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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED TRUST FUNDED ADDITIONAL FINANCING Report No: ML IN THE AMOUNT OF US$6.5 MILLION FROM THE TRUST FUND TO SUPPORT ENERGY SMALL AND MEDIUM SIZE ENTERPRISES IN SUB-SAHARAN AFRICA AND IN THE AMOUNT OF US$2 MILLION FROM THE AFRICA RENEWABLE ENERGY ACCESS TRUST FUND TO THE REPUBLIC OF MALI FOR A HOUSEHOLD ENERGY AND UNIVERSAL ACCESS PROJECT Energy Team Sustainable Development Department Africa Region August 2011 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 FISCAL YEAR January 1 December 31 ABREVIATIONS AND ACRONYMS AFREA TF Africa Renewable Energy Access Trust Fund AMADER Agence Malienne pour le Développement de l'energie Domestique et d Electrification Rurale BID Development Bank of India BOAD Banque Ouest Africaine de Développement CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Review CREE Commission de Régulation d Eau et d'electricité DA Designated Account DNCPN Direction Nationale de Contrôle des Pollutions et Nuisances DNE Direction Nationale de L'Energie DNEF Direction Nationale des Eaux et Forets (à partir de 2010) DNCN Direction Nationale de la Conservation de la Nature (jusqu au 2009) EDM SA Energie du Mali Société Anonyme EIA Environmental Impact Assessment EMP Environmental Management Plan ESCO Energy Service Company ESMAP Energy Sector Management Assistance Program ESME TF Trust Fund to support Energy SME in Sub-Saharan Africa ESMF Environment and Social Management Framework ERR External Rate of Return FER Fonds d'electrification Rurale FMR Financial Management Report FY Fiscal Year GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse Gas GoM Government of Mali GVEP-I Global Village Energy Partnership International HEURA Household Energy and Universal Access ICB International Competitive Bidding ICT Information and Communication Technologies IDA International Development Association IFR Interim Financial Reports IRR Internal Rate of Return ISA International Standards on Auditing KfW Kreditanstalt fuer Wiederaufbau kw Kilowatt kwh Kilowatt hour LPG Liquefied Petroleum Gas MDG Millennium Development Goals MTEF Medium Term Expenditure Framework ii

3 MW NCB NGO NPV OP RETs PEFA RPF PRSC PRSP PV RFP SCF SHS SME SOE SREP TF Megawatt National Competitive Bidding Non-Governmental Organization Net Present Value Operational Directive Renewable Energy Technologies Public Expenditure and Financial Accountability Resettlement Policy Framework Poverty Reduction Support Credit Poverty Reduction Strategy Paper Photovoltaic Request for Proposal Strategic Climate Fund Solar Home System Small- and Medium-sized Enterprises Statement of Expenditures Program for Scaling Up Renewable Energy in Low Income Countries Trust Fund Vice President: Sector Director: Country Director: Acting Sector Manager: Task Team Leader: Obiageli Katryn Ezekwesili Jamal Saghir Ousmane Diagana Anne Bjerde Koffi Ekouevi This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. iii

4 MALI Trust Funded Additional Financing for the Mali Household Energy and Universal Access Project TABLE OF CONTENTS Page I. Introduction... 1 II. Background and rationale for additional financing... 2 A. Background... 2 B. Project Performance... 4 C. Rationale for Additional Financing... 5 III. Proposed Changes... 7 IV. Consistency with CAS and Trust Funds objectives... 7 V. Appraisal of Scaled-Up Project Activities... 8 VI. Expected outcomes VII. Benefits and Risks VIII. Financial Terms and Conditions for the Trust Funded Additional Financing Annex 1: Detailed Project Description Annex 2: Results Framework and Monitoring Annex 3: Project Costs Annex 4: Economic and Financial Analysis Annex 5: Procurement Arrangements Annex 6: Financial Management and Disbursement Arrangements Annex 7: Safeguards Policy Issues Annex 8: Project Preparation and Supervision Annex 9: Mali at a Glance Table 1: Scaling up energy service delivery projects (ESME TF) Table 2: Scaling up renewable energy technologies (AFREA TF) Table 3: Revisions to the Result s Framework Table 4: Revised Arrangements for Results Monitoring Table 5: Original Credit, Additional Financing and Trust Funded Additional Financing Table 6: Trust Funded Additional Financing by component Table 7: Economic analysis connections, capacity and costs Table 8: Economic analysis benefits, NPV and IRR Table 9: Economic analysis switching values Table 10: Economic results HEURA (original project, IDA AF, TF AF) Table 11: Financial analysis HEURA (original project, IDA AF, TF AF) Table 12: Prior review threshold for goods, works and non-consulting services Table 13: Prior review threshold for consulting services iv

5 MALI TRUST FUNDED ADDITIONAL FINANCING - MALI HOUSEHOLD ENERGY AND UNIVERSAL ACCESS PROJECT PROJECT PAPER Basic Information (Original Project) Project ID: P Project Name: Household Energy and Universal Access Project Team Leader: Koffi Ekouevi Expected Closing Date: June 30, 2012 Environmental category: B - Partial Assessment Lending Instrument: Specific Investment Loan Joint IFC: Joint Level: Basic Information (IDA Additional Financing) Project ID: P Project Name: Additional Financing Mali Household Energy and Universal Access Project Team Leader: Koffi Ekouevi Expected Closing Date: June 30, 2012 Environmental category: B - Partial Assessment Lending Instrument: Specific Investment Loan Joint IFC: Joint Level: Basic Information (Trust Funded Additional Financing) Date: August 1, 2011 Team Leader: Koffi Ekouevi Country Director: Ousmane Diagana Sectors: Power (87%); Public administration- Sector Director: Jamal Saghir Energy and mining (7%); Renewable energy (3%); Acting Sector Manager: Anne Bjerde District heating and energy efficiency services (3%) Themes: Infrastructure services for private sector development (25%); Regulation and competition policy (14%); Rural services and infrastructure (55%); Climate change (3%); Land administration and management (3%) Project ID: P111018, P Lending Instrument: Grant Project Financing Data [ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 8.50 Proposed terms: Environmental category: B - Partial Assessment Additional Financing Type: Scale Up Joint IFC: Joint Level: v

6 Borrower IBRD/IDA AFREA Trust Fund ESME Trust Fund Private Sector Total Financing Plan (US$m) Source Local Foreign Total Borrower: Republic of Mali Responsible Agency: Agence Malienne pour le Developpement de l'energie Domestique et d'electrification Rurale (AMADER) Batiment CRES, Badalabougou, B.P Mali Tel: (223) Fax: (223) Estimated disbursements (Bank FY/US$m) FY FY11 FY12 Annual Cumulative Project implementation period: Start: August 1, 2011 End: June 30, 2012 Expected effectiveness date: August 1, 2011 Expected closing date: June 30, 2012 Does the project require any exceptions from Bank policies? Have these been approved by Bank management? Does the project include any critical risks rated substantial or high? [ ]Yes [ X ] No [ ]Yes [ ] No [ ]Yes [ X ] No Project development objective: The Trust Funded Additional Financing will have the same objectives as the original project, which is to support the Government of Mali s efforts to increase access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs). Project description The proposed Trust Funded Additional Financing will support the initial development objective of the Household Energy and Universal Rural Access (HEURA) Project. The proposed project will strengthen Component 1 (Capacity Development and Institutional Strengthening) and Component 2 (Energy Services Delivery) of the original project. No new trust funded activities are planned under Component 3 (Household Energy). Which safeguard policies are triggered, if any? No new safeguard policies have been triggered. The project s existing safeguard policies applicable to the Trust Funded Additional Financing are: Environmental Assessment (OP/BP 4.01), Forests (OP/BP 4.36) and Involuntary Resettlement (OP/BP 4.12). vi

7 I. INTRODUCTION 1. This Project Paper seeks the approval of the Country Director to provide a Trust Funded Additional Financing in an amount of US$8.50 million to the Republic of Mali for the Household Energy and Universal Access (HEURA) Project - (P073036), (Cr. 3828). The original Credit supporting the HEURA Project, in the amount of SDR million (US$35.65 million equivalent) with a GEF Trust Fund of US$3.50 million was approved on November 4, The Credit became effective on October 13, 2004 and benefited from an additional IDA credit (P111018), (Cr ML), in the amount of SDR million (US$35.00 million equivalent) which became effective on January 5, The HEURA Project, executed by the rural energy services agency, Agence Malienne pour le Developpement de l'energie Domestique et d Electrification Rurale (AMADER), has performed satisfactorily since its approval in The Government of Mali (GoM) had requested additional financing through two trust funds to scale up rural energy activities of the project. 2. Grant financing to scale up the project s impact and development effectiveness will be provided from the following two trust funds: (i) US$2.00 million from the AFREA TF (Africa Renewable Energy Access Trust Fund TF080138) 1 the Kingdom of the Netherlands contribution to the ESMAP Clean Energy Investment Framework Multi Donor Trust Fund and (ii) US$6.50 million from the recipient executed window of the ESME TF (Trust Fund to support Energy Small and Medium Size Enterprises in Sub-Saharan Africa TF071223) 2 donated by the Government of Russia. A parallel co-financing in the amount of US$0.5 million will be provided from the ESME TF through a recipient executed grant to Global Village Energy Partnership International (GVEP-I) to provide technical assistance. A second parallel co-financing in the amount of US$0.4 million will be provided from the AFREA TF in the context of the ESMAP Gender & Energy Development Strategies Program. About US$4.30 million will be leveraged from the private sector. 1 The AFREA program is managed by AFTEG and funded through a contribution from the Kingdom of the Netherlands to the ESMAP CEIF (Clean Energy Investment Framework) Multi Donor Trust Fund (MDTF) recipient executed and technical assistance window. The AFREA TF is designed to complement and support ongoing World Bank renewable energy sector operations in Sub-Saharan Africa, focusing on activities that (i) directly support and/or create enabling conditions for increased renewable energy investments, (ii) and expanding access to electricity related to renewable energy and (iii) help strengthening and mainstreaming the application of gender sensitivity guidelines and tools in rural energy services. A Technical Assistance for Gender in Energy Solutions program will support implementation of ESMAP s Gender and Energy Development Strategy Program. This program is working within the ESMAP/Energy sector and regional teams to identify opportunities for gender integration into project and program work. In delivering this technical assistance program, a SWAT Team consisting of international, regional and national energy and gender experts has been identified, who will provide just-in-time assistance to on-going ESMAP activities. 2 The ESME program is managed by AFTEG and funded by the Government of Russia. The objective of the ESME TF is to foster local private sector entrepreneurship and investment in the provision of energy services in remote, unserved and under-served regions within a number of Sub-Saharan African countries. Activities funded under the ESME program comprise recipient executed activities and technical assistance to small and medium sized enterprises and rural electrification agencies with support from the Global Village Energy Partnership International (GVEP-I). 1

8 3. The proposed Trust Funded Additional Financing to the HEURA project would allow the implementation of scale-up activities towards achieving a greater impact on the ground by (i) scaling up rural energy access with a focus on renewable energies; (ii) by financing a strategic capacity development and technical assistance program to further strengthen the technical and managerial capacities of AMADER and local energy service companies (ESCOs), and (iii) by promoting partnerships between AMADER and other energy sector initiatives at the national, regional, and global levels in view to attract future financing to scale up, in a sustainable manner, energy access expansion and productive energy uses in Mali. 4. This Trust Funded Additional Financing will not change the development objective and implementation modalities of the HEURA Project. In line with the objectives of the AFREA TF and ESME TF, the proposed project will strengthen two components of the ongoing HEURA Project, the HEURA Energy Services Delivery Component and the HEURA Capacity Development and Institutional Strengthening Component, respectively. No trust funded activities are planned under the HEURA Household Energy Component. A detailed project description is provided in Annex 1. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING A. Background 5. Main sector issues: To meet the country s goal of accelerated and shared growth, three main challenges have to be addressed in the energy sector: (i) a successful restructuring of EDM SA to become a financially viable and operationally efficient utility; (ii) an adequate supply of electricity to meet the growing demand of about 10 percent per annum; and (iii) a sustained energy access expansion in rural and peri-urban areas to support productive activities and to enhance social programs. 6. With an overall electricity access rate of 25 percent in the country and only 13 percent access rate in rural areas, there are tremendous opportunities for both grid-based and decentralized programs for expanding access to energy services. Progress made so far through the Bank-financed Household Energy and Universal Access (HEURA) Project should be sustained. This would not only ensure that an increasing number of connections are made to households, but also that energy services can enable competitiveness of small- and medium-size enterprises and social programs, thus facilitating the achievement of the Millennium Development Goals (MDGs). The additional financing to the HEURA Project of US$35 million, approved by the Board in September 2008 is expanding decentralized initiatives for energy access expansion. It is expected that reinforcement of EDM SA s transmission and distribution networks through the Mali Energy Support Project approved in June 2009 will create important grid-based opportunities to scale up energy access expansion in the country. To that end, the GoM has prepared several strategy documents aiming at an ambitious access expansion program. 7. The Government of Mali has shown political will and commitment to promote rural energy access. A national strategy for the development of RET in Mali was launched by the GoM in 2005, followed by a national strategy on biofuels in The GoM s rural energy access agenda aims to create an enabling environment to attract energy service companies (ESCOs) in rural energy service delivery schemes. The National Energy Sector Policy Letter was 2

9 adopted in March It is focusing on the following main objectives: (i) to provide wide access to rural energy services at an affordable cost; (ii) to develop all available renewable energy sources; and (iii) to promote access to finance. In addition, Mali has been selected on June 22, 2010, as a pilot country of recently established Program for Scaling up Renewable Energy in Low Income Countries (SREP) 3 to promote options to support a low-carbon and climate-resilient development. It is expected that Mali will develop and ambitious renewable energy program through this process. 8. The mission of the rural energy services agency is to improve access to electricity and household energy in rural and peri-urban areas. The GoM recognizes that in order to accelerate energy access expansion in rural areas in a sustainable manner, it is critical to develop a combination of an institutional (legal and regulatory) framework and tools (technical, economic and financial) adequate to attract private investors and operators. Supported by the HEURA Project, the GoM established the rural energy services agency, Agence Malienne pour le Developpement de l'energie Domestique et d Electrification Rurale (AMADER) in 2003 and a rural electrification fund, Fonds d' Electrification Rurale (REF), which is managed by AMADER since The GoM set a target to increase the share of RET in the national energy mix, 10% in 2015 and 15% in 2020 respectively. 9. Over the last seven years, AMADER successfully launched pilot projects to promote the development of decentralized energy services. Access to the rural electrification fund combined with AMADER s technical assistance (TA) has attracted almost 50 local energy service companies (ESCOs) to the rural energy service delivery business. These ESCOs obtained off-grid concession for a period of 15 years and have tested through their pilot projects both market appetite and different technical and institutional arrangements with highly positive results. A generation capacity of more than 7 MW has been installed through a bottom up rural electrification approach, serving about 50,000 households and community institutions. These pilots have demonstrated: (i) the affordability of energy services in rural areas; and (ii) the interest of rural populations and local ESCOs in the energy services delivery business. To date, the REF has received more than 200 spontaneous project proposals from local ESCOs and community initiatives. To satisfy this growing demand, AMADER signed in September 2009 an agreement with local ESCOs to provide energy services in two large concession areas in the Ségou and Mopti region (US$7 million) with funding from the German development bank KfW. AMADER also submitted funding requests in this regard to Japan (US$7.7 million), Italy (US$10.2 million), the Development Bank of India BID (US$11 million) and the West African Development Bank BOAD (US$27.4 million). 10. Renewable energy technologies have been successfully introduced into Mali s rural energy mix. With support from the Global Environmental Facility (GEF) 4, AMADER launched in 2004 rural energy service delivery schemes based on RET, aiming at reducing GHG emissions 3 The SREP, established as a targeted program under the Strategic Climate Fund (SCF) aims to pilot and demonstrate in low income countries, as a response to the challenges of climate change, the economic, social and environmental viability of low carbon development pathways in the energy sector by creating new economic opportunities and increasing access through the use of renewable energy. 4 GEF provided US$3.5 million from , in line with the objectives and activities under the HEURA. Household SHS had an installed capacity of up to 50 Wp, whereas institutional PV systems had an installed capacity of up to 800 Wp. 3

10 and promoting the wider use of clean energy technologies. Over a period of 6 years, more than 8100 individual solar home systems (SHS) and institutional solar photovoltaic (PV) systems were installed countrywide. Partnerships with UNDP, the German technical cooperation GTZ and CNESOLER, the Malian National Centre for Solar & Renewable Energy, were established to accelerate the deployment of solar energy technologies. AMADER s review of these pilot projects 5 proposed to include the following key points in future solar energy projects: (i) improve access to finance, (ii) reduce upfront investment costs, (iii) promote productive energy uses and, (iv) strengthen training and research. The proposed project will built on these lessons learnt. B. Project Performance 11. The HEURA Project has performed satisfactorily since approval. Overall implementation progress and development objectives ratings have been consistently satisfactory since As of November 30, 2010 about 54,415 off-grid connections in households and for public lighting have been made to provide electricity access to about 650,000 persons. In addition, through the project, about 825 public institutions,181 schools and 145 health centers have also been provided off-grid electricity access. This is also reflected by the steady increase of the project s disbursement curve. As of March 15, 2011, percent of the original credit and percent of the additional financing credit had been disbursed. 12. The project has succeeded in strengthening technical and managerial capacities at AMADER and in main sector institutions. These sector institutions include the National Directorate of Energy, Direction Nationale de l Energie (DNE), the Water and Energy Regulatory Agency, Commission de Régulation d Eau et d Electricité (CREE), and the National Directorate of Nature Conservation, Direction Nationale de la Conservation de la Nature (DNCN). The energy services delivery component is the driving force of the project. It has succeeded in developing an adaptive and multi-layered approach to rural energy - combining bottom up spontaneous small concessions with top down planned large concessions. With the bottom up approach, 80 sub-projects proposed by 46 local private operators have been financed so far and a growing pipeline of more than 200 business plans is under development. Local private operators have provided an average matching co-financing of 25 percent of the financed schemes. 13. Women s associations are also playing an important role in remote communities as providers of energy services 6. They manage multifunctional platforms 7 electrification initiatives after receiving training in basic accounting in local languages provided by NGOs financed through the project. To date, multifunctional platforms have been installed in 64 communities. 14. Implementation of the household energy component has been at a slower pace. The rate of physical progress of the woodland management initiatives is slow compared to that of rural electrification initiatives. However, an encouraging trend associated with the household 5 AMADER 2009 HEURA GEF Report 6 Burn N and Coche L (2001), Multifunctional Platform for Village Power Mali, in Generating Opportunities: Case Studies on Women and Energy, Misana S and Karlsson K (eds), UNDP, New York. 7 A multifunctional platform is composed of a small 10 kw diesel engine coupled to a generator. The platform can be connected to income generating equipment, such as cereal grinding mills, battery charger, dehuskers, and water pumps, or generate electricity that can be distributed through a micro-grid to households. 4

11 energy component is that of an increasing collection of forest revenues due to better law enforcement by both forestry officials and local communities. Through the woodfuels supply master plan, about 947,202 hectares have been placed under sustainable management and 282 rural wood markets had been created as of November 30, The experience with rural wood markets indicated that emphasis should be placed on ensuring their efficiency and sustainability rather and increasing their numbers. 15. Highly satisfactory progress has been made in the dissemination of improved stoves and low consumption lamps. As of November 30, 2010, 910,000 improved stoves had been disseminated. Similarly, 600,000 low consumption lamps have been disseminated. However, adoption of LPG stoves, briquettes, and kerosene stoves are following a slow curve. Consumers are switching very slowly to these devices either due to affordability or convenience reasons. Promotion campaigns are going on to convince household on the benefits of improved cooking stoves. 16. Benefits of access to modern energy services in rural and peri-urban areas are wideranging. The availability of modern energy services in rural communities is allowing children to do their homework at night, women to deliver babies more safely at night, and a whole range of income generating activities are emerging - from ice making, food processing to rural telephony, with markets open at night for business. C. Rationale for Additional Financing 17. AMADER s bottom up rural electrification approach needs to be complemented by projects of larger scale, including renewable energy technologies. The majority of energy service companies (ESCOs) have implemented business models based on isolated solar home systems (SHS) and conventional diesel fueled micro-grids with installed generation capacities mainly below 20kW. While considerable momentum has been created by these small scale energy service delivery projects, further interventions are needed which - by delivering higher amounts of power - have a potential to accelerate rural energy access and productive energy uses and may as well attract new sources of financing. It is essential for AMADER to start developing - in addition to small scale energy service delivery schemes projects of larger scale in villages where off-grid customers are concentrated enough to be economically interconnected. The strengthening of modern, affordable and renewable energy technologies in AMADER s existing portfolio is expected to leverage future funding from the private sector, international and bilateral donors and carbon markets. 18. Partnerships between AMADER and other energy sector initiatives at the national, regional, and global levels need to be strengthened to attract future financing to scale up, in a sustainable manner, energy access expansion and productive energy uses in Mali. AMADER s partnership initiatives that will benefit from capacity building and technical assistance under the Trust Funded Additional Financing will include the following partnerships: (i) Lighting Africa 8, which is a joint World Bank/IFC initiative to mobilize the private sector to 8 On October 6, 2010 AMADER signed a Memorandum of Understanding with the Lighting Africa team to initiate the development of a portable solar lantern market in Mali. Initially, the focus will be on development of a quality seal, in line with AMADER s existing work on promoting quality products, and piloting the lanterns in selected 5

12 provide clean, affordable, and quality off-grid lighting to people without access to electricity in Sub-Saharan Africa, (ii) Millenium Villages Project Mali, which is a joint UNDP/Millenium Promise Mali/Columbia University Earth Institute initiative for helping the Millenium Villages in the Segou region of Mali to fight poverty at the village level through community-led development in view of achieving the MDG, and (iii) Nyeeta Finance S.A., which is a Malian micro-finance institution with the objective of developing and testing target short and medium term loans for productive energy uses in rural areas of Mali. To stimulate renewable energy access and the development of productive energy uses and income generating activities, the proposed project will emphasize on capacity building, training and strengthening of the above mentioned partnerships. 19. In particular partnerships with the local banking sector need to be strengthened to stimulate income generating activities following electrification. Experiences from the HEURA Project have shown that if energy services are delivered at an affordable cost and capacity building is provided, rural initiatives are highly interested in expanding economic activities, resulting in higher revenues. Experiences in rural electrification in Mali have however demonstrated that productive energy uses are not spontaneously induced, when energy services start to be delivered in an off-grid area. One main barrier is access to finance for local ESCOs and microenterprises, in case these do not have sufficient investment capital, and a lack of enduser finance schemes for households to accelerate access to basic energy services. A recent financial sector review (World Bank/IMF 2008) and a study on financing in rural areas of Mali (World Bank, 2008) concluded that the availability of funds for investments and productive activities is one of the key limitations for rural households and SMEs. According to these studies less than two percent of rural households in Mali have access to institutional financing, as the banking sector is essentially concentrated in the capital city of Bamako. Similarly, only six of the country s 52 networks of microfinance institutions provide rural financing. Local micro finance institutions (MFI) established in rural Mali, such as Kafo Jiginew and Nyesigiso, do not yet include targeted short and medium term loans for productive energy uses in their lending portfolios. The proposed project will thus strengthen the locally grown partnership between AMADER and Nyeeta Finance S.A. 9 to provide capacity building and technical assistance for the MFI in order to develop and to test commercially viable business models for productive uses of energy, targeting income generating equipment for households and access to working capital for local microenterprises. 20. The proposed Trust Funded Additional Financing is fully aligned with the successfully established frameworks and implementation arrangements of the original project. The implementation of additional and expanded trust funded activities will scale up the impact and development effectiveness of the existing project. Project activities will contribute to the GoM s efforts to enhance accelerated and shared growth through the provision and expansion of renewable energy technologies (RET) in rural areas. The proposed scale and technology of RET minigrid electrification will be piloted in Mali, therefore benefitting from grant resources. The project will also continue to support the institutional strengthening of AMADER and other concession areas, including consumer awareness campaigns and assistance to service providers for adding portable solar lanterns to their product offerings. 9 Convention n09-058/meme-amader-dg-der entre AMADER et Nyetaa Finances, relative à la valorisation de l électrification et la mise en œuvre de projets d énergie renouvelable en milieu rural au Mali, Mars

13 energy sector institutions. In cooperation with the ESMAP s Gender and Energy Development Strategy Program, a gender impact assessment will be carried out to provide guidance on how to strengthen and mainstream energy and gender sensitive aspects of the project. The Trust Funded Additional Financing will provide necessary funds to further strengthen the monitoring and evaluation systems in terms of quality and efficiency of data collection and use in decisionmaking and policy development. A detailed project description is provided in Annex 1. III. PROPOSED CHANGES 21. Project Design: The original project design with its three components remains unchanged. The Trust Funded Additional Financing would support the original development objective and would be implemented using the same frameworks and implementation arrangements as established under the original project. No extension of the closing June 2012 date is required. In line with the objectives of the AFREA and ESME trust funds, the proposed Trust Funded Additional Financing will strengthen two components of the ongoing HEURA Project: the Energy Services Delivery Component and the Capacity Development and Institutional Strengthening Component. In particular, the Trust Funded Additional Financing to HEURA would allow the implementation of scale-up activities towards achieving a greater impact on the ground by (i) scaling up rural energy access with a focus on renewable energies; (ii) by financing a strategic capacity development and technical assistance program to further strengthen the technical and managerial capacities of AMADER and local energy service companies (ESCOs), and (iii) by promoting partnerships between AMADER and other energy sector initiatives at the national, regional, and global levels in view to attract future financing to scale up, in a sustainable manner, energy access expansion and productive energy uses in Mali. 22. Results Framework: The project development objective remains unchanged: the proposed Trust Funded Additional Financing will continue to support the Government of Mali's efforts to increase the access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs).The original outcome indicators in the project s results framework were revised in order to include additional indicators for the monitoring of renewable energies and harmonize existing indicators with the newly established IDA core indicators for energy sector operations. IV. CONSISTENCY WITH CAS AND TRUST FUNDS OBJECTIVES 23. Consistency with CAS: The original project and the proposed Trust Funded Additional Financing are consistent with the strategic priorities set out in the current Country Assistance Strategy (CAS, Report No , December 12, 2007) and the PRSP II. They support the longterm country development objective set out in the first pillar of the CAS - developing infrastructure and strengthening productive sectors. The project fits well within the CAS and PRSPII objectives by aiming to put in place policy, institutional and financing frameworks to increase access of energy services in rural and peri-urban areas with the participation of private entrepreneurs. Indeed, access to energy services is crucial in the enhancement of quality of social sectors as well as the competitiveness of productive sectors. 7

14 24. Consistency with AFREA TF objectives: The AFREA TF is designed to complement and support ongoing World Bank renewable energy sector operations in Sub-Saharan Africa, focusing on activities that (i) directly support and/or create enabling conditions for increased renewable energy 10 investments, (ii) expand access to electricity related to renewable energy and (iii) help strengthening and mainstreaming the application of gender sensitivity guidelines and tools in rural energy services. This project is in line with the AFREA objective of funding activities that would help accelerate preparation and implementation of electrification subprojects based on renewable energy technologies (RET) to expand energy access in Sub-Sahara Africa. In particular, the proposed activities under component 2.2 will: i) improve both the capacity of AMADER and local ESCO to identify, design, and implement renewable energy projects; ii) catalyze increased investment in renewable energy; and iii) expand access to renewable based modern energy. The proposed Trust Funded Additional Financing will help strengthening energy and gender sensitive aspects of the HEURA Project through various tools, such as gender impact assessment and gender capacity building and training. 25. Consistency with ESME TF objectives: The objective of the ESME TF is to foster local private sector entrepreneurship and investment in the provision of energy services in remote, unserved and under-served regions within a number of Sub-Saharan African countries. The aim is to support the establishment and development of stable and viable privately run enterprises and business models based on expectations of the public and users that will increase access to reliable, sustainable, and affordable modern energy services in peri-urban areas, small towns and rural areas within the selected countries. This project therefore fits well into the above stated objectives of the ESME TF. Specifically, this project will finance activities to increase access to modern energy services in rural and peri-urban areas isolated from the main infrastructure networks through the increased involvement of local private sector operators (ESCOs) in the decentralized supply of energy services. There will be a particular focus on building the capacity of the local private sector to develop and manage energy service delivery and utilization. AMADER will be responsible for the implementation of project activities. Selected studies, technical assistance and communication activities, targeted to ensure the long term economic and financial sustainability of decentralized energy services, will be implemented by AMADER in collaboration with GVEP-I. V. APPRAISAL OF SCALED-UP PROJECT ACTIVITIES 26. Technical and Institutional Analysis: There are no major technical issues foreseen as on-going activities have been implemented with satisfactory results since approval of the original project in With support from the Trust Funded Additional Financing the implementation of activities aims to make greater impacts on the ground. AMADER has already a built successful track record in diesel-fueled and SHS rural electrification schemes for which capacity already exists. First pilot RET mini-grids (solar and bio-fuels) have been implemented and a pipeline of RET expansion projects has been identified, including interested private sector operators. Regarding particularly energy services delivery, the principle adopted will continue to be a technology-neutral approach, looking for reasonable and cost-effective solutions to both providers' and customers' needs. The Trust Funded Additional Financing will further strengthen 10 Renewable energy includes hydropower of all sizes, wind, biomass, geothermal, and solar energy in all its forms. 8

15 the technical capacity of AMADER s staff and provide required training to local energy service companies (ESCOs). A detailed project description is provided in Annex Implementation Arrangements: The Trust Funded Additional Financing will be implemented using the same institutional and financial arrangements as the original project. AMADER will be responsible for the overall project coordination, building on management capacity already in place with trained staff and established management, procurement, and financial management systems. AMADER will continue to work closely with all institutions involved in the project. All investments and activities should be completed by March 31, Therefore the closing dates of both the original and the additional IDA Credits and the Trust Funded Additional Financing are proposed to be June 30, 2012, resulting in a cumulative project lifetime of about 8 years from the Board approval on November 4, Within the successfully established rural electrification framework, trust funds will be matched with private sector investments from local ESCOs to provide additional financing to scale up rural energy projects. AFREA and ESME grants aim at promoting the wider use of clean, renewable energy technologies and will be awarded to ESCOs with a proven track record in the implementation of energy service delivery schemes under the rural electrification fund (REF). Established ESCOs are operating under rural electrification concessions contracts for an average of 3 years and satisfy AMADER s technical, commercial and monitoring requirements. Initial investment subsidies are designed to make compatible acceptable tariffs for rural customers and financial rate of return for the ESCO. Investment subsidies will be limited to 70-80% and established on the number of customers to be connected during the first two years, the average tariff and the cost of investment by connected off-grid customer. No subsidies for energy consumption will be paid. A pipeline of projects and a sufficient number of experienced ESCOs has been identified to provide private sector finance equivalent to 20-30% of investment costs. AMADER will hire additional technical staff to provide technical assistance to ESCOs and ensure sound implementation of rural energy projects. In collaboration with GVEP-I, AMADER will carry out selected studies, technical assistance and communication activities, targeted to increase private sector finance and ensure the long term economic and financial sustainability of decentralized energy services. 29. Economic and Financial Analysis: The economic and financial analysis of the project has shown robust results. An economic analysis has been undertaken which combines the costs and benefits for the overall project. On this basis, the economic net present value (NPV) is about US$4 million and the economic rate of return is estimated at 30 percent at a 12 percent discount rate. The financial NPV is positive at US$1.7 million and the financial rate of return is 17%. This calculation does not take into account environmental benefits that would derive from green house gas mitigation. Project costs are presented in Annex Environmental and Social Safeguards: The original project was classified as a Category B (Partial assessment) project. An Environment and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF) were prepared and disclosed on May 2, 2003 before its appraisal. During the preparation of the IDA Additional Financing, ESMF and RPF were updated, reviewed and approved by World Bank safeguard specialists in Both frameworks, the project s ESMF and RPF, were re-disclosed in-country and in the Info Shop on 04/14/2009. The Trust Funded Additional Financing for Mali HEURA, as the original project 9

16 remains a Category B operation, predicated on the fact that project s objectives and components description remained unchanged. That is, the potential environmental and social impacts of envisioned activities, for the most part, are projected to be minimal, site-specific and manageable to an accepted level. Similarly, because project components remain the same, the safeguard policies applicable to this operation remain OP/BP 4.01, OP/BP 4.36, and OP/BP 4.12, defined as Environmental Assessment, Forests and Involuntary Resettlement, respectively. No new safeguards policies are triggered. A full description of environmental and social safeguards issues is provided in Annex Financial Management: The Trust Funded Additional Financing will be implemented using the same institutional and financial arrangements as the original project. AMADER will continue to be responsible for the overall project coordination. The financial management arrangements for the additional financing will be based on the existing arrangements in place under the ongoing projects. The overall performance of the HEURA project in financial management is satisfactory as substantiated by the last supervision mission in December Staffing has remained adequate and proper books of accounts and supporting documents have been kept in respect of all expenditures. The audit for the year ended December 2009 for the project was submitted on time, and was unqualified. The interim un-audited financial reports for the on-going project are also submitted on time and the quality of reports is being improved. 32. Procurement: The procurement functions for the Trust Funded Additional Financing will be handled by AMADER which has an acceptable expertise in procurement under the World Bank procedures. Procurement will follow World Bank Guidelines: Procurement under International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits dated May 2004 and revised in October 2006 and in May 2010, and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004 and revised October 2006 and in May 2010 and the provisions stipulated in the Legal Agreement. The procurement unit of AMADER is staffed with a Procurement Specialist who has been following the Bank's procedures since 2002, for the procurement operations of the HEURA project. Procurement issues and risks concerning the procurement component for implementation of the Trust Funded Additional Financing have been identified and corrective measures which have been agreed on. The overall project risk for procurement is moderate. A full description of procurement aspects is shown in Annex Policy Exceptions and Readiness: No policy exceptions are being sought. VI. EXPECTED OUTCOMES 34. Activities to be undertaken as part of the Trust Funded Additional Financing will scale up those of the IDA financed original and additional project and contribute to strengthen their impact. Key project outcome indicators and intermediate outcome indicators have been revised to better capture performance of the original and the additional financing to the project in alignment with the harmonization exercise of results measurement at the regional level. The detailed results framework is presented in Annex 2. 10

17 VII. BENEFITS AND RISKS Benefits 35. The Trust Funded Additional Financing will help increase the target number of communities with access to the benefits of modern energy services. In line with the original project, there are direct and indirect benefits associated with the different project interventions. Access to modern energy is likely to enhance the quality and efficiency of health and education facilities in rural areas as well as the productivity of small rural enterprises. An important direct benefit associated with the availability of modern energy services is the reduction of time spent mainly by women and children in basic survival activities. They can devote more time to educational, productive and recreational activities with the availability of modern energy services. In terms of indirect benefits, improvements in the availability and quality of energy services to small enterprises and communities can indirectly benefit the poor by creating jobs - both farm and non-farm; which helps reduce overall unemployment pressures, and opens up more possibilities for livelihood diversification and retention of teachers in rural areas. 36. The Trust Funded Additional Financing will help strengthening the institutional capacity of AMADER and selected ESCOs. The immediate benefits from the trust funded activities include an increased flow of strategic and technical knowledge to local private energy companies (ESCOs), an improved legal and regulatory operating environment for SMEs, and an improve public and private financing environment to support rural energy projects. The ultimate benefits include strengthened capacity of AMADER to support ESCOs in their day to day business. Risks 37. Relatively weak implementation capacity of AMADER to scale up energy services delivery initiatives and productive energy uses. The experience of the original project demonstrated AMADER s technical and managerial skills to manage rural energy sub-projects effectively. In a scale up situation however, there is a need to strengthen AMADER with external technical expertise to ensure that it standard of performance continues to be sound and that optimal low costs choices are being made. AMADER, in collaboration with GVEP-I, will evaluate and develop existing potentials of financing options within the banking sector to enhance the long term economic and financial sustainability of rural energy service delivery initiatives and productive energy uses. The study will also examine possible opportunities that increased donor funding for renewable energy and carbon markets might open up for energy businesses and investors. 38. Slow momentum among local private operators in energy services delivery subprojects. Weak managerial expertise and slow return on investment could reduce the momentum among local private operators in energy services delivery sub-projects. Specific capacity reinforcement is key to help them improve on their business plans preparation and implementation. AMADER will need to be adaptive to the constraints faced by local private operators and provide the necessary technical support. 11

18 39. Uncertainty of institutional and financial sustainability of AMADER. For AMADER to continue attracting donor financing for its activities, basic conditions of institutional and financial sustainability have to be met. Through the implementation of this Trust Funded Additional Financing AMADER will need to work with the Government to create the necessary conditions and mechanisms for sustainability. 40. Increasing political interferences in AMADER with the selection of sub-projects. The expectations generated by the original project are high and for AMADER, there is a risk of political interferences with the choice of sub-projects to direct them to locations that might not be economically viable. AMADER will need to reinforce its project selection criteria and make it public to local operators. Close supervision of the Bank during the preparation of trust funded activities ensured that AMADER respected these technical criteria in the selection of subprojects. 41. Adverse social and environmental impacts associated with rural energy projects. It is anticipated that there will be no cumulative negative impacts. An Environmental Social Management Framework and a Resettlement Policy Framework are in place, disclosed before project appraisal per Bank procedures. An environmental expert at AMADER s project coordination unit is overseeing institutional arrangement for social and environmental management. VIII. FINANCIAL TERMS AND CONDITIONS FOR THE TRUST FUNDED ADDITIONAL FINANCING 42. Not applicable 12

19 Annex 1: Detailed Project Description Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project A. HEURA Project Overview 1. The Household Energy and Universal Rural Access (HEURA) Project supports the Government of Mali's efforts to increase the access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs). The development objectives are: (i) accelerating the use of modern energy in rural and peri-urban areas in order to increase productivity of small and medium enterprises, to enhance the quality and efficiency of health and education centers, and to improve living standards; (ii) promoting further community-based woodland management to reduce un-sustainable pressure on forest resources while simultaneously encouraging interfuel substitution and energy efficiency initiatives; and, (iii) strengthening energy sector reform processes and related institutions to create a favorable investment environment for increased private sector participation in decentralized energy services delivery in rural and peri-urban areas. 2. The original Credit supporting the HEURA Project, in the amount of SDR million (US$35.65 million equivalent) with a GEF Trust Fund of US$3.50 million was approved on November 4, The Credit became effective on October 13, 2004 and benefited from an additional IDA credit (P111018), (Cr ML), in the amount of SDR million (US$35.00 million equivalent) which became effective on January 5, The HEURA Project has performed satisfactorily since approval. Overall implementation progress and development objectives ratings have been consistently satisfactory since This is also reflected by the steady increase of the project s disbursement curve. As of October 1, 2010, percent of the original credit and percent of the additional financing credit had been disbursed. 3. The project has succeeded in strengthening technical and managerial capacities at AMADER and in main sector institutions. These sector institutions include the National Directorate of Energy, Direction Nationale de l Energie (DNE), the Water and Energy Regulatory Agency, Commission de Régulation d Eau et d Electricité (CREE), and the National Directorate of Nature Conservation, Direction Nationale de la Conservation de la Nature (DNCN). The energy services delivery component is the driving force of the project. It has succeeded in developing an adaptive and multi-layered approach to rural energy - combining bottom up spontaneous small concessions with top down planned large concessions. With the bottom up approach, 46 sub-projects proposed by local private operators have been financed so far and a growing pipeline of more than 200 business plans is under development. Local private operators have provided an average matching co-financing of 25 percent of the financed schemes. As of November 30, 2010 about off-grid connections in households and for public lighting have been made to provide electricity access to about 650,000 persons. In addition, through the project, about 825 public institutions, 181 schools and 146 health centers 13

20 have also been provided off-grid electricity access. This is also reflected by the steady increase of the project s disbursement curve. B. Ongoing Activities of the HEURA Additional Financing Credit 4. Main activities conducted under the HEURA additional financing credit are summarized below: 5. Component 1: Capacity Development and Institutional Strengthening: This component is supporting the Water and Electricity Regulatory Commission (CREE), the Directorate of Energy (DNE), the National Directorate of Nature Conservation (DNCN) and AMADER. The original HEURA Project financed capacity development of AMADER and equipment to enable it to become an operational Agency. The additional financing credit is supporting AMADER (i) to improve on its monitoring of local private sector operators involved in energy services delivery; (ii) to develop more innovative technical and managerial schemes to promote lower cost electrification solutions; (iii) to promote additional productive uses of energy services in partnership with the local banking system; (iv) to continue to remove barriers to the development of renewable energy in line with the objectives of the GEF co-financed activities of the original project; and (v) to reinforce output based mechanisms related to the energy services delivery component. This subcomponent is also financing outreach and partnerships initiatives at the national, regional, and global levels to attract more financing for scaling up in a sustainable manner energy access expansion in Mali. A strategic capacity development program is financed as well as technical studies, equipment, and workshops. 6. Component 2: Energy Services Delivery: The Energy Services Delivery Component is financing the scale up of rural electrification projects. The successful experience of the spontaneous bottom up projects has demonstrated the potential of a large scale energy access project in Mali. Following the bottom up rural electrification approach spontaneous private initiative projects are selected based on promoters ability to develop and operate a viable project with a fixed investment subsidy (between percent, limited to US$500,000). Subsidies are established on the basis of (i) the number of customers to be connected during the first two years; (ii) the average tariff and (iii) subsidy by customer connected (total investment per number of customers). Through the Additional Financing credit the Energy Services Delivery investments are scaled up through the extension of existing bottom up projects, the development of new bottom up projects, and the development of one top down project. Through a separate financing from the German development bank KfW, AMADER is developing the implementation of two other top down larger projects. 7. Component 3: Household Energy: A strategic choice has been made to consolidate initiatives of the original project and to scale up only those that have proven satisfactory in their implementation. This subcomponent is financing: (i) the consolidation of woodland management plans; (ii) small woodfuels management activities by local communities and private operators; and (iii) a forestry information system. This sub-component is also financing specific activities initiated in partnership with the DNCN to strengthen the legal and regulatory framework sustaining the woodfuel sector. This sub-component will finance: (i) the scale up of improved 14

21 stoves dissemination; (ii) the scale up of low consumption lamps; and (3) an information system on energy efficiency. Studies are financed to further understand barriers to the adoption of kerosene stoves, LPG, wood briquettes, and evaporative air-coolers. C. Proposed activities under the HEURA Trust Funded Additional Financing 8. The proposed Trust Funded Additional Financing will support the initial development objective of the Household Energy and Universal Rural Access (HEURA) Project. The proposed project will strengthen Component 1 (Capacity Development and Institutional Strengthening) 11 and Component 2 (Energy Services Delivery) 12 of the original Project. No new trust funded activities are planned under Component 3 (Household Energy). Component 1: Capacity Development and Institutional Strengthening (ESME TF US$1.60 million) 9. The Trust Funded Additional Financing will provide capacity building, training and technical assistance in order to further strengthen the technical and managerial capacities of Mali s rural energy service agency AMADER and other rural energy sector institutions, such as local energy service companies (ESCOs). The project s strategic capacity development program will finance amongst others technical studies, consultants, equipment, and workshops, with a particular focus on renewable energies and productive energy uses. This component will also continue to finance rural energy outreach and partnerships initiatives between AMADER and other energy sector institutions at the national, regional, and global levels to attract future financing to scale up, in a sustainable manner, energy access expansion and productive energy uses in Mali. 10. AMADER s partnership initiatives that will benefit from capacity building and technical assistance under the Trust Funded Additional Financing will include the following partnerships: (i) Lighting Africa, which is a joint World Bank/IFC initiative to mobilize the private sector to provide clean, affordable, and quality off-grid lighting to people without access to electricity in Sub-Saharan Africa), (ii) Millenium Villages Project Mali, which is a joint UNDP/Millenium Promise Mali/Columbia University Earth Institute initiative for helping the Millenium Villages in the Segou region of Mali to fight poverty at the village level through community-led development in view of achieving the MDG), and (iii) Nyeeta Finance S.A. which is a Malian micro-finance institution with the objective of developing and testing target short and medium term loans for productive energy uses in rural areas of Mali. To stimulate renewable energy access and the development of productive energy uses and income generating activities, the proposed project will emphasize on capacity building, training and strengthening of the above mentioned partnerships. 11. The sustainability of the energy service delivery projects will depend on a solid grounding of economic, technical and management principles. Under the HEURA Project, 11 Trust funded activities under HEURA Component 1 are targeted to sub-component 1D (Support to AMADER). 12 Trust funded activities under HEURA Component 2 are tailored to subcomponent 2A (Scale-up of rural electrification projects). 15

22 AMADER s technical staff and local ESCOs attended training sessions to strengthen economic skills, such as business management and accounting, and technical skills, such as lay out design, operation, maintenance, and repair of conventional and renewable energy technologies. Building on these skills, emphasis of new TA will be on upgrading economic and technical skills to plan, operate, and repair renewable and hybrid minigrids as well as managing an increased number of customers. Planned ESME TF capacity building and technical assistance activities will include, amongst others, the organization of specific training sessions on operation and maintenance of minigrids with a special focus on renewable energy technologies, and the organization of training and exchange in local manufacturing and assembly of energy system components to optimize investment costs. 12. In cooperation with the ESMAP s Gender and Energy Development Strategy Program, the AFREA Gender and Energy program will provide tailored implementation support to strengthen and mainstream energy and gender sensitive aspects of the project. Planned AFREA funded gender sensitive capacity building and technical assistance activities will include: Gender impact assessment that will (i) review the extent of using a gender sensitive approach, (ii) establish the baseline for gender mainstreaming into the project and (iii) integrate indicators for gender sensitive monitoring and evaluation into the project s results framework Gender mainstreaming for all project components by providing energy and gender capacity building/training for AMADER and ESCOs. Technical assistance to help strengthening and integrating gender sensitive capacity into AMADER s management team, which will include (i) definition of scope of work, responsibilities and reporting level for a future gender and energy position (gender desk) and (ii) preparation of gender sensitive tools and documents 13. The proposed project will be implemented in line with a partnership between AMADER AMADER and the Global Village Energy Partnership International (GVEP-I). Capacities of AMADER and local ESCOs will be strengthened to ensure the long term economic and financial sustainability of off grid electrification projects in Mali. Based on experiences in rural energy projects in Mali, the ESME TF will finance studies and technical assistance activities through a recipient executed grant to GVEP-I in an amount of US$0.5 million to (i) evaluate and overcome market barriers, (ii) to facilitate innovative business models, and (iii) to introduce new opportunities in the mobilization of financial resources, such as equity, social and carbon funds, targeted to rural energy projects. On the long term, subsidies for rural energy projects are expected to decrease considerably. 14. AMADER will hire an additional engineer to help overseeing the implementation of trust funded energy service delivery projects and to deliver targeted technical assistance to local ESCOs. 16

23 Component 2: Energy Service Delivery (US$6.90 million) 15. The Energy Services Delivery Component will continue to finance the scale up of rural energy projects, in particular through the extension of existing bottom up rural energy projects and the development of new bottom up rural energy projects with a particular focus on renewable energies. Lessons learned from these spontaneous bottom up rural energy projects to date has demonstrated the potential of a large scale energy access project in Mali. Following the bottom up rural energy approach spontaneous private initiative projects are selected based on the promoters ability to develop and operate a viable project with a fixed investment subsidy (between 75-80%, limited to US$500,000). Under the proposed Trust Funded Additional Financing, grants from both the AFREA and the ESME Trust Fund will be matched with private sector contributions of local ESCOs to increase access to affordable and clean energy services in about 14 villages in 6 different regions in Mali. 16. Scaling up energy service delivery projects (ESME TF US$4.9 million): based on a technology-neutral approach, looking for reasonable and cost-effective solutions to both ESCO s and customer s needs, AMADER has already built a strong pipeline of existing bankable, energy service delivery projects suitable for expansion and/or construction. Building on lessons learned from the successfully established Kimparana PV minigrid and the Garalo biofuel minigrid (see boxes below), this sub-component will finance the development and extension of micro- and minigrids in 12 villages in 4 different regions. Box 1: Mali Kimparana solar PV minigrid electrification The ESCO Yeelen Kura piloted a 72 kw solar PV plant connected to an 8 km distribution network in Kimparana, representing the first one of its type and scale in West Africa. The PV minigrid has been operational since 2006, providing electricity to 500 households, community institutions and microenterprises. Under a fee-for-service business model the ESCO is responsible for delivering energy services, installation, maintenance, and general customer support. The solar plant maintains a diesel generator as back-up and can be run as a solar-diesel-hybrid plant in case of growing demand. Household customers pay a lump sum of US$7-13 per month for energy services, subject to one of the four service levels chosen. Large service contracts for microenterprises define electricity tariffs based on individual consumption at a maximum tariff of 0.3 U$/kWh. 17. Focusing on villages where customers are concentrated enough to be economically interconnected, each rural energy sub-project is expected to provide new connections and scale up the generation capacity by kw. By expanding existing energy service delivery projects, established local ESCOs will be supported in (i) satisfying growing energy demand from rural households, community institutions and microenterprises, and (ii) optimizing existing conventional energy technologies and distribution systems by the integration of PV or biofuel technologies, thereby reducing monthly operational costs (diesel fuel costs etc). Selected sub-projects to be financed by the ESME trust fund are summarized in table 1 below. 17

24 Box 2: Mali Garalo biofuel minigrid electrification The biofuel project was piloted in 2006 by the local ESCO ACCESS in Garalo. The 300 kw biofuel plant feeds electricity into a 13 km distribution network, serving more than 650 households, community institutions and microenterprises. Jatropha plantations, managed by rural farmer s cooperatives, supply the biofuel feedstock for the plant. The pure Jatropha oil is sold at a fixed price to the ESCO thereby generating revenues for the Jatropha farmer s cooperative. Impacts on the environment and food security are minimal, due to low water requirement of the Jatropha plant and the use of an inter-cropping model, where Jatropha is grown in association with different food crops. Connection fees to the mini network are US$30 for all customers. According to the service level chosen, subscribers with low electricity demand pay lump sums for consumption, starting at US$5 per month, and subscribers with high electricity demand are billed according their metered consumption and assigned a tariff of 0.3 US$/kWh per kwh. About 20% of the electricity produced is used by local microenterprises in Garalo, willing to pay monthly electricity bills of up to $50. The average bill recovery rate is 90 % which demonstrates the willingness to pay for energy services in remote rural villages. The micro finance institution Nyetaa is in the process of establishing a local office in Garalo to satisfy growing demand of rural households and microenterprises for micro credits targeted to productive energy uses. 18. Scaling up renewable energy technologies (RET) (AFREA TF US$2. million): this subcomponent will expand access to renewable energy in about 7 villages in 5 different regions in Mali, thereby reducing greenhouse gas emissions. Focusing on multiplying the successfully established schemes of biofuel and PV minigrids in Mali (see boxes above), AFREA trust fund grants will finance the expansion and/or construction of larger scale RET minigrids that are able to generate and distribute power to rural and peri-urban households, community institutions, and businesses. Focusing on villages where customers are concentrated enough to be economically interconnected, each renewable energy sub-project is expected to provide new connections. An additional offgrid renewable energy generation capacity of 250 kw will be installed under this subcomponent. An overview of selected sub-projects is provided in table 2 below. 18

25 Table 1: Scaling up energy service delivery projects (ESME TF) Table 2: Scaling up renewable energy technologies (AFREA TF) 19

26 Annex 2: Results Framework and Monitoring Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project Table 3: Revisions to the Result s Framework Original IDA Project (Closed) PDO To support the Government of Mali's efforts to increase the access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs). PDO Indicators Approximately 40,000 new subscribers receive electricity services within five years from Effective Date Approximately 1080 public institutions, approximately 125 schools and approximately 107 health clinics receive in rural and peri-urban areas receive electricity services within five years from Effective Date IDA Additional Financing (Current) To support the Government of Mali's efforts to increase the access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs). Number of households with access to electricity services Number of institutions with access to electricity services Trust Funded Additional Financing 13 (Proposed) To support the Government of Mali's efforts to increase the access of isolated low income populations to basic energy services to help achieve economic growth and poverty reduction targets, including those linked with the Millennium Development Goals (MDGs). Households connected to electricity (Number) Public institutions connected to electricity (Number) Comments/Rationale for Change Continued. The (PDO) remains unchanged. Continued. Change in end of project target values. Language revised to be consistent with Africa CORE Indicators. Continued. Change in end of project target values. Language revised to be consistent with Africa CORE Indicators. 13 The AFREA Gender and Energy program will provide support for strengthening and adopting an energy and gender sensitive approach into the project. Based on the results of a gender impact assessment during the first year of project implementation, energy and gender relevant project indicators will be developed, tested and quantified in line with the existing results framework for all project components. Indicators will be disaggregated between woman- and man- headed. 20

27 Number of communities with installed multifunctional platforms Intermediate outcome indicators 14 Number of private operators providing energy services Number of solar photovoltaic systems installed Number of communities with installed multifunctional platforms Number of private operators providing energy services Number of solar photovoltaic systems installed Not applicable Not applicable Solar photovoltaic systems installed (Number) Not applicable Not applicable Generation capacity of off-grid renewable energy technologies constructed (kw) Not applicable Direct project beneficiaries (Number), of which female (%) Direct project beneficiaries (Number), of which female (%) Not applicable Not applicable Business electricity connections (Number) Continued under the IDA AF. No change in target values. The TF AF will not finance platforms. Continued under the IDA AF. No change in target values. The TF AF will finance rural energy service delivery projects in cooperation with already established operators. Continued. Change in end of project target values. New. To monitor deployment of RET minigrids. IDA CORE indicator New. IDA CORE indicator New. To monitor progress on productive energy uses. Africa CORE Indicator 14 The trust funded additional financing will not include activities on household energy (Component 3). Indicators aligned to the household energy component will not change and are therefore not represented in the revised results framework. 21

28 Table 4: Revised Arrangements for Results Monitoring Baseline December 31, 2009 YR1 YR2 Data collection and reporting Frequency and reports Data collection instruments Dec June 2012 Revised PDO Indicators Quarterly AMADER supervision reports Households connected to electricity (Number) Public institutions connected to Quarterly AMADER electricity (Number) 15 supervision reports Revised Project outcome indicators Solar photovoltaic systems installed (Number) Generation capacity of off-grid renewable energy technologies constructed (kw) Direct project beneficiaries (Number), of which female (%) 16 50% Business electricity connections 17 (Number) Quarterly AMADER supervision reports Quarterly AMADER supervision reports % % Quarterly AMADER supervision reports Quarterly AMADER supervision reports Responsibility for data collection AMADER AMADER AMADER AMADER AMADER AMADER and MFI 15 Community electricity connections include community institutions, schools and health clinics. 16 Direct project beneficiaries are estimated as follows: number of household electricity connections multiplied by an average 6 beneficiaries per household. 50% of project beneficiaries are estimated to be female. 17 Business electricity connections include commercial buildings, hotels, restaurants and microenterprises with productive energy uses. 22

29 Annex 3: Project Costs Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project Table 5: Original Credit, Additional Financing and Trust Funded Additional Financing (in US$ million) HEURA Project Components Original IDA GEF Additional IDA Financing AFREA TF ESME TF Total Implementation Closed Closed Ongoing Preparation Preparation status Component 1: Capacity Development Component 2: Energy Services Delivery Component 3: Household Energy Total Table 6: Trust Funded Additional Financing by component (in US$ million) HEURA Project Components AFREA TF ESME TF Total Component 1: Capacity Development Component 2: Energy Services Delivery Component 3: Household Energy Total

30 Annex 4: Economic and Financial Analysis Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project 1. A financial and economic analysis has been undertaken for the Energy Services Delivery component as well as for the project as a whole. The main quantifiable economic benefit of the project is the increased supply of electricity. The economic costs are the total investment cost of the project (excluding price contingencies) and the operation and maintenance (O&M) costs. The investment costs include the construction of the plants, equipment, buildings, land purchase and distribution costs. The O&M costs include mainly fuel costs, repair and regular maintenance costs. 2. The following hypothesis have been adopted for this analysis (see Table 7): 75 % of the estimated 5866 connections of the project are domestic connections; 25 % of the estimated 5866 connections of the project are commercial/industrial connections for small scale enterprises; the average tariff of $11/kWh (the same as the one that was assumed for the IDA financed additional financing for the Household Energy and Universal Access Project of 2008); the tariff is 0.30 US$/kWh and their estimated consumption is 6 GWh/year; the operation and maintenance costs of the project are estimated at 2% of investment costs per year; and connection fees are estimated at US$30 for households and US$150 per commercial/industrial concern. 3. The result of the analysis is shown in Table 8 below. The economic NPV and rate of return take into account the willingness of consumers to pay for electricity services: US$20/month for households and US$0.50/kWh for commercial/industrial small scale enterprises. On this basis, the NPV is about US$4 million and the economic rate of return is 30%. 4. The financial NPV is positive at US$1.7 million and the financial rate of return is 17%. 24

31 Table 7: Economic analysis connections, capacity and costs Table 1: Connections, Capacity nd Cost RE Estimated new Capacity Production Village Region new conn. (kw) Costs (US$) Bourem Gao Ansongo Gao Koniakary Kayes Tinkélé Koulikoro Sougoula Koulikoro Nionsombougou Koulikoro Sandaré Kayes Manankoro Sikasso Zantebougou Sikasso Kimparana Ségou Yorosso Sikasso Kignan Sikasso Finkolo-Ganadougou Sikasso Kondogola Ségou Koumantou Sikasso Mpessoba Sikasso Niena Sikasso Molobala - Dialakoroba Kati Mafèlé Sikasso , ,573,234 Table 8: Economic analysis benefits, NPV and IRR 25

32 Table 2: Benefit Cost Analysis Year Investmen t US$ Million Operation & Maint. Costs Total Cost Connections Connection fees Electricity sales Households Commer./In dust. Total Revenue Net Revenue ,000,000 1,000, ,000, ,000,000 80,000 3,080,000 2, , ,160 1,079,755 1,586,635-1,493, ,200, ,000 4,364,000 4, , ,760 2,189,162 3,216,842-1,147, ,000, ,000 3,224,000 5, ,960 1,055,880 2,998,978 4,406,818 1,182, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550, , , ,734 1,799,387 2,380,121 1,550,121 NPV@12% 11,770,742 15,724,822 3,954,080 IRR 30% 5. Switching Values: Switching values are those values at which the NPV changes sign (i.e from positive to negative and vice-versa). The switching values in Table 9 show robust results to changes in the main variables of the project. Special attention however will be paid to the level of investment costs and to electricity sales to commercial/industrial small scale enterprises. Table 9: Economic analysis switching values Investment Costs 46% Operation and Maintenance Costs Electricity sales to households Electricity sales to commercial/industrial small scale enterprises 110% (-) 103% (-) 34% 6. The rate of return of the Household Energy and Universal Access Project has not apparently been recomputed following the IDA financed additional financing of Had this been done the proposed trust funds financed additional financing would have been included to give an overall NPV and IRR for the entire Household Energy and Universal Access Project (the original project, the IDA financed additional financing of 2008 and the proposed trust funds 26

33 financed additional financing). Nevertheless, since all three operations have not only positive but large NPVs and IRRs, one can deduce that the NPV and the IRR of overall Household Energy and Universal Access Project are also large and positive, making it a good project economically. 7. The economic and financial results of the three operations are recalled in the tables below: Table 10: Economic results HEURA (original project, IDA AF, TF AF) NPV (US$ million) IRR (%) Household Energy and Universal Access Project. The original project IDA financed Additional financing Trust Funds financed additional financing (current proposal)

34 Table 11: Financial analysis HEURA (original project, IDA AF, TF AF) NPV (US$ million) IRR (%) Household Energy and Universal 16 4 Access Project. The original project IDA financed Additional financing Trust Funds financed additional financing (current proposal)

35 Annex 5: Procurement Arrangements Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project A. General 1. Procurement will follow World Bank Guidelines: Procurement under International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits dated May 2004 and revised in October 2006 and in May 2010, and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004 and revised October 2006 and in May 2010 and the provisions stipulated in the Legal Agreement. The general description of various items under different expenditure category is described below. For each contract to be financed by the Loan/Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank s task team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Country Environment National procurement system and ongoing reforms 2. Mali adopted a Public Procurement Code in August 2008, as part of the action plan of the update of the Country Procurement Assessment Report (CPAR) for Mali carried out in FY04. The legal framework is in line with the WAEMU s guidelines. In addition, the Country has also adopted a law creating (i) an independent procurement regulatory body ( Autorité de Régulation des Marchés Publics et des Délégations de Service Public - ARMPDS ) responsible for policy and handling complaints from bidders and (ii) the procurement control body ( Direction Générale des Marchés Publics et des Délégations de Service Public - DGMPDS ) responsible for the control of procurements transactions. These bodies are operational and in addition, the control Body has been decentralized at regional level inside the country. As such, the project will benefit from the existence of the two bodies, and it is recommended that these bodies play their respective roles in procurement regulation and procurement control under the current new financing on an agreed basis. 3. In general, Mali s procurement laws and regulations do not conflict with IDA guidelines. However provisions related to the restriction of the eligibility of bidders to those coming from WAEMU countries only will not be applied. No special exceptions, permits, or licenses need to be specified in Credit documents since IDA procedures take precedence other those laws and regulations. 4. The above mentioned Code describes NCB (National Competitive Bidding) as the "open competitive bidding" method (reference to the provision 44 of the procurement Code, which mentions this method as "Appel d Offres Ouvert", i.e. Open Competitive Bidding. In reference to the code, some other provisions have limitations which are not acceptable with regard to the 29

36 Procurement Guidelines for the use of NCB under the World Bank Financing. These limitations are, among others: (i) the decision in provision 9 that the Code does not apply to small contracts defined as contracts for works, goods and non consulting services estimated to less than CFA 25 million (equivalent to US$50,000 at the rate of 1 US$ for CFA 500) and contracts for Consulting services estimated to less than CFA 15 million (equivalent to US$30,000); and the decision in the same provision that the Code does not apply to state-owned enterprises for contracts for works, goods and non consulting services estimated to less than CFA 100,000,000 (equivalent to US$200,000) and for consulting contracts estimated to less than CFA 60,000,000 (equivalent to US$120,000); (ii) advertisement of the general procurement notice not mandatory on the UNDB and dgmarket portals; (iii) the provision 22 is about the modalities of certification of candidates may, if abused, limit the participation of bidders either nationals of foreigners; (iv) the use of domestic preference (mentioned as community preference, in conjunction with WAEMU); (v) the minimum time frame for bid submission in case of urgency as mentioned in the provision 58, fixed for 15 days which may be abused; (vi) the evaluation and award process of alternative bids not concordant with the Bank s procurement Guidelines; (vii) possible abuse in handling cases where, if the bid which results in the lowest Evaluated Bid Price is seriously unbalanced or front loaded in the opinion of the Employer; (viii) Standard bidding documents, developed under an IDF from the Bank, are in use in the country since 2002: however these SBD have not been cleared by the Bank, and they may be revised so that to take into account the new procurement Code. 5. With regard to those provisions, in order that the NCB procedure becomes acceptable to IDA for its use for NCB contracts, the following special requirements will be taken into account: (i) even though the Code doesn't apply to small contracts, the procedures will require that for such contracts, a competitive method be used (reference to other methods described; (ii) in addition to the advertisement of the GPN in UNDB and dgmarket, bids will be advertised in national newspapers with wide circulation; (iii) eligible firms, including foreign firms, will not be excluded from the competition in any case; (iv) no preference margin will be granted to domestic bidders or bidder from the WAEMU Countries; (v) four weeks will be provided for preparation and submission of bids, after the issuance of the Invitation for Bids or availability of the bidding documents, whichever is later; (vi) the evaluation and award process of alternative bids will be revised to be concordant with the Bank s procurement Guidelines; (vii) if the bid which results in the lowest Evaluated Bid Price is seriously unbalanced or front loaded in the opinion of the Employer, the evaluation process should be concordant as speeled out in the relevant Standard Bidding Documents published by the Bank; (viii) for all procurement of goods and works, the Bank s Standard Bidding Documents (SBD) and bidding documents if any, acceptable to the Bank will be used and modified in order to meet the exceptions authorized under NCB; (ix) the project implementation agency will work with borrower's relevant authority in order to require that procurement audit will be included in the terms of reference of financial audits of the project. In addition, any other adjustment will be taken into account when the Bank determines during the project execution as necessary in order to assure economy, efficiency, transparency, and broad consistency with the provision included in the Section I of the Guidelines, will be amended. 6. Furthermore, in accordance with para.1.14 (e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: 30

37 (i) the bidders, suppliers, contractors and subcontractors shall permit the Association, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the association; and (ii) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.14(a)(v) of the Procurement Guidelines. 7. Procurement will be carried using the Bank s Standard Bidding Documents (SBD) for all ICB and National (SBD) contracts deemed satisfactory to the Bank. Contracts estimated at less than US$5,000,000 for works that can be procured by local companies may be awarded through the NCB procedures. Contracts estimated at less than US$ 500,000 for locally available goods may be awarded through NCB procedures. Contracts for small goods and office supplies, as well as minor equipment and furniture available locally and estimated at less than US$50,000 may be procured under shopping procedures in accordance with the provisions of clause 3.5 of the Bank s Guidelines on Procurement and the Guidance on Shopping Memorandum" issued by IDA, June 9, Contracts for small works, small goods or non-consulting services with a cost estimate equal or bellow US$100,000, may be procured under the shopping procedure in accordance with the provisions of clause 3.5 of the Bank s Guidelines on Procurement: Procurement under IBRD Loans and IDA Credits May 2004, revised October, 2006 and May 2010, and in accordance with the Memorandum Guidance on Shopping issued by the Bank, date June 9, 2000 subject this memorandum is not contradictory with the Procurement Guidelines. 9. Procurement of Works: Works procured under this project, would be mostly under component 2 and will include works for the development and extension of micro- and minigrids in 13 villages in 6 different regions. They would be in general procured under sub-project developed by their promoters under specific procedures agreed on with those promoters. 10. The procurement will be done using the Bank s Standard Bidding Documents (SBD) for all ICB and National SBD agreed with (or satisfactory to) the Bank. In the case of NCBs, while there not yet any National SBD, the Bank s Standard Bidding Documents (SBD) will be used and modified in order to meet the exceptions authorized under NCB. 11. For small contracts with a cost estimate equal or bellow US$100,000, shopping procedure may be used. 12. Procurement of non-consulting services: Non-consulting services would include general services related to training/workshop session, office house-keeping, office cleaning; general services related information, education and communication (IEC) for the project. These activities are not likely to be at high value; as such they may be contract through shopping process as described above. 13. Selection of Consultants: Consultants Services would cover additional training and technical assistance, focusing on the strengthening technical and managerial capacities of 31

38 AMADER and other sector initiatives at the national, regional and global level. In line with the ongoing project, consulting services will also include financial audit and technical audits. 14. Consultants will be selected using the Technical Quality and Cost-Based Selection (QCBS) method in most cases. In special cases specified in the Procurement Plan (PP) the following methods will be used: (i) Quality-Based Selection (QBS); (ii) Least Cost Selection (LCS), applicable particularly to financial audits; (iii) Selection Based on the Consultants Qualifications (CQS); (iv) Single Source Selection (SSS) and (v) Individual Consultants (IC) Selection (either through competitive selection or single source). For competitive selection methods, the selection will be through requests for expressions of interest (REIs) except for the selection of individual consultants for which REIs are not mandatory, short-lists, and the Bank s Standard Requests for Proposal where required under Bank s Guidelines. 15. Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 16. Operational Costs: Operating Costs would include equipment/vehicle operating and maintenance costs, office supplies and office furniture; energy and water, telephone, fax and internet/intranet. They will also include costs for all fees related to the implementation of the project such as its monitoring and supervision missions. B. Assessment of the agency s capacity to implement procurement 17. Procurement activities will be carried out by AMADER which is since FY2004 the implementing agency for the ongoing HEURA project under the initial and the additional financing. 18. An assessment of the capacity of the Implementing Agency to implement procurement actions for the project has been carried out by Cheick A. T. Traore, Sr. Procurement Specialist, on June 8 th, The assessment reviewed the organizational structure for implementing the project and the interaction between the project s staff responsible for procurement officer and the Ministry s relevant central unit for administration and finance. 19. AMADER has an acceptable expertise in procurement under the World Bank procedures. The agency is staffed with high level staff for handling the diverse components of the ongoing HEURA project including the administration and finance section. The Procurement Unit is staffed with a Procurement Officer who is the same since the beginning of HEURA project. 20. Most of the procurement related issues and risks concerning the procurement component for implementation of the project have been identified and include: possibility that the increased activities due to the increase of the financing, to the extension of sub-projects and to monitoring and capacity building services, may divert other high level staff from their usual support to the procurement unit; 32

39 risks of poor quality procurement related to the implementation of sub-projects on the side of promoters, while an important part of the financing is directed to subprojects that are not subject to prior review; and possible risk of political interferences at the administrative level, before the newly created procurement regulatory body and procurement control body are fully operational. 21. The corrective measures which have been agreed are: AMADER to maintain its internal organization with regard to handling procurement, in ensuring that technical staff remain involved in procurement under their respective components, and training activities on procurement and contract management are granted to both technical staff and procurement staff; AMADER to ensure closed supervision of the implementation of sub-projects with an emphasis on procurement under theses sub-projects; AMADER to do annual technical audits; and AMADER to ensure and take benefits that its procurement operations are under the supervision of the procurement regulatory body and the procurement control body. 22. The overall project risk for procurement is moderate. C. Procurement Plan 23. The Borrower, at appraisal, will develop a Procurement Plan for project implementation which will provide the basis for the procurement methods. This plan will be agreed between the Borrower and the Bank s task team once it is prepared. After approval by the Bank, it will be available at the office of AMADER, Bamako, Mali. It will also be available in the Project s database, in its external website and in the Bank s external website. The Procurement Plan will be updated in agreement with the Bank s task team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision 24. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended one supervision mission to visit the field and to carry out post review of procurement actions. 33

40 Attachement 1 Details of the Procurement Arrangement involving international competition. Goods and Works and non consulting services. (a) List of contract Packages: Ref. No. Contract (Description) 1. Supply of 2 vehicles to AMADER 3. Supply and installation of 2 computers for AMADER 4. Supply of office equipment to AMADER Estimate d Cost (US$ 00 0) Procureme nt Method Prequalification (yes/no) Domestic Preference (yes/no) Review by Bank (Prior / Post) Expected Bid- Opening Date 95 NCB No No Post July Shopping No No Post June 2011 Commen ts 44 Shopping No No Post June 2011 recurrent 5. Maintenance and repair of 5 Shopping No No Post July 2011 recurrent office equipment for AMADER 6. Maintenance of vehicles 42 Shopping No No Post June 2011 recurrent 7. Procurement of fuel and lubricants for AMADER 60 Shopping No No Post June 2011 recurrent 8. Vehicle insurances 12 Shopping No No Post October 2011 recurrent 9. Other support to 30 Shopping No No Post June 2011 recurrent AMADER s operating costs, incl. IEC Total (b) ICB Contracts estimated to cost the equivalent of US$5,000,000 or above for works per contract, and the equivalent of US$500,000 or above for goods per contract and all Direct contracting will be subject to prior review by the Bank. 34

41 Consulting Services (a) List of Consulting Assignments Ref. Description of Estimated Selection Review Expected Comments No. Assignment Cost Method by Bank Proposals (US$ 000) (Prior / Submission Post) Date 1 Selection of a 2 CQS Post July 2011 consultant for recruitment of an engineer Total 2 (b) Consultancy services estimated to cost the equivalent of US$200,000 or above per contract for firms, assignments estimated to cost the equivalent of US$100,000 or above per contract for individual consultants, and Single Source selection of consultants (for firms or for individuals), will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Prior Review Threshold. 25. Prior Review Threshold for Goods, Works and Non-Consulting Services: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement: Table 12: Prior review threshold for goods, works and non-consulting services Procurement Method Prior Review Threshold (US$) Thresholds for procurement methods (US$) 1. ICB and LIB (Goods) = or > 500,000 = or > 500, NCB (Goods) First contract < 500, ICB (Works) = or > 1,000,000 = or > 1,000, NCB (Works) First contract < 1,000, NCB (Non-Consultant Services) = or > 100,000 < 200, Shopping (Goods, Works, or Non = or > 50,000 < 75,000 Consulting Services) 7. Direct Contracting All Contracts No threshold Comments 35

42 26. Prior Review Threshold for Consulting Services: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants: Table 13: Prior review threshold for consulting services Selection Method Prior Review Threshold Comments 1. Competitive Methods (Firms) = or > 200,000; All audits contracts (financial audit, procurement audit, technical audit); All contracts for manuals of procedures; All contracts for environmental issues. 2. Single Source (Firms) All Contracts Competitive Methods (Individuals) On a case by case basis Single Source (Individuals) All Contracts 36

43 Annex 6: Financial Management and Disbursement Arrangements Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project 1. Executive Summary The trust funded additional financing will be implemented using the same institutional and financial arrangements as the original project. AMADER is still responsible for the overall project coordination. The financial management arrangements for the additional financing will be based on the existing arrangements in place under the ongoing projects. The overall performance of the Household Energy and Universal Access Project in financial management is Satisfactory as substantiated by the last FM supervision mission in May, 2010 and the follow up mission on December, Staffing has remained adequate and proper books of accounts and supporting documents have been kept in respect of all expenditures. The audit for the year ended December 2009 for the project was submitted on time, and was unqualified. The interim un-audited financial reports for the on-going project are also submitted on time and the quality of reports is being improved. The overall risk for the additional financing is rated Moderate. It is considered that the financial management satisfies the Bank s minimum requirements under OP/BP 10.02, and therefore is adequate to provide, with reasonable assurance, accurate and timely financial management information on the status of the project required by World Bank. 2. Country issues The inherent risk of the public financial management system in Mali is rated Substantial at the country level. Risks remain in terms of (i) inclusion in the budget of information such as data on the stock of debt, cash balances, and of autonomous government agencies, (ii) monitoring of budget execution, (iii) effectiveness of internal audit, (iv) quality and timeliness of in-year budget reports and annual financial statements and (v) effectiveness of external audit and legislative scrutiny of the annual budget law. However, these country issues would not impact the project as it is being implemented through AMADER, an autonomous agency. 37

44 3. Fiduciary Risks and Mitigation Measures Risk Risk Rating Risk Mitigation Measure Residual Risk Rating Inherent Risks: M M Country: Risks remain in term of monitoring of budget execution, quality and timeliness of in-year budget reports These country issues would not impact the project as it is being implemented through AMADER. and annual financial statements and, S effectiveness of external audit and legislative scrutiny of the annual budget law Entity: Legal and institutional framework is adequate M M Project: Follow-on repeater project and no major issues identified in the implementation of the current project L L Control Risks: M M Budgeting: Regular budget variance statements are S The budgetary control and monitoring will be improved through the review of IFRs and the M prepared but not used in a meaningful way oversight of the Board Accounting: A multi-projects software is in place and L accounting policies and procedures are documented L Staffing: Accounting function is staffed with L adequately experienced and qualified staff L Internal Control: Internal audit function is effective and it is M recommended during the last supervision mission to be more oriented to ex-post audits and actions should be taken on the reports M Funds Flow: Reporting and Monitoring : Delays in the submission of agreed consolidated IFRs and annual project financial statements Auditing: The annual financial statement might not be audited on time The additional financing operations might not be taken into account in the audit scope L M M Fund flow arrangements are functioning well and no delays have been reported. However it remains a need to make a reconciliation with client connection to update disbursements status Consolidated format for Interim Financial Reports and Financial Statements will be customized in the accounting system prior to effectiveness. The software distributor has been contacted and discussions are ongoing An experienced external auditor will be recruited based on ToR acceptable to the Bank The audit scope will cover the whole activities of HEURA including the additional financing and Nyetaa specific activities Overall Risk: M M L M M 38

45 H High S Substantial M Modest L Low 4. Strengths The accounting software is configured to meet project requirements and can be customized for additional activities, The financial and accounting personnel are adequately qualified and experienced, Financial reports are reviewed regularly and are used by the project for monitoring progress. 5. Implementing Entity AMADER will have the overall coordination of the FM and accounting tasks. The financial and administrative officer with the oversight of the managing director will oversee the financial management aspects of the project including the preparation of the financial statements, providing quarterly Interim Financial Reports, monitoring financial transactions on the project s accounts and making the necessary arrangements for the annual financial audit. 6. Disbursement arrangements Disbursements under the additional financing would be transactions based and follow the same disbursement arrangements currently in place for the existing project, except as noted below. Funds will flow primarily from the Trust Funds to, segregated (not the same accounts as being used for the designated accounts under the IDA Credits) XOF denominated designated accounts (one for each TF) to be opened in a commercial Bank on terms and conditions acceptable to IDA under the responsibility of AMADER.The designated accounts will have Fixed Ceilings of XOF 200m (TF099253) and XOF 650m (TF098148) respectively. 7. Budgeting arrangements The budgeting process is clearly defined in the FM Manual and the budget will be adopted by the Board before the beginning of the year and monitor through the accounting software. The project consolidated budget will be submitted to the IDA s objection. 8. Accounting policies and procedures Project accounts will be maintained on an accurate basis, augmented with appropriate records and procedures to track commitments and to safeguard assets. The Chart of Accounts will facilitate the preparation of relevant quarterly and annual financial statements, including (i) project expenditures, and (ii) total expenditures on each component/activity. All accounting and control procedures are documented in the Administrative, Accounting and Financial Manual, a living document that will be regularly updated. 39

46 9. Reporting and Monitoring Interim Un-audited Financial Reports (IFRs) would be prepared on a quarterly basis. The IFR will include sources and uses of funds by project expenditures classification. It will also include a comparison of budgeted and actual project expenditures (commitment and disbursement) to date and for the quarter. The PCU will submit copies of the IFRs to the Bank within 45 days following the end the calendar quarter. 10. Audit arrangements The Financial Agreement will require the submission of Audited Financial Statements for the PCU to IDA within six months after year-end. The terms of reference of the external auditor will be revised to take into account the additional financing. A single opinion on the Audited Project Financial Statements in compliance with International Standards on Auditing (ISA) will be required. The external auditors will prepare a Management Letter giving observations and comments, and providing recommendations for improvements in accounting records, systems, controls and compliance with financial covenants in the Financing Agreement. 11. Supervision Plan Supervision activities will include: (i) on-site mission (once a year) (ii) review the financial management aspects of quarterly IFRs; (iii) review of annual audited financial statements and management letter as well as timely follow up of issues arising; (iv) and, participation in project supervision missions, as appropriate. The intensity of supervision will be reassessed upon the evolution of the rating for the overall control risk. 12. Action to be taken prior to effectiveness Consolidated format for Interim Financial Reports and Financial Statements will be customized in the accounting system prior to effectiveness. 13. Financial Covenants The Borrower shall establish and maintain a financial management system including records, accounts and preparation of related financial statements in accordance with accounting standards acceptable to the Bank. 40

47 Annex 7: Safeguards Policy Issues Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project 1. Overall, the Trust Funded Additional Financing is expected to have positive environmental benefits. Applicable World Bank environmental and social safeguards for this project will be complied with by ESCOSs involved in decentralized energy services delivery, with assistance from AMADER s Environmental and Social Safeguard Unit. 2. From an environmental and social safeguards point of view, the Trust Funded Additional Financing is predicated on the fact that the project s objectives and components description remain unchanged. That is, the potential environmental and social impacts of the envisioned activities, for the most part, are projected to be minimal, site-specific and manageable to an accepted level. Similarly, because project components remain the same, the proposed scale up under the Trust Funded Additional Financing will not trigger any new safeguards policies. Environmental and Social Considerations 3. AMADER, through their Environmental and Social Safeguard Unit, will be the main entity responsible for carrying the environmental and social function of this operation. The main responsibility of AMADER s Environmental and Social Unit unit is to ensure that environmental and social measures are adequately taken into consideration in the processing of business plans proposed by ESCOs and other local initiatives for rural energy services delivery activities. In addition, the Direction Nationale des Eaux et Forêts (DNEF) and the Direction Nationale de Contrôle des Pollutions et des Nuisances (DNCPN) will ensure effectiveness of the implementation of proposed safeguards measures and compliance with National and Bank safeguard policies. 4. The project s Environmental and Social Management Framework (ESMF) and the project s Resettlement Policy Framework (RPF) will continue to be the guiding documents in implementing the project s safeguard measures under the proposed Trust Funded Additional Financing. Both frameworks are currently being implemented in a satisfactory manner by the borrower. The project s safeguard implementation is rated satisfactory since effectiveness of the original project in October 2004 and HEURA project activities to date had no negative environmental or social impacts. The project s two safeguard frameworks (ESMF and RPF) constitute a roadmap leading to subproject specific Environmental Impact Assessments (EIAs), Environmental Management Plans (EMPs) and Resettlement Action Plans (RAPs), whenever AMADER s screening process reveals it is necessary that they are conducted, or that simple measures drawn from the impacts and mitigations checklist are applied. In addition, the HEURA project will undertake a social audit to assess the effective implementation of social mitigation measures during the HEURA implementation. 41

48 5. The project s ESMF devised standards methods and procedures specifying how future subprojects whose location, number and scale are unknown will systematically address environmental and social issues in the screening, categorization, localization, design, implementation, operation and maintenance during the rural energy sub-project s lifecycle. It includes: (i) systematization of environmental and social impact assessment for all identified sub-projects before investment; (ii) procedures for applying safeguard related checklists or conducting sub-project specific EIA/EMPs and RAPs, whichever or the combination of which is deemed applicable. The ESMF thus provides sound institutional arrangements outlining the roles and responsibilities of the various stakeholder groups involved with the implementation and monitoring of identified measures, along with capacity strengthening measures and sensitization awareness raising campaigns targeting relevant actors closely involved with the project for better implementation and monitoring of the project s environmental safeguard measures. 6. Similarly, the project s RPF outlines the policies and procedures to be followed in the event that project activities require land acquisition and/or lead to loss of economic activities of project affected people. The RPF was prepared to minimize and mitigate the potential negative impacts resulting from project investments and it provides the overarching framework by which potential resettlement issues will be addressed. In compliance with OP 4.12, the result of the social audit will serve as clear basis for management of land acquisition issues in rural electrification operations which will continue to be based on standard practices in this sub-sector and namely: (i) the respect of sector regulations on land transfer for electricity production; (ii) the description of the nature of land transactions and process of identifying specific project sites during implementation; and (iii) the documentation of land transfers, when such new land acquisition is not likely to result in involuntary displacement in full complaisance with the OP Therefore, a resettlement or abbreviated resettlement plan consistent with the disclosed RPF will be prepared and disclosed before subproject financing. The likely scope of increased human and economic interactions as a result of increase access to energy services in rural communities will be assessed. If this increase is also likely to induce the spread of Sexually Transmitted Diseases (STD), then appropriated management measures will be included in the EMPs and RAPs of approved business plans presented by ESCOs and other local initiatives for rural energy service delivery activities with an appropriate reporting system regularly assessed during supervision mission. 7. The project s ESMF and RPF were reviewed and cleared by the Bank. They were disclosed by the Info Shop and in country on May 2, 2003 prior to appraisal of the original project. During the preparation of the IDA Additional Financing, ESMF and RPF were updated, reviewed and approved by World Bank safeguard specialists in Both frameworks, the project s ESMF and RPF, were re-disclosed in-country and in the Info Shop on 04/14/2009. Together, these safeguard instruments (the ESMF and the RPF), are considered both as a planning tool and as a means for a harmonious integration of the project in its bio-physical and social environment. They can also be considered as a way to maximize the positive effects on the same environment. Potential Environmental and Social Risks/Impacts 42

49 8. The global objective of the HEURA project is to contribute to positive environmental and social impacts peri-urban and rural areas of Mali. It is anticipated that there will be no major cumulative and/or long term adverse impacts due to project activities. All rural energy subprojects under the HEURA Component 2 (Energy Services Delivery) will continue to undergo social and environmental assessments to identify adequate mitigation measures in order to help avoid or minimize adverse environmental and social impacts. 9. In spite of the benefits expected to accrue to local communities, in terms of easy access to electricity and, by implication, improvement and their overall quality of life, investments in energy access, sometimes, have adverse impacts on the biophysical and socioeconomic environment, if proper mitigation measures are not in place. These impacts might include air and noise pollution; land acquisition; loss of livelihood and economic activities by project affected people; and impacts on cultural and historical resources. 10. Building on the existing safeguard mechanisms and frameworks established and implemented by AMADER s Environmental and Social Safeguard Unit under the original project, it is anticipated that there will be no major cumulative and/or long term adverse impacts. Monitoring Mechanisms of Agreed Plans 11. Successful implementation of the project safeguard requirements and performance measurement requires regular monitoring and evaluation of activities undertaken by the project to comply with national and Bank safeguard policies. In addition to the project s existing safeguard frameworks, safeguard related capacity building, training, and technical assistance will continue to be part of project activities under the HEURA Component 1. This will for instance include the strengthening of safeguard specific indicators within AMADER s existing monitoring and evaluation system. Arrangements for safeguards supervision 12. Through workshops and consultations, environmental and social issues will continue to be addressed during the implementation of the Trust Funded Additional Financing. ESCOs, other local initiatives and NGOs involved in the project will continue to be subject to sensitization on national and Bank safeguard policies and safeguard related risk mitigation measures. 13. Key stakeholders of the project include the PIU, Direction Nationale de la Conservation de la Nature; Direction Nationale du Contrôle de la Pollution et des Nuisances; ESCOs, Private operators and local communities. Through workshops and consultations, environmental and social issues will continue to be addressed during the implementation of the Trust Funded Additional Financing. ESCOs, other local initiatives and NGOs involved in the project will continue to be subject to sensitization on national and Bank safeguard policies and safeguard related risk mitigation measures, as well as take part in the implementation of those measures. 14. World Bank supervision teams will also include environmental and social safeguard experts. To ensure effective Bank supervision, the Environmental and Social Unit of AMADER 43

50 will prepare and update for review detailed reports on the implementation of the ESMF/EMP and RPF/RAP before Bank supervision missions. The Bank safeguards specialists will be responsible for corroborating these results and will contribute in updating the ISR. An appropriate budget for project supervision shall be included in the project financial evaluation and reflected in project cost-tabs. 44

51 Annex 8: Project Preparation and Supervision Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project Planned Actual PCN virtual review 09/06/2009 Pre-appraisal Decision meeting 12/18/ /10/2010 Appraisal Technical discussions 05/28/ /10/2010 Negotiations 04/29/2011 Country Director s Signature of the TF grant agreements 05/10/2011 Planned closing date 06/30/2012 Key institutions responsible for preparation of the project: Ministry of Energy and Water AMADER Bank staff and consultants who worked on the project included: Name Koffi Ekouevi Peggy Mischke Juliet Pumpuni Noureddine Bouzaher Marie-Paule Ngaleu Fily Sissoko Bouare Zie Ibrahima Coulibaly Moctar Thiam Maimouna Mbow Fam Celestin Adjalou Niamien Rokhayatou Sarr Samb Cheick Traoré Amadou Konare Abdoul-Wahab Seyni Miguel Santiago-Oliviera Daria Goldstein Marie Roger Augustin Dana Rysankova Katherine Deaton Steel Maria H. Rivera-Ramirez Adriana Maria Eftimie Vanessa Lopes Aoua Toure Sow Marie Lolo Sow Function TTL, Senior Economist Co-TTL, Power Engineer (JPO) Program Officer Consultant, Economist Team Assistant Senior Operations Officer Senior Infrastructure Specialist Sector Leader Financial Management Specialist Financial Management Specialist Procurement Specialist Senior Procurement Specialist Senior Environmental Specialist Senior Social Development Specialist Senior Finance Officer Senior Counsel Paralegal Senior Energy Specialist, Project Manager Lighting Africa Energy Specialist, Lighting Africa Team E T Consultant, Lighting Africa Team Mining Specialist, Energy and Gender Team Operations Analyst, Energy and Gender Team Program Assistant Program Assistant 45

52 Bank funds expended to date on project preparation: 1. Bank resources: 0 2. Trust funds: US$146, Total: US$146,000 Estimated Approval and Supervision costs: 0 Remaining costs to approval: 0 Estimated annual supervision cost: US$

53 Annex 9: Mali at a Glance Mali: Trust Funded Additional Financing for Household Energy and Universal Access Project 47