Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 54267-EG PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$70 MILLION, Public Disclosure Authorized A CLEAN TECHNOLOGY FUND LOAN IN THE AMOUNT OF US$149.75 MILLION AND A CLEAN TECHNOLOGY FUND GRANT IN THE AMOUNT OF US$0.25 MILLION TO THE Public Disclosure Authorized ARAB REPUBLIC OF EGYPT FOR A WIND POWER DEVELOPMENT PROJECT May 19,2010 Sustainable Development Department Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 31, 2010) Currency Unit = Egyptian Pound (LE) LE 5.56 = US$ 1 USD 0.179 = LE 1 FISCAL YEAR July 1 J June– 30 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement IBRD International Bank for Reconstruction and Development AfDB African Development Bank ICB International Competitive Bidding BOO Build Own Operate IFI International Financial Institution BOOT Build Own Operate Transfer IPP Independent Power Producer BOT Build Operate Transfer KfW German Agency for Development Assistance CAS Country Assistance Strategy kWh Kilowatt hour CASPR Country Assistance Strategy Progress Report LNG Liquified Natural Gas CCGT Combined Cycle Gas Turbine LPG Liquified Petroleum Gas CDM Clean Development Mechanism MENA Middle East and North Africa Region CEPC Cairo Electricity Production Company MMBTU Million British Thermal Units CFL Compact Fluorescent Lamp MoEE Ministry of Energy and Electricity CGC Credit Guarantee Company MIC Middle Income Country CSP Concentrated Solar Power NPV Net Present Value CTF Clean Technology Fund NIB National Investment Bank EEA Egyptian Electricity Agency NREA New and Renewable Energy Authority EEHC Egyptian Electricity Holding Company Mt Million Tons EIRR Economic Internal Rate of Return M/S Meters per second EETC Egyptian Electricity Transmission Company OCC Opportunity Cost of Capital EEUCPRA Egyptian Electric Utilities and Consumer Protection O & M Operation and Maintenance Authority ERA Electricity Regulatory Agency OHTL Overhead Transmission Line EIB European Investment Bank PPA Purchase Power Agreement ELNG Egyptian Liquefied Natural Gas PPIAF Public Private Infrastructure Advisory Facility EMP Environmental Management Plan REA Rural Electrification Agency EPC Engineering, Procurement, and Construction RPF Resettlement Policy Framework ESIA Environmental and Social Impact Assessment SBD Standard Bidding Document ESMAP Energy Sector Management Assistance Program SC Steam Cycle FDI Foreign Direct Investment SOE State –Owned Enterprise FM Financial Management SWH Solar Water Heating FMU Financial Management Unit TA Technical Assistance FY Fiscal Year Tcf Trillion Cubic Feet GDP Gross Domestic Product T & D Transmission and Distribution GEF Global Environmental Facility TOR Terms of Reference GoE Government of Egypt US¢ US cents GWh Gigawatt hour USAID United States Agency for International Development HFO Heavy Fuel Oil W/M2 Watts per square meter JICA Japanese International Cooperation Agency Vice President: Ms. Shamshad Akhtar Country Director: Mr. A. David Craig Sector Director: Mr. Laszlo Lovei Sector Manager: Mr. Jonathan Walters Task Team Leader: Mr. Chandrasekar Govindarajalu FOR OFFICIAL USE ONLY EGYPT. ARAB REPUBLIC OF Wind Power Development Project CONTENTS Page I . STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 A . Country and sector issues .................................................................................................... 1 B . Rationale for Bank involvement ......................................................................................... -9 C . Higher level objectives to which the project contributes .................................................. 11 I1 . PROJECT DESCRIPTION ................................................................................................ 12 A . Lending instrument. ........................................................................................................... 12 ' B . Project development objective and key indicators ............................................................ 12 C . Project components ............................................................................................................ 13 D . Lessons learned and reflected in the project design .......................................................... 15 E . Alternatives considered and reasons for rejection ............................................................. 15 I11 . IMPLEMENTATION ..................................................................................................... 16 A . Partnership arrangements .................................................................................................. 16 B . Institutional and implementation arrangements ............................................................... -16 C . Monitoring and evaluation of outcomeshesults ................................................................ 18 D . Sustainability and Replicability ......................................................................................... 18 E . Critical risks and possible controversial aspects .............................................................. -19 F . Loadcredit conditions and covenants .............................................................................. -20 IV . APPRAISAL SUMMARY .............................................................................................. 21 A . Economic and financial analyses ...................................................................................... -21 B . Technical ........................................................................................................................... 27 C . Fiduciary. .......................................................................................................................... -27 D . Social ................................................................................................................................. 28 E . Environment ...................................................................................................................... 29 F . Safeguard policies .............................................................................................................. 30 G . Policy Exceptions and Readiness ...................................................................................... 30 This document has a restricted distribution and may be used by recipients only in the performance of their official duties . Its contents may not be otherwise disclosed without World Bank authorization . Annex 1: Country and Sector or Program Background .......................................................... 31 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................. 37 Annex 3: Results Framework and Monitoring ......................................................................... 38 Annex 4: Detailed Project Description ...................................................................................... 42 Annex 5: Project Costs ................................................................................................................ 48 Annex 6: Implementation Arrangements .................................................................................. 49 Annex 7: Financial Management and Disbursement Arrangements ..................................... 52 Annex 8: Procurement Arrangements ....................................................................................... 63 Annex 9: Economic and Financial Analysis .............................................................................. 73 Annex 10: Safeguard Policy Issues............................................................................................. 95 Annex 11: Project Preparation and Supervision .................................................................... 120 Annex 12: Documents in the Project File ................................................................................ 121 Annex 13: Clean Technology Fund (CTF) .............................................................................. 122 Annex 14: International Energy Agency Comments and Responses .................................... 133 Annex 15: Statement of Loans and Credits............................................................................. 138 Annex 16: Country at a Glance ................................................................................................ 141 Annex 17: Map IBRD No . 37829 .............................................................................................. 143 EGYPT, ARAB REPUBLIC OF WIND POWER DEVELOPMENT PROJECT PROJECT APPRAISAL DOCUMENT MIDDLE EAST AND NORTH AFRICA MNSSD Date; May 19,2010 Team Leader; Chandrasekar Govindarajalu Country Director: A. David Craig Sectors: Renewable energy (1 00%) Sector ManagerDirector: Jonathan Walters Themes: Climate change (1 00%) Project ID: P113416 Environmental category: B Lending Instrument: Specific Investment Loan Joint IFC: Joint Level: Project Financing Data [XI Loan [ ] Credit [ XI Grant [ ] Guarantee [ 3 Other: For Loans/Credits/Others: Total Bank financing (US$m.): IBRD 70.00, Clean Technology Fund 149.75, Clean Technology Grant