Project Number: 49450-021 November 2020

Pacific Renewable Energy Investment Facility Republic of Kiribati: South Tarawa Renewable Energy Project

This document is being disclosed to the public in accordance with ADB's Access to Information Policy.

CURRENCY EQUIVALENTS (as of 9 November 2020)

Currency unit – Australian dollar/s (A$)

A$1.00 = $0.73

$1.00 = A$1.37

ABBREVIATIONS

ADB – Asian Development BankBESS – battery energy storage systemCOVID-19 – coronavirus diseaseGHG – greenhouse gasGWh – gigawatt-hourkm2 – square kilometerkWh – kilowatt-hourMFED – Ministry of Finance and Economic DevelopmentMW – megawattMWh – megawatt-hourMWp – megawatt-peakO&M – operation and maintenancePAM – project administration manualPUB – Public Utilities BoardTA – technical assistancetCO2e – ton of carbon dioxide equivalent

NOTE

In this report, "$" refers to United States dollars, unless otherwise stated.

Vice-President Ahmed M. Saeed, Operations Group 2 Director General Leah Gutierrez, Pacific Department (PARD) Deputy Director General

Emma Veve, PARD

Director Olly Norojono, Energy Division (PAEN), PARD

Team leader Cinderella Tiangco, Principal Energy Specialist, PAEN, PARD Team members Rafayil Abbasov, Energy Specialist, PAEN, PARD

Cynthia Ambe, Operations Assistant, PAEN, PARD Chandra Arora, Procurement Specialist; Procurement Division 2,

Procurement, Portfolio and Financial Management Department Cindy Bryson, Safeguards Specialist, Portfolio, Results, and Quality Control

Unit (PAOD-PRQ), PARD Faith Joy Buentipo, Senior Operations Assistant, PAEN, PARD Christian Ellerman, Senior Climate Change Specialist, Climate Change &

Disaster Risk Management Division, Sustainable Development and Climate Change Department (SDCC)

Jane Fantilanan, Associate Project Analyst, PAEN, PARD Lily Anne Homasi, Senior Economics Officer, Pacific Subregional Office

(SPSO), PARD Roshan Ouseph, Senior Counsel, Office of the General Counsel Eun Young So, Energy Specialist, PAEN, PARD Ritu Verma, Principal Social Development Specialist (Gender and

Development), PARD Jean Williams, Principal Environment Specialist, PAOD-PRQ, PARDa

Peer reviewer David Elzinga, Senior Energy Specialist, Energy Sector Group, SDCC a Outposted to Pacific Subregional Office in Suva, Fiji

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page PROJECT AT A GLANCE

MAP

I. BACKGROUND 1

II. THE PROJECT 1A. Rationale 1B. Project Description 4C. Value Added by ADB 5D. Summary Cost Estimates and Financing Plan 5E. Implementation Arrangements 6

III. DUE DILIGENCE 7A. Technical 7B. Economic and Financial Viability 8C. Sustainability 8D. Governance 9E. Poverty, Social, and Gender 10F. Safeguards 10G. Summary of Risk Assessment and Risk Management Plan 11

IV. ASSURANCES 12

V. THE PRESIDENT’S DECISION 12

APPENDIXES

1. Design and Monitoring Framework 13

2. List of Linked Documents 16

Project Classification Information Status: Complete

PROJECT AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 25082020174634974490 Generated Date: 06-Oct-2020 11:09:36 AM

1. Basic Data Project Number: 49450-021Project Name South Tarawa Renewable Energy Project Department/Division PARD/PAENCountry Kiribati Executing Agency Ministry of Finance and

Economic DevelopmentRecipient Government of Kiribati

Country EconomicIndicators

https://www.adb.org/Documents/LinkedDocs/?id=49450-021-CEI

Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id=49450-021-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Energy Energy sector development and institutional reform 0.20

Renewable energy generation - solar 7.80

Total 8.00

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalities

Accelerating progress in gender equality

Tackling climate change, building climate and disaster resilience, andenhancing environmental sustainabilityStrengthening governance and institutional capacity

GHG reductions (tons per annum) 4,633Climate Change impact on the Project

Medium

ADB Financing

Adaptation ($ million) 0.22

Mitigation ($ million) 5.61

Cofinancing

Adaptation ($ million) 0.18

Mitigation ($ million) 4.52

Sustainable Development Goals Gender Equity and MainstreamingSDG 1.4, 1.5SDG 5.5SDG 7.2SDG 10.3SDG 13.a

Effective gender mainstreaming (EGM)

Poverty TargetingGeneral Intervention on Poverty

4. Risk Categorization: Low.

5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: C

.

6. Financing

Modality and Sources Amount ($ million)

ADB 8.00

Sovereign Project grant: Asian Development Fund 8.00

Cofinancing 5.70

Government of New Zealand - Project grant (Full ADB Administration) 2.00

Strategic Climate Fund - SREP - Project grant (Full ADB Administration) 3.70

Counterpart 1.00

Government 1.00

Total 14.70

Currency of ADB Financing: US Dollar

N O R T H P A C I F I C O C E A N

Butaritari

Marakei

Makin

Abaiang

Kuria

Maiana Abemama

AranukaNonouti

BanabaTabiteuea

Onotoa

Tamana

Nikunau

Beru

Arorae McKean

Nikumaroro

Kanton

Birnie

Orona

Enderbury

Rawaki

Manra

Teraina

Tabuaeran

Kiritimati

Malden

StarbuckFilippo Reef

Millennium

Vostok

Flint

TARAWA

GILBERT GROUP

PHOENIX GROUP (RAWAKI)

LINE GROUP

Southern

Nor thern

National Capital

Town

International Airport

International Boundary

Boundaries are not necessarily authoritative.

Source: Satellite views of Bonriki, Google Earth (accessed 16 September 2020)

SOUTH TARAWA RENEWABLE ENERGY PROJECT

K I R I B A T I

0 500 1000

Kilometers

N

0o 0o

160 00'Wo

160 00'Wo

180 00’o

180 00’o

10 00'So 10 00'So

20

08

58

A 2

0K

IR A

BV

This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

L A G O O N

P A C I F I C O C E A N

Buariki

TebwangaroiNuatabu

Tearinibai

Taratai

Eretibou

Abaokoro

Marenanuka

TaborioBetio

Nanikai

Bikeman

Bairiki

Banraeaba

Teaoraereke

Abatao

Tabiteuea

Nabeina

Kainaba

Bonriki

Temaiku

BikenibeuEita

Buota

N O R T HT A R A W A

S O U T H T A R A W A

T A R A W A A T O L L

173 00'Eo

173 00'Eo

1 30'No

1 30'No

S O U T H P A C I F I C O C E A N

N O R T H P A C I F I C O C E A N

NEWCALEDONIA

FRENCH POLYNESIA

GUAM

A U S T R A L I A

N E W Z E A L A N D

HAWAIINORTHERN

MARIANA ISLANDS

REPUBLIC OF

PALAU

FEDERATED STATES

OF MICRONESIA

PAPUA

NEW GUINEA

NAURU

MARSHALL ISLANDS

VANUATU

FIJI

TUVALU

COOK

ISLANDS

SAMOA

SOLOMON

ISLANDS

TONGA

NIUE

K I R I B A T I

ADB'S DEVELOPING MEMBER COUNTRIES IN THE PACIFIC

I. BACKGROUND

1. On 22 June 2017, the Board of Directors of the Asian Development Bank (ADB) approvedthe Pacific Renewable Energy Investment Facility. 1 The facility finances renewable energyprojects in the 11 smaller Pacific island developing member countries (PIC-11).F

2 Upon approval,the Board delegated authority to the President to approve loans and/or grants to targetedcountries for qualifying projects of up to $200 million in cumulative ADB financing.

2. The facility will finance a grant to Kiribati for the South Tarawa Renewable Energy Project,ADB’s first project in the Kiribati energy sector. The Strategic Climate Fund3 and the Governmentof New Zealand’s Ministry of Foreign Affairs and Trade will provide grant cofinancing, to beadministered by ADB. Through the installation of a solar photovoltaic and a battery energy storagesystem (BESS) and capacity building, the project will help the Government of Kiribati (i) expandaccess to clean energy; (ii) improve the reliability and climate resilience of service; (iii) reducereliance on fossil fuels for power generation; (iv) reduce greenhouse gas emissions; (v) reducethe cost of power generation; and (vi) improve the capacity of energy sector stakeholders.

II. THE PROJECT

A. Rationale

3. Country context. Kiribati is a small island nation in the central Pacific. It comprises32 atolls and a coral island with a total land area of 810 square kilometers (km2) widely dispersedover an exclusive economic zone of 3.5 million km2 and spread across three island groups andtime zones. Kiribati’s remoteness from major markets and limited resources lead to high importcosts, while its low elevation—averaging only 2 meters above sea level—creates severevulnerability to sea-level rise and other climate change impacts and natural hazards. Like manyother small Pacific islands, Kiribati’s electricity generation relies heavily on imported diesel fuel,transported by sea over long distances and subject to weather and climate-change-related supplydisruptions. This dependence exposes Kiribati to high and fluctuating oil prices and has resultedin among the region’s highest costs of power generation. 4 The government has prioritizedstrengthening fuel security and reducing carbon emissions. The investments in renewable energy,energy storage, and distributed technologies are expected to improve the country’s energysecurity, increase grid reliability, and reduce fossil fuel consumption.

4. Sector context. Grid-connected electricity in Kiribati’s capital, South Tarawa, is generatedand distributed by the Public Utilities Board (PUB), a state-owned electricity, water, and sewerageutility. The PUB’s installed capacity of 7.01 megawatts (MW) comprises several diesel generatorstotaling 5.45 MW and recently completed grid-connected solar photovoltaic systems totaling 1.56megawatt-peak (MWp). These supply an annual peak demand of close to 6.0 MW to government,commercial, and residential customers. The photovoltaic systems account for 22% of installedcapacity but supply only about 9% of demand on South Tarawa; diesel generation supplies theremaining 91%. In 2019, the annual demand on South Tarawa was 24.7 gigawatt-hours (GWh).

1 ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Pacific Renewable Energy Investment Facility. Manila.

2 The countries comprising the PIC-11 are the Cook Islands, the Federated States of Micronesia, Kiribati, the Marshall Islands, Nauru, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu. Smaller refers to population.

3 Under the Scaling Up Renewable Energy Program in Low Income-Countries. 4 Pacific Power Association. 2018. Utilities Benchmarking Report, 2017 Fiscal Year. Suva. The report indicates that

the average supply costs across Pacific utilities is A$0.320 per kilowatt-hour (kWh) compared with A$0.395 per kWh for South Tarawa.

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5. High cost of electricity production. The PUB’s diesel generation system on SouthTarawa has low efficiency and incurs high repair and maintenance costs, large capitalreplacement costs, and high cost of fuel shipments. Due to the lack of back up generation assets,the PUB regularly conducts load shedding to manage generator failures.5 Outer islands areserved largely with solar home systems, and Kiritimati island, the second largest load center (1.65GWh in 2016) compared to South Tarawa, has a power system not managed by the PUB. Thegovernment recognizes that renewable energy can reduce power generation costs and supportequitable socioeconomic growth and poverty reduction, but this must be complemented bysupply-side efficiency, demand-side management, policy reform, and sustainable tariff structures.

6. Among the PUB’s three operations streams, electricity provides the most revenue (over80%). The government provides subsidy to the PUB equivalent to about 10% of total revenues.From 2015–2019, the PUB reported negative operating profits (inclusive of subsidies), except in2016 when electricity revenues increased by 9% due to improvements in metering and paymentcollection. Only small increases in the PUB’s revenue are driven by expanded consumption andnew residential consumers. Revenues in 2017–2018 were affected by the introduction of (i) aninverted block tariff structure for residential customers, whereby the highest-volume users pay thehighest tariffs, effectively providing an incentive for customers to consume electricity wisely; and(ii) a tariff equivalent to a lifeline or low-income tariff.6 In 2018–2019, the estimated losses fromelectricity were about A$0.5 million, increasing by 8% over 2017. The main reasons for losses inelectricity revenues are the below-cost recovery tariff and the subsidies provided to the wateroperations. The cost of fuel for power generation remains the largest expense for the PUB.Although decreasing steadily from 63% of total expenditure in 2015 to 50% in 2019, it continuesto expose the PUB to importers’ prices and adversely impacts its profitability and sustainability.7

7. Impact on vulnerable groups. Half of Kiribati’s population of 115,847 live in SouthTarawa, which has a land area of only 16 km2. Of the 7,877 households in South Tarawa (44%of households in Kiribati), 72.4% are grid connected. The high electricity cost continues tosuppress demand and has hindered growth in the commercial and tourism sectors. The PUBforecasts demand growth of 2% per annum up to 2030. Gender inequalities persist in the publicand private sectors, and within the home. Unemployment is high overall (31%), and even higheramong women (58%). Kiribati’s poverty rate was estimated at 22% in 2006. South Tarawa hasthe highest number of poor people, with a poverty rate of 24%.8 About 20%–25% of householdsare headed by women. The high population density of more than 3,600 people per km2 is stressingthe natural environment, housing, land management, sanitation services, and underground waterreserves. Women are the most affected by energy poverty, suffering health problems caused byusing biomass and kerosene for lighting, cooking, and boiling water for drinking. Access tomodern energy services reduces exposure to pollutants, saves time, and allows women toparticipate in the community, in decision making, and in income-generating activities.

8. Constrained renewable energy use and lack of private sector presence. On-grid solarphotovoltaic power is the least-cost option for South Tarawa (levelized cost of $245 per megawatt-hour [MWh] compared with $347 per MWh for diesel). Despite this and the significant technical

5 The PUB has requested funding from the Government of New Zealand for installation of a diesel generator and fiber optic cables for the entire South Tarawa grid (Bonriki–Betio), and for other network and institutional capacity building.

6 Kiribati’s per capita gross domestic product of A$2,397 ($1,625) is the lowest in the Pacific region. 7 The PUB spent A$6.1 million (57% of expenditures) on diesel fuel in 2017, 49% of which was for power generation.

Residential tariffs are A$0.10–A$0.55 ($0.08–$0.44)/kWh and A$0.70 ($0.56)/kWh for industry and government consumers, with a weighted average tariff of A$0.51/kWh. The government’s subsidy totaled A$1,282,258 in 2019.

8 Australia Department of Foreign Affairs and Trade. 2013. Kiribati Program Poverty Assessment 2013. Canberra.

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resource potential for solar energy (554 MW), deployment has been limited.9 This growth is constrained by the lack of energy storage to manage intermittency and transfer load to supply nighttime demand, grid instability, weak institutional capacity, affordability concerns, limited financing, and reliance on donor funding. Also, despite the potential for revenue generation from the high tariffs, there are no independent power providers in Kiribati. Barriers to private sector investment include (i) lack of an enabling policy and regulatory framework, (ii) creditworthiness of the PUB as an off-taker, (iii) lack of bankable projects, and (iv) small transaction sizes.10

9. Proposed solutions. The project will finance climate-resilient solar photovoltaicgeneration, a BESS, and institutional capacity building. Capacity building will include thedevelopment of a gender-sensitive draft energy act, which will be the framework to increaserenewable energy deployment, including through private sector investments. The project will helpSouth Tarawa increase its renewable energy grid penetration from 9% to more than 44%, thusexceeding the government target for South Tarawa of 36% contribution by 2025. Increased solargeneration will benefit the economy through reduced fossil fuel imports and place downwardpressure on tariffs. Renewable energy also reduces greenhouse gas (GHG) emissions, whichcontribute to global warming and rising sea levels that render Kiribati among the most vulnerablecountries. The project is expected to generate on average 6.43 GWh of clean electricity from solarphotovoltaic systems, displacing 1.546 million liters of diesel fuel consumption and avoiding 4,633tons of carbon dioxide equivalent (tCO2e) GHG emissions per year for 25 years.11 The grant toprepare the project is funded by the Strategic Climate Fund and administered by ADB.12

10. Alignment of development plans. The government views increasing renewable energyas a key strategy to address affordability, energy access, and climate change concerns, and hasprioritized sustainable renewable energy development. The project aligns with Kiribati 20-YearVision 2016–2036,13 the blueprint for Kiribati transformation and addresses the government’sobjectives outlined in its Energy Policy (2009), the Kiribati Joint Implementation Plan for ClimateChange and Disaster Risk Management 2014–2023,14 and the Kiribati Development Plan for2016–2019,15 which seeks to increase Kiribati population’s access to high-quality and climate-resilient infrastructure, and to provide equal opportunity by incorporating gender mainstreaming.The project will contribute to delivering government targets under the Kiribati Integrated EnergyRoadmap (footnote 9), its Climate Change Policy (2019), 16 and the country’s nationallydetermined contributions to reduce GHG emissions by 48.8% and fossil fuel consumption by45.0% in South Tarawa by 2025 through increasing renewable energy deployment.17

11. The project aligns with four of the seven operational priorities under ADB’s Strategy 2030:(i) addressing remaining poverty and reducing inequalities (operational priority 1); (ii) acceleratingprogress in gender equality (operational priority 2); (iii) tackling climate change, building climate

9 International Renewable Energy Agency. 2017. Kiribati Integrated Energy Roadmap: 2017–2025. Bonn. 10 ADB’s Private Sector Development Initiative supports reforms to expand private sector opportunities in Kiribati. 11 The project will generate 6.84 GWh of solar electricity, displace more than 1.64 million liters of diesel fuel, and avoid

4,892 tCO2e of GHG emissions in the first full year of operation. Over its lifetime, the project will generate 161 GWh of electricity, displace more than 38 million liters of diesel, and avoid 114,955 tCO2e of GHG emissions.

12 ADB. 2019. Technical Assistance for Preparing the Pacific Renewable Energy Investment Facility (Phase 2). Manila (TA 9772-REG). The TA is funded by ADB’s Technical Assistance Special Fund (TASF 6) ($3 million) and the Strategic Climate Fund under the Scaling Up Renewable Energy Program in Low Income-Countries ($1 million).

13 Government of Kiribati. 2016. Kiribati 20-Year Vision 2016–2036 (KV20). South Tarawa. 14 Government of Kiribati. 2013. Kiribati Joint Implementation Plan for Climate Change and Disaster Risk Management

2014–2023. South Tarawa. 15 Government of Kiribati. 2016. Kiribati Development Plan 2016–2019. South Tarawa. 16 Government of Kiribati. 2019. Kiribati Climate Change Policy. South Tarawa. 17 Government of Kiribati. 2015. Kiribati Intended Nationally Determined Contributions. South Tarawa.

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and disaster resilience, and enhancing environmental sustainability (operational priority 3); and (iv) strengthening governance and institutional capacity (operational priority 6).18 The project is in line with the objectives of ADB’s 2009 Energy Policy,7F

19 and supports the United Nations' Sustainable Development Goals. The project is consistent with ADB’s Pacific Approach, 2016–2020,F

20 under which ADB’s infrastructure program will harness renewable energy to drive down the cost of electricity, reduce risks, and reduce fossil fuel imports. ADB’s assistance to Kiribati since 1974 totals $116.99 million for 12 loans, grants, and TA projects, mostly in public sector management and in the urban and water sectors.21 Continuous support on government reforms and monitoring of protracted organizational changes are key lessons from completed ADB projects. The project is included in ADB’s country operations business plan for the PIC-11 for 2020–2022.F

22 12. Financing under the Pacific Renewable Energy Investment Facility. The project meets the qualifying criteria as set out in the facility’s report and recommendation of the President:

(i) The project scope includes renewable energy generation and support for energy sector infrastructure through installation of a solar photovoltaic system and BESS.

(ii) Kiribati is one of the 11 eligible Pacific developing member countries. (iii) The project is aligned with the Kiribati 20-Year Vision 2016–2036 and is prioritized

under the Kiribati Integrated Energy Roadmap 2017–2025. (iv) The project is classified category B for environment.

B. Project Description 13. The project is aligned with the following impacts: renewable energy generation increased and greenhouse gas emissions reduced in Kiribati (footnotes 9 and 17). The project will have the following outcome: generation and utilization of clean energy in South Tarawa increased.23 14. Output 1: Solar photovoltaic and battery energy storage system installed. The project will install 4 MW (5 MW peak) of climate-resilient, ground-mounted solar photovoltaic capacity and 5 MW/13 MWh of BESS, including related grid integration and control systems, on the Bonriki Water Reserve in South Tarawa. 15. Output 2: Draft energy act to enable increased deployment of renewable energy developed. The project will assist in developing a gender-sensitive draft energy act incorporating provisions to establish clear energy sector institutional responsibilities, modernize existing law, enhance renewable energy deployment and energy efficiency, develop and improve regulations (including grid code and standards), encourage private sector investments, and reform tariffs for submission by the Ministry of Infrastructure and Sustainable Energy to Parliament, following approval by the Office of the Attorney-General and the Cabinet. 16. Output 3: Institutional capacity for inclusive renewable energy project development and implementation enhanced. The project will provide institutional capacity building for the project executing and implementing agencies and other stakeholders on project management and supervision, and operation and maintenance (O&M) of renewable energy generation assets.

18 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila. 19 ADB. 2009. Energy Policy. Manila. 20 ADB. 2016. Pacific Approach, 2016–2020. Manila; United Nations. 2015. Sustainable Development Goals. Geneva. 21 https://www.adb.org/countries/kiribati/main. 22 ADB. 2019. Country Operations Business Plan: 11 Small Pacific Islands Countries, 2020–2022. Manila. 23 Performance indicators and targets are in the design and monitoring framework (Appendix 1).

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C. Value Added by ADB

17. ADB was able to leverage cofinancing and collaborated effectively with developmentpartners despite this project being its first in the country’s energy sector. The project involvestechnologies that are new to Kiribati, incorporates needed sector reforms, and is delivered throughinnovative approaches to ensure sustainability. The project will collaborate with the South TarawaWater Supply Project, approved in 2019 and funded by ADB, the Green Climate Fund, and theWorld Bank.24 This water sector project will also construct a photovoltaic and BESS in the BonrikiWater Reserve site to offset the electricity consumption of the reverse osmosis desalination plantsit will install. The renewable energy system of the water supply project and the proposed projectwill be procured jointly to achieve economies of scale, guarantee consistency and compatibility indesign and specifications, and ensure single responsibility under one contractor but with separateproject-specific contracts, implementation timelines, and funding sources. This is the first jointprocurement under two separate projects from different sectors within the Pacific Department andwithin ADB. The project design is also informed by the Government of New Zealand’s initiativesin building the PUB’s institutional capacity as well as in upgrading network capacity to avoidduplication, harmonize implementation timelines, ensure smooth grid integration, and guaranteetechnical and financial sustainability of the project and the PUB. The project design ensurescontinued grid stability and allows nighttime load shifting when the large desalination plantsbecome operational. Other innovative features include (i) a rainwater harvesting systemincorporated in the solar arrays; (ii) climate-resilient materials, foundations, and structures; (iii) atree planting program for protection of the water reserve; and (iv) the inclusion of an O&M servicescontract to ensure full capacity building for the PUB before operational acceptance and handover,given its lack of experience with BESSs.

D. Summary Cost Estimates and Financing Plan

18. The project is estimated to cost $14.70 million (Table 1). Detailed cost estimates byexpenditure category and by financier are included in the project administration manual (PAM). 25

Table 1: Summary Cost Estimates

Components Amounta ($ million)

A. Base Costb

Output 1. Solar photovoltaic and battery energy storage system installed 11.43 Output 2. Draft energy act development support 0.07 Output 3. Institutional capacity development support 0.83 Land acquisition and initial site preparation 0.10

Subtotal (A) 12.43 B. Contingenciesc 2.27

Total (A+B) 14.70 a Includes taxes and duties of $0.9 million and land acquisition and initial site preparation costs of $0.1 million to be

financed by the government. b In mid-2020 prices. c Physical contingencies computed at 17.76% for the turnkey contract. Price contingency is based on expected

inflation over the implementation period and includes provision for cofinancing administration fees and for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.

Source: Asian Development Bank estimates.

24 ADB. 2019. Report and Recommendation of the President to the Board of Directors: Proposed Grant and Administration of Grant to the Republic of Kiribati for the South Tarawa Water Supply Project. Manila.

25 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

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19. The government has requested (i) a grant not exceeding $8.0 million from ADB’s SpecialFunds resources (Asian Development Fund); (ii) grant cofinancing equivalent to $3.7 million fromthe Strategic Climate Fund, to be administered by ADB; and (iii) grant cofinancing equivalent to$2.0 million from the Government of New Zealand Ministry of Foreign Affairs and Trade, to beadministered by ADB, to help finance the project. The government will finance $1.0 millioncomprising land acquisition and initial site preparation costs, and taxes and duties by exemption.The summary financing plan is in Table 2. Expenditures are financed through cost sharing.

20. Climate mitigation is estimated to cost $10.13 million and climate adaptation is estimatedto cost $0.40 million. ADB will finance 55.4% of mitigation costs and 55.4% of adaptation costs.26

Table 2: Summary Financing Plan Amount ($ million)

Share of Total (%) Source

Asian Development Bank Special Funds Resources (ADF grant) 8.0 54.4 Strategic Climate Funda (grant) 3.7 25.2 Government of New Zealand, Ministry of Foreign Affairs and Tradeb (grant) 2.0 13.6 Government of Kiribati 1.0 6.8

Total 14.7 100.0 ADF = Asian Development Fund. a Under the Scaling Up Renewable Energy Program in Low-Income Countries. Administered by the Asian

Development Bank. b This amount includes provisions for currency fluctuations and payment of the Asian Development Bank's

administration fees and bank charges or other charges pursuant to the cofinancing arrangement. Source: Asian Development Bank estimates.

E. Implementation Arrangements

21. The Ministry of Finance and Economic Development (MFED) is the project’s executingagency.27 The PUB is the implementing agency. A project steering committee will be established.The regional transaction TA consultant will also support the PUB for pre-implementation works,including procurement (footnote 12). The project management unit to be set up in the PUB will besupported by the project implementation consultant for construction supervision and capacitybuilding. Since ADB is administering cofinancing resources for Asian Development Fund-financedoperations, universal procurement applies.28 Procurement of goods and works will be undertakenin accordance with the ADB Procurement Policy (2017, as amended from time to time). Theimplementation arrangements are summarized in Table 3 and detailed in the PAM (footnote 25).

22. Value for money. Strategic procurement planning was conducted to choose the optimalprocurement arrangement. The best value for money is achieved by (i) using e-procurement tolower the transaction cost and enhance process efficiency and transparency,29 (ii) packaging thesolar facilities of two projects (para. 17) and their O&M services together into a single package toensure standardization of equipment and capture economies of scale, and (iii) recruiting aninternational consulting firm following quality- and cost-based selection for effectiveimplementation support.

26 Details are in Climate Change Assessment (accessible from the list of linked documents in Appendix 2). 27 Supported by its Central Procurement Unit and the Kiribati Fiduciary Services Unit. 28 ADB. 2013. Blanket Waiver of Member Country Procurement Eligibility Restrictions in Cases of Cofinancing for

Operations Financed from Asian Development Fund Resources. Manila. 29 E-procurement will be conducted using the New Zealand-based TenderLink platform, the one-time whole-of-

government license for which will be procured under the project preparation TA (footnote 12). The use of drones and other information technology equipment for remote site inspections, monitoring, communications, and training will be explored, and will be used starting with the pre-bid meeting site visits and capacity-building events.

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Table 3: Implementation Arrangements Aspects Arrangements Implementation period March 2021–March 2024 Estimated completion date 31 March 2024 Estimated grant closing date 30 September 2024 Management

(i) Oversight body Project steering committee composed of secretaries of MELAD, MFED (chair), MISE, and chief executive officer of PUB

(ii) Executing agency MFED (iii) Key implementing

agenciesPUB will be the implementing agency with oversight from MISE. A PMU will be established at PUB, which will be led by a project manager and supervised by the PUB chief executive officer.

(iv) Implementation unit The PMU will be supported by a team of experts. Procurement OCB 1 contract $11.5 million Consulting services ICS, SSS 5 contracts (90 person-months) $0.3 million

QCBS 1 contract (firm) $0.6 million Retroactive financing and/or advance contracting

Advance contracting will apply for procurement and consulting contracts. Retroactive financing will not apply.

Disbursement The ADB and ADB-administered grant funds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed upon between the government and ADB.

ADB = Asian Development Bank; ICB = international competitive bidding; ICS = individual consultant selection; MELAD = Ministry of Environment, Lands and Agricultural Development; MFED = Ministry of Finance and Economic Development; MISE = Ministry of Infrastructure and Sustainable Energy; OCB = open competitive bidding; PMU = project management unit; PUB = Public Utilities Board; QCBS = quality- and cost-based selection; SSS = single source selection. Source: Asian Development Bank.

III. DUE DILIGENCE

A. Technical

23. The present yearly electricity demand in South Tarawa is about 25 GWh, and this isexpected to grow by 2% annually. The total power rating available to the PUB is about 5 MW,which is sufficient to meet the yearly demand when all diesel generation sets are operational.Because the instantaneous diesel power available is limited to 5 MW, occasional brownouts andblackouts occur when the instantaneous demand is higher than this value. Load shedding isinitiated by the PUB in these circumstances, which are common in South Tarawa. The introductionof solar photovoltaic and BESS technology into the Tarawa grid serves to offset expensive, diesel-based electricity generation without compromising the fast response that diesel generators canprovide. In the simulation, the total electricity generation is matched with the PUB’s forecast yearly2% increase in demand, and the diesel electricity replacement is determined at the least costpossible and to save diesel costs and minimize GHG emissions. Due diligence and simulationshowed the optimum project scope is a 4 MW alternating current (5 MWp direct current)photovoltaic plant with a 5 MW/13 MWh BESS.

24. The climate risk and vulnerability assessment classified the project risk as medium andfound vulnerability of the project to sea-level rise, storm surge, and swells, and increased risk offlooding, extreme rain events, and extreme wind gusts. Recommended adaptation measures areincorporated in the project design and specifications. To further ensure technical and financialsustainability, the project will also incorporate lessons from previous solar projects in its designand specifications, including on ensuring structural integrity and resilience and climate-proofing

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foundations, adaptation elements such as rainwater collection and storage, and early community engagement.30 It will include an O&M services contract and support for consulting services for project management and for construction supervision. It will (i) include an institutional capacity development program covering technical aspects (photovoltaic and BESS design, construction, testing, commissioning, and O&M), financial and economic analyses, financial management, environmental and social safeguards, gender, community engagement, procurement, tariff, and governance; and (ii) use various methods and modalities such as workshops, lectures, hands-on training, certified training, and academic degree scholarships, with focus on gender and inclusion.

B. Economic and Financial Viability

25. The project is economically viable with an economic internal rate of return of 15.3%,exceeding the benchmark 9.0% discount rate. The project is also financially viable with thefinancial internal rate of return of 11.0% higher than the weighted average cost of capital of 1.2%.Financial and economic viability are gauged by comparing the cost and benefit streams of with- and without-project scenarios. The project costs include the capital and O&M expenses. Theproject benefits will be the displaced fuel costs resulting from renewable energy generation andstorage. The project is also expected to generate positive environmental benefits from replacingdiesel plants with solar power plants, resulting in avoided GHG emissions. The sensitivity analysissuggests that the project economic and financial viability is robust against identified risks.31

26. A financial appraisal of the PUB was completed to determine its financial performance andsustainability. The PUB’s revenues, generated mostly from electricity and water supply tariffs, arenot sufficient to recover all the costs of operations that includes sewerage and sanitation services.From 2015–2019, electricity remains the largest source of revenues (more than 80% of totalsales) and fuel is the largest cost item, contributing to more than half of the PUB’s expenditure.There is no formal tariff policy and regulatory framework for setting electricity tariffs, and the PUB’sfinancial position is dependent on direct subsidies from the government in the form of equity fornew capital and liquidity support for fuel costs. Without the project, it is estimated that the PUB,given its adoption of the affordable water tariff structure under the water supply project, will needto increase its electricity tariffs by about 40% up to 2030 to recover its costs. Given the ratedsubstantial risk of sustainability for the PUB’s electricity services, training will be provided to PUBstaff. In addition, grant covenants have been agreed requiring annual petition for tariff revisionssufficient to cover operating costs, debt service, and capital replacement, along with periodicgender-sensitive review of the tariff policy and subsidy plan to progressively achieve cost recoverywhile minimizing the impact on low-income households.

C. Sustainability

27. Analyses reveal that, with the project and corresponding savings, the PUB will havesufficient financial capacity to cover the recurring costs for O&M of the project to ensure financialsustainability without the need for tariff increases within the first 5–6 years of operation. Targetedcapacity building and risk management action plans under the transaction TA and the projectensure sustained improvement in the PUB’s governance and institutional capacity to achieve theproject outcome and maintain the outputs. ADB’s ongoing assistance for sector reforms in Kiribati,complementing other donor initiatives—such as the electricity tariff review and restructuring,enhancements to the PUB’s financial management systems and human resources, interventions

30 This includes projects funded by the World Bank and the United Arab Emirates. Social safeguards issues can cause delays. Early and constant community consultation ensure acceptance and timely project processing.

31 Financial Analysis and Economic Analysis (accessible from the list of linked documents in Appendix 2).

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for asset replacement, insurance, and support for project management and O&M (including the use of a design–build–operate contract)—help ensure the satisfactory performance of the PUB and the technical and financial sustainability of the project. Agreed grant covenants on the PUB’s financial performance and sustainability are included in the grant and project agreements. The gender-sensitive energy legislation, with focus on mainstreaming renewable energy, energy efficiency, and private sector participation, will be designed to strengthen the organizational arrangements, processes, and structures of Kiribati’s energy sector to ensure financial, economic, social, environmental, and climate sustainability. The project has no long-term negative impacts on the environment but rather ensures the long-term sustainability of the Bonriki Water Reserve, which is the main source of fresh water in South Tarawa. The project’s design and scope, gender action plan, resettlement plan, and environmental management plan mitigate negative impacts on people and natural resources while enhancing inclusion, livelihoods, health, safety, environmental protection, and climate resilience.

D. Governance

28. Financial management capacity. The PUB’s assessed pre-mitigation financialmanagement risk is substantial, as it lacks sufficient financial management capabilities andexperience in managing externally funded projects. The board’s accounting policies, procedures,and financial reporting follow the Generally Accepted Accounting Principles and national statutoryreporting standards. The PUB prepares all basic financial statements on time and has beenaudited with no qualification in 2018–2019. The PUB’s internal audit unit is responsible forreviewing the key operational performance. The board has information systems procedures anda plan, including contingency for backup for its customer and accounting databases. The PUBhas very basic procedures on recording and disposing of fixed assets with a defined matrix ofresponsibilities and approvals. However, the PUB’s accounting for assets management does notinclude classification on useful life of assets and impairments. The accounting software used doesnot integrate a fixed assets database and all accounting updates are completed manually withhigh risk of incompleteness and error. Also, there is no overall asset management system toensure long-term value is achieved from assets. The PUB’s manual revenue recognition andaccounting reconciliation with billing may adversely impact the quality of accounts. Further, timelyadjustments in accounting policies and procedures on revenue recognition and accountsreceivable will be made consistent with ongoing deployment of prepaid metering for domesticcustomers. Detailed internal control and risk assessments and the financial management actionplan have been prepared and included in the PAM (footnote 25).

29. Procurement capacity. Kiribati has passed the new Public Procurement Act that isexpected to be declared effective within 2020. ADB has been directly supporting the Governmentof Kiribati in the development of its revised procurement legislation and associated capacitydevelopment activities. ADB completed a project procurement risk assessment and a strategicprocurement plan, noting that the PUB will require external support to mitigate the procurement-related risks to the project. The PUB does not have sufficient capacity or experience to undertakeprocurement of a project of this size and complexity, and the procurement risk is initially assessedmedium. Through support by the already engaged TA consultant (footnote 12), direct ADBassistance to consultant recruitment (via joint recruitment), and the engagement of additionalconsultants (individuals and firm) at the implementation stage, the procurement risk related to theproject is substantially mitigated.

30. Anticorruption measures. Integrity due diligence was conducted on the PUB and nointegrity risks were identified. ADB’s Anticorruption Policy (1998, as amended to date) was

10

explained to and discussed with the government and the PUB. The specific policy requirements and supplementary measures are described in the PAM (footnote 25).

E. Poverty, Social, and Gender

31. The project will add larger-scale ground-mounted solar photovoltaic and batteryinfrastructure that will increase renewable energy contribution and displace more diesel fuel and,as a result, help to reduce generation costs in South Tarawa. The tariff review being conductedunder ADB TA (footnote 12) has a two-pronged objective of moving towards full cost recovery ofPUB operations with provisions for asset replacement and O&M, while ensuring continuedequitable rate distribution that will benefit low-income consumers, including vulnerable groupssuch as households headed by women. A more sustainable and equitable energy supply fromthe project will not only benefit the entire population but will also contribute to narrowing the gapbetween the economically poor and the rest of the population.32 Women will be among the keybeneficiaries, being the main energy consumers at the household level, through cooking,cleaning, household management activities, lighting to contribute to personal safety at night, aswell as microenterprises, home-based businesses, and informal livelihood activities. Women inthe project area will benefit from potential rainwater harvesting and other resource accessprovided by the project. They can also maximize power supply for income-generating andproductive activities and benefit from business skills gained, professional opportunities provided,and capacity-building activities under the project.

32. The project is categorized as effective gender mainstreaming. A gender action plan hasbeen prepared. 33 Design features and targets include (i) arranging public awareness andstakeholder consultations to achieve 50% participation of women; (ii) if local workers are hired,having a target of at least 30% female local workers overall for construction, administration,maintenance, security, and supervision; (iii) developing and implementing formal PUB humanresource gender policies, including equal pay for equal work between men and women by theend of 2022; (iv) securing government funding and awarding in 2022 three academic scholarshipsfor Kiribati women and then hiring them on graduation to technical positions in the PUB;(v) developing a household electricity demand management public awareness program;(vi) training women and men on business skills and carrying out the program, with presenters,50% of whom are female; and (vii) carrying out a gender-sensitive review of tariffs and lawsrelevant to enabling renewable energy development and private sector participation andincorporating them in the draft energy act.

F. Safeguards

33. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguardcategories are as follows.34

34. Environment (category B). The project has been screened and categorized B forenvironment because the impacts will largely be site specific, with a small footprint generatedduring the construction stage and for which mitigation measures can be readily designed andimplemented. The environmental assessment has been prepared in accordance with ADB’sSafeguard Policy Statement and will be updated, following detailed design, to also comply withthe laws and regulations of Kiribati. Converting grassland and tree-covered green space to solar

32 The savings from avoided fuel costs allow marginal or no increase in tariffs, benefiting the poor as incomes increase. 33 Gender Action Plan (accessible from the list of linked documents in Appendix 2). 34 ADB. 2009. Safeguard Policy Statement: Safeguard Categories. Manila.

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photovoltaic arrays will have a net benefit on the infiltration rates of rainwater into the Bonriki freshwater lens. Being the main source of fresh water, the reserve is a critical natural resource for South Tarawa and the project will help to reduce the decline in water availability and water quality as well as avoid the risk of further encroachment of incompatible land uses and contamination. Potential impacts from earthworks, site preparation, haulage of equipment and materials, and presence of foreign workers, include vegetation removal, dust and noise generation, and health and safety risks.

35. Coronavirus disease. Relevant clauses in the tender documents and contracts for worksunder the project will be included in order to address the impacts of the coronavirus disease(COVID-19) pandemic. The contractors are required to create a COVID-19 risk management planto be integrated into the health and safety plans and emergency response plans under theenvironmental management plan, and implement a training program for prevention ofcommunicable diseases, including COVID-19, to employees in coordination with the local healthauthorities, the project implementation consultant, and the project management unit. In order tocontrol and minimize the impacts during operation, the PUB will implement measures identified inthe environmental management plan covering proper disposal of used equipment. Adequatemitigation measures have been included in the environmental management plan.

36. Involuntary resettlement (category B). 35 The project is classified category B forinvoluntary resettlement according to ADB’s Safeguard Policy Statement. The project will beimplemented in an area of land under a long-term lease by the government from customarylandowners. The project will not result in compulsory acquisition of land; there will be no physicaldisplacement impacts or impacts on livelihoods. There will be impacts on one communal waterwell and more than 600 trees. Consultations were conducted with affected people and nearbycommunities. A resettlement plan has been prepared in compliance with ADB’s Safeguard PolicyStatement and national laws of Kiribati. The resettlement plan outlines the project impacts andhas been disclosed to affected people and made available on the ADB website. Prior to contractaward, the resettlement plan will be updated and implemented (compensation and activitiescompleted). The funds to implement the resettlement plan will come from the governmentcounterpart funds. The MFED has committed to ensure that the funds are available for timelycompensation payments to affected people. If there are land ownership disputes in the projectarea at the time of compensation, undisbursed entitlements for affected assets will be depositedinto an escrow-like account by the MFED until land ownership claims are resolved. Acompensation completion report will be submitted by the PUB to ADB prior to award of the turnkeycontract.

37. Indigenous peoples (category C). The project is classified category C for indigenouspeoples according to ADB’s Safeguard Policy Statement. No distinct and vulnerable indigenouspeoples will be affected, and all project activities will be implemented in a culturally appropriateand participatory manner.

G. Summary of Risk Assessment and Risk Management Plan

38. No significant issues are expected to arise in implementing the project. Significant risksand mitigating measures are summarized in Table 4 and described in detail in the risk assessmentand risk management plan. F

36

35 Resettlement Plan (accessible from the list of linked documents in Appendix 2). 36 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

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Table 4: Summary of Risks and Mitigating Measures Risk Mitigation Measures

Project implementation capacity. Insufficient institutional, procurement, or technical capacity and experience in implementing large-scale investment projects

ADB, the project management unit, the technical assistance consultant, and the project implementation consultant will assist and train the Public Utilities Board and the Ministry of Finance and Economic Development, including its Central Procurement Unit and KFSU, in procurement, project implementation, execution, monitoring, and administration. Institutional capacity building and international consultant support will be provided. Market sounding was conducted to gauge and widen market interest before tendering through e-procurement and using ADB’s standard bidding documents, which includes anticorruption provisions. Operation and maintenance services will be included in the turnkey contract.

Governance. Weak financial management and information systems capacity, lack of internal audit function within the Public Utilities Board, and potential misuse of funds

ADB will strengthen oversight during the project, which will include holding monthly teleconferences and two review missions per year, and providing training in financial management, auditing, and reporting, and ADB disbursements. The project management unit will have a qualified and experienced project accountant responsible for addressing issues raised in the project audit reports prepared by the Kiribati Audit Office, in a timely manner. The Audit Act 2017 strengthens the powers of the Kiribati Audit Office including undertaking legal recovery actions. A project steering committee for oversight in procurement and project implementation as well as an audit committee in the PUB Board of Directors will be established.

ADB = Asian Development Bank, KFSU = Kiribati Fiduciary Services Unit, PUB = Public Utilities Board. Sources: Government of Kiribati and Asian Development Bank.

IV. ASSURANCES

39. The government, the MFED, and the PUB have assured ADB that implementation of theproject shall conform to all applicable ADB requirements, including those concerninganticorruption measures, safeguards, gender, procurement, consulting services, financialmanagement, and disbursement as described in detail in the PAM and grant documents.

40. The government, the MFED, and the PUB have agreed with ADB on certain covenants forthe project, which are set forth in the grant agreements and project agreement.

V. THE PRESIDENT’S DECISION

41. The President, acting under the authority delegated by the Board, through the approvalof the Pacific Renewable Energy Investment Facility, has approved (i) the grant notexceeding $8,000,000 from ADB’s Special Funds resources (Asian Development Fund), (ii) the administration of the grant not exceeding $3,700,000 from the Strategic Climate Fund, and (iii) the administration of the grant not exceeding $2,000,000 from the Government of New Zealand through the Ministry of Foreign Affairs and Trade to the Republic of Kiribati for the South Tarawa Renewable Energy Project, on terms and conditions that are substantially in accordance with those set forth in the grant and project agreements.

Appendix 1 13

DESIGN AND MONITORING FRAMEWORK

Impacts the Project is Aligned with

Renewable energy generation increased (Kiribati Intended Nationally Determined Contribution)a and greenhouse gas emissions reduced (Kiribati Integrated Energy Roadmap: 2016–2025)b in Kiribati.

Results Chain Performance Indicators with Targets

and Baselinesa

Data Sources and Reporting

Mechanisms Risks Outcome By 2024:

a. Increased renewable electricitysupply on South Tarawa to 44.00% ofthe generation mix (2017 baseline:8.67%)

b. Increase in generation from solarphotovoltaic by an average of 6.43GWh per year (2017 baseline: 2.37GWh)

c. Diesel fuel savings of 1.546 millionliters per year on average (2017baseline: 0)

d. Carbon dioxide equivalentgreenhouse gas emissions avoidanceof 4,633 tons per year on average(2017 baseline: 0)

a.–d. MISE, PUB, and Kiribati Oil Company annual reports, PUB hourly generation data

Extended delays because of the COVID-19 pandemic

Generation and utilization of clean energy in South Tarawa increased

Outputs 1. Solarphotovoltaic andbattery energystorage systeminstalled

By 2024, 1a. At least an additional 5.000 MWp

photovoltaic capacity commissioned and operational (2019 baseline: 1.565 MWp of solar photovoltaic)

1b. At least 5 MW/13 MWh of BESS commissioned and operational (2019 baseline: 0)

1c. Contractor engaged for operation and maintenance services and related training for 1 year after commissioning (2019 baseline: Not applicable)

1d. At least 50% of workers engaged by the contractor and PUB in photovoltaic and BESS construction, installation, operation, and maintenance are women (2019 baseline: 0)

1e. At least two mandatory awareness workshops and trainings for all project staff and contract workers on gender-sensitive renewable energy project design, installation, operation, and maintenance conducted upon mobilization and after commissioning, with at least 30% women participants (2019 baseline: 0)

1f. At least two public awareness programs conducted on efficient electricity demand management

1a.–f. MISE and PUB annual reports, quarterly project progress reports

Costs of equipment and materials increase significantly beyond the estimate

14 Appendix 1

Results Chain Performance Indicators with Targets

and Baselinesa

Data Sources and Reporting

Mechanisms Risks targeting women, youth, and church organizations (Target: 50% women; 2019 baseline: 0)

2. Draft energy act to enable increased deployment of renewable energy developed

By 2024, 2a. Draft energy act, which includes

restructured tariff policy, based on gender-sensitive tariff review and gender review of Kiribati Energy Policy, PUB Statement of Intent (Strategic Plan), and Recruitment Policy, submitted by MISE to Parliament (2019 baseline: Not applicable)

2b. Updates and enhancements to grid codes developed (2019 baseline: Not applicable)

2c. Technical standards on renewable-energy-related electrical equipment, which follow New Zealand and Australian standards, developed (2019 baseline: Not applicable)

2d. Model transaction documents for independent power producers developed (2019 baseline: Not applicable)

2a.–d. Ministry of Finance and Economic Development, MISE, PUB annual reports; project progress reports

Lack of agreement in higher levels of government

3. Institutional capacity for inclusive renewable energy project development and implementation enhanced

By 2024, 3a. At least 10 technicians (qualified

electricians or licensed electrical, mechanical, civil engineers), including at least two women, who received certified training on solar photovoltaic and BESS design, installation, operation, and maintenance are employed in PUB (2019 baseline: 0)

3b. At least five vocational students, including at least one woman, receive on-the-job training at PUB and MISE for technical or information-technology-related positions (2019 baseline: 0)

3c. Project management unit with at least 30% women staff established and operational (2019 baseline: 0)

3d. At least 40 stakeholders, including at least 30% women, participate in two national workshops and report increased awareness on photovoltaic and BESS technology (2019 baseline: 0)

3e. Gender-sensitive communication and advocacy strategy for PUB developed and adopted (2019 baseline: Not applicable)

3a.–e. MISE and PUB annual reports, quarterly project progress reports

Appendix 1 15

Key Activities with Milestones

1. Solar photovoltaic and battery energy storage system installed 1.1 Procure EPC contractor (Q4 2020–Q1 2021) 1.2 Award and mobilize EPC contract (Q2 2021) 1.3 Contractor procures solar photovoltaic, BESS, and auxiliary systems (Q3–Q4 2021) 1.4 Contractor installs and commissions solar photovoltaic, BESS, and auxiliary systems (Q1 2022–Q3

2022) 1.5 Contractor operates, maintains, and hands over solar photovoltaic, BESS, and monitoring systems

(Q4 2022–Q4 2023)

2. Draft energy act to enable increased deployment of renewable energy developed 2.1 Finalize and circulate draft energy act, revisions to grid codes, and technical standards (Q2–Q4 2021) 2.2 Conduct stakeholder consultations (Q1–Q3 2022) 2.3 Revise and recirculate documents and iterate (Q3–Q4 2022) 2.4 Submit for deliberations, approval, and submission to Parliament (Q1–Q4 2023)

3. Institutional capacity for inclusive renewable energy project development and implementation

enhanced 3.1 Establish project steering committee (Q1 2021) 3.2 Recruit project management unit and PICs (Q1 2021) 3.3 PIC to develop capacity-building program (Q2 2021) 3.4 PIC to organize and conduct training for public sector institutions and other stakeholders (Q2 2021–Q4

2023) 3.5 EPC contractor to organize and conduct hands-on training in solar photovoltaic and BESS design,

construction, operation, and maintenance (Q3 2021–Q4 2023) Project Management Activities Establish project management unit (Q1 2021) Engage PIC (Q1 2021) Monitor and guide process of the draft energy act (enabling framework) preparation, consultations, approvals, and submission to Parliament (Q1 2021–Q4 2023) Evaluate capacity-building events (Q3 2021–Q4 2023) Inputs

Asian Development Bank: $8.0 million (Asian Development Fund grant) Government contribution: $1.0 million Strategic Climate Fund: $3.7 million (grant) Government of New Zealand: $2.0 million (grant) Total $14.7 million

Assumptions for Partner Financing: Not applicable

BESS = battery energy storage system; COVID-19 = coronavirus disease; EPC = engineering, procurement, and construction; GWh = gigawatt-hour; MISE = Ministry of Infrastructure and Sustainable Energy; MW = megawatt; MWh = megawatt-hour; MWp = megawatt-peak; PIC = project implementation consultant; PUB = Public Utilities Board; Q = quarter. a Government of Kiribati. 2016. Kiribati Intended Nationally Determined Contribution. South Tarawa. b International Renewable Energy Agency. 2017. Kiribati Integrated Energy Roadmap: 2017–2025. Bonn. Contribution to the Asian Development Bank Results Framework: To be determined. Source: Asian Development Bank.

16 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=49450-021-2

1. Grant Agreement: Special Operations 2. Grant Agreement: Externally Financed – Government of New Zealand 3. Grant Agreement: Externally Financed – Strategic Climate Fund 4. Project Agreement 5. Sector Assessment (Summary): Energy 6. Project Administration Manual 7. Financial Analysis 8. Economic Analysis 9. Country Economic Indicators 10. Summary Poverty Reduction and Social Strategy 11. Risk Assessment and Risk Management Plan 12. Climate Change Assessment 13. Gender Action Plan 14. Initial Environmental Examination 15. Draft Resettlement Plan 16. Financial Management Assessment 17. Stakeholder Communication Strategy 18. Procurement Capacity Assessment