model to allow for adjustment from 0% to 100% of the full amount and interest projected to January 1 2007, based on the amounts certified by the Auditor General of Sierra Leone in June, 2002. The amounts to be repaid is subject to negotiation between the GoSL and the Contractor and Project Engineer.

6. Commercial Finance

Principle Amount

6.1 The principle of the Commercial Loan, to bridge the financing gap, is expected to be approximately US$38 million.

77 Principle Repayment Schedule

6.2 The principle repayment schedule is yet to be determined with a maximum term of 15 years. A grace period is being negotiated by BHC.

Interest Rate

6.3 The interest rate is expected to be 4.5% per annum.

7. Debts to Transmission Line Project Affected People (PAP)

As of March 2005, this debt is estimated to be US$1.2 million. It is expected that this debt will be discharged during the first five years of operations from Bumbuna Revenues. Also included is the annual contribution to the Bumbuna Trust Fund of US$2.3 million.

8. Total Project Debts.

The total project debt = 4(c) + 5(d) + 6(a) + 7, or US $161.5 million.

9. Project’s Fixed Costs For Debt Service and Operating Costs.

The annual fixed costs of debt service and operations is expected to be approximately US$17 million, reducing to US$15.5 million after 10 years.

10. Expected Cost of Production per kWh.

The expected cost of production per kWh is based on the annual fixed costs divided by the projected annual energy output of approximately 195GWh in 2007 and increasing in accordance with projected demand.

11. The Cost of Producing a kWh.

On the basis of the above assumptions, a number of options have been run to determine the impact of various contributing costs that influence the PPA tariff.

12. The BHC’s Revenues and Generating Costs of 1 kWh

12.1 The Generating Cost of 1 kWh. The average annual output available from the BHP is 300 GWh. The tariff per kWh of Bumbuna output will be based on the annual fixed costs of production, which in turn, would include the operating and maintenance costs of the BHP (BHC costs plus O&M costs); the provisions for reserve for equipment failure; and the repayment (principal, interest rates over a given repayment period) of debt associated with the completion of the BHP.

12.2 The project debt is comprised of: (i)the US$38 million equivalent Commercial Loan, at 4.5 percent over a 15 year repayment period; (ii)the debts to the contractor and the consultant, estimated to be US$49.6 million at 4.5 percent over a 15 years repayment period. The private debt has been audited by the Auditor General of Sierra Leone and accepted by GoSL and the parties; (iii) the AfDB loans of US$71.4 million at 1 percent interest rate repayable over 40 years; (iv) the long-standing debt of US$3.5 million owed to people affected (TL PAP debt) by the transmission line component of the project, which has been assumed to be repaid over 5 years with no interest charge.

78 13, Financial Flows of the Power Purchase: The Payment Process and Associated Risks, and Proposed Mitigation Measures

13.1 When considering the institutional arrangements for (i)the operation and maintenance management of BHC, and (ii)the concession to BHC for the BHP, attention is given to the financial transaction flows to ensure that the selected arrangement is able to function effectively, This is dependent on the uninterrupted flow offunds from consumer to producer.

13.2 The major risk inherent in the proposed arrangement is the Power Purchase Agreement (PPA) payment risk. The PRG will provide insurance against non-payment by NPA, and therefore the inability ofBHC to service the Commercial Loan. However failure or the inability ofNPA to make PPA payments to BHC has more far-reaching impacts than just the debt service. Failure to pay BHC and therefore its O&M contractor could result in abandonment of their obligations and the project being left without a manager or operator. This not only results in a loss of generation, but also could represent a potentially dangerous situation with respect to the plant equipment and dam safety. The PRG provides no coverage for payment of ongoing operating costs for the maintenance of BHC as well as the O&M Contractor.

13.3. It is then critical to ensure that payment mechanisms are in place that are, to the extent possible, automatic, and sheltered from any kind ofinterference, and/or the actions or inactions of an inefficient bureaucracy. The payment risk can be significantly reduced by establishing a fixed remuneration schedule, with pre-agreed remittances managed by a reputable local bank, which will have direct access to NPA’ s revenues account.

13.4. The tariff payment schedule would be updated annually to reflect any changes in BHC operational costs. Foreign currency denominated components of the payments due, would be converted at the applicable foreign exchange rate at the time of payment transfer to BHC’s account, Transfers to the BHC’s account (at the same bank should be made four times per month, (48 installments per year) in order to free up cash flows for NPA’ s ongoing operations. This is due to the PPA payment having to be set aside first, before the balance ofthe revenue account is transferred to NPA operating accounts. Monthly transfers would tie up to much of NPA’s operating cash flow. It is possible to use the same mechanism to allow for funding of a special account to collect funds required by the GoSL to service the AfDB and other debt.

13.5. In connection to the above, the legal documentation will stipulate that a pre-agreed, locked in payment process, is put in place, not only to mitigate the risk of default on the Commercial Loan, but also to ensure uninterrupted operation ofthe project.

13.6. The Tariff in year one (2007) will be made up of the following cost components as indicated in the pie chart below:

r- Tariff Annual Cost Components (2007) Tariff Annual Cost Components (2007) (Millions) (% of Costs) fl7 A% VI I

0 50

0 Reselves 0 AfDB Loans W Contractor Debts W Contractor Debts El Commercial Debt BCommsrclal Debt AR W TL PAP Debts

79 The following spreadsheet describe the changes in cash outflow over the first ten years of operations and the impact of debt reduction and growth in demand on the average tariff.

80 N $ co0 0N t r

m r N2 0N t r

P W 5 W N r! r

m r i? 0N 5r

m Wm NE ? r

r l- $ Nz n! r

0 m 3 .r mW 0 00 N 7 r

8 01 0 34 N 7 r

0co $ 0N OD 9 r

IC 0 0 0N P 9 r BHP Debt Service and PPA Payment Process

NPA Energy Electricity Customer Bills Payments Consumer

Bill Existing Bank Account for Aggregating Ail Customer Remittances (Revenue Account) Standing Letters of Instruction to transfer scheduled payments to joint accounts weekly. Local currency component, and foreign currency components at actual exchange rates. Bank Account Balance of funds transferred to NPA Operating Account Weekly.

Standing Letter of Instruction to NPA Operating NPNBHC transfer amounts to BHC according to Accounts Weekly Joint Account PPA (agreed schedule). Tra!sf er

Leone and Forex Joint Account Taxes Bank Accounts SLL Accounts

A EquivalentU c I/ II I E SLL E I , 1 Foreign 1 Reserve 1 Account GoSL IDA Transmission Commercial Concession Contractor Local Line PAP ksLL+ Operating Taxes ~ ~ Fee Cl:fes Debts 1 1 1 1uu 1 1 Accounts u ---I-- Local Goods and Services I Contractor

Consultant Private Debt costs & Profit

Provision is also made for funding a foreign reserve account for the sole purpose ofensuring funds are available for future procurement of offshore goods and services required for major maintenance and repairs.

82 Annex 9: Salini Construttori, S.p.A.: Technical and Financial Capabilities SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. Technical: Salini Costruttori, S.p.A. (“Salcost”) is a leading Italian contractor with over thirty years of international construction experience. Over the years, Salcost has acquired considerable experience in dam construction and hydroelectric projects, both as sole contractor and as a joint venture leader or partner. Salcost has a successful construction track record on the African continent and in Italy where it has successfully built various types of dams (concrete, earth and rockfill). Salcost’s geographical experience in Africa includes Ethiopia (Legadadi Dam, Little Beles Dam, Gilgel Gibe Dam), Ghana, Guinea (Garafiri Dam), Malawi (Kapichira Hydroelectric project), Sierra-Leone (Bumbuna Falls hydroelectric project) and Zimbabwe (Zhove Dam, Osborne Dam), Salcost’s experience in the Middle East and Asia includes two dams in Jordan (Karameh and Kafrein) and a participation in the CGIC joint venture implementing the large Xiaolangdi Multipurpose Dam project in China. In addition, Salcost has more than fifty years of experience in construction of large engineering projects: roads, highways, bridges, railroads, ports, airports, aqueducts, water treatment plants, industrial plants, and multipurpose integrated agricultural projects.

83 -I

v) Annex 11: Financial Management and Disbursement Arrangements SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. Under the Bank’s OPBP 10.02 with respect to projects financed by the Bank, the borrower and the project implementing agencies including the concessionaire are required to maintain financial management systems - including accounting, financial reporting, and auditing systems - adequate to ensure that they can provide the Bank with accurate and timely information regarding project resources and expenditures. The guidelines issued by the Bank’s Operations Policy and Country Services regarding Financial Monitoring Reports (FMRs) require adequate financial management arrangements, including the ability to produce timely FMRs, to report on implementation progress, project component by component.

2. A Financial Management evaluation of the PIU, the entity responsible for coordinating the implementation of the Bumbuna Hydropower Project, was conducted during the February-March 2005 pre-appraisal mission to determine whether this entity has acceptable financial management arrangements in place. The evaluation includes reviews ofthe PIU’ systems of accounting, reporting, auditing and internal controls (to be used for transactions recording). The reviews indicated that these are based on the same principles as for the NPA-PIU, for which a full Financial Management Assessment was conducted during the appraisal of the Power and Water Project (PWP, Cr. 3945-SL) in May 2004. The PIU’s existing systems and related procedures and reporting arrangements, though not formalized, were found acceptable, as they are capable ofrecording correctly all transactions and activities, supporting the preparation of regular and reliable financial statements, safeguarding the project’ assets, and will be subject to transparent and internationally acceptable auditing processes.

3. The Financial management assessment for the NPA-PIU was carried out jointly by a World Bank Financial Management team and persons responsible for financial management within the NPA- PIU. Financial management internal control questionnaires and interviews of key financial personnel were used as part of the assessment. The NPA-PIU, which was established to implement the PWP is being using the accounting system of NPA, which is fully documented in an accounting procedures manual. The accounts unit of the NPA-PIU has the full complement of staff headed by a Financial Accountant, who is a qualified accountant, and is reporting to the Financial Comptroller of NPA on matters offinance.

4. Similarly, the PIU’s accounting systems is being currently maintained by an accountant, who currently reports to the PIU Coordinator in the absence of a Financial Comptroller. While the accountant has worked on previous Bank funded projects, it is expected that more training will be provided to enhance its performance. Based on the mission review, even though the financial management system for the PlU, as discussed above, is adequate and meets the minimum requirements of the World Bank, more capacity is needed to further strengthen the financial management ofthe project.

5. Therefore, under the agreed upon arrangements, a Financial Comptroller is being recruited under the AfDB financing. Also, a full computerized management information system will need to be put in place, as well as a manual of procedures. These are de facto conditions of effectiveness of the proposed project, which should be met by end-August 2005.

Country Accountability Issues

6. The Bank has carried out a limited scope Country Financial Accountability Assessment (CFAA) for Sierra Leone. The report documents the public financial management system architecture, identifies weaknesses and makes recommendations to address them. A stakeholders workshop was organized by the Government of Sierra Leone in June 2002 to discuss the CFAA report

85 and agree on actions to address the identified weaknesses. An action plan was agreed upon at the end of the workshop and is presently under implementation.

7. The summary risk analysis is based on this work and our FM assessment of the entity which will be responsible for the implementation ofthis project.

Summary of Risk Analysis Risk RiskRating pkMitigation Measures

Inherent Risks: Country a) Weakness in legislative scrutiny of Budget and Audited rocessing of all items will be done at Accounts. The Chairman of Parliamentary Finance M Head office located in Freetown. committee (Budget) is the same as Chairman of Public accounts committee (Audit).

b) Weakness in the Banking sector and limited bank branches at District and provincial levels, leading to large center to the movement of provinces cash with from the risks associated with cash holding. Most banks are located S mainly in the capital, Freetown and major Regions.

c) Inadequacy of remuneration of public sector financial staff. ere there is critical need for high S eve1 staff, agreements would be eached with Government to recruit the eeded qualified staff.

Overall Inherent Risks

86 Risk Rating Pisk Mitigation Measures

Control Risk: Implementing Entity.

Project will help fund cost of qualified a) Limited number of accounts staff staff recruited to assist in project M implementation.The job functions of accounts staff, including job descriptio] of staff, functional responsibilities and reporting relationships will be clearly spelled out to ensure adequate internal controls.

The PIU would be assisted to documen their systems in Accounts Procedures Manual. Project specific requirements will be incorporated to ensure effective project management. b) Accounting system and Procedures Manual are not M current and up to date.

Risk Mitigation, Measure Risk Risk Rating Funds Flow Staff of the accounts unit will be M trained prior to effectiveness of project on World Bank disbursement Delays in submission of withdrawal applications to the Bank procedures.

Internal Audit Assistance will be provided within the M proiect to help the BHP-PIU improve their internal audit functions

Ejctemal Audit It is not expected that the Audit report M will be late, but to ensure its timely submission, the selection of independent auditors would be completed before the project becomes effective

Information Systems The BHP-PIU will receive assistance S to improve the control environment over its computerized system to improve controls

Overall Control Risk S

87 Financial Management System for the Project

8. The implementing agency, the PIU has been created for the purpose of managing the main components of the project. The PIU, which is being staffed with key qualified staff, including a Financial Comptroller, will assist other BHP' s entities to implement the respective components.

9. The PIU will be headed by a Coordinator who will have overall responsibility for project management. The Financial Comptroller, will be responsible for the day-to-day management of the of project funds, including that of the Special Accounts. He will be assisted by the present accountant, a support accounting officer. This accounting team will be responsible for maintaining adequate accounting records, preparing financial reports and statements, and ensuring that the project's financial management arrangements are acceptable to the Government and the World Bank at all times, The team will also be responsible for ensuring that the project financial reports, including the financial monitoring reports, are submitted to Government and World Bank on time and in accordance with the financial covenants ofthe financing agreements.

The PIU

10. The PIU manual of procedures will ensure the incorporation of the World Bank's disbursement policy and procedures, and project-specific activities. The manual, which will be part of the implementation manual, must be satisfactory to the World Bank and its production will be a condition of effectiveness of the project. The accounting staff will be provided appropriate training on World Bank disbursement policy and procedures prior to project effectiveness to ensure that all staff perform their functions adequately.

Flow of Funds

11. The project will have one (1) special account (SA). The PIU will operate a funds management system. All requests for major payments by entities implementing activities or subcomponents within the BHP shall be submitted to the PIU accounts unit for processing and payment. However, to facilitate smooth implementation, and to avoid all minor payments being sent to the PIU and to minimize the frequency of requests from the participating entities, these entities will operate an imprest account. The imprest account will be used to finance their operating cost expenditures, such as travel and transport, minor stationery purchases, etc. On the basis of the operating cost budget, approved by the Advisory Group, the accounts unit of the PIU will release funds from the project accounts (Le. counterpart funds allocated to the project) to the entities to meet their operating cost activities for the quarter. On submission ofreturns, the eligible expenditures will be reimbursed with funds from the SA ofthe project at the eligible percentage.

Auditing Arrangements

12. Independent and qualified auditors acceptable to the Bank would be selected to carry out annual audits of the project, including the Special Account and statements of expenditures for each financial year. The selection of auditors shall be on a competitive basis and in accordance with the Bank's new "Guidelines-Annual Financial Reporting And Auditing For World Bank-Financed Activities ", issued by the Bank on June 30, 2003, and would be in place before the project becomes effective.

13. For the Special Account, the project financial statements will be audited in accordance with International Standards of Auditing (ISA) and a single opinion will be issued to cover the project financial statements, SOEs and the Special Account, in accordance with the Bank's new audit policy, The audited financial statements of the entity and the project, including the auditors' management report, would be furnished to the World Bank within six months ofthe close ofeach fiscal year.

88 Reporting and Monitoring

14. The PIU will prepare quarterly financial monitoring reports (FMRs)' in the areas of finance, procurement (including complaints from bidders), and project progress. The PIU will be required to prepare this report on a quarterly basis as part of project quarterly implementation progress reports. The two Financial Specialists within the PIU will have the responsibility of ensuring that the systems put in place are capable of producing these reports on a timely basis. The reports are:

(a) The Quarterly Financial Report, which would consist of a statement of cash receipts by sources and expenditures by main expenditure classifications for the period and cumulatively; cash balances of the project and supporting schedules comparing actual and budgeted expenditures;

(b) Quarterly Physical Progress Report, including narrative information and output indicators, linking financial information with physical progress, and reporting on issues that require attention;

(c) Quarterly Procurement Management Report would consist of information on procurement for goods and works and for consultant services and compliance with agreed procurement methods. The report compares procurement performance against the plan agreed at negotiations and appropriately updated at the end of each quarter. The report should also provide any information on complaints by bidders, unsatisfactory performance by contractor, and any contractual disputes.

Disbursement Arrangements

15. The proceeds of the Grant would be disbursed over a four-year period. Disbursements under this credit will be transaction based, however it is envisaged that within a year after project effectiveness the decision to disburse on the basis of FMRs will be revisited The projected disbursement over the duration ofthe project will be as follows:

Annual 6 4 2 0.5 Cumulative 6 10 12 12..5

Statement of Expenditures (SOEs)

16. Disbursements for all expenditures would be against full documentation, except for items of expenditures under contracts and purchase orders below US$200,000 equivalent for works, US$150,000 for goods, US$lOO,OOO for consulting firms, and US$50,000 for consultant services (individuals), training and incremental costs for which disbursements would be based on statement of expenditures (SOEs). Supporting documentation for SOEs would be retained by the PIU for review by officials or representatives of the Government of Sierra Leone, IDA missions, and external auditors.

89 Special Account (SA)

17. The PIU already has a Special Account in conjunction with its management ofthe Bumbuna PPF; it is operated in US$ at a local commercial bank, under terms and conditions satisfactory to the IDA, Upon Grant effectiveness, a sum of US$1000,000 would be deposited by IDA into the SA

Allocation of Grant Proceeds

Amount ofthe Grant Allocated Yo of (Expressed in Expenditures Category SDR Equivalent) to be Financed

Goods and services other than US$ $2,511,804 100 % of foreign consultants’ services expenditures and 90% of local expenditures

Works US$ 1,698,866 100%

Consultants’ services US$3,387,513 100%

Training and audit US$732,561 100%

Community Grants US$830,000 100% of amounts disbursed

Operating costs US$696,856 90%

Refunding of Amount due pursuant Project Preparation to Section 2.02 (c) of Advance this Agreement

Unallocated

TOTAL

US$ 12,500,000

90 Annex 12: Contractual Arrangements SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

The contractual arrangements of the BHP are presented as follows:

1. In April 2003, the Government of Sierra Leone (GoSL) requested IDA to support the completion of the Bumbuna hydroelectric project (BHP). In order to qualify for an IDA PRG, the project had to be structured as a private public partnership, in partnership with the private sector and a number of other donors, including AfDB, the Government of Italy (GOI) and the OPEC Fund. In addition, the GoSL is providing funding towards the local cost of the project completion. These arrangements were confirmed at a Donors Meeting, chaired by the Vice President of Sierra Leone on September 11, 2003. Since April 2003, the project has been designed as a public private partnership. At the approval of the OC to proceed with the project, the cost of completion of the project was estimated to be approximately 62 percent public-sector financing and 38 percent private-sector financing. Today, this relation is very similar: 64 percent public and 36 percent private;

2. BHC will be granted a concession for operating, maintenance and management the project (Concession Agreement) for a term which is exceptionally long in a post-conflict country. Since the contractor does not have experience in hydro-plant operation, an O&M Agreement will be signed with an experienced hydropower utility. A Power Purchase Agreement will also be entered into between BHC and NPA for the supply to NPA of the power generated by the BHP. Some of the risks that BHC will be responsible for managing include: (a) interest rate risk, since the commercial loan will carry a floating rate of interest; (b) operational risk in a post-conflict country e.g. 300 out of560 ofthe transmission towers were damaged to varying degrees according to a recent condition assessment, of which 256 will be rehabilitated; and (c) due to the weak financial situation of NPA, there is a substantial risk of non-payment.

lndemnlty IAgreement

91 Annex 13: Letter of Sector Policy

March 31, 2004

Mr. James D. Wolfensohn President, World Bank, 1818 H St. NW Washington DC. 20433

Dear Mr. Wolfensohn

Re: Sierra Leone: Power and Water Project (PWP - Power Component) Letter of Sector Policy

In conjunction with the presentation ofthe above-captioned project to IDA’SBoard, Iwould like to set out for you briefly the Government’s policy for the reform ofthe power sector as Sierra Leone moves out of its post-conflict stage ofits development.

With the support of the PublicPrivate Infrastructure Advisory Facility (PPIAF) that is managed by the World Bank the Government of Sierra Leone (GoSL) commissioned a study in 2002 to identify the constraints facing the development ofthe power sector and propose appropriate remedial measures focusing on the role of the private sector. The major policy recommendations of this study, which have been accepted by Government, were to: i)reform the power sector to enable private sector participation and establish a national sector regulator; ii)reform the National Power Authority (NPA) and in particular reassign policy formulation to the Ministry of Energy and Power; and iii)complete the 50 MW Bumbuna hydroelectric project (BHP).

We would like to draw your attention to the fact that in addition to financing the urgently needed rehabilitation of the NPA’s generation, sub-transmission and distributions system in the Western Area, the PWP is supporting the restructuring ofthe power sector in accord with the recommendations of the PPIAF Study. The PWP is also supporting measures to improve NPA’s financial viability through the implementation of a performance-oriented management contract for NPA. We also strongly believe that the PWP will provide the platform to enable the nation and especially the Western Area, enjoy the full benefits of the Bumbuna Hydroelectric Project, the commissioning of which we have awaited for so many years and now with the assistance of the World Bank and other donors we expect in late 2006.

We are pleased to note the support from the World Bank, which is pivotal for reviving and completing the BHP, will comprise the provision of a Partial Risk Guarantee that will enable the project financing gap to be closed and facilitate its early commissioning in 2006. We acknowledge that a number of important environmental and resettlement matters need to be investigated and addressed prior to the commissioning of Bumbuna, which as you may know is 85 percent complete. The relevant studies would be undertaken soon and the Government pledges to address these matters in the most appropriate manner.

92 At a recent Cabinet Meeting, Government reaffirmed its commitment to the power sector reform program, specifically comprising the following elements:

i. Reaffirmed Government’s decision to reform the power sector to enable private sector participation including enabling private sector investment in the sector. To facilitate this directive, Government is committed to reforming the NPA Act and setting up a regulator for the power sector by June 2005.

ii. Government is also committed to facilitating private-public partnerships in the provision of services and specifically to contract out the management ofNPA in the first quarter of 2005.

iii. Pledges to budget for the needed counterpart local funds needed to accomplish the works for which the foreign component is to be provided by the World Bank. Inter alia, this means putting in place timely tariff adjustments to enable NPA be converted into a financially sustainable utility, and

iv. A commitment to address all the environmental and resettlement issues and development opportunities regarding the Bumbuna project.

We appreciate very much the support of the World Bank to the development of Sierra Leone’s power sector and look forward to continued close cooperation in the future.

Sincerely

Emmanuel 0. Grant

Minister ofEnergy and Power

93 Annex 14: Procurement Arrangements SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Introduction

1. The Implementing Agency (IA) under the project is the PIU (which is located in the Ministry of Energy and Power MOEP). For the IA, the Procurement Procedures under the project will be described in a Project Implementation Plan (PIP) and finalized by project effectiveness. The procurement arrangements in the PIP for the IA will be harmonized to the extent possible with the current procurement practices to ensure that the BHP-PIP is not overburdened with the use of different procedures, depending on the source of funding. In addition, the MOEP is preparing a Project Implementation Manual (PIM) for its various units, which will be adopted y the PIU.

Use of Bank Guidelines 2. All works and goods financed under the IDA grant will be procured in accordance with the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004. Consultants will be selected in accordance with the Guidelines: Selection and Employment of Consultants by World Bank Borrowers, May 2004. National Competitive Bidding (NCB) procedures will include: (a) an explicit statement to bidders of the evaluation and award criteria; (b) national advertising with public bid opening; (c) award to the lowest evaluated responsive and qualified bidder; (d) foreign bidders would not be precluded from participation in NCB; and (e). registratiodclassification of contractors may be used for establishing bidder qualification or for preparing a list for use under price comparison procedure but not as criteria for bidding, With the exception of complex information systems, the merit point system shall not be used as the basis of bid evaluation. “Bracketing” or rejection of bids outside a range or “bracket” of bid values shall not be permitted.

3. The Bank’s Standard Bidding Documents (SBD) will be used for all International Competitive Bidding (ICB), and, with appropriate modification, for all NCB. The Bank’s Standard Request for Proposals (SRFP) would be used for all consulting assignments. The IA should ensure that each time it is using the most current version of the appropriate SBD or SRFP and standard forms of evaluation. Less competitive bidding and selection procedures should not be used as an expedient to by-pass more competitive methods and fractioning of large procurements into smaller ones should not be done solely to allow the use of less competitive methods or to avoid administrative (including the MOEP) or IDA review.

Advertising

4. A General Procurement Notice (GPN) is mandatory and will be published in the UN Development Business as provided under the Guidelines and in Development Gateway Market (Dg Market). The GPN would show all ICB and all consulting services estimated to cost USD 100,000 or more. Specific Procurement Notices (SPN) will be required for contracts to be procured under ICB and NCB procedures and for consultant contracts (estimated to cost more than USD 100,000) to obtain expressions of interest (EOI) prior to the preparation of the shortlist. The SPNs will (as a minimum) be published in a newspaper of wide national circulation. All ICB and Consultant contracts estimated to cost USD 200,000 or more shall be advertised in Development Business online and in Dg Market. Sufficient time would be allowed (not less than six weeks for ICB and not less than 30 days for NCB and 14 days for EOI) to allow adequate time for bidders and consultants to obtain documents and respond appropriately.

94 Procurement Capacity

5. Under the BHP PPF (Q 4390-SL), the PIU has gained extensive experience and now has adequate capacity to carry out procurement under the project. However, in order to further strengthen their procurement capacity, provision has been made under the project for key staff of the two IAs to be trained in procurement under Bank financed projects. Special emphasis will also be placed on procurement planning, supply chain management, specification writing, preparation of bidding documents, bid evaluation and contract management.

6. The summary assessment shows an “Average Risk” for the project and the prior review thresholds have been set to reflect this rating. Procurement Post Reviews (PPRs) will be carried out annually by Bank staff and/or independent auditors and based on the findings of the reviews, the prior review thresholds will be reviewed. The main risks identified in previous procurement reviews are: (i)poor procurement planning and monitoring; (ii)poor record keeping; (iii)weak contract management and poor quality control; (iv) poor commitment control; (v) contract splitting; (vi) inadequate procurement capacity; and (vii) delays in processing procurement and payments. The actions planned to address the deficiencies are included in the project activities and include (i)further training of the IAs, in the application of the procurement procedures - this training will complement the nationwide training effort to be launched as part ofthe implementation of the Public Procurement Law; (ii)specialized training for IA staff in preparation of Bidding Documents and Request for Proposals, due diligence, verification of bidder’s qualifications, contract management and quality control; (iii)setting of standard processing times; (iv) establishment of semiannual reporting requirements; (v) establishment of a contract performance support system; (vi) annual procurement post reviews; (vii) annual review of prior review thresholds based on finding of the procurement post reviews; and (vi$ enforcement of remedies available to IDA, if Government does not take appropriate sanctions against officials who flout the agreed procedures.

7. The project launch workshop will, inter alia orient key staff on the principles of good public procurement practice and to discuss the procurement arrangements under the project. The project also includes funding for key staff in the IA to attend the Bank supported regional procurement course at the Ghana Institute for Management and Public Administration (GIMPA) or the East and Southern Africa Management Institute (ESAMI). Other areas of training supported under the project include contract management, record keeping and project management.

Procurement Plans

8. The PIU will prepare an annual work plan consisting of a procurement plan for the first 18 months of the project showing individual contract packages, and for each package its estimated cost, procurement method and processing times for key activities until completion. The procurement plan for the first 18- month period has been prepared and agreed upon between GoSL and IDA. Three months prior to the start of each subsequent fiscal year, the PIU will submit updated versions of the procurement plans in respect ofthe following eighteen months for IDA review.

9. Any revisions to the formally agreed procurement plan shall require the concurrence of IDA, The IA shall apply the most competitive method of procurement appropriate to the circumstances of the specific procurement as described in the PIP and the Table below. Implementing agencies may select a more competitive method for a particular procurement if they wish to do so, however, IDA concurrence will be required to use a less competitive method other than the one set out in the agreed Procurement Plan, Absence of this concurrence may result in mis-procurement.

95 10. Training, workshops, conference attendance and study tours will be carried out on the basis of approved annual programs that will identify the general framework of training and similar activities for the year, including the nature of trainingktudy tours/workshops, the number of participants, and cost estimates.

Contract Management and Expenditure Reports

1 1. As part of the FMR, the IA will submit a semi-annual report to the MOEP, which will submit the FMR to IDA not more than three calendar months after the end of every semester. In addition to accounting information, the FMR will include the status of (i)implementation of the procurement plan, and (ii)progress and expenditures on individual contracts.

Procurement Implementation Arrangements

12. See the institutional responsibilities for implementation in Annex 6. As a rule, the IA will be responsible for its own procurement. The PIM will as a minimum include: (a) a description of the roles and responsibilities of the various procurement functions; (b) authorization thresholds for department heads, the managing director, the procurement committee for the IA, the Board of Directors, and the Ministry of Energy; (c) IDA prior review thresholds, (d) standard processing times; (e) a statement to the effect that the procurement committee will be responsible for executive procurement and will constitute ad hoc specialized panels of experts to prepare bidding documents, RFPs and evaluation reports; and (0 a statement to the effect that the role of the Board of Directors & the Ministry of Energy will be limited to the approval of procurement plans, and if required, the review of the recommendations for the award of large value contracts which should exceed or coincide with IDA prior review thresholds.

Scope of Procurement and Procurement methods

The scope of procurement is covered under the description of the project components.

13. Contracts for civil works estimated to cost individually USD 250,000 or more will be procured using ICB procedures. Works estimated to cost between USD 50,000 and USD 250,000 equivalent per contract; shall be procured using NCB procedures. Very small contracts estimated to cost less than USD50,OOO equivalent may be procured by way of soliciting quotations through written invitations from not less than three qualified contractors. RegistratiodClassification of contractors may be used to identify contractors for such very small contracts. The invitation shall include a detailed description ofthe works, basic specifications, the required completion date, a simple form of agreement acceptable to the Bank, and relevant drawings. In all cases the award of contract shall be made to the contractor who offers the lowest price for the required work, and who has the experience and resources to successfully complete the contract within the contract period taking into consideration all current/future commitments. All procuring entities will be required to carry out due diligence and verify that the qualification information provided by the contractor recommended for the works is accurate.

14. To the extent possible, goods (and services that do not involve consultant services)that could be procured from one supplier would be grouped into contract packages, and packages estimated to cost the equivalent of USD 150,000 or more would be procured under ICB procedures. Procurement of goods packages estimated to cost more than USD30,000, but less than USD50,OOO would be procured using NCB procedures. Goods packages estimated to cost less than USD30,OOO would be procured by shopping on the basis of comparison of quotations from at least three eligible and qualified suppliers. Requests for such quotations shall be in writing and will include a clear description and quantity of the goods, basis of quotations, payment terms, as well as requirements for delivery time, point of delivery and warranty requirements, if any.

96 15. Software, spare parts and accessories which are of proprietary nature may, with IDA concurrence, be procured under contracts negotiated directly with the manufactures/suppliers or their authorized agents.

16. Consulting services and training will consist ofvarious planning, engineering and design studies, construction supervision and technical assistance to be carried out by both national and international consultants as well as workshops and group discussions. The preferred method for selecting consulting firms will be Quality and Cost Based Selection (QCBS). Alternatively, Quality Based Selection (QBS), Selection Under a Fixed Budget (SFB) or Least-Cost Selection (LCS) procedures may be used provided the assignment meets the requirements of paragraph 3.2 in the case of QBS; paragraph 3.5 in the case of SFB; and paragraph 3.6 in the case of LCS. Assignments estimated to cost the equivalent of USD 100,000 or more would be advertised for EO1 in Development Business (UNDB), in DGMarket and in at least one newspaper of wide national circulation. In addition, EO1 for specialized assignments may be advertised in an international newspaper or magazine. In the case of assignments estimated to cost less than USD 100,000 the assignment may be advertised only nationally and the shortlist of firms may be made up entirely of national consultants, if at least three qualified firms are available at competitive costs in Sierra Leone. However, foreign consultants who wish to participate should not be excluded from consideration. Consultant services estimated to cost less than the equivalent of USD 100,000 may be contracted by comparing the qualifications of consultants. Auditors would be selected using LCS procedures. In case of assignments requiring individual consultants, the selection will follow the procedures stipulated in Section V of the Consultants Guidelines. For assignments involving NGOs, selection will be in accord with paragraph 3.16 ofthe Guidelines.

17. Training programs and workshops would be packaged in the project’s work plans and budget and items therein procured using appropriate methods. IDA will review and clear training packages as found appropriate.

18. Contracts which meet the requirements of paragraph 3.15 of the Procurement Guidelines may be procured using Community ParticipatiodForce Account. The detailed procedures when using community participation will be detailed in the PIP.

IDA Review

19. All works contracts estimated to cost USD200,OOO or more and goods contracts estimated to cost USD150,OOO or more will be subject to the Bank’s prior review in accordance with the procedures in Appendix Iof the Procurement Guidelines. Any amendments to existing contracts raising their values to levels equivalent or above the prior review thresholds are subject to IDA review. All contracts awarded on basis of direct contracting will require prior review and clearance of IDA.

20. All single source selection will be subject to IDA prior review. Consultancy contracts with firms with estimated value of USD 100,000 or more, and consultancy contracts with individuals with an estimated value of USD 50,000 or more will be subject to prior review by the IDA in accordance with the procedures in Appendix Iof the Consultants Guidelines. All out of country trainingjworkshops will be subject to IDA review.

21. Contracts which are not subject to prior review will be selectively reviewed by IDA during project implementation and will be governed by the procedures set forth in paragraph 4 ofAppendix Ito the relevant Guidelines. Monitoring and evaluation of procurement performance at the IA would be carried out for procurement during IDA supervision missions and through annual ex-post procurement audits. At a minimum, 1 out of 5 contracts will be subject to post review. In addition, post-reviews of in-

97 country training will be conducted from time to time to review the selection of institutions/facilitators/course contentshrainees and justifications thereof, and costs incurred. Annual independent technical audits (ex-post procurement audits) would: (a) verify that the procurement and contracting procedures and processes followed for the projects were in accordance with the Development Grant Agreement (DGA); (b) verify technical compliance, physical completion and price competitiveness of each contract in the selected representative sample; (c) review and comment on contract administration and management issues as dealt with by the IA; (d) review capacity of the BHP-PIU in handling procurement efficiently; and (e) identify improvements in the procurement process in the light of any identified deficiencies. The Borrower and IDA will review all thresholds stated in this section on an annual basis, Amendments may be agreed upon based on performance and actual values of procurement implemented. Amendments to the DGA may be proposed accordingly.

Publication of Results and Debriefing

22. Publication of results of the bidding process will be required for all ICBs, NCBs, LIBs and Direct Contracting. Publication should take place as soon as the no objection is received, except for Direct Contracting and NCB which may be done quarterly and in a simplified format. For selection of consultants disclosure of results is also required. All consultants competing for the assignment should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals, and at the end of the selection process the results should be published. The publication of results in selection of consultants applies to all methods; however, for SBCQ and SSS, the publication may be done quarterly and in a simplified format. The IA shall debrief losing bidders/consultants on the reasons why they were not awarded the contract, if the losing bidders/consultants request an explanation.

Fraud, Coercion and Corruption

23. All implementing agencies as well as biddershuppliershontractors shall observe the highest standard of ethics during the procurement and execution ofcontracts financed under the project in accordance with paragraphs 1.15 and 1.16 of the Procurement Guidelines and paragraphs 1.25 and 1.26 of the Consultants Guidelines.

(US$ million equivalent) Table A: Thresholds for Procurement Methods and Prior Review'

Expenditure Category Procurement Method

'Thresholds generally differ by country and project. Consult OD 11.04 "Review ofProcurement Documentation" and contact the Regional Procurement Adviser for guidance.

98 24. Frequency of procurement supervision missions proposed: One every six months (includes special procurement supervision for post-review/audits).

99 Annex 15: Economic and Financial Analysis SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Background

1. The 50 MW Bumbuna Hydroelectric Power Plant project is located 2.4 km upstream ofBumbuna Falls on the Seli River in Sierra Leone. The project infrastructure consists of an 88 meter high asphalt- faced rockfilled dam with a 50 MW powerhouse (2x25 MW) at the foot ofthe dam. Once completed, the dam will function at its full 50 MW capacity during the wet season and will be used for peak production (with thermal-power baseload) during the 3-4 months dry season, equivalent to 18 MW of continuous capacity. The maximum seasonal drawdown of the reservoir will be about 31 meters, and the daily fluctuation of reservoir level is expected to be 0.1 meters during the dry season. The electricity generated at Bumbuna will be supplied to a substation in Freetown Peninsula via a 200 km 161 kV single-circuit transmission line.

2. Construction of the dam commenced in 1988 and slowed down in the early nineties due to a shortfall in financing. Construction stopped in May 1997 due to security problems at the onset ofthe civil war in Sierra Leone. By this time the hydroelectric plant was 85% complete. The 161 kV single circuit transmission line between Bumbuna and Freetown was constructed in the period 1994 - 1996. By the cessation ofthe construction most of the 540 towers had been built and approximately 80 km of the line had been strung. At the end ofthe hostilities, 29 ofthe towers had been destroyed or badly damaged, The entirety of the line will have to be restrung with cables. Following the end of the civil war in January 2002, discussions on the completion of Bumbuna resumed. Commercial production of hydroelectric power is set to begin by the middle of2007.

3. Given that the plant is complete at 85% most risk inherent in hydropower are minimized. This includes both the geological and technical risks as the dam has been built. The risk ofconstruction time is also minimized at this stage with two more years fully sufficient to complete the plant. On the other hand the risk at reservoir filling and hydrological risks remain.

Least Cost Properties

4. The least cost analysis was undertaken by Power Planning Associates (PPA) (2005), which shows that Bumbuna Hydroelectric plant is least cost. The least cost analysis is based on demand projections up to 2020. Supply options come in at least cost such that supply satisfies a minimum level of technical security in this analysis taken to be the Loss-of-load expectation (LOLE). For the analysis a LOLE of480 hours is adopted for 2005 - 2009, which is reduced to 240 hours from 2010 to 2014, and further reduced to 94 hours from 2015 onwards. This puts the value on the low-end for developing countries, with, for example, Ethiopia at 240 hours, Bangladesh at 96 hours, and Botswana at 94 hours. While the Loss of Load Probability (LOLP) is currently unknown for Sierra Leone, it is likely to be in excess of 50%. For the least cost analysis the assumption was made that Sierra Leone will aim to reach Ethiopia's current standard of240 hours in the next 5 years, and Botswana's standard of94 hours in the next 10 years. These targets appear realistic in the context of Sierra Leone. Relaxing the LOLE standard will delay commissioning ofthermal units in the least cost analysis, but not affect the least cost property ofBHP.

5. Rather than adopting a deterministic (n-1) criteriodreserve margin approach, a probabilistic method was used, wherein dispatch was simulated using a Monte Carlo approach to the availability of generation units. The benefit ofthis approach is that it facilitates expansion wherein customer and system costs are jointly minimized, whereas deterministic approaches simply aim to achieve compliance with technical standards

100 6. The Bumbuna Hydroelectric Plant was found to be least cost in all model runs and enters as a supply option as soon as this is technically feasible. The issue of seasonality of hydroelectric supply is fully internalized. The alternatives to hydropower in Sierra Leone are diesel or heavy fuel oil power plant in the near-term (5 years), and other hydropower plant, including small and medium-sized hydropower in the longer-term. All thermal alternatives are assumed to be located as closely as possible to the Freetown load center in order to minimize the cost oftransmission.

7. To estimate the demand, two different methodological approaches were used: a top-down approach and a bottom-up approach. Two sets of demand projections were made in order to verify their respective results. The top-down approach projects unconstrained demand from 2005 to 2020 using an econometric technique, based on actual data for 2003, GDP projections, estimates oftechnical losses, and an income elasticity value of 1.2. The bottom-up approach looks at each of the three main economic sectors separately and projects their likely demand, subject to the constraint of the maximum number of new connections that NPA is able to handle in any one year. It evaluates carefully what potential future clients are currently spending on off-grid applications with the aim ofclearly determining affordability of electricity. Under both methods three different demand scenarios are analyzed: a base case, a high case, and a low case. These scenarios have different underlying assumptions of economic growth and of suppressed electricity demand in the industrial, commercial and domestic sectors.

8. Table 1 presents the least cost all-thermal expansion sequence and the least cost hydro-thermal expansion sequence. Total system costs and total economic costs are approximately 25% lower for the least cost hydro-thermal expansion sequence than for the least cost all-thermal expansion sequence, An additional least cost sequence was undertaken with Bumbuna beginning exploitation in 2010 only. The system costs and economic costs increase by about 15% compared to the case where Bumbuna is connected in 2007.

Table 1: Least Cost Expansion Sequences for Sierra Leone

101 Summary of Benefits and Costs

9. The total costs of BHP as per the financing plan are US$ 92 million. To arrive at the economic costs, any costs of financing are deducted as the project is to be assessed according to the project's quality independent of its financing mode. Thus, the debt service reserve, interest during construction and other price contingencies need to be deducted to arrive at the project's economic costs at US$ 83 million. Whether or not the debt service reserve could be considered as economic costs is a borderline case. Traditional economic analysis suggests that any debt service facility should be excluded from economic analysis as it is a cost associated with the financing mode and does not affect the quality of the project. However, arguably the debt service reserve is necessary to render the project financeable and therefore feasible in the context of Sierra Leone, and in the absence of any equity from private investors. As part of the sensitivity analysis the debt service reserve is thus considered. Total costs including the debt service reserve are US$ 88 million.

10. At a total economic cost of US$ 83 million, the Bumbuna hydroelectric plant is part ofthe least cost expansion plan of Sierra Leone's power system. Costs incurred until the cessation of construction ahead of the civil war amount to around US$ 200 million. This amount can be considered as sunk. The EIRR is robust at 41%, which compares favorably with the opportunity cost of capital at 10%. Table 2 gives an overview ofthe key economic data.

11, The primary quantifiable economic benefits of the project include: (i)the revenue generated from the sale of electricity; and (ii)the revenue generated from the sale of carbon credits. Environmental benefits have not been quantified.

12. The primary quantifiable economic costs are (i)the total investment costs to complete the hydroelectric and transmission structures; (ii)the O&M costs; (iii)the costs of environmental mitigation and area development; and (iv) technical assistance (see table below). Environmental damage costs have not been quantified.

Table 2: Economic Analysis (in US$ million, NPV at 10%)

Present Value ofEconomic Flows Base Case Including pre-civil war costs (Pre-civil war costs are sunk) Benefits 517 517 Investment Costs 83 283 O&M Costs 79 19 Net Benefits 355 155 EIRR (in %) 41 15

Main Assumptions

13. World Bank 2004 projections for crude oil prices were used for the analysis. The prices projections assume a value of US$ 36.00 for 2005, a value of US$ 25.49 for 2010, and a value of US$ 25.70 for 2015. From 2015 onwards the prices are assumed to remain at US$ 25.70. The hydrological data on which the analysis is based provides monthly firm values that exceed the 95% significance level. Construction of BHP is phased over 24 months with 25% completed in 2005, 50% completed in 2006, and the remainder (25%) completed in 2007. Generation ofpower is firm from mid-2007.

102 Benefit Stream

14. The bene@ from served electricity: There are two ways by which the benefits from served electricity can be evaluated. First the benefit from electricity can be evaluated on the basis ofthe revenue stream generated evaluated on the basis of average tariff. The average tariff in Sierra Leone is at about US1522 (or Le 619). Alternatively, the value ofunserved energy can be evaluated on the basis of the costs of serving the demand through autogeneration. PPA (2005) evaluated the willingness-to-pay for unserved electricity in Sierra Leone at US153 1.8. This is a weighted average of suppressed demand in the industrial sector (28.9 GWh at a base cost of unserved energy of 36.2 US$/kWh), the commercial sector (9.3 GWh at a base cost of unserved energy of 30.6 US#/kWh), and the domestic sector (47.5 GWh at a base cost of unserved energy of 14.9 US$/kWh). PPA's value for unserved energy is used for the purposes of sensitivity analysis. Bulk supply costs are currently US$ 29 (or Le 807).

15. The revenue generatedfrom the sale of carbon credits: The value ofcarbon credits is evaluated at the unit price of US4per ton of C02, which is the expected value at which the carbon credits may be sold on the carbon market. The quantities of carbon units generated is evaluated by taking the difference of C02 emissions generated under the all-thermal least cost expansion plan and the C02 emissions generated under the combined hydro-thermal least cost expansion plan. This leads to credits in 2008 of US$ 530,000 and reaches US$ 620,000 in the year 2012. The total NPV of carbon credits is in the order of US$ 2 million. Carbon credits are only attributed from the onset of operation ofthe hydroelectric dam until the end ofthe crediting period under the Kyoto Protocol, which is 2012. While the expectations are that the Clean Development Mechanism (CDM) under which C02 emission reductions may be credited is to continue, this is pending the outcome of UN negotiations in the coming years. The estimate of C02 emission reduction under this project is conservative.

16. Environmental benefits: the main environmental benefits of the Bumbuna Hydroelectric power plant comprise:

0 Reduction of the threat of climate change by reducing C02 emissions and maintaining Sierra Leone's positive carbon balance; 0 Reduction of Total Suspended Particulates (TSP), S02, NOx and CO compared with diesel- fueled power plant; 0 Increases in dry season flows, which will be beneficial by avoiding severe reductions in river area that occurs naturally and which will enhance Bumbuna Fall's attractiveness as a waterfall for tourists; 0 Reduction of river blindness incidence along a 30 km stretch of the Seli River due to permanent removal ofblack fly habitat.

17. The benefits of reducing C02 emissions are assumed to coincide with the revenue from carbon finance, The other elements have not been quantified.

Table 3: Detailed Benefit Breakdown (in US$ million)

Benefit Components Present Value Benefits of served energy 515 Benefits from the Sale of Carbon Credits 2 Total Benefits 517

103 Cost Stream

18. The costs consist of investment costs, O&M costs, costs of environmental mitigation- and area development, and environmental damage costs. A breakdown of quantifiable costs is presented in Table 2.

(a) Total investment costs to complete the hydroelectric and transmission structures: The flow of capital investments was taken from the base cost estimate for the project, excluding taxes, duties and contingencies. Timing was based on the implementation schedule, which assumes that 50% of the construction will be undertaken in year 1 and the remainder of the investment will be undertaken in the following year. The completion of the project involves the completion of the civil and hydraulic steel structures, electromechanical equipment, and the transmission line and two substations. As a result ofthe civil unrest and the long lag time in project finalization additional costs occur.

(b) These include remobilization of equipment including for completing excavation, items that were stolen or damaged during the civil war, and a number of design changes as a result of recommendations made by the Dam Safety Panel and the Environmental and Social Advisory Panel. Other design changes include the relocation of the diesel building and locating the contol building on top of the powerhouse. The remaining work is aggregated in three contracts that deal with the outstanding work as follows (i)Contract A2/B on civil and hydraulic steel structures; (ii) Contract C on electromechanical equipment, and (iii)Contract D on the transmission line and substations.

(c) O&M costs: The operating and maintenance costs incurred cover the operation and maintenance costs for the hydroelectric dam estimated at US$3 million per year. Incremental distribution costs are estimated at US$ 1.14 million when operation commences in 2008, and stabilize at the level of US$ 5.22 million from the year 2020 onwards. The O&M costs associated with new connections amounts to US$ 0.21 million at the onset of operation, and will stabilize at US$ 0.55 million by 2020. The recurrent costs associated with the community development program and the Environmental Monitoring Plan amount to US$ 1.16 million annually. The recurrent cost of managing the BHC is estimated at US$ 0.5 million annually.

(d) Costs of environmental mitigation and area development: Operation of Bumbuna Hydroelectric plant requires the prior resettlement ofpeople from the reservoir basin and the transmission line route. As a result 135 people will lose their homes equivalent to one village. 3,648 others will lose land and assets. The economic analysis implicitly assumes that the activities under the mitigation program will fully offset any damage that displaced people or people losing agricultural land would incur.

(e) Environmental damage costs, which are not easily quantified and are not evaluated include:

0 Increased incidence of malaria through standing water (although this will be mitigated through the establishment ofhealth centers by the operator); 0 The displacement of several communities ofchimpanzees and other primates; 0 The reduction ofriparian forest in the Upper Seli catchment area.

104 Note that the effects are mitigated through the Environmental Management Plan, and that the costs ofthe plan reduce the likely environmental damage cost ofthe above.

(0 Technical assistance: The technical assistance provided under the project includes the construction supervision for hydroelectric projects contracts, support for the project implementation unit (PIU), the Dam Safety Panel of Experts, the Environment and Social Advisory Panel of Experts, and the project management and supervision associated with the program on environmental mitigation and area development.

Table 4: Detailed Economic Cost Breakdown (in US$ million)

Total Project Costs 83.23 87.69

Sensitivity Analysis/Switching Values of Critical Variables

Input Switching value (Change YO) Investment costs 1-400 Total Benefits - 68 Total Costs (investment and O&M) + 210 Electricity tariff (switches at US$ 7) - 69

The table demonstrates that even significant changes of costs only affect the EIRR marginally. A sensitivity analysis was also carried out to quantify the impact of alternative cost and benefit assumptions on the EIRR. When using the value of unserved energy for Sierra Leone, which is based on the cost and

105 usage of alternative sources of electricity (small diesel generators), the EIRR is significantly increased to 58%. The results are summarized below:

Change (%) EIRR (Yo) Total Investment Costs +25 34 Total Costs (investment and O&M) i25 33 -..&-I n..--C&- -si 1, Value of unserved electricity (US#3 1.8) +45 58

20. As discussed above, inclusion of the debt reserve account increases the project costs to US$ 88 million. The EIRR for this case remains a robust 40%.

21. Changing the LOLE in the least cost analysis does not affect the least cost properties of the Bumbuna significantly. This follows, because changing the value of the LOLE will only impact the timing of the introduction of thermal power, and will affect both all-thermal and hydro-thermal planting sequences to a similar degree. The NPV of the least-cost hydro-thermal sequence will remain substantially lower (approximately 25%) than the least-cost all thermal sequence.

22. Increasing the price of oil will augment the EIRR and Net Benefits of the project even further, A decrease in the oil price below the levels projected by the World Bank appears unlikely.

Macroeconomic Impacts

23. The major macroeconomic impacts of the project are expected through the reduction of the fuel costs for thermal power especially during the wet season. Once the hydroelectric plant is operating in 2008, the annual fuel bill will be reduced by US$11.5 million or 15% compared with an all-thermal scenario. By 2019 the decrease in the annual fuel bill would be even higher at US$ 16.5 million or 34% compared with an all-thermal scenario. This in turn would reduce Sierra Leone's trade deficit in 2008 already by 5 to 6%. But the reduction in the use of mineral fuels will lead to a reduction in tax revenue of the Government of around US$0.77 per year, which is equivalent to 1% of Sierra Leone's aggregate tax revenues in 2003.

24. The impact of the completion of the Bumbuna hydroelectric dam on the local economy would, however, more be limited. Total local costs of the project amount to US$19.40 million. Regression analysis for the period from 1980 to 1999 (excluding thus the civil war period) indicates that the multiplier effect of investment in Sierra Leone is about 2.29. During the two years of construction, the GDP can be expected to increase by US$22.21 million in each year, representing an increase of GDP of about 3% (evaluated on the basis of Sierra Leone's year 2003 GDP in current US$).

25. The annual payment to be made under the Purchasing Power Agreement (PPA) are based on the annual costs that the BHC is incurring and covers debt service, payments to the Capital Reserve Fund, the BHC administration fee, and O&M costs of BHP. The value of the PPA payments in the first year are US$ 17.5 million, and over time come down to about US$ 15.5 million annually. Expressed in costs per kWh generated this corresponds to approximately US$ 9 in the first year, and over time comes down to about US$ 6 by 2013. This compares with the current costs of electricity generation of US$ 29, and an average tariff of US622. This not withstanding, the total fixed costs represent a substantial amount in the context of Sierra Leone's economy and correspond to about 2% of Sierra Leone's 2003 GDP (in current US$).

106 Implications for Millennium Development Goals

26. The overall impact of the project on the achievement of the Millennium Development Goals (MDGs) in Sierra Leone is expected to be positive. Where negative impacts are likely such as the increase ofthe incidence ofHIV/AIDS and malaria, these are expected to be minimized through the Trust Fund to be established for Bumbuna. The Trust aims at providing a stable, sustainable financing mechanism for benefit sharing and a local development plan for the project. This overall impact not withstanding, Sierra Leone is far from reaching the MDGs.

(a) MDG 1: The Goal 1 targets are to halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day, and to halve, between 1990 and 2015, the proportion of people who suffer from hunger. In Sierra Leone, the proportion below the national poverty line (defined at US$ 1 per day) is inordinately large, estimated at 70% of the population in Sierra Leone. Some 26% ofthe population may be classified as extremely poor, i.e. unable to meet 50% of their daily needs. There is ample evidence to establish that providing adequate electricity and energy services can help raise GDP, productivity and employment, all of which create a positive environment for reducing poverty (Brenneman and Kerf, 2002). The magnitude of impact is, however, subject to high uncertainties. Canning and Bennathan (1 997) looked at the rate ofreturn to electrical generating capacity as measured by increases in GDP for 51 developing countries. Values ranged from 5% for Zimbabwe and 6% for Senegal to 106% for Indonesia and 1 14% for Congo. The overall impact ofthe project on achieving MDG 1 is expected to be positive.

(b) MDG 2: The Goal 2 target is to ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling. The Interim PRSP notes that the primary school enrolment rate in Sierra Leone is amongst the worst in the world. A survey conducted by NCRRR in March 1998 established that 1270 primary schools were destroyed during the Civil War. The consequences of this damage and deterioration are reflected in a UNDP Human Development Report, in 1998. The report shows that only three out of every ten Sierra Leoneans can read and write compared to a sub-Saharan average of 6 out of 10 persons. Research has shown that electrification can increase household income and decrease time spent on collecting traditional fuels, which increases the time available for children to attend school. For example, a survey undertaken in 1980 of 631 households in the Indian states of Punjab, Andhra Pradesh, Maharashtra and West Bengal showed that the percentage of eligible children attending school was strongly and positively correlated with the percentage of households with electricity, when controlling for the distance from schools, agriculture innovation index, double-cropping, yield per acre, proximity to services, and distance from mass media (Barnes 1988). The overall impact of the project on achieving MDG 2 is expected to be positive.

(c) MDG 3: The Goal 3 target is to eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of education no later than 2015. The Interim PRSP notes that the primary school enrolment for girls is 38% against 52% for boys. Of the nearly 80% ofthe population is illiterate. Illiteracy among females stands at 89% and for men it is 69%. Over time, increased household incomes and the availability of electrical appliances will help reduce the need for female children to assist with domestic chores. Perhaps a greater impact of BHP-related electrification, however, will be increased access to radio and television, through which public awareness campaigns

107 addressing gender issues will have greater prospects of success. Khandker et a1 (1994) show for Morocco, for example, that a 10% increase in the presence of electricity in a (rural) village would lead to a 4.8% increase in school participation for boys, and an 8.2% increase in school participation for girls. The overall impact of the project on achieving MDG 3 is expected to be positive.

(d) MDG 4: The Goal 4 target is to reduce by two-thirds, between 1990 and 2015, the under- five mortality rate. In 2002 the under-5 mortality rate (U5MR) for Sierra Leone stood at 284 per 1000, which is among the highest in the world. In this context Brenneman and Kerf (2002) note that the lack ofmodern energy sources negatively affects health centers. Without electricity for refrigeration, clinics cannot safely administer vaccines. Without a constant source of good lighting, doctors cannot safely perform operations or even adequately examine a patient at night. A further factor is that many doctors and nurses will not serve at health centers that don’t have security lighting provided for their safety. The impact of the Bumbuna project on this MDG will follow from the increased availability of electricity for health centers and the planned establishment of health centers around Bumbuna as part of the development plan. The overall impact of the project on achieving MDG 4 is expected to be positive.

(e) MDG 5: The Goal 5 target is to reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio. A study in the Philippines suggests that electrification can lead to a decline in fertility rates, and consequentially on maternal mortality (Herrin 1979). The study indicated that households affected by a rural electrification project reported a 9.2% decline in fertility over two years, compared to a 0.5% decline in the previous year. This was attributed to increased economic prospects, which placed lower benefits on children. The overall impact of the project on achieving MDG 5 is expected to be positive.

(f) MDG 6: The Goal 6 targets are: to have halted by 2015, and begun to reverse, the spread ofHIV/AIDS, and to have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases. According to the Interim PRSP of 2001 for Sierra Leone, the estimated national prevalence ofHIV/AZDS is 4.9%, although in the Western Area where the project is located it is 6.1%. Construction camps for large civil engineering projects are often linked with high incidence of €€IV/AIDS, due to large numbers ofmale workers being away from their homes for extended periods. Although a substantial camp will be re-established for the completion of Bumbuna, the number of camp residents will be significantly lower than during the earlier phases of the project. Most of the major civil engineering project components are at least substantially completed, and the majority of the outstanding works will involve the erection and commissioning of plant and equipment. The focus will largely be on shorter assignments for a relatively small number of skilled erection workers, rather than on extended assignments for large numbers ofunskilledhemi-skilled workers. The potential for the spread ofHIV/AIDS in the Bumbuna area will probably be lower than it was at the time that construction works were suspended. Project completion will, however, still be likely to increase the spread of HIV/AIDS. Malaria is prevalent and widespread in the country, and that a large proportion of the poor and extremely poor do not buy the drugs to prevent the disease. 46% ofthe national child morbidity rate is due to malaria. The new reservoir will create additional breeding sites for the mosquito vectors ofmalaria around the site ofBumbuna. This could be particularly prevalent during drawdown, in the dry season, which can be expected to leave a number of small isolated pools of water. In general it appears that BHP may increase the incidence of malaria in the Bumbuna area. The area development

108 plan for Bumbuna foresees measures to mitigate these impacts. The overall impact of the project on achieving MDG 6 is expected to be negative.

(g) MDG 7u: The Goal 7a target is to integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources. The establishment of a Trust Fund is based on the idea to enhance sustainable development in the context of the project. Essentially, the Trust would provide a stable, sustainable financing mechanism for benefit sharing and local development components of the BHP. The overall impact ofthe project on achieving MDG 7a is expected to be positive.

(h) MDG 7b: The Goal 7b target is to halve, by 2015, the proportion of people without sustainable access to safe drinking water. According to the Interim PRSP, only around 34% of the population of Sierra Leone has access to safe drinking water. In the area around Bumbuna the project might lead to gastro-intestinal problems due to changes in water quality and usage. These effects are planned to be mitigated by the Trust Fund. The overall impact of the project on achieving MDG 7b is expected to be neutral.

(i) MDG 7c: The Goal 7a target is that, by 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers. The Civil War imposed great pressures on housing in the Westem Area, as rural dwellers sought refuge in Freetown. High- density squatter camps and temporary housing are common in Freetown, with extremely low standards of living available to the residents. The Government of Sierra Leone has undertaken that funds generated from the proceeds of the divestiture of state enterprises, including the gains from ending current subsidies to prop up non-performingenterprises, will be redirected to finance socio-economic development and the extension of services to the poor, particularly in the slums and deprived rural areas. The BHP should lead to cheaper and more abundant electricity supplies. If the Bumbuna hydroelectric plant is as a result taken up under the Government's scheme, the overall impact of the project on achieving MDG 7c would be positive.

(j) MDG 8a: The Goal Sa target is, in cooperation with developing countries, to develop and implement strategies for decent and productive work for youth. Unemployment and under-employment is a major problem in Sierra Leone, and has been exacerbated by the influx of refugees from rural areas to Freetown and the Western Area. The unemployment rate is highest among the youths and those aged between 18 and 35. The informal sector accounts for at least two-thirds of the labor force and over 70% of the urban labor force. The step-change in electricity availability, to be brought about by Bumbuna, will inevitably increase employment opportunities in the Western Area. As much of the energy produced by Bumbuna would be displacing diesel generation by industrial and commercial auto-generators, in the short-term new employment opportunities would not be created. In the medium-term, however, the improved reliability and lower cost of electricity would help to attract inward investment and would enable industrial and commercial companies to divert the resources that they may otherwise have devoted to backup generation facilities, into product, service or market expansion, thus creating employment opportunities. The overall impact of the project on achieving MDG Sa is expected to be positive.

(k) MDG 8b: The Goal Sb target is, in cooperation with the private sector, to make available the benefits of new technologies, especially information and communications. The absence of these technologies will inhibit such growth. Sierra Leone generally has poor penetration levels of key technologies, especially outside the Westem Area. The BHP

109 should make grid supplies considerably more reliable, especially if parallel investments are made in thermal generation for dry season duty.

Financial Analysis - NPA’s Past Performance.

27. The financial issues that been identified during the various Bank missions as critical to the successful implementation of the BHP on NPA’ s side include: the increase in the downtime of NPA’ s generating capacity; the new increase in the level of system losses, including generation auxiliary consumption, technical and non-technical losses (about 33 percent, at the end of 2004), and the system inefficiency resulting from the very aged status of the installations leading to high operating costs, including fuel and lube oil consumption. In addition, a number of factors have contributed to exacerbate the already precarious financial situation of the utility: the historical cost accounting in an environment with high inflation resulting in making inadequate provision for the replacement of NPA’s fully depreciated assets, and uneconomic tariffs setting structure and the absence of a very experienced staff to manage the Kingtom Power station @PA’ s generating capacity) to improve the plants efficiency.

110 28. Gross energy produced in 2004 decreased by 22.5 percent to 84.8 kWh million from 109.4 kWh million in 2003. The decrease is due mainly to the breakdown of Mirrlees and the Mitsubishi for about six months (10.3 MW). At the same time, the production cost increased by 4 percent in 2004 from Le28.37 billion to Le29.50 billion. This could be attributed to the increase in price of Marine Fuel Oil (MFO) from Le3340 to Le3715 per gallon. In addition, most of the generation was done through the two aging Sulzer generators (about 15 MW, procured in 1975), which are not economical to run because of high specific fuel consumption and increased repair cost.

29. The number of customer accounts increased from 42,069 in 2003 to 43,406 in 2004, representing 3.2 percent increase. However, the average number ofpaying customers dropped from 19,158 in 2003 to 16,013 in 2004 (a drop by 16.2 percent). The reason for the drop could be attributed to the unwillingness of people to pay their bills because ofthe unavailability and unreliability ofthe power supply.

30. Revenue collection was impressive despite the poor generation experienced. 102 percent of sales were collected in the year 2004, 7 percent higher than the percentage collected in 2003. Management in its strides to meet its target of 120 percent has put strategies in place to ensure the NPA targets for revenue collection are achieved.

3 1, The ratio of gtross energy produced per employee increased by 4 percent in 2004 compared to year 2003 due to a reduction in the number ofemployees.

Review of Management Accounts for 2004 Year-End

32. The total sales for the year amounted to Le 33.760 billion for a budgeted sales figure of Le53, 601 billion, or a reduction of Le19, 841 billion (37 percent). The reason for the decrease in sales is attributed to the poor generation experienced during the year and the increase in systems losses.

33. The Authority net operating loss for the year was Le2.727 billion (or about US$1 million) as compared to a budgeted profit of Le7.305 billion (or about US$2.65 million). This excludes interest on existing loans from foreign donors.

34. The following reasons are attributed to the loss: high systems losses; high cost ofgeneration; high fixed cost; low volume of generation; high cost of repairs on generating plants. The average cost per kWh of electricity generated is presently higher than the tariff for the year. This cost is Le807 per kWh (or about US29 cents) compared to the tariff of Le619 per kWh (or US22.5 cents), which entails a structural loss ofLe188 (or US6.5 cents) for every 1 kWh generated.

35. Thus, in 2004, the base year for the financial projections, NPA’s financial performance was particularly weak as indicated by a net profit margin ofonly 6.8 percent, return on total assets of about 5.8 percent and a return on equity of2.2 percent amongst others.

NPA’s Future Financial Performance : Review of the Projected Key Performance Indicators

36. As indicated above the NPA’s present financial situation threatens its “going concern” status. Nevertheless, this project, together with a number of other measures, present an opportunity for a substantial recovery of NPA’s financial health The project will contribute to NPA’s recovery through injection of lower cost energy which will partially displace outputs from high cost diesel generators. Other measures include the following:

111 (a) Installation of a 2 X 6.8 MW of medium speed generation plant by end-December 2005 as per the ESKOM’s “Report on Improvements in Power Utility in Freetown, Sierra Leone”, dated December 20, 2004 , Funding for this activity has been provided by the Government of South Africa in the amount ofUS$10 million;

(b) Further additional generation capacity (about 10.8 MW) is contemplated to be funded out of the proceeds of the upcoming BADEA financing and about 20 MW more from IDB financing (other than the PWP’s IDB/BADEA-financed program);

(c) continued implementation of the loss reduction program and revenues collection programs, amongst other performance improvement measures. Expected benefits include: increased and reliable power supply that will impact positively on the confidence ofNPA’ s customers; increased sales and profitability; improvements in NPA’ s financial covenanted ratios and performance indicators; improved cash flow to meet operating costs; and increased contribution to fixed costs.

37. In addition to these the following specific assumptions have been used in the preparation of financial projections for NPA

(a) Gross energy produced increased by 70 percent to 144 kWh million in 2005 from 84.8 kWh million in 2004. It is expected that by 2006 - 2008 gross energy produced would increase progressively by 93 percent, 43 percent and 7 percent respectively. (b) The system losses ratio is expected to drop from 33 percent in 2004 to 25 percent in 2006. A further decrease in the system losses would be achieved in 2007 (to 19 percent) when the rehabilitation ofthe transmission line is completed. (c) the four base load machines and the three caterpillars will be operational by June 2005; (d) Only about 30 percent of the total output in 2007 and 2008 would come from existing Thermal Plants, as some ofthe very aged ofthese generators would be decommissioned (e) Energy tariffs for purchases from Bumbuna would be about US$O.O873/kWh in the first year ofoperation, gradually decreasing to about US$O.O74/kWh by 2010 (f) Energy tariffs for purchases from Bumbuna would be about US$O.O873/kWh in the first year of operation, gradually decreasing to about US$O.O74/kWh by 2010 (8) The introduction of Pre-paid meters is also reflected in the improvement in expected revenue collection from sales. This will also help to reduce systems losses and to improve collection ofreceivables. (h) Cost ofsales would increases at the rate ofdomestic inflation

38. The financial covenants for the power component of the Power and Water Project (PWP) have been designed to appropriately address the above-mentioned issues. The covenants include the following ratios: (i)total NPA’s revenues should be equivalent to not less than the sum of cash operating expenses and interest and other charges on debts; (ii)the annual rate of return of approximately 4 percent on average current value ofNPA’ s fixed assets (or on revalued fixed assets) in operation; and (iii)the debt service coverage ratio whereby the net revenues ofNPA should be at least 1.5 times the estimated debt service requirements.

112 Annex 16. IDA Guarantee Structure REPUBLIC OF SIERRA LEONE Bumbuna Hydroelectric Project

INDICATIVE TERMS AND CONDITIONS OF THE IDA-GUARANTEED FACILITY Borrower: [Bumbuna Hydropower Company Ltd (BHC)] (the “Company”) Guaranteed Lender: Commercial Bank Loan Amount: Up to US$ 38,000,000.00 The loan will benefit from the IDA Guarantee (as described in Schedule 1 (Indicative Terms and Conditions of the IDA Guarantee)

Purpose of the Loan Financing part of the construction and start up costs of BHP. Guarantor: International Development Association (“IDA”) Use of proceeds: To fund IDA eligible costs (“IDA Eligible Costs”) only. Proceeds of the IDA-Guaranteed Facility may only be used to fund Project Costs incurred for assets located in Sierra Leone and may not be used for: - Costs, charges and expenses relating to the acquisition, leasing or use of land for the Project; - Costs in connection with the acquisition of the existing facilities and plant sites; - Value-added tax or other taxes payable by the Company and levied in Sierra Leone or in connection with goods and services, or on the importation, manufacture or procurement thereof; - Costs in connection with the acquisition or use of nuclear, military or luxury items; - Fees, commissions, expenses or other financing costs (including interest) unrelated to the IDA-Guaranteed Facility or the IDA Guarantee; - Development fees; and - Any payment or expenses incurred in respect of, goods or services supplied from the territory of any country, which is not a member of the International Bank for Reconstruction and Development (“IBRD”) or IDA.

Availability Period: The period ending the earlier of [TBD] months from signing of the IDA Guaranteed Facility agreement, or [TBD] months from financial close.

Maturity & Grace Period: [Up to 151 years, including [TBD] months of grace Repayments: [TBD] quarterly [or semi-annual] installments commencing on the first repayment date; [TBD] months grace after commercial operations date. The principal component of the installments will vary to reflect the seasonal pattern of the Company’s power generation and cash flows throughout the calendar year.

Margin: [TBD] % per annum [to be satisfactory to IDA] Interest Rate: Applicable Euribor plus the Margin. Euribor is the rate at which euro inter-bank term deposits are offered by one prime bank to another prime bank and is published at 11.OOAM Central European Time for spot value (T+2)).

Interest Period: Three or six month period. Up-front Fees: [TBD] % [to be satisfactory to IDA] Commitment Fee: [TBD] %per annum [to be satisfactory to IDA] Debt Service Reserve Account: To cover a minimum of [I21 months principal and interest Conditions Precedent to each Disbursement: As specified in the condition precedent of the commercial loan facility provided to the Company. Inter alia, all transaction documents and IDA Guarantee documents in full force and effect.

Governing Law: English

113 Schedule 1. IND ATIVE TERMS AND CONDITIONS OF THE IDA GUARANTEE Beneficiary: Lender Guarantor: International Development Association (“IDA”) Maximum Aggregate Liability under the Up to US$ 38,000,000.00 of principal plus interest (excluding any default interest and Guarantee: breakage costs) accrued on such principal amount under the IDA Guaranteed Facility Covered Obligations: Except for Provisional Payments and Excluded Obligations (see items below), the IDA Guarantee covers defaults of the Borrower in the payment of scheduled payment of principal and interest (excluding default interest and breakage costs), resulting from a breach of GoSL’s obligations to the Borrower under the concession agreement or its guarantee of NPA’s obligations under the PPA. The Guarantee would be callable by the Lender following the occurrence of a covered GoSL’s event of default. Covered GoSL’s event of default will include Termination Payment by GoSL to BHC following the issuance of a Termination Notice caused by the occurrence and continuation of(i) a Direct or Indirect Political Event, (ii) a GoSL Event of Default, or (iii) a Change in Law, or breach of the GoSL’s guarantee obligations under the PPA, that adversely affects BHC’s ability to service the IDA-Guaranteed Facility. Excluded Obligations: The IDA Guarantee will specify GoSL payment obligations under the Concession Agreement that will not be covered by the Guarantee, including: (i) certain obligations such as compensation payment upon termination of the Concession Agreement resulting from any General Termination Event; (ii) a natural force majeure event; (iii)a BHC termination event; and (iv) other BHC defaults. Provisional Payments: IDA will make Provisional Payments for scheduled payments if: (a) the Company or the IDA Guaranteed Lender is unable (within an agreed time period) to commence or proceed with dispute resolution in accordance with the relevant provisions ofthe Concession Agreement or the GoSL Guarantee Agreement (of NPA’s obligations under the PPA), by reason of court decision, judgment or order in Sierra Leone (whether temporary or permanent, and whether commenced by GoSL or arising from third party legal action) to: (i) prevent or impede the dispute resolution process; (ii) have the dispute transferred to or determined by the courts in Sierra Leone;or (iii) otherwise pursue the dispute in a manner not consistent with the agreed dispute resolution mechanism and not agreed by the Company, and (b) the IDA Guaranteed Lender and/or the Company have agreed with IDA that they will use their best efforts to resolve the dispute and the IDA Guaranteed Lender has provided IDA with irrevocable stand-by letters of credit to repay IDA on call the amount of the provisional payment and interest thereon in the event that the award subsequently determines that the liability of the GoSL is less than the full amount of the provisional payment. The IDA Guaranteed Lender’s obligation to repay the Provisional Payments expires after three years if dispute resolution continues to be interrupted. No Acceleration of Guarantee: The Beneficiary may not accelerate the IDA Guarantee even if the underlying payment obligations of the IDA-GuaranteedFacility are themselves accelerated. The IDA Guarantee will cover payment of principal and interest payable in accordance with the original payment schedule applicable to the IDA Guaranteed Facility. IGuarantee Related Fees: Guarantee Fee (“Guarantee Fee”). 0.75% per annum on the aggregate disbursed and outstanding principal amount of the IDA Guaranteed Facility, payable semiannually in advance of each Interest Period, with the first installment due on the earlier of: (x) the effective date of the IDA Guarantee, and (y) sixty (60) days after signature of the IDA Guarantee Agreement; and Standby Fee (“Standby Fee”)). 0.35% per annum during the period when the IDA Guarantee is in effect. This fee would be calculated on the aggregate un-disbursed principal amount of the IDA Guaranteed Facility and is payable semiannually in advance of each Interest Period, with the first installment due on the earlier of: (i)the effective date of the IDA Guarantee, and (ii)sixty (60) days after signature ofthe IDA Guarantee Agreement; Initiation Fee (“Initiation Fee”)). US$ 100,000 payable by the Company following IDA’S Board Approval, upon the Company’s receipt of written demand from IDA; and Processing Fee (“Processing Fee”)). US$ [TBD] up to 0.50% of the guaranteed amouni payable in equal annual installments with the first payment due at Financial Close and subsequent installments on their succeeding anniversary dates.

114 Conditions Precedent: Usual and customary conditions precedent for a financing of this type, including but not limited to the following: Execution of all Transaction Documents and Finance Documents; Delivery ofall legal opinions; Effectiveness of insurance required by the Finance Documents to be in effect at Financial Close and the naming of the Lender as co-insured under those insurance policies and of IDA as named insured under third-party liability insurances; Approval of the Executive Directors of IDA; Execution, delivery and effectiveness of the Indemnity Agreement and the IDA Project Agreement(s); Effectiveness of the IDA Technical Assistance Grant Agreement with Sierra Leone; and Payment of the Initiation Fee, the first installment of Processing Fee, and the first installment of Standby Fee and the Guarantee Fee. Exclusions: The Guarantor (IDA) is not liable for the payment of any amount which is due to: The Company’s failure to comply with any law, decree or regulation in force in Sierra Leone as ofthe date ofthe Guarantee Agreement; Any action or omission agreed to by the Beneficiary or the Company. Any action or omission caused by a proscribed conduct of the Beneficiary, the IDA Guaranteed Lender or the Company. Any failure of the Beneficiary, the IDA Guaranteed Lender or the Company to comply with applicable laws or regulations of Sierra Leone; Any breach by the IDA Guaranteed Lender or the Company of their material obligations under the Concession Agreement and related Transaction Documents, and failure to fulfill their other agreed obligations towards, or assurances given to, Sierra Leone; or Any act by the IDA Guaranteed Lender or the Company, that constitutes a Corrupt Practice, Fraudulent Practice, Harmful Child Labor or Forced Labor (Prohibited Activities) Corrupt Practices: Means: (a) the offering, promising, or giving of any undue pecuniary or other advantage, whether directly or through intermediaries to any official of the government, for that official or for a third party to influence the official to act or refrain from acting in relation to the performance of official duties, with the purpose of obtaining or retaining business or any other improper advantage; or $1 the acquisition, possession, use, conversion, transfer, or concealment of the true nature of property of any description, and legal documents or instruments evidencing title to, 3r interest in, such property, knowing that such property is an economic advantage in any way related to or arising from criminal offenses, for the purpose of (i)concealing or disguising the illicit origin of the property or (ii) assisting any person who is involved in the commission of a ximinal offense as a result of which such property is generated or sustained, to evade the legal :onsequences of such actions; Suspension of Additional Coverage: [f anv of the following events occur and is continuing, IDA may. bv written notice to the Beneficiary, deny guarantee coverage to subsequent draw downs, in case of 4ny material default by the parties under any other Transaction Document, or Events of Default under the IDA Guaranteed Facility Agreement; Breach by any of the parties (excluding IDA) of any of its material obligations to IDA under :he IDA Project Agreement@) which breach, in the opinion of IDA, is continuing after the :xpiry of the relevant cure period (if any) specified therein; 4n installment of the Guarantee Fee or Standby Fee is not paid when due, after expiration of he relevant cure period; Suspension of lending by IDA or IBRD to Sierra Leone; or Sierra Leone’s suspension or lapse of from membership in IBRD, IDA or the International Monetary Fund. rermination by IDA: The IDA Guarantee Agreement may be terminated immediately if ’ The IDA GuaranteG Lender inientionally makes an untrui statement in, or intentionally Imits material information or evidence from, a demand; ’ The IDA Guaranteed Lender, or the Company or any of its private shareholders or affiliates, mgages in Prohibited Activities; Any material change is made without IDA’s consent to those provisions of the Project or :inancing Documents for which IDA’s consent is required for changes; or If any installment of the Guarantee Fee is not paid when due, after expiration of the relevant :ure period. The IDA Guarantee Agreement will also be terminated: Upon IDA’s notice of termination if the Company is in material violation of the IBRD/IDA 3nvironmental Guidelines and Safeguard Policies applicable to the Company; or Effective as ofthe date any IDA Guaranteed Lender transfers, assigns or encumbers, without DA’s prior consent, any rights under the IDA Guarantee Agreement, the IDA Guaranteed ,oan, or an Award.

115 Subrogation: If and to the extent IDA makes payment under the IDA Guarantee and is not reimbursed by GoSL under its Indemnity Agreement within 60 days of notice from IDA, then IDA will be subrogated immediately to the IDA Guaranteed Lender‘s rights under the IDA Guaranteed Facility. Until IDA has been fully paid out under the IDA Guarantee Agreement, IDA will not realize on security under the IDA-Guaranteed Facility. Right to Offer to Purchase the IDA If there is a call on the IDA Guarantee, IDA shall have the right, at its sole discretion, to limit Guaranteed Loan: its obligation to guarantee interest payments by acquiring the IDA Guaranteed Loan from the IDA Guaranteed Lender for an amount equal to the then unpaid principal and interest (not including default interest). In the event that IDA acquires the IDA Guaranteed Loan, IDA, at its discretion, will have the right under its Indemnity Agreement with Sierra Leone, to cause Sierra-Leone to make immediate payment to IDA of the outstanding IDA Guaranteed Loan amount together with interest thereon. Claims Process: IDA will pay within sixty days after IDA’s receipt of a Demand Notice or Demand for Provisional Payment. Demands must be made not less than thirty days and not more than ninety days from the date on which an Award is rendered. Demands for Provisional Payments must be made no later than nine months after the due date of the scheduled payment that is in default. Dispute Resolution: Dispute settlement by arbitration in accordance with the UNCITRAL Arbitration Rules (or other international rules acceptable to IDA). Governing law: English

Schedule 2. KEY TER S ASD COSDITIOSS OF THE IKDE\ISITY AGREEllEST (GoSL-ID.1) ~~ ~~ Parties: IDA and Sierra Leone. Indemnity: Sierra Leone will reimburse and indemnify IDA, on demand or as IDA may otherwise direct, for all losses, damages, costs, expenses, etc. incurred by IDA relating to or arising from payments under the IDA Guarantee. Key Covenants Sierra Leone will covenant. inter alia, that it: will comply with all its .obligations under the Transaction Documents, including all its environmental and social obligations; will obtain IDA’s consent prior to agreeing to any change to a Transaction Document which would materially affect the rights or obligations of IDA under the IDA Guarantee Agreement, the IDA Project Agreement(s) or the Transaction Documents; will provide certain notices to IDA, including any proposed notice of termination of the Concession Agreement together with all underlying reasons therefore; will take all action necessary on its part to enable the Company to obtain any required approval or environmental authorization for the Project and to perform all of the Company’s obligations under the IDA Project Agreement@)and the Transaction Documents; will not create or permit to exist or occur any circumstances or Change in Sierra Leone Law which would render obligations under the Concession Agreement illegal, invalid, unenforceable, ineffective or void in whole or part; and will comply with all its obligations under the Technical Assistance Grant Agreements. Remedies: If Sierra Leone fails to perform under its indemnity or any other obligation under this agreement, IDA may suspend or cancel, in whole or in part, Sierra Leone’s rights to make withdrawals under any other loan with the IBRD or developmental credit agreement with IDA or any IBRD loanADA credit to a third party guaranteed by the Government. IDA may also declare the outstanding principal and interest of such loadcredit immediately due and payable in the circumstances piovided-forin the Indemnity Agreement.

Choice of Law: The Indemnitv,- Aereement will follow the usual legalII regime and include disoute settlement provisions customary for agreements between member countries and IDA. Schedule 3. KEI ’ERMS AND CONDITIONS OF THE IDA PROJECT AGREEMENT Parties: IDA and the Company [and Salcost]. Representations and Warranties: The Company [and Salcost] will represent, inter alia, that it is in compliance with applicable World Bank-Environmental Guidelines, Safeguard Policies, and Fiduciary Policies. The Company [and Salcost] will also represent that it has not been engaged in Prohibited Activities. Key Covenants: The Company will covenant, inter alia, that it: will use the proceeds of the IDA Guaranteed Loan only for the agreed purposes; will use the portion of the Technical Assistance Grant for the purposes agreed by IDA and GoSL in the Grant Agreement; Each of the Company [and Salcost] will covenant, inter alia, that it: will comply with applicable World Bank Environmental Guidelines, Safeguard Policies, and Fiduciary Policies (including all of its environmental and social obligations included in the Concession Agreement); will enforce the contractor’s obligations included in the Transaction Documents regarding environmental and social matters; will not engage in any Corrupt Practices or hire any individual or firm included in the World Bank group’s list of firms barred from World Bank-financed contracts; and will provide regular accounts and reports to IDA. Governing law:

116 Annex 17: Safeguard Policy Issues SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. The BHP Project is classified as a “Category A” operation under the World Bank environmental screening procedures specified in OP 4.01. The package of safeguard documents prepared for the project comprises three primary reports: (i)the Environmental Assessment (EIA) containing and Environment Management Plan (EMP); (ii)the Resettlement Action Plan for the 161 kV transmission line, and; (iii)the Resettlement Action Plan for the dam site and reservoir area. The EIA and RAPSaddress the World Bank Safeguard Policies that are triggered by the project (see D6). The proposed activities for management and mitigation of the Project impacts are in compliance with the following World Bank Safeguard Policies: Environmental Assessment Policy OP/BP 4.01, Natural Habitat Policy OP/BP 4.04, Forests Policy OP/BP 4.36, Involuntary Resettlement OP/BP 4.12, Cultural Property Policy OPN 11.03 and Safety of Dams OP/BP 4.37 (see also the EIA (2005) Executive Summary).

2. The Bumbuna project has been under development since the early 1980’s when GoSL initiated the site preparation works. Construction of the dam and transmission lines started in 1990 and was 85 percent completed when abandoned in 1997 due to the intensifying rebel war. The World Bank was not involved in the project construction from 1990 to 1997, although the Bank had financed the original feasibility studies in the early 1980’s under a Power Sector Credit. The Bank became involved in the Project again in 1994 through a new Power Sector Credit that included provisions to support the Government in preparing an EIA for the project (then under construction) that had not been prepared to that point. The Credit was also to fund a Panel ofExperts and a Water Resource Engineer and support the GoSL in preparing a Power Sector Master Plan. However, these activities were not fully implemented due to the security situation.

3. The present World Bank supported project will finance the environment and social management activities for completion of the remaining 15 percent ofthe BHP including the hydroelectric infrastructure works, reservoir clearing and rehabilitation and completion ofthe transmission line. The World Bank will also be involved in establishing the social and environmental management activities for the operation phase and capacity strengthening for these activities.

4. Because the BHP is a “Category A” project, an Environmental and Social Assessment Panel (ESAP) and a Dam Review Panel (DRP) composed ofexperienced international experts were constituted by the Government of Sierra Leone.

Analysis of Alternatives

5. As described in Section A5, the Bumbuna site was first identified in a national hydropower inventory financed by the UNDP in 197 1, where a hydroelectric development ofBumbuna Falls emerged as the best way to supply the Western Area grid, the country’s main load center. The design ofthe BHP project was subsequently based on a feasibility study completed in 1980 and a supplemental feasibility study in 1984, wherein the BHP was conceived as the first stage of a potential 275 MW Bumbuna-Yiben hydropower development on the Seli River. The BHP was reconfirmed as the least-cost option to supply electricity to Freetown and intermediate towns along the transmission routing by an ESMAP team (Sierra Leone: Issues and Options in the Energy Sector, 1987), in a report issued before the Government secured financing from the Government ofItaly for the civil works in 1988.

6. A retrospective options assessment was prepare as part of the EIA (2005) for this project. This confirmed the decision parameters both for the selection of the BHP and the main within-project

117 alternatives. The options assessment also compiled information and analysis on wind, solar and biomass generation options in Sierra Leone. The analysis indicates these options have limited potential in the near term to meet grid supply needs in the Western Area of Sierra Leone, in terms of specific energy costs, quantum of supply, and experience with the technology in Africa relative to hydropower. These non- hydro renewable alternatives nevertheless have immediate and longer term potential for displacing thermal generation in the up-country diesel power plants (to be considered in reviving the stand-alone provincial supply networks and generation capacity destroyed during the war), particularly the small hydro option and biomass generation, where there is an assured supply of biomass.

7. A Strategicmegional Environmental Assessment (EM) at the basin scale will be carried out as an up-front step in future planning of further hydropower development on the Seli River. Development of the multi-annual storage dam at Yiben located 30 km upstream of the existing Bumbuna dam (completion of the Yiben dam was identified in the 1996 Master Plan as the next major hydropower project in Sierra Leone) would for example, involve significantly higher flow regulation of the Seli River and higher resettlement impacts than the BHP.

Environmental Impacts

8. The area of the BHP reservoir is relatively small (21 km2) as compared to many other hydropower reservoirs in Africa and the world. The reservoir will have a maximum drawdown of 3 1 m in the dry season. If the upstream Yiben reservoir is built the inflows to the Bumbuna reservoir will be such that Bumbuna will have no drawdown and operate rim full all year round. A major consideration in moving forward today is the dam is already in place and the transmission system exists, but needs rehabilitation. The main environmental and social impacts due to past construction of 85 percent of the hydropower facilities and transmission line have already taken place; however, no environmental or social mitigation actions were implemented, or at least not formally recorded and monitored.

9. The adverse environmental and social impacts of the BHP completion mainly result from clearing and impoundment of the reservoir area and operation of the reservoir, and where possible, addressing the legacy compensation issues. Potential water quality issues are associated with the decomposition of organic matter in the reservoir, creating conditions of low oxygen and high nutrient levels, especially in the lower strata of the reservoir. The downstream impacts due to flow regulation are expected to be limited due to several factors, namely: (i)the presence of the Bumbuna Falls 2.5 km downstream of the dam; (ii)the increase in the dry season flow that Bumbuna will provide; (iii)the limited nature of downstream water use impacts because the Seli river is not relied upon for irrigation or community / urban water supply off take; and the low population density in the lower flood plain. Alteration to the flow regime will have some positive and some adverse consequences that will be monitored. Completion of the existing transmission line will have limited environmental and social impacts.

10. The EM (2005) undertaken by GoSL provides survey information and comprehensively documents the expected impacts of the remaining construction activities and operation of the BHP; the mitigation and compensation measures proposed; the implementation arrangements, including institutional responsibilities, budgets and timelines; and the monitoring and supervision programs designed to ensure compliance safeguard policies and GoSL requirements.

11, A summary of the expected impacts and proposed mitigation measures is provided below:

(a) Clearance and inundation of the riparian (gallery) forests along the Seli River in the reservoir area. These riparian forests are under heavy human pressure and these, and many other forest areas in the catchment, would disappear within 10 to 20 years given demographic trends and land use practices. The reservoir slopes need to be cleared of

118 those forests that will be submerged before impoundment in order to maintain water quality in the narrow reservoir. About 1590 ha of the total 2100 ha of the reservoir area is forested, including approximately 450 ha of these fringing (riparian) forest containing both commercial and non-commercial trees, 5 10 ha of mixed tree savannah and 630 ha of forest re-growth (fallow) areas. The project otherwise provides an opportunity to protect the remaining riparian forests in the wider project area.

(b) Communities around the reservoir will be heavily engaged in and benefit from the clearing of the trees in the reservoir area. This will provide immediate economic relief to these communities who are among poorest in the country through the injection of cash into the local economy. It would also reduce immediate pressure on the remaining forests outside reservoir area, at least in the short term (as fuel wood represents the major energy source in rural areas) while the main forestation and land use reforms as part of the watershed management activities the project supports are introduced and take effect;

(c) It is anticipated that only one village will need to physically relocate, involving 16 houses. However, the reservoir impoundment will affect the farmlands of 33 communities located in the reservoir area. It will affect their farms and their access to river and forest resources. A Resettlement Action Plan has been prepared and which implementation will ensure that the livelihood of the affected communities will be restored. A Stabilized Agriculture Program and a Livelihood Assessment and Income Restoration Program are part of the compensation package. The most important aspect of the RAP will be to ensure that project affected people’s livelihood are restored to pre- impoundment levels, i.e. that people relocated or people affected by loss of farmland have been able to harvest the last harvest at their original location and are able to plant their crops at the new location before impoundment. Internal monitoring by the RU and external monitoring by the Witness NGO will ensure that the RAPSare implemented in a satisfactory manner. The most important objective is to ensure that the incomes of project affected people are restored and avoid food shortage during or after the critical period of land acquisition, relocation and resettlement.

(d) The affected communities will also lose cultural property in the form of sacred sites in the forests, in their fields and along the river. Some sites are shrines to which members of the communities offer contributions and respect and which are associated with “secret societies”. Other sacred sites are graveyards, which may risk flooding and therefore would need to be moved. Otherwise it is not traditional practice to move graves when a village relocates (under the system of shifting agriculture dominant in the area). The appropriate mitigation measures will be applied as described in the RAP, An archaeological survey was carried out as part of project preparation. While no archaeological artifacts or sites were identifies in the project area, it was recommended that a more extensive study be carried out. That study has been included in the program of additional pre-impoundment studies.

(e) Completion of the 200 km transmission line from Bumbuna to Freetown will result in limited resettlement. In line with public consultations which expressed an unwillingness to resettle and conforming to accepted utility practice in many developed’and developing countries, the transmission lines will be permitted to overpass existing building and houses, provided that a minimum clearance between structures and the lowest conductor of 7.0 meters is maintained at all times. Otherwise houses have to move and people compensated and resettled. Of the total of 367 houses in the transmission right-of-way identified in the RAP and based on a tower-by-tower field survey undertaken in February

119 2005, only 6 structures that encroach the 7.0 m minimum clearance will need to be relocated;

(f) Some legacy issues remain from the construction activities in the 1980’s and 1990’s that result in pre-existing GoSL liabilities in connection with the project. These relate to: i) 428 households who lost land and property for construction of tower foundations and erection of towers along the transmission right-of-way in the mid 1990’s, and ii) compensation for the loss of agricultural land at the dam site and for involuntary resettlement caused by quarrying and excavations twenty-five years ago when the site preparation works started, and iii) compensation for additional property and lands lost due to construction of the dam between 1990 and 1997. A compensation plan for the affected households along the transmission line was prepared by the PIU in 1994, but compensation was never paid. The compensation amounts to equivalent of $US 1,265,295 today (including an escalation factor of 10 percent). It is proposed that this compensation will be paid out of project revenues in the first years of the BHP operation. The old agreements will be reconfirmed and upgraded to current price levels in consultation with the affected households. The four villages affected in the damheservoir area by quarry, dam, camp and road construction, were not compensated at the time they were impacted in the 1980’s and 1990s, and no compensation plan was prepared. Communal compensation to these four villages in the dadreservoir area is included in the DamReservoir RAP.

(g) The EL4 (1996) and the EIA (2005) both identified the presence of chimpanzee communities in the wider reservoir area. The chimpanzee is considered an endangered species in the IUCN’s 2003 Red List. The riparian forests to be cleared from the reservoir might be part of the range of some of the chimpanzee communities. There are no indications that the chimpanzees use the area to be impounded as a nesting area. They might however use the riparian forest area during a part of the year for feeding. The EIA (2005), the ESAP and World Bank Safeguard Policy staff identified the riparian forest areas as non critical habitat in the definition of the World Bank Safeguard Policy on Natural Habitat OP/BP 4.04 (see Appendix 1 to Annex 17). Continued baseline monitoring of the chimpanzee population in the wider reservoir area will be carried out to be able to design mitigation measures for their protection. Surveys were carried out as part of the 1996 and 2005 EAs to identify the presence of other endangered, or rare species of plants, amphibians, reptiles, birds and small mammals. There are no indications at present that the area to be inundated contains any endemic or endangered plant or animal species;

(h) The project will finance mitigation measures in order to protect the remaining chimpanzee communities, other primates and other biodiversity in the wider reservoir area. As a mitigation measure the remaining chimpanzee communities will be protected by the establishment of a Bumbuna Conservation Area (BCA) and area of approximately 17 km2 (Environmental Offset for lost biodiversity as required by OP/BP 4-01), and by including strong wildlife and conservation measures in the Bumbuna Watershed Management Plan (see Appendix 1 to Annex 17). The best way to protect these chimpanzee communities can only be decided after the chimpanzee and other biodiversity studies have been carried out (these started in May 2005 and are part of the Environmental Management Plan (EMP)). These studies will generate specific and concrete recommendations on how to best protect the chimpanzee communities and other biodiversity in the BCA before the reservoir is impounded utilizing project funds initially, and sustainable financing from the Bumbuna Trust in the longer term.

120 (i) Impacts on the fish fauna as a consequence of the closure of the dam and the impoundment of the reservoir are expected to be limited. During the preparation of the 1996 EIA and 2005 EIA fish surveys were carried out. The results of these surveys indicate that the Seli River does not contain any endemic or endangered fish species. The impacts of the dam closure on the fish faunas downstream, in the reservoir area and upstream of the reservoir will be moderate, since no true migratory fish species, such as the salmon in North America have been identified. The Bumbuna Falls, located 2.5 km downstream of the dam is an effective fish barrier. Fish surveys and results of other studies did not indicate the occurrence of any significant fish migration upstream or downstream. For these reasons the dam is expected not to have a significant impact on fish migration upstream. Downstream and upstream fish faunas are largely similar. It is expected that downstream fish migration will not be affected. The fish fauna in the reservoir area will adapt itself from riverine to lake conditions, which has been observed in many manmade lakes in Africa. This change is often beneficial for the local fishermen and would increase catches and income from fisheries. A monitoring plan has been designed in order to provide a tool for fisheries management. The EMP includes a downstream and reservoir fisheries management program;

('j) Reservoir operation will regulate flow in the river, which will alter the hydrological regime downstream of the Seli River downstream of the dam. There are adverse and positive aspects to the change in the downstream flow regime. The annual filling of the reservoir will reducing a portion of the normal wet season flow in the downstream of the dam for about the first 5 weeks of the rainy season, as water is retained to refill the reservoir. For the balance of the wet season the flows and floods will be assed normally. In the dry season there will be an increase in the average low flow of 6 m? /s to a regulated flow of 33 to 40 m3/s. In the months when the reservoir is full there will be no change to the flow regime downstream of the dam.

(k) An amenity or environmental flow will be maintained at all times during the pre- impoundment, impoundment and operation phases of the BHP. The amenity flow during the dry season will be equal or greater than 6 m3/sand during the rainy season the flow will be 100 m3/s.The operation of the BHP will be subject to the environmental / amenity flow requirements specified by the ESAP for the wet and dry seasons. Operation of the BHP will result in the following physical changes to the downstream river flow regime: (i)an increase in river flow to about 33 to 40 m3/s during the January-May dry season period (average minimum natural flow in this period is 6 m3/s in March); (ii)a delay of about five weeks in the onset of flood conditions at the start of the rainy season, as the reservoir is re-filled to FSL; (iii)depending upon operating rules for the scheme, possible reductions in flow at night and weekends due to retention of water to meet peak demand. All of the water released from the powerhouse at the base of the dam during operation will flow over the Bumbuna Falls 2.5 km downstream of the dam and therefore the aesthetic value of the Falls will not be reduced. Further study will be carried out to determine more precisely the environmental, social and ecological flow needs. When more detailed information becomes available amenity flow levels will be adapted. The borrower agrees with this environmental, social and amenity flow requirement and will implement it.

(1) Hydropower development in Africa has always led to impacts on public health. Prevalence rates of intestinal and urinary schistosomiasis (bilharzia) might increase, as well as the prevalence rate of malaria. The EIA (2005) indicated that the prevalence of

121 river blindness (onchocerciasis) will likely decrease because of the inundation of a number of streams flowing into the reservoir area reducing disease vectors. A health protection program will be implemented in the immediate catchment with additional support from the BHP operator and BWMA in coordination with the Ministry of Health. Measures will include: functioning and well equipped and staffed health centers providing free healthcare; improved drainage and flattening of land where needed to eliminate pools of standing water in the reservoir draw down area; a public education program on water bome diseases and the prevention of infection; and, actions to break the parasite-host cycle including removal of aquatic vectors and public health treatment covering the main diseases prevalent in the area including schistosomiasis, onchocerciasis and malaria.”

(m) Because of the impoundment of the reservoir, people and chimpanzee will likely be squeezed on a smaller area, which causes the so-called habitat squeeze. This habitat squeeze will further decrease the sustainability of the present agricultural shifting cultivation system and will increase the pressure on the chimpanzee habitat. The project will finance the development and implementation of a Land Management Strategy and Action Plan, a Land and Soil Management Program, an Agro-forestry and Forestry Program and an Agricultural Development Program for the Bumbuna Watershed. The potential for ecotourism development will be studied and an action plan developed. These activities will be executed by the Bumbuna Watershed Management Authority (BWMA) and financed through a trust, partly financed from the electricity tariff (3 percent), to fund the activities of the Authority, including the proposed environmental offset of the Bumbuna Conservation Area (see Appendix 6 on implementing arrangements for the Trust). It is expected that these mitigation measures will improve the livelihood of the extremely poor farmer population, reduce reservoir siltation and protect the habitat for the chimpanzee population, other primates and other biodiversity;

(n) An Emergency Preparedness Plan will be prepared to warn and protect people downstream in case of an emergency. The Plan will be operational before the impoundment of the reservoir starts;

(0) A benefit sharing mechanism will be the establishment of the Upper Seli Community Development Plan (see annex 4) through which indirectly affected communities around the reservoir can benefit from social and economic development activities. This will be the basis for testing institutional arrangements and community development mechanisms for delivery of ongoing benefit sharing programs through a window in the Bumbuna Trust (see Annex 2).

(p) The borrower is committed to implement these mitigation measures.

ESAP and DPR Panel

12. The Environmental and Social Advisory Panel (ESAP) consisting of experience international experts has visited the site, consulted with stakeholders and issued their first report in November 2004. The ESAP reviewed the impact assessments and initial mitigation proposals of the EIA team and made further conclusions and recommendations on the priorities that should be reflected in the EM, with due consideration of the project engineering schedule. These included: (i)to start the additional biodiversity field surveys as soon as possible to firm up the EIA conclusions and fill gaps on the baseline data for future impact monitoring, where these studies needed to be completed before test impoundment of the reservoir; (ii)verification, and if necessary modification ofthe gates ofthe dam, or other measures during

122 the physical completion works, to ensure the provision ofa minimum environmental flow of 6 m3/s at all times during impoundment and dry season operation; (iii)in the transmission line RAP, to avoid and minimize involuntary resettlement in urban areas consider the alternative of raising existing transmission towers, where needed, to overpass existing houses while providing a safe clearance between structures and conductors, and conforming to accepted international practice.

13. The Dam review panel also visited the site in Nov 2005, consulted with stakeholders issued their first report also in November 2005 related to the continuation of investigations, planning and design, construction and operation and maintenance ofthe BHP. The DRP concluded the design and construction ofthe dam was sound. Major conclusions of the DRP on design and engineering components were: (i)on hydrology, the hydrology analysis corresponded to good practice and was adequate; (ii)on geology and geotechnics, the scope, quantity and quality of the investigations were adequate for the type and size of the Bumbuna dam and appurtenant facilities; (iii)on the asphalt concrete faced rock fill dam, the design of the embankment dam and the instrumentation, as well as the installation of a separate monitoring center in the powerhouse control room corresponds to good engineering practices and meets international standards; (iv) on hydraulic structures, the quality of the final design and construction of the civil works and choice/specification of equipment of these facilities is acceptable; (v) on tunnels; structures would require final inspection; (vi) on spillways, use of the left spillway as the service spillway for more frequent floods to limit the occurrence of unfavorable flow conditions affecting the right tunnel and the radial gate; (vii) on intake radial control gate structures, the executed activities of inspection and verification of operation conditions of the metallic structures (trash racks, linings etc.) and equipment (cylindrical gate, trash rack cleaning equipment etc.) were acceptable; (viii) on generation facilities, the quality of design and construction of the civil works is appropriate and corresponds to good engineering practices; (ix) on the reservoir, adoption of a 2-stage impoundment plan with the first partial impoundment up to about 40-50 percent ofthe total height ofthe dam; and (x) on operation, the need for preparation of a Reservoir Operation Plan Operation and Maintenance Plan.

14. Several specific recommendations were made to follow-up the main conclusions. For example, on hydrology, the Panel recommended: (i)an additional review of the PMF should be made to see if recent records altered the design PMF; (ii)three gauging stations should be rehabilitated or installed at the Bumbuna site, two upstream and one downstream of the dam.; (ii)further analysis of power and energy using one month data should be carried out. The Panel noted the reason for the two-phase impoundment, which is not uncommon in the case of large dams, is to provide a real test of the water tightness and deformation behavior ofthe dam in time to take action should excessive leakage occur

Safeguard Implementation Schedule:

15, Figure 1 below illustrates the implementation schedule for safeguard activities in relation to the key project milestones.

Schedule of Activities Safeguard and Related Studies

123 Schedule of Activities Safeguard and Related Studies

16, The schedule for reservoir impoundment (both test impoundment and start of final filling) impacts on the timing of the initial stages of a number of safeguard activities. On the basis of the EIA (2005) and the ESAP and DRP recommendations, the activities to take place prior to the test impoundment ofthe Bumbuna reservoir, would include:

the implementation of all compensation and resettlement measures included in the Dam and Reservoir Resettlement Action Plan; the completion of biodiversity baseline studies (to the satisfaction of the ESAP) required to firm up the EIA (2005) conclusions and provide baseline for future impact monitoring; completion of all environmental and social safeguard measures included in the overall EMP and civil contractor’s EMP required to be completed prior to inundation of the reservoir; Completion of and adoption of an impoundment plan that specifies activities to be undertaken prior to impoundment and impoundment procedures; Completion of an Emergency Preparedness Plan (EPP) to establish a warning system for downstream users and rules to prevent sudden changes in flow rate (either increases or decreases) as well as extreme event of a dam failure; Clearance of the trees from the reservoir prior to impoundment trees to reduce biomass decomposition in the reservoir and the potential for eutrophicationof reservoir waters; The Dam Review Panel (DRP) and the Environmental and Social Advisory Panel (ESAP) have formally commented on the impoundment plan, the status of the biodiversity studies, the reservoir clearing and the reservoir resettlement.

124 17. The requirements for the start of full impoundment will be identified in the impoundment plan and reflect the comments ofthe ESAP and DRP.

18. The biodiversity baseline survey program on the critical path started in May/June 2005. The program includes a further year of study of the chimpanzee population and other primates in the wider reservoir area and additional fish surveys, as well as separate one-month field surveys led by international experts to firm up baseline data for flora, amphibians, reptiles, birds, and small mammals. An invertebrates/butterflies baseline survey will be added that was not done in 1996. A desk study for the BCA will also be prepared. The schedule for the biodiversity studies, particularly those activities in the primate study concerned with the reservoir area will be coordinated with the schedule for clearing forests before test impoundment.

Environment Management Plan (EMP)

19. The Bumbuna Project Implementation Unit (PIU) has overall responsibility for coordination and supervision of all EMP related studies for the BHP as well as the mitigation and monitoring actions required to successfully implement the EMP. The Ministry ofEnvironment has oversight responsibility to ensure compliance with national environmental regulations. An environment specialist with international experience will be appointed in the PIU and supported by local experts for the coordination and implementation tasks. They will work in close cooperation with the PIU communication unit to ensure that all stakeholders and affected communities are fully involved in a two-way dialogue on the EMP, and with the team of environment specialists at Ministry of Environment operating under the Chief Environmental Officer of Sierra Leone, who is also a member of the Intergovernmental Technical Committee for the BHP (See Annex 6).

20. The specific mitigation/ monitoring measures to be taken are identified in EMP presented in the EIA (2005). These measures will be supplemented with those that are recommended in the Additional Studies that are acceptable to the Bank and adopted by GoSL. The transmission contractor and main civil contractor will be contractually obligated to implement and report on environmental and social mitigation measures for their respective construction activities closely supervised by the PIU environment team. The PIU will also be responsible to effect coordination with local government Councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP activities (in particular the Environment Department). Similarly the PIU will initiate all legal and administrative activities needed to strengthen the Seli River Basin Authority (SRDA) and establish the Bumbuna Watershed Management Authority (BWMA) and Bumbuna Conservation Area (BCA).

21. It is expected the BWMA will be established in October 1996 before the start of final filling of the reservoir. As the BWMA and the BCA become fully operational, the PIU will gradually transfer responsibilities for implementation of the watershed management activities indicated in the EMP that are supported by the project and the conservation activities (see schedule in Figure 1). The Bumbuna Trust will then fund these activities.

22. After commissioning of the BHP, the Special Project Company (SPC) will be contractually responsible for maintaining ongoing environment and management programs for the operation ofthe dam and reservoir and the transmission facilities and right-of-way. These responsibilities will be specified in the O&M management contract for the international operator for the dam / reservoir and the transmission facilities.

23. The construction and operation of the BHP will be carried out in compliance with the World Bank Safeguard Policies, the EIA (2005) and the Environmental, Health and Safety Guidelines (Electric Power Transmission and Distribution; Occupational Health and Safety, and General Environmental

125 Guidelines and Monitoring as well as those presented in the World Bank Pollution Prevention and Abatement Handbook (1998). Environmental management clauses, for instance with regard to environmental, social and amenity flow requirements, water quality monitoring and destruction of mosquito breeding sites in the drawdown area of the reservoir, will be reflected in the Concession Agreement to the SPC who will be responsible for contractual undertaking of the operators. The PIU will monitor the establishment of these contractual obligations.

Contractor and Operator EMPs

24. The civil and transmission contractors will prepare their own EMPs and establish their own environmental management and monitoring capacities that will be implemented under the PIU supervision and monitoring by the Ministry of Environment. The contractors EMP have been outlined in the EMP in the EIA (2005) in the following categories: (i)management of construction areas and camps; (ii) management of construction solid wastes and toxic wastes; (iii) management of land; (iv) management of transport; (v) community facilities; (vi) health and safety; and, (vii) emergency plans. They include the development of policies for local training and hiring. Standard provisions for health and safety are provided, such as: all construction workers must be given a medical examination (including sight and hearing tests) before being accepted for employment repeated annually and all employees must be given printed information on the health implications of their work and how to avoid problems including advice in the field of sexually transmitted diseases (STDs and HlV / AIDS).

25. The civil contractor EMPs (Contract A2B) will include actions to mitigate impacts such as: safe storage and prevention of spillage into the river channel of chemicals and toxic materials; soil disposal; waste management and vegetation clearing; monitoring of reservoir slopes during impoundment for detection of instability and provision of environmental flows during impoundment of the reservoir.

26. The transmission contractor (Contract D) will be responsible for measures that conform to accepted utility practice environment management of transmission construction and World Bank Safeguard Policies. The ESAP and the Bank will formally comment on provisions in the construction contractor EMPs. Monitoring and consultation with affected communities will be essential to ensure the success ofthe detailed the contractor EMPs.

27. Similarly once the project is operational the O&M contractors for the transmission line and hydroelectric facilities will be contractually responsible to prepare EMPs to an acceptable standard, prior to commissioning of the BHP. The EMP will include the elaboration of reservoir operating rules and emergency procedures. The Dam Review Panel (DRP) and the Environmental and Social Advisory Panel (ESAP) and the Bank will formally comment on these plans and the operation phase EMP before they are finalized.

28. Other measures in the EMP include the rehabilitation of river flow gauges at Bumbuna and Badela. These are specified as an obligation of the civil contractor. The O&M contractor will have an obligation to maintain these gauges. Both the construction contractor and O&M operator would be responsible for water quality monitoring in their respective EMPs and submitting reports on a pre- established schedule. The program of water sampling and physico-chemical analysis for the O&M operator will monitor the occurrence of detrimental effects such as eutrophication of the reservoir and water pollution, through water quality measurements, particularly of nutrient levels and dissolved oxygen as well as other parameters specified in the EIA (2005).

126 Watershed Management Plan

29. An important aspect of the EMP to promote the longer-term sustainable management of the BHP is the Bumbuna Watershed Management Plan (BWMP). This plan will set out an integrated approach to influence agricultural improvement, soil conservation, forest conservation, river water quality protection and wildlife management in the Bumbuna catchment. This strategy and action plan will be initiated by the Bumbuna PIU and will be gradually handed over to the administratively ‘lean’ BWMA. It is envisaged that the BWMA would also undertake the initial steps to establish the proposed Bumbuna Conservation Area that will provide the BHP environmental offset, under the supervision of the PIU environment team and oversight from the Environment Department.

30. Once established the BWMA will serve as the facilitator for the delivery of the Land Management Strategy and Action Plan financed by the project that include: (i)a Land and Soil Management Program - consisting of soil conservation measures to reduce soil erosion, sediment load and potential for landslips into the reservoir (important for the long-term viability of the BHP); (ii)an Agro-forestry and Forestry Program - to improve land use systems and the sustainable benefits arising from agriculture and forestry that entail action to improve agricultural techniques and improve yields, introduce ago-forestry methods, establish community forests, and improve forest use; and (iii)an Agricultural Development Program - to develop and implement measures such as crop husbandry techniques, basic farm management, crop diversification, harvesting and post-harvest techniques, use and care of farm tools and improvement in management techniques to reduce bush fires and enhance pasture quality. These measures will be promoted through a combination of awareness, extension worker inputs, and on-farm demonstration plots.

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3 1. The filling of the reservoir will cause impact on a total of 518 households in 33 villages who will be affected by filling of the reservoir. Of these, only one village (Matombe) with 16 households will need to physically relocate. A second village (Waia) with 80 households will loose a considerable part of their land, approximately 80 percent, but it is hoped that this village will not need to move their houses. The other 31 villages are affected by losing < 40 percent of their total land. Another 4 villages were affected by loss of land in the past when the dam, access roads, the quarry and the project camp were built. New land, stabilized agriculture and livelihood restorative initiatives will ensure appropriate compensation and restored household economies.

32. The main area for compensation is the area of the future reservoir, which will be covered by water once the reservoir has been filled. Compensation will be made as well for land originally used for dam construction (including access roads, quarry, camp, etc.). This land has been expropriated without compensation having been made so far. In order to get information on the affected population, a household survey was carried out, and focus group discussions were held in the villages potentially affected be the project. In a first phase, 27 villages were covered. During this and subsequent fieldwork, during which 57 villages were surveyed, 6 more villages were found to be affected and were included in the survey in a second phase of fieldwork. At a later stage, information was obtained concerning the existence of a total of 19 additional villages. These were then surveyed in November. One part of the project area, in the far north-east of the future reservoir, with at least one village known to exist (Yiben), could not be reached during the whole period of the study do to high river discharge.

33. Most of the project affected people will experience loss of their plantations -meaning their rice fields, oil palm trees, bananas, vegetables, pineapples, etc. Agriculture is by far the most important activity, and the most important livelihood basis, in the project area. For this reason, restoration of the farming potential will be the top priority of RAP implementation. This will be achieved by provision of support and training in agricultural production, setting up demonstration farms and providing tools, which could be some of the options. Also training farmers in new methods of farming techniques and extension services will be offered. Therefore the purpose of the Stabilized Agriculture Program is to provide an alternative conservation farming extension strategy, which will balance the need of production of subsistence and commercial commodities with the need to conserve and protect the environment and the ecosystem. This will be achieved by overcoming the conditions, which force poor people to take a short-term view and live from hand-to-mouth or day-to-day. The livelihood levels will be raised above the poverty line as well as above a security line, which provides for savings and household “contingency funds” that can be tapped for investments or in times ofdisasters.

34. The most important aspect of the RAP will be to ensure that project affected people’s livelihood are restored to pre-impoundment levels, i.e. that people relocated or people affected by loss of farmland, have been able to harvest the last harvest at their original location and to plant their crops at the new location - before impoundment.

35. The overall impact of Bumbuna HEP on the population in the reservoir area is shown in the following Table.

130 Table 4: Number of Affected Villages, Households and Persons in the Reservoir Area

36. The project affected people in the dam and reservoir area will be compensated through a resettlement program which has several components, each of which respond to the determined impact, the specific needs of the PAPSand to what mitigation measure will be implemented in order to reduce physical and psychological discomfort. Land for land and in kind compensation is the basic rule which will be adopted but because of the fact that the area has already reached its carrying capacity (because of slash and burn cultivation and population increase), land which is already degraded or situated too far away, (i.e. further up the hills) may not always be the best option. For this purpose, a “Stabilized Agriculture Program” (SAP) and a “Livelihood Assessment and Income Restoration Program” (LAIR) will accompany the traditional compensation package of land, housing, income rehabilitation, assistance, etc.

37. The Stabilizing Agriculture Program (SAP) will be implemented in all the 33 villages that are affected by the project in the damkeservoir area. There are two villages (Matombe and Waia), which are most critically affected by physical relocation (Matombe) and will lose approximately 80 percent of their land (Waia). The remaining 3 1 villages will lose between 20-40 percent of their land (see Table A). The SAP will provide the basis for stabilizing the prevailing system of shifting cultivation by replacing it with a more stable, less land-consuming form of agriculture which will only be possible by two means: firstly by making best use of water resources during the dry season, i.e. by trying to retain as much water as possible on its way from the catchment areas through the fields to the reservoir. Secondly, the fertility of the soil has to be maintained or improved by different means so that an abandoning of plots is not necessary anymore. This maintenance of fertility also includes erosion protection. The program will need to focus on the following themes:

Terrain Management - Operation and maintenance of the various terrain modifying infrastructures installed for control of irrigation water, rainfall runoff and soil erosion e.g. flooded and piped irrigation systems, self-build bunded terraces, gully stops, fishponds, protective vegetation. Soil Management - Maintenance of soil structure and fertility through appropriate zero tillage, fertilizing, composting, mulching, green manuring, cover-cropping, ally cropping, incorporationof unburned crop and weed residues. Agricultural Crop Management - Production and procurement of high quality diversified planting materials, environmentally and ecologically compliant weed and pest control practices e.g. biopesticides, insect repellent intercrops, sacrificial planting, integrated pest management, crop rotation and diversification, crop sanitation, crop field dispersion, post-harvest weed control. Water Management - Economical and timely application of water to crops and drainage through management of the timing, quantity and distribution of water applied through basin, mini-terrace, bed-and-ditch, drip, soaker, mini-sprinkler water application systems, as appropriate

131 (m) Livestock Management - nutritional enhancement including cut-and-carry composting, local quarantine, vaccinations, breed improvement, housing, controlled grazing from fencing, tethering, confining etc. and pond and cage aquaculture. (n) Forest management - inventory, determination and control of sustainable harvest rates, guarding and fire control, silviculture practices (weeding, thinning, pruning, culling and replanting). (0) Minor infrastructure asset management - operation, maintenance and repair of communal access routes, bridges, landings, irrigation and water supply systems, erosion control works, windbreaks, gully-head erosion control structures, machinery, equipment, buildings, communal fencing plan and erection. (p) Labor Management - introduction and familiarization with labor-saving cultural practices, advanced programming of seasonal operations. (9) Commodity Management - secure storage of inputs and produce and in-village processing and pre-sale value-adding (brewing, distilling, textile and mat weaving, basketry, paper making, bamboo and wood working, sericulture, apiculture, fungiculture, food preservation, charcoal production, oil extraction, sticklac production, brick making, pottery, blacksmithing, smelting, “sa-paper” making), bulking-up, contract farming (e.g. oilseeds) and group marketing.

38. The activities under the Stabilized Agriculture Program will be synchronized with the LAIR Program and the agricultural program under the Environmental Management Plan, to a large extent possible. However, the primary focus of LAIR and SAP should be on the directly affected villages (33) in the reservoir area

39. The Livelihood Assessment and Income Restoration (LAIR) Program will serve the purpose of providing income generation alternatives to the project affected people. The program will be implemented in all 33 villages that are affected in the dadreservoir area. There are two villages (Matombe and Waia) which are most critically affected in the way that they will need to relocate physically (Matombe) and will lose approximately 80 percent of their land (Waia). The remaining 31 villages will lose up to 40 percent of their land. It will therefore be important to assist the communities in identifying different skills and training which can assist them in increasing the household incomes. The program will also provide direct assistance in creatingjob opportunities. The scope of work will be to focus on the following themes:

(a) Detailed economic surveys of the villages to determine and reconfirm baseline income levels, the level of dependence on agriculture by households for both food supply and income source and other existing sources of livelihood. (b) Identification of social, economic, logistical or technical restrictions that limit potential food security, economic growth or the development of other income sources. (c) Design of models that define existing systems of agricultural production, models on how to intensify use of land and increase production value e.g. via irrigation, new techniques, improved crop species, increased cash cropping and possibility of product processing for added value; and the estimated household incomes through these opportunities. (d) Design of models for alternate income and livelihood sources, defining the existing option and those that can be introduced, estimated household incomes through different sources and the means and actions that will be needed to expand the identified opportunities, e.g. credit, market development, skills training, access to transportation.

132 (e) Preparation of detailed program proposals including goals and objectives, implementation plans, budgets, schedules and measurement tools for monitoring achievementlsuccess.

40 The LAIR Program itself will be developed in cooperation with the international staff in RU with assistance and input from other parties such as VRCs, government agencies, NGOs and technical experts. To date a number of possible programs and projects for community development and the LAIR Program have been identified based on the concerns and priorities of the affected villages during interviews and surveys and focus group discussions. Potential LAIR activities are the following:

Agricultural Support

41. Most of the affected persons interviewed by the RAP team have mentioned loss of their plantations -meaning their rice fields, oil palm trees, bananas, vegetables, pineapples, etc. Agriculture is by far the most important activity, and the most important livelihood basis, in the project area. Provision of support and training in agricultural production, setting up demonstration farms and providing tools could be some of the options, (including improving market facilities). Also training farmers in new methods of farming techniques and extension services, which are found wanting should be offered. Budgets and an action plan will be prepared as part of the LAIR Program and will be synchronized with the SAP

Support of Alternative Economic Activities

42. One of the income generation activities in some of the communities is the mining of gold and its sale. Alternative activities will be identified and taught to especially the youth who feel they have no other means of earning an income. Some have mentioned carpentry as an option, together with all round education and vocational training. Budgets and an action plan will be prepared as part of the LAIR Program.

Women’s Savings Pool and Training

43. A micro-credit loan scheme is found to be taxing as no NGO is prepared to deal with loans, but a saving scheme is more appealing and will be established to allow women to increase their income generating capability. Women will be encouraged to form groups to access the savings and borrow from it on a rotational basis or as the need arises, this makes them accountable as a group in paying back the “loans” and encourages them to carry out the chosen activities as a group. The program will target at least 10 groups of women with ten women per group as pilot and then expanded later. Women will be trained in simple book keeping and financial management and other skills.

Literacy and Skills Development

44. Literacy levels are low in the surveyed villages and the youth are also affected. Establishing adult literacy and skills development has been identified with the targeting of disadvantaged girls and women (e.g. tie & dye, tailoring, other income generating activities) in particular. Men have expressed interest to learn skills as carpenters, blacksmiths, masons etc. The youth identified fish farming and running a boat transport business to ferry people across the river, as possible activities. Budgets and an action plan will be prepared as part of the LAIR Program.

133 Improved Access and Transportation

45. Most of the affected communities are located very far from access roads and the inhabitants need to walk long distances in order to reach markets and services. It is therefore important to identify means of transport, which can be introduced and improved in these communities, and to link them to their neighbors and larger villages and towns. Such initiatives can be for example, boat service up and down the rivedlake, ferry service across the rivedlake, and the introduction of bicycles.

Fisheries and Aquaculture Development

46. Fish is an important part of the diet in Sierra Leone, supplying about 80 percent of the total animal protein consumption. The introduction of fish farming and the construction of fishponds is totally in line with the necessities pointed out in the Food Vulnerability Assessment (FA0 2002). Fresh water fish consumption in the riverine villages provides the main source of animal protein. Villagers use scoop nets, fencing techniques and traps to capture fish from these water bodies. In large rivers, gillnet fishing is practiced. Present annual yield of inland fisheries is estimated at 20'000 tonnes, of which about 5'000 tonnes are from lakes and 15'000 tonnes from rivers and floodplains. There is still room for increasing production to an estimated 40'000 tonnes annually. Finfish culture started in 1977, in the town of Makali, and 10 years later in Bo town. Earthen ponds were constructed and used for production of fingerlings and harvestable Tilapia nilotica. Men mostly construct the fishponds, while the day-to-day maintenance is carried out by women and children. Farmers own 1 to 4 fish ponds with surface areas ranging from 100 to 500 mz per pond. The yield from these ponds ranges from 1'500 to 2'500 kg/ha/year, which is 50 percent of the maximum attainable under these conditions. Trials with local freshwater fish species were done and the production yields were very encouraging (source: Interim Fisheries Policy of Sierra Leone, Ministry of Fisheries and Marine Resources, 2004).

47. The following tasks are necessary for the fishing component:

e Establish scientific basis for fish farming in specific locations. e Train communities in fish farming techniques and pond management. e Construct community fish farms in 10 selected villages. e Establish monitoring system. e Enhance the growth performance of cultured species. e Promote appropriate fishing technology for capture. e Train fish farmers in preservation and marketing offish. e Involvement of farmers in construction of ponds

48. Both RAPSwill be implemented by a Resettlement Unit which will report to the PIU who will have the major and overall coordinating function. The Resettlement Unit will be composed of international and national consultants, local specialists and field assistants who participated in RAP preparation, Village Resettlement Committees for each affected village, legal council, and independent observer. The RU will have its main offices in Kafogo and Bumbuna and with a coordinating office in Freetown. A Resettlement Advisory Group will have an advisory and oversight function and will be composed of and represent all stakeholders.

49. Two critical components in the resettlement and compensation package, are the SAP and the LAIR, which will also be implemented by consultant contracts but will sort under the RU. The SAP agricultural specialist, who will be recruited under a direct contract with PIU, will

134 technically also sort under the Ministry of Agriculture, Forestry and Food Security and the Block representatives in the project area. The SAP consultant will establish a full team of agricultural extension workers and other specialists who will be necessary in order to implement this program. The specialist group, which will be in charge of the LAIR program, could be one of the NGO’s in Sierra Leone that has significant experience with livelihood assessments and income restoration programs. The NGO, which will also be recruited under a direct contract with PIU, will sort under that same unit. The specialist group should establish a full team of extension workers and other specialists who will be necessary in order to implement this program.

50. The RU will be composed by an international consultant with extensive experience of resettlement in Sierra Leone and who also previously has trained local specialists and field assistants (students in legal and social sciences for example). The Village Resettlement Committees will be crucial in that they will participate in the entire process, represent the interest of the project affected people and ensure that the resettlement process is transparent and fair. A Legal Council will be providing legal assistance to project affected people continuously throughout the resettlement process and will also be included in the RU contract (through sub- contract to the “Lawyers Centre for Legal Assistance”) Internal monitoring and evaluation will be carried out by the RU and external monitoring and evaluation of the resettlement process will be carried out by an independent “Witness NGO” as well as by the Panel of Expert

Resettlement along the Transmission Line

5 1. The existing transmission line is 200 kilometers consisting of 565 transmission towers in a 30-meter right-of-way long starting at the switchyard at the project site in Bumbuna and ending at a substation in Freetown near the Kingtom thermal power station. The transmission RAP disclosed in January 2005 determined that 367 households were in the 30 m right-of-way. In keeping with World Bank OP/BP 4.12 on Involuntary Resettlement where involuntary resettlement should be avoided where feasible, or minimized, three alternatives were explored in the RAP, namely:

Alternative 1 Relocating the end-of line-substation in Freetown to the city perimeter (i.e. moving the right-of-way) and rerouting the line around Makeni town. This would avoid involuntary resettlement and social disruption in urban sections of the line where the bulk of the resettlement would occur;

Alternative2 Defining an exclusion zone within the ROW on the basis of vertical and horizontal clearances of 7.0m from the conductors, or effectively reducing the area within the ROW where houses would be moved (to 35 percent) and thus minimizing resettlement; and

Alternative 3 Raising the transmission towers in critical sections (Le. increasing conductor heights) to provide a minimum vertical clearance of 7.0m and allowing the lines to overpass existing commercial buildings, households and other structures in the ROW.

52. Efforts to consider these alternatives responded to strongly expressed views of the affected communities in the public consultation meetings during the RAP. Most of the families living in the ROW do not want to relocate or experience social disruption, particularly those households residing in the more populated sections of the right-of-way in Freetown and Makeni, where unoccupied urban land is scarce. A field survey program was undertaken as part of a comprehensive Condition Assessment of the entire transmission line that involved a tower-by- tower inspection and photo documentation (of all 565 towers).

135 53. In the course of the survey it was established that no existing buildings violate the 7.0m clearance criteria Freetown and Makeni, where most of the resettlement would occur if the ROW were cleared. Over the entire line, a total of 6 structures encroach with 7.0m of the conductors, mostly between Waterloo and Lunsar. These are five houses and the secondary school block, All remaining households in the 30m ROR (all 132 houses) are more than 7.0m from the lowest conductor, and in majority of cases well exceed this minimum requirement. It is anticipated that all structures can be built only meters away, on the same plot of land.

54. The results suggested that rather than raising towers in critical sections, a more practical and cost-effective approach would be to relocate only those structures that violate the minimum clearance. After considering all the factors the alternative advanced by the PKJ as most feasible was to allow existing land use to remain in the right-of-way, subject to the minimum vertical clearance between conductors and structures applied consistently over the full length of the ROW. The approach: (i)meets the World Bank’s safeguard policy on involuntary resettlement, where involuntary resettlement should be avoided where feasible, or minimized, exploring all viable alternative project designs; (ii) responds to the desire of households not to move and avoids unnecessary social disruption; (iii) conforms to accepted international practice for management of transmission right-of-ways and does not impose higher standards on Sierra Leone.

55. In countries in Europe, as well as other developed and developing countries, it is accepted practice to allow permanent structures, including homes to remain under medium and high voltage transmission lines, provided safe minimum clearances are maintained. In developing countries often the need is to expand electrical services in urban areas where electrification ratios were previously low, particularly among low-income and poor segments of the populations.

56. Where a house or other structure must be moved, the Bank’s Involuntary Resettlement Policies would be applied in consultation with the affected household. In the case of the secondary school the concerned school authorities would be involved. All resettlement provisions that are identified in the RAP would be provided for the affected households (e.g. access to legal advice, disturbance compensation, grievance procedures).

57. These arrangements were discussed in public consultation meetings and were highly welcomed. In these consultations it was discussed that public safety is addressed by the conductor and tower design standards. The field effects resulting from the voltage and current flow (electric field and electromagnetic field) were explained. These had been calculated for the 7.0 m minimum clearance as well as for other clearances. Analysis shows the EMF exposures conform to international guidance and even the strictest emerging guidance in the European Union. These results were review by ESAP and an independent expert who concluded they reflected accepted practice.

58. The status of land ownership in the 30-meter right-of-way under the transmission line would not change. Households with title deeds would retain ownership of land. Similarly, there would be no change in rural areas for community property managed under the under the traditional system of community land ownership. Provisions will be made to control any future alteration to existing structures or new building and land development in the right-of-way, such that the minimum clearances are always maintained e.g., restricting building heights, restricting erection of antenna / metal poles, tree planting, etc.) This will require appropriate authorities to be assigned to a government regulator (to be established with support from the Power and Water Credit) and MoEP in conjunction with the transmission O&M contractor responsible for

136 maintaining the right-of-way to approve alterations to existing buildings or new development on a case-by case basis. These provisions will be established during the RAP implementation.

59. The transmission resettlement will be implemented under the same contract as for the Daaeservoir RAP, Le. the same international consultant firm will assist the PIU with implementation of both RAPSthat are supervised by a resettlement specialist in the PIU.

137 Appendix 1 to Annex 17

Sierra Leone Bumbuna Hydroelectric Project

Note to the Operations Committee on Critical Natural Habitat and Chimpanzees

April 9,2005

1. Role of the Bank and Project Status. The Bank is preparing a Partial Risk Guarantee and an IDA technical assistance grant to allow completion of the Bumbuna Hydroelectric Project (BHP). Completion costs are estimated at approximately US$83.6. The safeguards documentation (Environmental Assessment and two Resettlement Action Plans for the reservoir and the transmission line) was disclosed in country and in the Infoshop on January 26, 2005. Pre- appraisal of the project took place during the second half of February 2005 and the first two weeks ofMarch 2005. The task team seeks to appraise the project in April 2005, and is returning to the OC, based on their request ofApril 7,2004, to provide an update on the status ofquestions about critical natural habitat raised at the OC meeting.

2. Location and Background: The BHP is located on the Seli River, 200 km northeast of Freetown, the capital of Sierra Leone (see Map 1.). Project construction was stopped in 1997 due to civil war. At that time, the project was and remains approximately 85 percent complete. The dam is largely built, but the reservoir has not yet been filled and the turbines and ancillary equipment have not been installed. The civil war has caused demographic instability throughout Sierra Leone and contributed to considerable environmental degradation throughout the country. The Bumbuna area has also been affected by these population movements and consequent negative impacts on the environment. The BHP will flood an area of21 km2,comparatively small for a hydropower reservoir. The inundated area contains approximately 450 ha of degraded, closed riparian (gallery) forests, which are part of the most northern extensions of the tropical rainforests of southern Sierra Leone. These riparian forests (upstream of the reservoir, in the reservoir area itself and downstream of the dam) are at present under heavy human pressure and without the project are likely to disappear over the coming decades.

3. Project Alternatives. The Seli River site is the best alternative to supply power that is urgently needed in Sierra Leone and the only feasible site for the BHP, as confirmed by a retrospective alternatives analysis (2005 EIA, Appendix C1 ). This analysis has confirmed that the scaled-down Bumbuna project from the 1984 Supplemental Feasibility study (followed by thermal plants) was the most economically attractive of the four sequences. Out of the 16 combinations of future oil prices, discount rates and load growth examined, the reduced Bumbuna was the least-cost solution in 12 cases (including the base case) (Appendix C1 paragraph 85 page 120).

4. World Bank Natural Habitats Safeguard Policy (OP/BP 4.04). This policy states the following: i) “The Bank does not support projects, that in the Bank’s opinion, involve the significant conversion or degradation of critical natural habitats.” (see also paragraph 8 and

138 footnote 1 for the definition); ii) “The Bank does not support projects involving the significant conversion of natural habitats unless there are no feasible alternatives for the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs. If the environmental assessment indicates that a project would significantly convert or degrade natural habitats, the project should include mitigation measures acceptable to the Bank. Such mitigation measures include, as appropriate, minimizing habitat loss (e.g., strategic habitat retention and post-development restoration) and establishing and maintaining an ecologically similar protected area” (Natural Habitats OP 4.04 paragraph 5). The World Bank was not involved in the financing of the present construction phase before 1997, although the Bank was involved in studies and planning the BHP since 1977.

5. 1996 Environmental Assessment (1996 EIA). An Environmental Assessment (EIA) was carried out in 1996 (Electrowatt Engineering Services Ltd. and Techsult Co. Ltd.) for the African Development Bank, which together with the Italian Government was involved in financing the 1997 construction phase. At the time the 1996 EIA was finished the BHP construction was close to 85 percent completion. The 1996 EIA identified the presence of chimpanzees (Pan troglodytes verus or Western chimpanzee) in the reservoir area, as did the 2005 EIA. The 2005 EIA states further: “The only other endangered primate which could live in the wider BHP area is the red colobus (Procolobus badius) (see Table 1.). This species was not encountered during the surveys, although this species was once widespread in northern Sierra Leone. The yellow-backed duiker (Cephalous sp.) is a near threatened species in the wider BHP area. This species was encountered during the field surveys. The wider BHP area contains no unique features of ecology and geography, so it is unlikely that the fauna (and flora) would differ significantly from those found in similar regions of Sierra Leone. The data suggest that many species are under continuing threat of habitat loss and hunting, but there is no evidence that any are endemic to the immediate catchment or are endangered requiring immediate protection. All animal species appear to be adapting to changing vegetation zones, although some populations are becoming locally unviable, from the reduction and fragmentation of habitats, caused mainly by the clearance of land for agriculture. The latest available data indicate that from 1975 to 1987 the riparian forest cover decreased with approximately one percent.” Field observations by World Bank safeguard policy staff indicate that since then the riparian forest cover and its quality is further decreasing and it is expected that the riparian forests will largely disappear in the coming decennia.

6. 2005 Environmental Assessment (2005 EIA). The Torso for the 2005 EIA, carried out for the Government of Sierra Leone by an international consulting firm, specifically required a special chimpanzee study as well as investigation of other endemic or endangered species identified in the 1996 EIA in order to provide updates of the existing status of the habitat in and around the area to be inundated. These studies were carried out in 2004 by Dr. Janette Wallis, an internationally known primatologist, in collaboration with Sierra Leonean primatologists and biodiversity specialists. The study found that chimpanzees do live in the vicinity of the BHP, but concluded that areas affected by reservoir inundation are not critical natural habitat, as defined in OP 4.04, and are not critical for the chimpanzees, as further discussed in this note. Results of the 2004 field studies are detailed in Appendix J to the 2005 EIA. The study methodology entailed interviews with local hunters and farmers, assistance from local people to guide researchers to nest sites and reconnaissance walks in areas where chimpanzees would be expected. Chimpanzees were sighted in the hills above the dam site. These reconnaissance walks also confirmed the existence ofchimpanzee presence and nests in other areas (see Maps 2 and 3.). No signs of chimpanzee presence were observed in the area to be inundated, including the gallery forests. Nevertheless, the possibility that chimpanzees might use the gallery forest at certain times of the year cannot be ruled out, as the gallery forest contains fruit trees on which

139 chimpanzees feed. These same fruit tree species also grow on the hillsides. The 2005 EM concluded that five chimpanzee communities and possibly more inhabit the area around the proposed reservoir.

7. Status Chimpanzee Communities in Wider BHP Area. The 2005 EM survey team found physical evidence of at least three communities of chimpanzees living in the southern portion of the project area (two to the west of the Seli River, and one to the east), and received verbal reports ofat least two additional communities further north (see Maps 2 and 3,). Because the entire project area could not be surveyed within the timeframe ofthe 2005 EMstudy, the total number of chimpanzees inhabiting the area was not determined. The 2005 EIA states further: “Based on the evidence of the chimpanzee communities observed and the nature of the vegetation, ten to fifteen chimpanzee communities may utilize the area. . The chimpanzee community observed nearest to the dam site was estimated to consist of at least twelve individuals. These chimpanzees were recorded above the future full supply level (FSL) of the reservoir. They may range around the project area, including visits to the riverine forest (gallery forest) at certain times ofthe year according to food availability, unless human foot traffic may be a sufficient disturbance to keep them away from the river itself.“

8. Critical Natural Habitat Evaluation. Based on the field studies, the researchers concluded that the reservoir area cannot be considered critical natural habitat8 as defined by the World Bank Safeguard Policy on Natural Habitats (OP 4.04). The 2005 EIA states: “the vegetation has been greatly altered by man and natural habitats remain as small isolated fragments within an expanse of cultivated and fallow land and as yet there are no designated or proposed protected areas recognized by the communities, the Sierra Leone Government, or the World Bank. The small areas of gallery or riparian forest alongside the river are also not critical habitat, because they are largely altered by human activity over a long period of time, although chimpanzees might use these areas occasionally to search for food. These riparian forests could, however, be considered as natural habitat, despite disturbance by humans. While there was some natural habitat clearing due to the dam construction in 1994 [70 percent ofthe forest below FSL in 1992 (Appendices page 238 and Figure l.)],by far the major part of natural habitat destruction was due to human activities over last decades.” Most of the area to be inundated is now part of the shifting cultivation system and natural vegetation has been largely modified by human interference and the subsequent invasion of non-indigenous species. Thus, the area to be inundated cannot be considered critical natural habitat according to the definition of the Bank’s Natural Habitats Policy OP 4.04 and the value of the remaining natural habitat is largely diminished.

* The Bank does not support projects that, in the Bank’s opinion, involve the significant conversion or degradation of critical natural habitats (see OP 4.04 paragraph 4.). OP 4.04 Annex A Definitions 2001 defines critical natural habitat in paragraph 1. as follows: (b) Critical natural habitats are: (i)existing protected areas and areas officially proposed by governments as protected areas (e.g., reserves that meet the criteria ofthe World Conservation Union [IUCN] classifications), areas initially recognized as protected by traditional local communities (e.g., sacred groves), and sites that maintain conditions vital for the viability of these protected areas (as determined by the environmental assessment process);or (ii) sites identified on supplementary lists prepared by the Bank or an authoritative source determined by the Regional environment sector unit (RESU). Such sites may include areas recognized by traditional local communities (e.g., sacred groves); areas with known high suitability for bio-diversity conservation; and sites that are critical for rare, vulnerable, migratory, or endangered species. Listings are based on systematic evaluations of such factors as species richness; the degree of endemism, rarity, and vulnerability of component species; representativeness; and integrity of ecosystem processes. (c) Significant conversion is the elimination or severe diminution ofthe integrity of a critical or other natural habitat caused by a major, long-term change in land or water use. Significant conversion may include, for example, land clearing; replacement of natural vegetation (e.g., by crops or tree plantations); permanent flooding (e.g., by a reservoir); drainage, dredging, filling, or channelization of wetlands; or surface mining

140 9. Ecological Flexibility of Chimpanzees, Chimpanzee communities are found in many regions of Sierra Leone. They have been sighted or observed at the edge of Freetown in the Western Area Forest Reserve on the Freetown Peninsula and near the Freetown Lungi airport, which demonstrates that chimpanzees are adaptive to a variety of habitats (personal communication from Sierra Leonean primatologists involved in the chimpanzee study to World Bank safeguard policy staff, 2004). Given the relative behavioral and ecological flexibility ofthis species and its general distribution in the Guinea-Sierra Leone region, it is likely that a chimpanzee population would survive in the absence ofthe gallery forest (ESAP page 23, 2004). Nevertheless, existing information is not sufficient to determine the precise impact ofthe loss of this habitat on the population (ESAP page 23, 2004). There is, however, no question, that the chimpanzee as a species will not be threatened by the inundation of the reservoir area (personal communication 2005 EL4 consultants, Sierra Leonean primatologists to World Bank safeguard policy staff, 2004).

10. Potential Impacts on Chimpanzees. The potential impacts of completion and operation ofthe BHP on chimpanzees in the project area, as determined in the 2005 EM, are as follows:

0 Chimpanzees will not likely be drowned during inundation, because the water level will rise slowly. However, the prior removal of large trees, as recommended in the EIA report, will help to prevent the stranding ofchimpanzees in the rising water; 0 Filling ofthe reservoir may remove part of the chimpanzee’s range, and, at the same time, cause further degradation of chimpanzee habitat, when the area used by humans is reduced and local people move their activities into formerly marginal forest fragments; 0 A consequence of this habitat ‘squeeze’ will be to bring humans and chimpanzees into closer proximity, with an increased likelihood of conflict, i.e. hunting by humans, and crop-raiding or physical attacks by chimpanzees.

11. Status of Other Primates and Potentially Endangered Species. The 2005 EIA also found that other primates inhabit the project area. (see Table 1). . Several Cercopithecine species were observed or heard by the primate survey team; vervets, mangabeys, patas, spot-nosed monkeys, and Campbell’s monkeys were located in various parts of the surveyed area and are likely to occur in the non-surveyed areas, as well. [Cercopithecinae store food inside their cheeks and typically eat fruits, leaves and other plant parts, and even some animal products. Because of their ability to store food, the Cercopithecinaes are more likely to be crop-raiders.] Although informal interviews provided reports that black and white colobus are in the BHP area, no sightings by the team were recorded. [Colobinae are leaf-eating monkeys and have a chambered stomach adapted to allow digestion of leaves. They are less likely to be crop-raiders and spend more of their time high in the trees.] Because their skin is highly sought after for use in ceremonies, this species is likely on the decline in the Bumbuna area. The endangered bay colobus or red colobus (Procolobus badius) appears to be absent. The red colobus, once found throughout much ofnorthern Sierra Leone, was expected to be encountered during the survey, but there have been recent hunting pressures on this subspecies. Of the nine globally threatened bird species living in Sierra Leone none has been recorded in the study area (1996 EIA). Also no other endangered animal and plant species were recorded in the study area by the 1996 and 2005 EAs.

12. Review by Environmental and Social Advisory Panel. Following World Bank practices for a potentially controversial Category A project, an Environmental and Social Advisory Panel (ESAP) was convened to review and advice on safeguard related issues. The task team determined that one of the three ESAP members should be a primatologist. The selected

141 primatologist, John Oates, is an internationally renowned expert on chimpanzees and he has worked extensively on primate issues in Sierra Leone. The draft 2005 EIA was submitted to and reviewed by the Panel in November 2004. Concerning the adequacy of the chimpanzee and other primate surveys in the 2005 EIA, the Panel concluded: “Surveys of chimpanzees, and monkeys have been adequately conducted within the constraints of time and resources available.” The ESAP notes on page 6 of their 2004 report: “The Panel finds that the consultant demonstrated well that the project area is home to several communities of chimpanzees. However, the ESAP also agrees with the EIA consultant that further study (preferably for one full year) is needed to obtain better knowledge of the size, distribution and socio-ecology of the chimpanzee population. This study should pay particular attention to the importance, or otherwise, of the riparian forest habitat for this species, and to the likely impacts of human resettlement (including changes in agricultural patterns) on chimpanzee food supply and ranging behavior.” The ESAP agreed that the area to be inundated is not critical natural habitat as defined by the Bank’s Natural Habitats Policy OP 4.04, but that further investigation was needed to evaluate the ecological importance of the gallery forests for the chimpanzee population in the area. Bank environmental safeguard staff with ecological and biodiversity expertise agree with the conclusions of both the 2005 EIA and the ESAP review.

13. Additional Investigation. Both the 1996 and the 2005 EAs carried out biodiversity baseline surveys on all fauna and vegetation elements, with the exception of butterflies. The ESAP recommended additional biodiversity studies to complete the baseline and start the biodiversity monitoring program. These additional biodiversity studies are the following: one year chimpanzee and other primate study, one year fish study, a limited small mammal survey, a limited amphibian and reptile survey, a limited tree and other plants survey, a limited butterfly survey and a limited bird survey. These biodiversity surveys will start in April 2005. The Panel proposes that these studies be regarded as the initial components of a monitoring program. The ESAP agreed that construction work could start and continue while these studies are in progress, but reservoir impoundment should not take place before the recommendations of these studies are known and their implementation agreed with the government. Furthermore, these studies will be valuable to the work entailed in creating an environmental offset because the habitat, while not critical habitat, falls under OP 4.04’s definition of natural habitat. See paragraph 15.

14. Natural Habitat Mitigation and Protection of Chimpanzees. The area to be inundated does meet the criteria for significant conversion of natural habitat under the Natural Habitat Policy OP 4.04 (OP 4.04 paragraph 5)’. The Bank can support significant conversion of natural habitat only when there are no feasible alternatives for the project and its siting (see paragraphs 4 and 3 above, and 2005 EIA Appendix C1 paragraph 85 page 120) and the overall benefits from the project substantially outweigh the environmental costs. Concerning the overall benefits vis a vis the environmental costs, it must be emphasized that almost the entire country will be dependent on the BHP for their electricity supply and economic development. The provision of electricity will also be a stabilizing factor in helping to prevent the country from slipping back

~~ Wherever feasible, Bank-financed projects are sited on lands already converted (excluding any lands that in the Bank’s opinion were converted in anticipation ofthe project). The Bank does not support projects involving the significant conversion of natural habitats unless there are no feasible altematives for the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs. Ifthe environmental assessment indicates that a project would significantly convert or degrade natural habitats, the project includes mitigation measures acceptable to the Bank. Such mitigation measures include, as appropriate, minimizing habitat loss (e.g., strategic habitat retention and post-development restoration) and establishing and maintaining an ecologically similar protected area. The Bank accepts other forms of mitigation measures only when they are technically justified.

142 into another civil war. The policy also requires mitigation measures to compensate for the loss of the natural habitat. The ESAP Panel and the 2005 EL4 report both recommend protecting the remaining chimpanzee communities through establishing the Bumbuna Conservation Area (BCA) and including strong wildlife and conservation measures in the Bumbuna Watershed Management Plan.

0 A centerpiece of the Environmental Management Plan (EMP) of the 2005 EIA is the creation of the BCA, which will be the environmental offset for the loss of biodiversity in the area to be inundated. The area of the BCA will initially be 17 km2,but an additional year-long study will be carried out to identify the best area to be protected and to establish the most appropriate boundaries for the protected area. The first step is to execute a desk study on the BCA. This step will start in May 2005. The second step will be the establishment and the administration of the BCA. This step is planned in the first year of project implementation. 0 The 2005 EIA also proposes a mitigation plan to protect the remaining patches of riparian forests and chimpanzee communities and other biodiversity in the wider project area and the inclusion of strong wildlife and conservation measures in the Bumbuna Watershed Management Plan. This mitigation plan will be further refined based on the recommendations ofthe baseline surveys starting in April 2005. 0 The Bumbuna Catchment Management Activities, the WLMSAP (Water and Land Management Strategy and Action Plan), the BCA and the BWMA mitigation measures will be financed from a small levy on the electricity bill (approximately 3 percent of the tariff per kilowatt-hour) and is expected to provide a maximum annual recurrent contribution of US$ 1,575,000 (page 200 in the 2005 EIA report). 0 The Borrower is committed to implement the mitigation measures.

15. BHP as an Opportunity for Chimpanzee Protection. The BHP will provide the opportunity to promote conservation of the chimpanzee communities that remain in the project area. The first step, as noted above, is to conduct further field studies on the Bumbuna chimpanzee population over a period of at least one year to enable their numbers, distribution and movements to be better defined. Such data will, in turn, provide the information needed to elaborate the mitigation measures. The mitigation measures that have been recommended include: 0 Long-term monitoring ofthe chimpanzee population; 0 Declaring the most important chimpanzee habitat(s) in the Bumbuna Catchment as protected area(s); 0 Improving chimpanzee habitat by the management of adjacent areas, including reforestation, and encouraging corridors that connect to other chimpanzee habitats in the Bumbuna Catchment; 0 Creating local public awareness concerning the need to protect and not decimate the chimpanzee population; and 0 Encouraging the development of the BHP as a centre for ecotourism and chimpanzee research, with the beneficial after-use ofthe construction camp.

16. Conclusion: Based on studies to date and independent evaluation ofthese studies by the ESAP, the area to be inundated is not deemed vital for the survival ofthe chimpanzee population remaining in the Bumbuna project area. Further, inundation of the Bumbuna reservoir area is not vital for the survival of the chimpanzee population in Sierra Leone. Increasing human pressure, in the without project situation, will eliminate the chimpanzee population and the remaining gallery

143 forests in the Bumbuna area in the coming decades (see Figures 2 and 3). The project poses an opportunity to protect: 0 the chimpanzees and the remaining gallery forests in the Bumbuna area; 0 at the same time, improve the livelihood of the farmers in the area; and 0 provide electricity to Sierra Leone for economic development.

144 Annex 18: Information Sharing and Public Consultation SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. Public Consultation and Information Dissemination: the public consultation process undertaken during preparation of the Completion of the Bumbuna Hydroelectric Project has provided an opportunity to engage project affected people and concerned stakeholders at the village, district and national levels. The principal objectives of this process have been to ensure that: (i) adequate and timely information was provided to project-affected, ‘primary”’ stakeholders as well as ‘secondary’” stakeholders who have legitimate interests in the project at the national level; (ii)these stakeholders are given sufficient opportunity to voice their opinions and concerns; (iii)poor and vulnerable groups are given an opportunity to voice their opinions as legitimate stakeholders; and (iv) their concerns are factored into the EM and the RAPSas well as the complementary Upper Seli Community Development Initiative.

2. Consultations were carried out in compliance with the World Bank safeguard policies on Environmental Assessment (OP 4.01) and Involuntary Resettlement (OP 4.12) which require that the project affected people and other stakeholders are consulted in a meaningful way. To accommodate these policies, a three-step approach was followed in the safeguard studies (the EIA Update study and the two Resettlement Action Plans) to involve and consult with stakeholders at national, district and village levels. The general approach is noted in Table 1, which provides more detail on the type of stakeholder engagement on these studies.

Table: 1 Three-step process in stakeholder interactions on safeguard studies in 200 and 2005 Step 1: Introduction and eliciting concerns Initial presentations were made to stakeholder groups on the purpose and process of each study in order to elicit their concerns on the key issues and the proposed approach for the study. For example, in preparing the EIA Update, a scoping meeting for national stakeholders was held based on a Scoping Report and draft Public Consultation Plan. Subsequently, on-site meetings were held with community members , traditional leaders and local government authorities to discuss the same agenda. 1 For the RAPS,a strategy for public consultation and information disclosure was prepared, followed by a series of meetings with local communities at different locations, including presentation and discussion sessions with district and local government agencies, the Paramount and Village Chiefs, and elders. m Issues of concern such as the process steps and specific compensation policies and grievance procedures were discussed. Methods for stakeholder involvement in the process were agreed. Step 2: Active involvement in the data collection, surveys and evaluation The field teams for each study then met individually with the affected communities and local leaders in group meetings, focus groups, and in interviews with individual households to establish baseline data, attitudes and expectations, and areas of concern in carrying forward the analysis. 1 In the case of the RAPS,this involved the delineation ofthe areas impacted by the project and the documentation of affected families’ situation, livelihoods and amenities, etc. impacted by the project. The analysis was made in relation to codified and traditional rights and entitlements. 1 For the EIA Update this involved surveys and field data collection, consulting with local resources users and collecting local knowledge. National level stakeholders in the environment and resource management agencies were interviewed and consulted throughout the process. Step 3: Presentation, Stakeholder Review and Feedback The results of the analyses and interaction with stakeholders were then presented for discussion. These meetings were initially held with local government officials and Paramount Chiefs, followed by open community meetings. Feedback on the outcome of the local meetings was provided to the inter-agency Technical Committee for the project and national stakeholders (some ofthese steps are still in progress and the results will be included in the disclosure ofthe safeguard report drafts). Depending on the particular study, this led to further negotiation, or steps to present the findings and recommendations to decision- makers (national-level or local decision makers depending on the issue), and to prepare for subsequent public consultations.

loPrimary stakeholders are traditional authorities, women, elders, local authorities, community youth, religious leaders, Secondary stakeholders are civil society organizations, NGO community, central government ministries, parastatal organizations, academidresearch institutes, the media.

145 3. While each safeguard study team interacted directly with target stakeholder groups, a Communications Action Plan was developed to provide an overall communications framework for the PIU. This will help the PIU to provide consistent information and messages to the different stakeholder groups during the completion phase and as the project moves into the commissioning trials and operation stages.

4. The Communications Action Plan outlines a series of media and outreach programs with public dialogue forums to raise issues and debate concerns as they arise. There will be on-site information offices in the project-affected areas (e.g. both sides ofthe river in the reservoir area and at convenient locations along the 200 km transmission route) that will be proactive in providing the affected communities with timely information and also serve as a centre where people can receive detailed information and support services as well as register and resolve any grievances that arise. These arrangements are set out in the Communications Action Plan (Annex 7,) and the more specific provisions and mechanisms are contained in the RAP documents.

5. Engagement of Local Authorities and Project Affected Communities: The RAPs and EIA Update studies are the main platforms for interaction with affected communities. Those responsible for decision-making at this level include the local government and traditional authorities in the affected areas, e.g. Paramount Chiefs of Bumbuna, Fadugu, Kondembaia and Makeni, and the Local District Councils of Bombali in Makeni, Koinadugu in Kabala, and Tonkolili in Magburaka, as well as the Village Chiefs, community elders and other influential people in the communities, such as teachers. The RAPs and the EL4 update collectively recommend mechanisms that are appropriate for the completion phase and for subsequent operation phases ofthe project.

6. Engagement of National Stakeholders, Other Audiences And Interested Parties: National stakeholders and the public (as consumers) have a major stake in the successful completion of the project and the promised delivery of affordable power services. Print media, radio and television programs have been developed to inform the public ofthe project status and provide a forum for public debate (the first Radio Q&A was held on 26 Sept 2004, 8 additional national radio programs have been produced between Sept 2004 and May 2005).

7. The Other Audiences Addressed by the Communication Action Plan Include:

Development Agencies and NGOs: this includes the development agencies active in Sierra Leone and particularly in the region, as well as the local and national NGOs and civil society groups to be contacted with information throughout the project implementation period and subsequently in the BHP project management and monitoring phases. International Stakeholders: The PIU is currently preparing material for a website that will provide international NGOs, other development agencies, civil society and professional associations with access to all safeguard studies and project implementation documents, as well as the Dam Review and Environmental and Social Advisory Panel reports as they become available.

8. Summary of EIA Scoping Consultations: Various meetings were conducted between August and September 2004 at the local level and a workshop was organized in Freetown for the national stakeholder group. The views and concerns of individual stakeholders were noted and compared separately for local and national stakeholders and were subsequently summarized for each stakeholder group. The consultations were undertaken in Krio, Limba, Koranko and in the English language. The EIA and RAP studies were disclosed in the World Bank Infoshop on

146 January 26, 2005 and reports were made available for comment in various sites in Sierra Leone and by providing notice, to that effect, in the government Gazette and two issues of a national newspaper.

9. The main questions raised during scoping consultations centered on ten issues: 1) Livelihoods (compensation): compensation arrangements for resettlement of communities, individual houses, and plots and/or economic displacement caused by the hydropower project and the 161 kV transmission line; 2) Livelihoods (Zand take): loss of areas for mining of gold and sand gold and sand mining and access prevented to land and other natural assets by ‘new’ water levels in the river; 3) Livelihoods (severance): access made more difficult to land and other natural assets and to markets and social infrastructure facilities in neighboring communities, in particular village children attending secondary school in Bumbuna and village patients visiting the dispensarylclinic in Bumbuna; 4) Livelihoods (changes in occurrence and abundance in natural assets): possible restrictions on hunting and reduction in numbers ofkey species in area; 5) Hydrological regime changes (upstream): effects on tributaries flowing into reservoir backing up in high rainfall and possible localized flooding in vicinity of villages. Likelihood of flooding ifthere is too large a release of water in case of exceptionally heavy rains and effect on crops, houses and other assets; 6) Hydrological regime changes (downstream): changes in flooding pattern in Seli floodplain and effects on those farmers benefiting from the annual flooding; changes in downstream flows creating areas of water with more limited flushing and increased risk of exposure to waterborne diseases to those using the river for bathing and washing clothes etc.; 7) Health and threats to life: increase in STDs and other infectious diseases from influx of workers. Increase in water- borne diseases such as malaria and onchocerciasis. Increased habitat for crocodiles from changes in hydrological regime; 8) Food security: effects of loss of assets such as crops and farmland and inadequate or delayed compensation. Also, issue of time period for economic trees to reach fruit bearing potential in relocation areas. Links to potential nutritional health consequences, numbers of in-migrants, and local infrastructure capacity. Increase in crime rates for theft, fraud, assault and domestic violence. Increase in prostitution; 9) Social changes: inflation in housing market with locals unable to afford the higher rents for accommodation. Potential damage to infrastructure such as roads and water supply network from increase in heavy vehicles. Effects on sacred sites areas such as ‘society bush’. Compensation for cost of performing ‘abandoningtmoving’ rituals. 10) Cumulative impacts: agricultural land ‘squeeze’ due to removal of land near river from production, movement uphill to farm (less fertile), decreased fallow periods, and land exhaustion. Growing rural population. Food security. Effects of developing multiple areas for relocation with farmland renovated or improved access.

Table 6.2-3 below provides additional details on the scoping consultations.

147 Table 6.2-3: Scoping ConsulntionSIPctings

Stakeholder(s) Loerrion Date Typeof 30,of ?iouo.of -omen meeting attendees Acme Proliucd Secretary. Northem bl&m 23.08 03 Pnvate 1 Not spplicable Ron" Village &ref elders and luhabirauts Kadala 24.0804 F'ubhc 11' 6 1

teacher. one retued teacher Police (0fficerm"bg. $emor I Bubuna Tom'. I 26.08.W I hvate I 3 1 Not apphcabh CID officer and stanon sergeat) Romm Catholic pnest I Not apphcebk

Tomsfup chefdm speaker, elders and I Fadup- I 26.08.03 I Pubhc I 31 I

10. Summary Results of Draft EIA and Reservoir RAP Public Consultations: Following the scoping consultations and those carried out during the studies update, a third wave of consultations with primary and secondary stakeholders has been carried out by the PIU of BHP, the EL4 team, and the RAP teams involved in the project preparation and safeguard studies at local, district and national levels.

11. The consultations for the EIA draft report and Reservoir RAPs were undertaken as a joint exercise. Three open public meetings and one meeting with a women farming association were held in Bumbuna, Kasasi and Fadugu (with attendants representing 13 additional villages) and one national level workshop was held in Freetown. The third wave was conducted from April 13th through April 20th, 2005 and involved the communities and stakeholders groups consulted in the earlier phases of the EIA and RAP process.

12. The overall program for the consultation started with a radio program talk show called "Night Line" at Radio UNAMSIL FM103, in late March 2005. The discussion covered all aspects of the Project including the project background and the EL4 and RAPs, followed by questions and answers from listeners around the country. Subsequently, confirmation letters setting the time, date, and venue for local consultations were sent to the local authorities in the project areas. A weeklong radio announcement of the commencement of the consultation exercise was also provided. On the day of consultations, meetings were preceded by megaphone announcements.

148 13. Consultations discussed the purpose of the EM and RAP reports followed by the presentation of findings and recommendations, followed by a question and answer session and closing remarks by the dignitaries present. Many of the participants had previously attended scoping consultations. This allowed the collection of additional feedback on the EIA and the RAP and ensured continuity with the previous discussions. Methods used included workshop or conference, focus groups, household surveys and semi structured interviews. The consultations were undertaken in Krio, Limba, Koranko and in the English language.

14. All meetings were recorded and photographed; verbatim notes of the proceedings are being prepared. All questions and comments raised during consultations are being grouped into topics and summarized in a standard format composed of issues raised, consultation team responses, and follow up action as to how this feedback will be reflected in the joint final EIA/RAP consultation report.

A total ofmore than 1,200 people have participated in the consultations.

Main Findings:

15. National Level Consultations: The national level workshop was held in Freetown on Wednesday the 20th of April, where EL4 and RAPS issues were addressed from a wider perspective. The specific issues raised were similar to those raised in local consultations, (potential heath hazards related to water borne diseases, electromagnetic radiation from the transmission line, hydrological and aquatic ecological impacts.) However, the most pertinent comments and suggestions related to ensuring that the overall EIA mitigation actions are designed in a cost-effective manner, and secondly, that all ministries and government officials actively participate in the design, and where appropriate implementation, so as to avoid duplication, mismanagement and uncoordinated actions. Table 2 provides additional information on the reservoir RAP consultations carried out in the period from August to October 2004 and on the category ofstakeholders involved.

16. Bumbuna and Reservoir Area: the discussions in the Bumbuna consultation centered on local employment opportunities and local hiring policies for the project completion and operation phase. Several speakers requested additional benefits for the townspeople, for instance roads to other communities. Two main concerns were raised on potential heath hazards related to water borne diseases and electromagnetic radiation from the transmission line. Stakeholders also expressed concern about prohibition of slash and burn activities and the risk to farming opportunities. Additional concerns were expressed about the relationship between primates and humans in light of the squeeze on cultivable land and chimpanzee habitat, and the possible of crocodile numbers increasing thus affecting public safety in the reservoir.

149 Table 2: Reservoir RAP Consultations Meetings August/October 2004

Stakeholder (9) Location Date Type of Meeting Zonsultation team

Fadugu 13 .OS .04 ReconnaissancePrivate ream ofExperts doing first Paramount Chief of .econnaissance field trip Kassunko with Chiefdom, 'IU.

Makeni 13 .OS .04 ReconnaissancePrivate ream of Experts doing first .econnaissance field trip Chief Security Officer with ?IU.

~ Bumbuna 13.08.04 ReconnaissancePrivate ream of Experts doing first ,econnaissance field trip Bumbuna Paramount Chief, with 'IU.

~ Kadala 14.08.04 Public Ms. I.Yhr, MM. R. Kadala Community Zwahlen, C.J. Thomas, S. Weekes, H.H. Walker

Kasasi 14.08.04 Public MS.I. Yhr, MM. R. Zwahlen, C.J. Thomas, S. Kasasi Community Weekes, H.H. Walker

Kayakala 14.08.04 Public Ms. I.Yhr, MM. R. Kayakala Village Chief and Zwahlen, C.J. Thomas. S. inhabitants. Weekes, H.H. Walker

Gbulia Public Ms. I.Yhr, MM. R. Village chief and elders 15.08.04 Zwahlen, S. Weekes, H.H. Walker

Fula Public Ms. 1. Yhr, MM. R. 16.08.04 Zwahlen, S. Weekes

Kakekor Public Ms. I.Yhr, MM. R. Kakekor Community 16.0S.04 Zwahlen, S. Weekes

Kanu Village Chief and Kafogo Public elders,

Fula Village Chiefand Ms. I.Yhr, MM. R. inhabitants 16.08.04 Zwahlen, S. Weekes

Chief of Limba community ofFula Town.

National Repatriation & Freetown Private Reintegration Officer, 30.08.04 Imelda Yhr NaCSA

Freetown Private 30.08.04 Imelda Yhr Driven Program, NaCSA

Freetown 7.09.2004 Private Imelda Yhr

150 Location Date Type of Meeting Zonsultation team

Freetown 7.09.2004 Private melda Yhr

Kamankay: Public vls. K. Ivarsdotter, WB sections opposed to the 2onsultant: Ms. I.Yhr; MM. 19.09.04 Bumbuna 1. Paramount Chief Cwahlen, C.J. Thomas.

Bumbuna Public vls. K. Ivarsdotter, WB 2onsultant: Ms. I.Yhr; MM. Bumbuna Paramount Chief 19.09.04 1. and inhabitants Cwahlen, C.J. Thomas, H.H. Walker.

Director of LAWCLA Freetown 23.09.04 Private vl. Gelbert, Musa Bai Sesay

Kanu Village Chief and Kafogo Public 24.09.04 vl. Gelbert, Musa Bai Sesay elders

Fula Village Chief Fula 24.09.04 PubliciExcursion vl. Gelbert, Musa Bai Sesay

Village Chief, elders and Kakekor: Public 24.09.04 M. Gelbert, Musa Bai Sesay inhabitants.

Village Chief, elders and Camayimbo Public 24.09.04 M. Gelbert, Musa Bai Sesay inhabitants

3eremakono-Kamayimbo Private 24125.9.04 M. Gelbert, Musa Bai Sesay community teacher

Camaron, Kasuluba and Excursion 25.09.04 M. Gelbert, Musa Bai Sesay (onteya

3umbuna Private 27.09.04 M. Gelbert, Musa Bai Sesay Pietrangeli

3bulia 27.09.04 Private M. Gelbert, Musa Bai Sesay

29.09.2004 Private Imelda Yhr

3umbuna 29.09.04 Private M. Gelbert, Musa Bai Sesay

UNAMSIL; Governance & +eetown Private Stabilization Policy Adviser and 1.10.04 M. Gelbert Special Assistant to the Deputy SRSG

GIS Development Officer :reetown 1.10.04 Private M. Gelbert

1.Minister of +eetown Private Tourism and Culture, M. Gelbert, C.J. Thomas, 2,Director of Tourism Dept. 4.10.04 3,Director of Culture Dept Musa Bai Sesay 4,Director of IFAD S.Director of Crops

151 Stakeholder (s) Location Date Type of Meeting Consultation team

Director, Ministry ofYouth Freetown Private M. Gelbert, C.J. Thomas, 4.10.04 and Sports Musa Bai Sesay

Honoraly Consul General Freetown Private 4.10.04 M. Gelbert, Musa Bai Sesay ofSwitzerland

Country Director, SDC Freetown Private M. Gelbert Swiss Agency for 5.10.04 Development Co-operation

Deputy Director of Freetown Private Fisheries, Ministry of 6.10.04 Fisheries & M. Gelbert Marine Resources

Local Representative Studio Freetown Private 6.10.04 Pietrangeli M. Gelbert, C.J. Thomas, Musa Bai Sesay

Deputy Country Director, Freetown Private 7.10.04 li_ Imelda Yhr Director ofTourism Dept Freetown 7.10.04 Private I M. Gelbert, C.J. Thomas

152 Table 3 Joint Consultation Meeting on EIA draft Report and Reservoir/Dam RAP April 2005

Stakeholders Location Date Type of Meeting Consultation Team

Traditional leaders Regent, Bathurst, 30/03/2005 EIA and RAP Hastings & Kossoh Meeting Town Notification

Traditional leaders Hastings Masiaka, 3 1/03/2005 Port Loko. Lunsar.

Traditional leaders 1/04/2005 Binkolo Traditional leaders and Matombe 14- 15/04/2005 Public Mr. R. Bisset of BMT inhabitants (EIA & RAP) Cordah Ltd, Dr. Karim head national EIA, Mr. N. Vandi & MI. M. Kargbo BHP PIU, Mr. M. Barrie CUPIU Mr. G. Khoryama Journalist, Dr. Thomas Bumbuna 16/04/2005 I Public EIA & RAP) Kasasi 17/04/2005 Public Mr. N. Vandi & Mr. M. inhabitants Kargbo BHP PIU, Mr. M. Barrie CUPIU Mr. G. Khoryama Journalist, Dr. Thomas Fadugu 18/04/2005 Public Mr. R. Bisset ofBMT inhabitants (EIA & RAP) Cordah Ltd, Dr. Karim head national EIA, Mr. N. Vandi & Mr. M. Kargbo BHP PIU, Mr. M. Barrie CUPIU Mr. G. Khoryama Journalist, Dr. Thomas General Public Government Freetown Workshop (EIA & Ministries/Beneficiaries; Political Bodies; Parastatals; AcademiaResearch Community; NGOs

Kathombe

17. Summary Results of the Transmission RAP Public Consultations: consultations on the transmission line RAP were held with the communities and stakeholders groups involved in the earlier phases of the RAP process in the period from April 5* through April 16, 2005. Open meetings were held at ten venues along the transmission route, namely: in the communities and towns of Regent, Hastings, Waterloo, Newton, Masiaka, Freetown, Lunsar, Makenipamlap, Binkolo, and Bumbuna. People from surrounding villages and towns who were impacted by the transmission line were invited to attend meetings at the center closest to them.

18. Each consultation session was adjusted to the needs of the group involved, but essentially followed a common format consisting of an initial review and discussion of the Transmission Line RAP findings and recommendations, followed by a presentation of the preferred approach,

153 followed by an open Q&A session on the issues and concerns that PAP and other stakeholders had.

19. Consultations started in the Freetown area and concluded in Bumbuna Town, Approximately 800 people attended the meetings. The PIU reports that the consultations were highly successful. The recommendation to allow households to remain in the right-of-way, subject to maintaining a minimum safe clearance of 7.0 m was warmly received by all the communities, as well as their local government representatives and tribal authorities.

20. The main questions raised centered on four issues: 1)Whether people’s houses were going to be demolished (what communities and households needed to be relocated); 2) And after discussion of the need to move only those houses and structures that violated the 7 m minimum clearance from conductors; 3) Whether it was safe to live under the transmission line, specifically in relation to- a) the perception of a public health hazard, in particular whether there was a potential danger of miscarriage during pregnancy; and b) the perception of a public safety hazard, expressed as whether there was a potential danger from lightning strikes and touching towers, or a conductor breaking; 4) what compensation would be provided to people required to move, and the beginning and completion dates for the transmission work.

21. The video presentation and photos that gave examples from other developed countries where it was accepted practice to overpass residential areas, provided that safe clearances were maintained, was central to the discussions. On the basis of the consultations the PIU feels there is a high degree of confidence that the alternative of allowing existing land uses and houses to remain in the right-of-way under the line is acceptable to the public, subject to the safe minimum clearances and controls on future development in the right-of-way. The communities in rural areas, in particular, welcomed the fact they could play a role (be contracted) to help maintain access roads and clear vegetation growth in the right-of-way. Table 4 provides additional information on these consultations and on the type of stakeholders involved.

Table: 4 Consultation Meetings - RAP (Transmission Line ROW) Marchmovember 2004

Chief, Elders and Inhabitants Makeni Town hall 01/11/2004 Public I I I1 I 1 I I Chief, Elders, Youths including Bumbuna Township Public 32 5 women Subtotal 246 61 Total 307

154 Table: 5: Consultation Meetings - RAP (Transmission Line ROW) ApriVMay 2005

Stakeholders Location Date Type of Meeting Consultation Team

Local govemment, 5/04/2005 Public Mr. N. Vandi & Mr. M. Kargbo town and district Regent BHP PIU, Mr. M. Barrie council members, CUPIU Mr. G. Khoryama district and village Joumalist, Dr. Thomas inhabitants Public Hastings 6/04/2005

6/04/2005 Public Waterloo 7/04/2005 Public Newton

7/04/2005 Public Masiaka

9/04/2005 Public Y.W.C. A 1 11/04/2005 Public Lunsar

,I 11/04/2005 Public Makeni (MariaRadio)

Makeni / Panlap 12/04/2005 Public 12/04/2005 ,I Public Binkolo 12/04/2005 I I

22. Consultations for the Upper Seli Community Development Initiative (which will be a complementary project to BHP) : During the preparation of the USCDI, (see Annex 2 for more details on this initiative), eight venues were selected for additional consultations. The consultations venues were located in the BHP operational area among those villages that had not being visited by the RAP team. Consultation methods applied for the design of the USCDI were based on focus group discussions and semi-structured interviews with stakeholders (including paramount chiefs, section and village chiefs, youth, religious leaders, handicapped, women’s leaders and women, civil society organizations and NGOs.) During consultations particular attention was given to ensuring that various community members were given a chance to speak. Particular attention was given to ensuring that the interests of women were adequately recorded.

23. The findings of these consultations have been grouped in three main categories: 1) perceptions, 2) misconceptions and 3) myths. The main perceptions about the BHP centered on three issues: a) feeling of entitlement to getting electricity; b) desire to be relocated near main roads or highways; c) happiness with regard to the completion of the project and shared belief that the project will bring a number of benefits in a wide range of sectors (employment, national industrialization and regional development, improvements in road and transportation, fishing, pure drinking water.) Misconceptions: a) the blasting of the stone in the quarry has damaged the foundations of the houses and they need compensation; b) concerns linked to dam failure and flooding during times of heavy rain; c) perception that during work construction and completion the constructor would find gold that needed to be shared with local communities. Myths: a) local spirits annoyed with the constructors for threading on their rights; b) belief that whoever will start the generator will not survive.

155 Consultations conducted for the Upper Seli Community Development Initiative, September, 2004 - February 2005

Date District Chiefdom Type of meeting Stakeholder No. of No. of

24/09/2004 Bombali a. Seabrook Limba Interviews with key Paramount chiefs b. Berea respondents, setting up Section chiefs of community Youths consultations Religious leaders The handicapped Women’s leaders 25/09/2004 Koinadugu a. Casino Interviews with key respondents, setting up ofcommunity consultations

26/09/2004 Koinadugu a. Ding Interviews with key respondents, setting up of community consultations

27/09/2004 Tonkolili Cholera Rule Interview and The District Consultation -To help Coordinator and staff guide in the selection to of NaCSA in avoid duplication Magburaka Town 27/09/2004 Bombali **** Debora Interview and The Regional Consultation -To help Coordinator and key guide in the selection to project staff to help avoid duplication guide the process 27/09/2004 Bombali Bombali Debora Interview with CARE- CARE - Sierra Leone 6 1 (International ) - Sierra Makeni staff Leone Staff

2/10/2004 Bombali Bombali Debora Interview Action Contra La Faim (ACF)

2/10/2004 Bombali Bombali Debora Interview Christian Extension Services (CES)

4/10/2004 Western Freetown Interview Christian Children’s Area Fund (CCF)

5110/2004 Western Freetown Interview CARE- Sierra Leone 1 Nil Area WQ 5/10/2004 Westem Freetown Interview NaCSA - WQ Area Freetown

I 6/10/2004 Tonkolili Kalansogoia, Communitv Paramount chiefs 63 consultations Section chiefs Youths Religious leaders The handicapped vi. Women’s leaders 7/10/2004 Koinadugu DianglWaia Community Village consultations 8/10/2004 Bombali Safroko Limba Community consultations

156 Date District Chiefdom Type of meeting Stakeholder No. of No. of participants women

Bombali Biriwa I Community I 45 15 consultations 13/10/2004 Koinadugu Kasunko 14 4 Community , consultations r14/10/2004 Koinadugu DiangKonimbaya Community 28 10 Town (Chiefdom consultations WQ) rKoinadugu DiangKonimbaya Community 30 8 Town (Chiefdom consultations

Koinadugu Diang I Community I Paramount Chief I1 I NA consultations Bombali Bombali Shebora Interview and Staff and Coordinator 3 consultations with 1 NaCSA Northern region I Coordinator and staff I Bombali Bombali Shebora I Interview and I Staffand Assistant I 6 13 18/02/2005 I consultations 1 Training Manager I I j16 1 Withstaffof SLOIC I Tonkolili Kholifa Ruala 1 Interview and I ChiefAdministrator I 6 I Nil 19/02/2005 consultations and staff of Tonkolili With District Council and PC.Kalansogoia !i18/02/2005 Bombali Bombali Shebora Interview and Chairman and Chief 1 Nil consultations Admin Bombali District Council rBombali Bombali Shebora, Setting of appointments PCs of Kafe Simira 15 Nil 20/02/2005 Biriwa and Safroko for consultations and Safroko Limba 119I Limba and Biriwa chiefdoms

Interview with CARE- CARE - Sierra 1 27/02/2004 Bombali Bombali Sebora (International )-Sierra Leone Makeni staff 6 Leonestaff ' 1 Bombali Bombali Sebora Interview Plan International - 2 27/02/2005 SL I=I Makeni Office

157 24. The consultations carried out during the USCDI project preparation were largely positive. The large majority of the stakeholders interviewed clearly expressed their support and their happiness for the completion ofthe project.

25. Follow up activities on EIA and RAP consultations : All comments and feedback collected during the last wave of consultations carried out in April 2005 will be collected, analyzed and entered into a specially-constructed reporting template. A similar single template will be used to synthesize all the comments and feedback from the national workshops. Once completed, this template will be used by PIU/MEP to provide feedback to those consulted. The final report will disclosed in the World Bank Infoshop, on the project website and in the public locations previously used for the draft EIA Update Report/RAPs/Executive Summaries in Sierra Leone.

26. Preliminary conclusions: the consultations carried out during the EIA, RAPS and USDCI project preparation were largely positive. The PrU reports confirm that the consultations were overall highly successful. The large majority of the stakeholders interviewed clearly expressed their support and their happiness for the completion of the project. The village inhabitants living in the project area were largely optimistic on the potential of the completion of the project as a key factor for the development of their area and for an improvement in the economy. Stakeholders also clearly identified several opportunities linked to the completion of the project, ranging from improved communications (mobile phones and radio station) to potential social and health benefits linked to electricity, potential of increased job opportunities, and better economic ‘integration’ of project with local settlements. Stakeholders also identified the likely economic changes creating links with the economic growth in Makeni and other towns along the 161 kV line arising from electricity, return of ‘out-migrants’, and beneficial impacts acting to enhance tourism potential of the area and consequent economic growth.

27. Finally, all local, district and national consultations have confirmed general community support for the project. Consultations have documented local preferences with respect to sensitive issues and have helped to identify local priorities in project area. The consultations also helped clarify rights and responsibilities of various stakeholders.

28. Public consultation and disclosure of environmental and social information will continue to be undertaken during project implementation, and will be supported by additional information campaigns tailored to continuing a proactive program of public involvement and dissemination of information through the project implementation period.

158 Annex 19: Dam Safety Issues SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Status of the Dam Review Panel (DRP) Recommendations:

Recommendation Status O&M Plan The Consultant (Studio Pietiangeli), will provide the O&M Plan including the manual for routine operation of the plant and dam monitoring, as foreseen in the Broad Framework of the Dam Safety Programme submitted in November 2003. The first Impoundment Plan will be prepared at least 6 months prior to the first impoundment, but after that the commencement date of works and the implementation program are fixed. The O&M InstructionsManual of each equipment item will be provided by the Contractor as per clause 5.6 of G.C.C. and 5.6.2.6 of G.T.S. The Engineer, as per sub-clause 3.3 of Consultancy Agreement, will "check and approve the O&M Instructions prepared by the Contractor and Manufacturers". However, since a hydropower utility will enter into Agreement with the Bumbuna Hydropower Corporation (BHC) for the operation and maintenance of the power plant, this O&M Operator will be responsible for the preparation O&M Manual with the approval of the BHC. Emere. Preo. Plan (EPP) The Broad Framework of the EPP was submitted to DRP in November 2003. According to the Consulting Agreement, the Final version of the EPP shall be completed not less than one year prior to the BHP commissioning. The main recommendation of the DRP refers to the definition of the Notification Flow Chart, which specifies the names and responsibilities ofthe persons involved the implementation of the EPP. The EPP, which is expected to be completed by the end of 2005. will be implemented by the O& M Operator

Potential Landslide Areas The Engineering Consultant will be requested to cany out such a study, including developing a mitigation plan for discussion and approval by the PIU. SDilled Water Addendum No 3 of Contract M/B,includes slope protection works for the ski-jump impact area and for the Downstream river stretch downstream of plant outlet for total length ofabout 350 m. ImDervious Laver Investigations of this phenomenon have been already carried out by the Engineer. Recommendations of the Conditions DRP (extension of rehabilitation works) have been included in the Bill-of-quantities of Addendum No 3. Provisions for additional investigations to be carried out before rehabilitation works starts have been foreseen in the Addendum No 3. Hvdroloeical monitoring The Addendum No 3 includes provisions for: rehabilitation of existing flow gauges; additional gauging station downstream of the dam; as well as the water level indicator/flood gauge upstream of the Dam. Flood Manaeement Plan This will be developed by the O&M Operator, based on the existing/planned hydrological monitoring system and a flood forecasting mathematical model.

159 Annex 20: Project Preparation and Supervision SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

Planned Actual PCN review November 24,2003 Initial PID to PIC April 2,2004 Initial ISDS to PIC April 2,2004 Appraisal April 8,2005 April 19,2005 Negotiations April 24,2005 BoardRVP approval June 16,2005 Planned date of effectiveness August 3 1,2005 Planned date of mid-term review June 30,2007 Planned closing date August 31,2009

Key institutions responsible for preparation ofthe project: Ministry ofEnergy and Power

Bank staff and consultants hired by the Bank who worked on the project included:

Name Title Unit ' Dona1 O'Leary Task Team Leader AFTEG Richard Senou Sr. Financial Analyst AFTEG Fanny Missfeld-Ringius Energy Economist AFTEG Pierre Vieillescazes Sr. Financial Officer IEF Charlotte Bingham Lead Environmental Specialist ESDQC Robert A. Robelus Sr. Env. Assessment Specialist AFTS 1 Kristine M. Ivarsdotter Sr. Social Dev. Specialist AFTS 1 Wendy Wakeman Sr. Operations Officer PRMGE Leonard0 Mauei Communications Specialist EXTCD Tesfaalem Gebreiyesus Sr. Procurement Specialist AFTPC Giovanni Casartelli Lead Procurement Specialist OPCPR Mohammed Bekhechi Lead. Counsel LEGEN Alberto Ninio Sr. Counsel LEGAF Manush Hristov Counsel LEGAF Ximena Talero Sr. Counsel LEGCF Helene Bertaud Sr. Counsel LEGAF Frederick Yankey Sr. Financial Management Specialist AFTFM Erica Hyde Program Assistant AFTEG Marie-Adele Tchakounte Program Assistant AFTU2 Lawrence Haas ConsultantPower Systems Planner James Vincent ConsultantCommunity Driven Development (CDD) Thomas Katta Youth Expert Don Webster Consultanflower Economist Nigel Wills Consultanflower Utility Expert Manitoba Hydro

Bank funds expended to date on project preparation:

1, Bank resources: 2. Trust funds: 3. Total:

Estimated Approval and Supervision costs:

1. Remaining costs to approval: $ 100,000 2. Estimated annual supervision cost: $ 180,000

160 Annex 21: Documents in the Project File SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

1. SIERRA LEONE: Bumbuna Hydroelectric Project. Report of the First Meeting of the Dam Review Panel, October 25-November 4,2004. 2. Retrospective Review of the Bumbuna Hydroelectric Project: Emphasizing the role and application of Options Assessment Concepts; Lawrence J.M. Haas, in collaboration with the PIU Bumbuna Staff and with contributions from stakeholders; November 30, 2004 (draft final report) 3. Bumbuna Hydroelectric Project, Environmental Impact Assessment. NKUK/BMT CORDAH EFA, draft final report January 2005 (3 volumes). 4. Resettlement Action Plan for the Reservoir and Dam Area, Bumbuna Hydropower Project, Electrowatt-EKONO, Techsult Company Ltd, Final Report, January 26,2005 (2 volumes). 5. Resettlement Action Plan Bumbuna Hydroelectric Project - Transmission Line Project from Bumbuna to Freetown Sierra Leone, AZIMUT, INFOTIERRA, BGJLR, Land Compensation Consultants, with the collaboration of the Bumbuna PIU staff, Final Report January 2005. 6. Completion of the Bumbuna Hydroelectric Project, Environmental and Social Advisory Panel, Report 1, 1 1 November, 2004. 7. Upper Seli River, Community Development Initiative, James Vincent, February 2005. 8. SIERRA LEONE: Recommended Legal Framework for the Electricity Sector, prepared by Hunton and Williams LLP, Washington D.C. January 2005 9. Bumbuna Falls Hydroelectric Project. Laser Scanning Survey Report. Studio PietrangeWAirborne Laser Solutions, January 2005. 10. The National Power Authority (Amendment) Act 2005 - Bumbuna Arrangements. February 2005 (Draft). 11. Design of the Public Utilities Regulatory Commission for Sierra Leone. International Management and Regulatory Institute, Freetown, Sierra Leone, March 2005 (Draft). 12. The Sierra Leone Public Utilities Regulatory Commission Act. International Management and Regulatory Institute, Freetown, Sierra Leone, March 2005 (Preliminary Draft) 13. Republic of Sierra Leone: Institutional Support Project to Strengthen the Public Financial Management and the Energy Sectors: Appraisal Report. African Development Fund, Country Operations Department, West Regions, September 2004. 14. Transitional Support Strategy for the Republic of Sierra Leone, World Bank, March 2002. 15. Poverty Reduction Strategy Paper, A National Programme for Food Security, Job Creation and Good Governance (2005 - 20071, Government of Sierra Leone, February 2005. 16. Country Assistance Strategy for the Republic of Sierra Leone, World Bank, May 2005. 17. Upper Seli River Community Development Initiative, World Bank, proposal to the Japan Social Development Fund, March 2005.

161 -0 Y J

w CAS Annex B8 (IFC) for Sierra Leone

Sierra Leone Statement of IFC's Held and Disbursed Portfolio As of 02/28/2005 (In US Dollars Millions)

Held Disbursed

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic CeltelSierraLeon 1.72 0001.72 0 00

Total Portfolio: 1.72 0 001.72 000

Amrovals Pending Commitment Loan Eauitv Ouasi. Partic

163 Annex 23: Country at a Glance SIERRA LEONE: Completion of the Bumbuna Hydroelectric Project

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