Mozambique - Transmission Upgrade Project : restructuring

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 69894-MZ RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE TRANSMISSION UPGRADE PROJECT CREDIT 4354-MZ July 17, 2007 TO THE REPUBLIC OF MOZAMBIQUE January 31, 2013 Energy Practice 1 (East and Southern Africa), AFTG1 Sustainable Development Department Africa Region 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. ABBREVIATIONS AND ACRONYMS APL Adaptable Program Lending DA Designated Account DEP Electrification and Project Directorate DDCM Department of Debt and Contracts Management EA Environmental Assessment EdM Electricidade de Mocambique ESCOM Electricity Supply Corporation of Malawi ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan FM Financial Management IBRD International Bank for Reconstruction and Development IDA International Development Association kV Kilovolt MOU Memorandum of Understanding MWh Megawatt Hour PDO Project Development Objective PMU Project Management Unit PPF Project Preparation Fund RPF Resettlement Policy Framework SADC Southern African Development Community SAPP Southern African Power Pool SOE Statement of Expenses Regional Vice President: Makhtar Diop Country Director: Laurence Clarke Sector Director: Jamal Saghir Sector Manager: Lucio Monari Task Team Leader: Rob Mills 11 MOZAMBIQUE TRANSMISSION UPGRADE PROJECT CONTENTS Page PROJECT DATA SHEET ........................................................................................... iv A. SUM M ARY ........................................................................................................ 1 B. BACK GROUND .................................................................................................... 2 C. PROJECT STATUS ............................................................................................. 4 D. PROPOSED CHANGES ....................................................................................... 6 E. APPRAISAL SUMMARY .................................................................................. 13 ANNEX 1: RESULTS FRAMEWORK AND MONITORING.............................. 14 ANNEX 2: TEAM COMPOSITION...................................17 iii MOZAMBIQUE TRANSMISSION UPGRADE PROJECT DATA SHEET Restructuring Status: Submitted to SECPO Restructuring Type: Level one Last modified on date : 01/31/2013 1. Basic Information Project ID & Name P084404: 3A- MZ-MW Transmission Interconnection Country Mozambique Task Team Leader Robert Mills Sector Manager/Director Lucio Monari Country Director Laurence C. Clarke Original Board Approval Date 07/17/2007 Original Closing Date: 06/30/2013 Current Closing Date 06/30/2013 Proposed Closing Date [if applicable] 12/31/2014 EA Category B-Partial Assessment Revised EA Category B-Partial Assessment-Partial Assessment EA Completion Date 11/18/2003 Revised EA Completion Date 11/18/2003 2. Revised Financing Plan (US$m) Source Original Revised BORR 16.70 0.00 IDA 93.00 13.80 Total 109.70 13.80 3. Borrower Organization Department Location Government of Mozambique, Mozambique Government of Malawi 4. Implementing Agency Organization Department Location Electricidade de Mozambique Mozambique (EdM) 5. Disbursement Estimates (US$m) Actual amount disbursed as of 04/11/2013 2.97 Fiscal Year Annual Cumulative 2010 0.00 2.97 2013 2.50 5.47 2014 7.40 12.87 2015 1.00 13.87 Total 13.87 iv 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select N from the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The APL 2 development objective is to implement the Mozambique-Malawi transmission interconnection (i) to increase access to diversified, reliable, and affordable supplies of energy; and (ii) to expand Malawi and Mozambique#s opportunities to benefit from bilateral and regional power trading on the Southern African Power Pool. 7b. Revised Project Development Objectives/Outcomes [if applicable] To reduce the frequency of electricity outages in Tete province v  TRANSMISSION UPGRADE PROJECT RESTRUCTURING PAPER A. SUMMARY 1. The Mozambique-Malawi Transmission Interconnection Project, approved by the Board in July 2007, was comprised of two credits: US$45 million (SDR 29.6 million) for Mozambique and $48 million (SDR 31.5 million) for Malawi. The Project's investments included a transmission interconnection between Mozambique and Malawi, as well as high-priority associated investments on both sides of the border. 2. The credit offer for Malawi for this regional Project was withdrawn in July 2010, after the previous Government of Malawi eventually decided that interconnection with Mozambique was no longer a priority investment. However, the US$45 million Mozambique credit was declared effective on April 11, 2008. 3. The proposed restructuring concerns the Mozambique credit. It will cancel the US$31.2 million (SDR 20.5 million) IDA allocation associated with the cross-border transmission components of the Project, while retaining those urgent activities unrelated to the transmission line, particularly the reinforcement of the main transmission substation in Tete province, with US$13.8 million (SDR 9.1 million) of IDA financing. 4. The reinforcement of this substation is viewed as a high-priority investment by the Government of Mozambique. During the period since the Project was approved in 2007, Tete city in north-west Mozambique has experienced rapid economic growth and is considered a 'growth pole' for the whole of the sub-region. Rapid economic growth has been accompanied by even faster growth in energy demand, with electricity consumption increasing at an annual rate of 22% over the past 4 years. The current electricity infrastructure has become inadequate: with the power transformers at the main substation now overloaded, electricity outages are increasing in frequency and the power utility is no longer able to connect new customers. 5. The task team assesses that the upgrade of the main transmission substation component in Tete, which is part of the original Project, remains a critical investment to ensure that reliable power supply to Tete can be maintained. During the period since Project approval, it was not possible to proceed with implementation of this activity because of the uncertainty regarding the Malawi credit, as detailed below. 6. Given Project delays, an 18 months extension of the closing date is proposed in order to finalise all Project activities. The new closing date is December 31, 2014. 1 B. BACKGROUND 7. Southern Africa exhibits substantial variations in energy resource endowments, degrees of industrial development, levels of electricity consumption, and power costs. These differences present opportunities for development of the power sector at the regional level to generate cost savings through economies of scale and to manage the risks of climate-related power shortages in hydro-dependent countries. 8. In the Southern African Power Pool (SAPP) specifically, connection to the regional grid of the two' non-connected SAPP member power systems is a priority in terms of SAPP planning. 9. The World Bank (WB) has supported the strengthening and expansion of regional power pools in Africa. One of the main instruments for WB support in southern Africa is the Southern African Power Market Program (SAPMP) Adaptable Program Lending (APL) series. The program consists of a set of projects that aim to promote and manage electricity trade in the Southern Africa region. 10. In the 2006 SAPP Annual Report, the Mozambique-Malawi Transmission Interconnection was explicitly noted as a top priority for the regional pool. Subsequently, in 2006, the World Bank was requested by the Governments of Malawi and Mozambique to provide financing for the Mozambique- Malawi Transmission Interconnection Project, as the second phase (APL-2) of the SAPMP program, via two credits to be on-lent to their respective national electric power utilities. 11. The Project, approved by the Board of the World Bank on 17 July 2007, had three components: (A) Construction of a 220kv transmission interconnection line from the Mozambique electricity grid to the Malawi electricity grid, hence connecting Malawi to the SAPP; (B) Technical assistance, capacity building, training and equipment necessary for both utilities to achieve the Project objectives; and (C) investments to upgrade inadequate power infrastructure and remove critical bottlenecks in each country's network. It is important to note that Component C includes activities that are independent from the transmission interconnection line. For example, the Mozambique credit finances upgrades to transmission infrastructure in the main substation in Tete province. 12. Total Bank financing for the Project was US$93 million equivalent, via IDA credits to the Government of Malawi for US$48 million equivalent and the Government of Mozambique for US$45 million equivalent. The major share of these credits was to be on-lent to the national power utilities, EdM in Mozambique and ESCOM in Malawi. 13. The original Effectiveness date for both credits was November 23, 2007. After some delays in signing, the Mozambique portion of the credit was declared effective on April 11, 2008. However, the Malawi credit for the Project was never signed, and the credit offer was eventually withdrawn in July 2010. Angola and Malawi. 2 14. In summary, the following circumstances led to the withdrawal of the Malawi credit: * In September 2007, less than 2 months after Project Board approval, the Malawian Parliament was suspended for over 18 months. Other than two emergency sessions for consideration of the budget, Parliament was subsequently dissolved until the May 2009 elections. As Malawi law requires Parliamentary approval of Government borrowing, signing of the credit was not possible during this period. However, reiterations of support for the Project were received from Government officials during this period, including at the Annual Meetings in 2007 and 2008, and the Spring Meetings in 2009. * The WB consequently extended the signing deadline to August 2009. However, shortly before the first session of the new Parliament in June 2009, a decision was taken by the Government of Malawi to withdraw the Interconnector bill from Parliament's order of business. Subsequent discussions with Government revealed that Government had reservations regarding the Project, including on whether it undermined development of Malawi's own energy resources and on the monthly payments to be made as a result of the 'Wheeling Charge Agreement' negotiated between the two power utilities, EdM and ESCOM.2 * Subsequently, the Government of Malawi formally communicated in April 2010 that the Mozambique-Malawi Transmission Interconnection Project was not considered to be a priority investment at that time, signaling that the Malawi credit for the Project would not be signed. * Following these communications, the WB wrote to the Government of Malawi in June 2010, indicating that the IDA credit to Malawi in support of the Project had been withdrawn. 15. The decision of the Malawi Government not to sign the credit rendered impossible any progress in the regional parts of the Project. However, before proceeding with an immediate restructuring of the Project, further time was allowed to assess if any further discussions between the Governments of Mozambique and Malawi would allow for progress on the Project. 16. During this period of delay, the World Bank continued discussions with EdM regarding the critical and urgent upgrades to transmission infrastructure at the Matambo substation in Tete province that the Mozambique credit finances via Component C. During the period since the Project was approved in 2007, Tete city in north-west Mozambique has experienced rapid economic growth. Tete was one of the poorest parts of Mozambique until relatively recently, but large foreign investments in the mining sector have sparked an economic boom. Annual economic growth rates in the province reached 6.1% in 2010 (latest available data), and are likely to have accelerated since with the expansion of the mining operations, which have triggered associated private sector growth in Tete city. This economic growth has helped reduce poverty, with headline 2 The Wheeling Charge Agreement signed between EdM and ESCOM set out the monthly 'wheeling charge' that ESCOM would make to EdM. This payment acted to compensate Mozambique for borrowing IDA for a project from which it would not benefit until such time as the transmission line was extended through Malawi into northern Mozambique. 3 poverty rates declining from 53% to 30% since the late 1990s. Tete city is increasingly considered a 'growth pole' for the whole of the sub-region. 17. This rapid economic growth has been accompanied with even faster growth in energy demand, with electricity consumption increasing at an annual rate of 22% over the past 4 years, driven by the energy-intensive mining operations. Matambo is the main substation serving the city of Tete and surrounding areas. However, the current infrastructure has become inadequate: with the existing power transformers at the main substation now overloaded, electricity blackouts are increasing in frequency. In addition, EdM has indicated that it is no longer able to connect new customers. A failure to upgrade the Matambo substation risks undermining the reliability of power supply to Tete, with negative implications for Tete's growth prospects. 18. Specifically, the critical infrastructure upgrade financed by the Project is an increase in power transformation capacity that would be provided by a new 220/66/3kV transformer and the associated equipment. This item was part of the Mozambique Project as originally appraised. It is described in further detail in the component description below. 19. In line with the above, the restructured Project will continue to finance the high- priority components financed by the Mozambique credit that are unrelated to the transmission interconnection line itself. The objective is to support reliable electricity supplies by reducing the frequency of electricity outages in Tete province. This will allow EdM to respond more effectively to growing demand for energy as a key pillar of continued economic growth and development in the north-west of the country. This is in line with objective 7 ("improve access to electricity") of Pillar 1 on 'Competitiveness and Employment' of the Mozambique Country Partnership Strategy (CPS) FY12-15. C. PROJECT STATUS 20. As noted above, the $45 million Mozambique credit for the Project was declared effective on April 1, 2008. It has been agreed with the Government of Mozambique and EdM that the credit will be restructured as a standalone 'national' project of approximately US$13.8 (SDR 9.1 million), after the cancellation of US$31.2 million of IDA (SDR 20.5 million) associated with the regional aspects of the Project. Of the US$13.8 million amount, US$2.9 million has already been disbursed. 21. There are no overdue quarterly reports or annual audit reports. 22. The Project remains 'active' and implementation for the urgent remaining activities has been ongoing, in parallel to the restructuring process. The current status is as follows: Component Activity Status A Consulting Engineer to assist Consulting Engineer shortlist evaluation EdM with project report received and under review. implementation 4 B Environmental and Social Final report was submitted to GoM for Impact Assessment (ESIA) & approval in December 2011. Formal Resettlement Policy GoM approval was received in June Framework (RPF) for the 2012. Final disbursements have now been proposed Mozambican made. Regional Transmission Development project. Other technical services, To be procured. studies and training C Supply & install contract for Revised Bidding Documents have been reinforcement of 220kV prepared and issued by EdM, Matambo substation incorporating the relevant safeguards measures. The Bid Evaluation Report has been submitted, and the team expects to recommend Bid Award by end-December 2012. 23. It was not possible for EdM to make progress on the Matambo substation power transformer during the period when the Malawi credit remained unsigned. This is because the original scope of the works contract for Matambo substation bundled together in a single procurement package both the 'national' activity of the new power transformer and the 'regional' activity of installing line bays for the cross-border transmission line. The direct result of the delays on the Malawi side was that the entire procurement package was held up. 24. Following the cancellation of the regional parts of the Project, the technical scope of the Matambo substation works has been clarified to cover only the 'national' activity, and the bidding documents adjusted accordingly. Procurement of the main remaining Project activity - the power transformer at the substation - is now well-advanced. This is a simple activity in technical terms, involving the shipping and installation of a power transformer at the existing substation. The technical documentation has been completed, bids have been received and the Bid Evaluation Report submitted. The following timeline to complete the activity is expected: * Recommendation of Bid Award: by December 31, 2012 * Contract signature & contractor mobilization: by January 31, 2013 * Installation of transformer: by end-June, 2014 25. As the main activity in the restructured Project is technically simpler than the construction of the cross-border transmission line, it is expected that the new power transformer will be installed approximately by mid-2014. The proposed revised Project closing date is December 31, 2014, to provide a six-month cushion to allow for post- installation checks (e.g. on control systems), to complete disbursements and for any eventualities. This is 18 months later than the current Project closing date. 26. Expected disbursement from the restructured credit is as follows (figures in US$ mn): 5 Disbursed to CY 2012 CY 2013 CY 2014 date H2 HI H2 HI H2 2.9 0.2 2.3 3.9 3.5 1.0 27. Progress towards achievement of the Project's development objective (PDO), as well as Implementation Progress, have been rated 'Unsatisfactory' since the Government of Malawi's decision not to proceed with the Project, given that the primary objective of connecting Malawi to the Southern African Power Pool was no longer attainable. 28. It is important to underline, however, that the Project's 'Unsatisfactory' rating is a function of the cancellation of the Malawi part of the Project. In the Mozambique part, the borrower's performance in the remaining activities (for example, safeguards studies in Component B, as noted above) has been satisfactory and in line with Project covenants. It is proposed to upgrade the Project's performance rating to 'Satisfactory' upon approval of the restructuring. Given the limited disbursement on the credit to date, it is expected that an overall performance rating of 'Satisfactory' will be attainable at the time of the ICR. D. PROPOSED CHANGES Project Instrument and Name 29. This Project was originally phase two of the Southern African Power Market Program (SAPMP) Adaptable Program Lending (APL) series. The original Project name was "Mozambique-Malawi Transmission Interconnection Project". The IDA credit extended to Mozambique for the Project was hence named "Mozambique Component - Mozambique-Malawi Transmission Interconnection Project". 30. As the restructured Project will no longer have regional characteristics, the restructuring will remove the Project from the SAPMP APL series and create a stand- alone Specific Investment Loan (SIL) operation in the Mozambique portfolio. The restructured Project retains the investments to upgrade inadequate power infrastructure at the national level. The components of the original Project that relate to the cross-border transmission line will be removed. The restructured Project will be re-named the "Transmission Upgrade Project". 31. The remaining two projects that form part of the SAPMP - APL 1 and APL 1 a - are unrelated operations focused on DRC. Implementation of these projects continues. Project Development Objectives (PDO) 32. The original PDO for the Project was: (i) to increase access to diversified, reliable, and affordable supplies of energy; and (ii) expand Malawi and Mozambique's opportunities to benefit from bilateral and regional power trading on SAPP. 6 33. The proposed PDO for the restructured Project is to reduce the frequency of electricity outages in Tete province. Results & Indicators 34. The original indicators for those activities that are being retained in the restructured Project remain valid. These refer to the upgrade of the Matambo substation, and the completion of studies and training activities. The indicators that related to the transmission interconnection line itself have been removed. An indicator related to the average number of interruptions has been added. For more information, please see Annex 1. Components 35. The restructured Project will have three components, in line with the structure of the Project as originally appraised: * Component A: Consulting Engineering Services (US$0.8 million, excluding contingencies). This component includes consulting services and provision of technical assistance to assist EdM with engineering, technical, procurement and environmental & social aspects associated with the Matambo substation works. * Component B: Capacity Building and Technical Support to EdM (US$1.6 million, excluding contingencies). This component will continue to finance system planning and operation studies for EdM, through the provision of technical advisory services and training, including inter alia in environmental & social management, loss reduction, project management, system operation and other areas. As part of this, Component B will continue to support the Environment and Social Impact Assessment (ESIA) for the proposed Mozambican Regional Transmission Development project (P 108934). * Component C: Improved Transmission Infrastructure (US$10.0 million, excluding contingencies). This component will ensure that the Matambo substation has sufficient power transformer capacity for the rapidly growing electricity loads in Tete province. The scope of work, which has already been appraised as part of the original project preparation, covers the rehabilitation and reinforcement of the existing 220 kV Matambo substation including the provision of a new 220/66/33 kV (80/60/20 IVA) power transformer, the connection of the new transformer to the 66kV and 33 kV busbars at the substation, and the carrying out of associated civil, control and protection works at the substation. This component is going to be carried out through the provision of works, including supply and installation, and services other than consultants' services. Financing Aspects 36. The financing table below provides a comparison with the original costs of each component: 7 Estimated Project Costs Original Costs Revised Costs Components/Activities (US$ mn) Components/Activities (US$ mn) Component A: Mozambique-Malawi Component A: Consulting 0.8 Interconnection engineering services Component B: Capacity building and Component B: Capacity technical support for upgrade and 1.7 building and technical support 1.6 expansion to support power trading to EdM Component C: Improved infrastructure to 4.13 Component C: Reinforcement 10.0 support electricity trading of the Matambo Substation Contingencies 4.7 Contingencies 1.37 Total4 49.8 Total 13.8 37. As the Mozambique-Malawi Interconnector was developed as a regional project, the US$45 million (equivalent) IDA allocation for the Mozambique credit was comprised of US$30 million from the regional IDA allocation and US$15 million from the Mozambique IDA allocation, in line with the standard '%:1/3' formula for regional projects. 38. As the financing table above indicates, the revised cost estimate for all activities is US$13.8 million. This implies that the Restructuring will cancel the US$31.2 of IDA as follows: (i) approximately $1.2 million (SDR 0.8 million) from Mozambique's national IDA allocation, and (ii) approximately US$30 million (SDR 19.8 million) from the Africa regional IDA allocation. There will be no counterpart funding requirement, and the financing percentage of local expenditures will hence increase from 72% to 100%. 39. In line with the OpMemo of December 3, 2009 (regarding cancellation and recommitment of IDA resources, linked to OP/BP 13.50), the cancelled Mozambique IDA allocation of approximately $1.2 million will be available for recommitment to other activities in Mozambique instead of being returning to the general IDA pool for future redistribution. The cancelled Africa regional IDA allocation of approximately $30 million will be returned to the IDA pool, and it is expected that a request will be made for approval to re-allocate these resources to other regional operations in the Africa region. These amounts will be available either to supplement ongoing projects or for new operations. In line with paragraph 3 of the OpMemo, the recommitment is expected to be achieved in the same year as the cancellation, but no later than June 30 of the last year of the IDA replenishment cycle (i.e. IDA-16). The cost estimate for this item in the original PAD was $4.1 million (excluding contingencies). Following Project appraisal, EdM finalised in mid-2008 an update of the preliminary engineering design and specification for the Matambo substation works. Specifically, the following items were added: (i) 220 kV busbar extension; (ii) additional 66 kV switchgear; (iii) additional 33 kV switchgear; (iv) additional interlocking of transformers; (v) dismantling and replacement of 2 auxiliary transformers; (vi) additional 66 kV, 33 kV 0.4 kV and control cable works; and (vii) replacement of AC, DC and control. As a result of this updated design & specification, the appraisal-stage cost estimate was updated. 4 Total Project cost, of which US$4.8 million financed by EdM and US$45 million financed by IDA. 8 Safeguards 40. Even though the original Project anticipated very limited displacement and dispossession, a Resettlement Policy Framework (RPF) was carried out. The original Project had an environmental category B Partial Assessment, which required an Environmental Assessment (EA). The RPF and the EA were disclosed in Mozambique and at the World Bank Infoshop on January 9 2007. 41. The removal of the cross-border transmission line from the Project scope significantly decreases the risks of any negative environmental and social impacts of the Project. The restructured Project will nonetheless be maintained as environmental category B Partial Assessment. The Project is geographically limited to the northwest region of Mozambique, near Tete. All physical implementation will occur within an existing substation area. None of the activities under Component C (Improved Transmission Infrastructure) are expected to have any environmental and/or social implications, beyond those which can be addressed in contractor specifications (for example, low-noise equipment, material free of polychlorinated biphenyls and better construction techniques). The environmental management aspects will be handled according to the standards described in the Environmental Assessment study. In particular, the disposal of any hazardous wastes will be handled according to international standards. The contractor's bidding documents and contract will include the obligation to implement the environmental and social clauses related to construction activities, as described in the Environmental Assessment report, of the Matambo Substation. The Supervising Engineer's contract will include the requirement to supervise the adequate implementation of these environmental and social clauses, which will need to be in compliance with the World Bank Group General Environmental, Health and Safety Guidelines of April 2007. 42. The RPF will be implemented by EdM's existing environmental and social unit. This unit will have the overall supervision of the implementation of the environmental and social clauses during construction and will have the responsibility for the implementation of the Environmental and Social Management Plan (ESMP) during operations. This unit will be strengthened under the Project through technical assistance in Component B (Capacity Building and Technical Support to EdM). Institutional arrangements 43. The sole implementing institution for the Project is EdM, which already has a Project Management Unit (PMU) in place as part of the ongoing implementation of the valid parts of the current Project (as described above). This PMU is constituted by: Project Manager, Project Engineer, Social and Environmental Specialist, Financial Management Specialist and technical specialists, including transmission line and substation engineers and a staff member familiar with World Bank procurement guidelines. The Project Manager, with input from the Financial Management Specialist, will be responsible for financial reporting. Training and capacity building for the PMU is included in the Project. 9 Disbursement arrangements 44. The credit became effective in April 2008. US$2.86 million has already been disbursed. Disbursements from IDA will continue to be made on the basis of incurred eligible expenditures (transaction based disbursements). It is estimated that about US$13.0 million will follow special commitment procedures, where IDA special commitments cover a commercial bank's Letter of Credit. For the remainder, IDA would make advance disbursement from the proceeds of the Credit by depositing into an EdM- operated Designated Account (DA) to expedite Project implementation. The advance to a DA would be used by EdM to finance Project expenditures under the proposed Credit. Another acceptable method of withdrawing funds from the Credit is the direct payment method, which could be used in cases where the DA was exhausted, involving direct payments from the Credit to a third party for works, goods and services upon the EdM's request. The Disbursement Letter stipulates the minimum value of applications is 20% of the amount advanced to the DA. 45. Upon credit effectiveness, EdM was required to submit a withdrawal application for an initial deposit to the DA, drawn from the IDA credit, as stated in the Disbursement Letter. Replenishment of funds from IDA to the DA will be made upon evidence of satisfactory utilization of the advance, reflected in the Statements of Expenses (SOEs) and/or on full documentation for payments above SOE thresholds. Replenishment applications are required to be submitted monthly. 10 Disbursement Category Reallocations Original Revised Category of Allocation % of Financing Category of Allocation % of Expenditure (US$ mn, Expenditure (US$ mn) Financing from PAD) (1) Works including 31.30 100% of Foreign (1)(a) Works, including 0 N/A supply and installation, Expenditures and supply and installation, and services other than 72% of Local and services other than Consultants' services: Expenditures Consultants' services for a) for Parts A.1 and Part A of the Project A.2 "Pro Memoria" [Legacy category 5] (1) Works including 100% of Foreign (1)(b) Works including 100% supply and installation, Expenditures and supply and installation, and services other than 72% of Local and services other than Consultants' services: Expenditures Consultants' services for b) for Part C 3.95 Part C of the Project 10.0 (2) Goods, Consultants' 4.55 100% (2) Goods, Consultants' 2.4 100% services, Training and services, Training and Workshops for Parts Workshops for Parts A A.3, A.4 and B of the & B of the Project Project (3) Refund of Project 0.51 Amount payable (3) Refund of Project 0.41 Amount Preparation Advance pursuant to Preparation Advance payable Section 2.07 of pursuant to the General Section 2.07 of Conditions the General Conditions (4) Unallocated 4.69 (4) Unallocated 0.96 (contingencies) Total 45.0 1 1 13.84 1 Cancellations 46. As noted above, the US$48 million (equivalent) IDA credit offer for Malawi for this Project was withdrawn in July 2010. The original US$45 million (equivalent) IDA credit for Mozambique will be reduced to approximately US$13.8 million (SDR 9.1 million), after the cancellation of US$31.2 million (SDR 20.5 million). 47. The table below presents the IDA allocations to the original Project, as well as the current cancellations, by component (including contingencies): 5 This category is maintained in order to preserve the original disbursement category structure 11 Original (US$ mn) Revised (US$ mn) ESCOM, Malawi Component IDA allocation Component IDA allocation A: Mozambique- 37.5 A: Mozambique- Cancelled Malawi Malawi Interconnection Interconnection B: Capacity building 2.7 B: Capacity building Cancelled and technical support and technical support for upgrade and for upgrade and extension to support extension to support power trading power trading C: Improved 7.8 C: Improved Cancelled infrastructure to infrastructure to support power trading support power trading EdM, Mozambique Component IDA allocation Component IDA allocation A: Mozambique- 38.9 A: Consulting 0.9 Malawi engineering services Interconnection B: Capacity building 1.7 B: Capacity building 1.8 and technical support and technical support for upgrade and to EdM expansion to support power trading C: Improved 4.4 C: Improved 11.1 infrastructure to transmission support power trading infrastructure Note: These amounts include contingencies Financial management 48. EdM is the only implementing institution for the restructured Project. The financial management (FM) issues of the Project will be handled by the Department of Debt and Contracts Management (DDCM) under Finance Directorate. A review of the FM arrangements indicates that the DDCM continues to maintain adequate and acceptable FM and disbursement arrangements, and no major alterations are expected in the FM and disbursement arrangements. A financial manager has been appointed to handle the FM issues of the Project. In view of the general country FM issues and the issues specific to the Project, the overall FM risk rating for this Project is Moderate. 49. There are no overdue quarterly reports or annual audit reports. Procurement 50. The Procurement under the restructured Project will be carried out in accordance with the World Bank's "Guidelines: Procurement of Goods, Works and Non-consulting Services under International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits and Grants by World Bank Borrowers" published by the Bank in January 2011 and the World Bank's "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers," 12 published by the Bank in January 2011. Anti-corruption guidelines which applies to this Project: "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006 and revised in January 2011". 51. EdM is the only implementing institution for the restructured Project. Procurement activities will be carried out by the PMU which was created under the original Project and established under the Electrification and Project Directorate (DEP) of EdM. The PMU is staffed by a procurement proficient Project Manager supported by a Project Engineer, an Environmental and Social Specialist, a Transmission and Substation Engineer, and a Financial Management Specialist, and the procurement function will be under the responsibility of the Project Manager, who is familiar with World Bank procedures and guidelines and is also currently managing the EdM component under the World Bank-financed Energy Reform and Access Project. An assessment was carried out of the capacity of the implementing agency to implement procurement actions for the Project and the established capacity is found to be adequate. The overall procurement risk rating continues to be Average. Closing date 52. The original Project closing date was June 30, 2013. In compliance with OP/BP 13.30, to ensure successful completion of the Project, the closing date for the revised Project has been extended till December 31, 2014, an extension of eighteen months. The new date has been calculated taking into consideration the nature of the works at the Matambo substation in the revised Project and the status of procurement, as well as allowing time for any eventualities. 53. The proposed restructuring meets the requirements of OP/BP 13.30, as follows: (a) the revised Project objectives are achievable, (b) the performance of the borrower and EdM (the Project implementing agency) is satisfactory for those activities that are ongoing, and (c) this restructuring documentation, in conjunction with the revised procurement plan for the remaining activities and the revised Project timeline, represents an action plan that is acceptable by the Bank for the completion of the Project. E. APPRAISAL SUMMARY 54. As the restructured Project contains only activities that were appraised as part of the original Project, there has been no re-appraisal. 13 N o 0 - uu -en o8 0 uo 2 åt -o o 8 0 r 't 0 - . -o 0 e e~ -E 0 o . - -o a b c)'c UDo >0 0 ogjog 0 %lo o o cr 8~ et et1 ---8 0' cp e o a o o8 0a 02 1 0 0 0 m0 8 o- 0 LO o~ - a2 aa 0 o o . o o o o S e g a0 xx e amtuue .s o- oo 0 8 8 (8 N0 么· ANNEX2 Team Composition Name Title Unit Rob Mills TTL, Senior Economist AFTEG Sara Nso Consultant, Energy AFTEG Specialist Antonio L. Chamuco Senior Procurement AFTPR Specialist Elvis Langa Financial Management AFTFM Specialist Robert Robelus Consultant, Enviromnental AFTEN Safeguards Specialist 17