The World Bankdocuments.worldbank.org/curated/en/...Wolloh Team Member Program Assistant GEE08 Madina Tall Team Member Energy Consultant GEE07 Rahmoune Essalhi Team Member Procurement

Document of

The World Bank

FOR OFFICIAL USE ONLY Report No: PAD3359

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT PAPER

ON A

PROPOSED ADDITIONAL CREDIT

IN THE AMOUNT OF EUR 18.0 MILLION

(US$20.0 MILLION EQUIVALENT)

AND A

PROPOSED JAPAN-POLICY AND HUMAN RESOURCE DEVELOPMENT FUND (PHRD) GRANT

IN THE AMOUNT OF US$2.7 MILLION

TO THE

REPUBLIC OF MALI

FOR THE

MALI RURAL ELECTRIFICATION HYBRID SYSTEM PROJECT

June 28, 2019

Energy and Extractives Global Practice

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.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 31, 2019)

Currency Unit = West African CFA Franc (XOF)

XOF 588 = US$1

EURO 0.89718285 = US$1

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AF Additional Financing

AMADER Mali’s Rural Electrification Agency (Agence Malienne pour le Développement de l’Energie Domestique et de l’Electrification Rurale)

BP Bank Policy

CFL Compact Fluorescent Lamp

CPF Country Partnership Strategy

DA Designated Account

DNACPN National Direction of Sanitation and Pollution Control (Direction Nationale de l'Assainissement du Contrôle des Pollutions et des Nuisances)

EIRR Economic Internal Rate of Return

ENPV Economic Net Present Value

ESMF Environmental and Social Management Framework

ESMP Environmental and Social Management Plan

FM Financial Management

FY Fiscal Year

GBV Gender-based Violence

GHG Greenhouse Gas

GPN General Procurement Notice

GPOBA Global Partnership for Output-Based Aid

GRM Grievance Redress Mechanism

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IEC International Electrotechnical Commission

IFR Interim Financial Report

IMF International Monetary Fund

IP Implementation Progress

ISR Implementation Status and Results Report

IVA Independent Verification Agent

kW Kilowatt

kWh Kilowatt-hour

kWp Kilowatt-peak

LED Light-emitting Diode

M&E Monitoring and Evaluation

MEF Ministry of Economy and Finance

MW Megawatt

MWh Megawatt-hour

MWp Megawatt-peak

NGO Non-Governmental Organization

NPF New Procurement Framework

NPV Net Present Value

OP Operational Policy

PDO Project Development Objective

PIU Project Implementation Unit

PHRD Japan Policy and Human Resources Development

PPSD Project Procurement Strategy for Development

PV Photovoltaic

RAP Resettlement Action Plan

RPF Resettlement Policy Framework

SCF Strategic Climate Fund

SHS Solar Home System

SPN Specific Procurement Notices

SREP Scaling Up Renewable Energy Program in Low Income Countries

TCO2eq Ton of Carbon Dioxide equivalent

UNDB United Nations Development Business

XOF West African CFA Franc

WB World Bank

Regional Vice President: Hafez M. H. Ghanem

Country Director: Soukeyna Kane

Senior Global Practice Director: Riccardo Puliti

Practice Manager: Charles Joseph Cormier

Task Team Leaders: Franklin Gbedey, Nefer Monyl Toga Makang

TABLE OF CONTENTS

I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................ 7

II. DESCRIPTION OF ADDITIONAL FINANCING .................................................................... 13

III. KEY RISKS ..................................................................................................................... 18

IV. APPRAISAL SUMMARY .................................................................................................. 22

V. WORLD BANK GRIEVANCE REDRESS .............................................................................. 27

VI SUMMARY TABLE OF CHANGES ..................................................................................... 28

VII DETAILED CHANGE(S) .................................................................................................... 28

VIII. RESULTS FRAMEWORK AND MONITORING ................................................................... 33

ANNEX 1: ECONOMIC ANALYSIS ........................................................................................... 43

ANNEX 2: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN ................................... 47

ANNEX 3: PROJECT AREA MAP ............................................................................................. 52

The World Bank Additional Financing to the Mali Rural Electrification Hybrid System Project (P169912)

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BASIC INFORMATION – PARENT (Mali Rural Electrification Hybrid System Project - P131084)

Country Product Line Team Leader(s)

Mali IBRD/IDA Franklin Koffi S.W. Gbedey

Project ID Financing Instrument Resp CC Req CC Practice Area (Lead)

P131084 Investment Project Financing

GEE07 (9258) AFCW3 (278) Energy & Extractives

Implementing Agency: AMADER ADD_FIN_TBL1

Is this a regionally tagged project?

Bank/IFC Collaboration

No

Approval Date Closing Date Original Environmental Assessment Category

Current EA Category

11-Dec-2013 30-Sep-2020 Partial Assessment (B) Partial Assessment (B)

Financing & Implementation Modalities Parent

[ ] Multiphase Programmatic Approach [MPA] [ ] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster

[ ] Alternate Procurement Arrangements (APA)

Development Objective(s)

The objective of the Project is to expand access to modern energy services in rural areas of the Recipient and to


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increase renewable energy generation in target areas.

Ratings (from Parent ISR) RATING_DRAFT_NO

Implementation Latest ISR

04-Aug-2016 09-Mar-2017 31-Oct-2017 05-Jun-2018 20-Dec-2018 30-Apr-2019

Progress towards

achievement of

PDO MS

MU

MU

MS

MS

MS

Overall

Implementation

Progress (IP) MS

MU

MU

MS

MS

MS

Overall

Safeguards

Rating MU

MU

MU

MU

MS

MS

Overall Risk S

H

H

H

H

H

BASIC INFORMATION – ADDITIONAL FINANCING (Additional Financing to the Mali Rural Electrification Hybrid System Project - P169912) ADDFIN_TABLE

Project ID Project Name Additional Financing Type Urgent Need or Capacity Constraints

P169912 Additional Financing to the Mali Rural Electrification Hybrid System Project

Cost Overrun, Scale Up No

Financing instrument Product line Approval Date

Investment Project Financing

IBRD/IDA 23-Jul-2019

Projected Date of Full Disbursement

Bank/IFC Collaboration

31-Jan-2022 No

Is this a regionally tagged project?

No


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Financing & Implementation Modalities Child

[ ] Series of Projects (SOP) [✓] Fragile State(s)

[ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster

[ ] Alternate Procurement Arrangements (APA)

[ ] Contingent Emergency Response Component (CERC)

Disbursement Summary (from Parent ISR)

Source of Funds Net

Commitments Total Disbursed Remaining Balance Disbursed

IBRD

%

IDA 25.00 13.63 9.10

60 %

Grants 19.46 12.40 7.06

64 %

PROJECT FINANCING DATA – ADDITIONAL FINANCING (Additional Financing to the Mali Rural Electrification Hybrid System Project - P169912)

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFi n1

SUMMARY (Total Financing)

Current Financing Proposed Additional

Financing Total Proposed

Financing

Total Project Cost 44.90 22.70 67.60

Total Financing 44.90 22.70 67.60

of which IBRD/IDA 25.00 20.00 45.00

Financing Gap 0.00 0.00 0.00

DETAILSNewFinEnh1- Additional Financing

World Bank Group Financing


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International Development Association (IDA) 20.00

IDA Credit 20.00

Non-World Bank Group Financing

Trust Funds 2.70

Japan Policy and Human Resources Development Fund 2.70

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

National PBA 20.00 0.00 0.00 20.00

Total 20.00 0.00 0.00 20.00

COMPLIANCE

Policy

Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [ ✔ ] No

Does the project require any other Policy waiver(s)?

[ ] Yes [ ✔ ] No

INSTITUTIONAL DATA

Practice Area (Lead)

Energy & Extractives

Contributing Practice Areas

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks


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Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF Yes b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment Yes c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes

PROJECT TEAM

Bank Staff

Name Role Specialization Unit

Franklin Koffi S.W. Gbedey Team Leader (ADM Responsible)

Senior Energy Specialist GEE07

Monyl Nefer Toga Makang Team Leader Senior Energy Specialist GEEES

Mahamadou Bambo Sissoko

Procurement Specialist (ADM Responsible)

Senior Procurement Specialist GGOPF

Boubacar Diallo Procurement Specialist Senior Procurement Specialist GGOPF

Tahirou Kalam Financial Management Specialist (ADM Responsible)

Financial Management Specialist

GGOAW

Emeran Serge M. Menang Evouna

Environmental Specialist (ADM Responsible)

Senior Environmental Specialist

GENA2

Mahamadou Ahmadou Maiga

Social Specialist (ADM Responsible)

Senior Social Development Specialist

GSU01

Aoua Toure Sow Team Member Program Assistant AFCW3

Javier Freire Coloma Team Member Carbon Finance Specialist GCCFM

Leonard Ewang Ngumbah Wolloh

Team Member Program Assistant GEE08

Madina Tall Team Member Energy Consultant GEE07

Rahmoune Essalhi Team Member Procurement Analyst GGOPA

Tolidji Blaise Donou Environmental Specialist Environmental Specialist GENA2


Page 6 of 52

Extended Team

Name Title Organization Location


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I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING

A. Background

1. This Project Paper seeks the approval of the Executive Directors to provide an additional credit for the Mali Rural Electrification Small Hybrid System Project (P131084) in the form of an additional International Development Association (IDA) credit in the amount of Euro 18.0 million (US$20.0 million equivalent) to the Republic of Mali. The original project was approved by the Board on December 11, 2013 and became effective on June 18, 2014. The additional credit is co-financed by a grant in the amount of US$2.7 million from the Japan Policy and Human Resources Development (PHRD) Trust Fund (Grant Number TF0B0437) (jointly, the “additional financing” (AF)).

2. The Project Development Objective (PDO) of the original project is to expand access to modern energy services in rural areas of the Recipient and to increase renewable energy generation in target areas. The original project finances renewable energy capacity for existing diesel-fueled mini-grids in existing rural mini-grids, the creation of a market for energy-efficient products, and the provision of extensive capacity building to strengthen the rural energy services sub-sector. By introducing lower-cost renewable energy generation in areas served by diesel mini-grids and promoting the use of energy-efficient appliances, the original project contributes to reducing operating costs, improving the affordability of electrification services in rural areas and ultimately, expanding electricity access to households, businesses and community service facilities.

3. The original project has three components:

• Component 1: Service Improvement and Extension of Existing Mini-Grids (Total cost US$39.4 million equivalent of which original IDA credit US$19.5 million equivalent, Scaling-Up Renewable Energy in Low Income Countries Program of the Strategic Climate Fund (SCF-SREP or SREP) grant US$14.9 million and Global Partnership for Output Based Aid (GPOBA) grant US$5.0 million). This component supports activities related to (a) the procurement and installation of hybrid solar photovoltaic (PV)/diesel plants for mini-grids in rural areas; and (b) the extension and densification of existing mini-grids, up to the household connections.

• Component 2: Development of off-grid Lighting Markets and Energy Efficiency (US$2.7 million equivalent from original IDA credit). This component aims to: (a) expand off-grid lighting and solar lanterns in targeted rural areas by catalyzing the markets; and (b) improve energy efficiency and promote a rational and efficient use of electricity in the targeted mini-grids.

• Component 3: Project Management Support and Capacity Building (US$2.8 million equivalent from original IDA credit). This component supports project management, capacity building, technical studies, and technical assistance for Mali’s rural electrification agency (Agence Malienne pour le Développement de l’Energie Domestique et de l’Electrification Rurale, AMADER) and private operators in rural areas.

4. The original project consists of an IDA credit in the amount of SDR 16.3 million (US$25.0 million equivalent), a grant from SREP in the amount of US$14.9 million, and a grant from the GPOBA in the amount


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of US$5.0 million. As of June 26, 2019, the disbursement rates of the IDA credit and the SREP grant were 60 and 53 percent, respectively. The GPOBA Trust Fund closed on June 30, 2018 and was fully disbursed.

5. The proposed AF seeks to (a) cover a financing gap due to cost overruns by supporting the completion of the activities of the original project, which cannot be completed without additional funds; and (b) enhance the development effectiveness of the project by scaling-up activities that were successfully implemented using the grant from GPOBA. It is proposed to extend the project closing date from September 30, 2020 to September 30, 2021 to provide enough time to fully implement the activities financed through the proposed AF. The disbursement estimates and schedule, and the results framework are revised as a result of the scale-up activities and the proposed closing date extension.

B. Performance of the Original Project

6. Overall performance. The performance of the original project has been rated Moderately Satisfactory for both the PDO and the Implementation Progress (IP), since June 2018. Between March 2017 and April 2018, the PDO and the IP were rated moderately unsatisfactory due to the inadequate performance of the Project Implementation Unit (PIU) related to the environmental and social safeguard requirements. Both ratings were upgraded to Moderately Satisfactory in June 2018 to reflect the progress on the implementation of Resettlement Action Plans (RAPs) for the project’s activities. The PDO is rated Moderately Satisfactory as approximately 170,000 people have been provided access to electricity services either through household connections to existing mini-grids, or through solar home systems. AMADER is the project’s PIU and sole implementing entity. Unaudited interim financial reports (IFR) were regularly submitted, and such reports were found acceptable to the World Bank. To date, the audit reports have been reported as unqualified, and none are overdue. The original project is fully compliant with the key legal covenants; AMADER has appointed a procurement specialist for the project, purchased and installed a new accounting software factoring in its ability to generate financial statements, and hired an external financial auditor.

(a) Component 1: Service Improvement and Extension of Existing Mini-Grids (total cost US$39.4 million equivalent of which original IDA credit US$19.5 million equivalent, SCF-SREP grant US$14.9 million and GPOBA grant US$5.0 million)

7. Sub-component 1.1: Hybridization of existing mini-grids (US$17.0 million equivalent IDA, US$14.9 million SREP). AMADER has signed contracts1 for the hybridization of 45 out of 50 existing mini-grids for a total amount of XOF 18.7 billion (US$32.7 million equivalent). However, construction works could not commence before the preparation of a RAP and the implementation of appropriate mitigation measures pursuant to the RAP, including the identification and compensation of people affected by the project. Following the completion of the implementation of the RAP in January 2019, the Ministry of Energy and Water officially launched the commencement of the construction works on February 9, 2019. The construction of the hybrid mini-grids will be implemented for a duration of eight to 12 months. 8. Sub-component 1.2: Mini-grid extension and densification (US$2.5 million equivalent IDA, US$5.0 million GPOBA). This sub-component is supported by IDA funds for network extension and by a grant from GPOBA to support household connections in targeted rural areas. Household connection activities have been

1 The contracts for the 45 mini-grids were signed between July 17, 2017 and April 13, 2018.


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fully implemented. The procurement of the network extension works is under preparation. The performance of the component is rated Satisfactory in the most recent Implementation Status and Results Report (ISR).2 The GPOBA trust fund closed on June 30, 2018 and supported the achievement of the results presented in Table 1.

Table 1: Results Achieved under the GPOBA-funded Activities

Results indicator Target Actual (June 30, 2018)

Achievement ratio (%)

Number of solar home systems installed 2,440 4,437 182

Additional connections to mini-grids 9,770 9,072 93

Number of compact fluorescent lamps (CFLs) distributed

36,600 40,527 111

(b) Component 2: Development of off-grid Lighting Markets and Energy Efficiency (original IDA credit US$2.7 million equivalent)

9. Sub-component 2.1: Off-grid lighting and solar lanterns (US$1.5 million equivalent IDA). This sub-component supports (a) results-based financing to private distributors for the sale of up to 100,000 Lighting Africa-certified portable lanterns, and related pico-PV equipment and plug-and-play solar home systems (SHS); and (b) the acquisition and deployment of approximately 10,000 Lighting-Africa-certified solar portable lanterns and related pico-PV equipment in public schools, and other community facilities in line with the World Bank’s Human Capital Development approach. Approximately 17,816 appliances have been distributed as of April 30, 2019.

10. Regarding implementation of the results-based financing scheme, only 9,869 (out of a target of 100,000) solar lanterns were sold. The underperformance of this mechanism can be explained by several factors including: (a) the delays observed in the setup of the database of solar lanterns sales and the provision of cards to distributors to monitor the distribution of lamps by the Independent Verification Agent (IVA); (b) the non-systematic recording of final beneficiaries in the database by the distributors, which prevented the validation of the sales by the IVA and therefore the allocation of the subsidy to the distributors; and (c) the level of subsidy deemed insufficient by the distributors to conduct impactful marketing activities. Starting in 2018, specific measures were taken to improve the performance of the activities supported through the result-based financing mechanism including, the introduction of an open enrollment system to allow new distributors to register on a rolling basis, and a penalty system to enforce contractual obligations. These measures will be supplemented by an increase in the subsidies provided to the solar lantern distribution companies, from US$1.0 million to US$2.0 million equivalent, through the proposed AF. 11. All the 10,000 Lighting Africa-certified solar portable lanterns and related pico-PV equipment to be distributed in selected public schools and other social facilities in project target areas had been acquired and 7,947 had been distributed by April 30, 2019. All the solar lanterns are expected to be disseminated by the closing date of the project (currently, September 30, 2020). 12. Sub-component 2.2: Energy efficiency promotion (US$1.2 million IDA equivalent). This sub-component supports the energy efficiency promotion activities designed to reduce demand on the existing

2 ISR No 10 of April 30, 2019


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mini-grids. Activities comprise (a) communication campaigns in support of energy efficiency, including public awareness of energy-efficient equipment and appliances; and (b) acquisition of energy-efficient equipment for women’s groups and community associations involved in income-generating activities. Communication and awareness campaigns were delivered in 50 localities (out of a target of 50), thus a 100 percent achievement rate. The project procured 10 energy-efficient appliances (fridges, deep freezers, solar pumps, grinding mills and huskers) for the conservation, processing and sale of agricultural products in Simidji, N’Toubougou (region of Koulikoro). Overall, 50 energy-efficient appliances are expected to be procured by the closing date of the project (currently, September 30, 2020).

13. Overall, the performance of the component is rated Moderately Satisfactory3.

(c) Component 3: Project Management Support and Capacity Building (original IDA credit US$2.8 million equivalent)

14. This component finances operational cost, project management activities, including the procurement of equipment, software and vehicles, the recruitment of consultants (for example, gender focal point, procurement specialist and engineers), the financing of feasibility and socio-environmental studies, the establishment of a technical control center to monitor the operational performance of the mini-grids, and training and capacity building for key stakeholders (including AMADER’s staff). The project has procured the services of an Owner’s Engineer for the supervision of the construction of the45 mini-grids for which the contracts have been awarded, provided trainings for 476 rural electrification actors and stakeholders (compared to an overall target of 420 people), financed the preparation of five rural electrification studies (out of a target of four), including a gender needs assessment. The performance of the component is rated Moderately Satisfactory.4

(d) Financial Management and Procurement

15. Procurement. AMADER is responsible for the procurement of works, goods, non-consulting services and consulting services, and the agency has been working to ensure compliance with the World Bank’s requirements. Overall AMADER’s procurement procedures and its contract management practices are reliable, transparent, efficient but require corrective actions with regard to adequate record keeping and document management. The latest procurement performance assessment was conducted in April 2019 and rated the performance Moderately Satisfactory, and the risk, Moderate. 16. Financial Management (FM). The current FM arrangements are working effectively. It is proposed to maintain these arrangements because AMADER is familiar with the World Bank’s FM requirements and is currently managing the original project. The current FM staffing is adequate. The FM performance was rated Satisfactory following the supervision mission completed in February 2019.

(e) Monitoring and Evaluation

17. The responsibility for monitoring and evaluating the activities of the project lies with AMADER. These functions are performed in accordance with the indicators presented in the results framework. AMADER has

3 ISR No 10 of April 30, 2019. 4 ISR No 10 of April 30, 2019.


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a dedicated monitoring and evaluation (M&E) specialist with relevant experience. AMADER has been submitting quarterly and annual reports to the World Bank on the progress implementation status and the results achieved. The reporting is supported by adequate documentation and evidence is being generated to make necessary adjustment to the implementation of the project’s activities to facilitate the achievement of the PDO. The M&E activities of the original project are deemed satisfactory.

(f) Environmental and Social Safeguards

18. The project is rated category B and its performance is deemed Moderately Satisfactory. The safeguard policies triggered by the project are OP/BP 4.01 (Environmental Assessment), OP/BP 4.11 (Physical Cultural Resources), and OP/BP 4.12 (Involuntary Resettlement). An Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF) were developed during the preparation of the original project as the specific project sites had not yet been identified, and were publicly disclosed in-country and on the World Bank’s website on October 17, 2013. The ESMF identified potential negative impacts from the installation and operation of the mini-hybrid systems, the SHS and the associated grid extension (that is, minor resettlement for the mini-hybrid systems, impacts on the cultivated land during the construction of the distribution lines, and impacts on socio-economic activities in case of land expropriation). 19. The preparation and implementation of the RAP pursuant to the RPF experienced significant delays due to the low level of commitment demonstrated by the PIU initially and, subsequently, the lengthy administrative processes to establish appropriate financing mechanisms to compensate populations affected by the project. These shortcomings were subsequently addressed to the satisfaction of the World Bank. 20. The RAP was prepared and approved in 2017, with an action plan related to the restoration of economic income and livelihood of the 23 people affected by the project. The implementation of the mitigation measures took about a year. By the end of January 2019, the Government had (a) identified people affected by the project and made the required payments to compensate them for the losses incurred as a result of the project5; (b) established a grievance redress mechanism including designated committees to process and manage complaints and conflicts that may arise; (c) identified vulnerable households within the project area; (d) completed the payment of the compensation of the people affected by the project and provided financial support to vulnerable households6; and (e) commenced administrative procedures to secure the land. The RAP is now fully implemented, and the World Bank has issued a no objection to the terms of reference for an external audit of its implementation. The audit is expected to be completed by September 2019 and the findings will be utilized to further strengthen the implementation of safeguard measures for the project.

C. Rationale for the Proposed Additional Financing

(a) Cost Overruns

21. The project has a shortfall of US$20.0 million equivalent (including US$2.0 million of contingency amount), which is primarily due to the underestimation of investment costs and taxes during the preparation of the project, exacerbated by the persistent security risks and concerns since the approval of the original

5 Payments for compensation amounted to XOF 25,308,340 (or approximately US$45,000) 6 Financial assistance provided was equivalent to XOF 13,500,000 (or approximately US$24,000)


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project, and which results in a cost premium for the procurement of goods, works, non-consulting services, and consulting services.

(i) Unbudgeted Tax Expenditures

22. The financing agreements of the original project provided for tax-inclusive expenditures. However, in 2014, the Government of Mali adopted a decree7 granting a five-year tax exemption for the importation of renewable energy equipment. This decree was followed by a ministerial order8 providing customs duty and tax exemption for all the projects implemented by AMADER. The ministerial order specifically applied to equipment, construction material and spare parts used to build, repair and maintain rural electrification infrastructure. Thus, the contracts executed under the original project did not include tax and customs duty. In March 2016, the Ministry of Economy and Finance (MEF) requested the World Bank to ensure that the procurement of goods and services under World Bank-funded projects include all tax and customs duty applicable, in line with their financing agreements and with a recommendation of the International Monetary Fund (IMF). A follow-up communication from the MEF to the Ministry of Energy dated February 2017 reinforced that message, citing the Mali Rural Electrification Hybrid System Project (the original project) among the non- compliant projects. AMADER then, took steps to retroactively include tax and customs duty in all the contracts procured under the project, which led to a cost increase of approximately 20 percent on average, for all the project’s activities (including imported equipment, works, consulting and non-consulting services).

(ii) Higher Capital, Project Management Cost and Subsidies

23. Service improvement and extension of existing mini-grids (Component 1 of the original project). At the time the project was prepared in 2013, budget estimates were prepared on the basis of regional benchmarks for similar works in the absence of detailed feasibility studies, which were prepared during the implementation phase of the project as intended. The project allocated US$31.9 million (of which US$17.0 million equivalent IDA credit and US$14.9 million SREP grant) to Sub-component 1.1 (Hybridization of existing mini-grids). This estimate assumed that the project would support the increase of 4.8 MWp through hybrid systems (including PV panels, inverters, batteries, and control electronics). Technical feasibility studies conducted during the project implementation period led to refining the technical characteristics of the infrastructure needs. The total renewable energy capacity for the 45 sites is 6.7 MWp (as opposed to 4.8 MWp for 50 sites as originally envisaged). Actual bids received resulted in a higher-than-expected capital cost partially due to the higher power capacity requirement. This results in a financing gap of US$8.1 million equivalent (or 40 percent of the proposed AF). Similarly, actual capital cost for mini-grid extension and densification amounted to US$4.0 million compared to a budget of US$2.5 million; the financing gap is US$1.5 million (7.5 percent of the proposed AF). 24. Output-Based Subsidies for the Sale of Lighting Africa-Certified Portable Solar Lanterns (Sub-component 2.1 of the original project). During the project supervision mission conducted in October 2018, it was agreed to increase the subsidies provided to private distributors for the sale of Lighting Africa-certified portable solar lanterns and related pico-PV equipment included in the original project’s activities. The higher subsidies will accelerate the dissemination of the solar lanterns by enabling distributors to intensify marketing and outreach activities and ultimately lead to the achievement of the overall sales target of

7 Decree No2014-0816/P-RM of October 27, 2014. 8 Ministerial order No 2014-3759/MEF/SG of December 30, 2014.


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100,000 appliances. This results in a total increase in subsidies from US$1.0 million to US$3.0 million equivalent. The additional funding needs amounts to US$1.9 million (or 10 percent of the proposed AF).

25. Project Management (Component 3 of the original project). The project has allocated US$2.8 millionequivalent for this component, split as follows: project management support (US$1.4 million equivalent;capacity building (US$0.9 million equivalent); M&E (US$0.3 million equivalent); and information, educationand communication (US$0.2 million equivalent). However, the Owner’s Engineer contract alone amountedto US$1.37 million, which is approximately 98 percent of the budget allocated to project managementsupport. The services of an Owner’s Engineer are important in the context of the project and of Mali to (a)strengthen the technical capacity of the PIU to prepare and evaluate tender documents for the technicalstudies; (b) ensure adherence to the technical specifications of the project during the construction of theinfrastructure; (c) provide adequate resources to supervise construction activities taking place concurrentlyon multiple sites; and (d) certify payment requests issued by the contractors. The procurement of all theconsulting services is supported by this component. This includes the technical engineering firms for theelaboration of feasibility studies, the procurement and gender specialists to strengthen the implementationcapacity of AMADER, and the external financial auditor. Overall, actual consultants’ cost amount to US$5million (of which US$2.4 million has been paid out). The revised total cost for this component amounts toUS$9.3 million, hence a financing gap of US$6.5 million (33 percent of the proposed AF).

(b) Scale-up activities

26. The rationale for scaling-up the activities successfully implemented under the original project lies inthe need to further enhance electricity access to reduce vulnerability and promote economic opportunitiesfor populations living in rural areas in Mali. The portion of the AF allocated to scale-up activities will befinanced through the US$2.7 million PHRD grant and will be applied to activities that are additional to thosefinanced under the original project. The grant-funded activities comprise the installation of SHSs inhouseholds not living within the vicinity of a mini-grid, the deployment of solar lanterns, and the delivery ofcommunication and awareness raising campaigns in targeted areas.

II. DESCRIPTION OF ADDITIONAL FINANCING

27. There are no changes in the design of the original project, or to the nature of its activities. The implementation arrangements of the original project will be maintained for the proposed AF. As such, AMADER will implement the activities financed by the proposed AF. The additional IDA credit finances the activities of the original project. The PHRD grant supports additional activities, under Component 1 and Component 2 of the project. The additional activities are consistent with the original scope of the original project and with the World Bank Group’s Country Partnership Framework for Mali for the period FY16-19 (Report No. 94005)9 discussed at the Board on December 10, 2015.

9 World Bank. 2015. Mali - Country partnership framework for the period FY16-19 (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/839461468198005347/Mali-Country-partnership-framework-for-the-period-FY16-19.


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A. Proposed Changes

(a) Project Components and Activities (i) Component 1 (Service improvement and extension of existing mini-grids): US$53.30 million

equivalent of which US$19.50 million equivalent original IDA credit, US$$11.60 million

equivalent additional IDA credit, US$14.90 million SREP grant, US$5.00 million GPOBA grant,

and US$2.30 million PHRD grant

28. Sub-component 1.1: Hybrid electricity generation (US$40.0 million equivalent of which US$17.00 million equivalent original IDA, US$8.10 million additional IDA credit and US$14.90 million SREP grant). The AF will cover the funding shortfall for the construction of the 45 hybrid systems. The Engineering, Procurement and Construction contracts have been signed and construction works have started. 29. Sub-component 1.2: Mini-grid extension and densification (US$11.3 million equivalent of which US$2.50 million equivalent original IDA, US$1.50 million equivalent additional IDA credit, US$5.00 million GPOBA grant and US$2.30 million PHRD grant). The additional IDA funds will cover the financing gap due to the underestimation of capital cost for the mini-grid network extensions (medium and low voltage) approved under the original project. The PHRD grant will finance new activities to scale-up the results achieved through the GPOBA grant (under the original project) to help remove barriers to the electrification of poor communities in rural areas (for example, high upfront investment cost, unaffordable connection charges and costly internal wiring) and ultimately, make access to basic electricity services affordable. This objective will be achieved by financing the supply and installation of up to 4,420 SHS and the deployment of approximately 22,100 light-emitting diode (LED) lamps (five per SHS) in 20 villages.

30. For the SHS, the PHRD grant will provide output-based subsidies to the existing mini-grid operators. Households pay a fixed contribution representing approximately 2 percent of the total cost for per unit installed, while private operators provide the balance of the funding to supply and install the SHS. IVAs to be appointed by AMADER will audit the works and certify that the installation and equipment provided comply with the pre-defined norms and technical standards. On the basis of satisfactory verification reports, the operator will receive a subsidy representing a portion of the supply and installation cost of each SHS.

31. Sub-component 1.3: Contingencies (US$2.00 million equivalent additional IDA credit). The contingency amount will cover unforeseen cost escalation that may arise during the implementation of the activities supported by the proposed AF. For instance, additional price increases may result from increases in price of raw materials and labor cost, requiring amendments to the signed contracts; there was over a one-year gap between the signing of some contracts and the issuance of the notice to commence construction works. Third-party monitoring may also be needed as a result of increased security risk in the project area. (See also the security risk discussion in Section III).


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(ii) Component 2 (Development of Off-Grid Lighting Markets and Energy Efficiency): US$4.86

million equivalent of which US$2.70 million equivalent original IDA credit, US$1.90 million

equivalent additional IDA credit, and US$0.26 million PHRD grant

32. Sub-component 2.1: Off-grid lighting and solar lanterns (US$3.73 million equivalent of which US$1.50 million equivalent original IDA credit, US$2.00 million equivalent additional IDA credit, US$0.23 million PHRD grant). The additional funds from IDA will cover the increase in subsidies for the Lighting Africa-certified portable solar lanterns. The PHRD grant will support the deployment of an additional 800 Lighting Africa-certified solar portable lanterns and related pico-PV equipment in selected public schools through the procurement of eight solar lantern libraries.10 33. Sub-component 2.2: Energy efficiency promotion (US$1.13 million equivalent of which US$1.20 million equivalent original IDA credit, US$0.10 million equivalent IDA savings, US$0.03 million PHRD grant). This sub-component supports the acquisition and supply of energy-efficiency equipments and related promotion campaigns to reduce the demand on existing mini-grids. Budget utilization projections related to the implementation of this sub-component show anticipated savings equivalent to US$0.10 million. It is proposed to reallocate these savings to Sub-component 2.1. The PHRD funds will finance information and consumer awareness campaigns in the 20 localities that will be covered by the PHRD activities. These campaigns will involve community meetings, radio and TV commercials and the dissemination of flyers of other marketing materials.

(iii) Component 3 (Project Management Support and Capacity Building): US$9.44 million

equivalent of which US$2.80 million equivalent original IDA credit, US$6.50 million

equivalent additional IDA credit, and US$0.14 million PHRD grant

34. Sub-component 3.1: Project management support (US$7.84 million equivalent of which US$1.40 million equivalent original IDA credit, US$6.30 million equivalent additional IDA credit, and US$0.14 million PHRD grant). The AF funds will cover the financing gap for the procurement of consulting services, the procurement of a geographic information system, the establishment of a technical control center to monitor the operational performance of the mini-grids, and operational cost. The PHRD grant will procure the services of a firm to conduct the independent verification of the SHS installed under Sub-component 1.2 and will contribute to operational costs. 35. Sub-component 3.2: Capacity building and technical assistance (US$0.70 million equivalent of which US$0.90 million equivalent original IDA credit and US$0.20 million equivalent IDA savings). This sub-component supports the participation of key institutional stakeholders (such as the personnel of AMADER

10 A solar lantern library is essentially a rental program that aims to improve the learning conditions of students in rural areas (for example, access to electricity for homework at home), and it demonstrates the benefits of the use of solar lanterns within the targeted communities. It consists of a 20-ft container located within the premises of a public school, and housing approximately 100 solar lanterns. Students can borrow lanterns after school to study at home in the evenings against the payment of a flat fee, allowing immediate and nearby households to observe their use, functionalities and benefits. A dedicated management committee comprising representatives of the school and of the community, have decision-making powers over key aspects related to the operations of the solar library including setting the rental fee, appointing a ‘librarian’ to manage day-to-day activities, establishing access criteria (for example, a school may choose to give priority to students preparing exams), and deciding on the utilization of the rental fees collected (for example, buy additional lamps, replace non-functional lanterns).


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and the staff of the National Directorate of Energy in decentralized administrations) to training workshops, and to the organization of intersectoral coordination committees. It is does not finance consultants’ services. The analysis of actual and projected expenditures shows that approximately US$0.20 million equivalent will be unallocated under this sub-component. It is proposed to use these savings to offset part of the cost overruns incurred under sub-component 3.4.

36. Sub-component 3.3: Monitoring and Evaluation (US$0.10 million equivalent of which US$0.30 million equivalent original IDA credit and US$0.20 million equivalent IDA savings). This sub-component supports the preparation of a baseline study for the targeted mini-grids, as well as the deployment of Geo-Enabling Monitoring and Supervision tool (“Kobotoolbox”) which enables remove supervision within the project area through a geo-enabled M&E platform. Cost savings of US$0.20 million equivalent are anticipated under this sub-component. It is proposed to reallocate this amount to partial cover the financing gap under Sub-component 3.4. 37. Sub-component 3.4: Information, education and communication (US$0.80 million equivalent of which US$0.20 million equivalent original IDA credit and US$0.60 million equivalent additional IDA credit). The AF will support information campaigns and communication efforts, launched under the original project, between AMADER, local operators, relevant central government (energy, health, education, and so on) and local government institutions to generated interest for renewable energy-based electrification solutions.

(b) Project Closing Date

38. The implementation the activities supported by the proposed AF requires an extension of the closing

date of the original project by twelve (12) months, from September 30, 2020 to September 30, 2021. This

would be the first extension of the closing date of the original project.

B. Project Cost Summary

39. Table 2 sets out the total project cost summary.


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Table 2: Comparison of Budgeted versus Actual capital Cost

Project component Original financing Additional financing

Revised total project cost (US$ million equivalent)

IDA credit (US$ million equivalent)

SREP grant (US$ million)

GPOBA grant (US$ million)

Total (US$ million equivalent)

IDA funding of cost overruns in (US$ million equivalent)

PHRD funds for scale up (US$ million)

Component 1: Service improvement and extension of existing mini-grids

19.50 14.90 5.00 39.40 11.60 2.30 53.30

1.1 Hybrid electricity generation

17.00 14.90 31.90 8.10 40.00

1.2 Mini-grid extension and densification (1)

1.3. Contingencies

2.50 5.00 7.50 1.50

2.00

2.30 11.30

2.00

Component 2: Development of off-grid lighting markets and energy efficiency

2.70 2.70 1.90 0.26 4.86

2.1 Off-grid lighting and solar lanterns

1.50 1.50 2.00 0.23 3.73

2.2 Energy-efficiency promotion

1.20 1.20 -0.10 0.03 1.13

Component 3: Project management support and capacity building

2.80 2.80 6.50 0.14 9.44

3.1 Project management support

1.40 1.40 6.30 0.14 7.84

3.2. Capacity building and technical assistance

0.90 0.90 -0.20 0.70

3.3 Monitoring and evaluation

0.30 0.30 -0.20 0.10

3.4 Information, education and communication

0.20 0.20 0.60 0.80

Total 25.00 14.90 5.00 44.90 20.00 2.70 67.60

40. The additional contribution of the Government of Mali to cover the operating expenses of AMADER during the extension period, is estimated at US$0.60 million. As provided in the original project, the maintenance of the hybrid systems will be financed by AMADER’s operators. Tables 3 presents eligible expenditures per the disbursement categories and the project description in the additional IDA Financing Agreement.


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Table 3: Additional IDA Credit Allocation by Disbursement Category

Category IDA allocation (EUR) IDA allocation (US$

equivalent)

Percentage of Expenditures to be

Financed (inclusive of Taxes)

(1) Goods, works, non-consulting services, consulting services, and Operating Costs, and Training for Part 1.1, Part 1.2 (i) and Parts 3.1 and 3.4 of the Project, in accordance with the Annual Work Plan in Section II.E of Schedule 2 the IDA Financing Agreement

14,490,000

16,100,000

100%

(2) Output-based Subsidies to Participating Distributors under Part 2.1 (i) of the Project

1,710,000 1,900,000 100%

(3) Non-allocated 1,800,000 2,000,0000 100%

`Total 18,000,000 20,000,000 100%

41. Table 4 presents eligible expenditures per the disbursement categories and the project description in the PHRD Grant Agreement.

Table 4: PHRD Grant Allocation by Disbursement Category

Category PHRD allocation

(US$) Percentage of Expenditures to be

Financed (inclusive of Taxes)

(1) Goods, works, non-consulting services, consultants’ services and Operating Costs, and Training under Parts 2.1 (iii), 2.2 (i), 2.2 (ii), and 3.1 of the project, in accordance with the annual work plan in Section II.E of Schedule 2 of the PHRD Grant Agreement

400,000 100%

(2) Output-based Subsidies to Participating Operators under Part 1.2 (ii) of the project

2,300,000 100%

Total 2,700,000 100%

III. KEY RISKS

42. Mali is affected by Fragility, Conflict and Violence, which represents a critical development challenge and a source of instability. The risk rating for the proposed AF is the same as that of the original project for all the risk categories. The overall risk rating remains High, given the country’s current political and security situation, the sector strategies and policies, and the institutional capacity for implementation and sustainability.

43. The political and governance risk is rated High. In early 2012, some regions in the northern part of the country fell under the control of extremist forces, resulting in political instability and turmoil. Despite a strong international military response in early 2013 and a peace agreement between the Government of Mali and the ‘Platform and Coordination Groups in the North’ in June 2015, political stability remains fragile in Northern Mali. This risk is partly mitigated by the fact that the area of influence of the original project and of the proposed AF activities is in the central and southern parts of the country (regions of Kayes, Koulikoro, Sikasso, Segou and Mopti). However, a further deterioration of the political and security situation, as criminal activities spread to the south could affect the implementation of the project due to violence and migration of populations.


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44. The macroeconomic risk is rated Substantial. The fiscal performance in the first half of 2018 was marked by significantly lower-than-programmed revenues, reflecting weak taxpayers’ compliance, the impact of uncertainties ahead of the July 2018 presidential election, and losses due to international fuel price increases11. Structural concerns include increased fraud associated with growing insecurity and recurrent terrorist attacks, organizational inefficiency, and inefficient management.12 The authorities have offset the impact on the fiscal balance by significantly cutting public spending.13 If this situation persists and given Mali’s limited fiscal buffers, the availability of the Government’s counterpart funds to the project could be compromised and this could affect the achievement of the PDO. Macroeconomic risks are being mitigated by the IMF and the World Bank closely monitoring the macroeconomic developments, through their respective financial programs (Extended Credit Facility and Development Policy Operations). 45. The risk related to sector strategies and policies is High. At the sectoral level, end user electricity prices are higher in the areas that are served by AMADER, than in those that are connected to the main electricity grid. This gap reflects the much higher cost of providing the service in rural areas. Moreover, the Malian authorities periodically remove localities previously under the control of AMADER to connect them to the national electricity grid, to allow the populations to benefit from the lower tariffs afforded to the customers of Mali’s National Power Utility (Energie du Mali). The gap between regulated and uniform utility tariffs and the much higher prices applied by rural operators is a source of both institutional and social tensions. 46. The Mali rural electrification model exclusively relies on revenues collected from end-user customers to cover the operating costs related to the provision of electricity services; investments are made by the state. By introducing lower-cost renewable energy generation in diesel mini-grids, the project contributes to reducing operating costs. However, financial requirements related to correctly maintaining systems, and replacing some key components at the end of their useful life need to be part of any financial plan for long-term sustainability. As the cost of equipment replacement is passed through the tariff, the cost of electricity services in rural areas will remain high in the absence of public subsidies. AMADER and the Malian authorities are working on a framework and on methodologies to set up a cross-subsidy mechanism through the application of a uniform tariff for rural electricity services. 47. The risk related to the technical design of the project is Substantial. Hybrid solar systems have been piloted in a few sites in Mali but will represent a new technology for most operators. Mitigation: The project design provides for technical assistance and capacity building to assist in the management of issues specific to hybrid systems (for example, maintenance, recycling of spare parts) to ensure that the systems are properly operated and maintained. The risks related to civil, mechanical and electrical works, as well as grid expansion and logistics, are manageable under the project’s scope, given that the mini-grids already exist, are operational, and are of relatively small size.

11 IMF. 2018. Mali: Tenth review under the extended credit facility arrangement and request for waiver of nonobservance of a performance criterion. Country Report no. 18/360. December. 12 ibid 13 ibid


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48. The institutional capacity for implementation and sustainability risk is rated High. This risk relates to the following three main aspects:

• Construction supervision. Construction supervision for the 45 sites could be challenging for AMADER because the hybridization of several sites will take place simultaneously. To mitigate the associated risk, construction supervision is carried out by AMADER, with the assistance of an Owner’s Engineer.

• Capital cost escalation. There is a risk of further cost inflation due to the volatile security conditions in some parts of the country and its potential impact on the cost of raw materials, supplies, transportation, and so on. These costs are likely to be passed on to the project for works for which the procurement process has not been concluded such as the extension and densification of the mini-grids. This risk is mitigated by a contingency amount provided as part of the proposed AF.

• Sustainability. The sustainability of the infrastructure procured under the project rests on the provision of high-quality maintenance services for operations. The inadequate maintenance services risk is mitigated through AMADER’s operating model, which involves private sector-led delivery of electricity services through long term contracts. Capacity building and awareness raising of local stakeholders could also contribute to the long-term viability of rural electrification in Mali.

49. The fiduciary risk is rated Substantial. The fiduciary risk is correlated with the political, governance and macroeconomic situation of Mali. Like the original project, the fiduciary risk for the proposed AF has been assessed as substantial, due to inadequate public FM capacity and transparency. Furthermore, there is a perception that laws and contracts are arbitrarily enforced.14 To promote good governance and combat corruption, the Government is currently focusing its efforts to properly implement Law n°2014-015 of May 27, 2014 on the prevention and repression of illicit enrichment and to implement the recommendations of the Auditor General’s Office to ensure a proper use of public resources.15 At the project level, the role of the internal auditor will be strengthened to ensure a greater oversight of the project (see also Section IV.C (Financial Management)). 50. The overall environmental and social risk is Substantial. Despite potential positive social impacts such as electrification of basic social infrastructures (schools, and so on), land acquisition or involuntary resettlement of populations because of the construction works poses a high social risk for the project. For the proposed AF, the World Bank’s social and environmental safeguard specialists will follow up with their counterparts at the project level to ensure compliance with the ESMF and RPF and the World Bank’s procedures and confirm that the relevant instruments pursuant to the ESMF and RPF are prepared and implemented on time. The grievance redress mechanism (GRM) committees put in place under the original project will be trained to allow more participation of project beneficiaries. The PIU will put in place gender-based violence (GBV) prevention measures and monitoring as part of the GRM. Its capacity will be strengthened to ensure regular field monitoring. The updated ESMF provides that Environmental and Social Management Plans (ESMP) should be prepared, approved and notified before civil works start. The PIU will also work closely with the Ministry of Environment, through the National Direction of Sanitation and Pollution Control (Direction Nationale de l'Assainissement du Contrôle des Pollutions et des Nuisances, DNACPN), to ensure full compliance with national environmental regulations.

14 IMF. 2018. Mali: Tenth review under the extended credit facility arrangement and request for waiver of nonobservance of a performance criterion. Country Report no. 18/360. December. 15 ibid


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51. The security risk is Substantial. Overall, security threat presents a potential challenge. The implementation of the activities of the original project has not been affected by criminal activities so far, and the localities covered by the proposed AF are mainly outside the conflict area. Nonetheless, armed non-state actors have forced schools to close and have carried out sporadic attacks on Malian security personnel in northern parts of Koulikoro and Segou regions. Project sites in Mopti region would be at a higher risk of being targeted; however, the proposed locations are in areas where the Government and the international community are focusing efforts to bring stability through an integrated security plan for the central regions. The construction sites for the hybrid mini-grids could be targeted by criminal groups attracted by construction materials and equipment, for instance. The security situation will be closely monitored by the Government and the World Bank. Mitigation: In sensitive areas, media communications and public information sharing will be reduced during the construction works phase to minimize unwanted attention. Working closely with the Bamako-based country security specialist, assessments and updates on the security arrangements will be provided on a biannual basis throughout the implementation of the AF. Contingencies included in the project will be used for the implementation of third‐party monitoring of the implementation progress, as needed. Finally, the Government and the World Bank will consider alternative localities, if the threat level becomes too high to be effectively mitigated. Annex 3 presents a geographic map of the project area. 52. Disaster and climate screening. The climate and disaster risk screening identified that exposure to high temperatures, floods and droughts within the project area is high. Approximately 90 percent of all poor people live in rural areas (which cover 73 percent of the total population). Conflict arising from allocations of increasingly scarce natural resources has increased the incidence of poverty. Despite significant progress over the last decade, access to electricity services in Mali remains low, with 19 percent access in rural areas in 2017. The proposed AF strengthens the contribution of the original project, and its support to the efforts of the Government of Mali, to provide economic opportunities to rural areas populations and promote the use of renewable energy for electricity generation through the hybridization of existing diesel mini-grids and the creation of a market of energy-efficient renewable energy appliances, among others. 53. The design of the solar PV/diesel mini-grids constructed under the project include specifications that mitigate damages and loss due to climate hazards. These specifications relate to structural stability, drainage and effect of high temperatures. To mitigate the risk of water shortage, the civil works for the hybridization of the mini-grids include the construction of boreholes to provide adequate water supply to clean the solar PV panels and ensure sustained electricity output. Training activities, capacity building and community outreach campaigns launched as part of the project; increase the awareness of the beneficiaries on the use of renewable energy and strengthen the institutional and technical ability to plan for and respond to climate change impacts, thus reducing the risk from climate hazards. The project also supports women-led community associations by providing training, and disseminating energy-efficient equipment for income-generating activities, to reduce vulnerability. The overall potential impact on investments is low. While the soft components slightly reduce the level of impact, the development context will significantly increase impacts as there are low levels of adaptive capacity.


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IV. APPRAISAL SUMMARY

A. Economic Analysis

54. Rationale for public financing. The rationale for public sector financing presented for the original project remains relevant. A significant proportion of the rural electrification models implemented worldwide rely on sustained commitment from the public authorities to provide subsidies and ongoing financial support. The Malian rural electrification model is based on the provision of service by local private operators. However, the tariff charged to end users does not cover the full cost of service. Public financing is required to make electricity services affordable for people living in rural areas, which is home to predominantly poor populations.

55. World Bank’s added value. The continued involvement of the World Bank is aligned with the objectives to create economic opportunities for populations in rural areas and to reduce poverty, by improving the affordability of energy services through the introduction of renewable energy, especially where the expansion of the national electricity grid is not economic viable. 56. The economic analysis of the original project was updated to incorporate the changes linked to the proposed AF and the assumptions. With the proposed AF, the project will finance the introduction of solar PV generation in at least 45 rural mini-grids currently operating purely on diesel generation and will facilitate access to electricity for approximately 18,000 rural households either through mini-grid connections or through SHS. 57. Investment costs are based on actual disbursements under the original project for completed activities, payment commitments, and scale-up activities financed under the proposed AF. These costs include civil works, machineries, studies, construction supervision activities, and major equipment replacement (for example, batteries) during the life cycle of the assets. Routine operation and maintenance activities for the solar plant and distribution network represent 2 percent of the infrastructure cost (including contingencies). The operation and maintenance costs of the existing diesel plants will be incurred whether or not the project takes place, and thus they are not considered in the analysis. It also assumes that there will be no incremental diesel generation, as a result of the project. In line with the original analysis, expenditure and benefits for Lighting Africa and energy efficiency activities (under Component 2) are not considered. 58. The major benefits derived from the project will be the reduction of diesel generation (substitution) and the expansion of electricity access. The substitution benefits are estimated based on the reduction in fossil fuel-based generation costs (mainly fuel, lubricants and spare parts consumption). The benefits from increased access through new connections are valued at the actual average cost paid by rural households in Mali for both mini-grids and SHS. Additional benefits arise from uses of electricity for productive and income- generating activities. The economic benefits arising from avoided greenhouse gas (GHG) emissions are monetized using the World Bank’s Guidance Note on Social Value of Carbon in Project Appraisal,16 to account for global externalities.

16 World Bank. 2014. “Guidance note of social value of carbon in project appraisal.”


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59. Overall, the project results in net economic benefits, with the proposed AF. Assuming a project life span of 20 years and an economic discount rate of 5 percent, the project yields an economic internal rate of return (EIRR) of 14.2 percent for an economic net present value (ENPV) of US$39.1 million compared to 11.1 percent and US$2.2 million, respectively, under the original analysis17. The economic value of the project remains robust with fluctuations in the XOF/US$ exchange rate, changes in the economic discount rate, or changes in the value of carbon benefits. However, it is significantly sensitive to the life span of the project’s assets; the net present value (NPV) becomes negative when their useful life is below eight years. Thus, the sustainability of the infrastructure is key to the project’s economic value.

B. Technical

60. The technical appraisal of the proposed AF confirmed that hybrid mini-grids (solar PV production with thermal engine for back-up) and SHS remain the most suitable technological option for the targeted localities due to (a) the geographical dispersion and the low-density of the localities served by AMADER; (b) the availability of good quality solar resources within the project area; and (c) the low marginal cost of solar PV-based solutions which will help reduce the reliance on fossil fuels. 61. The activities supported by the proposed AF use well-established technologies. Feasibility studies have been conducted to define the technical parameters of the hybrid mini-grids. Turnkey contracts have been awarded for 45 hybrid power plants and the services of an experienced Owner´s Engineer have been competitively procured to carry out supervision of the construction works. AMADER and the operators have a proven record of successful grid densification and expansion based on simplified and optimized standards for numerous localities. The equipment and the technologies involved do not present operational challenges. 62. SHS are a simple renewable energy solution for dispersed users with a proven track record in Asia and several parts of Sub-Saharan Africa. In Mali, a private operator has successfully implemented a ‘fee-for service’ scheme since 2001. Over 4,400 SHS were successfully installed under the original project. Each kit was equipped with solar panels of 50 to 130 Wp capacity, batteries of 70 -100 Ah, and three CFLs. The SHS supported by the proposed AF will be upgraded as follows: 200 -250 Wp solar panels, 150-200 Ah batteries, and five LED light bulbs that consume approximately 20 percent less energy than CFLs. 63. As with the original project, the portable solar lanterns disseminated with the support of the proposed AF are Lighting Africa-certified. As such, they meet the Lighting Global Quality Standards. These products are tested against a baseline level of quality, durability, and truth in advertising and must also carry a warranty. The test methods used to assess the Lighting Global Quality Standards have been adopted by the International Electrotechnical Commission (IEC) as a reference point for quality assurance of off-grid lighting products (IEC Technical Specification 62257-9-5).

C. Financial Management

64. FM assessment. The FM system and performance of AMADER (the PIU) under the original project are acceptable to IDA. AMADER will be responsible for FM of the AF. This PIU is familiar with the World Bank’s FM requirements and is currently managing the first phase of this IDA-financed project. The current FM staffing

17 The original analysis did not include the valuation of avoided GHG emissions reduction.

https://www.lightingglobal.org/qa/standards/

http://www.iec.ch/

http://www.iec.ch/


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is adequate. The FM performance was rated Moderately Satisfactory following the last supervision mission completed in February 2019. 65. FM arrangements. The FM of the AF will follow the same approach as the implementation arrangements in place for the ongoing project. The configuration of the current accounting software ‘TOMPRO’ will be updated. The existing FM procedures manual that was prepared for original project will be used for this AF.

66. FM reporting.

(a) The unaudited IFRs are prepared every quarter and submitted to the World Bank regularly on time. The frequency of IFR preparation as well as its format and content will remain unchanged.

(b) The internal audit function will be strengthened. The financial controller will be required to communicate copies of the reports of his missions and his/her quarterly reports to the World Bank. The terms of reference of the current internal auditor will be updated, to cover the AF activities as well as the reporting line, the scope of the reviews, and the submission of the reports.

(c) There is no overdue audit report in the project and the sector at the time of preparation of the AF. The audit report of the current project covering the period ending on December 31, 2017, was submitted on time; the external auditor expressed an unqualified opinion. The last audit report of IDA-financed projects in the sector in Mali was submitted June 27, 2019. The accounts of the AF will be audited on an annual basis and the external audit report will be submitted to IDA no later than six months after the end of each calendar year; similar to the original project. The project will comply with the World Bank’s disclosure policy of audit reports and place the information provided on the official website within one month of the report being accepted as final by the team.

67. Disbursement arrangements. The AF will finance 100 percent of eligible expenditures inclusive of taxes. Two new Designated Accounts (DA) will be opened by AMADER in a commercial bank acceptable to IDA for the IDA credit and the PHRD grant, respectively. Interest incomes generated from the DAs will be credited in a sub-account to be opened in a commercial bank. Initial advances up to the respective ceilings will be made upon effectiveness. Subsequent disbursements will be made against submission of statements of expenditures reporting on the use of the initial/previous advance. In addition, disbursements against output-based subsidies should be accompanied by the notification from IDA confirming acceptance of the IVA report and the amount payable. The option to disburse against submission of quarterly unaudited IFRs (also known as report-based disbursements) could be considered, as soon as the project meets the criteria. The other methods of disbursing the funds (reimbursement, direct payment, and special commitment) will also be available to the project. The minimum value of applications for these methods is 20 percent of the DA ceiling. The project will sign and submit Withdrawal Applications electronically using the e-signatures module accessible from the World Bank’s Client Connection website.

D. Procurement

68. All goods, works, non-consulting services and consulting services required for the project and to be financed out of the proceeds of the AF for which the procurement process has started before the signature date of the AF Agreement, shall be procured in accordance with the requirements set forth or referred in the “Guidelines: Procurement of Goods, Works and Non-consulting Services under International Bank for


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Reconstruction and Development (IBRD) Loans and IDA Credits and Grants by World Bank Borrowers” and the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,” both dated January 2011 (revised July 2014), and the provisions of financing agreement of the original project. 69. All goods, works, non-consulting services and consulting services required for the project and to be financed out of the proceeds of the AF for which the procurement process starts on or after the signature date of the AF Agreement, shall be procured in accordance with the requirements set forth or referred to in the Procurement Regulations of July 2016 and revised November 2017 and August 2018, and the provisions of the AF Agreement. 70. A Project Procurement Strategy for Development (PPSD), including a risk and market analysis, has been prepared by AMADER. The PPSD analyzes that the national, regional and international markets have the experience and capacity to support the implementation of the proposed AF. AMADER has demonstrated its mastery of the competitive bidding process. Given that this AF builds on the on-going project implementation, some activities will be implemented through amendments of existing contracts. The World Bank has rated the procurement performance of the original project as Moderately Satisfactory during the most recent supervision mission, and the procurement risk is Moderate. The manual on administrative, financial, and accounting procedures of the original project will be updated to include the new AF. 71. All procuring entities as well as bidders, and service providers, that is, suppliers, contractors and consultants shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 3.32 and Annex IV of the Procurement Regulations. 72. A detailed procurement description and institutional arrangements can be found in Annex 2, Implementation Arrangements.

E. Social (including Safeguards)

73. The following safeguard policies are triggered OP/BP 4.01 (Environmental Assessment), OP/BP 4.11 (Physical Cultural Resources) and OP/BP 4.12 (Involuntary Resettlement), as with the original project. The proposed AF does not trigger additional social safeguard policies. The RPF was updated to consider the potential impact of the mini-grid network extensions (medium and low voltage) for which the exact routes are not yet known. The updated version of the RPF was publicly disclosed in-country and on the World Bank’s website on May 28, 2019. 74. Gender. The original project is gender-informed with a strong approach to address gender inequality and includes a gender-disaggregated reporting of the beneficiaries. The proposed AF will build on the gender needs assessment conducted under the original project and the promotion of energy-efficient appliances for women’s groups and community associations. As with the original project, the implementation of the scale-up activities will be gender-sensitive. Cultural norms in Mali’s rural areas restrict women’s mobility, their participation in the public sphere, and their access to public information or networks, which accentuate their inequality and disadvantage in relation to men. Together with low literacy rates, these restrictions may keep women, and female entrepreneurs from learning about the possibility of getting an electricity connection or successfully applying for and obtaining a connection. The gender gaps the project will address women’s lack


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of access to the public sphere, which prevent them from, for example, getting information about the availability of electricity connections or applying for and getting a connection. Consequently, the proposed AF will strengthen ongoing actions to ensure that women, including female-headed households have the same access to information than men, and can benefit from electricity services by reducing barriers to apply for electricity connections. Rural areas operators will also be trained to recognize and address gender gaps. 75. The GBV risk rating for the project is Substantial as the project is implemented in GBV high-risk zones. The ESMF has been updated and includes activities designed to address the risk of GBV such as the elaboration and public disclosure of a code of conduct for contractors explicitly prohibiting sexual exploitation, and targeted information and awareness raising campaigns in collaboration with local NGOs. The PIU is responsible for the implementation of all GBV related mitigation measures and project response actions. 76. Citizen engagement. The proposed AF will build on the citizen engagement activities conducted under the original project through information and education campaigns to reach groups that do not have access to information (for example, women, young people), setting ways to engage with the communities. Through the proposed AF, AMADER will continue to build a trusting relationship with affected communities and other interested stakeholders and to solicit feedback from beneficiaries on the impact of the project. The AF will also finance an impact evaluation of the improvement of the electricity services through the hybridization and the extension of the mini-grids; which will allow to understand and address key issues around electricity connections, consumer satisfaction, communication with the operators and other social issues.

F. Environment (including Safeguards)

77. The policies triggered under the original project are the following: OP/BP 4.01 – Environmental Assessment, OP/BP 4.12 - Involuntary Resettlement, and OP/BP 4.11 - Physical Cultural Resources. These policies remain relevant for the proposed AF. No new environmental safeguards policies are triggered and the safeguard category for the project remains category B. The updated version of the ESMF was publicly disclosed in-country and on the World Bank’s website on May 28, 2019. 78. The activities supported by the AF will be deployed in localities situated in the southern and central parts of Mali. The central part corresponds to the semi-desert climate with annual precipitation ranging from 100 mm to 600 mm. This sector is characterized by the presence of the inner delta of the Niger River that provides fertile farmland and water resources for agricultural production, especially local rice. The southern part of the country comprising the regions of Kayes, Koulikoro (included Bamako city), Segou, and Sikasso, is wetter than the central regions, with annual rainfall ranging from 600 to 1000 mm. This situation occurs under a tropical savanna climate. This type of climate offers appropriate conditions to produce solar energy. It not only favors the setting of hybrid system but also causes the energy needs to increase during the dry season. 79. As with the original project, the AF will mainly finance acquisition and installation/distribution of electronic and electric devices which, though of small size and being site-specific, may induce environmental concerns during their exploitation (maintenance) and at the end of their lifecycle (electronic and electric waste). The AF will also cover the financing gap due to the underestimation of capital cost for the realization of the mini-grid network extensions (medium and low voltage) for which the exact ways or routes are not yet known. The indirect impacts of the project relate to the positive effects of improved availability of electricity services.


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G. Results Monitoring and Evaluation

80. As with the original project, the overall results M&E of the project activities will remain AMADER’s responsibility. The agency will carry out M&E of the different components/activities in accordance with the indicators included in the results framework presented in Section VIII. For the activities financed through output-based subsidies, IVAs appointed by AMADER prepare independent verification reports certifying that the goods supplied, and the services provided meet pre-agreed technical and service standards. There is no change to the PDO and intermediate-level indicators, or to the monitoring mechanisms. However, the target value of some indicators has been revised to consider the impact of the scale-up activities and the target dates have been revised to reflect the proposed project extension.

V. WORLD BANK GRIEVANCE REDRESS18

81. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org

18 The original project has a functional GRM in place, accessible to project-affected people, and operational (ISR No 8 of June 5, 2018).

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/


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VI SUMMARY TABLE OF CHANGES

Changed Not Changed

Results Framework ✔

Components and Cost ✔

Loan Closing Date(s) ✔

Safeguard Policies Triggered ✔

Implementing Agency ✔

Project's Development Objectives ✔

Cancellations Proposed ✔

Reallocation between Disbursement Categories ✔

Disbursements Arrangements ✔

EA category ✔

Legal Covenants ✔

Institutional Arrangements ✔

Financial Management ✔

Procurement ✔

Other Change(s) ✔

VII DETAILED CHANGE(S)

COMPONENTS

Current Component Name Current Cost (US$, millions)

Action Proposed Component Name

Proposed Cost (US$, millions)

Component 1: Service improvement and extension of existing mini-grids

39.40 Revised Component 1: Service improvement and extension of existing mini-grids

53.30

Component 2: Development of Off-grid Lighting Markets and Energy Efficiency

2.70 Revised Component 2: Development of Off-grid Lighting Markets and

4.86


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Energy Efficiency

Component 3: Project Management Support and Capacity Building

2.80 Revised Component 3: Project Management Support and Capacity Building

9.44

TOTAL 44.90 67.60

LOAN CLOSING DATE(S)

Ln/Cr/Tf Status Original Closing

Current Closing(s)

Proposed Closing

Proposed Deadline for Withdrawal Applications

IDA-53560 Effective 15-Sep-2020 15-Sep-2020 15-Sep-2021 15-Jan-2022

TF-15897 Closed 30-Jun-2018 30-Jun-2018 30-Jun-2018 30-Oct-2018

TF-15961 Closed 30-Jun-2018 30-Jun-2018 30-Jun-2018 30-Oct-2018

TF-18873 Effective 30-Sep-2020 30-Sep-2020 30-Sep-2020 29-Jan-2021

Expected Disbursements (in US$) DISBURSTBL

Fiscal Year Annual Cumulative

2014 182,260.00 182,260.00

2015 835,800.00 1,018,060.00

2016 1,295,300.00 2,313,360.00

2017 1,807,760.00 4,121,120.00

2018 5,819,240.00 9,940,360.00

2019 7,532,320.00 17,472,680.00

2020 10,476,220.00 27,948,900.00

2021 10,601,400.00 38,550,300.00

2022 6,449,700.00 45,000,000.00

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Latest ISR Rating Current Rating

Political and Governance ⚫ High ⚫ High

Macroeconomic ⚫ Substantial ⚫ Substantial


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Sector Strategies and Policies ⚫ High ⚫ High

Technical Design of Project or Program ⚫ Substantial ⚫ Substantial

Institutional Capacity for Implementation and Sustainability

⚫ High ⚫ High

Fiduciary ⚫ Substantial ⚫ Substantial

Environment and Social ⚫ Substantial ⚫ Substantial

Stakeholders ⚫ Moderate ⚫ Moderate

Other ⚫ Substantial

Overall ⚫ High ⚫ High

Safguard_Table COMPLIANCE

Change in Safeguard Policies Triggered

Yes

Safeguard Policies Triggered Current Proposed

Environmental Assessment OP/BP 4.01

Yes Yes

Performance Standards for Private Sector Activities OP/BP 4.03

No No

Natural Habitats OP/BP 4.04

No No

Forests OP/BP 4.36

No No

Pest Management OP 4.09

No No

Physical Cultural Resources OP/BP 4.11

Yes Yes

Indigenous Peoples OP/BP 4.10

No No

Involuntary Resettlement OP/BP 4.12

Yes Yes

Safety of Dams OP/BP 4.37

No No

Projects on International Waterways OP/BP 7.50

No No


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Projects in Disputed Areas OP/BP 7.60

No No

LEGAL COVENANTS2

LEGAL COVENANTS – Additional Financing to the Mali Rural Electrification Hybrid System Project (P169912)

Sections and Description

OPS_LEGAL_CONVENANT_CHILD_NODATA No information available

Conditions

Type Description Effectiveness Additional Financing Agreement (FA)

FA, Article 5.01: The Additional Conditions of Effectiveness consist of the following: (a) The [Grant] Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. (b) The Amended Subsidiary Agreement satisfactory to the Association has been executed on behalf of the Recipient and the Project Implementing Entity.

Type Description Effectiveness Additional Financing Agreement (AF)

FA, Article 5.02: The Additional Legal Matter consists of the following, namely that the Amended Subsidiary Agreement has been duly authorized or ratified by the Recipient and the Project Implementing Entity and is legally binding upon the Recipient and the Project Implementing Entity in accordance with its terms.

Type Description Effectiveness Grant Agreement (GA)

GA, Article 4.01. The Condition of Effectiveness is that all conditions for the effectiveness of the Additional Financing Agreement, except for the effectiveness of this Grant Agreement, have been met.

Type Description Disbursement Additional Financing Agreement (FA)

FA, Schedule 2, Section IV, B, 1 (a): Notwithstanding the provisions of Part A of Section IV, no withdrawal shall be made for payments made prior to the signature date for contracts procured in accordance with the procurement


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regulations as set forth in Section III.A of Schedule 2 to the Financing Agreement.”

Type Description Disbursement Additional Financing Agreement (FA)

FA, Schedule 2, Section IV, B, 1 (b): No withdrawal shall be made under Category (2) [output based subsidies to private distributors for the sale of up to approximately one hundred thousand (100 000) Lighting Africa-certified portable solar lanterns and related pico-PV equipment] until the receipt by the Project Implementing Entity of a verification report, approved by the Independent Verification Agent and acceptable to the Association confirming the equipment.

Type Description Disbursement Grant Agreement (GA)

GA, Schedule 2, Section IV B, 1 (b): No withdrawal shall be made under Category (2) [output-based subsidies to participating operators for the supply and installation of solar home systems in approximately twenty (20) villages] until the receipt by the Project Implementing Entity of a verification report, approved by the Independent Verification Agent and acceptable to the World Bank confirming the equipment.


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VIII. RESULTS FRAMEWORK AND MONITORING

Results Framework

COUNTRY: Mali Additional Financing to the Mali Rural Electrification Hybrid System Project RESULT_NO_PDO

Project Development Objective(s)

The objective of the Project is to expand access to modern energy services in rural areas of the Recipient and to increase renewable energy generation in target areas.

Project Development Objective Indicators by Objectives/ Outcomes

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline End Target

Expand access to modern energy services (Action: This Objective has been Revised)

People provided with access to electricity under the project by household connections - other renewable energy - off grid (Number)

0.00 612,000.00

Action: This indicator has been Revised

Rationale:

The number of people having access to electricity services is reduced from 681,000 to 612,900. The revision reflects the fact that the target hybrid solar/diesel plants have been reduced to 45, compared to 50 as originally planned.

Direct project beneficiaries (Number) 0.00 1,060,000.00


Rationale:

There is no change to the target number due to the impact of the scale-up activities. The timeline for achieving the results is extended to be aligned with the project end date.

Female beneficiaries (Percentage) 0.00 50.40


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RESULT_FRAME_T BL_ PD O



Rationale:

The target percentage of female beneficiaries remains unchanged.

Increase renewable energy generation in target areas (Action: This Objective is New)

Annual generation of electricity from renewable energies (solar) (Megawatt hour(MWh))

0.00 14,000.00


Rationale:

The revision of the target value from 8,653 MWh to 14,000 MWh reflects the increase in renewable energy capacity needs (from 4.8 MWp to 6.7 MWp) identified during the feasibility studies conducted during the project implementation period

Generation Capacity of Renewable Energy (other than hydropower) constructed (Megawatt) 0.00 6.70


Rationale:

The revision reflects an increase from 4.8 MWp to 6.7 MWp in the capacity needs identified in the feasibility studies conducted during the implementation period of the parent project.

Installed solar power (Megawatt) 0.00 6.70


Annual greenhouse gas emission reductions (Tones/year) 0.00 11,577.00


Rationale:

The target value has been revised to reflect the annual avoided GHG emission resulting from the hybridization of the mini-grids and the installation of the solar home systems upon project completion, rather than a cumulative value.

PDO Table SPACE


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Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO


Component 1: Service improvement and extension of existing mini-grids (Action: This Component has been Revised)

Hybrid mini-grid systems installed (Number) 0.00 45.00


Rationale:

Unanticipated cost increases led to the reduction of the hybrid mini-grids to be installed under the project from 50 to approximately 45.

Number of Solar Home systems installed (Number) 0.00 6,860.00


Rationale:

The target value increases from 2,440 to 6,860 to reflect the additional 4,420 solar home systems supported by the PHRD grant.

Additional connections to mini-grids (Number) 0.00 9,770.00


Rationale:

The target value for remains unchanged.

Distribution lines constructed or rehabilitated under the project (Kilometers)

0.00 225.00


Rationale:

The reduction of the target value from 250 to 225 km reflects the fact that number of hybrid mini-grids has been reduced to 45, compared to the 50 originally planned

Distribution lines constructed under the project (Kilometers) 0.00 225.00


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Number of CFLs or LEDs distributed (Number) 0.00 58,700.00


Rationale:

The target value is increased from 36,600 to 58,700 to reflect the fact that the PHRD will support the dissemination of 22,100 LEDs in additional to the CFLs disseminated undder the GPOBA-funded activities.

Component 2: Development of Off-grid Lighting Markets and Energy Efficiency

Number of solar lanterns disseminated (Number) 0.00 110,800.00


Rationale:

The target value is revised from 110,000 to 110,800 to account for the additional 800 appliances supported by the PHRD grant

Number of Energy efficient equipment for social infrastructure distributed (Number)

0.00 50.00


Rationale:

The target value remains unchanged.

Localities reached by information and communication campaigns (Number) 0.00 50.00


Rationale:


Component 3: Project Management Support and Capacity Building


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Number of persons trained under the project (Number) 0.00 420.00


Rationale:


Studies related to rural electrification completed (Number) 0.00 4.00


Rationale:


Project related grievances registered under the project grievance redress mechanism (GRM) and addressed (Percentage)

0.00 100.00

Action: This indicator is New

IO Table SPACE

Monitoring & Evaluation Plan: PDO Indicators Mapped

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

People provided with access to electricity under the project by household connections - other renewable energy - off grid

This indicator measures the number of people living in the localities covered by the mini-grids based on the average household size.

Annual

AMADER's progress reports

Geo-enabled monitoring and supervision tool Field surveys

AMADER

Direct project beneficiaries

This indicator measures the number of people that directly benefit from increased access to

Annual

AMADER's progress reports Independent

Geo-enabled monitoring and supervision tool Field surveys

AMADER


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modern energy services as a result of the project

verification audit reports

Female beneficiaries

The indicator measures the percentage of female directly benefiting from improved access to modern energy services as a result of the project

Annual

AMADER's progress reports

Field surveys

AMADER

Annual generation of electricity from renewable energies (solar)

This indicator measures the annual energy generated from the solar capacity installed under the project

Annual

AMADER´s progress reports Owner's engineer reports Independent verification audit reports

Field visits Meter reading

AMADER

Generation Capacity of Renewable Energy (other than hydropower) constructed

This indicator measures the capacity of solar energy procured under the project. This is a combination of the solar PV capacity of the hybrid mini-grids and that of the solar home systems.

Quarterly

AMADER´s quarterly project reports Owner's engineer reports Independent verification audits.

Geo-enabled monitoring and supervision tool Field visits

AMADER

Installed solar power


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Annual greenhouse gas emission reductions

This indicator measures the annual avoided GHG emission (in tons of CO2 equivalent) resulting from the hybridization of the mini-grids and the installation of the solar home systems

Annual

AMADER´s reports

Calculation based on the annual energy generated from solar technologies multiplied by a grid emission factor of grid-emission factor of 793.7 TCO2eq per GWh.

AMADER

ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Hybrid mini-grid systems installed

This indicator measures the number of hybrid mini-grid constructed or rehabilitated under the project.

Quarterly

AMADER's quarterly progress reports Owner's engineer reports

Field visits Geo-enabled monitoring and supervision tool

AMADER

Number of Solar Home systems installed

This indicator measures the number of solar home systems installed as a result of the project.

Quarterly

AMADER's quarterly project reports Independent verification audit reports


AMADER


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Additional connections to mini-grids

This indicator measures the number of new connections to the hybrid mini-grid constructed or rehabilitated under the project

Quarterly


Geo-enabled monitoring and evaluation tool Field visits

AMADER

Distribution lines constructed or rehabilitated under the project

This indicator measures the length of the medium or low voltage distribution lines constructed or rehabilitated under the project.

Quarterly

AMADER's quarterly project reports Operators' reports Owner's engineer reports

Geo-enabled monitoring and supervision tool Field visits

AMADER

Distribution lines constructed under the project

Quarterly

AMADER

Number of CFLs or LEDs distributed Quarterly


Field visits

Quarterly

Number of solar lanterns disseminated This indicator measures the number of solar lanterns

Quarterly

AMADER's quarterly

Geo-enabled monitoring and evaluation tool

AMADER


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and pico-PV appliances distributed or solar under the project.

progress reports Database recording solar lantern sales Independent verification reports

Database entries Field visits

Number of Energy efficient equipment for social infrastructure distributed

This indicator measures the number of energy efficient appliances purchased by the project and distributed to women-led associations and community service facilities in the localities covered by the project.

Quarterly

AMADER's quarterly reports


AMADER

Localities reached by information and communication campaigns

This indicator measures the number of information and customer awareness campaigns conducted in the localities covered by the project, assuming one project per locality

Quarterly

AMADER's project reports

AMADER

Number of persons trained under the project

Quarterly

AMADER's quarterly project reports Training / workshop agenda, attendance lists

Desktop review of documentary evidence Geo-enabled monitoring and supervision tool Survey of beneficiaries

AMADER


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and other documentary evidence (pictures, etc...)

Studies related to rural electrification completed

Annually

AMADER's project reports Documentary evidence resulting from the studies (e.g. reports produced)

Desktop review of documentary evidence (reports)

AMADER

Project related grievances registered under the project grievance redress mechanism (GRM) and addressed

ME IO Table SPACE


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ANNEX 1: ECONOMIC ANALYSIS

1. This analysis below is an update of the economic analysis conducted under the parent project. It assesses the project’s development impact in terms of expected costs and benefits and considers the impact of avoided GHG emissions.

2. General assumptions. With the proposed AF, the project will finance the introduction of PV solar generation in at least 45 rural mini-grids currently operating purely on diesel generation and will facilitate access to electricity for approximately 18,000 rural households either through mini-grid connections or through SHS. The analysis considers both actual results achieved under the parent project and those anticipated under the activities supported by the proposed AF. The economic discount rate is assumed to be 5 percent, or twice the value of Mali’s long-term inflation rate. The general assumptions to the economic model are presented in Table 1.1.

Table 1.1. General Assumptions

Designation Value Unit Comment

Exchange rate 560 XOF per US$

Economic discount rate 5%

Household connections to mini-grids

Number of connections 9,072

Actual value results achieved

Specific consumption 240 kWh/year/household 20 kWh/month for 10–12 hours supply

Service fee 30,000 XOF/year/household Actual service fee

Average tariff 225 XOF/kWh Actual average tariff

Households connections to SHS

Number of connections - GPOBA 4,437

Actual results achieved

Number of connections - PHRD 4,420

Expected under the proposed AF

Total 8,857

Average capacity per SHS 157 Wp

Service fee 36,000 XOF/year Flat fee - actual value

3. The estimation of renewable energy generation is estimated on the targeted load factor of PV (21 percent reflecting Mali’s conditions). Generation from PV is adjusted to reflect storage losses in batteries (estimated at 5 percent). Electricity generated from the mini-grid and the SHS is estimated at 12 GWh and 2.5 GWh, respectively. Detailed calculations are presented in Table 1.2.

Table 1.2. Renewable Energy Generation

Value Unit

Technical assumptions

Load factor 0.21

Losses on storage 0.05

Total installed PV capacity 6.7 MWp


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Value Unit

Impact of the installation of 1 kWp

Capacity 0.001 MWp

Load factor 21%

Gross annual PV generation 1.84 MWh

Proportion stored in batteries 40%

Losses on storage 5%

Net incremental PV generation 1.80 MWh

Impact of the installation of hybridization under the project

Incremental PV generation - mini-grids 12,079 MWh

Incremental PV generation - SHS 2,507 MWh

4. Avoided cost of thermal generation. The savings on fossil fuel-based generation are based on a cost estimate of diesel-based generation close to US¢42 per kWh. This high unit cost reflects factors specific to rural areas in Mali (high costs of diesel due to transportation and logistical costs, low engine efficiency related to small size, sub-optimal load factor, high cost of maintenance, and so on). Table 1.3 outlines the assumptions and the calculations.

Table 1.3. Cost of Thermal Generation

Value Unit

Diesel prices 650 XOF/l

Density 830 g/l

Specific consumption 260 g/kWh

Ancillary losses 3%

Fuel cost per net kWh 198 XOF/kWh

Lubricants 7.3 XOF/kWh

Other variable (spare parts, filters, and so on) 5 XOF/kWh

Genset tear and wear 25 XOF/kWh

Cost of thermal generation 235 XOF/kWh

0.42 US$/kWh

5. Investment costs are based on actual disbursements under the parent project for completed activities, payment commitments, and scale-up activities financed under the proposed AF. These costs include infrastructure investment, studies, construction supervision activities, and major equipment replacement (for example, batteries) during the life cycle of the assets. Routine operation and maintenance activities for the solar plant and distribution network represents 2 percent of the infrastructure cost (including contingencies).


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Table 1.4. Life Cycle Investment and Operating Cost Summary

Designation Value Unit

Hybrid systems

Plant, property, and equipment 21,228,530,207 XOF

Feasibility studies 390,909,771 XOF

Socio-environmental studies 205,610,863 XOF

Construction supervision 845,972,147 XOF

Sub-total 22,671,022,988 XOF

Network extension and densification

Feasibility studies 30,000,000 XOF

Network extension works 2,094,332,914 XOF

GPOBA - household connections 2,511,002,170 XOF

PHRD - household connections 1,384,320,000 XOF

Sub-total 6,019,655,084 XOF

Contingencies 1,120,000,000 XOF

Total 29,810,678,070 XOF

Equipment replacement cost (batteries, and so on)

2,267,102,299 XOF

Operation and maintenance 488,857,262 XOF

6. GHG accounting was conducted under the parent project. GHG emissions reduction data were updated to consider the higher impact of the 6.7 MWp solar PV generation from the hybrid systems, and 1.4 MWp from the SHS. Overall, the project is expected to generate approximately 14.6 GWh per year from solar resources and lead to avoided GHG emissions equivalent to 11,577 tCO2eq19 annually, and 231,534 tCO2eq over the 20-year lifetime of the project.

7. The benefits from hybridization will materialize as a significant reduction in fuel cost (which will vary depending on site characteristics and on the substitution and rate achieved). The net benefits will be reallocated through the existing mechanisms for price adjustment for rural electricity concessions. The bulk of the benefits will be passed on to consumers (for existing consumers through extended service hours, more reliable power, and additional connections). With a large share of renewable generation, operators will benefit from more stable operating expenditures which will strengthen their business model and financial viability (reduced exposure to fuel price volatility and less frequent need to negotiate price adjustments with AMADER and village committees).

8. For existing mini-grid customers, the benefits from the project arise from extended service hours and more reliable power supply. New customers can switch to electricity consumption to substitute costly alternative source of energy (primarily lighting with kerosene lamps and batteries, cell phone recharge and batteries). By switching to electricity for current energy usages, the typical household connected under the project would benefit from a reduction in energy costs for an identical level of service (typically from more than US$15 per month to about US$12 per month for an average electricity consumption of

19 Considering an average GHG grid-emission factor of 793.7 TCO2eq per GWh.


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20 kWh supplied through a mini-grid, and approximately US$6 per month for people connected through SHS).

9. Given the reduction in energy costs brought by electrification, one should also expect an increase in electricity consumption beyond pure substitution (for example, increase in the number of electrical household appliances and development of productive uses of electricity). This increase is not considered in the estimation of the project benefits, which is conservative from a methodological standpoint because it does not assume any consumer surplus beyond the substitution effect.

10. Overall results. The net economic benefits from the project arise from the substitution of diesel-based generation with renewable energy, and the increased access to electricity services by people living in rural areas. Assuming a project life span of 20 years and economic discount rate of 5 percent, the project yields an EIRR of 14.2 percent for an ENPV of US$39.1 million.

Table 1.5. Summary of Economic Analysis Calculations

11. Sensitivities. The economic value of the project remains robust with XOF / US$ exchange rate fluctuations, changes in the economic discount rate, or in the value of carbon benefits. However, it is significantly sensitive to the lifespan of the project’s assets; the NPV becomes negative when their useful life is below eight years. Thus, the sustainability of the infrastructure is key to the project’s economic value.

Table 1.6. Sensitivity Table

Switching Values Results

Parameter Value EIRR (%) ENPV (US$ million)

Exchange rate (XOF to US$) 600 14.3 36.9

500 14.1 43.1

Project lifespan (years) 15 12.7 24.9

10 8.3 7.0

7 2.4 -4.0

Economic discount rate (%) 12 14.2 4.4

Social value of carbon Low scenario 13.99 38.1

2014 2019 2024 2029 2034 2039

Hybrid mini-grids lifespan 20 yesr 0 5 10 15 20

Investment cost (57,281,751) US$ (1,396) (22,049,057) - (4,048,397) - -

Operating cost (872,959) US$ - - (43,648) (43,648) (43,648) (43,648)

Avoided cost of thermal generation 117,962,029 US$ - (3,827,111) 6,115,735 6,115,735 6,115,735 6,115,735

Electricity revenues (HH connection by mini-grid) 29,937,600 US$ - 1,360,800 1,360,800 1,360,800 1,360,800 1,360,800

Electricity revenues (HH connection by SHS) 12,100,114 US$ - 427,307 569,379 569,379 569,379 569,379

Net economic benefit 101,845,033 US$ (1,396) (24,088,061) 8,002,266 3,953,869 8,002,266 8,002,266

EIRR 13.06%

ENPV 33,638,098 US$

Annual avoided GHG emissions 239,773 TCO2eq - 7,244.5 11,576.7 11,576.7 11,576.7 11,576.7

Social cost of carbon - base scenario - 2014 real US$/TCO2eq 33.9 40 48 56 63

Total net economic benefit (accounting for global externalities) 113,438,122 US$ (1,396) (23,842,203) 8,469,584 4,512,421 8,645,148 8,735,264

Total EIRR (accounting for global externalities) 14.18%

Total ENPV (accounting for global externalities) 39,110,674 US$


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ANNEX 2: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN

1. The Recipient will carry out procurement under the proposed project in accordance with the World Bank’s ‘Procurement Regulations for IPF Borrowers’ (Procurement Regulations) dated July 2016 and revised in November 2017 and August 2018 under the New Procurement Framework (NPF); the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’, dated October 15, 2006, and revised in January 2011 and as of July 1, 2016; and other provisions stipulated in the AF Agreement.

2. All procuring entities as well as bidders and service providers, that is, suppliers, contractors, and consultants shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 3.32 and Annex IV of the Procurement Regulations.

3. The Recipient shall prepare and submit to the World Bank a General Procurement Notice (GPN) and the World Bank will arrange for publication of GPN in United Nations Development Business (UNDB) online and on the World Bank’s external website. The Recipient may also publish it in at least one national newspaper.

4. The Recipient shall publish the Specific Procurement Notices (SPNs) for all goods, works, non-consulting services, and consulting services, and the Requests for Expressions of Interest (REOIs) on its free access websites, if available, and in at least one newspaper of national circulation in the Recipient’s country, and in the official gazette. For open international procurement selection of consultants using an international short list, the Recipient shall also publish the SPN in UNDB online and, if possible, in an international newspaper of wide circulation; and the World Bank arranges for the simultaneous publication of the SPN on its external website.

Institutional Arrangements

5. As the existing PIU, AMADER will be responsible for the coordination and day-to-day management of the proposed project. The PIU will be responsible for the project planning and procurement management. The coordinator will be responsible for decision making during the procurement process. The PIU will also update the Project Implementation Manual (including the section on procurement procedures) that will describe in detail the processes and procedures related to the implementation of the proposed activities.

6. Filing and record keeping. The Procurement Procedures Manual will set out detailed procedures for maintaining and providing readily available access to project procurement records, in compliance with the Financing Agreement. Archiving room will be available and the PIU will assign one person responsible for maintaining the records.

7. The recruitment of civil servants as individual consultants or as part of the team of consulting firms will abide by the provisions of paragraph 3.23 (d) of the Procurement Regulations.

8. Procurement plan. The Recipient and the PIU prepared a detailed 18-month Procurement Plan, which was agreed upon by the Government and the World Bank during the negotiations. The Procurement


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Plan will be updated in agreement with the World Bank team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. It has been disclosed on the World Bank’s external website.

9. The PIU will carry out the procurement necessary for the project implementation. It procures goods, works, or services for the project as included in the Procurement Plan and agreed with the World Bank.

10. Training, workshops, study tours, and conferences. Training activities would comprise workshops and training, based on individual needs, as well as group requirements, on-the-job training, and hiring consultants for developing training materials and conducting training. Selection of consultants for training services follows the requirements for selection of consultants above. All training and workshop activities (other than consulting services) would be carried out on the basis of approved Annual Work Plans/Training Plans that would identify the general framework of training activities for the year, including the (a) type of training or workshop; (b) personnel to be trained; (c) institutions that would conduct the training and reason for selection of this particular institution; (d) justification for the training, how it would lead to effective performance and implementation of the project and or sector; (e) duration of the proposed training; and (f) cost estimate of the training. A report by the trainees, including completion certificate/diploma upon completion of training, shall be provided to the project coordinator and will be kept as parts of the records, and will be shared with the World Bank if required.

11. A detailed training and workshops plan giving the nature of training/workshop, number of trainees/participants, duration, staff months, timing, and estimated cost will be submitted to IDA for review and approval before initiating the process. The selection methods will derive from the activity requirement, schedule, and circumstance. After the training, the beneficiaries will be requested to submit a brief report indicating what skills have been acquired and how these skills will contribute to enhance their performance and contribute to the attainment of the project objective.

12. Operational costs. Operational costs financed by the project would be incremental expenses incurred by the PIU on account of the project implementation, including in-country travel; office materials and supplies (stationary and other consumables but not limited to the purchase of equipment); office rentals and maintenance; utilities (including electricity and water); communication costs (including telephone and Internet charges); equipment rental; operation, maintenance, and repair; transport cost of the staff related to supervision activities in the field (including per diem). Such services’ needs will be procured using the procurement procedures specified in the Project Implementation Manual and accepted and approved by the World Bank.

13. Procurement manual. Procurement arrangements, roles and responsibilities, methods, and requirements for carrying out procurement shall be elaborated in detail in the Project Implementation Manual, which shall be updated by the Recipient based on the Procurement Regulations, and approved by the World Bank.

14. Procurement methods. The Recipient will use the procurement methods and market approach in accordance with the Procurement Regulations.


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15. The open national market approach is a competitive bidding procedure normally used for public procurement in the country of the Recipient and may be used to procure goods, works, or non-consultant services provided it meets the requirements of paragraphs 5.3 to 5.6 of the Procurement Regulations.

Table 2.1. Requirements and Actions for National Open Competitive Procurement

Number Requirements Actions

1 Open advertising of the procurement opportunity at the national level

The advertising must be extended to all contracts through the inclusion of all contracts in the Procurement Plan and its publication.

2 The procurement is open to eligible firms from any country

None

3 The request for bids/request for proposals will require that bidders/proposers submitting bids/proposals present signed acceptance at the time of bidding which will be incorporated in any resulting contracts, confirming application of, and compliance with, the World Bank’s Anti-Corruption Guidelines (including without limitation the World Bank’s right to sanction and the World Bank’s inspection and audit)

Reinforce the related provisions (Public Procurement Code art. 29/Code of ethics and professional conduct in Public Procurement art. 8, 11, 12, 13, 28, 38, 39, 40, 41, 42, 44, and 47) by considering the aspects related to the World Bank’s Anti-Corruption Guidelines (including without limitation the World Bank’s right to sanction and the World Bank’s inspection and audit rights). Introducing a template of this acceptance in the bidding documents. World Bank-approved template will be provided.

4 Contracts with appropriate allocation of responsibilities, risks, and liabilities

Update and consider the required new elements (in particular to strengthen environmental and social performance, health, and safety)

5 Publication of contract award information The advertising must be extended to all contracts (the field of application of the public procurement code or not).

6 Rights for the World Bank to review procurement documents and activities

The requirement must be included in the bidding documents to grant rights to the World Bank to review procurement documentation and activities. The Legal Agreement may also allow this provision.

7 An effective complaints mechanism None

8 Maintenance of records of the procurement process

The requirement must be included in the bidding documents and in the Legal Agreement. The Recipient must spell out the practical modalities and the appropriate documentation to archive in the Procurement Manual of procedures.

16. The thresholds for particular market approaches and procurement methods and the World Bank’s prior review requirements are also provided in Table 2.2.


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Table 2.2. Thresholds for Procurement Methods and Prior Review

No. Expenditure

Category

Contract (C) Value Thresholda

(eq. US$) Procurement Method

Contracts Subject to Prior Review/(eq. US$)

1 Works (including turnkey, supply and installation of plant and equipment, and PPP)

C ≥ 15,000,000 Open competition international market approach

≥15,000,000

200,000 < C < 15,000,000

Open competition national market approach

None

C ≤ 200,000 Request for quotation None

2 Goods, IT, and non-consulting services

C ≥ 3,000,000 Open competition international market approach

≥4,000,000

100,000 < C < 3,000,000

Open competition national market approach

None All contracts at or above US$3 million are subject to international advertising and the use of the bidding documents are agreed with the World Bank

C ≤ 100,000 Request for quotation None

3 National short list for selection of consultant firms

C < 200,000 Consulting services None

C ≤ 400,000 Engineering and construction supervision

None

4 International short list for selection of consultant firms

C ≥ 200,000 Consulting services ≥2,000,000

C > 400,000 Engineering and construction supervision

≥2,000,000

5 Selection of individual consultants

All values All approaches ≥400,000

6 Direct contracting

All values As agreed in the Procurement Plan

7 Training, workshops, study tours

All values Based on approved annual work plan and budgets

Note. a. These thresholds are for the initial Procurement Plan for the first 18 months. The thresholds will be revised periodically based on reassessment of risks. All contracts not subject to prior review will be post reviewed.

17. Procurement risk rating. The project procurement risk before the mitigation measures is Moderate. The risk can be reduced to a residual rating of Low upon consideration of successful implementation of the mitigation measures.

18. Support plan. A support plan for strengthening procurement capacity was discussed and agreed with AMADER (Table 2.3). It will be updated during the implementation period, as needed.


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Table 2.3. Support Plan for Strengthening Procurement Capacity

No. Key Risks Mitigation Actions By Whom

1 Absence of a Procurement Procedures Manual based on Procurement Regulations

Update the existing Project Implementation Manual with a section on procurement detailing all applicable procedures, instructions, and guidance for handling procurement, standard bidding documents, and other standard procurement documents to be used under the Procurement Regulations. The updated Project Implementation Manual will outline the interaction between the project stakeholders responsible for procurement

PIU

2 The procurement team and technical staff involved in procurement processes have not mastered the World Bank’s NPF and its tools

Train the procurement specialist, the technical experts, and the tender committee members on the World Bank’s Procurement Regulations

PIU/World Bank

3 Lack of local qualified bidders in certain regions facing insecurity

Strengthen the capacity of bidders (suppliers, firms, and so on) to increase their participation in procurement process for better delivery. Simplify procedures to enable a good execution of contract in the context of urgency and insecurity

PIU

19. Procurement supervision. In addition to the prior review and implementation support mission carried out by the World Bank, it is recommended that at least two missions be carried out each year, with one visit to the field to carry out post review of procurement actions.

20. Post review procurement. Post reviews can be done either by World Bank staff or consultants hired by the World Bank. They may also be carried out by third parties such as supreme audit institutions, procurement regulatory authorities, consultancy firms, NGOs, and others, according to procedures acceptable to the World Bank to ascertain compliance with procurement procedures as defined in the legal documents. The procurement post reviews should cover at least 20 percent of contracts across the World Bank portfolio that have not been prior reviewed in a financial year. The sampling is risk based and considers (a) the project procurement risk rating, with the riskier projects having a larger sample and (b) the contract risk rating, to ensure that riskier contracts constitute a higher proportion of the sample. Post reviews contribute to the overall procurement performance rating of the project based on the rating of the post procurement review and provide a basis for updating the project procurement risk and the risk mitigation plan.

21. Oversight and monitoring arrangements for procurement. The Project Implementation Manual

prepared under the parent project will be updated and submitted for the World Bank’s approval. It will

define the project’s internal organization and its implementation procedures. It will include, among other

things, all relevant procedures for calling for bids, selecting consultants, and awarding contracts. The

project monitoring arrangements for procurement have been specified. Detailed procurement

documentation (namely the PPSD) may be referenced as such and retained in the project files. The

detailed 18-month Procurement Plan has been agreed with the Recipient and uploaded on the World

Bank’s website.


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ANNEX 3: PROJECT AREA MAP

Documents

The World Bankdocuments.worldbank.org/curated/en/...Wolloh Team Member Program Assistant GEE08 Madina Tall Team Member Energy Consultant GEE07 Rahmoune Essalhi Team Member Procurement