AFRICAN DEVELOPMENT BANK GROUP NIGERIA

Transcription

1 AFRICAN DEVELOPMENT BANK GROUP Public Disclosure Authorized Public Disclosure Authorized NIGERIA JIGAWA SOLAR INDEPENDENT POWER PRODUCER PROGRAMME PHASE 1 PEVP DEPARTMENT April 2018

2 SEFA Grant Request (SGR) Enabling Environment Grant TA FOR JIGAWA SOLAR IPP PROCUREMENT IN NIGERIA April 2018

3 SEFA PRELIMINARY EVALUATION NOTE TA FOR JIGAWA SOLAR IPP PRCOUREMENT IN NIGERIA Task Manager: Rhoda Mshana/ Michael Kane Grant Beneficiary: Federal Government of Nigeria Division: PESR.1/SEFA Grant Amount: Up to USD 1.5 million Project Summary Project Description: SEFA Alignment and Role: Cost Structure: Description Recipient: Bank s Role: Implementation Arrangements: Strategic Alignment: Development Outcomes: of The power sector in Nigeria is dominated by the intensive use of fossil fuel (88%) for power generation and low electrification rates at about 45% (55% urban and less that 35% rural). The Federal Government of Nigeria (FGN) aims to increase access to electricity to 75% and 90% by 2020 and 2030 respectively and at least 10% of renewable energy mix by 2025 which, according to the Rural Electrification Strategy, entails connecting approximately 470,000 additional rural households per year by 2020 and 500,000 rural household from 2020 to In March 2017, FGN approved a Power Sector Recovery Plan which aims at increasing the sector sustainability and improving energy services for the Nigerian population. To this effect, it commits to enabling private sector investments in renewable energy, to scale-up on-grid generation capacity as well as off-grid connections. To achieve its 2GW target for on-grid renewable energy generation, the FGN has initiated the Jigawa Solar Park to develop 1GW of power across approximately 2,000 ha of land in the northern Nigerian State of Jigawa in the city of Gwiwa. Jigawa is intended to be a world class solar park promoted by FGN that will provide a dedicated site and basic facilities to competitively procure utility scale solar generation companies to produce approximately 1GW of power for evacuation onto the national grid. The purpose of this TA programme is therefore to support the FGN towards its planned reduction of national dependency on fossil fuels through the promotion of renewable energy, in particular on-grid solar. This programme is aligned to SEFA s mandate to support the development of renewable energy and energy efficiency in Africa by creating an enabling environment. SEFA would provide technical assistance support to an interagency/departmental team headed by the Rural Electrification Agency (REA), for project development and enabling environment activities (including technical, legal and financial services) as well as transaction advisory support to take the projects to market. SEFA will work with the FGN to undertake project development including technical studies, planning/packaging of projects and structuring work that will provide a conducive environment to attract potential private investors for up to 200MW of installed capacity (in Round 1) through a competitive bidding process (to be tendered as 2X100MW projects). Total project development costs including common infrastructure is estimated at approximately USD 32 million. SEFA is requested to contribute USD 2.5millon - expected to be implemented in 2 phases. Phase 1 will finance the completion of the outstanding technical studies and detailed site masterplan to the tune of USD 1,500,000 (current request). Phase 2 funding of USD 1,000,000 will be sought, subject to and conditional upon the results of the technical studies, to finance the recruitment of transaction advisory services to support the launch of the IPP Procurement program. The FGN has already committed approximately USD 4.5 million towards advancing project development activities including securing the project site and undertaking initial studies including the ESIA and Site Surveys. Additionally, the FGN s Transmission Company of Nigeria (TCN) will also undertake to provide transmission infrastructure in the region and are at advanced stages of negotiating sovereign credit lines for the projects with Agence Française de Développement (AFD) and Islamic Development Bank (IsDB). FGN has also committed to provide common site services including access roads, utilities (water and communications) and other ancillary services. The grant recipient is the FGN via the Federal Ministry of Power (MoP). The Ministry of Power has the overall authority to oversee the energy sector and is responsible for energy policy formulation and implementation and has mandated REA to undertake the implementation of this programme. The Bank is a key actor in Nigeria s energy sector, playing a financing role in the generation, transmission and distribution subsectors. The Bank is also a key partner to the implementation of the FGN s Power Sector Recovery Plan, a USD 7.6 billion 5-year program which will be funded by FGN, the AfDB (USD 1 billion), World Bank (USD 1 billion) and other development partners. SEFA s support (TA) will complement the Bank s effort in the country and will specifically support the FGN s ambition to promote private sector participation in renewable energy investments thus meeting her commitments to the PSRP. A project team led by the Rural Electrification Agency (REA) including the Transmission Company of Nigeria (TCN), Ministry of Environment, Nigeria Bulk Electricity Trading Plc (NBET), and the Renewable Energy Department of the Ministry of Power will implement/administer the grant resources on behalf of FGN. SEFA will fund the transaction/programme development advisory services including legal, financial, technical (including feasibility studies) and programme management services (including procurement) for the IPP Procurement program of up to 200MW (Round 1) of the Jigawa Solar Park. Experienced/world class consulting firms will be competitively procured in conformity with applicable Bank rules to provide the services. Payment of service providers will be by direct payment from the Bank. PESR department and SEFA Secretariat will support and monitor the implementation of the programme. The programme aligns with Nigeria s Power Sector Recovery Plan ( ) and the Rural Electrification Strategy and Implementation Plan (2016). The programme is also aligned with the Bank s Country Strategy Paper (CSP) for Nigeria ( ) pillar 2 centered on investing in critical infrastructure particularly energy/power. The programme also aligns with the Bank s Ten Year Strategy ( ), Energy Policy, Private Sector Development Strategy ( ); and New Deal on Energy for Africa (NDEA). This programme directly supports the roll out of the Bank s IPP Procurement program identified as a critical component to deliver on the NDEA, that proposes to launch 30 country-specific programmes over the next five years, with targeted program size per country of up to 2,500 MW depending on the needs and size of the country. Overall, the programme is expected to contribute towards the country s development objective of improving power supply and attain universal access to electricity by 2040, promote and encourage investor confidence, electrify unserved and underserved areas. The programme will also have regional integration outcomes given the transmission infrastructure upgrades and connection to the West African Power Pool (WAPP).

4 Application Summary Processing Stage Date Bank Team Lead SEFA Team Support Final 4/9/2018 Rhoda Mshana Michael Kane Ayodeji Adebola Programme Sector/Technology Renewable Energy Sector Implementing Agency Rural Electrification Agency Programme Country/Region Nigeria Partner Donors N/A Programme Description The programme entails the feasibility studies and launch of IPP procurement for the design, construction and operation of a 1GW solar power plant, comprised of different technologies including, solar PV and CSP in Gwiga, Jigawa State. Programme Components 1. Phase 1: Technical Studies 2. Phase 2: Advisory Services for IPP Procurement Launch Key Performance Indicators 1. Technical Studies Completed 2. IPP Procurement Launch Summary Financing Plan (USD million) # Component SEFA funding FGN contribution Total 1 SEFA Funded Activities Phase 1 (current request) Phase FGN Funded Activities GRAND TOTAL 31.7

5 TABLE OF CONTENTS APPLICATION SUMMARY ABBREVIATIONS i 1. INTRODUCTION 1 a) Country Context 1 b) Sector Context 1 c) Legal and Institutional Context 2 d) AfDB and Development Partner Activities 3 e) Programme Rationale 3 f) Justification for SEFA intervention 4 2 THE PROGRAMME 5 a) Programme Description 5 b) Current Status of Programme 5 c) Institutional implementation arrangements 6 d) Cost Structure and Financing Plan 6 e) Implementation Timeline 6 f) Analysis of Development Outcomes 7 g) Environmental, Economic and Social Impact 8 3. SEFA TECHNICAL ASSISTANCE GRANT FOR ENABLING ENVIRONMENT 8 a) Grant Description and Procurement 8 b) Disbursement Modalities CONCLUSION & RECOMMENDATION 11

6 ABBREVIATIONS AA Action Agenda (of SEforALL) NEPA National Electrical Power Authority AfDB/ ADB African Development Bank NERC Nigerian Electricity Regulatory Commission AFD Agence Française de Développement NESI Nigerian Electricity Supply Industry BPE Bureau of Public Enterprise NIPP National Integrated Power Projects CBN Central Bank of Nigeria NREMP Nigeria Renewable Energy Master Plan CSP Country Strategy Paper NREEEP National Renewable Energy and Energy Efficiency Policy DFI Development Finance Institution O&M Operation and Maintenance DFID Department for International Development PAG Payment Assurance Guarantee DisCo Distribution Company PCOA Put Call Option Agreement DSCR Debt Service Cover Ratio PEN Preliminary Evaluation Note E&S Environment and Social PIU Project Implementation Unit EPC Engineering, Procurement and Construction TA Project Preparation Grant EPSRA Electric Power Sector Reform Act PRG Partial Risk Guarantee ERGP Economic Recovery and Growth Plan PSRP Power Sector Recovery Plan ESIA Environmental and Social Impact PV Photovoltaic Assessment ESMP Environmental and Social Management RAP Resettlement Action Plan Plan FEC Federal Executive Council REA Rural Electrification Agency FDI Foreign Direct Investment ROE Return on Equity FGN Federal Government of Nigeria PSRR Power Sector Reform Roadmap FMP Federal Ministry of Power SCADA Supervisory Control And Data Acquisition GDP Gross Domestic Product SEFA Sustainable Energy Fund for Africa GenCo Generation Company SPV Special Purpose Vehicle GIZ Deutsche Gesellschaft für Internationale TCN Transmission Company of Nigeria Zusammenarbeit IPP Independent Power Producer TYS ADB Ten Year Strategy KFW Kreditanstalt für Wiederaufbau USAID United States Agency for International Development kwh Kilowatt Hours USD US Dollar MoE (Federal) Ministry of Environment WAPP West African Power Pool MoP (Federal) Ministry of Power WB World Bank MTF Medium Term Expenditure Framework MYTO Multi-Year Tariff Order NBET Nigeria Bulk Energy Trader Plc NDC National Determined Contribution i

7 1. Introduction a) Country Context 1.1 Country and Economy. Nigeria has the largest economy in Africa with a 2016 GDP of USD 420 billion. The Nigerian economy is primarily based on oil extraction and refining, employing approximately 10% of the labour force and accounting for 34% of the GDP. Nigeria is categorized as a middle-income, mixed economy and emerging market country, with expanding manufacturing, financial, service, communications, technology and entertainment sectors. It is one of the-largest economies in the world, in terms of purchasing power parity, and it produces a large proportion of goods and services for the West African subcontinent. In 2017, the Federal Government of Nigeria (FGN) launched the Economic Recovery and Growth Plan (ERGP), a Medium Term Plan for , which builds on the previous Strategic Implementation Plan of 2015, and has been developed for the purpose of restoring economic growth. The ERGP is predicated on sustained inclusive growth, with a plan to structurally transform the economy with an emphasis on improving both public and private sector efficiency, increasing national productivity and achieving sustainable diversification of production, significantly growing the economy and achieving food and energy security. The ERGP also provides a blueprint for the type of foundation that needs to be laid for future generations, and focuses on building the capabilities of the youth of Nigeria to be able to take the country into the future. One of the key execution priorities is ensuring energy sufficiency (power and petroleum products). b) Sector Context 1.2 Energy Sector. Nigeria faces the challenge of fast rising electricity consumption, coupled with growing carbon emissions. In addition, Nigeria, in its development objective to rank amongst the top 20 economies of the world by the year 2020, targets an ambitious 40,000MW of electricity generation. Despite Nigeria s current installed generation capacity of 12,000 MW, the maximum electricity generation capacity is estimated at approximately 5,500 MW which is inadequate to meet the unsuppressed demand estimated at approximately 10,000 MW. Nigeria s current power mix is composed of 86% gas-fired plants and 14% hydropower, with a target of 20% solar power generation by To meet the generation targets significant private sector investment is required in the supply chain, including generation, gas to power infrastructure and distribution networks. The Nigerian Electricity Supply Industry has experienced liquidity issues stemming from a variety of interconnected issues such as failure in implementing cost reflective tariffs, significant gas supply shortages, high aggregate technical, commercial and collection losses (ATCC); and shortfall in revenue collection mainly due to inaccurate customer / meter databases, theft and lack of metering of customers. In order to address these issues and perform a sector reset, the FGN approved the Power Sector Recovery Plan (PSRP) in April 2017 as a long term plan to address the range of challenges in implementing the Power Sector Reform Roadmap (PSRR). The PSRP is a series of policy actions, operational & technical, governance and financial interventions to be implemented by FGN over the next five (5) years to restore the financial viability of Nigeria s power sectorand providing comfort for private sector investment into its privatised power market. 1 The Nigerian Power Sector Investment Opportunities and Guidelines, available at 1

8 In the short term however, the bulk trader, Nigerian Bulk Electricity Trading Plc (NBET) will meet its financial obligations under existing Power Purchase Agreements (PPAs) through a NGN 701 billion ($2.3billion) payment assurance guarantee (PAG) for the power sector provided by the Central Bank of Nigeria (CBN) c) Legal and Institutional Context 1.3 Institutional context: The Federal Ministry of Power (MoP) performs an oversight role in the electricity sub-sector, including sector planning, policy and program development. Agencies and parastatals that report to the ministry and for which the MoP has oversight responsibilities include; the Rural Electrification Agency (REA), Transmission Company of Nigeria (TCN), and NBET. A process to privatise the Nigeria Integrated Independent Power Projects (NIPPs, totalling 4,774 MW) commenced in 2013; but suspended in These initiatives and reforms are yet to reach the targeted installed capacity of 40,000MW by 2020 delineated in its Vision 20:2020 and the Transformation Agenda 1.4 Policy direction and regulatory context: The Government has undertaken several policy reforms to address the challenges of the electricity subsector. The reform of the power sector started in 2005 with the enactment of the Electric Power Sector Reform Act (EPSRA) and was accelerated in 2010 with the Power Sector Reform Roadmap (PSRR) which led to the unbundling of the former National Electric Power Authority (NEPA) into privately owned distribution companies (DisCos) and generation companies (GenCos) in 2013 with a state-owned transmission company (TCN). 1.5 The country currently operates under the Multi-Year Tariff Order (MYTO) that was passed by the Nigerian Electricity Regulatory Commission (NERC) in June The MYTO is a tariff model for incentive-based regulation that seeks to reward performance above certain benchmarks, reduce technical and non-technical/commercial losses and lead to cost recovery and improved performance standards from all industry operators in the Nigerian Electricity Supply Industry (NESI). Tariffs in Nigeria are primarily based on four criteria: location, tariff class, tariff rate and quantity of consumed energy (in kwh). The tariff differs by Discos but the average tariff for residential customers is NGN36 / kilowatt hour. The MYTO is currently under review and the new MYTO 2 will cover , under which the residential tariff is expected to rise by about 40%. 1.6 The Economic Recovery & Growth Plan (ERGP) recognises the fundamental role of power to the development of all sectors of the economy. In the long term, the ERGP aims to increase power generation by optimizing operational capacity, encouraging small-scale renewable projects, and building more capacity. Medium term, the ERGP aims to optimize the delivery of at least 10,000 MW of operational capacity by 2020 by optimising the existing installed capacity available for generation, addressing gas supply issues including vandalism and completing major gas infrastructure lines for power. In addition, FGN, as documented in the ERGP, aims to improve NBET financial capacity to support the electricity market, strengthen the governance and capacity of sector agencies, and improve the commercial viability of GenCos and DisCos. 1.7 The PSRP which was approved by the FGN in April 2017 is designed on the basis of the ERGP. The PSRP is intended to address the range of challenges in implementing the Power Sector Reform Roadmap, and providing comfort for private sector investment into its privatised power market. As one of the main objectives of the EGRP, the FGN wants to expand power sector infrastructure, thereby optimizing the delivery of at least 10 GW of operational power capacity by 2020 to boost economic activity across all sectors and improve the quality of life of the citizenry. The PSRP takes this goal and articulates it further by setting out a series of carefully thought out policy actions, operational, governance and financial 2

9 interventions to be implemented by FGN over the next five years ( ) to restore the financial viability of Nigeria s power sector, improve transparency and service delivery, and reset the NESI for future growth. The PSRP intervenes in the power sector in four different areas: i) financial support to fully fund past and future sector deficits, ii) operational and technical support, iii) governance and iv) policy support. d) AfDB and Development Partner Activities 1.8 Bank involvement: This IPP procurement programme will complement the Bank s ongoing operations in the country, including the Energy Sector Economic Reform Program and the Partial Risk Guarantee program for IPPs in Nigeria. Additionally, the Bank is also considering non sovereign lending to the various IPP projects in the gas and solar power sectors with a total AfDB funding requirement of up to USD 500 million. The Bank has been acknowledged as one of the key development partners working with the FGN to address the challenges in the power sector that are impeding economic development and energy remain a key focus under the Bank s Country Strategy Paper (CSP) for Nigeria ( ). The Bank has also been working closely with the World Bank and other partners on the implementation of the PSRP, where the Bank has committed up to USD 1 billion in support alongside the World Bank. 1.9 Other development partners support: Various development partners have been supporting the FGN in the energy sector, across the power value chain. Current support in the sector is provided by the World Bank, European Union, United States Agency for International Development, Department for International Development, Agence Française de Développement (AfD), and Japan International Cooperation Agency, among others. e) Programme Rationale 1.10 Renewable Energy Potential. According to the Nigeria Renewable Energy Master Plan (NREMP) being implemented by the Federal Ministry of Environment (MoE), Nigeria seeks to increase the supply of renewable electricity from 14% of total electricity generation in 2015 to 23% in 2025 and 36% by Nigeria s unrealized renewable energy generation potential is estimated at circa 63,000 MW across all generation technologies, and according to the National Renewable Energy and Energy Efficiency Policy (NREEEP 2015), solar potential is estimated at 13,200 MW. Against this background, in 2016, NBET signed 14 PPAs with different developers (in the north region of the country) with a view to providing up to 1.4GW of on-grid renewable energy The proposed Jigawa Solar Park programme seeks to deliver a total of 1GW of on-grid electricity to Nigeria. Jigawa is located in one of the highest solar irradiation zones in Nigeria with an estimated value of 25.17MJ day-1 2. The programme will support the FGN ambition to reach over 2 GW of solar power in the country. In order to facilitate the speedy delivery of the programme, the FGN has set up an interdepartmental/agency task force including TCN, NBET, REA, MoP and MoE to ensure that all necessary components of development activities are speedily undertaken. NBET will be the sole off taker for the electricity generated by the programme In response to the immediate needs of the FGN to generate power for the country as well as meet its commitment under the NDC, a phased project development of the site is expected (subject to conclusions of the technical studies), with the first 2*100MW IPP procurement for solar PV expected to commence in Q This will be further replicated over the remaining project site 3. Competitive procurement has been proven to lead to improved transparency, efficiency and competition leading to decreased costs in infrastructure projects generally, and in power sector projects specifically. Solar PV has been deployed in The FGN has secured 1,957ha to develop the Solar Park 3

10 several parts of the country for different purposes, however, this programme is unique because it is the first competitive IPP procurement program and can thus be replicated across the country. f) Justification for SEFA intervention 1.13 Given the electrification rates in Nigeria, this programme will increase the generating capacity for the whole country by infusing much needed power into the grid and providing access to the citizens, bringing overall installed generation capacity to 6,500 MW. As a flagship program of the FGN, this programme additionally contributes to Nigeria s Nationally Determined Contribution (NDC) under the Paris Agreements, under which Nigeria intends to work towards 13000MW of solar PV generation by Furthermore, the FGN has identified key partners to ensure successful outcome of its Programme by establishing a partnership with the Kingdom of Morocco, through the Moroccan Agency for Sustainable Energy (MASEN). MASEN is acclaimed for its success in the delivery of large utility scale renewable energy project in Morocco including the world s large Concentrated Solar Power (CSP) project. MASEN is on target to deliver an additional 3,000 MW of clean electricity generation capacity by 2020 and a further 6,000 MW by 2030 for the country. The MASEN model provides for significant investment and commitment upfront by the State with the aim to de-risk the investment and therefore reduce the overall cost from the IPP developers during procurement. The FGN intends to replicate MASEN model for Jigawa. The Jigawa Solar Park will thus be designed using the same best practice and model of the Moroccan Solar Program, known as the "Noor Program, which aims to achieve a production capacity of at least 2,000 MW of solar power by MASEN through its Directorate of International Cooperation and Partnerships has been engaging with the FGN in providing technical guidance and support on the development of Jigawa Additionally, following the success of the MASEN Noor solar park project, where the Bank is a lender, this programme will support the Bank s efforts in transferring lessons learned and success to other parts of Africa and take the lead as an advisor and arranger for the programme. The Bank will seek to capitalise on its knowledge from the MASEN Noor solar park and its collaboration with the Kingdom of Morocco to better design the Jigawa Solar Park programme with support from the Bank and MASEN Unlike the 14 PPAs for solar PV generation signed by NBET, the FGN has committed to de-risking the Jigawa Solar by performing programme development activities including the Environmental Social Impact Assessment (ESIA) study, layout and topographical site surveys and fencing of 500ha for the first phase of the Programme. Additionally, the Government has committed to provide common site services including access roads, utilities (water and communications) and other ancillary services as well as transmission infrastructure. The FGN also intends to competitively procure the 1GW capacity on the site, which will be a departure from previous power procurements in Nigeria, thereby procuring the power at the lowest possible tariffs Linkage to SEFA Objective. The programme fits SEFA s objective of providing grant resources and technical assistance (TA) for conducting project development activities for Renewable Energy (RE) and Energy Efficiency (EE) projects. The programme and the proposed technical assistance (TA) for enabling environment grant aligns with SEFA s mandate to unlock private investments in clean energy and fits its eligibility criteria, in particular project cost in the USD million range. The SEFA grant will support a flagship programme of the FGN, and diversify the geographical as well as technology coverage of SEFA s portfolio. SEFA s TA also presents an opportunity for the Bank to participate and/or lead syndication of debt financing for the programme This programme also directly supports the roll out of the Bank s IPP Procurement program identified as a critical component to deliver on the NDEA, that proposes to launch 30 country-specific programmes over the next five years, with targeted program size per country of up to 2,500 MW depending on the needs and size of the country. 4

11 1.19 SE4All Objectives: The programme is aligned with two of the three objectives of the SE4All s Investment Prospects for Nigeria as it contributes to universal access to modern energy services and will assist to double the share of renewable energy in the global energy mix Strategic Alignment. The programme is aligned with the Bank s CSP for Nigeria ( ) which is anchored on creating a sound policy environment and investing in critical infrastructure. Under Pillar II Investing in Critical Infrastructure to Promote the Development of the Real Sector of the Economy, the CSP seeks to support the FGN s goal of providing safe, efficient, cost-effective, environmentally friendly, climate resilient, and fully integrated infrastructure network, especially in the energy sector The programme is aligned with the Bank s Ten-Year Strategy focusing on inclusive/green growth through the delivery of energy access, the Bank s Private Sector Development Strategy ( ) through leveraging of private sector financing, the Bank s Energy Sector Policy 2012 and the New Deal on Energy for Africa. With the programme being sponsored by the FGN, it shows the government s commitment to its NDC commitment under the Paris Agreement. Additionally, the programme is aligned with the EGRP, the NREEEP and the PSRP, which all have a focus on developing alternative and renewable sources of energy. 2 The Programme a) Programme Description 2.1 Scope. At full scale, the programme entails the design of and implementation of a competitive IPP procurement programme for the design, construction and operation of 1GW solar power plants, comprised of different technologies including, solar PV and concentrated solar power in Gwiga, Jigawa State. NBET as the bulk trader for the electricity sector in Nigeria, will be the sole off taker for all the electricity generated. The power will be wheeled via a 33KV line to be constructed by the TCN to the nearest point, located fifteen kilometre (15km) away. 2.2 Programme Components. The Grant will support the development and launching of Round 1 of competitive IPP programme to procure 2*100MW plants, which will then be replicated across the programme site. The implementation of the proposed SEFA support is in 2 phases as follows: Phase 1 Completion of Technical Studies and Design of the Masterplan: In this phase, a SEFA enabling environment grant of up to USD 1.5 million will be used to finance outstanding technical studies. The studies will include the detailed feasibility study including energy resource/yield analysis and geotechnical survey. Additionally, this phase will include the design of a masterplan for the entire 1,957 ha site Phase 2 Transaction Advisory Services: Phase 2 will be conditional upon the successful completion of, and outcome/results of Phase 1. Phase 2 components will include the procurement of a Transaction Advisor to support the FGN to design, launch, manage and conclude the IPP procurement for the first 2*100MW. SEFA contribution to this Phase is expected to be USD 1,000,000. b) Current Status of Programme 2.3 Programme Development Status. The programme is a greenfield programme. A pre-feasibility study was concluded by FGN confirming irradiation resource availability and suitability/layout of the proposed 1,957 hectare site. The FGN has committed in excess of USD 4,500,000 towards significantly advancing programme development milestones/activities including; 5

12 i) Acquisition of project site from Jigawa State Government. ii) Completion of Topographical/Site survey iii) ESIA Scoping Report and baseline data collection concluded for the dry season, with the wet season report to be issued shortly, agreed and approved by Federal Ministry of Environment. iv) Commencement of fencing for the proposed location of the first 2*100 MW plants (500 hectares). Additionally, the FGN through the TCN, has committed to undertaking the evacuation study for the transmission infrastructure and also providing the transmission infrastructure required to integrate the programme into the national grid to enable NBET to off take the power. The FGN will also be providing the common facilities (access roads; site drainage, water infrastructure, telecommunications etc.) for the programme. c) Institutional implementation arrangements 2.4 For this programme, an inter-agency project taskforce/implementation unit (PIU) comprising dedicated members/staff/specialists from NBET, MoP, MoE, TCN and REA has been created. The PIU reports to, and is coordinated by the Managing Director of REA. In addition to full time Government staff, the FGN has also employed the services of specialist consultants who will support the delivery of the Jigawa Solar Park programme, including procurement launch and bid assessment for the Programme. The Bank s procurement team is working with REA to identify and select appropriate staff with requisite skills and experience for the Financial Management and Procurement experts to undertake the procurement activities. The transaction advisor will work in close collaboration with the FGN to take the project(s) to market and provide advice on the commercial, legal and economic/financial structuring of the project. d) Cost Structure and Financing Plan 2.5 Development Cost. Total project development cost for the first phase (2*100MW) of the IPP Procurement is estimated at USD 32,000,000 (including infrastructure costs i.e. transmission and site services) for the entire 1,957 ha site. To date, the FGN has committed approximately USD 4.5 million. An additional USD 24.7 million is to be committed by the FGN from other sources to fund the construction of the transmission and facilities infrastructure as part of the ongoing project development activities. The proposed USD 2,500,000 SEFA TA, thus represents less than 10% of the total development cost. The FGN is requesting an initial approval of up to USD 1.5 million to complete the required technical studies and masterplan in Phase 1. Subject to the results of the technical studies, management will submit an information update for approval to the Power, Energy, Climate Change and Green Growth Vice Presidency VP, PEVP) 4 for the balance of USD 1,000,000 for Phase 2 for the recruitment of transaction advisory services. e) Implementation Timeline Implementation Timeline. The schedule for conclusion of Phase 1 of the SEFA funded activities is expected to be 12months from commencement in February, Subject to successful completion of and outcome/results of Phase 1, the schedule for completion of the programme s development phase commencing with the SEFA Phase 2/ appointment of Transaction Advisor, launch of the IPP Procurement for the Round 1, 2*100 MW solar power plants and financial close, is expected to be eighteen (18) months from Q1, Tables 1 and 2 below presents a summary of the proposed SEFA TA implementation timeline: 4 As per SEFA rules, approval of grants up to USD 1 million are vested in the Vice President of the PEVP complex. 6

13 Table 1: Summary Phase 1 Implementation Schedule SEFA TA Activities PHASE 1 Grant approval/signature Procurement of consultants Detailed feasibility studies Masterplan Design Q1 Q2 Q3 Q4 Q1 Table 2: Summary Phase 2 Implementation Schedule SEFA TA Activities PHASE 2 Transaction Advisory Q1 Q2 Q3 Q4 Q1 Q2 f) Analysis of Development Outcomes 2.6 The programme s economic and development outcomes include: i) Improving access and power supply: At full production capacity of 1GW, the programme will contribute to the installed power generation capacity of the country and improve access to electricity for 170 million Nigerians, particularly in the rural areas of Northern Nigeria where access rates are lowest 5. It is expected that the Programme will significantly improve access rates in the region, especially because this fits in with the mandate of REA to improve rural access to electricity. ii) Encourage investor confidence and produce demonstrative results. The viability of the proposed programme will have a significant demonstration effect and showcase an alternative business model of competitively procured solar power in Nigeria as an anchor for future power procurement. This process is expected to result in significantly lower tariffs because of the significant upfront costs and de-risking of the programme by the FGN. The lowest tariffs for recent sole sourced/bilaterally negotiated solar project in the country is approximately US$0.11/kwh the Jigawa IPP procurement hopes to achieve a tariff reductions by at least 40%. As a result of this, IPPs and investors may be able to recover their investments faster in a timely manner leading to further market confidence in the NESI and catalyse private investment in the renewable energy sector. iii) Regional integration outcomes. The programme will potentially benefit the West African Power Pool (WAPP) through transmission upgrades with interconnections to the WAPP grid, being implemented by the TCN around the programme site. This will enable sale of power to neighbouring countries Benin and Niger. 5 JICA, February 2007, The Master Plan Study for Utilization of Solar Energy in the Federal Republic of Nigeria, Final Report, Volume 1, p

14 g) Environmental, Economic and Social Impact The programme s economic and development outcomes include: 2.7 Improving access and power supply: At full production capacity of 1GW, the programme will contribute to the generating capacity and improve access to electricity for 170 million Nigerians, particularly in the rural areas of Northern Nigeria. 2.8 Environmental Effects. The programme will support the reduction of CO 2 emissions reduction in the country. At full capacity, the 1GW of solar power production would displace an estimated 900 metric tonnes of CO 2 per day that is currently used in the gas-thermal plants. 2.9 Social Effects. The programme will support rural women in the Jigawa State. Women are disproportionately affected by the low electricity access rates in Northern Nigeria, due to their household responsibilities and in particular for finding and using biomass fuels for cooking and heating. It is expected that the increased electricity rates will improve access to cleaner and more affordable energy for household use including cooking. 3. SEFA Technical Assistance Grant for Enabling Environment a) Grant Description and Procurement 3.1 Grant Description. The SEFA grant amounting to USD 2,500,000 will be used to finance programme development activities. This SGR is for an initial request of up to USD 1.5 million to finance Phase 1 components including the following: i) A detailed Feasibility study to determine the appropriate economic/financial, technical, legal and commercial factors and the potential impacts of the programme. In terms of the technical components, the study shall include but not be limited to the energy yield analysis, geotechnical site survey, irradiation levels, plant layout, plant sizing, geotechnical survey, geodetic surveys, requisite site utilities and services. For the economic/financial component, the study would include the requisite metrics and indicators i.e. CAPEX, assumed cost of capital, revenue projections (based on tariff projects), IRRs and NPVs. The commercial and legal considerations shall include, programme structure, requisite government support mechanisms i.e. guarantees, as well as an elaboration of the any mandatory licensing, permitting and regulatory requirements and preapprovals required. ii) Masterplan design for the entire site including schematic site layout, land-use planning and zoning, architectural designs for ancillary buildings, access road network for the entire site. Subject to the conclusions of the technical studies in Phase 1, Phase 2 component will include: i) Transaction Advisory services to support the launching of Round 1 of the Jigawa Solar Park programme. Proposed activities will include the development of bidding documents, draft form/standardised PPAs, developing Project Information Memorandum (PIM), leading capital raising/stapled finance to accompany the bidding documents, launching and management of the procurement (RFPs, bid evaluations and recommendations) conducting due diligence on the preferred bidders and supporting FGN with negotiations with winning bidders for the first 2*100MW of the programme. 8

15 During Phase 2, the FGN will also finalise the arrangements to deliver the site services to the Programme, including provision of access roads, water, power and telecoms The SEFA TA (Phases 1 and 2) will be implemented over thirty (30) month beginning in Q1, The tables below present a summary of the TA activities, expected outputs, cost structure and implementation schedule. Table 2: SEFA Grant Budget & Activities Phase 1 Activities Outputs Budget (000 USD) Technical Studies Masterplan design Feasibility Study (technical, economic/financial) Geotechnical Survey Topographical/Geomatic Surveys & Site layout 300 Architectural & Civil Engineering Designs for Ancillary & Support Services (Roads, Utilities & buildings/control centres) 500 Sub-total Phase 1 1,500 Phase 2 Activities Transaction Advisory Transaction Design (including legal documents, security package) + Bidding Documents 450 Due Diligence & Support for Evaluation of Bids 350 Negotiations + Contracting 200 Sub-total Phase 2 1,000 Total 2,500 Table 3: SEFA TA implementation schedule SEFA TA Activities PHASE 1 Grant approval/signature Procurement of consultants Detailed feasibility studies Masterplan Design Q1 Q2 Q3 Q4 Q1 SEFA TA Activities PHASE 2 Transaction Advisory Q1 Q2 Q3 Q4 Q1 Q2 3.2 Procurement Methods and Procedures (PMPs). All procurements to be carried out under the Programme shall be carried out in accordance with the Procurement Policy for Bank Group Funded Operations, dated October 2015 or, as may be amended from time to time. Categories of procurement to be undertaken are indicated below: 9

16 3.2.1 Borrower Procurement System (BPS) This technical assistance will be undertaken using the Bank s procurement rules for consulting services Bank Procurement Policy and Methodology (BPM): Consulting Services: Acquisition of Consulting Firms shall be done using Quality and Cost Based Selection (QCBS) and utilizing the Bank Standard Request for Proposals (SRFP). The individual procurement arrangements are as follows: i) Technical Studies & Masterplan this will entail detailed feasibility study, including energy yield analysis, geotechnical survey and detailed masterplan design services for the site layout, architectural design for outbuildings and road networks for the site for an amount not to exceed USD 1,500,000; and ii) Transaction Advisory services for an amount not to exceed USD1,000, Advertising. General Procurement Notice. The text of a General Procurement Notice (GPN) will be agreed with the FGN and it will be issued for publication in UNDB online and in the Bank s Internet Website, upon approval by the Board of Directors of the Financing Proposal/SEFA Grant Request. To expedite the procurement process towards the achieving the programme s goals, it is proposed that, after clearance/endorsement of the Board of Directors, the Advance Procurement option be implemented for the conduct of the Technical Studies & Masterplan. 3.4 Procurement Review. The following documents are subject to review and approval by AfDB before promulgation: (i) General Procurement Notice; (ii) Requests for Expressions of Interest (EoI); (iii) Request for Proposals (RFP); (iv) Technical Evaluation Reports; (v) Combined Evaluation Report and minutes of contract negotiations including draft initialled contracts. 3.5 Programme Implementation & Procurement Capacity. The SEFA grant will be administered by the PIU coordinated by REA. The inter-agency team comprising dedicated members/staff/specialists from NBET, MoP, MoE, TCN and REA was created for the sole purpose of implementing the Jigawa IPP programme. The PIU reports to and is headed by the Managing Director of REA. The team s leadership, shall ensure compliance with AfDB procurement and financial management requirements. Constituent members of the PIU have extensive experience in implementing both AfDB and World Bank funded projects and thus, are very conversant with the respective procurement rules and procedures. That notwithstanding, CVs for the nominated Procurement Specialist and Financial Management Specialist would be subject to review and approval by the Bank s Fiduciary Safeguards department. The PIU s leadership has designated a contact person who serves as the interlocutor between the SEFA/Bank team and the PIU on all procurement related issues. All notices and evaluation reports would be subject to prior review by the Bank. 3.6 Approval of Procurement Plan: During the implementation of the SEFA TA, all procurement plans shall be subject to review and approval by the Bank. b) Disbursement Modalities 3.7 Disbursement. Disbursements shall be by the direct payment method to all service providers/consultants based on agreed deliverables and schedule with the FGN. 10

17 4. Conclusion & Recommendation 4.1 Conclusion. The FGN s need to quickly and cheaply electrify the underserved and unserved in Nigeria makes the development of the Jigawa Solar Park imperative. The FGN has shown its commitment to the project by investing significant upfront costs and has proven with the progress of the programme s development thus far, it s commitment to transition the programme to a bankable stage. Additionally the FGN has partnered with the Kingdom of Morocco through MASEN to seek technical guidance to ensure the program replicates best practice models. 4.2 The proposed SEFA TA would provide much needed support to complete the critical technical studies, masterplan and eventually, through to taking it to market and conducting the competitive independent procurement of Round 1 of the Jigawa Solar Park of 200 MW. 4.3 The use of renewable energy, in the form of solar power technology, also has significant environmental and economic benefits. At full capacity, the programme displaces significant amount of fossil fuel based power generation with associated 900 tonnes per day reduction of CO2 emissions. The programme will also create jobs for the local community in the surrounding area. 4.4 Recommendation. The SEFA Secretariat recommends that the Board of Directors clear this Enabling Environment Grant Request of a total amount up to USD 1,500,000, on a lapse-of-time basis, as stated in the SEFA Operational Guidelines. The successful completion of Phase 1 shall be a condition precedent for Phase 2 submission to SEFA Technical Committee. 11

18 Annex 1: Results-Based Log Framework RESULTS CHAIN IMPACT Contribute to sustainable economic growth through provision of renewable power/energy at competitive cost Contribute to Nigeria s rural electrification targets PERFORMANCE INDICATORS Indicators Baseline Target Composition of clean/renewable energy technology in National Energy Mix (%) Increase rural access to electricity by 45% 1% (2014) 21% (2030) 39% (2015) MEANS OF VERIFICA- TION FGN Ministry of Power reports/ NDC Monitoring Reports 45% (2020) REA Reports RISKS/ MITIGATION MEASURES Climate Change Mitigation GHG emissions avoided N/A 328,500 (CO2 Eq/annum) Additional installed generation capacity Number of MW produced - Up to 200MW (2020) Up to 1000 MW (2030) OUTCOMES Quantum of finance/capital leveraged Jigawa Solar IPP Procurement program launched Equity, quasi equity and debt amount leveraged (USD million) Number of Rounds launched and concluded (Tender/Auction Process concluded and winning bidders selected/announced) N/A N/A USD200mill ion (2021) USD 900million (2030) 1 (Q1, 2020) FGN Reports & Project Completion Report SEE ANNEX 3 RISK MITIGATION Job Creation No. of fulltime employment created (% of which are for women) N/A 55 /10% (2021) 275/15% (2031) OUTPUTS KEY ACTIVITIES Detailed feasibility study completed and approved Programme development Masterplan designed and activities and related reports approved and outputs Transaction Advisor Recruited (Outputs delivered) Development of ToRs Development of Procurement Notices (GPN, EOIs and RFPs) Procurement Post Review Contract Implementation/Monitoring Disbursement Monitoring Launch of IPP Procurement program (Q2,2019) 1 (Q2,2019) 1 (Q4, 2020) INPUTS SEFA: USD Phase 1: 1,500,000 Phase 2: 1,000,000 I

19 Annex 2: Draft Procurement Plan for Contract Implementation Package Number Package Description Selection Method Lumpsum Time-Based or Estimated Budget (USD) Prior/Post Review EOI Publication Date Start Date End Date 1 Detailed Feasibility Study and Masterplan Design QCBS Lumpsum 1,500,000 Prior 02/ / / Transaction Services Advisory QCBS Lumpsum 1,000,000 Prior 02/ / /2020 Total Cost 2,500,000 II

20 Annex 3: Risk Assessment and Mitigation Identifiable risks to the programme s success are grouped under development phase risks incorporating risks to the implementation of the proposed SEFA TA are listed below: i) Implementation Delays delays to the implementation of the SEFA TA grant components could impact the launch of the IPP procurement schedule as set by the FGN. The FGN has already started advancing development activities in order to buffer potential implementation delays. ii) Adverse Selection of Service Providers the risk of adverse selection of service providers/consultants to undertake the SEFA TA activities would undermine the quality of outputs and thus threaten bankability/fund raising for the programme. To mitigate this risk, all procurement would be undertaken according the Bank s Rules & Procedures. TORs and procurement evaluation report would be subject to prior review and approval by Bank/SEFA team. iii) NESI Risks - There is a risk that NBET as the manager and administrator of the electricity pool in NESI will be unable to purchase generated power from the IPP, due to the liquidity issue and inability to pay current GenCos. However, NBET is extremely supportive of the programme and has indicated its willingness to take on additional capacity from the programme in form of a PPA to be signed between NBET and the first competitively procured IPP. iv) As part of measures to solve the liquidity problems in the power sector, the PSRP has detailed a financing plan where the shortfall in the sector has been captured in the medium-term expenditure framework and the proposed 2018 budget fully reflects the FGN contribution to the plan. The Debt Management Office has given NBET an envelope of USD 5billion for contingent liabilities. Also, NBETs ability to deliver on its PPA obligations to the GenCos is based on the Federal Executive Council s (FEC) approval of a NGN701 billion payment assurance guarantee (PAG) for the power sector, to be provided by the Central Bank of Nigeria (CBN). In addition to this, a Put-Call-Option- Agreement (PCOA) will be negotiated with the developers to guarantee sponsor payments in a termination event. Finally the IPPs will also have access to the Bank s credit enhancement products including the Partial Risk Guarantee. III