Input:
5. The HWA has been receiving targeted financial management capacity building
interventions through other Bank initiatives. HM municipality has been receiving financial
management assistance from JPLG/UNDP project. BRA, HM and GM will each need to recruit a
dedicated Financial Management Specialist (FMS) to carry out the project financial management
functions. The implementing agencies’ financial management staff will work closely with the
respective Ministries of Finance to ensure that project activities are well recorded and
incorporated in governments budget and financial statements.

_Budgeting Arrangements_

The projected annual disbursements shall be integrated into the respective budgets of the national
agencies onto which the transfers to the municipalities executing the RE activities fall and the
respective municipal budgets. Each implementing agency (municipality) will prepare the budget,
work plan and cash flow forecast and submit for the necessary approvals from the governments
and the World Bank.

_Accounting and Reporting_


Input:
8. The implementing entities would also prepare financial statements covering the entire
project period. The FS will be prepared in accordance with IPSAS - Cash Basis. The FS shall
include adequate notes and disclosures consistent with the cash basis of financial reporting under
the IPSAS.

9. Each implementing entity will ensure that all important business and financial processes
are adhered to; adequate internal controls and procedures are in place; Interim Un-audited
Financial Reports (IFRs) are prepared and submitted to the World Bank on a timely basis; the
annual financial statements will be prepared on a timely basis and in accordance with Cash
Based IPSAS and the external audit will be carried out and audit findings and recommendations
monitored to ensure they are implemented expeditiously.

_Internal Control and Auditing_

10. The project internal controls procedures and processes will be based on the FM manuals
for the EAFS [15], HWA [16] and HM [17] for the respective regions and implementing entities. The FM
manuals are found to be sufficient for the SUIPP and will be updated for the main project
activities by the engaged FM specialists.

---
[16] Developed by E & Y with support from Bank WASP
[17] Developed by UNDP administered JPLG Project


Input:
11. Given the regional spread and the capacity challenges in the Offices of the Auditors
General in the regions, an external audit firm will be engaged and funded by the project to carry
out the audit of the project activities. Each of the project implementing agencies (BRA, GM,
HWA and HM) will prepare and submit project financial statements.The project will carry out
one external audit covering the entire project period for the Recipient Executed activities. The
audited project financial statements together with any additional information required will be
submitted to the World Bank not later than six months after the end of the project. The audit
would be in conformity with the World Bank’s audit requirements and in accordance with
internationally recognized auditing standards. The auditor will express an opinion on the
Financial Statements in compliance with International Standards on Auditing (ISA); and also
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 Grant Agreements.

_Disbursements_

12. The project will open three dollar denominated Designated Accounts in a financial
institution acceptable to the World Bank.


Input:
13. Designated Account 1: The FGS EAFS will open a US Dollar Designated Bank Account
(DA) in Central Bank of Somalia. The BRA will open and operate a separate project bank
account for transfers from the DA for project expenditures based on a quarterly cash projection
of expenditure.Payments from the DA will only be for eligible expenditure which will have to be

15
Developed by E&Y with support from the Bank PFM Capacity Strengthening project


Input:
justified and properly documented. The EAFS will prepare and submit withdrawal applications
for the DA.

14. Designated Account 2: The Somaliland Ministry of Finance will open and operate a DA
for the HM in a financial institution acceptable to the World Bank. HM will open a segregated
project bank account for transfers from the DA for project related expenditure based on a
quarterly cash projection of expenditure.

15. The HM will prepare and submit detailed reports and analysis of expenditure to the
Ministry of Finance and the World Bank prior to reimbursement of its project account. The
Ministry of Finance will prepare Withdrawal Applications. Payments from the project account
will only be for eligible expenditure which has to be justified and properly documented.


Input:
16. Designated Account 3: The Puntland Ministry of Finance will open and operate a DA for
the GM in a financial institution acceptable to the World Bank. The GM will open and operate a
separate project bank account for transfers from the DA for project expenditures based on a
quarterly cash projection of expenditure. Payments from the DA will only be for eligible
expenditure which will have to be justified and properly documented.The Ministry of Finance
will prepare and submit withdrawal applications for the DA.

17. IDA funds will be transferred into the DAs against an approved Withdrawal Application.
The first IDA fund release will be an advance payment based on an agreed ceiling and on the
submission of a Withdrawal Application. Replenishment and Reimbursement of Withdrawal
Applications will be accompanied by Statement of Expenditures (SOEs) and direct payment will
be accompanied by copied of records in accordance with the procedures established in the
disbursement Letter and the Bank’s Disbursement Guidelines.

18. Detailed disbursement arrangements will be documented in the Disbursement Letter.

_Procurement_


Input:
19. Under SUIPP the major procurements will be undertaken in respect of Bank Executed
activities. In addition, some project funding is to be used for Recipient Executed activities. These
procurements will be simple i.e. to procure qualified individuals (viz. Project Coordinator,
Procurement Specialist, Financial Management Specialist, Safeguard Specialist and M&E
Specialist) at all the three locations Mogadishu, Garowe and Hargeisa to assist with the
preparation (and, later, implementation) of SUDP. This activity will be conducted by the BRA at
Mogadishu, HM at Hargeisa and GM at Garowe. An initial procurement assessment of these
agencies suggests that though these agencies have some procurement experience they will
require some support to undertaken the necessary procurements according to Bank procedures
satisfactorily. In Mogadishu the necessary procurement support would be provided to BRA by
EAFS of Ministry of Finance. However, at Hargeisa and Garowe necessary support/guidance
would be provided by the World Bank procurement staff. The project will hire the procurement
specialists first who will handle the procurement processes for the remaining four positions.

34


Input:
**Project Procurement Plan**

|Col1|Contract
Description|Estimated
Cost
(US$)|Bank
Executed
or
Recipient
Executed|Procurement
/ Selection
Method|Review
by
World
Bank
(Prior/
Post)|Col7|Expected
Bid/Propos
al/ EOI(for
ICS)
Submission
date|Col9|Expected
Contract
Signature|Col11|Expected
completion
date|
|---|---|---|---|---|---|---|---|---|---|---|---|
|
||||||||||||
||

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|

**Bank Executed Activities**

|
|
|**Consultancy Services**

|**Consultancy Services**

|
|
|
|
|
|
|
|
|
|
|
|
1
|Engineering feasibility studies, preliminary designs
for urban roads, and solid and liquid waste
management Mogadishu secondary/community
roads feasibility studies and preliminary design
|2,200,000
|BE
|SSS
|NA
|NA
|Feb 2016
|Feb 2016
|Mar 2016
|Mar 2016
|Feb 2017
|
|2
|
Institutional assessments of government agencies in
Mogadishu, Hargeisa and Garowe and of the Local
Development Fund
|600,000
|BE
|QCBS
|NA
|NA
|Feb, 2016
|Feb, 2016
|Mar., 2016
|Mar., 2016
|Oct., 2016
|
|3
|
Conflict studies - Individual consultant(s)
|150,000
|BE
|ICS
|NA
|NA
|Feb, 2016
|Feb, 2016
|Apr, 2016
|Apr, 2016
|Dec, 2016
|
|4
|Impact assessment preparation study - Individual
consultant(s)
|150,000
|BE
|ICS
|NA
|NA
|Feb, 2016
|Feb, 2016
|Apr, 2016
|Apr, 2016
|Dec, 2016
|
||
Total BE|**3,100,000**||||||||||
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|**Recipient Executed Activities**
|
|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|**Component 2 Mogadishu**

|
|
|**CONSULTANCY SERVICES**
|
|
|
|
|
|
|
|
|
|
|
|1
|Project Coordinator (for 9 months)
|148,500
|CE
|ICS
|Prior
|Mar. 2016
|Mar. 2016
|Apr 2016
|Apr 2016
|Jan 2017
|Jan 2017
|
|2
|Procurement Specialist (for 9 months)
|148,500
|CE
|ICS
|Prior
|Mar 2016
|Mar 2016
|Apr 2016
|Apr 2016
|Jan 2017
|Jan 2017
|
|3
|Financial ManagementSpecialist (for 9 months)
|148,500
|CE
|ICS
|Prior
|Mar 2016
|Mar 2016
|Apr 2016
|Apr 2016
|Jan 2017
|Jan 2017
|
|4
|Safeguard Specialist (STC for 4.5 months over 9
months)
|74,250
|CE
|ICS
|Prior
|Apr 2016
|Apr 2016
|May 2016
|May 2016
|Jan 2017
|Jan 2017
|
|5
|
M&E Specialist (STC for 4.5 months over 9 months)|74,250|CE|ICS|Prior|Apr 2016|Apr 2016|May 2016|May 2016|Jan 2017|Jan 2017|


Input:
|Col1|GOODS|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|6|Procurement of Equipment( furniture, filing cabinets,
computers and accessories) for HM and HWA|65,000|CE|Shopping|Prior|Feb, 2016|Apr, 2016|Apr, 2016|
|
|
**OPERATING COSTS**
|
|
|
|
|
|
|

|
|7
|Costs of specialized and short training for HWA and
HM staff
|40,000
|CE
|SOE
|Post
|NA
|NA
|Dec2016
|
|8
|
Costs related to the PCU operations (advertisements;
conference room hire, office stationery, Internet
connectivity, refreshments e.t.c)|15,000
|CE
|SOE|Post|NA|NA|Dec2016|
||**TOTAL**|**714,000**|||||||
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
**Recipient Executed Activities**
|
|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|**Component 2 Garowe**

|
|
|**CONSULTANCY SERVICES**
|
|
|
|
|
|
|
|
|1
|Project Coordinator (for 9 months)
|126,000
|CE
|ICS
|Prior
|Mar. 2016
|Apr 2016
|Jan 2017
|
|2
|Procurement Specialist (for 9 months)
|126,000
|CE
|ICS
|Prior
|Mar 2016
|Apr 2016
|Jan 2017
|
|3
|Financial ManagementSpecialist (for 9 months)
|126,000
|CE
|ICS
|Prior
|Mar 2016
|Apr 2016
|Jan 2017
|
|4
|Safeguard Specialist (for 4.5 over a period of months)
|63,000
|CE
|ICS
|Prior
|Apr 2016
|May 2016
|Jan 2017
|
|
5|
M&E Specialist (for 4.5 over a period of 9 months)|
63,000|
 CE|
ICS|
Prior|
Apr 2016|
May 2016|
Jan 2017|
|

|**GOODS**
|
|
|
|
|
|
|
|
|6|Procurement of Equipment( furniture, filing cabinets,
computers and accessories) for HM and HWA|54,000|CE|Shopping|Prior|Feb, 2016|Apr, 2016|Apr, 2016|
|
|
**OPERATING COSTS**
|
|
|
|
|
|
|

|
|7
|Costs of specialized and short training for HWA and
HM staff
|30,000
|CE
|SOE
|Post
|NA
|NA
|Dec2016
|
|8
|
Costs related to the PCU operations (advertisements;
conference room hire, office stationery, Internet
connectivity, refreshments e.t.c)|15,000
|CE
|SOE|Post|NA|NA|Dec2016|
||**TOTAL**|**603,000**|||||||


Input:
|Recipient Executed Activities|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|**Component 3 Hargeisa**

|
|
|**CONSULTANCY SERVICES**
|
|
|
|
|
|
|
|
|1
|Project Coordinator (for 9 months)
|103,500
|CE
|ICS
|Prior
|Mar. 2016
|Apr 2016
|Jan 2017
|
|2
|Procurement Specialist (for 9 months)
|103,500
|CE
|ICS
|Prior
|Mar 2016
|Apr 2016
|Jan 2017
|
|3
|Financial ManagementSpecialist (for 9 months)
|103,500
|CE
|ICS
|Prior
|Mar 2016
|Apr 2016
|Jan 2017
|
|4
|Safeguard Specialist (for 9 months)
|103,500
|CE
|ICS
|Prior
|Apr 2016
|May 2016
|Jan 2017
|
|
5|
M&E Specialist (for 9 months)|
103,500|
 CE|
ICS|
Prior|
Apr 2016|
May 2016|
Jan 2017|
|

|**GOODS**
|
|
|
|
|
|
|
|
|6|Procurement of Equipment( furniture, filing cabinets,
computers and accessories) for HM and HWA|80,000|CE|Shopping|Prior|Feb, 2016|Apr, 2016|Apr, 2016|
|
|
**OPERATING COSTS**
|
|
|
|
|
|
|

|
|7
|Costs of specialized and short training for HWA and
HM staff
|30,000
|CE
|SOE
|Post
|NA
|NA
|Dec2016
|
|8
|
Costs related to the PCU operations (advertisements;
conference room hire, office stationery, Internet
connectivity, refreshments e.t.c)|20,000
|CE
|SOE|Post|NA|NA|Dec 2016|
|
|**TOTAL**|**647,500**|||||||

38


Input:
_Environmental and Social (including safeguards)_

22. The project is a TA that is financing the preparation of feasibility and preliminary design
studies for civil works in Mogadishu, Garowe and Hargeisa for which the ToRs will be disclosed
in-country and at the InfoShop. Subsequent operations (likely to be financed by the MPF) will
undertake the preparation of detailed engineering designs and environmental and social studies.

23. Environmental and Social Management Frameworks (ESMFs) will be produced (see next
section for details), complying with international good practice norms and approaches, that also
would cover the collection of socio-economic baseline data and the determination of likely
typologies of social and livelihood impacts, or the need for land acquisition or resettlement.
These activities will be accomplished during SUIPP’s implementation period, informing the
planned technical and engineering studies.

24. Moreover, should it be determined that the subsequent operation (SUDP) will involve
works or activities with land acquisition leading to involuntary resettlement and/or restrictions of
access to resources or livelihoods, ToRs for a Resettlement Policy Framework (RPF) and/or
Resettlement Action Plan (RAP) would be prepared, consulted upon and disclosed.


Input:
25. While the project will not finance any physical activities, civil works or final design
studies for the potential investments in urban infrastructure in Mogadishu, Hargesia and Garowe,
it has been assigned the safeguards category B. The rationale for this safeguards rating is that the
project will finance the preparation of feasibility and preliminary design studies for primary
roads in Mogadishu, roads and, potentially, bridges in Garowe, and water supply infrastructure
as well as solid waste investments in Hargeisa, as well as strengthening institutional structures
and capacity. All of these activities could have downstream environmental and social impacts
and implications that would need to be assessed and managed with appropriate instruments.


Input:
26. The final identification of specific projects and detailed design work – e.g. detailed
engineering design, social and environmental impact assessments, exploratory drilling and
preparation of bid estimates – will not be carried out as part of the project (SUIPP). This will be
undertaken in a later phase, most likely as part of a MPF funded operation which will be
prepared on the basis of the studies prepared under the SUIPP. Detailed preparation of this
follow-up operation, which has been classified as environmental category B, will commence
once the work supported by the SUIPP is completed. This will include the preparation,
consultation on, and disclosure of the required E&S due diligence instruments, for which two
main types of activities will be carried out:

(c) a baseline survey of environmental and social information, data and issues that will
help to identify E&S constraints, but also areas of potential enhancement of project
outcomes, and provide E&S information, criteria and constraining factors for the
processes for design and environmental / social assessments planned for SUDP or
other downstream planning activities;

baseline survey of environmental and social information


Input:
28. The Bank team will be responsible for monitoring the progress of the activities it will
execute; client agencies will be responsible for monitoring the progress of the activities they will
execute. Reporting procedures between client agencies and the Bank on client-executed
activities will be agreed during the early stages of implementation of the SUIPP. Given that the
security environment may make monitoring difficult, the Bank will explore the possibility of
using third parties to monitor aspects of progress, to the extent that this may be necessary and
possible. Given that the project supports only feasibility and preliminary design studies, no
evaluation will be undertaken.

40


Input:
**Annex 4: Systematic Operations Risk-Rating Tool (SORT)**

**Somali Urban Investment Planning Project**

1. The assessment of risks takes into account both the likelihood of the risk materializing, as
well as the severity of its impact on the achievement of the project development objectives


Input:
|(PDO). The SORT operation. 18|T focuses on identifying, assessing, and managing risks throughout an|
|---|---|
|**Risk Categories18 **
|**Rating (H, S, M or L)**
|
|1. **Political and**
**governance**
|
Risks to the development objective stemming from the country’s political situation and
governance context.

**_Rating: High_ **

**Changes in leadership (substantial)**
Changes in political leadership/appointees could undermine government ownership of both
this preparatory project and the follow on SUDP. Any changes in leadership could result in
the Federal Government of Somalia raising concerns regarding planned activities in any of
the three cities.

_Risk mitigation._ There will be a continuous process of engagement and consultation with
government at the federal and decentralized level during project implementation and
investment in client dialogue through regular missions to all territories.  The project TTL
will be based in Nairobi and would follow up on discussions with Government,
documentation and dissemination of agreement in all meetings.

**Political competition for project resources (substantial)**
The Government at the Federal and decentralized level may raise issues over the allocation
of project funds across the territories in the main SUDP which would impact planned
activities in this preparatory project. Issues may also be raised regarding the selection of
consulting entities contracted for technical activities.

_Risk mitigation._Project team will engage in transparent dialogue with stakeholders
regarding the allocation of resources and the selection and contracting processes used for
consultants carrying out the technical activities.

|
|2. **Macroeconomic**|
External and domestic economic risks that may derail proper preparation, implementation
and achievement of results.

**_Rating: Substantial._**

Somalia is one of the poorest countries, with a gross national income of US$284. Some 80
percent of its exports are from one product—livestock—leaving it exceptionally prone to
external economic shocks. The substantial dependency of the FGS upon donor funding
underlines the fiscal fragility and weak revenue base. The Bank, working with others such
as the International Monetary Fund (IMF), is engaged in strengthening the overall
macroeconomic and fiscal framework. This includes potential next steps toward debt relief.

_Risk mitigation_. There will most likely be minimal impact from macroeconomic risk on this|


Input:
|Col1|project as it is primarily Bank-executed. There are therefore no risk mitigation measures.|
|---|---|
|3. **Sector**
**strategies and**
**policies**

|
Risks associated with the strategies and policies of the sector(s) relevant to the project.

**_Rating: Low. No significant sector risks identified._ **

|
|4. **Technical**
**design of**
**project or**
**program**
|
Risks related to the technical design of the project.

**_Rating: Moderate_**

**Complexity in project design (moderate)**
Project involves many different activities spread over a number of different areas working
with a range of different organizations and institutions which will make project
management a challenge.

_Risk mitigation._Seeking contracting arrangements with consulting entities that are simple
and as wide in scope as possible (e.g. seeking to contract UNOPS to undertake a number of
different activities) rather than entering into contracts with several different entities.  Begin
contract negotiations (especially with UN agencies) as early as possible in order to allow
sufficient time for communication with relevant headquarters.

**Lack of coordination between WB projects (low)**
WB projects targeting institutional capacity building and/or support to decentralized
government (capacity injection, PFM, WSP, SFF- local government facility) may be
insufficiently coordinated to effectively and efficiently deliver desired results.

_Risk mitigation._The project team will maintain regular communication with related project
teams to ensure coordination. The MPF Secretariat will provide additional support for fund-
level coordination of WB activities.

|
|5. **Institutional**
**capacity for**
**implementation**
**and**
**sustainability**
|
Risks related to the capacity of the government to implement the recipient executed
activities and oversee the Bank executed activities, taking into account the institutional
capacity of the implementing agencies.

**_Rating: High_**

**Capacity constraints within implementation agencies (high)**
There are severe capacity constraints among potential implementation agencies identified
across the three main cities, mainly lack of availability of competent staff with
procurement, financial management, technical and management experience to supervise
feasibility studies or preparation of preliminary designs.  Although this project will be
Bank-executed on behalf of the client, close co-operation, support and effective decision
making may be required from key counterpart institutions at critical points.

_Risk mitigation._The project activities will be executed by the Bank on behalf of the client
thereby greatly mitigating any capacity risks. Supervision support will be provided to
implementing agencies at critical points as required.  This project plans to undertake an
institutional assessment of government agencies responsible for urban development and
service delivery which will inform any future urban operations in Somalia.

**Lack of familiarity with WB procedures (high)**
The client’s lack of familiarity with WB procedures may lead to delays in implementation
of the Recipient Executed activities.|


Input:
|Col1|Risk mitigation. The team will hold regular dialogue with the client to explain procedures
and provide support, a project focal point will be based in Nairobi to provide regular
support.|
|---|---|
|6. **Fiduciary**
|
Risks that funds will not be used to achieve value for money with integrity in delivering
sustainable development

**_Rating: Moderate_**

**Limited FM and Procurement capacity (moderate)**
There are capacity constraints among potential implementation agencies identified across
the three main cities in both procurement and financial management.

_Risk mitigation._ Most project activities will be executed by the Bank on behalf of the client
thereby greatly mitigating any capacity risks. Given this is a preparatory project, one of the
activities is to set up PIUs across the three cities and hire qualified procurement and FM
staff and address this capacity gap ahead of the main project -SUDP.

**Fraud / corruption (moderate)**
The main project activities are being implemented by the Bank through contracted
consulting entities that will be undertaking the technical studies and institutional
assessments. Only a fraction will be managed by the client. There is therefore a moderate
chance of misuse of project funds.

_Risk mitigation:_Directly contracting consulting entities with prior experience with similar
activities in Somalia; closely monitoring work of consulting entities; providing strategic
technical support when required.

|
|7. **Environment**
**and social**
|
Risks posed to the project by environmental and social risks and potential unintended
consequences posedbythe activity on physical, biological and cultural resources and on
human health and safety.

**_Risk: Low_**

**Environmental and social impact of project activities (low)**
The proposed feasibility studies and institutional assessments are not expected to entail
major safeguard issues.  The proposed road works to be studied are within the existing
right-of-way thus reducing considerably the safeguard risk.

_Risk mitigation._Close monitoring of safeguards during implementation, appropriate staffing
within the task team –social and environment safeguard support throughout
implementation.

|
|8. **Stakeholders**
|
Risks related to stakeholders who may affect successful project completion by delaying or
halting its implementation.

**_Risk: High_**

**Lack of intra-governmental coordination (moderate)**
Within government, there is a lack of clarity on the division of labor amongst Ministries,
agencies and departments and as a result, poor coordination. Given the number of levels of
government and agencies this project will be working with, this lack of internal
coordination could potentially slow down some of the project activities.
|


Input:
**Annex 5: Implementation Support Plan**

**Somali Urban Investment Planning Project**

**Strategy and Approach for Implementation Support**

1. In the design of the Implementation Support Plan (ISP), consideration has been given to
the risks identified in the SORT, the context of Somalia as a fragile and post conflict country and
the implementation arrangements of the SUIPP involving a combination of Bank and Recipient
execution as well as a number of implementing agencies.

2. The main challenge to providing the necessary implementation support to the project will
be insecurity which poses a risk to human security of WB staff, consultants as well as the client.
The second key issue is the complexity of the project involving a range of different activities
spread over three different cities – Mogadishu, Garowe and Hargeisa involving several
implementing agencies at the central and subnational level. Factoring in these challenges, the
implementation support for the project will include:

(a) A multidisciplinary Bank team as has been the case during preparation, with an engineer,
environment and social safeguards specialists, procurement and financial management
specialists, conflict specialist, institutional strengthening specialist and a Task Team
Leader.


Input:
|Col1| Training and capacity
building support to TA.
Component 3: Hargeisa
 Contracting of and
technical support to UN
agency and Consultant
carrying out feasibility
and preliminary design
studies for solid and
liquid waste
investments.
 Contracting and
technical support to
consultant carrying out
institutional
assessments of HM and
HWA.
 Contracting of technical
assistance for HM and
HWA and establishing
a project support office.
 Training and capacity
building support to TA.
Component 4: Other
Cross Cutting Activities
 Contracting of
consultant to carry out
an assessment of the
LDF.
 Contracting and support
to consultant carrying
out a study on conflict
and fragility and on
socio-economic impacts
of infrastructure
investments.|Col3|Col4|Col5|
|---|---|---|---|---|
|_12-48 months_|_Component 1: Mogadishu_
 Finalize feasibility and
preliminary design
studies for primary and
secondary roads.

_Component 2: Garowe_

 Finalize feasibility and
preliminary design
studies for roads and|Technical
expertise in
engineering,
institutional
strengthening,
safeguards,
procurement,
financial
management, and
conflict.|$150,000||

47


Input:
Document of

# The World Bank

FOR OFFICIAL USE ONLY

Report No: 77930-BF

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 33.4 MILLION
(US$50 MILLION EQUIVALENT)

TO

BURKINA FASO

FOR AN

ELECTRICITY SECTOR SUPPORT PROJECT (ESSP)

July 3, 2013

_Energy Unit_
_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.


Input:
HVDC High Voltage Direct Current
IBRD International Bank for Reconstruction and Development
ICB International Competitive Bidding
IDA International Development Association
IMF International Monetary Fund
IPF               Investment Project Financing
ISR Implementation Status and Results Report
LCS Low Cost Selection
M&E Monitoring and Evaluation
MME Ministère des Mines et de l’Energie (Ministry of Energy)
MOOD _Maître d’Ouvrage/d’Œuvre Délégué_ (Advisory Engineer)
NCB National Competitive Bidding
O&M Operation and Maintenance
OP Operations Policy
PRSP Poverty Reduction Strategy Paper
PSDP Power Sector Development Project
QCBS Quality & Cost Based Selection
RAP Resettlement Action Plan
RPF Resettlement Policy Framework
SCADD Strategy for Accelerated Growth and Sustainable
Development
SDR Special Drawing Right
SONABEL _Société Nationale d'Electricité du_ _Burkina_ (National Power
Utility)
SWER Single Wire Earth Return
SWS Shield Wire Schemes
UER _Unité d'exécution de la réforme du secteur de l'énergie_ (Energy Sector
Reform Implementation Unit)
USD U.S. dollar
WADB West African Development Bank
WAPP West Africa Power Pool
WTP Willingness to Pay

Regional Vice President: Makhtar Diop
Country Director: Madani M. Tall
Country Manager: Mercy Miyang Tembon
Sector Director: Jamal Saghir
Sector Manager: Meike van Ginneken
Task Team Leader: Fatouma Toure Ibrahima

iii


Input:
**BURKINA FASO**

**Electricity Sector Support Project**

**TABLE OF CONTENTS**

**Page**

I. **STRATEGIC CONTEXT .................................................................................................1**

A. Country Context ............................................................................................................ 1

B. Sectoral and Institutional Context ................................................................................. 1

C. Higher Level Objectives to which the Project Contributes .......................................... 9

II. **PROJECT DEVELOPMENT OBJECTIVES (PDO) ....................................................9**

A. PDO............................................................................................................................... 9

B. Project Beneficiaries ..................................................................................................... 9

C. PDO Level Results Indicators ..................................................................................... 10

III. **PROJECT DESCRIPTION ............................................................................................10**

A. Project Components .................................................................................................... 11

B. Project Financing ........................................................................................................ 13

C. Project Cost and Financing ......................................................................................... 14

D. Lessons Learned and Reflected in the Project Design ................................................ 15

IV. **IMPLEMENTATION .....................................................................................................16**

A. Institutional and Implementation Arrangements ........................................................ 16

B. Results Monitoring and Evaluation ............................................................................ 17

C. Sustainability............................................................................................................... 18

V. **KEY RISKS AND MITIGATION MEASURES ..........................................................18**

A. Risk Ratings Summary Table ..................................................................................... 18

B. Overall Risk Rating Explanation ................................................................................ 19

VI. **APPRAISAL SUMMARY ..............................................................................................19**

A. Economic and Financial Analysis ............................................................................... 19

B. Technical ..................................................................................................................... 21

C. Financial Management ................................................................................................ 24

D. Procurement ................................................................................................................ 24

iv


Input:
E. Environment ............................................................................................................... 25

F. Social .......................................................................................................................... 27

G. Environmental and Social Management ..................................................................... 27

**Annex 1: Results Framework and Monitoring .........................................................................29**

**Annex 2: Detailed Project Description .......................................................................................33**

**Annex 3: Implementation Arrangements .................................................................................45**

**Annex 4: Operational Risk Assessment Framework (ORAF) .................................................59**

**Annex 5: Implementation Support Plan ....................................................................................61**

**Annex 6: Team Composition ......................................................................................................65**

**Annex 7: SONABEL’s Financial Situation................................................................................66**

v


Input:
|Project Financing Data(US$M)|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|Col10|Col11|Col12|Col13|Col14|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|[  ]
Loan|[  ]
Loan|[ ]
Grant|[ ]
Grant|[ ]
Grant|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|[  ]
Other|
|[X]
Credit|[X]
Credit|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|[ ]
Guarantee|
|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|**For Loans/Credits/Others**|
|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|Total Project Cost (US$M): 52.87|
|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|Total Bank Financing
(US$M):
50.00
.|
|**Financing Source**|**Financing Source**|**Financing Source**|**Financing Source**|**Financing Source**|**Financing Source**|**Financing Source**|**Amount(US$M)**|**Amount(US$M)**|**Amount(US$M)**|**Amount(US$M)**|**Amount(US$M)**|**Amount(US$M)**|**Amount(US$M)**|
|BORROWER/RECIPIENT|BORROWER/RECIPIENT|BORROWER/RECIPIENT|BORROWER/RECIPIENT|BORROWER/RECIPIENT|BORROWER/RECIPIENT|BORROWER/RECIPIENT|02.87|02.87|02.87|02.87|02.87|02.87|02.87|
|International Development Association (IDA)|International Development Association (IDA)|International Development Association (IDA)|International Development Association (IDA)|International Development Association (IDA)|International Development Association (IDA)|International Development Association (IDA)|50.00|50.00|50.00|50.00|50.00|50.00|50.00|
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|Total
52.87
|
|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|.
**Expected Disbursements (in USD Million)**|
|Fiscal
Year|2013|2013|2014|2015|2015|2016|2016|2017|2018|2019|2019|0000|0000|
|Annual|0.00|0.00|0.20|12.00|12.00|15.00|15.00|15.00|07.80|00.00|00.00|0.00|0.00|
|Cumulati
ve|0.00|0.00|0.20|12.20|12.20|27.20|27.20|42.20|50.00|50.00|50.00|0.00|0.00|
|.|.|.|.|.|.|.|.|.|.|.|.|.|.|
|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|**Project Development Objective(s)**|
|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|The objectives of the Project are to contribute to: (i) increasing access to electricity, (ii) improving the
reliability of electricity supply; and (iii) improving efficient use of energy in targeted areas.
.|
|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
**Components**|
|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Component Name**|**Cost (USD**
**Millions)**|**Cost (USD**
**Millions)**|**Cost (USD**
**Millions)**|
|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:|The proposed project, whose cost is estimated at about US$52.87 million, will
include the following components:||||
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|**_Component 1: Improving the reliability of energy supply:_** Construction of two
(2) turnkey diesel power stations of at least 7.5 MW each convertible to heavy
fuel oil to reinforce the capacity in two (2) regional growth poles, and provision of
technical advisory services for construction supervision.
|

**_US$15.39 million_**|

**_US$15.39 million_**|

**_US$15.39 million_**|
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|**_Component 2:_** **_Increasing electricity access in target areas:_**Grid expansion and
installation of connections in about forty (40) communities through (a) existing
and new 33kV transmission lines, and (b) the existing 34.5 kV Bobo-Dioulasso -
Ouagadougou line.
|

**_US$25.59 million_**
|

**_US$25.59 million_**
|

**_US$25.59 million_**
|
|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|**_Component 3: Improving efficient use of energy in target areas:_**(a) Strengthen
the institutional, legal and regulatory framework to support demand-side
management and energy efficiency initiatives, including public lighting. (b)
Support investment in energy efficient equipment. (c) Support awareness|

**_US$4.70 million_**
|

**_US$4.70 million_**
|

**_US$4.70 million_**
|


Input:
|campaigns through the provision of information, education, and communication to
promote the rational and efficient use of electricity. (d) Implement Lighting
Africa activities including, inter alia: (i) provision of capacity training on off-grid
lighting in rural electrification strategies; (ii) develop public service
announcements and awareness campaigns to inform consumers of the benefits of
solar lanterns and other good quality products; and (iii) deploy around twenty five
thousand (25,000) lanterns in public schools focusing on those in off-grid
communities.|Col2|Col3|Col4|Col5|
|---|---|---|---|---|
|**_Component 4: Institutional Strengthening and Capacity Development:_**(a)
Strengthen the institutional capacity of the FDE, SONABEL, and DGE to support
scaling up of energy service expansion. (b) Strengthen the capacity of energy
service providers including,_inter alia,_ energy services cooperatives, local
communities, NGOs, and private sector small- and medium-size enterprises. (c)
Undertake specific studies to improve the energy mix, more particularly in
renewable energy in the medium term. (d) Provision of institutional support to
DGE, SONABEL and FDE. (e) Provision of support to DGE for coordination of
the Project.|**_Component 4: Institutional Strengthening and Capacity Development:_**(a)
Strengthen the institutional capacity of the FDE, SONABEL, and DGE to support
scaling up of energy service expansion. (b) Strengthen the capacity of energy
service providers including,_inter alia,_ energy services cooperatives, local
communities, NGOs, and private sector small- and medium-size enterprises. (c)
Undertake specific studies to improve the energy mix, more particularly in
renewable energy in the medium term. (d) Provision of institutional support to
DGE, SONABEL and FDE. (e) Provision of support to DGE for coordination of
the Project.|**_Component 4: Institutional Strengthening and Capacity Development:_**(a)
Strengthen the institutional capacity of the FDE, SONABEL, and DGE to support
scaling up of energy service expansion. (b) Strengthen the capacity of energy
service providers including,_inter alia,_ energy services cooperatives, local
communities, NGOs, and private sector small- and medium-size enterprises. (c)
Undertake specific studies to improve the energy mix, more particularly in
renewable energy in the medium term. (d) Provision of institutional support to
DGE, SONABEL and FDE. (e) Provision of support to DGE for coordination of
the Project.|

**_US$5.49 million_**
|

**_US$5.49 million_**
|
|**_Physical and price contingencies_**
|**_Physical and price contingencies_**
|**_Physical and price contingencies_**
|**_US$1.70 million_**|**_US$1.70 million_**|
|.
**Compliance**|.
**Compliance**|.
**Compliance**|.
**Compliance**|.
**Compliance**|
|**Policy**|**Policy**|**Policy**|**Policy**|**Policy**|
|Does the project depart from the CAS in content or in other significant
respects?|Does the project depart from the CAS in content or in other significant
respects?|Yes [  ]
No [X]|Yes [  ]
No [X]|Yes [  ]
No [X]|
|.|.|.|.|.|
|Does the project require any waivers of Bank policies?|Does the project require any waivers of Bank policies?|Yes [  ]
No [X]|Yes [  ]
No [X]|Yes [  ]
No [X]|
|Have these been approved by Bank management?|Have these been approved by Bank management?|Yes [  ]
No [  ]|Yes [  ]
No [  ]|Yes [  ]
No [  ]|
|Is approval for any policy waiver sought from the Board?|Is approval for any policy waiver sought from the Board?|Yes [  ]
No [X]|Yes [  ]
No [X]|Yes [  ]
No [X]|
|Does the project meet the Regional criteria for readiness for implementation?|Does the project meet the Regional criteria for readiness for implementation?|Yes [ X ]
No [  ]|Yes [ X ]
No [  ]|Yes [ X ]
No [  ]|
|.|.|.|.|.|
|**Safeguard Policies Triggered by the Project**|**Yes**|**Yes**|**Yes**|**No**|
|Environmental Assessment OP/BP 4.01|X|X|X||
|Natural Habitats OP/BP 4.04||||X|
|Forests OP/BP 4.36||||X|
|Pest Management OP 4.09||||X|
|Physical Cultural Resources OP/BP 4.11|X|X|X||
|Indigenous Peoples OP/BP 4.10||||X|
|Involuntary Resettlement OP/BP 4.12|X|X|X||
|Safety of Dams OP/BP 4.37||||X|
|Projects on International Waterways OP/BP 7.50||||X|
|Projects in Disputed Areas OP/BP 7.60||||X|
|.|.|.|.|.|


Input:
|Team Composition|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|**Bank Staff**|
|**Name**|**Name**|**Title**|**Title**|**Specialization**|**Specialization**|**Specialization**|**Specialization**|**Unit**|
|Fatouma Toure Ibrahima-
Wane|Fatouma Toure Ibrahima-
Wane|Senior Financial
Specialist|Senior Financial
Specialist|Team Lead|Team Lead|Team Lead|Team Lead|AFTG2|
|Elisabeth Marie Bambara|Elisabeth Marie Bambara|Program Assistant|Program Assistant|Program Assistant|Program Assistant|Program Assistant|Program Assistant|AFMBF|
|Begnadehi Claude Bationo|Begnadehi Claude Bationo|Operations Officer|Operations Officer|Monitoring and Evaluation|Monitoring and Evaluation|Monitoring and Evaluation|Monitoring and Evaluation|AFMBF|
|Fabrice Karl Bertholet|Fabrice Karl Bertholet|Senior Financial Analyst|Senior Financial Analyst|Senior Financial Analyst|Senior Financial Analyst|Senior Financial Analyst|Senior Financial Analyst|AFTG2|
|Maman-Sani Issa|Maman-Sani Issa|Senior Environmental
Specialist|Senior Environmental
Specialist|Environmental Specialist|Environmental Specialist|Environmental Specialist|Environmental Specialist|AFTN2|
|Roch Levesque|Roch Levesque|Senior Counsel|Senior Counsel|Legal Counsel|Legal Counsel|Legal Counsel|Legal Counsel|LEGAM|
|Paivi Koskinen-Lewis|Paivi Koskinen-Lewis|Social Development
Specialist|Social Development
Specialist|Social Development
Specialist|Social Development
Specialist|Social Development
Specialist|Social Development
Specialist|AFTCS|
|Marie-Paule Ngaleu|Marie-Paule Ngaleu|Program Assistant|Program Assistant|Program Assistant|Program Assistant|Program Assistant|Program Assistant|AFTG2|
|Christopher Saunders|Christopher Saunders|Operations Officer|Operations Officer|Lighting Africa|Lighting Africa|Lighting Africa|Lighting Africa|AFTG2|
|Leopold Sedogo|Leopold Sedogo|Energy Specialist|Energy Specialist|Energy Specialist|Energy Specialist|Energy Specialist|Energy Specialist|AFTG2|
|Mamata Tiendrebeogo|Mamata Tiendrebeogo|Senior Procurement
Specialist|Senior Procurement
Specialist|Senior Procurement Specialist|Senior Procurement Specialist|Senior Procurement Specialist|Senior Procurement Specialist|AFTPW|
|Melissa Olga Basque|Melissa Olga Basque|Consultant|Consultant|Lighting Africa|Lighting Africa|Lighting Africa|Lighting Africa|AFTG2|
|Boubacar Diallo|Boubacar Diallo|Consultant|Consultant|Procurement Specialist|Procurement Specialist|Procurement Specialist|Procurement Specialist|AFTPW|
|Edith Atioumoutio Zannou
Tchoko|Edith Atioumoutio Zannou
Tchoko|E T Consultant|E T Consultant|Financial Management|Financial Management|Financial Management|Financial Management|AFTME|
|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|**Non-Bank Staff**|
|**Name**|**Name**|**Title**|**Title**|**Office Phone**|**Office Phone**|**Office Phone**|**Office Phone**|**City**|
||||||||||
|.|.|.|.|.|.|.|.|.|
|**Locations**|**Locations**|**Locations**|**Locations**|**Locations**|**Locations**|**Locations**|**Locations**|**Locations**|
|**Country**|**First**
**Administrative**
**Division**|**First**
**Administrative**
**Division**|**Location**|**Location**|**Planned **|**Actual**|**Comments**|**Comments**|
|Burkina Faso|||Fada Ngourma,
Ouahigouya and
other localities to be
determined|Fada Ngourma,
Ouahigouya and
other localities to be
determined|
||||
|.|.|.|.|.|.|.|.|.|
|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|**Institutional Data**|
|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|**Sector Board**|
|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|Energy and Mining
.|
|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|
**Sectors / Climate Change**|


Input:
I. **STRATEGIC CONTEXT**

**A.** **Country Context**

1. Burkina Faso is a low-income, landlocked, Sub-Saharan country with 16 million
inhabitants and limited natural resources. During February and June 2011, the country
experienced episodes of civil unrest unprecedented in the last 23 years.  Burkina Faso also faced
significant economic vulnerability and twin food and refugee crises in 2012.

2. Burkina Faso has maintained economic stability in the face of many structural obstacles
and economic shocks, including recurring droughts. Strong reserves of gold and a vibrant cotton
sector have supported a respectable economic growth rate, despite vulnerability to commodity
price movements and terms of trade shocks. Burkina has also received significant aid flows in
the last decade. It is recognized for being a one of the best performers in West Africa as
measured by the 3.78 CPIA score that it has maintained since 2010. Yet, partly because of a high
population growth rate and a non-inclusive pattern of growth, poverty incidence has registered
only a moderate decline since the 1990s and remained at 46.7 percent in 2009 (compared with 51
percent in 2003).


Input:
3. An inflow of Malian refugees in 2012 has put fiscal pressure on Burkina’s budget.
Government has responded by allocating close to US$30 million to pay for food and schools for
the Malian refugees. Latest estimates from October 2012 suggest that there are 107,000 Malian
refugees who have crossed over into Burkina in the aftermath of the Malian political unrest.

4. Growth is expected to reach 7 percent in 2013, but will continue to be reliant on
commodity prices and therefore subject to downside risk. Reasonable agricultural production and
a mining sector boom will help boost growth in the medium-term. Through 2015, economic
growth is projected to remain strong and average 7 percent, mostly driven by agriculture, cotton,
mining, and services sectors, as well as higher public investment in infrastructure. Medium-term
forecasts assume that agricultural production will benefit from continued implementation of
measures supporting higher productivity and that the cotton sector, despite volatility in
international prices, will continue to increase productivity, in part through the extended use of
genetically modified seeds. Strong gold prices and increasing domestic gold production are also
expected to contribute to growth, as is higher value added in the manganese sector.


Input:
5. The Strategy for Accelerated Growth and Sustainable Development (SCADD) covering
the 2011-2015 period is the Government’s main strategic document. It identifies four strategic
axes that the Government will pursue to meet its development challenges. They are: (i)
development of the pillars of accelerated growth [1], (ii) strengthening human capital and
promoting social protection, (iii) strengthening good governance, and (iv) taking into account
cross-cutting priorities in development policies and programs. These various axes are

1
The overall situation of energy in Burkina Faso is characterized by a predominance of thermal power in the overall
supply of electricity, a total dependence on petroleum products, very low development of renewable energies, a low
coverage of electricity needs, and low output by energy consuming equipment. All these factors increase costs and
burden the competitiveness of the economy. Meeting the challenge of accelerated growth and sustainable
development will require a permanent supply of electricity at low cost.

1


Input:
complementary and interact to achieve the objectives of accelerated growth and sustainable
development.

6. The first axis identifies energy as an important element of growth and the second axis
highlights the need to increase access to modern energy services.  To promote access to energy
services for the greatest number of people and improve their productive capacity, the
Government will pay particular attention to rural areas where rates of access to energy are
generally very low. To address energy service access, the Government plans to: (i) connect most
of the population to the electricity network, (ii) install power stations in major centers outside the
network, (iii) develop multifunctional platforms with small networks providing access to energy
for sparsely populated communities, and (iv) use photo-voltaic systems for population in lowdensity areas. The SCADD pays particular attention to the development of renewable energies,
in particular solar energy, and the development of interconnection with countries of the subregion.

**B.** **Sectoral and Institutional Context**


Input:
7. Burkina Faso faces limited access to modern energy sources. The electrification rate is
about 14 percent (about 40 percent in urban areas and no more than 5 percent in rural areas).
The full survey of the living conditions of households shows that the rate of access to electricity
remains generally low in Burkina Faso, albeit with disparities between urban areas. The rate of
access to electricity by region varies greatly from one region to another 41.3 percent for the
Center region, 27.3 percent for the Hauts-Bassins, and 20.8 percent for the Cascades region.
However, it remains very low for the Sahel (2.6 percent), the Center-South (3.2 percent), and
Center-North (3.4 percent) regions.

8. Per capita consumption of electricity by total population is only 50 kWh per year. About
90 percent of the population still relies on firewood and charcoal for the bulk of their energy
needs. Total generation capacity in Burkina Faso is 256MW, which is insufficient to meet peak
demand. Power demand is growing at close to 10 percent per annum.

2

full survey of the living conditions of households


Input:
9. Burkina Faso depends on thermal generation with imported fuel **.** The country has limited
hydropower potential. Electricity imports from Cote d’Ivoire and Ghana (via small cities at the
border) are just enough to ensure a precarious equilibrium between demand and supply during
non-peak load periods. Petroleum product consumption is entirely dependent on imports (more
than 500,000 tons annually) by road at high cost from ports over 1,000 km away. The country’s
hydroelectric potential is limited, with less than 100 MW of potential capacity in five identified
sites. The combination of these various factors has hindered Burkina Faso’s ability to diversify
its energy mix and expand access to electricity.


Input:
12. Electricity tariffs in Burkina Faso are amongst the highest in sub-Saharan Africa,
averaging 22 US cents per kWh [2] . High electricity costs stem in part from Burkina Faso’s
complete dependency on imports for its large fuel needs for thermal electricity generation.  Yet,
even these high tariffs do not reflect full costs of service delivery and the national utility,
SONABEL, has relied on public subsidies and on-lending from the Government for its

---
[2] Sales over kWh sold.


Input:
14. To diversify the energy mix and reduce cost, SONABEL must resort to developing
interconnection with neighboring countries and import cheaper bulk supply electricity. The
completion of the interconnection lines will secure capacity for the medium term. The pursuit of
regional integration goals, in the wider framework of the West Africa Power Pool (WAPP), is
further developed in the sectoral strategy (Vision 2020 de l’Accès aux Services Énergétiques
Modernes). The WAPP, sponsored by the Member States of the Economic Community of West
African States (ECOWAS) is designed to bring about economic benefits through the
strengthening of the transmission network and other actions to facilitate electricity trade between
member states and to strengthen energy security and efficiency. Other economic benefits include
a reduction in energy prices and possibly the deferment of the need for new power generation.


Input:
15. Against this background, the extension of the existing Cote d’Ivoire-Bobo Dioulasso
transmission line to Ouagodougou financed under the _Power Sector Development Project_ serves
as a stepping stone towards a better integrated regional power market [3] . To diversify and improve
the reliability of supply for the CRCO, the interconnection with Ghana through the abovementioned transmission line between Bolgatanga (Ghana) and Ouagadougou is expected to be
operational not before 2015. To increase access to, and use of energy services to improve living
conditions in selected rural, peri-urban, and urban areas, the _Energy Access Project_ supports
Burkina Faso’s efforts in expanding energy access. Other donors such as the African
Development Bank, the European Investment Bank, the European Union, the West Africa
Development Bank, the Indian Government trough EXIM Bank and the French Development
Agency (AFD) are also assisting the Government of Burkina Faso through investments and
knowledge to help increase electricity access.

---
[3] For instance, in 2009, the respective shares of the thermal, hydro and imports were 70%, 15% and 15%. In 2010,


Input:
17. Improving energy efficiency and demand side management would help reduce pressure
for increased generation capacity. Until recently, the response to capacity shortages on the
CRCO was on the supply side, i.e. by increasing power generation capacity. Very limited
demand-side management (DSM) options were considered. An aggressive DSM program on the
CRCO would result in the more efficient use of electricity and a reduction in peak loads, which
would in turn reduce pressure for more generation capacity in the short and medium term, and
contribute to the financial sustainability of the utility. The Power Sector Development Project
approved in 2008, initiated important demand side management activities by financing training,
workshops, seminars audits and studies as well as the acquisition of software to better manage
and monitor energy consumption in public buildings. In that context, 345 beneficiaries
optimized their power. Moreover, the energy survey allowed the cancellation of 250 inactive
accounts, the replacement of obsolete meters, and identification of private meters within public
buildings (total savings are estimated at about US$2.0 million). Additionally, twenty five public
buildings have been equipped with energy saving equipment.


Input:
18. Expanding access of energy services to rural and peri-urban populations is crucial in the
country’s development. For Burkina Faso to reduce significantly the incidence of poverty there is
a crucial need to expand access to modern energy services. Only about 17 percent of the total
population has access to electricity. This prevailing low level of access constitutes a severe
handicap for the development of small- and medium-size productive enterprises and limits the
impact of existing social programs.

_**Institutional Setting**_

19. The Ministry of Mines and Energy and (MME) is responsible for policy development on
the generation and distribution of electricity, the control of energy infrastructure, and the
promotion of sustainable energy systems. The _Direction Générale de l’Energie_ (General
Department of Energy - DGE) was created within the MME to ensure the development and the
implementation of energy policies and strategy design.

20. In 2004, the electricity distribution segment was unbundled into two segments. The first
sub-segment covers the current perimeter of SONABEL and the second segment covers all the
areas outside SONABEL’s perimeter. Operations in the second segment are eligible for
financing through the Electrification Development Fund (Fonds de Développement de
l’Electrification - FDE).


Input:
21. SONABEL is the state-owned electric utility created in 1954. It is a vertically integrated
utility which has a monopoly on electricity import/exports but not on generation or distribution.
After the disruptions that followed the political crisis in Côte d’Ivoire in 2010, SONABEL’s
financial situation deteriorated due to the use of expensive rental power plants. SONABEL
initiated measures aimed at putting in place a more aggressive collection policy, an increase in
sales by a reduction of energy losses, and a reduction of other internal costs. Over the past two
years, these measures have been insufficient to improve the financial situation of SONABEL.
The Government and SONABEL are reviewing options aimed at increasing SONABEL’s
revenues during the second half of 2013 through a combination of revenue, subsidy and debt

5


Input:
restructuring measures. Without additional measures, analysis shows that SONABEL may not
reach financial equilibrium before 2015-2016.

22. The Rural Electrification Agency (FDE) was created by decree in 2003 to promote an
equitable energy access in rural areas; contribute to the implementation of the National
Electrification Plan; and develop, appraise, and tender the rural electrification projects identified
by the central government, local governments, and by private investors or operators. The FDE
gets its resources from state subsidies, the tax for electricity development billed and collected by
SONABEL (2 FCFA francs per kWh sold), and bilateral and multilateral donors (representing
about US$ 70 million in 2011). The FDE also acts as a technical quality regulator in the rural
electricity subsector particularly with the COOPELs which are cooperative associations, formed
under Burkina laws by future payers, either at village or municipal level.


Input:
23. Cooperative association (COOPELs) formed under Burkina laws at village or municipal
level, play a significant role in rural electrification, but some of them face financial challenges
due to their very small size. A COOPEL is the guarantor and owner of the rural electrification
assets. It is responsible for: the administration, operation, and management of the assets; the
management of finances; competitively selecting and recruiting the Supplier/Constructor/
Operator; ensuring the maintenance and durability of the assets; and collecting the proceeds from
the sale of electricity.

**Figure 1** : **Burkina Faso’s Energy Sector Institutional Setting**

after the decision to reverse the privatization process in the electricity sector in 2010, the
Government maintained the ARSE which operates under the authority of the Prime Ministry
with a mandate to control the operators of the sector, arbitrate disputes between operators and to

6


Input:
|Area|Investment/Economic and Sector Work|Source of Financing|
|---|---|---|
|Policy
Reform|Public Expenditure Review in the Energy Sector|IDA|
|Policy
Reform|Scope and financing of sector investments and tariff implications|IDA|
|Policy
Reform|Technical audit on SONABEL’s infrastructure and assets|IDA|
|Policy
Reform|Audit of SONABEL’s human resource|IDA|
|Policy
Reform|Tariff study|AFD|
|Interconnection
and Renewable
Energy (Solar)|Bolgatanga – Ouagadougou Interconnection Project|IDA, EIB, AFD|
|Interconnection
and Renewable
Energy (Solar)|PPP Study for solar energy|AFD|
|Interconnection
and Renewable
Energy (Solar)|Construction of two solar plants 0,5 and 1 MW in Ouaga and Kaya|AFD|
|Interconnection
and Renewable
Energy (Solar)|Construction of a  20 MW solar plant in Ouaga|EIB, EU, AFD|
|Interconnection
and Renewable
Energy (Solar)|Construction of a solar plant (pre-feasibility)|IFC|
|Production
Capacity|Production master plan|EDF|
|Production
Capacity|Increase thermal production capacity in Ouaga|WADB, WAEMU|
|Production
Capacity|Increase thermal production capacity in Bobo|WADB|
|Transmission
and
Distribution|Electrical infrastructure rehabilitation (and rural electrification)|ADB|
|Transmission
and
Distribution|Connection of SONABEL’s isolated centers|WADB, AFD|
|Access|Rural electrification|ADB|
|Access|Rural electrification project|India|
|Access|Energy Access Project|IDA|
|Demand-Side
Management
|Action plan for demand-side management
(follow-up to the Power Sector Development Project closed in June
2012)|IDA|

27. The Government and the donor community maintain an intensive dialogue on the
financial situation of the sector. In addition to the number of economic and sector work being
financed, both the Power Sector Development Project and the first phase of the inter-zonal
transmission hub project of the WAPP (APL3) include legal covenants related to SONABEL’s
financial situation.

8


Input:
29. The project is consistent with the CAS’s objective to help improve competitiveness and
to support broad-based growth. By improving energy supply, expanding energy services access,
and improving demand side management, the project will allow the Government to reach out to
remote and poor populations, thus allowing them to increase their productivity and to improve
their overall livelihoods.

30. Moreover, the project is also fully in line with the specific objective defined under the
Africa Region’s Energy Strategy to scale-up energy supply/security and expand access to
modern energy. As recognized in the World Bank Strategy for Africa, addressing energy deficits
will be critical to transformational growth.

II. **PROJECT DEVELOPMENT OBJECTIVES (PDO)**

**A.** **PDO**

31. The project development objectives are to: (i) increase access to electricity (ii) improve
the reliability of electricity supply, and (iii) improve efficient use of energy in target areas.

**B.** **Project Beneficiaries**


Input:
**C.** **PDO Level Results Indicators**

33. In line with the focused objectives of the project, the following key PDO indicators are
proposed:

a) PDO 1: Direct Project Beneficiaries of which, Female project beneficiaries (%)
b) PDO 2: Peak demand met in selected cities when standing alone (islanding)
c) PDO 3: People provided with access to electricity under the project by household
connection
d) PDO 4: Total capacity (kW) of installed equipment replaced by more efficient equipment

III. **PROJECT DESCRIPTION**


Input:
34. The project has been prepared against the backdrop of Burkina Faso’s robust electricity
sector portfolio with the World Bank. The Bank has recently financed two investment
operations in Burkina Faso: the Power Sector Development Project (US$63.58M), which
finances the interconnection between Bobo Dioulasso and Ouagadougou hence (linking Cote
d‘Ivoire and Burkina Faso) and demand-side management activities in public buildings which
closed on July 31, 2012; and the Energy Access Project (US$38.8M) which finances grid-based
rehabilitation, expansion, and intensification in urban and peri-urban areas, access expansion to
electricity services in urban, peri-urban and rural areas, and is scheduled to close in April 2014.
Moreover, since 2005, four lending operations have been approved by the Board under the West
African Power Pool Program to strengthen interconnections and facilitate power exchange in the
region.


Input:
36. The rural electrification strategy is based on the Government establishing the objectives,
policies, and regulations, and the implementation being carried out by the specialized public
entities, local communities (in part through cooperatives), NGOs and the private sector. Welldesigned public-private sector partnerships are more effective in building and maintaining rural
electrification services than public sector programs alone. Until now, essentially two types of
rural electrification projects are developed by the FDE: (i) projects connected to the national
interconnected network; and (ii) the isolated systems (diesel generators or hybrid systems). For
projects connected to the national interconnected network, the investment cost related to the
feeder line fully subsidized (100 percent), while investments in relation to the distribution grid is
subsidized up to 60 percent only. The investment in transformation and distribution equipment
(transformers, poles, conductor, and so forth) is financed through a 10-year (with 3-year grace
period) interest-free loan from the FDE to the COOPEL. The isolated systems receive a global
subsidy of 60 percent of the investment cost. The remaining 40 percent in relation to distribution

10


Input:
44. The demand-side management and energy efficiency initiatives will include the
acquisition of testing and certification equipment, the recruitment of consultants to support legal
review and capacity building initiatives such as experience sharing and south-south
collaboration, consumer and distributors awareness campaigns. Investments in energy efficient
equipment will include the installation of energy saving lamps in selected households and public
lighting).  To complement these activities, the proposed set of Lighting Africa interventions will
help catalyze the market for solar lanterns, thus providing consumers with cheap and efficient
access to lighting where grid access will not extend. Specific activities include: (i) capacity
building on off-grid lighting in rural electrification strategies; (ii) public service announcements
and awareness campaigns to inform consumers of the benefits of solar lanterns and other good
quality products; (iii) market research for Lighting Africa products; (iv) private and public sector
engagement activities to raise awareness among actors from both sectors about existing solar
market opportunities and connect these actors to have them work together and catalyze the solar
lantern’s market; and (v) the deployment of approximately 25,000 lanterns in public schools
targeting persons in off-grid communities.


Input:
**B.** **Project Financing**

49. The proposed lending instrument would be a five-year IDA Investment Project Financing
(IPF). Alternative instruments to the IPF were considered including a Development Policy Loan,
which was rejected because the project aims at financing specific investments.

13


Input:
53. Regional integration paves the way for enhanced energy security and efficiency. These
objectives have been pursued through the development of the West Africa Power Pool (WAPP).
In 2003, 14 ECOWAS countries, including Burkina Faso, signed the Energy Protocol to the 1975
ECOWAS Treaty, which provides for the integration of the electricity systems in West Africa
with an ultimate view of creating a power pool. Against this background, the extension of the
existing Côte d’Ivoire–Bobo-Dioulasso transmission line to Ouagadougou under PSDP
represented a stepping stone toward better regional integration.

54. Donor coordination is important to support Burkina Faso’s reform agenda and
investments. As presented in Table 1 above, a number of donors are present in the energy sector
in Burkina Faso, including the French Agency for Development (AFD), the European Investment
Bank (EIB), the European Union (EU), etc. A common platform is used by donors (through
donors’ meetings and joint missions) to convey specific messages to the Government on the
reform agenda and investment plans.


Input:
57. Consultations improve ownership of the initiative. It is crucial to give priority to
consultations with the Government at the national and at the local levels, as well as beneficiaries,
donors, and other stakeholders. During implementation the project team will continue these
consultations initiated during preparation to increase local ownership of the proposed initiatives.

IV. **IMPLEMENTATION**

**A.** **Institutional and Implementation Arrangements**

58. The Ministry in charge of Energy (MEM), through a steering committee, will oversee the
overall supervision and coordination of the Project. The steering committee will be comprised of
representatives of the Ministry of Energy, Ministry of Finance, SONABEL and FDE.


Input:
59. The implementing agencies of the project are SONABEL, FDE and DGE. SONABEL
will be responsible for the implementation of component 1, FDE for Component 2, and DGE for
Components 3 and 4. SONABEL, FDE, and DGE will be responsible for procurement,
monitoring and evaluation, and implementation of environmental and social safeguard mitigation
measures for their respective components. The Project Coordination Unit (PCU) in DGE will be
responsible for the financial management of the project and will manage the sole designated
account for the project. The PCU, with support from DGE’s procurement specialist, will
consolidate procurement related information at the project level (such as procurement plans,
procurement related information in project monitoring reports, etc.). The PCU will also
consolidate inputs from SONABEL, FDE and DGE to facilitate monitoring and evaluation for all
components of the project. Lastly, the PCU will support the other two implementing agencies on
safeguard measures to ensure that they are timely, appropriately considered and implemented
throughout the life-cycle of the project.


Input:
60. SONABEL is the state-owned electric utility created in 1954; it is a vertically integrated
utility which has monopoly on electricity import/exports but not on generation or distribution.
As per SONABEL’s 2010 annual report, the company had 436,250 customers, 1,510 employees,
a turnover of FCFA 102.4 billion and energy sales of 952GWh. SONABEL is currently
involved in three World Bank-financed operations, and is familiar with procurement and
financial management under World Bank rules, guidelines and bidding documents.

61. The FDE was created by decree on February 19, 2003 with the following mission: (i)
promote an equitable energy access in rural areas; (ii) contribute to the implementation of the
National Electrification Plan; (iii) develop, appraise, and tender the rural electrification projects
identified by the central government, local governments, and by private investors or operators;
and (iv) facilitate rural electrification programs by providing investment guarantees and
subsidies and by financing feasibility studies. The FDE also acts as a technical quality regulator
in the rural electrification segment.


Input:
62. The DGE is the Department within the Ministry of Energy responsible for the country
energy policy and strategy design. It was created in 1995. The DGE is involved in two World
Bank-financed projects under execution. Compared to SONABEL, it has less experience with
World Bank rules, guidelines and bidding documents. The DGE has been suffering from weak

16


Input:
63. The M&E system will be based on the agreed Results Framework (Annex 1). On that
basis, performance monitoring would take place in two steps. First, SONABEL, FDE and DGE
will be responsible for conducting M&E activities (for their respective components). In other
words, they will provide the inputs necessary for the overall consolidated and periodic fiduciary
and M&E reports (quarterly progress reports for each of the components they are implementing
on agreed format and deadline). The second step will involve the review and consolidation of
impact and output indicators as well as data for the production of the annual audit of the financial
statements (including of project) by the PCU. The PCU will therefore be the unit responsible for
furnishing the required quarterly implementation progress status report as validated by the
Steering Committee convened by the MME for forwarding to the Ministry of Finance and the
Bank. Finally, DGE will be responsible to undertake in a participatory way reasonably early
during project implementation, the process to elaborate an M&E manual that will guide the
overall M&E activities.


Input:
SONABEL so that they can adequately lead M&E activities. If needed, the project will secure
the services of consultant (M&E specialist) to help establish system requirements, develop
adequate and reliable monitoring and evaluation tools, which would provide reliable data and
reporting of sector performance beyond the scope of the project.

**C.** **Sustainability**

66. The sustainability of the Project depends largely on: (a) the reinforcement of the turnkey
power stations and their proper maintenance; (b) an improved access to electricity in the areas
selected, and (c) energy efficiency. The project’s sustainability depends on the commitment of
the Government to continue with sector rationalization and modernization. Sustainability would
also depend on Government’s commitment to least-cost regional interconnection schemes, which
should be systematically pursued. Also important for the sustainability of the project is the
Government’s commitment to its sector development strategy and the fundamentals of the sector,
including the legal and the regulatory frameworks to allow sustained sector performance and
efficiency.

67. The sustainability of the Project is also dependent on the mitigation of the critical risks
presented below.

V. **KEY RISKS AND MITIGATION MEASURES**


Input:
68. Risks and mitigation measures that have been identified are described in the Operational
Risk Assessment Framework (ORAF) worksheet in Annex 4.

|ings Summary Table|Col2|
|---|---|
|**_Risk Category_**|**_Rating_**|
|**_Stakeholder Risk_**|**_S _**|
|**_Implementing Agency Risk_**|**_S _**|
|-
**_Capacity_**|**_S _**|
|-
**_Governance_**|**_M _**|
|**_Overall Preparation Risk_**|**_S _**|
|**_Project Risk_**|**_M _**|
|-
**_Design_**|**_L _**|
|-
**_Social and Environmental_**|**_M _**|
|-
**_Program and Donor_**|**_L _**|
|-
**_Delivery Monitoring and Sustainability_**|**_M _**|
|**_Overall Implementation Risk_**|**_M _**|

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Input:
70. The institution’s capacity to carry out project management, monitoring and evaluation;
including capacity to carry out activities pertaining to procurement, disbursement, financial
management and safeguards need to be strengthened. This risk is compounded by extremely
long national procurement procedures which affect the speed of project implementation. A
survey conducted in 2010 showed that the procurement process could take anywhere between
nine to fourteen months. This risk will however be partially mitigated by the new procedures
which assign the review of procurement documents to decentralized structures.

71. The risks relating to project management capacity are partially mitigated by the
experience of the implementing agencies in the ongoing and recently closed IDA projects. As
the Ministry of Energy is encouraging capacity building within national institutions, it is
expected that capacity building efforts to support project implementation will be done by
enhancing capacity in DGE through the recruitment of fiduciary and safeguards staff (which
would be financed under this project).


Input:
thermal generation. The implication for least-cost development is that the combination of
interconnections and domestic generation capacity for back-up is preferable to developing
domestic thermal generation only. Another factor is that interconnection investments are lumpy
and involve long preparation and construction time. Contrary to diesel engines, interconnections
are therefore not sufficient to meet annual increments in electricity demand.

74. Based on the above, from a methodological standpoint, the team assessed the economic
justification of additional thermal generation by estimating the value for electricity users of
increased reliability of supply and energy security and comparing it to the incremental
investment and operating costs related to this additional generation. Additional thermal
generation is expected to reduce the probability of load shedding for users (Loss of Load
Probability – LOLP). An individual load shedding event will create disruption for electricity
users and engender costs. The Cost of Unserved Energy (CUE) tends to have an inverse
relationship with the LOLP. In a system with high LOLP (frequent load shedding), the impact of
each individual event is lower and users with greater need for reliability are more likely to invest
in back up generation.


Input:
75. For the economic assessment of the component prepared by the Bank team, the estimate
of the reduction in LOLP and of the CUE have been derived from the latest SONABEL
Generation Master Plan prepared by EDF (Oct 2011). On the cost side, the project incremental
economic costs included estimated initial investments costs (plus contingencies) and additional
operating costs (fuel, O&M) throughout the project life. On this basis, the component Economic
Internal Rate of Return (EIRR) is estimated at 16.3% with a NPV of US$8.00 million with a
10% discount rate. The switching value (EIRR of 10% and nil NPV) would be reached with a
28% reduction in benefits (LOLP times CUE).


Input:
76. With regard to component 2 (Rural Access to Electricity), the economic analysis
compares the total costs (investments and operations) of expanding electricity services to the
benefits derived by users (based on their estimated willingness to pay). The Bank economic
analysis builds on the detailed study and modeling of the electrification of about 40 rural centers
prepared by FDE (Final report February 2013). The economic benefits for electricity users are
based on the estimated willingness to pay (WTP) of rural electricity users. In the absence of
more recent study or data, the WTP has been derived from the electricity prices which were
actually practiced by local rural operators in Burkina Faso until 2010 (when a decision to align
rural tariff with SONABEL’s was taken by the GoBF). On the cost side, the analysis takes into
account all investment costs either borne by the rural operators (distribution network, buildings,
metering) or SONABEL (transmission to connect the new centers). The operating costs are
primarily related to the management of the rural centers (personnel, O&M) and to bulk purchase
of electricity to SONABEL valued in the base case at currently applied tariffs (20USc/kWh).


Input:
81. With respect to the sector financial viability, the fuel price subsidy mechanism
established in 1994 by the GoBF has some merits. Contrary to most power utilities in the subregion, it has, in the past, allowed SONABEL to maintain its financial viability and liquidity, and
allowed the management of the company to maintain a focus on the core utility business, as
opposed to crisis management. SONABEL performance with regard to total distribution losses
(12% overall technical and non-technical) compares favorably with the rest of West Africa.

82. Still, this subsidy mechanism to lower electricity tariffs is regressive in its redistributive
impact. Also, its total budgetary cost is a direct function of the volume of fuel used for thermal
generation, and of the difference between the administered fuel purchase price applied to
SONABEL and market prices.

83. SONABEL’s medium term financial prospects which suggest financial recovery in 2016.

**Table 3: SONABEL’s 2012-2020 Projections**

|Financial objectives|2011|2012|2013|2014|2015|2016|2017|2018|2019|2020|
|---|---|---|---|---|---|---|---|---|---|---|
|Net results<br>|-15,171|-14,608|-5,096|-6,284|-4,983|14,058|9,719|12,136|14,301|17,700|
|Cashflow available for debt service|21,656|14,630|20,334|20,646|25,923|47,312|50,014|49,816|50,772|57,867|
|Debt payment|11,692|14,783|18,366|22,648|23,980|26,759|29,216|28,431|26,528|27,855|
|Debt service coverage ratio|1.9|1.0|1.1|0.9|1.1|1.8|1.7|1.8|1.9|2.1|
|Debt to equity|2.1|2.8|3.3|4.3|4.5|3.4|2.8|2.6|2.1|1.6|

**B.** **Technical**

84. _**Component 1: Improve the reliability of energy supply**_ . SONABEL’s future demand
should undoubtedly be met through interconnections with neighboring countries including Côte

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Input:
d'Ivoire, Ghana and Nigeria which, with an important gas and hydroelectricity potential, have a
comparative advantage on electricity generation. In such context, the country’s growth and
development strategy (SCADD) devotes a major place to interconnecting the national network
with neighboring countries.

85. However, the need for minimum and critical generation capacity has to be acknowledged
for stability both for network technical requirements. Moreover, neighboring countries often
share the same hydrology pattern which can be problematic particularly with drought or poor
rainfall. Kossodo, Ouaga 2, Bobo 2 and Komsilga are all power plants that will increasingly help
fill the demand gap while the share of gas and hydropower plants will gradually increase in the
energy mix. Through this component, the project will help achieve this scheme, with particular
emphasis on fast-growing economic development in regional growth poles. The 15 MW
additional capacity constructed under the proposed project will therefore not compromise the
trend towards more imported energy from neighboring countries.

**Figure 3: Energy Mix in Burkina Faso**

_**Technology Assessment**_