Document of The World Bank
Public Disclosure Authorized Report No: ICR00003363
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41200 IDA-H5740 IDA-H7830)
ON A
CREDIT IN THE AMOUNT OF SDR 4.7 MILLION (US$ 7.0 MILLION EQUIVALENT) Public Disclosure Authorized AND A
GRANT IN THE AMOUNT OF SDR 4.0 MILLION (US$ 6.0 MILLION EQUIVALENT)
AND A
GRANT IN THE AMOUNT OF SDR 3.4 MILLION (US$ 5.2 MILLION EQUIVALENT) Public Disclosure Authorized TO THE
REPUBLIC OF DJIBOUTI
FOR A
POWER ACCESS AND DIVERSIFICATION PROJECT
September 27, 2015
Energy & Extractives Global Practice Public Disclosure Authorized Middle East and North Africa Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective April 30, 2015)
Currency Unit = FDJ Euro 1.00 = US$ 1.12 US$ 1.00 = 176.89 FDJ
FISCAL YEAR
ABBREVIATIONS AND ACRONYMS
AF Additional Financing AFD French Development Agency (Agence Française de Développement) AfDB African Development Bank CAS Country Assistance Strategy CMS Customer Management Software (or System) CPS Country Partnership Strategy CERD Djibouti Center for Studies and Research (Centre d’Etudes et de Recherches de Djibouti) EDD Djibouti Electricity Company (Electricité de Djibouti) EHS Environment, Health and Safety EPC Engineer, Procure, Construct ERR Economic Rate of Return ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan ESMAP Energy Sector Management Assistance Program FDJ Djiboutian Franc FDI Foreign Direct Investments GDP Gross Domestic Product GEF Global Environment Facility GoDj Government of Djibouti GWh Gigawatt Hour HFO Heavy Fuel Oil HR Human resources IC Individual Consultant ICB International Competitive Bidding IDA International Development Association IFC International Finance Corporation IPP Independent Power Producer IRENA International Renewable ENergy Agency IT Information and Telecommunication Km Kilometer kVA Kilovolt Ampere kWh Kilowatt Hours LCB Local Competitive Bidding LPC Local Project Coordinator
LV Low Voltage MENA Middle East and North Africa MOE Ministry of Energy, Water, and Natural Resources MOF Ministry of Finance MW Megawatts NCB National Competitive Bidding NPV Net Present Value OFID OPEC Fund for International Development O&M Operation & Maintenance ONED Office National des Eaux de Djibouti (National Water Supply Company) ORAF Operational Risk Assessment Framework PADSE Projet d’Accès et de Diversification du Secteur de l’Energie (Project ’s name) PCN Project Concept Note PDO Project Development Objectives PEFA Public Expenditure and Financial Accountability PK Point Kilométrique PMU Project Management Unit PLC Power Line Communication PPA Power Purchase Agreement PPIAF Public-Private Infrastructure Advisory Facility PPP Public Private Partnership QCBS Quality and Cost-Based Selection RE Renewable Energy ROE Return on Equity SIL Specific Investment Loan SG Secretary General SDR Special Drawing Rights SMEs Small Medium-Size Enterprises SOE Statement of Expenditures SW Staff-Week TA Technical Assistance TTL Task Team Leader UGPE Unité de Gestion du Projet Energie (Project Management Unit) WB World Bank WACC Weighted Average Cost of Capital
Vice President: Hafez M. H. Ghanem Country Director: Asad Alam Country Manager: Homa-Zahra Fotouhi Senior Global Practice Director: Anita Marangoly George Practice Manager: Charles Joseph Cormier Task Team Leader: Roger Coma Cunill ICR Team Leader and Author: Frederic Verdol
Republic of Djibouti Power Access and Diversification Project Implementation Completion and Results Report
Data Sheet A. Basic Information ...... i B. Key Dates ...... i C. Ratings Summary ...... i D. Sector and Theme Codes ...... ii E. Bank Staff ...... ii F. Results Framework Analysis ...... iii G. Ratings of Project Performance in ISRs ...... vii H. Restructuring (if any) ...... vii I. Disbursement Profile ...... viii 1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 10 3. Assessment of Outcomes ...... 18 4. Assessment of Risk to Development Outcome ...... 22 5. Assessment of Bank and Borrower Performance ...... 22 6. Lessons Learned ...... 25 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 27 Annex 1. Project Costs and Financing ...... 29 Annex 2. Outputs by Component ...... 30 Annex 3. Economic and Financial Analysis ...... 33 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 35 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 37 Annex 6. Comments of Cofinanciers and Other Partners/Stakeholders ...... 41 Annex 7. List of Supporting Documents ...... 44 Map ...... 45
Data Sheet
A. Basic Information Djibouti Power Access Country: Djibouti Project Name: and Diversification Project IDA-41200,IDA- Project ID: P086379 L/C/TF Number(s): H5740,IDA-H7830 ICR Date: 06/30/2015 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: DJIBOUTI Original Total XDR 4.70M Disbursed Amount: XDR 11.90M Commitment: Revised Amount: XDR 12.10M Environmental Category: B Implementing Agencies: Primature / PMU - Tel. 253/35.18.12 – [email protected] Cofinanciers and Other External Partners: None
B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/20/2004 Effectiveness: 03/29/2006 03/29/2006 12/31/2008 12/17/2009 Appraisal: 04/18/2005 Restructuring(s): 12/30/2010 03/30/2012 03/31/2013 Approval: 11/01/2005 Mid-term Review: NA NA Closing: 12/31/2009 12/31/2014
C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory
Quality of Implementing Satisfactory Satisfactory Supervision: Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance:
C.3 Quality at Entry and Implementation Performance Indicators Implementation Indicators QAG Assessments (if any) Rating Performance Potential Problem Project Yes Quality at Entry (QEA): None at any time (Yes/No): Problem Project at any Yes Quality of Supervision (QSA): None time (Yes/No): DO rating before Moderately Satisfactory Closing/Inactive status:
D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General energy sector 30 Other Renewable Energy 76 10 Transmission and Distribution of Electricity 22 55 Water supply 2 5
Theme Code (as % of total Bank financing) Climate change 25 25 Infrastructure services for private sector development 25 5 Urban services and housing for the poor 50 70
E. Bank Staff Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Christiaan J. Poortman Country Director: Asad Alam Emmanuel Mbi Practice Manager Charles Joseph Cormier Jonathan D. Walters Project Team Leader: Roger Coma Cunill Anna M. Bjerde ICR Team Leader: Frederic Verdol ICR Primary Author: Frederic Verdol
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document)
The project development objectives are to (i) increase the access of underserved populations to electricity services, through priority investments, (ii) increase reliability of electricity services, through the development of alternative sources of production and targeted technical assistance; and (iii) improve efficiency of the electric utility, through technical assistance.
Revised Project Development Objectives (as approved by original approving authority)
The revised project development objectives (June 2010) are: (i) to increase access of underserved populations to electricity services; (ii) to improve EDD's efficiency through execution of investment operations aimed at reducing EDD's electricity losses, and; (iii) to reduce the negative effects of drought on water pumping in both rural and urban areas by strengthening the country's power supply resilience to natural catastrophes, through the creation of High Fuel Oil (HFO) and diesel security stocks.
(a) PDO Indicator(s)
Original Target Formally Actual Value Achieved at Values (from Indicator Baseline Value Revised Completion or Target approval Target Values Years documents) Indicator 1 : Increased number of electricity connections in poor targeted area of Balbala Value quantitative or 0 500 2,462 3,828 Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 12/31/2014 Comments (incl. % 158% achieved, target exceeded. achievement) People provided with access to electricity by household connections-Grid (Number, Indicator 2 : Core) Value quantitative or 0 NA 22,800 26,796 Qualitative) Date achieved 10/11/2005 12/31/2014 12/31/2014 Comments (incl. % 117% achieved, target exceeded. achievement) Indicator 3 : Total electricity technical and commercial losses as a percentage of total billed Value 21% 3% - 12%
quantitative or Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 Comments 50% achieved. (incl. % Targets at approval were to be identified in the studies carried out under the Technical achievement) Assistance Component of the project Indicator 4 : Direct project beneficiaries (Number, Core) Value quantitative or 0 NA 468,000 468,000 Qualitative) Date achieved 10/11/2005 12/31/2014 12/31/2014 Comments 100% achieved. The Project provided electricity access to 4% of the country’s total (incl. % population, and it is estimated that 10% of the population having on-grid access can benefit achievement) from this electricity service thanks to the Project Indicator 5: Female beneficiaries (Percentage, Core Supplement) Value quantitative or 0 NA 49.30% 49.30% Qualitative) Date achieved 10/11/2005 12/31/2014 12/31/2014 Comments Target 100% achieved. Percentage of female in households from national census remained (incl. % the same, households being the vast majority of beneficiaries. achievement) Indicator 6 : Increase in the energy generation mix (wind as % of peak load generated) Value quantitative or 0% 3% NA NA Qualitative) Date achieved 10/11/2005 12/31/2009 Comments Wind component was removed at restructuring. Objectives were modified to reflect this (incl. % change. Arta site wind feasibility study was conducted and is still valid. achievement) Indicator 7 : Monthly electricity load shedding (in MWh) Value quantitative or 4678.8 NA 2153.2 1374.1 Qualitative) Date achieved 06/30/2008 12/31/2009 06/30/2009 12/31/2014 Comments Target achieved thanks to the electricity provided through new power interconnection with (incl. % Ethiopia. Because of the cancellation of wind component, the project has not been achievement) contributing to this objective. Reduction in the number of annual outages in the Arta line corridor (Number, Indicator 8 : Custom) Value quantitative or 58 NA 10 0 Qualitative) Date achieved 05/19/2010 06/30/2009 12/31/2014 Comments (incl. % Target achieved. No outage during Q1 CY2015 (source : EDD) achievement) Indicator 9 : Days of HFO purchased, stored and maintained (Days, Custom)
Value quantitative or 0 NA 5 0 Qualitative) Date achieved 05/23/2012 12/31/2014 12/31/2014 Comments Not achieved. The purchase of HFO has been cancelled because it was not deemed to (incl. % contribute to revised PDO. achievement) Indicator 10 : Days of Diesel purchased, stored and maintained (Days, Custom) Value quantitative or 0 NA 5 360 Qualitative) Date achieved 05/23/2012 12/31/2014 12/31/2014 Comments (incl. % Target surpassed in fuel utilized for water pumping in rural areas. achievement) Indicator 11 : New security stocks regulation designed and implemented (Yes/No, Custom) Value quantitative or No NA Yes Yes Qualitative) Date achieved 05/23/2012 12/31/2014 12/31/2014 Comments 100% achieved. Draft law delivered under the project has been endorsed by Ministry of (incl. % Energy (April 29, 2014), then voted by Parliament ((June 12, 2014). achievement)
(b) Intermediate Outcome Indicator(s)
Original Target Formally Actual Value Achieved at Values (from Indicator Baseline Value Revised Target Completion or Target approval Values Years documents) Indicator 1 : Distribution lines constructed or rehabilitated under the project (Kilometers, Core) Value (quantitative 0 NA 21.09 28.12 or Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 Comments (incl. % 133% achieved. Target exceeded. achievement) Indicator 2 : Transmission lines constructed or rehabilitated under the project (Kilometers, Core) Value quantitative or 0 NA 6.54 7.61 Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 Comments (incl. % 116% achieved. Target exceeded. achievement) Transmission lines rehabilitated under the project (Kilometers, Custom Breakdown) – Indicator 3 : Arta line
Original Target Formally Actual Value Achieved at Values (from Indicator Baseline Value Revised Target Completion or Target approval Values Years documents) Value quantitative or 0 NA 33.64 35,29 Qualitative) Date achieved 10/11/2005 12/31/2014 12/03/2014 Comments (incl. % 105% achieved. achievement) Indicator 4 : Consultant for the draft of a security stocks regulation is recruited (Yes/No, Custom) Value quantitative or No NA Yes Yes Qualitative) Date achieved 05/23/2012 12/31/2014 12/31/2014 Comments (incl. % Achieved. Consultant delivered draft law, for endorsement by the authorities. achievement) Indicator 5 : Rate of progress on installation of 3341 smart meters (Percentage, Custom) Value quantitative or 0 NA 100 100 Qualitative) Date achieved 07/27/2010 12/31/2014 12/31/2014 Comments (incl. % 100% achieved before the closing date. All meters purchased under the project were installed. achievement) Indicator 6 : Awarding of a wind farm EPC contract Value quantitative or None Yes NA NA Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 Comments (incl. % Component was dropped on the request of the Government, after two unsuccessful tenders. achievement) Recruitment of a consultant for the purchase of petroleum products and the negotiation Indicator 7 : of their storage and maintenance (Yes/No, Custom) Value quantitative or No NA Yes Yes Qualitative) Date achieved 05/23/2012 12/31/2014 12/31/2014 Comments (incl. % 100% Achieved. Consultant provided the assistance required, purchase was conducted. achievement) Number of sites targeted by the parent project’s distribution component fully completed Indicator 8 : (Number, Custom) Value 0 8 8 8 quantitative or
Original Target Formally Actual Value Achieved at Values (from Indicator Baseline Value Revised Target Completion or Target approval Values Years documents) Qualitative) Date achieved 10/11/2005 12/31/2009 12/31/2014 12/31/2014 Comments (incl. % 100% Achieved. achievement)
G. Ratings of Project Performance in ISRs
Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 11/30/2005 Satisfactory Satisfactory 0.00 2 12/22/2005 Satisfactory Satisfactory 0.00 3 06/27/2006 Satisfactory Satisfactory 0.53 4 06/28/2006 Satisfactory Satisfactory 0.53 5 12/19/2006 Satisfactory Satisfactory 0.53 6 04/23/2007 Satisfactory Satisfactory 0.74 7 11/05/2007 Satisfactory Satisfactory 1.32 8 02/06/2008 Satisfactory Satisfactory 1.32 9 07/03/2008 Moderately Satisfactory Moderately Satisfactory 1.57 10 03/11/2009 Highly Satisfactory Satisfactory 2.03 11 06/17/2009 Highly Satisfactory Satisfactory 5.30 12 11/30/2009 Satisfactory Satisfactory 6.43 13 06/22/2010 Satisfactory Satisfactory 6.80 14 09/27/2010 Satisfactory Satisfactory 6.80 15 06/29/2011 Satisfactory Moderately Unsatisfactory 6.93 16 12/31/2011 Satisfactory Moderately Satisfactory 6.93 17 06/29/2012 Satisfactory Moderately Satisfactory 7.23 18 12/28/2012 Moderately Unsatisfactory Moderately Satisfactory 7.70 19 07/06/2013 Moderately Unsatisfactory Moderately Unsatisfactory 9.11 20 12/29/2013 Moderately Unsatisfactory Moderately Satisfactory 10.56 21 06/01/2014 Moderately Satisfactory Moderately Satisfactory 12.41 22 12/29/2014 Moderately Satisfactory Moderately Satisfactory 17.37
H. Restructuring (if any)
ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved PDO Date(s) Restructuring Changes Made Change DO IP in USD millions Change in the Project PDO to reflect the wind component’s withdrawal, associated 01/22/2009 Yes HS S 1.93 funds being channeled into the emergency procurement of heavy fuel oil for EDD.
ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved PDO Date(s) Restructuring Changes Made Change DO IP in USD millions First extension of Project’s closing (IDA Credit no: 4120-DJI) from December 31, No change to the 2009 to June 30, 2010, and reallocation of 01/23/2010 S S 6.63 PDO funds among categories. first six-month extension has already been approved in December 2009 Second extension of the closing date for No change to the the Project (IDA Credit no: 4120-DJI) 06/23/2010 S S 6.80 PDO from June 30, 2010 to June 30, 2013. Reallocation of funds among categories. Restructuring to remove legal covenant No change to the “agreement between EDD and ONED to 12/30/2010 S S 6.95 PDO implement the action plan for a joint commercial services.” Level II restructuring: 9-month extension of the project's current closing date (June No change to the 30, 2013 to March 31, 2014), reallocation 03/30/2012 S MS 7.23 PDO of the remaining proceeds of Credit 4120- DJ, and removing activities from AF I and moving them to the parent project. Level II restructuring: 9-month extension No change to the of closing date, from March 31, 2014 to 03/30/2014 MS MS 14.53 PDO December 31, 2014, and reallocation of undisbursed funds.
I. Disbursement Profile
1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
1. Country Context: In 2005, at the time of project preparation, Djibouti’s social indicators were amongst the lowest in the world: EDAM-IS1 studies show that poverty in Djibouti is both extremely high and increasing, with three fourths (74.4%) of the population living under the relative poverty line and 42% under extreme poverty, compared to 45% and 10%, respectively, in 1996. Djibouti City shelters had the largest of poor people (65% and 57% of the relative and extreme poverty, respectively). With very limited known natural resources at this period, Djibouti’s economy was characterized as a ‘rent economy, benefiting mainly from its strategic location on the Red Sea’s southern entrance for military and international shipping purposes. Unusually high government wages (15% of GDP, 60% of total fiscal revenues) were impacting negatively on the poor; it has also been identified as a key obstacle to improved competitiveness and development of the private sector. The country had also to face severe droughts as other countries in sub Saharan region.
2. Energy Sector. At appraisal (and until the present time), the power sector was one of the key bottlenecks to poverty alleviation in Djibouti due to its high cost, constituting barriers to access for the poor and overall competitiveness and growth prospects. The consumer price for electricity services were the highest in the MNA region, at an average of US$0.25/kWh, because of the reliance on expensive imported fuels for power generation, high administrative overhead costs, and high import tax on petroleum products (33% tax, passed through to the consumers). A Poverty and Social Impact Analysis (PSIA), conducted as part of project preparation, showed a strong correlation between electricity access and poverty in Djibouti: forty three (43) percent of urban households did not have access to electricity, and seventy (70) percent of these households were among the poor (more than half of the country’s population lived in Djibouti City). The PSIA also identified the high connection charges of about US$250 on average as a significant barrier to electricity access by the poor (electricity accounting for roughly 25% of household budget expenditures on average). For this reason, developing electricity access has been a major objective of the project.
3. In its Poverty Reduction Strategy Paper (PRSP), the Government has identified an action plan for the power sector that would: (i) improve efficiency and financial performance of the utilities through restructuring and eventual promotion of private sector participation; (ii) address key service delivery constraints through rehabilitation and extension of networks and administrative improvements; and (iii) explore new resources for power generation (e.g., renewable energy and interconnection with Ethiopia). This action plan was intended to help addressing key efficiency and financial issues in the sector, such as: (i) overstaffing is acute in the sector with 31 electricity connections per employee at the public utility Electricity of Djibouti (EDD), (ii) financial performance in the power sector that had become problematic(the electricity tariff was set to cover cost at a price per barrel below US$25 but international oil prices were the
1 «Enquête énergie auprès des ménages – Indicateurs sociaux (EDAM-IS)», Djibouti Bureau of Statistics, Djibouti. 1996 & 2002.
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double that level), and (iii) consumers arrears2, with the water company (ONED) being EDD’s largest debtor and the state representing another major debtor to the company.
4. Djibouti City was growing and most of the population growth was taking place in an area called Balbala, home to almost 40% of the city’s residents and characterized by high population density and poverty. Although the residents were poor, EDD was experiencing the highest level of demand for new electricity connections in Balbala. By default and as a substitute to grid connected electricity, kerosene was used as a leading source of energy in that area, primarily for cooking.
5. Finding alternative resources for electricity generation was a key preoccupation of the Government of Djibouti. In terms of alternative power supply options, Djibouti was endowed with both wind and geothermal renewable energy resources, both of them deemed as undeveloped at project appraisal stage. While the geothermal potential was proven3, GoDj was interested in scaling up wind power to take advantage of the nascent market, keeping geothermal energy as a long-term solution for Djibouti. The AfDB-funded power interconnection with Ethiopia has been commissioned by end 2011, which permitted the import of baseload electricity (mostly from hydropower). While electricity imports had no direct impact on the PDO, the relatively low cost of hydroelectricity imported from Ethiopia allowed EDD to achieve a satisfactory financial situation and contributed to the diversification its energy mix, although Djibouti become more dependent to seasonality of hydropower resource.
6. Project Rationale. The Bank has assisted the Government in supporting the financial performance of key public enterprises, including the power company EDD through the Fiscal Consolidation Credit (FCC) which closed in June 2003. Under the FCC and during the preparation of the PRSP, several discussions took place on how to address the challenges of the sector, although there were no dedicated resources available at the time to assist the Government in advancing from discussion to action. The IDA allocation to Djibouti was very limited and required the Bank to work in selected strategic sectors and where its assistance could serve as a catalyst for additional financing and development support. In the power sector, the Bank, through the GEF, was already assisting the Government in identifying the potential for larger scale development of its renewable energy sources and the potential for improved energy efficiency.
7. A large amount of households in Balbala were expected to benefit from increased incomes through the numerous jobs that would be needed at the new port of Doraleh, being developed nearby for commission by 2006. Electricity services were expected to not only improve human development outcomes (promoting children’s education through availability of light at night) but also provide a means for small entrepreneurial activities (such as car mechanics, food processing
2 Ernst & Young’s 2003 review of cross-debts between EDD and the Government of Djibouti and all public entities revealed that receivables in favor of EdD amounted to FDJ 8.3 billion, of which the Government’s share alone amounted to 78 percent (ONED amounted 25 percent of those total arrears); the Government committed, as spelled out in a September 2003 Presidential Decree, to a ten-year repayment plan of all government entities and SOEs’ arrears in favor of EdD. 3 In 1987, the World Bank through IDA in participation with the Government of Italy, the African Development Bank, UNDP, the GoDj (ISERST & USAID Grant) and the OPEC Fund executed the exploratory drilling of Assal wells 3 through 6.
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by women, etc.). Expansion of electricity services to Balbala was hence identified as a key priority by the Government of Djibouti and was thus a key component of this project. As for the wind activity, the Government had undertaken wind measurements in 2004 in several potential sites. These measurements indicated an encouraging wind resource at 40 meters in the range of 6.2 to 9.2 meters per second. The Government was keen on exploring the potential for wind energy in Djibouti and its contribution to an overall least-cost power generation expansion plan.
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)
8. The original project development objectives – as stated in the project’s legal agreements - are to (i) increase the access of underserved populations to electricity services, through priority investments, (ii) increase reliability of electricity services, through the development of alternative sources of production and targeted technical assistance; and (iii) improve efficiency of the electric utility, through technical assistance.
9. The power sector in Djibouti was facing numerous and complex challenges that were of structural and macro-economic in nature. It was acknowledged that these issues cannot reasonably be tackled through this project alone, but would rather require long and sustained countrywide efforts. This was recognized in the CAS, which - in its base case scenario - included the preparation of a Country Economic Memorandum (CEM), which would develop a Medium-Term Reform Framework for Growth, including an assessment of the economic and social impact of a public wage bill reform. Thus, given the limitations in resources imposed by the project’s size and the nature of the policy issues faced in the power sector in particular, the Project would primarily focus on improved access, the piloting of a new energy source with very careful monitoring of its results to assess whether larger scale development of wind would make sense, and initiation of measures in the power sector towards improved sector performance. The project, through these efforts, was expected to contribute to the larger CAS and PRSP objectives described above. The CAS also acknowledged the modest size of the assistance due to the spreading of resources, and called for enhanced collaboration with donors.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification
10. The PDO was revised with the first restructuring in December 2008, to reflect GoDj’ s request to provide emergency relief to the national electricity utility’s fuel bill, in order to help it cope with the important cost of increased oil prices in the short-term, while awaiting more sustainable relief from the completion of the Ethiopia-Djibouti electric interconnection line. This short-term assistance intended to prevent the utility from failing to meet its supplier’s obligations, and from being cut off from the fuel necessary to continue producing electricity services. It was also expected to relieve the strained government budget by reducing its aid transfers to the utility. Finally, it would also help assess the performance of the utility’s governance in fuel procurement.
11. The PDO was revised to the following: (i) increase the access to the power sector; (ii) ensure emergency reliability of the power generation; and (iii) provide some diagnostic tools to improving the efficiency of the power utility. Note that the PDO indicators have been revised again later to take into account specific objectives of the additional financing to the project (AF I & II).
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12. These changes did not impact the original credit amount, as they were financed through a reallocation of the funds initially earmarked for a pilot wind component, un-disbursed to this day due to the very challenging wind and local conditions. Achieving the original objective of introducing wind energy in Djibouti was believed to not be any longer viable, hence the corresponding component and indicators were removed. International and local conditions, including highly saturated and selective global wind market at this period of time, a strong Euro exchange rate (most of wind manufacturers being based in Europe), and very little strategic interest shown by wind construction bidders for a nascent market in Djibouti, demonstrated the very challenging implementation of the wind component. Indeed, harsh market conditions and price inflation have led to a lengthy and unsuccessful tender process and to an important reductions in the expected wind installed capacity that could be financed under the available budget (over three times smaller than the original)
13. Induced changes in the PDO indicators by the 2008 restructuring were as follows:
Original Revised Key Indicators Target Target Monthly electricity load-shedding (in MWh) observed during New 2153.20 the first half of 2009, compared to its 2008 levels Formal discussion held with EDD and GoDj to draw the lessons learned from the Bank-compliant fuel procurement New Yes transaction and associated recommendations for future similar transactions
Increase in the energy generation mix (wind as % of peak load 3% Dropped generated)
14. With Additional Financing I, PDO indicators have been refined and extended: electricity access has been reinforced with the rehabilitation of the Arta line and the extension of LV lines in Balbala and PK12 areas. EDD’s performance improvement indicators were monitored through reduction of the grid losses and smart metering component.
15. With Additional Financing II, a new PDO indicator has been added to monitor mitigation of impacts from droughts through the availability of security stocks for HFO and diesel. During implementation, it has been demonstrated that HFO could not be exclusively dedicated to water pumping in urban areas, where other energy uses – such as air conditioning, for instance – would have benefited from the electricity generated on-grid; hence, it has been decided to focus only on water pumping in rural areas, powered by diesel generators.
16. Project Development Objectives have evolved during the life of the project in order to take into account new and specific constraints (see figure below).
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1.4 Main Beneficiaries,
17. The beneficiaries were not identified clearly in the PAD. Based on the PDO, the primary target groups included (a) population lacking electricity connections in poor urban and peri-urban areas of Djibouti City4, which would be served directly by EDD; (b) rural communities lacking water service, which would benefit from the fuel funded under the project to pump water underground; (c) EDD customers, who would benefit from improved electricity services, adequate tariffs, remote metering services, and (d) EDD and GoDj’ s civil servants who would benefit from capacity enhancement and sectoral studies and assessments. Within the population getting electricity access and/or getting facilitated access to potable water thanks to the project, women and children would be getting supplemental benefits, on enhanced entrepreneurship and education capacity. Also, the fuel crisis response that the project contributed to address in 2009 and the avoided budget transfers to the utility EDD allowed the extension of the project’s scope to the entire population, to some extent.
1.5 Original Components
18. The original project included three components: (i) the expansion of electricity distribution, (ii) a pilot wind farm, and (iii) technical assistance focusing on targeted studies aimed at enhancing sector reliability, efficiency and performance.
19. Expansion of Electric Distribution in Balbala (US$1.0 million). The first component covered investments for the extension of the distribution network of Djibouti Cityto reach a number of unserved public and residential neighborhoods of Balbala (including PK12), a large
4 In Balbala and PK12, around 3,150 households have been estimated to be beneficiaries at the project approval period.
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low-income area in the Western outskirts of Djibouti City. The distribution extension covered about 7.3 km of primary lines (20kV) and 19.7 km of secondary lines (400/220V) and installation of 1,360 kVA of transformer capacity. This component was aimed to support the installation of 2,000 new connections, expected to provide electricity to about 3,150 households.
20. Pilot Wind Farm in Arta (US$4.9 million, including consulting services for project management, amounting to US$0.1 million). The second component consisted of the introduction of a pilot wind farm near Arta, a small town west of Djibouti City that is connected to the capital city’s grid. The size of this farm would be confirmed during the tendering process, but its capacity was expected to range from 2 to 3 MW. The wind farm’s contribution to the grid’s capacity would have been marginal, but by its experimental nature, the lessons and experience gained during the pilot would contribute to determining whether or not Djibouti had the potential to develop viable wind-based electricity generation at a larger scale.
21. Technical Assistance (US$0.5 million). The third component was in the form of three targeted technical assistance subcomponents that focused on efficiency and performance improvement in the power sector. The Technical Assistance component comprised the following consulting services:
(i) An Electricity Tariff Study 5 to review the structure and level of electricity prices in Djibouti in the short and long run. This Study would take into consideration the potential impact of upcoming developments at the approval period, such as the effect of the new Port of Doraleh on the supply of petroleum products and the consequences of imported electricity from Ethiopia through an interconnection line expected to start operating in 2009. The Study would also look at the financing of access for low-income households including mechanisms for spreading or reducing the one-time payment for the initial connection charge, and an impact analysis of the removal of the domestic consumption tax on enhanced access and affordability, including a review of the economic trade-offs.
(ii) An Electricity Loss Reduction Study that would identify and clarify the levels and nature of losses in order to allow EDD to have a better diagnostic and, more importantly, to take adequate and optimal actions in order to further reduce them. This Study was expected to contribute to improving EDD’s financial situation, including an implementation action plan that would spell out priority measures and investments, as well as their associated costs;
(iii) An Electricity-Water Joint Commercial Management Study6 to assess the synergies and the feasibility of the joint commercial management of EDD’s and ONED’s consumer bases (including joint billing, collection, and client services), building on the existing information, systems, and procedures. The Study would also design a concrete action plan for the implementation phase, with an inventory of the associated investments and actions required. This Study aimed at reducing the electricity and water utilities’ respective costs and, a
5 This study has been cancelled after the project’s first restructuring. 6 The study has been reduced to ONEAD’s client management study (cf. section 1.6).
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fortiori, increasing their financial sustainability, including the reduction of inter-enterprise arrears accumulation.
22. The total parent project costs were US$ 7.3 million, of which US$ 7.0 million was financed under the IDA Credit, including the US$0.5 million that had been made available in the form of a Project Preparation Facility (PPF). The Government of Djibouti (GoDj) was expected to provide a total amount of US$ 0.28 million contribution in cash, to cover (i) the installation of the electric distribution component (US$0.2 million), (ii) the recruitment of a PMU secretary (US$ 40,000), and (iii) some of the PMU’s operating costs, namely the cost of communications and small office supplies (US$ 40,000). The Government also had agreed to provide a contribution in kind, which consisted of office space for the PMU at EDD, salary of a PMU Director and an Electric Engineer, and PMU’s electricity and water utility costs.
1.6 Revised Components
23. Per the Parent Project restructuring in December 2008, the following changes were made on the components:
. The Arta pilot wind farm component (US$ 4.9 millions), including physical works and associated consultant services for the supervision of works, was canceled;
. A new Emergency fuel procurement support component, of the equivalent amount to the wind component (US$ 4.9 millions) was introduced. Per OP/BP 13.25, the reallocation of funds to this activity constituted a reallocation of project cost savings. Emergency fuel procurement support component, of the equivalent amount to the wind component (US$ 4.9 millions) has ben be introduced. The latter was expected to support the emergency purchase of about 10,000 Metric tons of Heavy Fuel Oil 180cst (Diesel) to be supplied to the Boulaos power plant, representing about 2-3 months of the generation plant’s average annual fuel consumption. A transparent international competitive bidding was agreed upon as the most appropriate method of purchase;
. The Electricity tariff study has been removed from the technical assistance component;
. The description of the commercial management study under the TA component has been modified to reflect developments in the sector and was formulated as follows: “carrying out of a Water and Sanitation Client Management study to assess the status of, and recommend improvements in ONEAD’s client management”;
The financial covenant pertaining to EDD’s Net Client Rotation Ratio has been removed, given the changes in ambition regarding improvements of the utility efficiency.
1.7 Other significant changes
24. The Project has had two additional financing (AF) and five Restructurings of which two regarded a change to the PDO, in the following chronological approval sequence: (1) on January 21, 2009, first Restructuring (R1), to remove the Wind component, add an emergency fuel supply component, and remove the electricity tariff study; (2) On January 23, 2010, a second Restructuring to extend the Project’s closing date ; (3) on June 15, 2010, approval of the first
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Additional Financing (AF1), an IDA credit (IDA-H5740) amounting to US$ 6m; (4) on December 20, 2010, a third Restructuring (R3) to remove the legal covenant “agreement between EDD and ONED to implement the action plan for joint commercial services”; (5) on March 30, 2012, a fourth Restructuring (R4) to extend by 9-month the project's closing date (June 30, 2013 to March 31, 2014), reallocate remaining proceeds of Credit 4120-DJ, and remove activities from AF1 towards the parent project; (6) on June 12, 2012, approval of the second Additional Financing (AF2), an IDA credit (IDA-H7830) amounting to US$ 5.2 million; and (7) on March 31, 2014, a fifth restructuring (R5) to extend by nine months the project’s closing date (from March 31, 2014 to December 31,2014) and reallocate undisbursed funds.
25. Rationale for the first restructuring and change of PDO (December 2008). The reasons for restructuring were because by end 2008, delays in implementing the Project’s wind component coincided with a severe cash crisis at EDD. In the absence of proportionate electricity price adjustments, this crisis - brought on by record international oil prices - led to unsustainable government budget transfers to cover the costs of fuel, and to risks of defaults by EDD in its payments to oil suppliers. The Bank’s Board of Executive Directors agreed that savings from the wind component (US$4.9 million) could be channeled into the emergency procurement of fuel oil for EDD, per the Government’s request. Adjustments were also made to cancel the planned tariff study under the project, as the African Development Bank had already financed and initiated a similar study.
26. Rationale for the second restructuring (December 2009). To facilitate completion of the project’s new PDOs while the additional financing AF1 was prepared, the closing date was extended to June 30, 2010; this R1 allowed for (i) the preparation of the AF1 and (ii) completion of the ongoing activities (fuel purchases, grids rehabilitation, studies). The extension of the closing date was also justified to: (i) allow completion of the study on EDD staffing streamlining (which was expected to provide complementary inputs to the design of the AF1 components related to loss reductions; and (ii) which would allow the preparation by the client of an updated environmental and social impact assessment, management plan and implementation plan of the components, required to process the AF1.
27. Rationale for the First Additional Financing (Grant H5740). An additional financing grant in the amount of US$6 million was approved on June 15, 2010 to help reduce EDD’s operating costs and enhance access to electricity services, bringing the total cost of the project to US$13.00 million. Through this AF1, the project was to fund the rehabilitation and expansion of the Arta transmission line, of the power distribution network in Balbala, and of a new remote metering pilot project. The Arta line is a key section of Djibouti’s transmission network that was expected to enable new investments in the network. The extension and rehabilitation of the network in the neighborhood of Balbala was expected to directly allow 2,000 new households to access electricity and indirectly enable an additional 1,500 households to be connected to the grid, which corresponded to at least 21,000 people provided with new electricity services. In all, 243 street lights were expected to be set up in the same area, to improve public safety in this densely populated neighborhood, while further increasing small business development opportunities. Finally, 3,300 smart meters and their information system would be financed under the AF1, allowing an improvement in the quality of the EDD’s commercial performance and services.
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28. Rationale for the third restructuring (December 2010). In response to GoDj’ s request made during the AF1 negotiations, the Project’s closing date was extended to June 30, 2013, to (i) align parent project deadline to the AF1 deadline; and (ii) utilize the undisbursed savings of the parent project (estimated US$ 361,000). The savings were reallocated as follows: US$ 91,542 to Category 4 (Operating Costs) and US$ 269,191 to Category 3 (Consultancy Services and Audit).
29. Rationale for the fourth restructuring (March 2012). On March 30, 2012, a level II Restructuring (R4) was approved, primarily to extend by 9-months the project's closing date (June 30, 2013 to March 31, 2014). This exceptional extension of closing date was requested to reflect the 9-month effectiveness delay of AF1. Two other changes under the R4 were necessary in addition to a closing date extension:
(i) a reallocation of the remaining funds of the parent project (US$ 571,598 remaining under the Credit 4120-DJ), from Categories I and 2 (Works and Goods respectively) to Categories 3 (Consultant Services, Audit and Capacity Building – US$ 452,481), and 4 (Operating Costs – US$ 118,367), in order to finance consulting activities needed to strengthen project implementation capacity and cover the PMU’s incremental operating costs until the revised closing date;
(ii) an amendment of the description of activities under both the Credit Agreement and the AF 1 Grant Agreement, by removing activities from AF 1 and moving them to the parent project.
All legal covenants and safeguards requirements were complied with, and the latest audit reports of the project were up to date and deemed satisfactory at the time of this restructuring
30. Rationale for Second Additional Financing (Grant H7830). An additional financing grant in the amount of US$5.2 million was approved on June 12, 2012 to mitigate the impact of droughts in the rural areas, bringing the total cost of the project to US$18.2 million. As part of the second additional financing, the Bank introduced the development of a disaster risk management mechanism in Djibouti through the setting up of petroleum product security stocks that would help the country ensuring continued electricity generation even in the event of a force majeure (most notably during droughts), to allow water pumping. The activities financed by the grant consisted in the purchase of diesel fuel for the purpose of electricity generation rural areas, the storage of these products until the project’s closing and the development of a security stocks regulatory framework to ensure the sustainable availability of these stocks.
31. Rationale for the fifth restructuring (March 2013). This level II restructuring consisted in the extension for nine months the project’s closing date (from March 31, 2014 to December 31, 2014) and reallocation of undisbursed funds. Closing dates of all three financings (IDA Credit 41200, IDA grant H5740, and IDA grant H7830) were extended. The main reasons for this restructuring were: (i) to provide the Client with sufficient time to satisfactorily complete all remaining activities and achieve the project development objectives; (ii) to reallocate US$ 592,000 of undisbursed and uncommitted funds granted to Government of Djibouti under the IDA-H7830 Grant, from category 2 (non-consulting services) to category 1 (goods) and category 3 (consultants); and (iii) to update the results framework to adequately measure all relevant objectives and achievements of the project. This reallocation of funds under this restructuring
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hence enabled the Client to purchase of larger petroleum stocks and to strengthen project implementation capacity with adequate consultants.
32. The figure below positions all the main events which occurred during the project life. It should be noted that all the extensions of closing dates were completed before the approval of the project extensions (AF I and AF II). They became a severe constraint for the implementation of the forthcoming project extensions.
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry
33. Design. After a comprehensive assessment of the Energy sector in Djibouti conducted during preparation, the Bank team considered Djibouti’s limited capacity to implement and operate donor funded projects, and accordingly simplified project’s design as much as possible. The components as originally envisaged consisted of two independent components (a pilot windmill and power distribution) and three major studies to enhance efficiency and performance of the power sector and to support the viability and reliability of commodities services7. Lessons learned from other Bank projects in small Client countries showed that joint commercialization could result in a substantial increase in the number of connections8. However, conclusions of these studies have been rejected by GoDj and its utilities because of their lack of realism in the specific context of Djibouti. Indeed, EDD is a large employer which has a key social role for the country. From a purely economic point of view, staff downsizing which was recommended as part of commercialization would have had a severe national social impact.
7 In 2004, A PPIAF-funded study on options of institutional reform concluded recommended as optimal the eventual merger of the power, water supply and sewerage services and the possible future entry of a private service provider to manage the three services. 8 Number of connections would increase by flushing out the illegal and inactive connections by running the ONED connection databases against those of EDD databases, which will strengthen the financial position of EDD and ONED, and allow ONED to pay its electricity bills to EDD.
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34. Power Generation options. At the preparation stage, the project considered the best options available to produce electricity in Djibouti, in the context of the future large additional electricity supply to come from Ethiopian imports and the need to reduce average power generation costs. The option of using the funds to expand or modernize some of the existing diesel generation was ultimately rejected because of the project’s limited funding and because it would not have helped mitigating the power sector’s oil dependency. Focusing on domestic resources, and despite GoDj’ s demonstrated commitment to develop its geothermal resource9, the project opted to develop a pilot wind farm; as the maturity of the wind market and costs for small capacities were judged acceptable for both the Bank team and the GoDj.
35. Distribution Networks. The power distribution feasibility study conducted at preparation analyzed options for rehabilitation and extension and determined that extension of services would have the greatest impact by expanding / increasing access, in particular to the poorest if selection of the targeted area identified well these beneficiaries. Also, the modest consumption of these households would have allowed to serve more new customers with a given power generation capacity (greater economies of scale given the current imbalance between capacity available and consumption).
36. Lessons learned from a World Bank funded project in Cape Verde had also been applied for the design and preparation of this project; as Cape Verde was similar to Djibouti in population size (700,000 in Cape Verde), power system (installed capacity of 80 MW) and level of development, the Project looked closely at the wind turbines being procured (8 to 9 MW). Costs were pretty competitive in the suppliers’ offers (5-7 US$ cents/kWh, using 850 kW turbines) and comforted the Bank team with the fact that a similar operation in Djibouti would likely lower the average generation cost, with indigenous renewable resource and in a sustainable manner.
37. Risks. At appraisal, pertinent risks were identified, together with mitigation measures, as summarized below.
Potential Risks Proposed Mitigation From its initial design (two distinct component and a series of studies), the project would inevitably require exceptional efforts by the PMU to Limited capacity for project ensure successful implementation and management, calling on skills implementation and from various ministries and agencies in Djibouti. Specific training has management in Djibouti. been provided to improve procurement and financial management skills, making use of the project preparation activities. Inclusiveness and Poverty The distribution component and the electricity tariff study would Reduction: risk that electricity address this risk in contributing to extension of electricity access to a provision remains a service poor and underserved area, at an affordable tariff level aimed at only reserved to the privileged supporting the less privileged. in Djibouti. IDA funds have been used on a component that was too risky for GoDj Technology risk introduced by or a private entity alone to endorse; successful implementation of this the wind farm demonstration demonstration wind component would enable a larger scale deployment
9 Since 2005, Djibouti was part of a regional development effort headed by the GEF to develop geothermal projects in Eastern Africa.
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Potential Risks Proposed Mitigation project, in terms of operative of wind, using private funding. This risk was however evaluated as capacity and scalability. worth taking under the project, and in line with the high priority given by GoDj to poverty reduction through cheaper electricity. Tapping renewable energy resources was also a risk mitigation strategy to lower the risks of large fuel imports of highly volatile prices. The record peaks in petroleum product prices observed on the international markets prior to the project’s approval had understandably a very important negative impact on Djibouti’s power generation cost and, more generally, on the economy and the country’s social development. The high fuel oil prices were deemed as beneficial to keep the economic return of the wind component quite attractive, but Volatility of Fuel Oil Prices simultaneously deeply affected EDD’s financial situation. The project tried to alleviate the impact of high oil prices, for example with the electricity tariff study investigating structures that could better reflect fuel prices. However, this particular risk was beyond the control of the project, as Djibouti’s power system relied exclusively on fuel oil products
38. Retrospectively, the only risk to materialize was the full implementation of the electricity sector reform (a regulatory authority was setup in 2013); but the sector was not unbundled as initially envisioned by GoDj; however, this event had no consequences on project implementation. Unforeseen risks (which materialized and affected implementation) consisted of implementation capacity of the sector and Government agencies—including procurement weaknesses.
2.2 Implementation
39. Three implementation periods. Implementation was characterized by three distinct phases: a period of inactivity and delays due to issues in the wind component implementation, which lasted roughly three years, until end-2008, a period of active implementation with the emergency fuel purchase in 2008-2009 having the expected immediate impacts, and a period of implementation of the power distribution infrastructure in 2010-2014, with results going beyond expectations in terms of number of beneficiaries and GoDj involvement.
40. As most projects in Djibouti (and most infrastructure projects in the Bank portfolio), the project has experienced some delays in implementation, particularly in the early stages after approval. Coincidentally, component 2 faced major implementation delays and uncertainties before the original project was restructured, essentially due to unexpected supply constraints in the world market for small-scale wind power equipment leading to price hikes, and a concomitant steep decline in supplier’s interest for a market like Djibouti’s. The GoDj and the Project had rapidly reacted to this context, to make a more efficient use of the funds.
41. Most recent implementation efforts, including the restructured fuel purchase support component, have received sustained attention from counterparts and have been implemented in a satisfactory manner. The technical assistance component has provided significant inputs for key strategic decisions to EDD and the energy sector stakeholders, to diagnose better some of their challenges and to clarify the least electricity expansion priorities for Djibouti.
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42. There was no on-lending agreement between GoDj and EDD for this project, as GoDj was responsible for the repayment of the Credit. Instead, an agreement spelling out the roles and responsibilities of concerned entities (including EDD), has been signed with the Government. This was an important agreement for the project’s sustainability as EDD would play a key role in most of the project activities’ implementation, operations and maintenance.
43. A Project Management Unit (PMU) has been established and was reporting to a Steering Committee chaired by the Director of the Prime Minister’s Office (“Primature”). The Steering Committee was composed of high representatives of the Ministry of Economy, Finances and Planning, of the Ministry of Energy, of EDD, and of ONED. The PMU was managed, by appointment by the Government, by a PMU Coordinator, who was also an energy expert. Although the PMU’s office space was at EDD’s Palmeraie facilities, initial implementation period has been hectic, due to the unavailability of EDD staff, dedicated only part time for implementing the project; this issue has been rapidly fixed by EDD’s management decision to allocate five full time staff to adequately implement the Project.
44. Project restructuring – 5 in total - were either implemented to respond to an urgent need from GoDj in line with the Electricity sector, either to improve the conditions for a successful implementation or completion of activities. The two Additional Financings were also expected to increase the impact of activities identified as the most promising to contribute to the PDO. Due to these important number of milestones during the project implementation (each bringing an extensive assessment of the project status), no mid-term review (MTR) was conducted.
45. Main project technical issues were successfully overcome. With exception to the wind component – which was primarily a Procurement related issue, as there was no technical impediment to the implementation of a wind pilot project, all technical difficulties during implementation have been addressed, by the PMU and EDD and with the external assistance provided. Regarding the purchase of petroleum products, the recruitment of an expert allowed GoDj to develop a petroleum purchase strategy (and endorse an enabling regulatory framework), and to procure small volumes at acceptable market conditions. Regarding the installation of smart meters and its remote metering system, the involvement and flexibility of EDD technical and commercial teams allowed to adjust operational processes along implementation of the activity. Regarding the energy access expansion activities, the good complementarity of infrastructure development (electricity was the first public commodity infrastructure to be deployed in these areas, and with the best equipment available) and studies (tariff reform with social components allowing the poorest to have new access) allowed a rapid implementation of this component.
46. With regard to renewable energy development in Djibouti, no technology assessment was done at appraisal, with the exception of geothermal and wind resources. In 2013, PPIAF financed a study for rural electrification using solar energy; and outcomes of this study highlighted the “hybrid mini-grid” model as suitable for Djibouti remote villages having already a diesel generator. Small scale wind power has also been recommended as viable technology in this study, but solar power was not seen as an efficient on-grid solution. If cost reduction of solar PV may have changed these perspectives (as seen in 2015 IRENA study ‘Djibouti Renewables Readiness Assessment’), geothermal remains the technology of choice as alternatives to thermal plants for centralized generation.
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2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
47. Design. M&E was conceived within the framework and experience gained with similar Bank-funded projects. Government statistics were considered unsuitable for reporting on project performance, i.e. on project outcomes or proxies thereof; as a result, M&E was designed to rely on project-specific data such as its performance indicators. One of the PMU staff was expected to be in charge of the project’s M&E and to draft regular M&E reports. The following table provides an assessment of the selected indicators and their appropriateness for project monitoring.
Indicators Appropriateness of Indicator for Monitoring Outcomes A proxy for overall benefits of the project assuming that (1) People provided with access to access to electricity will increase productivity and enhance electricity by household connections impact of education and health programs--Appropriate (2) Increased number of electricity A proxy for improvement in quality of health and education connections in poor targeted area of programs (better clinics and schools)--Appropriate Balbala (3) Total electricity technical and A proxy for improvement of EDD’s overall performance and commercial losses as a percentage of total improvement of quality of electricity services (for billed businesses and households)--Appropriate Similar to (1), with the Gender beneficial impacts on (4) Female beneficiaries (Percentage) economic and social development--Appropriate (5) Increased in the energy generation A proxy for improved indigenous energy generation, lower mix (wind as percentage of peak load GHG emissions, lower power system generation cost and generated) lower vulnerability to oil prices.--Appropriate (6) Monthly electricity load shedding (in Assimilated to (3) MWh) (7) Reduction in the number of annual outages in the Arta line corridor (Number, Assimilated to (3) Custom) (8) Days of HFO and Diesel purchased, Indicator to assess vulnerability and outages reduction due stored and maintained (Days, Custom) to a potential fuel shortage—Appropriate (9) New security stocks regulation Assimilated to (8) designed and implemented (Yes/No) Intermediate Results Indicators (10) Transmission and distribution lines constructed or rehabilitated under the Assimilated to (1), (2), (3) and (4) project (Kilometers) (11) Consultant for the draft of a security Assimilated to (8) stocks regulation is recruited (Yes/No) (11) Rate of progress on installation of Indicator of electricity services and EDD commercial 3341 smart meters (Percentage, Custom) performance improvements (12) Awarding of a wind farm EPC Assimilated to (5) contract (13) Recruitment of a consultant for the purchase of petroleum products and the Assimilated to (8) negotiation of their storage and maintenance (Yes/No, Custom)
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Indicators Appropriateness of Indicator for Monitoring Outcomes (14) Number of sites targeted by the parent project’s distribution component Assimilated to (1), (2), (3) and (4) fully completed (Number, Custom)
48. Implementation. M&E was performed by the PMU, on a regular basis, or for update of indicators during preparation of AFs and Project Restructurings. When M&E reports were not delivered, reactivity of the PMU to update the indicators as needed was in line with other rigorous deliverables the project’s implementing agency complied with (financial reports and audits, legal covenants).
49. Utilization. On the Bank side, the M&E was utilized to follow the progress on the implementation of the different components by targeting successful activities and detecting under- achieving activities in order to take actions that would encourage the progress on the implementation of those activities such as the fuel purchase, fuels storage or smart meters components. The PMU used the M&E to follow project progress; report to the Primature, and to EDD’s management.
50. Analysis. The PDO and Intermediate Outcome Indicators have been difficult to monitor. Some PDO indicators were too broad. For instance, indicator #3 (reduction losses) encompasses contributing factors that are external to the project, such as the commercial organization of EDD, which impeded the monitoring of the project’s impact on losses (which is a generic issue on power losses reduction projects). Other PDO indicators could not show regular progress as they can only be assessed at the completion of the activity. Similar observation can be made for Intermediate Outcome Indicators, where values to be assessed do not always reflect the volume of effort made under the activity and the level of difficulty to collect the information.
2.4 Safeguard and Fiduciary Compliance
51. Safeguards. The project triggered the environmental assessment (Op 4.01) and involuntary resettlement (OP 4.12) safeguards. The project has been classified as a Category B project (i.e. minimal, site-specific, and manageable impacts). An Environmental and Social Management Plan was prepared, together with a Resettlement Policy Framework. GoDj had experience with the Bank’s safeguard policies, but the power sector did not have such experience. However, the Project benefited from EDD and the Ministry of Environment’s similar experience, as they had been exposed to requirements similar to the World Bank’s requirements during the pre-feasibility study of the Interconnection Transmission Line with Ethiopia (AfDB’ s environmental safeguards).
52. Safeguard compliance was rated either as MS or S during project execution. As planned at the project preparation level, the electric distribution expansion component in Balbala and PK12 did not entail the removal of people or economic activities. Similarly, the wind farm in Arta – when the component was under implementation - did not trigger any social safeguards as the location was on a public land. A staff from the Ministry of Environment has been seconded on a part time basis to the PMU to follow the application of the safeguard measures. Regarding the fuel purchase and storage activities, World Bank guidelines have been followed for the environmental specifications of the tendering documents; the Bank ICR mission also did a field
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visit to the storage facilities to verify credentials of the firm Horizon and storage conditions of the fuel products. Ultimately, the project confirmed the B rating, as environmental and social impacts were easily managed in the field, were financially affordable, and did not delay the project implementation significantly.
53. Fiduciary. Financial management aspects of the project were continuously rated either Moderately Satisfactory or Satisfactory; the related FM risk was rated High at project approval and throughout project implementation. The FM action plan that was one of the project’s effectiveness conditions has been developed and implemented. Overall, financial management covered adequately the project’s accounting and reporting arrangements, internal control procedures, planning and budgeting, counterpart funding, funds flow arrangement, external audit reporting arrangements, and project accounting staff issues. Staffing remained adequate and proper books of accounts and supporting documents were kept in respect of all expenditures. Most of the financial statement audits were submitted on time10, and were unqualified. The interim un-audited financial reports were also submitted on time for the most part11 and the quality of those reports improved throughout project implementation.
54. Procurement. Final disbursement rate of the overall project was 97 percent: the initial 4120-DJ Credit was fully disbursed, the H5740-DJ IDA Grant was disbursed at 94 percent (US$ 311,407 undisbursed) and the H7830-IDA Grant was disbursed at 96 percent (US$ 174,563 undisbursed). For the wind component, the project experienced two failed bidding processes, which resulted in major delays on this component. As the global wind and energy context had shifted since the project approval, GoDj decided to interrupt the third procurement process for a wind pilot project. Assistance provided for the procurement of petroleum products and fuel storage allowed the Project to make savings, in comparison to the initial budget. Procurement was rated Moderately Satisfactory or Satisfactory on almost all the project period, as other goods and services purchased under the project were cost-efficient in comparison with budget estimates. Also, EDD achieved significant savings (and avoided costs) by including in the rehabilitation of distribution grids the assessment of used electrical equipment for re-deployment of viable material in the provinces (meters, poles). The Project also implemented innovative procurement practices for EDD, dividing in lots the different distribution circuits to be rehabilitated and expanded; this allowed a smoother and more progressive improvement and integration for EDD (load increase, loss reduction), and a bearable payment profile for the suppliers – in particular the little local firms – reflecting in a more progressive disbursement profile for the Project. The PMU easily managed to handle the additional work due to this procurement method.
2.5 Post-completion Operation/Next Phase
55. Post-completion. Investments financed by the project under the grid’s rehabilitation and expansion Component are standard equipment requiring basic and well-known maintenance procedures; EDD technical staff has demonstrated the ability to maintain sustainably these infrastructure. Under the smart metering Component, EDD Commercial and IT divisions took
10 Only one audit was submitted late along the whole project period (10 years), with a delay lower than three months. 11 On above 40 interim financial reports submitted, one has been submitted within 30 days after the deadline and two were submitted within 90 days after the deadline.
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more time to get familiarized with the new meters and commercial management system; strong involvement of all the management and staff to have a successful and sustainable modernization was key (see Lessons Learned); and EDD is currently scaling-up this component in purchasing additional remote meters, which will increase the critical mass and ensure a more expensive maintenance to the park of meters. Regarding the fuel purchase component, no specific post- completion action was envisioned: the main objective was to reduce EDD’s financial fragility in a context of high oil price (in 2008-2009). The regulation endorsed – in 2014 – measures to ensure diesel availability for water pumping to promote sustainability which is consistent with the objectives of the fuel security stocks Component, in addition to the replenishment of the fuel stock over the next 10 years, financed by the project.
56. Next phase. No major component financed under this operation has been included into a follow-up World Bank funded operation. Nevertheless, the GoDj has informally expressed the interest in continued support from the World Bank to expand energy access in the country. EDD has scaled-up significantly the smart meter and the distribution grid activities initiated under the Project by purchasing and installing additional equipment. With a 50 MW interconnection commissioned at end 2013 providing cheaper electricity from Ethiopia (mostly from hydropower source), and a national power dispatch center that is being modernized, EDD and GoDj have now more flexibility to envision the energy mix diversification vowed at the origins of PADSE project.
57. In line with the most recent Country Partnership Strategy for FY13-FY17, a US$ 31.2 million multi-donor12 geothermal power generation project (P127143) has been approved by the World Bank in May 2013. Approved during the implementation of PADSE, this geothermal project’s rationale was aligned with the findings of ‘A New Growth Model for Djibouti’, a study undertaken by the Bank that underlined that electricity was considered by the majority of companies in Djibouti as the main impediment to private sector development and economic diversification. The project is likely to play a key role in bolstering the business environment and the private sector involvement in renewable energy generation in the country (as PADSE initially intended to do on the wind sector), although it is recognized that the energy access gap will need to be addressed simultaneously by GoDj.
12 Donors include GEF, IDA, ESMAP, and other MDBs.
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3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
58. The Project’s objective of increasing access of underserved populations to electricity services remains highly relevant to the overall development goals of Djibouti. PADSE is considered to have made a significant contribution to the country’s poverty reduction strategy and the MDGs by contributing substantially to the increase in the national electricity access rate, from 43% during appraisal to an estimated 57% in 2014.
59. Overall, the Project’s design is fully consistent with its development objectives and, hence, highly relevant since it included investment components that directly address electricity access, the reduction of power losses, the mitigation of drought effects and the efficiency of the utility EDD. From the Project’s original design, successive changes demonstrated an ability to adapt to changing conditions, while keeping in sight the overall poverty alleviation objective through improved energy services. The Project first managed to rebound from a global wind market unfavorable to small remote niches like Djibouti, then switched the dedicated funding to address a rising energy crisis in a timely manner that could potentially cascade into a water shortage hence a major health and sanitation crisis.
60. Technical Assistance (TA) supported by the Project provided the expected complementary inputs that enhanced the efficiency of the investment activities. The electricity tariff study allowed to design adequate tariff levels for the poorest households in Balbala and PK12, to ensure that consumers could afford the connection to the new distribution grid and pay for the electricity service. It was the commercial success of this grid expansion activity that demonstrated to EDD the viability of providing new electricity services to the urban poor, and leveraged an additional investment of US$ 1.19 million from EDD for this component (increase of 400% of the GoDj’ s contribution to the overall project). Along the same lines, the TA correctly selected fuels to mitigate the effects of drought, by purchasing both diesel fuel, which was utilized in remote villages to pump water, and HFO which was necessary to maintain the operating capacity of large power plants. TA on the regulatory framework of fuel storage also ensured the sustainability of the IDA funds allocated for this activity.
3.2 Achievement of Project Development Objectives
61. The objective of the Project at approval was to (a) increase electricity access for the urban and peri-urban poor, (b) develop the power generation capacity by using the wind resource and (c) improve the efficiency of the utility EDD. The revised objective of the Project – from January 01, 2009 to December 31, 2014 was to (d) increase electricity access for the urban and peri-urban poor, (e) ensure the security of fuel supply during dry seasons and (f) improve the efficiency of the utility EDD by using smart metering systems.
62. In assessing achievement of the project development objectives, a split evaluation was carried out, based on the original and revised project indicators, in accordance with the ICR guidelines. The split evaluation used the following disbursement-based weights for each objective, assessed at the time of PDO change and at the project closing:
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PDO (a) (b) (c) (d) (e) (f) Weight 40 30 30 33 33 33 Achieved (% disbursed) 100 0 60 100 100 95 Achievement score 40 0 18 33 33 31 Total score per period 58 97.3 Total weighted score 87.5
63. The split evaluation yields an overall Moderately Satisfactory rating on the achievement of PDO, as well as for the rating for indicators.
64. The Project’s contribution in increasing electricity access in the targeted areas is substantial, as it is estimated that 4% of Djibouti’s population gained access to electricity services. The project succeeded in connecting 3,800 new households to the EDD grid; representing an estimated 26,796 people with new access to electricity. For EDD, this also represents an increase of 11% of the number of connections over the project’s duration. The social impact of this electrification was also significant, as numerous social infrastructures were developed in PK12 and Balbala following the implementation of the project (a health center, a police office, a community center, a primary school, a hardware store, 7 bakeries, 6 windmills and 5 mosques). To enhance impact in the same areas, 421 street lights have been installed in total, of which 360 were funded by the Project. Because most of the key indicator linked to Energy Access have been fulfilled or surpassed, this major contribution of the project has overall met its objective.
65. Other components of the project have had mixed results, as on the one hand, the wind component has been removed and has not achieve its objective, but on the other hand, the purchase of fuel products and storage resulted in the significant mitigation of fuel shortage during dry seasons, and smart meters and remote metering system did improve EDD’s customer management efficiency. The Technical Assistance component of the project provided the timely and efficient support to decision-making processes and implementation of other project’s components. Overall, the Project’s performance in achieving its PDO is considered Moderately Satisfactory, despite the important achievement on the access to electricity front.
3.3 Efficiency
Rating: High
66. As showed in the project PAD, an important characteristic of the Project’s design and implementation was its special attention to the efficient use of resources, in a sector in great need and with quite a diverse nature of activities to be undertaken. While maintaining the objective of having impactful activities, the Project also adapted its activities to the context as needed and when overall sector performance indicators were at stake, and responded to emergency requests from the Government in a timely manner. In this respect, the Project’s efficiency can be rated as high, the replication of Project activities with Government funding providing additional rationale for its viability.
67. An economic evaluation of the project was performed on the basis of actual costs and estimated benefits (Annex 3). The analysis concentrated on the electricity components of the project, with separate evaluations for the grid rehabilitation and extension activities, the smart
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metering activities, and the use of the fuels supplied. The economic analysis of project components yielded the following results:
Component NPV NPV Costs NPV Net EIRR Benefits Benefits Distribution Grid Extensions (Balbala) 2.31M$ 1.17M$ 1.14M$ 24.1% Transmission Grid Rehabilitation (Arta) 7.77M$ 3.77M$ 4.00M$ 18% Smart Metering System 6.40M$ 2.00M$ 4.40M$ 25.6% Emergency Fuel Purchase 4.90M$
68. When estimating the Project’s contribution to loss reduction in electricity grids, it is always complex to assess efficiency of power grid rehabilitation ex-post, and allocate the contribution of a given project in quantitative manner. In this project, it is indeed difficult to quantitatively measure the impact on loss reduction, as Over the 9 year period of the project, there was a drastic increase in both the demand, as well the number of connections and supply (with the interconnection with Ethiopia commissioned in 2013). EDD estimated however that the rehabilitation of distribution grids engendered additional annual yearly revenues amounting US$ 26,880, and that avoided yearly maintenance cost of US$ 50,850 for the Arta MV line. Increased transit capacity in Arta area (8MW capacity, against 4MW prior rehabilitation) and increased quality of service delivered in the area allow to envision progressive improvements in yearly commercial revenues as the number of connections increase in Arta and Weah.
3.4 Justification of Overall Outcome Rating
Rating: Moderately Satisfactory
69. A Moderately Satisfactory rating is assigned based on the high relevance of the Project’s objectives and high importance of the sector in the country’s development strategy, on its positive outcomes in terms of electricity access expansion and improvement of the power utility’s performance – in particular, the very important result on viability of electricity access for the poorest (number of connections), and in spite of the relative sustainability of the fuel purchase and storage and that the Pilot Wind Farm was canceled. It is worth noting that the Project outcomes have been considered successful by all parties at the closing of the Project, both on GoDj and EDD than on the Bank (SMU and CMU) side. Put into perspective, the Project managed to adapt to a rapidly evolving global context, implementing successfully commercially-based activities in a small and fragile country, and using all the instruments provided by the Bank to increase the Project’s impact (restructurings, AFs). Some of the innovative approaches (e.g., TA combined with investment for a given activity) have been replicated since in similar projects.
3.5 Overarching Themes, Other Outcomes and Impacts
(a) Poverty Impacts, Gender Aspects, and Social Development
70. The project has had important verifiable poverty impacts by providing electricity access in the poorest urban and peri-urban areas of the capital Djibouti City, where benefits of lighting, improved communication and improved leisure have materialized (as confirmed, for example, during the ICR mission field visit to Balbala that benefited from the project). The provision of
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reliable electricity for the purpose of water pumping had also a clear positive impact, as this benefited mostly the poorest (wealthiest having alternatives to procure or pump water). Improved gender equality can be surmised to be a consequence of the project in the long term with increasing opportunity for women to develop small businesses relying on electricity. Social development can be a positive consequence of electrification in targeted areas by supporting, for example, after- work and leisure community activities, or social and community centers.
(b) Institutional Change/Strengthening
71. The Project had important impacts in strengthening institutions through the activities carried out in all components. First, this is evident through the investment activities implemented with EDD, where training of technicians and commercial staff using the new equipment has been conducted (installation and maintenance of remote meters, use of the commercial software platform). Specific training was also provided to the civil servants purchasing fuel products and managing the fuel storage. Lastly, the PMU consultants and EDD staff dedicated for the implementation of this Project gained substantial expertise in project management, in line with the Bank practices (they were assigned to management of EDD’s large infrastructure projects due to their successful support to the PADSE project).
(c) Other Unintended Outcomes and Impacts (positive or negative)
72. Over the Project’s lifetime, several unexpected or unintended outcomes occurred, the most significant ones being listed below:
- Technical hurdles on integration of smart meters technology in Djibouti overcome by EDD. Immediately after noticing the loss of commercial information through the remote metering – advanced - technology13 selected for the smart meters component, EDD rapidly took action to track the source of signal distortion, and isolated the dysfunctional appliances (one used television and low-cost compact fluorescent lights). Then EDD technical staff took the initiative to test other types of devices sold in Djibouti, and communicated to the Djibouti Commerce authorities the specifications of appliances that should be prohibited at import in the country. During the smart meters deployment information campaign14 (also funded by EDD), information regarding this technical issue has been communicated to the EDD’s clients. In addition, EDD Commercial teams adapted the period of remote data collection with the moments those ‘parasite equipment’ are less likely to be in use. This type of scientific approach by experiment to solve a technical issue impeding the success of the whole remote metering component is quite unprecedented within Bank Clients’ power utilities, hence needed to be saluted.
13 Power Line Communication (PLC) technology has been selected to transit the commercial information (metering, load curve, control/command of the meter) from the smart meters to the EDD Customer Management Software (CMS), using EDD’s distribution lines; this technology has been preferred to more commonly used communication technology like mobile phone networks (not reliable in Djibouti, according to EDD) or dedicated radio frequency networks (requiring upfront investment). 14 Web link to EDD’s communication campaign, broadcasted locally: http://www.EDD.dj/News.html?condition=611
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- Creation of a sustainable mechanism to provide fuel for water pumping in remote areas. Under the guidance and expertise of the consultants providing assistance for the fuel purchases, the GoDj decided to purchase primarily diesel fuel instead of HFO; the HFO could be used only in EDD power plants and would have benefited to the water pumps supplied by EDD grids as well as rich clients using air conditioning. The switch to diesel fuel purchase hence allowed to serve first the intended need and the targeted population, by providing this fuel to the rural villages for water pumping. In order to ensure at least 3 months of free diesel supply for the villages in case of drought (gensets used for pumping fresh water), a cross-subsidy mechanism is being implemented (tax on the large and luxury vehicles).
- Towards a sustainable development of grids expansion to the poor areas. The increase of connection requests from modest households has been for EDD an unexpected induced effect of the very successful rehabilitation and expansion of the Balbala and PK12 neighborhood. This has been made possible by the adapted tariff structure put in place to allow affordability of a new connection, independently from the social and income status of the prospected customer. As EDD became more comfortable with the management of an increasing portfolio of customers with modest revenues, the utility started expanding the grids beyond the scope of the PADSE project; visible benefits in newly electrified areas and feedback of customers on affordability engendered more demand for new connections.
4. Assessment of Risk to Development Outcome
Rating: Moderate
73. The rehabilitation and expansion of power distribution grids used proven technologies, which have been installed and commissioned without difficulty; the commercial risk identified at the project preparation has been adequately addressed by including a ‘Domestic Social’ tariff affordable to the poorest customers. Despite the wind resource assessment conducted on the selected site prior to the Project, the implementation of a pilot project – first of a kind by nature – is always a risky activity; the GoDj reacted adequately when procurement processes for a wind farm were unsuccessful, avoiding to further increase the risk of inefficient use of the funding for this component. Similarly, the smart metering component using PLC technology could have been a too risky activity in regard of its benefits; EDD’s full commitment to the modernization of its commercial infrastructure has been critical for the success of an upfront risky choice by the Project. Finally, if the activities related to fuel purchase and storage were well prepared and conducted, an extensive assessment of Djibouti’s dependency to oil products for electricity and water production, as well as vulnerability to oil prices, would have allowed the Project to better apprehend the associated risk.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Moderately Satisfactory
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74. Parent Project design was consistent with the nature of the challenges identified during preparation and remain highly relevant. The Project has proceeded essentially as designed in the PAD, until the first major restructuring in which the Wind component was canceled and emergency fuel purchase integrated. As the first AF was under preparation during this restructuring, it may have been easier to design a separate fuel supply project – or budget support to GoDj – on an emergency basis and reallocate funds of the wind component to strengthen the on-grid energy access activities. The very distinct nature of activities within the Project did not lend itself to having one principal objective, which makes it difficult to assess the Project’s overall outcome and contributed to the multiple restructurings that occurred.
75. Also, project sequencing (in particular, setting of end date) for AF I & AF II have been finalized after the approval of project restructurings requesting end dates extensions. As a result, it has been difficult for the project to accelerate implementation to comply with the end date. In addition, these end dates encompassed tight implementation periods, allowing no flexibility for large tendering processes which were – on the other side - market dependent. The case of wind generation has been very instructive: no offer was submitted to the first call for tender; and only one offer was received for the second bidding process, which turned out to be financially unacceptable.
(b) Quality of Supervision
Rating: Satisfactory
76. The Bank actively supervised the Project, frequently dialoguing and reengaging with GoDj, EDD and Djibouti authorities along the Project. Because of the relative importance of the Project in the Bank’s portfolio in Djibouti, particular attention was given to overlap of different Team Leaders (TLs). Technical advice of the Bank team was generally considered valuable, both by the Client and the CMU. Project restructurings were conducted diligently and with adequate rationale; similarly, AFs were conducted in a smooth manner, despite an extension of AF2’s effectiveness deadline due to administrative issues on the Client side. In addition, close supervision resulted in all legal covenants and safeguards requirements being complied with, and the latest audit reports of the project being up to date and deemed satisfactory. Lastly, a good transition was operated between the PADSE and the geothermal project, which implied a supplemental effort from the Bank team to optimize work during supervision / preparation missions.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately Satisfactory
77. Taking in account preparation and supervision ratings, and the Bank team efforts to support implementation despite ex-post arguable choices for some restructuring or AF, an overall rating of Moderately Satisfactory is assigned.
5.2 Borrower Performance
(a) Government Performance
Rating: Moderately Satisfactory
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78. The Government was directly involved in the project through the utility EDD, the Ministry of Energy, ONEAD and SIHD. During the second phase of the project (AF I & II) strong ownership and commitment was demonstrated by all these public entities, from preparation to completion; this has not been the case for the first phase, where PMU was hosted in a structure not fully recognized by EDD and the Ministry of Energy. Moreover, financial commitment from the public entities to contribute to the development objectives have gone far beyond expectations: (i) GoDj injected US$ 28 million to support EDD in 2008, avoiding the utility to face bankruptcy; (ii) EDD and the Djibouti Social Development Agency (Agence Djiboutienne de Développement Social, ADDS) used funds provided by other donors15 to connect 3,000 additional people and add 61 additional street lights to the distribution infrastructure financed by the Project; (iii) an additional US$ 2.09 million EDD investment to build 22.5 km of additional underground transmission line in the areas covered by the Project and (iv) EDD’s investment in the purchase of 35,000 additional smart meters, to provide this modern technology to all its customers. It is important to note that EDD decided to install these new smart meters with its own technical staff who benefited from the training provided during the Project’s initial phase.
79. Most importantly than this, matching funding from the Government to increase the Project’s impact, the exceptional appropriation of the Project by EDD Management and Staff is the real key of its success and sustainability. During the Supervision and ICR missions, the Bank team had the privilege to observe this progressive commitment, that materialized by EDD’s spontaneous initiatives to (i) adapt its commercial culture to fit with the new metering and billing system, (ii) experiment Customers’ dysfunctional appliances16 to improve performance of remote metering, and (iii) expand the electricity access to the urban poor as the teams became aware17 of the critical importance of electricity to poverty reduction and shared prosperity, while being a viable activity for the utility.
(b) Implementing Agency or Agencies Performance
Rating: Satisfactory
80. The PMU’s contribution to the Project implementation – and in particular the leadership of its coordinator – has been critical to ensure the achievement of observed outcomes in a timely manner and with adequate FM and M&E. The rating on quality of supervision by the Client has been consistently Satisfactory along the Project, and the good dialogue with high level authorities allowed to take faster important decisions. Also, the PMU noticed since the early stages of the Project than the initial EDD team allocated for supervision – in accordance with Project design - was not sufficient, and managed to influence the early decision to allocate five full time staff to support PADSE project’s implementation; these EDD staff and PMU consultants remained at their
15 US$ 1.19 million, to build 6.7 km of low voltage lines and 3.7 km of high voltage line in the PK12 area. 16 Feedback from a customer showed that EDD’s Project Manager for the remote metering subproject – a young female engineer from EDD’s Networks Division – replaced an old television for a modest household, at her own initiative and expenses. 17 During the ICR field visits in Balbala and PK12 new distribution grids, feedback from an EDD engineers showed that EDD never went to the unserved areas prior to the Project, and now benefit from a very positive reputation in these poor areas.
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position for the whole period of the project, and their project management skills allowed them to also manage projects from other funding sources.
(c) Justification of Rating for Overall Borrower Performance
Rating: Moderately Satisfactory
81. Traditionally, in Djibouti, counterparts funding includes in kind contributions (PMU office space, salary of the project coordinator and local technical staff). With a total contribution of US$ 3.28 million only for the grids rehabilitation and expansion component, EDD surpassed expectations and allowed part of the Project outcomes to be successful in a sustainable manner. In regard to its fragile situation and the achievements for this Project, but also in the late ownership of the project by the authorities that contributed to implementation delays, overall Borrower performance has been rated Moderately Satisfactory.
6. Lessons Learned
82. Scaling-up national energy access by expanding urban electrification has been a very wise choice. At the time of project preparation, enabling conditions for off-grid energy access were less mature and cost effective than addressing the access to electricity services for the urban poor. The Project managed to address the latter adequately, by developing critical affordability and accountability conditions (tariffs, communication campaigns). On this component and for this typology of borrower (small nation with low electricity access rate), lessons from the PADSE project on urban access may be amongst the Bank Best Practice projects regarding urban and peri- urban electricity access.
83. Developing a new renewable energy resource requires more than a good – wind - potential. The canceled Wind component has been full of positive lessons, in terms of preparedness and strategic development of an indigenous renewable resource. In addition to having the detailed resource mapping and a country readiness (financially and technically), this strategic development requires a well-planned sequence of milestones for the sub-sector to take off. The GoDj has already integrated the lessons of this activity, by (i) financing a measurement mat on the Arta wind site to keep recording data on the wind potential, and (ii) intended to pass a law on feed-in tariffs for on-grid renewable energy projects. Even if not implemented, this component is the most useful in terms of lessons learned for the multi-donor Geothermal Project that started implementation in 2013.
84. Sustainability of fuel purchase and storage activities. Similarly to the grids rehabilitation component, the Technical Assistance (TA) provided to GoDj under the project to accompany the purchase and storage of fuel products has been a critical input; it ensured an adequate technology transfer on the understanding of global fuel oil markets and purchase strategies, and allowed GoDj to be better prepared to similar oil price shocks in the future, by
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taking structural decisions18. This combination of TA and investment components added a lot of value to components that would have not been sustainable otherwise.
85. Challenges and benefits of a unique – and pancaking – longstanding operation in a fragile environment. Main lesson on the Project design is the ex-post feedback on the choices to have a unique project instead of creating several projects with distinct activities (grids and meters on one side, fuel purchase and storage on the other side). Obvious benefits have been the Project management costs, both on Bank and Borrower sides, which is a significant rationale for this design; another important benefit has also been the deeper dialogue that the Bank team could have with the Djibouti Energy authorities, as all activities were supervised and coordinated by a unique Bank team. On the other side, it engendered the need for adjustments and extension of project duration that may retrospectively be seen as inefficient. This reinforces the need for a sharpened design of project objectives at entry, when developing critical infrastructure activities in a small country with low capacity; the ongoing Geothermal Project seems to have adopted this design.
86. Other lessons learned deal with market presence of the private sector. Djibouti is a very small country, ranked 155 for doing business (WBG 2015). For many projects, at least in the energy sector, very few private companies expressed an interest (only one offer for wind turbine component, two offers for extending the distribution grid, two offers for smart metering). As an example, the poor telecom services of the national company forced the smart meter contractor to have a technician on site in order to report malfunctions during the phase test. In other countries, a simple internet connection would be sufficient to remotely manage this type of installation. As a lesson, private competitors have to be contacted before the project and informed about what services are locally available and what are not. They have also to be informed that because of the WBG financing, they should not have payment issues. Last but not least, private actors must be informed about the important lag time between EoI and call for tenders (one year or more during this project).
87. The sizing of the project (costs and duration) is another area to be improved. For a traditional project, the cost is often proportional to the size (e.g. for a distribution grid: number of poles, length of the wires, etc.). Given a budget, it’s easy to size the project. For the smart metering component, an important part – the IT system – did not follow this rule: for the supplier, the cost of the IT system is the same for 1 meter or for 100 000 meters. Within the initial budget (~ USD 2 million) it was almost impossible to build the pilot project (3 000 meters). In addition, WBG was not willing to fund the global project even in case of successful pilot. In order to avoid a lack of offers, a tricky solution has been found with the following arrangement: private companies have been invited to make two offers, one for the pilot and another one for the generalization phase. Selection has been made on the full project even if WBG funding was limited to the pilot phase. The evaluation of a pilot project by WBG procedures is another issue. A pilot is designed to verify
18 By October 2015, GoDj will own 43% of Horizon fuel storage facilities (10% ownership now), and will hence significantly increase its share of strategic fuel storage in the country. Also, learning lessons from the 2008 fuel and water crisis, GoDj has signed an agreement with Ethiopia to receive 100,000 m3 of potable water during the next 20 years (at 0 cost), to ensure the sustainable supply of potable water for the whole population. Construction of the water infrastructure financed by GoDj started on March 23, 2015.
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technical and economical hypothesis. Failures to reach some of the initial objectives may be lessons for improving the subsequent phase and not a failure of the project itself.
88. Lessons learned are also important from the project implementation perspective. The deliverables of the distribution component (AF I) were to extend the LV grid. But to be directly useful for the population, this grid extension has to be completed with the connection of clients. The main risk with this type of activity is that it is incomplete until the consumers are connected, metered and billed. EDD project team and the Contractor coordinated effort on the ground to connect progressively the clients; this phased commissioning of rehabilitated power distribution circuits is key to serve beneficiaries and show regular implementation progress.
89. The smart metering component (AF I) gives another implementation lesson for this type of project. In many countries, the advent of smart meters has been negatively perceived. In order to prevent that, EDD General Manager took two important decisions. First of all he bought an advertisement at the national TV in order to present the benefits for consumers of such technology. A funny video clip 19 of 2’30 has been broadcasted daily during three months before the deployment. During the first day of the deployment, the General Manager invited national press and TV to meet the clients during the installation of their new meter. This deep commitment of the management has been a key success factor for this project. Deployment has been done quicker than forecasted and without opposition of the population. Consumers have been informed individually several days before the installation of the new meters so that if their connection to the grid was illicit they had time to correct their connection.
90. The main deliverable of the project AF II (security stock of petroleum products) have been modified during the project thanks to the study done by a consulting firm hired to design the future regulation for Djibouti. The initial deliverable was to buy HFO corresponding to 5 days of consumption by EDD (urban water pumps are fed by EDD) and 5 days of diesel for rural water pumps in villages (not connected to the grid). In case of severe drought, the Consultant demonstrated that there were no means to prevent HFO from this security stock to be used for all the other usages of electricity including air conditioning. It has been decided to buy diesel instead of HFO, for the same price, and to give it to rural villages. At the end, the total stock of diesel for water pumping in rural villages jumped to 360 days. As a lesson, thanks to this initial study, the project deliverables have been readjusted to fully satisfy the main objective: to reduce negative impacts of drought on water pumping.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
(a) Borrower/implementing agencies
91. Annex 7 summarizes the findings and conclusions of the Borrower’s draft Completion Report. More lessons learnt have been provided by the Borrower (see Annex 7).
(b) Cofinanciers
19 These videos are available at: http://www.EDD.dj/News.html?condition=611#.
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N/A
(c) Other partners and stakeholders
92. Annex 8 includes valuable comments from an international consultant who provided extensive support to EDD for the implementation of this project.
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Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent)
Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions)
C1 : extension of LV grid in Balbala 1.2 1.16 C2 : Purchase of HFO (*) 4.9 4.9 100% C3 : Technical assistance 0.5 0.92 C4 : Capacity development for 0.7 0.79 Project Management Unit C5 : MV lines (Arta) 0.0 3.77 N/A C6 : Smart meters 0.0 2.0 N/A C7: Petroleum security stock 0.0 4.27 N/A C8: Technical assistance for security 0.0 0.49 N/A stock Total Baseline Cost 7.30 17.70 (**)
Physical Contingencies 0.00 0.00 0.00
Price Contingencies 0.00 0.00 0.00 Total Project Costs 7.30 0.00 Front-end fee PPF 0.00 0.00 .00 Front-end fee IBRD 0.00 0.00 .00 Total Financing Required 7.30 0.00
N.B.: At appraisal, US$ 0.5 million has been made available in the form of Project Preparation Facility (PPF).
(b) Financing
Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (USD millions)(USD millions) Borrower 0.30 3.28(*) 1093%0 International Development Association 7.00 18.20 260% (IDA) Total Financing 7.30 21.48 294% (*) GoDj’ s contribution to the Project, utilized to purchase office furniture and other operational expenses for the PMU. EDD’s contributions included networks rehabilitation in the Project area, scale-up of the remote metering activity.
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Annex 2. Outputs by Component
Table below presents the project outputs for each of the components described in sections 1.5 and 1.6 of this ICR:
1- Expansion of Electric Distribution in Balbala (including PK12 area)
i) 3,828 new electricity connections established in Balbala households and businesses, representing 26,796 new urban people provided with electricity access. ii) 7.3 km of primary distribution lines (20kV) and 19.7 km of secondary distribution lines (400/220V) built and installation of 6 transformers (20kV / 400V / 200V). iii) 360 street lights built along the power distribution lines in most underserved areas, complemented by 61 street lights funded by EDD.
2- Pilot Wind Farm in Arta
iv) 6 EDD staff trained on wind-based electricity generation. v) Engineering and grid-connection feasibility study, and environmental assessment conducted for the installation of a wind project in Arta area. vi) Bidding and contractual documents drafted for the Ministry of Energy.
Emergency Fuel Purchase
vii) Purchase of 12,057 metric tons of heavy fuel oil, 20% more than expected in the AF1’s estimate, at given budget.
Technical Assistance to EDD and ONEAD
viii) 1 car purchased for the ONEAD needs (supervision of fuel distribution for remote water pumping). ix) Studies conducted to the benefit of EDD; 1 electricity loss reduction study (including cost-benefits analysis and action plan), 1 Human Resources reform program, x) 1 commercial improvement action plan on water and sanitation delivered to ONEAD.
Capacity development for Project Management Unit
xi) 4 consultants recruited to staff the PMU (Coordinator, Procurement Specialist, Finance Management specialize, Assistant). xii) Project management software purchased, all PMU staff trained on software.
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xiii) 1 car purchased for the PMU needs; vehicle was maintained and lased beyond the project period. xiv) Office furniture, computers, printers purchased for PMU’s 4 offices. xv) 10 annual external audits of the project conducted.
Rehabilitation of MV lines in Arta region
xvi) 72 km of transmission line (20kV) and 127 pylons rehabilitated, between Jaban’AS and Weah villages. xvii) 350m of MV network built in Weah village, to comply with environmental and social management plan.
Smart Metering Component
xviii) Economic and technical feasibility and viability studies conducted for the pilot smart metering component and for its potential generalization to all customers. xix) 3,300 smart meters and their information system installed; 20 commercial and 9 IT staff in the utility trained on operation and maintenance of the system.
Petroleum security stock
xx) 4,500 metric tons of diesel fuel capacity purchased, for emergency supply of remote water pumping stations during droughts.
Technical assistance for security stock
xxi) Law on security stocks drafted, presented to the authorities, endorsed by Ministry of Energy (April 29, 2014), then voted by Parliament ((June 12, 2014). xxii) 4 staff in Ministry trained on fuel stocks management and optimal use, and on fundamentals of international fuel markets.
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Components Detailed Breakdown (in US$) Allocated Disbursed Undisbursed
1- Extension of low voltage grids in Balbala 1,164,697 1,164,697 1,164,697 1,164,697 2- Purchase of Heavy Fuel Oil (HFO) 4,288,820 4,288,820 4,288,820 4,288,820 3- Technical assistance 926,290 917,410 8,880 3.1- Study on technical and non-technical losses of the grid 327,574 327,574 3.2- Study on strengthening commercial activity of ONEAD (water) 135,655 135,655 3.3- Study for HR optimization at EDD 61,900 61,900 3.4 - Update of the study on environmental and social impacts 25,140 25,140 3.5- Consultant for smart meter pilot tendering process 270,000 270,000 3.6- Consultant for environment study 22,200 13,320 8,880 3.7- Study on environmental and social impacts 83,821 83,821 4- Capacity development for Project Management Unit 815,824 790,355 25,469 4.1- PMU office equipment and computers 65,070 65,070 4.2- Preparation of project manuals 14,820 14,820 4.3- Implementation and upgrade of an Information System 26,725 26,725 4.4- PMU financial and administrative support 182,284 161,415 20,869 4.5- PMU day to day operation 59,678 59,678 4.6- Supervision and control of PMU activities 56,695 56,695 4.7- Project preparation 382,775 382,775 4.8- Training 4,205 4,205 4.9- Update of the wind power feasability study 22,497 22,497 4.10- Update of project manual 13,000 8,400 4,600 5- Component 5 : MV lines 3,867,510 3,771,990 95,520 5.1- 20 kV line for Arta and Balbala 3,867,510 3,771,990 95,520 6- Component 6 : smart meters 1,996,355 2,005,205 -8,850 6.1 Smart metering pilot project 1,996,355 2,005,205 -8,850 7- Component 7 : Petroleum security stock 4,502,280 4,265,597 236,683 7.1- Security stock and purchase of diesel 4,502,280 4,265,597 236,683 8- Component 8:Technical assistance for security stock 520,856 493,007 27,849 8.1- Consultant for oil matter 70,650 70,650 8.2- Consultant for reglementation 175,591 175,591 8.3- Consultant for financial management 45,000 35,500 9,500 8.4- Environmental expert 28,300 21,933 6,368 8.5- Contract extension for supervision support 53,605 53,605 8.6- Consultant for external audit (2013, 2014 and 2015) 21,350 21,350 8.7- Consultant for procurement, contract extension 1 and 2 58,520 57,440 1,080 8.8- Consultant / expert for geothermal , contract extension 1 30,400 22,325 8,075 8.9- Hiring of procurement expert 37,440 34,614 2,826 Grand Total 18,082,632 17,697,081 376,671
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Annex 3. Economic and Financial Analysis
The economic evaluation of the PADSE comprises separate analyses for the following different components: (i) works on low voltage distribution grids extension in Balbala and PK12 areas, (ii) works on medium voltage grid rehabilitation in Arta, (iii) installation of the remote metering system, and (iv) purchase and use of diesel for power generation and water pumping.
Analysis of the distribution grid extension in Balbala
The analysis includes the actual investment cost of US$ 1.17 million for 3,828 residential and commercial connections to the grid, including capital investment and connection costs, and excluding taxes and duties. It does not include annual O&M costs (estimated 3.5% of investment costs), neither the cost of energy that is provided by EDD’s latest social tariff (Balbala population being mostly urban poor), as follows:
Table 3.1- EDD Tariff structure as of March 31, 2014 (in FDJj)
Category Capacity Max. Unit tariff (FDj / kWh) Residential Social tariffs 1 kVA 27 for the first 200kWh, 62 above 3 kVA 40 for the first 200kWh, 58 above 6 kVA 40 for the first 200kWh, 58 above Residential 9 kVA 48 for the first 210kWh, 55 above > 9 kVA 40 for the first N* kWh, 58 above Industrial and Commercial ≤ 36 kVA 62 (+ monthly fee of 605) > 36 kVA 62 (+ monthly fee of 66 x Capacity) Small Enterprises N.A. 50 Public Lighting N.A. 59 * N = 105 + (5 x Capacity)
New users replaced kerosene lamps or alternative forms of lighting and other uses of energy by electricity, which allowed them to benefit from considerable improvement in everyday comfort and community activities.
Other assumptions for this component are:
Infrastructure installed have an economic life of 20 years;
Residential consumption of electricity in the target area will increase at an annual rate of 3 percent;
Discount rate: 10 percent; Exchange rate: FDj 176.89 per US$.
The cost and benefits analysis for this Balbala grid extension component leads to an economic ERR of 24.1 percent and a NPV of US$ 1.14 million. This result is close to the low oil price scenario of the ex-ante analysis during project appraisal, the difference being in the number of new connections higher than expected.
Analysis of the MV grid rehabilitation in Arta
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Similarly, the analysis for this component includes the actual investment cost of US$ 3.77 million for the rehabilitation of 72 km of 20kV transmission lines and 127 pylons rehabilitated, providing enhanced electricity service – hence, increased power consumption – for the population in Jaban’AS and Weah villages (13,010 and 3,167 respectively).
With similar assumptions on infrastructure lifetime and a retail tariff for the province of Arta at FDj 60/kWh, the economic rate of return for this component reaches 18 percent and NPV equals to US$4 million. The financial analysis, and in particular the combined impact of a lower power generation cost (thanks to the interconnection with Ethiopia) and rehabilitated transmission infrastructure should show a significant positive impact on EDD’s revenues and profits as the electricity consumption will grow in the Arta area.
Analysis of the smart metering component
With a total investment of US$2 million under the project, the analyses estimates the benefits of higher metering, billing and bill recovery rates for the 3,300 clients equipped with the smart meters. The analysis assumes as insignificant the internal savings in EDD’s staff and operational costs, as the staff who formerly were doing the metering have been redeployed inside the commercial services.
With an improvement of 3.5 percent of volume of electricity billed and collected for this smart metering pilot project during the 2013-2014 period, a power demand increasing at a 4 percent per year, a 15 year lifetime for the meters and an information system maintenance cost amounting 5% of its investment cost, ERR for this component is 25.6 percent and corresponding NPV equals to US$ 4.4 million. An extrapolation to all the EDD clients and sensitivity analysis on the electricity demand increase rate could easily provide rationale for the replication of the pilot smart metering activity undertaken in the PADSE.
Analysis of the fuels purchase components
The purchase of US$ 4.29 million equivalent of heavy fuel oil in 2009 was justified by the coincidence of a financial crisis at the utility EDD and a sustained high oil price international context, both events being related. GoDj’ s request to divert the funds initially planned for the wind pilot project to do an emergency fuel purchase has showed that all other alternative scenarios would have been heavily damageable for the national budget (US$ 28 million were already transferred to EDD earlier in 2008) and would have affected the development of all the project components related to EDD. As no record of the underlying assumptions or crisis scenario simulation has been shared with the ICR team, the analysis of its efficiency cannot be conducted. However, by evaluating the volume of fuel purchased by EDD in 2008 and assuming that the GoDj would have purchased fuel in any case to avoid an energy crisis, it is estimated that this emergency fuel purchase under the project has avoided the loss of 0.3 percent of the country’s 2009 GDP.
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Annex 4. Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members
Responsibility Names Title Unit Specialty Lending Anna M. Bjerde Director, Strategy and Operations ECAVP Team Lead Dominique M. Dietrich Language Program Assistant MNSSD - HIS Team Member Klas B. Ringskog Consultant GWADR Team Member Meskerem Brhane Program Leader AFCE2 Team Member Nourredine Bouzaher Senior Energy Economist MNSSD - HIS Team Member Supervision/ICR Abduljabbar Hasan Al Qathab Lead Procurement Specialist GGODR Team Member Alain Bourguignon Consultant GEEDR Team Member Anas Abou El Mikias Sr Financial Management Spec. MNAFM - HIS Team Member Andrew Michael Losos Safeguard Specialist GTIDR Co-Team Lead Angeline Mani Language Program Assistant GEEDR Team Member Chandrasekar Govindarajalu Senior Energy Specialist CASEE Team Member Dahlia Lotayef Safeguards Specialist GENDR Team Member Dominique M. Dietrich Language Program Assistant MNSSD - HIS Team Member Fatou Fall Senior Social Development Spec GSURR Team Member Fowzia Hassan Energy Specialist GEEDR Team Member Frederic Verdol Senior Power Engineer GEEDR ICR Team Lead Gael Gregoire Sr Policy Officer CRKPQ Team Member Georg Caspary Operations Officer CDPPR Team Member Ilhem Salamon Senior Energy Economist GEEDR Team Lead Karim Kamil Fahim Auditor IADVP Auditor Lamis Aljounaidi Junior Professional Associate MNSTI - HIS Team Member Mark Njore Program Assistant GEEDR Team Member Meskerem Brhane Safeguards Specialist AFCE2 Team Member Michael Hamaide Senior Country Officer MNCO1 Team Lead Michelle C. Keane Lead Country Officer LCC8C Team Member Mohamed Mehdi HQ Consultant ST MNAFM - HIS Team Member Philippe R. Roos Consultant MNSEG-HIS Team Member Pierre Audinet Senior Energy Specialist GEEDR Team Lead Reinaldo Goncalves Mendonca Consultant GEEDR Team Member Rock Jabbour Finance Management Specialist GGODR Team Member Roger Coma Cunill Energy Specialist GEEDR Team Lead Siaka Bakayoko Lead Financial Management Spec GGODR Team Member Sydnella E. Kpundeh Senior Program Assistant GENDR Team Member Walid Dhouibi Procurement Specialist GGODR Team Member
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(b) Staff Time and Cost
Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY04 19.01 106.35 FY05 44.04 194.54 FY06 7.50 39.18 FY07 0.00 0 FY08 0.00 0 FY09 9.78 43.2 FY10 0.00 0 FY11 6.31 35.3
Total: 88.63 418.57 Supervision/ICR FY06 13.17 68.87 FY07 13.73 97.15 FY08 24.61 137.69 FY09 34.39 151.92 FY10 23.2 121.27 FY11 22.77 161.12 FY12 18.4 102.96 FY13 29.55 130.54 FY14 14.76 92.59 FY15 17.09 120.93
Total: 211.67 1185.04
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Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR
The completion report for the PADSE was prepared by PMU in March and April 2015; it has been endorsed by EDD’s Management and GoDJ prior sending to the Bank, on April 22, 2015. It provided a thorough documentation regarding project indicators, cost efficiency and financial performance, and lessons learned from the Client’s perspective. The following sections summarize the relevant conclusions reached by the Borrower and included in the report.
Introduction
The Power Access and Diversification Project (PADSE) started in 2005 and after two extensions it has been achieved by the end of 2014. The first phase aimed at extending the access of electricity to the low revenue population in Balbala and should introduce renewable generation with wind power. The second phase had in view also the access of electricity for low income population and the reduction of technical and commercial losses.
Finally, an additional financing has in view the implementation of a diesel security stock for reducing the impacts of droughts on the rural population. A dedicated structure has been set up with a PMU attached to the prime minister and a technical project team within EDD. External consultants have been recruited for specific competences not available locally.
Overall project evaluation
During the first phase, two main events modified the initial plan. First of all, in 2008, the tendering process for the implementation of 3,5-4,5 MW of wind power failed because of the absence of offer; Djibouti’s wind project has been considered too small by international suppliers, focused at that time on larger projects in Europe and Asia, as following figure shows:
- Annual Wind Energy Capacity by region, 2006-2014 (Source: Global Wind Energy Council, 2015)
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2008 has been also a very difficult period for EDD because of the oil price surge. IDA funds (US$4.9 million) have been affected, instead, to an urgent purchase of HFO by EDD for Boulaos power plant in order to avoid a national energy crisis.
The project produced tangible results listed, for the most important ones, in the table below.
Phases 1 Installation 20 kV line 4.9 km LV lines 15.890 km MT/BT stations 6 Public street lights 192 Studies Environmental and Social Impact Assessment Feasibility study for a wind park (Arta) Feasibility study for Arta distribution grid Tendering documents for wind park and Arta grid Project operation manual Reduction of grid losses Improvement of ONEAD (water distribution) commercial activities Optimization of human resources within EDD Purchases 12,056.871 metric tons of HFO for Boulaos Vehicle for the project and for ONEAD Computers and office furniture for the PMU Payments Salary of the accountant Audit AF-1 Installation Arta MV line 24 km Balbala MV line 5 km Balbala LV line 12,35 km Street lights 168 MT/BT stations 6 Smart meters 3400 Data concentrators 14 BPL modems 52 IT system (head end, MDM) 1 EDD investments Test platform 1 TSP (portable terminals for data collection) 17 AF-2 Purchase Diesel 4.5 tons Study Environmental and Social Impact Assessment Security stock regulation
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Social / economic impacts for the grid components
The replacement of the Arta MV line contributes to reduce technical losses, offers additional capacity for Jaban’As zone and enhances the availability of supply for Arta. In addition, water pumping is now secured for Balbala. The risk of accident in Wéah is reduced since the overhead line has been replaced by an underground line in the village. To do that, women installed on the route of the future line have been displaced during construction. A compensation has been given to them for the lack of revenue.
The extension of the MV/LV grid in Balbala offers an access of electricity for several hundreds of families. In addition, many new commercial activities are now installed along the MV line (bakeries, shops, carpentry, hardware …). Mobility and security are also improved thanks to street lights. Children revise their lessons under street lights.
A study has been made to take into account the treatment of old wood poles (they are very toxic if burnt for cooking) and old electromechanical meters.
Lessons learned for the grid components
Time allocated for the project (AF-1), limited by the initial date for ending the parent project, has been insufficient. Modification of the initial plans by EDD caused a need for a contract extension. The contractor made the topological studies from his offices in Paris; He has been obliged to modify them to take into account the reality of the field.
As a consequence, we suggest that preliminary study should be done by EDD who perfectly know the terrain. The international contractor shall demonstrate his capacity to manage local teams in an efficient manner.
Beyond the strict perimeter of the project, EDD invested in portions of lines and in the connection of final customers. This has been very useful to fully take advantage of the project as soon as it has been terminated.
Lessons learned for the smart meter project (pilot)
EDD invested in a test platform and in portable terminals used for supervision and exploitation of smart meters. An intensive communication of the management of EDD and the project team (interviews by local TV, 4 daily spots, press article, web site) to announce the deployment of the smart meters has been instrumental for the adoption of the new system by the clients. A pre-pilot phase has been introduced to optimize the deployment procedures of smart meters. A database describing meters, connection points and MV/LV stations is key for the success of such deployment. The standardization of connections and the replacement of all the breakers have been very important.
The use of Power Line Communication technology has been deeply analyzed during this pilot phase. The rate for meter reading is around 85%. Noises on the electric lines may reduce this rate. EDD has been obliged to invest in a platform for analyzing these disturbances.
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The Data Concentrators are supposed to work with all types of meters. This has not been yet demonstrated. However, beyond 300 meters, a data concentrator cannot maintain a good collection ratio (lack of communication bandwidth). This type of product shall allow for a daily collection of client consumption (billing) but also for the collection of load curves (hourly points) in order to detect frauds. As a consequence, data concentrator should have a task scheduler and a wider communication throughput.
On the MV side, the BPL communication type prevents EDD from using external mobile radio systems (GPRS). With BPL technology, EDD fully master the communications with its billing system. However, this new technology requires skills and experienced technicians that may be difficult to find. Analysis tools and test procedures are needed to investigate problems. In order to improve the availability of the communication system, redundancy has to be introduced to be sure that meters will be read with any topology of the LV distribution grid. A second level of redundancy can be introduced with GPRS. For this new technology also, training of the technical teams is not an option.
The Meter Data Management system is a key and new component for Utilities. The system used in the pilot phase is made of four applications. This situation introduces complexity and low performances for analyzing and displaying data. New procedures for analyzing meter readings and optimization of the task management are important for the day to day operations. The test platform has been very useful for testing new versions and for training the teams.
EDD already invested in the generalization phase of the project by purchasing 5,000 additional smart meters.
Evaluation of the project
The table below characterizes the main deliverables and results of the global project (parent, AF- 1 and AF-2).
Number of direct project beneficiaries (Total number of connections) 3 828 Female beneficiaries 43 % People provided with access to electricity by household connections 26,796 Number of additional connections 1,586 Improved connections, reconnections established in Balbala 2,242 Number of new street lighting units 421 Distribution lines (Medium Voltage 20 kVA) constructed 13 km Distribution lines (Medium Voltage 20 kVA) constructed or rehabilitated 35.39 km Distribution lines ( Low Voltage 400V) constructed (km) 31.17 Distribution lines ( Low Voltage 400V) constructed or rehabilitated 37.91 km Number of annual outage in the Arta corridor 2013 15 Number of annual outage in the Arta corridor Q1 2015 0 Number of days of diesel purchased, stored and maintained 350
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Annex 6. Comments of Cofinanciers and Other Partners/Stakeholders
The following feedback has been provided by a consultant selected by the client (EDD) during the second phase of the project (AF-I). Comments and recommendations provide a cross-view of the project implementation from the Borrower’s side, and are intended to provide areas of enhancements of World Bank processes and practices, in the Djibouti’s particular case.
Client ownership and coordination between the Bank and the Borrower were key for the success of the project
This involvement has been obtained through two different mechanisms:
- For the “smart metering” component, the World Bank project paper stated that some tasks should be locally financed (to the amount of US$ 319,000) in addition to the project budget for this component (US$ 2 million). This clear co-financing involvement of the Borrower has been surpassed, as EDD provided additional resources which were not initially planned (for test platform, portable tool easing the deployment of new additional meters). This avoided requests and discussions for additional funding and delay during implementation.
- For the distribution rehabilitation component, (extension and rehabilitation of the distribution grid) the Client complemented the project funding with all necessary tasks to connect new clients onto the distribution grid. Furthermore, a good coordination with other donors (e.g. AFD) led to extend the initial perimeter of the project (with additional street lighting and additional client connections). The main distribution infrastructure has been financed by PADSE project and the client took care of all the end customer connections (the “last 100 meters”). This has been eased by the firm awarded to install the meters, who accepted to modify its initial plans. More than 20% of additional customers living in Balbala got an access to electricity thanks to the outstanding coordination between donors and EDD.
Project indicators should be easily measurable and reflect the objectives
World Bank projects require to monitor both PDO and intermediate results indicators. To improve the definition of these indicators to make them useful tools from a project management point of view, it would be useful to ensure the Client’s formal endorsement of the results matrix during project preparation.
As an example, the reduction of losses needs to be clearly defined and above all, the method to be used shall be explicit in the project paper. For instance, the losses in a part of the distribution grid could not be easily measured. A formula based on line impedance has been adopted for the Arta segment. For the smart metering component, the reduction of losses could not be calculated. Measures are needed but results will not be obtained at the end of the implementation. Several months will be required after the implementation is completed.
The intermediate results indicators need to reflect the real work and above all, the anticipated difficulties. A percentage on constructed line has no meaning if the Contractor decides first to make all foundations and then erects all the poles, etc. For the smart metering component, it took more time to implement the information system than to deploy meters. For these intermediate
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indicators, it should be useful to update the project document with the planning given by the contractor. This would avoid having to different kind of indicators (Bank and client/contractor).
How to make the level of disbursement a good indicator of the project progress?
Taking the example of the distribution component, it should start with a study/design phase. The cost of this engineering phase was proportionally small compared to the line construction itself. In addition, this phase took more time than forecasted. As a result, the client and the firm contracted have been urged to accelerate their work, leading to technical errors and the revision of this activity. The installation – and disbursement - went relatively smoothly after this episode.
At the contrary, the smart meter component has experienced 90 percent of disbursement for 50 percent of the time needed to implement the project.
Lessons would be, (i) to avoid using disbursement level as a proxy for the progress measurement of activities where it is only expected to disburse at the completion, and (ii) disbursement planning should reflect the real activity with phases with low disbursement (studies) and other phases with a high level of disbursement (purchases). Project planning should have specific key milestones that are important to the client. For instance, recruiting a project director, to complete the design phase and have it approved by the client, to deliver faster all the goods and works.
How to make sure that the project planning reflects the - Bank and client - response time?
When looking at the AF-I, the Project Note published in May 2010 specified a 3 year project (to close in end June 2013). Main steps were the following:
2010 June EOI for a consultant supporting EDD during the tendering process December Request for proposals (consulting companies) 2011 September A consulting firm is selected for drafting bidding documents 2012 January Request proposals for both distribution and smart metering projects December Contracts are signed by the Client 2014 February Contractual end of the projects
The selected Contractors for the projects had less than 40 percent of the total project timeline to implement the project on the ground, due to long procurement processes, that are even longer in small fragile countries.
The main lesson here is the lack of flexibility allowed to the private sector between the announcement of a project by the Bank (June 2010) and the request for proposals (18 month later): only 6 weeks have been given to candidates for preparing an offer and 8 months were taken for the selection and the signature of the contract. As a consequence, since the end project date is a strong constraint, bidders take a high risk that may have consequences on the quality of the deliverables and sometimes on the competition (the distribution component had only one offer; the smart metering had only two).
As a lesson, the project timeframe as identified in the project note / PAD / legal agreements should either take into account the realistic time needed for preparing bids or, exclude this variable and uncontrollable
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period of time. In addition, since World Bank archives have a large number of projects all around the world, a database recording key parameters should provide the TTL with standard values. For instance, the standard time needed for building 20-100 km distribution grid, or the standard cost for 1000 smart meters.
Contractual arrangements should take into account the particular case of a (smart metering) pilot project and protect a future generalization phase
Sizing a project like building a power plant (MW) or a transmission line (km) is relatively straight forward. For a pilot project, the question is not simply a downsizing operation. This is particularly true when Information Systems are involved because the cost of such a system cannot be reduced proportionally to the size of the pilot project. For the smart metering component, this question has been an issue and WB’s experts have not been very comfortable with this matter. Bidders have been forced, in their respective offer, to make the assumption that they will be automatically selected in case of project generalization, so that they would recover a part of their costs later on. But the project funding was limited to the pilot only (this has not been clearly said to candidates). In order to avoid any dumping with the pilot phase (which occurred recently in several African countries with smart meter pilots), the request for proposal issued by EDD asked for two offers: one (firm) for the pilot and another one (option) for the generalization phase. The selection has been made considering these two offers. Following the success of the pilot phase, EDD is now contracting the firm for an extension of the pilot project, based on the same financial conditions.
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Annex 7. List of Supporting Documents
Project Appraisal Document
Mid-term Review
Project Legal Agreements
WB Implementation Status Reports
Aide Memoires
WB Memos
Progress Report submitted by Borrower
Final Report submitted by PMU
‘A New Growth Model for Djibouti’, World Bank report, 2013
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Map
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