Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 67296-AFR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 93.3 MILLION

(US$144.5 MILLION EQUIVALENT)

TO THE

REPUBLIC OF LIBERIA

FOR A

WEST AFRICAN POWER POOL (WAPP) - COTE D'IVOIRE, LIBERIA, SIERRA LEONE, AND

GUINEA (CLSG) POWER INTERCONNECTION PROJECT

AND A

PROPOSED GRANT

IN THE AMOUNT OF SDR 20.4 MILLION

(US$31.5 MILLION EQUIVALENT)

TO THE

WEST AFRICAN POWER POOL (WAPP)

FOR A

WAPP INTEGRATION AND TECHNICAL ASSISTANCE PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE CLSG POWER SYSTEM RE-DEVELOPMENT

SUB-PROGRAM OF THE WAPP APL PROGRAM

May 4, 2012

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 March 31, 2012)

€ 1 = US$ 1.33

SDR 1 = US$ 0.64554

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank

CEB Communauté Electrique du Bénin (Electric Community of Benin)

CLSG Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea

ECOWAS Economic Community of West African States

EIB European Investment Bank

EEP ECOWAS Energy Protocol

ERERA ECOWAS Regional Electricity Regulatory Authority

ESIA Environmental and Social Impact Assessment

ESMP Environmental and Social Management Plan

FIRR Financial Internal Rate of Return

FMM Financial Management Manual

FNPV Financial net present value

JIC Joint Implementation Committee (see also WAPP JIC below)

HV High voltage

IDA International Development Association

IDC Interest during construction

IPA International Project Agreement

IPP Independent Power Producer

GRIDCO Ghana Grid Company Limited

GWh Giga Watt hours

KfW Kreditanstalt für Wiederaufbau

km Kilometer

kV Kilo Volt

kWh Kilo Watt hours

M&E Monitoring and Evaluation

MW Megawatt

NEPAD New Partnership for African Development

NPA National Power Authority (of Sierra Leone)

NPV Net present value

OMVG Organisation de Mise en Valeur du Fleuve Gambie (Organization for the

Development of the River Gambia)

OMVS Organisation de Mise en Valeur du Fleuve Sénégal (Orgnization for the

Development of the River Senegal)

OPGW Optical Fiber Ground Wire

ii

PPA Power Purchase Agreement

PIPES Planning, Investment Programming and Environmental Safeguards Department at

the WAPP

RAP Resettlement Action Plan

RIAS Regional Integration Assistance Strategy

RoW Right-of-way

RTC CLSG Regional Transmission Company

SCADA Supervisory Control And Data Acquisition

SIEPAC Sistema de Interconexión Eléctrica de los Países de América Central or Central

American Electrical Interconnection System

SOGEM Société de Gestion de l‟Energie de Manantali (Energy Management Company for

Manantali)

SONABEL Société Nationale d‟Electricité de Burkina Faso (National Power Company of

Burkina Faso)

SPC Special Purpose Company

SWER Single wire earth return system

SWS Shield wire system

TSA Transmission Service Agreement

TSO Transmission System Operator

WAPP West African Power Pool

WAPP JIC West African Power Pool Joint Implementation Committee

Regional Vice President: Obiageli K. Ezekwesili

Acting Regional Director:

Country Director:

Elizabeth Laura Lule

Yusupha Crookes

Sector Director: Jamal Saghir

Sector Manager: Lucio Monari

Task Team Leader: Fanny Missfeldt-Ringius

iii

LIBERIA

West African Power Pool (WAPP) - Côte d'Ivoire, Sierra Leone, Liberia, and Guinea

Power Interconnection Project

WAPP

WAPP Integration and Technical Assistance Project

TABLE OF CONTENTS

Page

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

A. Regional Context .......................................................................................................... 1

B. Sectoral and Institutional Context ................................................................................. 6

C. Higher Level Objectives to which the Project Contributes .......................................... 8

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................9

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

B. Project Beneficiaries .................................................................................................... 10

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

III. PROJECT DESCRIPTION ............................................................................................11

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

B. Project Financing ........................................................................................................ 15

Lending Instrument ........................................................................................................... 15

Project Cost and Financing ............................................................................................... 15

C. Program Objective and Phases.................................................................................... 17

D. Lessons Learned and Reflected in the Project Design ................................................ 17

IV. IMPLEMENTATION .....................................................................................................21

A. Institutional and Implementation Arrangements ........................................................ 21

B. Results Monitoring and Evaluation ............................................................................ 22

C. Sustainability............................................................................................................... 23

V. KEY RISKS AND MITIGATION MEASURES ..........................................................24

A. Risk Ratings Summary Table ..................................................................................... 24

B. Overall Risk Rating Explanation ................................................................................ 24

iv

VI. APPRAISAL SUMMARY ..............................................................................................25

A. Economic and Financial Analyses .............................................................................. 25

B. Technical ..................................................................................................................... 27

C. Financial Management ................................................................................................ 27

D. Procurement ................................................................................................................ 28

E. Environmental and Social Safeguards ........................................................................ 28

F. Environmental and Social Issues ................................................................................. 35

Annex 1: Results Framework and Monitoring for the WAPP CLSG Power Interconnection

Project ...........................................................................................................................................37

Annex 2: Results Framework and Monitoring for the WAPP Integration and Technical

Assistance Project ........................................................................................................................40

Annex 3: Detailed Project Description .......................................................................................41

Annex 4: Implementation Arrangements ..................................................................................53

Annex 5 Operational Risk Assessment Framework (ORAF) ..................................................70

Annex 6: Implementation Support Plan ....................................................................................73

Annex 7: Economic and Financial Analysis ..............................................................................78

Annex 8: Trading Potential and Arrangements ......................................................................102

Annex 9: Institutional Structure for the CLSG Interconnector ............................................107

Annex 10: Implementation Status of Projects of the West Africa Power Pool (WAPP)

Adaptable Lending Program ....................................................................................................115

Annex 11: Environmental and Social Safeguards ..................................................................121

v

PAD DATA SHEET

Liberia

West African Power Pool (WAPP) - Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea

Power Interconnection Project

WAPP

WAPP Integration and Technical Assistance Project

PROJECT APPRAISAL DOCUMENT .

Africa

AFTEG

.

Basic Information

Date: May 4, 2012 Sectors: Power (90%); General Energy Sector (10%)

Country Director: Yusupha Crookes Themes: Infrastructure services for private sector

Sector

Manager/Director:

Lucio Monari / Jamal Saghir EA Category: A (Full Assessment)

Project ID: P113266

Lending Instrument: Adaptable Program Loan Team Leader(s): Fanny Missfeldt-Ringius

Joint IFC: No .

Recipient: The Republic of Liberia, The West African Power Pool

Responsible Agency: The CLSG Regional Transmission Company

Contact: Shahid Mohammed Title: Chief Executive Officer

Telephone No.: +231 880 719963 Email: smohammad@mhi.mb.ca

Responsible Agency: The West African Power Pool (WAPP) Secretariat

Contact: Amadou Diallo Title: Secretary General

Telephone No.: +229 21 37 71 44 Email: adiallo@ecowapp.org .

Project Implementation Period: Start Date: May 31, 2012 End Date: June 30, 2017

Expected Effectiveness Date: For the WAPP CLSG Project - December 1, 2012; For the WAPP Integration and Technical Assistance Project – June

15, 2012

Expected Closing Date: December 31, 2017 .

Project Financing Data(US$M)

[ ] Loan [ X ] Grant Term:

Standard IDA credit terms [X] Credit [ ] Guarantee

For Loans/Credits/Others

Total Project Cost : US$476 million Total Bank Financing : US$ 176 million

Total Cofinancing : US$300 million Financing Gap : None .

mailto:smohammad@mhi.mb.camailto:adiallo@ecowapp.org

vi

Financing Source Amount(US$M)

BORROWER/RECIPIENT 21

IBRD 0

IDA: New 176

IDA: Recommitted 0

Others, of which AfDB

EIB

KfW

279

133

105

41

Financing Gap 0

Total 476 .

Expected Disbursements (in USD Million)

Fiscal Year FY13 FY14 FY15 FY16 FY17 FY18

Annual 1 20 40 50 60 5

Cumulative 1 21 61 111 171 176 .

Project Development Objective(s)

The Project development objectives of the WAPP CSLG Project are: (i) to reduce the cost of and increase the electricity supply at utility level; and (ii) to increase the export capability of Côte d'Ivoire.

The Project development objective of the WAPP Integration and Technical Assistance Project is to increase the technical integration of the WAPP‟s network. .

Components

Component Name Cost (USD Million)

Project 1: WAPP CLSG Power Interconnection 444.4

Component 1.A: Power interconnection between CLSG 327.5

Component 1.B: Institutional framework and project oversight 45.4

Unallocated 71.5

Project 2: WAPP Integration and Technical Assistance Project 31.5

Component 2.A: Supply alternatives studies and project preparation support 10.0

Component 2.B: Technical assistance and integration of WAPP interconnected

network

21.5

.

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .

Does the project require any waivers of Bank policies? Yes [ X] No [ ]

Have these been approved by Bank management? Yes [X ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [X] No [ ]

Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

vii

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Special Conditions for Effectiveness for the WAPP CLSG Power Interconnection Project

Name Justification

(a) The Subsidiary Credit Implementation Agreement has been

executed on behalf of the Recipient and the Regional

Transmission Company in form and substance satisfactory to the

Association.

The Subsidiary Credit Implementation Agreement is expected to be

entered into between Liberia and the RTC to pass onto the Regional

Transmission Company the entire proceeds of the credit for the

implementation of the Project. This agreement is expected to include

many of the conditions on the use of credit proceeds that would normally

be part of a Project Agreement with a Project implementing entity, and be

the vehicle by which Liberia will collect revenue to repay the credit.

(b) The execution and delivery of the Treaty on behalf of each

Participating Country has been duly ratified by all necessary

governmental action.

The Treaty provides the legal framework under which the entire Project

will be implemented (including for the Regional Transmission Company,

which is a creature of this instrument), and its ratification is necessary to

ensure enforceability of its obligations against each of the Participating

Countries.

(c) The execution and delivery of the International Project

Agreement, in form and substance satisfactory to the

Association, on behalf of each Participating Country and the

Regional Transmission Company, has been duly ratified or

authorized by all necessary governmental and/or corporate

action.

While the Treaty provides the legal framework for implementation of the

Project and the establishment of the RTC, the International Project

Agreement (IPA) provides all of the detailed mechanics for

operationalizing the Treaty‟s obligations and making the RTC operational.

It is an agreement between the Participating Countries and the RTC

whereby the Participating Countries grant the RTC the rights agreed to in

the Treaty and obligate the RTC to implement the Project. For example,

the IPA provides the RTC the right to the real property rights needed for

implementation of the Project, the protections it needs in the event of

action by a Participating Country in contravention of the terms of the

Treaty, the basic tariff methodology that forms the core of the company‟s

cost recovery, the obligations of the company with respect to the organs

set up by the Treaty to monitor its implementation for the Participating

Countries, the obligation of the Participating Countries (with which the

Association does not have any direct contractual relationship, aside from

Liberia) to provide the necessary financing for implementing the Project,

etc.

(d) The Establishment Agreements have been executed on

behalf of the Participating Countries and the Regional

Transmission Company in form and substance satisfactory to the

Association.

The Treaty stipulates that the RTC will enter into Establishment

Agreements with the Participating Countries in which the company will

establish offices to enable the company to carry out its obligations under

the IPA. Without such Establishment Agreements in place, it would be

very difficult, if not impossible, for the RTC to supervise construction of

the Project.

(e) The Power Purchase Agreement has been executed on behalf

of the Utilities in form and substance satisfactory to the

Association.

At the heart of the sustainability of the Project is the premise that

Participating Countries will enter into transactions that use the

transmission line constructed under Part A.1 of the Project. Although it is

difficult to stipulate specific conditions for these transactions, at a

minimum, there should be an anchor transaction agreement – a Power

Purchase Agreement - between one or more of the Utilities and/or other

generators in the Participating Countries to demonstrate the viability of

the Project.

viii

(f) The Transmission Service Agreement has been executed on

behalf of the Regional Transmission Company and an energy

user in form and substance satisfactory to the Association.

This condition relates to (e) above. As the RTC is expected to provide

transmission service only, there should be a Transmission Service

Agreement associated with the Power Purchase Agreement.

(g) Each of the Co-financing Agreements with Liberia 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.

The Project is being developed as a regional one with benefits to all of the

Participating Countries. As IDA is financing only a portion of the Project,

it is necessary to ensure that funding for Liberia is secured and available

for Project start-up.

(h) The Regional Transmission Company has been duly created,

established and made operational in the territory of one of the

Participating Countries, all in form and substance satisfactory to

the Association. As part of such requirements, there shall be in

place for the RTC: (i) the paid-in equity contribution pursuant to

the provisions of the Treaty, including the amount required on

behalf of each Participating Country to finance the Resettlement

costs and the Interest During Construction; (ii) the Shareholders‟

Agreement, in form and substance satisfactory to the

Association, signed and effective; (iii) the RTC Project

Implementation Manual, in form and substance satisfactory to

the Association, adopted; (iv) a financial management

assessment of the RTC completed to the satisfaction of the

Association; (v) the representatives of the RTC‟s shareholders

and the WAPP and two (2) independent directors appointed to

the RTC‟s Board of Directors; and (vi) its General Manager and

the key staff recruited, designated and/or appointed, all of them

under terms of reference and with qualifications and experience

satisfactory to the Association.

As a practical matter, the RTC needs to be fully constituted and

operational in order to undertake the various obligations and activities

expected of it. For example, in order to execute the IPA and the

Transmission Service Agreement, the company needs to have officers

appointed and empowered by the Board of Directors to bind the company.

Accordingly:

(a) The Utilities, as the RTC's shareholders, must enter into the

contemplated Shareholders Agreement that will govern their rights and

responsibilities as the RTC's shareholders;

(b) The shareholders must meet to appoint their own Directors to and

constitute the company‟s Board to allow the company to take corporate

action in accordance with the terms of its Articles of Association that is

annexed to the Treaty;

(c) the RTC Project Implementation Manual must be adopted, in form

and substance satisfactory to the Association, to allow the RTC to operate

in accordance with transparent principles and procedures consistent with

the Bank's requirements;

(d) The representatives of the RTC‟s shareholders and the WAPP and two

(2) independent directors must be appointed to the RTC‟s Board of

Directors; and

(e) The General Manager (and key staff) of the RTC must be recruited and

appointed by the Board, and the Board must give the General Manager the

authority to enter into the various agreements to bind the company.

In addition, because the financing plan for the RTC contemplates nominal

equity contributions by the company‟s shareholders ($17 million) to cover

the costs of implementing the ESMP and interest during construction, this

equity needs to be made available for the company to carry out its related

obligations. The Project assumes these costs to be the responsibility of

the Participating Countries under Component A-5.

Disbursement condition for withdrawal of the Credit proceeds

to finance the construction of the 225kV converter substation in Yekepa, Liberia: the Côte d‟Ivoire Co-financing Agreement

between Côte d‟Ivoire and the African Development Bank has

been executed and delivered and all conditions precedent to its

effectiveness or to the right of Côte d‟Ivoire to make

withdrawals thereunder have been fulfilled.

This co-financing is necessary to ensure the Liberia transmission line

financed by IDA can be operated and import power from Côte d‟Ivoire.

Special Conditions for Effectiveness for the WAPP Integration and Technical Assistance Project

WAPP shall have adopted the WAPP Project Implementation

Manual in form and substance satisfactory to the Association.

The WAPP Project Implementation Manual must be adopted, in form and

substance satisfactory to the Association, to allow the WAPP to operate in

accordance with transparent principles and procedures consistent with the

Bank's requirements.

ix

Legal Covenants for the WAPP CLSG Power Interconnection Project

Description Recurrent Due Date Frequency

The Association may suspend disbursements under the Credit if

the Guinea Financing Agreement and/or the Sierra Leone

Financing Agreements shall have failed to become effective.

No December 31, 2013 Once

The Recipient shall require the Regional Transmission

Company (RTC), except as the Association shall otherwise

agree, to maintain a debt service coverage ratio of at least 1.3

under terms and conditions that have been agreed upon with the

Association.

Yes Following effectiveness Annually

The Recipient shall cause the RTC to recruit a qualified and

experienced internal auditor and an accounts officer on the basis

of terms of reference and with qualifications and experience

satisfactory to the Association and to acquire and install an

accounting information system for the Project.

No 6 months after

effectiveness

Once

The Recipient shall cause the RTC to prepare and furnish to the

Association as part of the Project Report not later than forty-five

(45) days after the end of each quarter, interim unaudited

financial reports for the Project covering the quarter, in form

and substance satisfactory to the Association.

Yes Within 45 days after the

end of the quarter to

which the IFRs relate

Quarterly

The Recipient shall take all action required on its behalf to

ensure that the Project is implemented in accordance with the

provisions of the Liberia Environmental and Social Impact

Assessment (Liberia ESIA), the Liberia Environmental and

Social Management Plan (Liberia ESMP), and the Liberia

Resettlement Action Plan (Liberia RAP), all in a manner

satisfactory to the Association.

Yes

Following effectiveness

Ongoing

The Recipient shall cause the RTC to collect, compile and

furnish to the Association reports on the status of compliance

with the Environmental and Social Impact Assessments

(ESIAs), the Environmental and Social Management Plans

(ESMPs), and the Resettlement Action Plans (RAPs) for the

Participating Countries.

Yes Within a quarter

following effectiveness

Quarterly

The Recipient shall cause the RTC to acquire and install a

suitable accounting information system for the Project.

No 6 (six) months after

effectiveness

Once

The Recipient shall ensure that the RTC employ an operations

and maintenance contractor under terms of reference and with experience and qualifications satisfactory to the Association.

No Two (2) months before

the expected date of

completion of the

construction under

Component 1.A.1

Once

The Recipient shall require the RTC to carry out the Project

with due diligence and efficiency and in accordance with sound

technical, economic, energy, financial, managerial,

environmental, and social standards and practices satisfactory to

the Association, including in accordance with the provisions of

the ESMPs and the RAPs and pursuant to the RTC Project

Implementation Manual and the Anti-Corruption Guidelines

applicable to recipients of loan proceeds other than the

Recipient.

Yes Following effectiveness Ongoing

The Recipient shall ensure that the RTC conclude with the

WAPP a Control Area Agreement in form and substance

satisfactory to the Association.

No Six (6) months before the

expected date of

completion of the

construction under

Component 1.A.1

Once

x

The Recipient shall cause the RTC to review with the

Association the mid-term review report and, thereafter, take all

measures required to ensure the efficient completion of the

Project and the achievement of the objectives thereof.

No On or about January 31,

2015

Once

The Recipient shall exercise its rights and carry out its

obligations under the Subsidiary Credit Implementation

Agreement in such manner as to protect the interests of the

Recipient and the Association and to accomplish the purposes of

the Credit. Except as the Association shall otherwise agree, the

Recipient shall not assign, amend, abrogate or waive the

Subsidiary Credit Implementation Agreement or any of its

provisions.

Yes Following effectiveness Ongoing

Not later than six (6) months after the Effective Date: (i) to set

up an audit committee under terms of reference and with a

composition satisfactory to the Association to follow-up with

management on any issues raised in the annual audits, thereby

ensuring they properly addressed; and (ii) to develop an anti-

fraud and anti-corruption policy satisfactory to the Association

and set up an anti-fraud and anti-corruption committee under

terms of reference and with a composition satisfactory to the

Association to handle any fraud and corruption cases

No 6 months after

effectiveness

Once

No withdrawal shall be made for payments made prior to the

date of this Agreement, except that withdrawals up to an

aggregate amount not to exceed SDR 650,000 equivalent may

be made for payments made prior to this date but on or after

April 1, 2012, for Eligible Expenditures under Category (1)(b).

No Disbursement Condition

Legal Covenants for the WAPP Integration and Technical Assistance Project

Description Recurrent Due Date Frequency

Schedule 2, Section IV, B.1: No withdrawal shall be made for

payments made prior to the date of this Agreement, except that

withdrawals up to an aggregate amount not to exceed SDR

1,880,000 equivalent may be made for payments made prior to

this date but on or after June 20, 2011, for Eligible Expenditures

under Category (1)

No Disbursement Condition

.

Team Composition

Bank Staff

Name Title Specialization Unit

Fanny Missfeldt-Ringius Senior Energy Economist TTL and Economics AFTEG

Zayra Romo Energy Specialist Engineering AFTEG

Franklin Gbedey Energy Specialist Engineering AFTEG

Issa Diaw Senior Power Engineer Engineering AFTEG

Tjaarda Storm Van Leeuwen Consultant Inst. Framework & Financial Analysis AFTEG

Arnaud Braud Financial Analyst Financial Analysis AFTEG

Dukjoong Kim Financial Analyst Financial Analysis AFTEG

Marcelino Madrigal Senior Energy Specialist Trading SEGEN

Maria C. Cruz Lead Social Development

Specialist

Social Safeguards AFTCS

Paivi Koskinen-Lewis Social Development

Specialist

Social Safeguards SDV

xi

Robert Robelus Consultant Environmental Safeguards AFTWR

Allan Rotman Lead Procurement Specialist Procurement AFTPC

Itchi Ayindo Senior Procurement

Specialist

Procurement AFTPC

Mathias Gogohounga Procurement Specialist Procurement AFTPC

Patrick Umah-Teteh Senior Financial

Management Specialist

Financial management AFTFM

Alain Hinkati Financial Management

Specialist

Financial management AFTFM

Maxwell Bruku Dapaah Financial Management

Specialist

Financial management AFTFM

Luis M. Schwarz Senior Finance Officer Disbursement CTRLA

Claudia Pardiñas Ocaña Senior Counsel Law LEGAF

Sameh Mobarek Senior Counsel Law LEGPS

Anthony Molle Senior Counsel Law LEGAF

Anders Jensen M&E Specialist Monitoring and Evaluation AFTDE

Manuel Berlengiero Energy Specialist Economics AFTEG

Bipulendu Narayan Singh Operations Analyst Economics SEGES

Anta Lo-Loum Language Program Assistant Administrative and Client Support AFTEG

Non Bank Staff

Name Title Office Phone City

Fiona Woolf Legal Advisor - London .

Locations

Country First Administrative Division Location Planned Actual Comments

Côte d‟Ivoire Dix-Huit Montagnes Region (Departments of Man and Danane)

Man to border (Côte d‟Ivoire/Liberia).

Liberia Counties of Nimba, Grand Bassa, Montserrado,

Bomi, and Grand Cape Mount.

Border (Côte

d‟Ivoire/Liberia) and border

(Guinea/Liberia) -

Yekepa – Buchanan – Mount Coffee -

Monrovia – Mano –

border (Liberia/Sierra

Leone).

Sierra Leone Eastern province (Kenema and Kono districts),

Northern province (Bombali, Kambia,

Koinadugu and Tonkolili districts), and Southern province (Pujehun district).

Border

(Liberia/Sierra

Leone) – Kenema – Bikongor –

Bumbuna – Yiben –

Kamakwie – border (Sierra

Leone/Guinea).

Guinea Administrative regions of Kindia (Madina-Oula

and Sougueta), Labe (Linsan) and Nzerekore

(Nzerekore and Yalenzou).

Border

(Guinea/Liberia) -

Nzérékoré; and border (Sierra

Leone/Guinea) –

Linsan.

.

1

Liberia West African Power Pool (WAPP) Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea

Power Interconnection Project

And

WAPP

WAPP Integration and Technical Assistance Project

I. STRATEGIC CONTEXT

A. Regional Context

Regional Overview

1. The 15 member states1 of the Economic Community of West African States (ECOWAS) occupy some five million square kilometers and are currently home to about 250 million people.

Half of the present population lives in poverty, with per capita income barely above US$300 per

year. Despite the region‟s large energy endowment, the per capita consumption of electricity is

among the lowest in the world with approximately 171 kWh per capita and year in 2010.

2. Faced with this power system expansion challenge, ECOWAS Member States have acknowledged that past efforts to achieve national self-sufficiency in electricity supply have been

uneconomical due to the high cost of establishing power generation and transmission

infrastructure. They also acknowledge two major shortcomings in the region at the present time:

(a) low-cost, sizeable, and complex hydro-based power plants and systems are difficult to

develop in the national context alone, but are key to providing low-cost electricity in a region

that has among the highest electricity prices in the world, and (b) the lack of adequate

transmission infrastructure (within and between national power systems) is a key constraint in

the drive towards greater cooperation in power sector development.

ECOWAS Vision – West Africa Power Pool

3. To address these challenges ECOWAS has formed and put in place the West African Power Pool (WAPP) – a cooperative power pooling mechanism for integrating national power

system operations into a unified regional electricity market – with the expectation that this

mechanism would, over the medium to long term, assure their citizens a stable and reliable

electricity supply at affordable cost. To this end, ECOWAS states adopted an ECOWAS Energy

Policy in 1982 and decided to establish a West African Power Pool (WAPP) in 1999. To

operationalize this mission, the 29th Summit of the Heads of State and Governments of the

1 Benin, Burkina Faso, Cape Verde, Côte d‟Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria,

Senegal, Sierra Leone, and Togo.

2

ECOWAS Member States adopted the "Articles of Agreement," which formally set up the

WAPP Secretariat as a "Specialized Institution of ECOWAS."2

4. As a “flagship infrastructure project” of the New Partnership for African Development (NEPAD),

3 the WAPP directly contributes to the broader ECOWAS agenda to establish an open,

unified, regional economic space in West Africa. The vision for WAPP is also embodied in the

ECOWAS Energy Protocol (EEP) – that of creating a "level playing field" to facilitate the

balanced development of diverse energy resources of the ECOWAS Member States for their

collective economic benefit, through long-term energy sector co-operation, unimpeded energy

transit and increasing cross-border electricity trade. To this end, the WAPP has been helping

countries in the ECOWAS region to develop regional priority projects. These priority projects

are identified through a regional Masterplan, which is regularly updated, and subsequently

endorsed in WAPP fora. The Masterplan was most recently updated in December 2011.

5. In July 2006, the "WAPP Organization" was formally inaugurated as an all-inclusive organization of (public and private) electric power utilities based in ECOWAS member states.

The governance structures of the WAPP organization is constituted of, (i) the General Assembly,

which comprises representatives of all members and is the highest decision making body; (ii)

the Executive Board, which consists of six elected members and the Secretary General and is

responsible for policy, overseeing WAPP operations and planning for future development; (iii)

the WAPP Organizational Committees, which include the Engineering and Operations, the

Strategic Planning and the Finance & Human Resources Committees and are composed of

technical experts of WAPP Membership to provide support and advice to the Executive Board;

and, (iv) the WAPP Secretariat, which is the administrative organ headed by the Secretary

General and is responsible for the day-to-day operations of the WAPP.

6. The Implementation "road map" of the WAPP Infrastructure Program is based on realizing distinct but mutually reinforcing infrastructure sub-programs, which when fully

realized will converge into a unified, well functioning regional power pooling mechanism in

West Africa. The five (5) sub-programs being implemented by WAPP are the following (see

also Graph 1):

(a) Coastal Transmission Backbone Subprogram (Côte d'Ivoire, Ghana, Benin/Togo, Nigeria): aims to establish a robust interconnection link between the

ECOWAS Coastal Member States.

(b) Inter-zonal Transmission Hub Sub-program (Burkina Faso and Mali via Ghana, OMVS via Mali, Liberia-Sierra Leone-Guinea via Cote d'Ivoire): aims to

establish more secure, reliable transmission corridors for transfer of low cost

energy to displace diesel-based sources especially in Burkina Faso through Ghana

and Côte d‟Ivoire, and OMVS through Mali.

2 ECOWAS/ CEDEAO (2006). 29th Session of the Authority of Heads of State and Government. Decision A/Dec. 18/01/06

Adopting the Articles of Agreement Relating to the Establishment and functioning of the West African Power Pool, Niamey, 12

January 2006; and Decision A/Dec.20/01/06 Granting the Status of a Specialized Institution of ECOWAS to the WAPP

Organization. Niamey, 12 January 2006. 3 NEPAD was established to implement an integrated socio-economic development framework for Africa, and was formally

adopted at the 37th Summit of the Organisation for African Unity in July 2001.

3

(c) OMVG/OMVS Power System Development Subprogram (The Gambia, Guinea, Guinea Bissau, Mali, Senegal): aims to interconnect national systems of

The Gambia, Guinea, Guinea Bissau, Mali, Senegal and secure access to sources

of low cost energy to be built on the Gambia River, the Senegal River and the

Konkoure River Basins.

(d) North-core Transmission Sub-program (Nigeria, Niger, Burkina Faso, Benin): aims to upgrade and extend existing capacity to transfer low cost energy supply to

Niger, Burkina Faso, and northern Benin and Togo.

(e) Côte d'Ivoire–Liberia-Sierra Leone-Guinea Power System Re-development Subprogram (Côte d'Ivoire, Liberia, Sierra Leone, Guinea): aims to interconnect

Côte d'Ivoire, Liberia, Sierra Leone, and Guinea into the WAPP Energy System

and to develop the hydropower resources in the sub-region.

Figure 1: Implementation Roadmap of the Core WAPP Programs

Interconnecting Côte d’Ivoire, Liberia, Sierra Leone and Guinea

7. In early 2012, Liberia and Sierra Leone are still recovering from the civil wars that have devastated large parts of both countries, and – in the case of Liberia – led to the complete

destruction of it public power system. Guinea is also only stabilizing after getting to the brink of

4

civil war in 2010. Cote d‟Ivoire‟s situation only normalized in 2011. Both the power systems in

Sierra Leone and Guinea are marked by heavy investment needs. Electricity connection rates are

among the lowest in the world and the cost of generating power in these countries remains high,

primarily due to the small size of the power systems and the reliance on fossil fuel-based

generation. The unavailability of public power supply and high costs of power generation are

recognized to be one of the major impediments to economic recovery and poverty reduction in

Liberia, Sierra Leone, and Guinea.

8. Liberia is only slowly rebuilding its power utility Liberia Electricity Corporation (LEC) that had ceased operating during the civil war, and in early 2012 has about 5000 customer. In

Guinea‟s forest region, no grid-provided power is available. The national power utility,

Electricité de Guinea (EdG), has been unable to restore service in the forest region since the end

of the war in the area and there is still heavy load shedding in areas served by EDG. In Sierra-

Leone, public electricity services are currently only available in selected parts of Sierra Leone

for about 25 percent of the time only. The operations of the two utilities, the National Power

Authority (NPA) and the Bo Kenema Power Service Ltd, have been stagnant since the civil war.

9. However, the efforts that are underway in Liberia, Sierra Leone, and Guinea should both improve the current performance of the of the energy sectors and broaden the electricity access

rates. In Liberia, a management contractor, Manitoba Hydro International, has been in place

since July 2011. Since the contractor‟s arrival, both the technical and financial performance of

LEC has improved, and the number of customers has more than doubled. In addition, an

investment package in the amount of US$50 million has been made available by the World

Bank, GPOBA, the Government of Norway, and USAID to support the expansion of customer

connections to 33,000 by 2015.

10. In Sierra Leone, the new electricity law ratified in early 2012 should lead to greater financial accountability of the energy sector. In addition, a World Bank financed energy project

is expected to reach financial closure in early 2013. The proposed project should significantly

improve the distribution network and increase customer connections of Sierra Leone‟s power

utility, the National Power Authority (NPA). In Guinea, the Government endorsed a new sector

strategy in February 2012. With ongoing support from AfDB and new support planned by the

World Bank, the performance of the power sector is also put on target to improve.

11. Nevertheless, the energy sectors of Liberia, Sierra Leone, and Guinea in their own right are too small to be able to lower the cost of electricity to levels that are internationally

competitive. By interconnecting these small systems, however, this structural challenge can be

overcome.

12. In recognition of these benefits and following the return to peace in Liberia and Sierra Leone, the 2005 WAPP Master Plan already retained the interconnections between Man (Côte

d‟Ivoire) – Monrovia (Liberia) and Conakry (Guinea) – Bumbuna (Sierra Leone) on the priority

list of projects. In 2006, the WAPP undertook a detailed review of the power systems in Liberia,

Sierra Leone, and Guinea, which led to the drafting of the “Concept for Liberia, Sierra Leone,

5

Guinea Power System.”4 Under this review, these individual projects were aggregated into a

single transmission line project to interconnect Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea,

and to develop the systems of these three countries as a single network and within one sub-

program. The wider WAPP LSG concept seeks the following outcomes:

Provide residents of the greater Monrovia area in Liberia; Bo, Kenema and Western Areas in Sierra-Leone; and, the Forest Region of Guinea, with improvements in power

supplies in the short term.

Pursue a regional infrastructure developmental approach that will provide over the medium to long term adequate electricity to the people in a more efficient and cost

effective way, boosting economic and social development.

Establish a regional regulatory framework for the sector that is conducive to the participation of private/strategic partners in the development of the power sector. The

participation of the private sector and strategic partners is critical to obtaining the

required capital investment and effective management for the electricity sector. This will

also enable Government to concentrate on other social needs; and

Ensure the technical capacity, management competence and the financial viability of the institutions of the electricity sub-sector for the sustainable provision of services and

specifically, the viability of those agencies that are responsible for operating an open

access transmission network and associated support services that enable competitive

delivery of power to consumers.

13. The project will contribute to economic recovery and poverty reduction through improved access to essential power supplies in the LSG area. This will be accomplished through

the re-construction of essential infrastructure and strengthening of institutional capabilities to

plan, procure, operate, maintain and sustainably manage these services. It will provide support

for targeted critical investments with the aim of developing the most economic power resources

in the LSG area and making services available from a regional power system that overcomes the

structural inefficiencies presented by the small sizes of the individual economies. The realization

of the CLSG Power Network will also interlink the WAPP Coastal Transmission Backbone and

the OMVG/OMVS Power System. The proposed CLSG Power Network project was confirmed

as one of the high priority projects in the revised WAPP Master Plan (2011).

14. The regional context of the program will have a transformational impact in the national power systems by building its own backbone transmission line. While the CLSG

interconnector transmission line represents the initial stage for enabling energy trade in the

region, the project will also transform the domestic power systems by building the backbone

transmission lines in Liberia and Sierra Leone at the time when both domestic generation and

distribution infrastructure are limited in these countries. The small size of the power sector

prevents economies of scale, making it difficult for governments to afford and operate large

infrastructure investments while the nascent national systems emerge from emergency response

mode. In turn, the combined regional and domestic impacts will support the transition to

4 Arthur Energy Advisors (2006). Concept for LSG Power System covering Liberia, Sierra Leone, and Guinea.

Commissioned by the WAPP Secretariat.

6

normally functioning power utilities in these countries with lower cost, more sustainable

generation and more effective means to control and optimize system expansion and operations.

15. Grid connection of mining sites would allow a number of alternative power supply models to be developed. The CLSG countries are endowed with vast areas of world class iron

ore deposits that once developed could represent a major demand on the CLSG line. Once the

CLSG Regional Transmission Company (RTC) is established and the CLSG line constructed, the

cost of extending the transmission grid to connect the major mining sites would be low. Indeed

the CLSG line goes closely past the most significant mining areas and the potential amount

traded by the mining companies is high. If mining demand were interconnected to the grid,

different supply arrangements could be developed that would allow the energy supply surplus

from mining to be sold to the grid (either bilateral or to the utilities) or allow the development of

large supply generation plan to meet the mining demand while using the CLSG line. Taking into

consideration the impact of the mining demand on the design of the line, a two phase

construction approach was adopted. The line is expected to be upgraded by 2020 with the second

circuit equipped (i.e. an additional capacity of 145 MW) to accommodate higher demand.

16. In recognition of the benefits that this project will bring to the CLSG countries, it was singled out by the G20 as a priority project at the 2011 Cannes meetings.

World Bank Support of the WAPP

17. On June 30, 2005, the World Bank's Executive Board of Directors endorsed the application of the adaptable program lending (APL) instrument, within the framework of the

World Bank's Regional Integration Assistance Strategy (RIAS) for West Africa, as the vehicle

for providing IDA credit support to the WAPP initiative. The Bank earmarked US$350 million

in IDA resources under the IDA Regional Pilot Program to put in place a multi-year

programmatic framework to help close the financing gap and thereby ensure timely

implementation of priority WAPP investments and technical assistance activities of the Revised

WAPP Master Plan.

18. The APL instrument provides the framework for the IDA credit support to the original set of WAPP priority projects. It is a useful and relevant tool, as it reinforces policies through

dedicated policy triggers, such as country commitments and ratification of the ECOWAS Energy

Protocol. The APL original umbrella envelope of US$350 million has been depleted.

19. Future WAPP priority projects that are being considered for World Bank financing include the Mount Coffee Hydropower Plant Rehabilitation in Liberia, the Adjarala Hydropower

Plant between Benin and Togo, and the Gouina Hydropower Plant in Mali. Annex 10 provides

an overview of the implementation status of projects of the WAPP APL program.

B. Sectoral and Institutional Context

20. The Heads of State of Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) project have entrusted the preparation of the CLSG power interconnection project to the WAPP

Secretariat. The Energy Ministers then established the WAPP Joint Implementation Committee

(JIC), which gathers representatives from all four countries‟ ministries in charge of energy and

the power utilities. Following the adoption of the WAPP Cote d‟Ivoire Liberia-Sierra Leone-

7

Guinea (LSG) sub-program and the setting up of the WAPP JIC in 2007, the four countries have

jointly pursued the preparation of this project, which has been considered a high priority project

for the sub-region. Once constructed, it will constitute the first interconnection of power systems

ever among these four countries.

21. The WAPP JIC has overseen the preparation of the project‟s feasibility study, the Environmental and Social Impact Analyses (ESIAs), and the institutional studies that have

defined the institutional framework for the project. They have endorsed final reports and studies,

as well as concepts for moving forward.

22. In 2008, the ECOWAS Heads of State endorsed the establishment of “Special Purpose Companies” (SPC) as a major vehicle for the implementation of WAPP regional priority

projects. A few examples of such SPCs exist in the ECOWAS region. These include SOGEM,

which runs the Manantali (and soon also the Felou) hydropower plants in Mali, which are jointly

owned by Mauritania, Senegal and Mali. This also includes the CEB, which owns and operates

key generation plant and transmission lines for the Governments of Benin and Togo. The

experience of these SPCs in the ECOWAS region has been mixed, and the WAPP JIC is aiming

to take the lessons learned from these experiences to setting up a better structured SPC for the

WAPP CLSG project (see below discussion in the lessons learned section).

23. After the technical and safeguard studies were well underway, the WAPP JIC began to tackle the setting up of the SPC (CLSG Regional Transmission Company or “RTC”) in 2011. In

a first instance, the WAPP JIC adopted in Guinea in June 2011 an interim institutional

mechanism, the Project Implementation Unit (PIU), which would initially be located with the

WAPP Secretariat, and then will be strengthened and transferred to the RTC, once the later is

established. At the WAPP, the PIU is to have a “light” structure. Once the RTC is established,

and presumably construction of the line has begun, the PIU would be reinforced and merged into

the RTC to ensure the construction can properly supervised. The PIU would not only be directly

responsible for the management of the Contractor(s) of the line, but also for the management of

the Owner‟s Engineer, who in turn will directly oversee the Contractors‟ work.

24. In 2011-2012, the WAPP and JIC began developing the legal framework for implementation of the CLSG Transmission Line. As discussed in more details in Annex 9, this

structure is primarily based on creating a RTC by treaty among the States to design, construct,

own, operate, maintain, and develop the line. The RTC, a supranational entity with commercial

character, would be set up based on articles of association annexed to the treaty that provide for

the entity's governance structure. An international project agreement (IPA) implements the

provisions of the treaty by agreement among the CLSG states and this RTC.

25. The IPA provides for the countries' obligations towards the RTC and gives the RTC the mandate to implement the CLSG Transmission Line. The RTC's shareholding will be divided in

equal shares among the national utilities designated for the role by the States and subject to a

shareholders' agreement that governs the utilities' respective rights and responsibilities. Users of

the CLSG transmission line are expected to enter into power purchase agreements for the sale

and purchase of power, and use the line to move the power pursuant to a transmission service

agreement with the RTC. The ownership structure of the RTC is illustrated in the graph below.

8

26. On 5 and 18 March 2012 the draft treaty was initialed by the Ministers of Energy of the CLSG states. By the end of April 2012 the outstanding legal documents are to be finalized, and

the Heads of State are expected to sign the treaty by the end of May 2012. The treaty is expected

to be ratified by the CLSG parliaments by early September 2012. The RTC is expected to be

fully staffed by end 2012.

Figure 2: Ownership Structure of the CLSG Regional Transmission Company

C. Higher Level Objectives to which the Project Contributes

27. The project is aligned with the goals and strategies of relevant regional and sub-regional organizations—namely, NEPAD, ECOWAS and the WAPP Organization. The

WAPP is part of NEPAD‟s development strategy toward regional integration of electricity

networks. As a result of this strategy, the WAPP aims to create an open, unified regional

economic space through the integration of markets for infrastructure services. The WAPP‟s

regional infrastructure development program for ECOWAS states fully aligned with the goals of

NEPAD. It provides the power utilities of the region with a vehicle to achieve the vision

embodied in the ECOWAS Energy Protocol –that of creating a “level playing field” to facilitate

the balanced development of diverse energy resources of the ECOWAS Member States for their

collective economic benefit, through long-term energy sector cooperation, unimpeded energy

transit and increasing cross-border electricity trade. The CLSG countries have shown their

commitment to the project by endorsing the updated WAPP Master Plan (2011) that identifies

the proposed project as a priority project for the sub-region.

CLSG Regional Transmission Companya supranational entity with a commercial character

Énergies de Côte d'Ivoire

(CI-Energies)

Liberia Electricity Corporation

National Power Authority

Electricité de Guinée

S H A R E H O L D E R S

SHAREHOLDERSAGREEMENT

CLSG TREATY

ARTICLES OF ASSOCIATION

9

28. The Project is consistent with the criteria of engagement and selectivity set out in key assistance strategies. These include the World Bank‟s Regional Integration Assistance

Strategy (RIAS),5 which under its Pillar 1 recognizes the need for improving access to clean

energy and improving supply reliability. The Program also meets the three key criteria for

regional projects: (a) involvement of more than two countries (b) economic benefits that will

accrue to several countries, and (c) evidence of regional ownership and commitment of the

participating countries and provision of a platform for policy harmonization in power sector

development.

29. The Project will reduce greenhouse gas emissions. The interconnection results in reduced use of hydrocarbon fuels in the four countries and helps avoid more than 5.6 million

tons of carbon over the lifetime of the project in comparison to the “without” project scenario.

Assuming a damage cost value of US$20 per ton, overall gains from avoided carbon emissions

can be valued at US$62.5 million in net present value (NPV) terms.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

30. The Project development objectives of the WAPP CSLG Project are: (i) to reduce the cost of and increase the electricity supply at utility level; and (ii) to increase the export capability

of Côte d'Ivoire.

31. The Project development objective of the WAPP Integration and Technical Assistance Project is to increase the technical integration of the WAPP network.

32. While all CLSG countries will benefit of reduced costs and increased electricity supply over the lifetime of the investment of the CLSG transmission line, the impact of the CLSG

project over the five-year lifetime of the present project is more differentiated as follows: (i)

Liberia and Sierra Leone are expected to exhibit reduced costs of electricity supply at the utility

level; and (ii) Liberia, Sierra Leone, and Guinea are expected to experience an increase of

electricity supply at the utility level.

33. The WAPP CLSG project will increase Côte d'Ivoire's capacity of exporting electricity by interconnecting Côte d'Ivoire with Liberia, and through Liberia with Sierra Leone and Guinea

as well. Export could initially come both from Côte d'Ivoire and Ghana. The increased revenue

stream from exports to Côte d'Ivoire's power sector would be a combination of revenue of sale of

electricity and transmission wheeling charges. In the medium term, the project would also help

unlock Guinea‟s large hydropower potential. It is estimated that with the Project Guinea would

add about 2,800 MW of hydropower capacity and generate an additional 133,400 GWh over the

period of 2012-2030. Without the project, there would be lower demand for hydropower from

Guinea, and only 1,600 MW of Guinea‟s potential would be developed generating about 67,500

GWh over the same period.

5 Regional Integration Assistance Strategy, IDA and IBRD, April 2008.

10

34. For the WAPP Integration and Technical Assistance Project, increasing the technical integration of the WAPP network means enhancing the synchronization of the WAPP

transmission network by installing equipment to enhance such trades and to provide technical

assistance to the WAPP to ensure better operation of networks.

B. Project Beneficiaries

35. The WAPP CLSG Power Interconnection Project. The project beneficiaries are the existing and future customers of the power utilities in Côte d‟Ivoire, Liberia, Sierra Leone, and

Guinea, who will be provided with more and lower cost power. This cost reduction will help

make electricity more affordable for households and along with greater security of supply, will

improve the competitive edge of firms in Liberia, Sierra Leone and Guinea to create jobs and

spur economic growth. At the end of the project‟s life, a total addition of 5.2 million people is

expected to benefit from the electricity provided through the line, of which 2.6 million are

women. Both men and women are expected to benefit equitably from the proposed project.

36. In Côte d‟Ivoire, revenues from electricity exports will help the newly created Énergies de Côte d'Ivoire (CI-Energies) to increase its income substantially.

37. The WAPP Integration and Technical Assistance Project. The direct beneficiaries of this project are the power utilities in the ECOWAS region, which will benefit from more

efficient electricity trades, in turn rendering their own operation more efficient.

C. PDO Level Results Indicators

38. The key PDO Level Results Indicators for the WAPP CLSG Power Interconnection Project are the following:

Annual electricity supply from CLSG imports at utility level (GWh) disaggregated by Liberia, Sierra Leone, and Guinea.

Annual weighted cost of electricity supply at power utility level in Liberia and Sierra Leone (USD/kWh).

Cote d‟Ivoire export capability to CLSG countries (MW).

Direct project beneficiaries (number), of which female (%).

39. The key PDO Level Results Indicators for the WAPP Integration and Technical Assistance Project are the following:

WAPP Master Plan Priority projects prepared to financial closure (number).

Ratio of annual total hours of synchronization of WAPP Zone A against total hours in a year within TCN-CEB-GRIDCO interconnection (%)

40. Annex 1 presents the detailed results framework for project 1, and Annex 2 provides the detailed results framework for project 2.

11

III. PROJECT DESCRIPTION

A. Project Components

41. Two Projects are presented under this phase of the Program, each of them being implemented independently. The first project is dedicated to the implementation of the WAPP

CLSG Power Interconnection, while the second project is dedicated to the implementation of the

supply and technical integration of the WAPP network. Total costs are respectively US$444

million and US$31.5 million (project 1 includes US$71 million for physical and price

contingencies). The overall cost is therefore US$476 million (excluding duties and taxes), of

which IDA is financing US$176 million. A detailed project description is presented in Annex 3.

The WAPP CLSG Power Interconnection Project

Component 1.A: Power interconnection between Côte d’Ivoire, Liberia, Sierra Leone, and

Guinea (US$321.9 million, of which IDA US$84.8 million, AfDB US$106.9 million, EIB

US$82.9 million, KfW US$37.0 million, CLSG Governments US$10.1 million)

42. Under this component, the infrastructure of the 1,349 km transmission interconnection between Côte d‟Ivoire, Liberia, Sierra Leone, and Guinea is being financed. The component will

be implemented by the CLSG Regional Transmission Company (RTC), and it will be co-

financed by AfDB, EIB, KfW, and IDA. The co-financing structure is based on parallel

financing. A coordinated procurement strategy for the structuring of the bidding process and

bidding documents has been adopted.

Sub-Component 1.A-1: Transmission and Distribution Interconnection

43. This component will finance the construction of 1,349 km of 225kV double circuit overhead transmission line interconnecting Côte d‟Ivoire, Liberia, Sierra Leone and Guinea. The

line will have a transmission capacity of 290 MW once completed (see detailed explanation in

Annex 3). This component is estimated to cost about US$193 million excluding contingencies,

taxes and duties. The line will be co-financed by AfDB, EIB, and IDA.

44. The IDA credit will finance the sections of this transmission line within Liberia, from Yekepa, to Buchanan, and onwards to Mount Coffee up to the border with Sierra Leone in Mano.

The IDA credit will also finance the construction of two lines totaling a total length of 50 km of

66kV overhead distribution lines in Liberia from Mount Coffee to Monrovia. The agreed

financing plan foresees for the remaining co-financiers6 the following breakdown: (i) the EIB

will finance the transmission line between Yiben (Sierra Leone) to the border between Sierra

Leone and Liberia; (ii) the AfDB will finance the remaining transmission lines as follows: from

Linsan (Guinea) to Yiben (Sierra Leone), from Nzérékoré (Guinea) to Yekepa (Liberia), and

from Yekepa (Liberia) to Man (Côte d‟Ivoire).

45. To ensure the sizing of the transmission line responds to the actual needs on the ground and to reduce the initial investment costs, a two-stage implementation of the proposed

6 Co-financiers include all multilateral and bilateral institutions involved in the project (AFDB, EIB, KfW, and WB).

12

component has been adopted. The CLSG interconnection transmission line will be built as a 225

kV double circuit line with one circuit equipped and with a capacity of 145 MW. The

transmission towers will be built to support a double circuit line. Under phase 2 the line will be

upgraded to include the second circuit, with a total transmission capacity of 290 MW. The

second phase is expected to be undertaken about 3 years after operation of the line is initiated,

when the load on the line is expected to increase. The financing for this second circuit is not part

of the present project.

46. The transmission line has a provision of Optical Fiber Ground Wire (OPGW) in Sub-Component 1-A-1. As per the normal international practice for OPGW, supply, installation, and

commissioning will be part of electricity wire tender. The AfDB is considering exploring the

feasibility of using the line for purposes of telecommunications as part of its financing, which

could add to the revenue of the line.

Sub-Component 1.A-2: Substations

47. This sub-component will finance the construction of 11 225kV substations in Yekepa, Buchanan, Mount Coffee and Mano in Liberia; in Kenema, Benkongor, Bumbuna, Yiben, and

Kamakwie in Sierra Leone; and in Linsan and Nzérékoré in Guinea. Additionally, this

component will provide financing to the required compensation system. The feasibility study

identified that compensation equipment would need to be installed in the substations of Mount

Coffee (Liberia), Bumbuna (Sierra Leone), Linsan (Guinea), and Man (Côte d‟Ivoire). The

Owner‟s Engineer will verify the location of the compensation equipment as part of his

assignment.

48. The financing plan for the construction of the 11 substations, compensation system and reinforcement of specific substations has been confirmed as follows: (i) the World Bank will

finance Yekepa sub-station in Liberia; (ii) KfW will finance Mano, Monrovia, and Buchanan

substation in Liberia; (iii) EIB will finance Bikongor, Kenema, and Bumbuna Substations in

Sierra Leone; and (iv) AfDB will finance Linsan and Nzérékoré sub stations in Guinea,

Kamakwie and Yiben substations in Sierra Leone, and Man substation in Côte d‟Ivoire.

Sub-Component 1.A-3: Supervisory Control and Data Acquisition (SCADA)

49. This sub-component will finance the procurement and installation of the supervisory control and data acquisition (SCADA) system that will monitor and control the interconnected

transmission line in the four countries to ensure proper exchange of power and operating control

of the system. The estimated cost of the SCADA is US$6.4 million and will be financed by

AfDB. The finances will go towards the financing of a new control center in Guinea, and

towards the upgrading of the capabilities of the SCADA system and control center in Côte

d‟Ivoire so that it can accommodate operation of the WAPP CLSG transmission line.

Sub-Component 1.A-4: Installation and Supply of Compensation and Frequency Regulation

Equipment

13

50. This sub-component will finance measures to enhance compensation and frequency control along the CLSG transmission line, which are to be determined by the Owner‟s Engineer

at a time closer to commissioning of the transmission line. This would include measures to

minimize reactive power and enhance frequency control in transit situations. This sub-

component is financed by IDA.

Sub-Component 1.A-5: Implementation of the Environmental and Social Management Plans

(ESMPs) and Resettlement Action Plans

51. The cost of implementation of the Environmental and Social Management Plans (ESMPs) (which includes the cost of the Resettlement Action Plans or RAPs) in the amount of

US$ 10.1 million will be covered by the respective Governments as part of their counterpart

financing. The costs of the implementation of the environmental mitigation measures under the

ESMPs will be almost entirely included in the contractor contract, while the costs of the social

mitigation measures will be directly born by the CLSG Governments. The measures to be

adopted in relation to the ESMPs are discussed in the section pertaining to safeguards further

below as well as in Annexes 4 and 11.

Component 1.B: Institutional framework and project oversight (US$45.4 million, of which

IDA US$45.0 million, AfDB US$0.4 million)

52. Under this component key institutional features of the project will be supported and developed that will ensure the sound implementation of the WAPP CLSG transmission

interconnector. The component will be implemented or administered by the Regional

Transmission Company (RTC) and it will be financed by IDA and EIB.

Sub-Component 1.B-1. Establishment of the Regional Transmission Company

53. This sub-component will cover the operating costs of the RTC during the construction of the line. It will cover support for the development of the institutional framework of the RTC, the

setting-up of the RTC, including setting up of systems such as procurement and financial

management systems and recruitment of staff, and the operational costs during the construction

phase of the CLSG power interconnection. The AfDB will finance part of the auditing costs.

Sub-Component 1.B-2. Implementation support through the Owner’s Engineer

54. The proposed project will finance an Owner‟s Engineer to assist the RTC with (i) overall project management and supervision of the procurement, design, construction and preparation

for operation and maintenance of the complete investment, including the full transmission line,

construction and upgrade of substations; (ii) supervision and monitoring of the implementation

of the Environmental and Social Management Plans (ESMPs) and the Resettlement Action Plans

(RAPs), based on an agreed monitoring plan; (iii) the carrying out of a compensation and

frequency regulation studies and measures, to re-evaluate the compensation requirements for the

line, including reactive power and frequency control in transit situations, and further dimension

the scope and the scale of compensation and frequency regulation required; and (iv) the carrying

out of the audits of the Regional Transmission Company.

14

55. The pre-award (pre-construction) activities for the Owner‟s Engineer will be financed by the EU-Africa Infrastructure Trust Fund through the European Investment Bank (EIB) under a

single contract and will be lump-sum. Funding for post award (construction) activities of the

Owner‟s Engineer will be provided by IDA under a separate single contract. This contract will be

time-based. As agreed with the EIB, the overall assignment for the Owner‟s Engineer will be bid

out as a single procurement, and World Bank procurement rules will be used. Moreover, the

World Bank will provide no objections to the client during the recruitment process. Only if the

Owner‟s Engineer is performing well under the first phase will the firm‟s contract for the second

phase be signed. This type of contracting is standard best practice for Owner‟s Engineer‟s

contracts.

The WAPP Integration and Technical Assistance Project

Component 2.A: Supply Alternatives Studies and Project Preparation Support (US$10 million,

all of which financed by IDA)

56. Under this component a key studies will be conducted to ensure that in the medium to long-term the generation capacity along the line will be developed in a timely manner and in

accordance with least cost principles. More specifically, technical assistance will be provided for

preparatory institutional, legal, pre-feasibility/feasibility, and environmental and social impact

assessment studies for the CLSG transmission line and potential hydropower plant candidates

along the transmission line. The potential hydropower plant candidates may include (i) Bikongor

hydropower plant (Sierra Leone); (i) Kassa B hydropower plant (Guinea); and (iii) Souapiti

hydropower plant. These project sites have been identified as part of the least cost expansion

plan along the WAPP CLSG interconnection through the updated WAPP Masterplan (2011).

This component will be implemented by the WAPP Secretariat, and it will be financed by IDA.

In addition, this component will support project preparation, including the WAPP CLSG JIC,

through studies and support of decision meetings, training, staffing and outfitting of a Project

Implementation Unit (PIU).

Component 2.B: Technical Assistance and Integration of WAPP network (US$21.5 million,

all of which financed by IDA)

57. This component financed by IDA proposes to support the integration of WAPP networks and to provide technical assistance.

Sub-Component 2.B-1: Technical Integration of WAPP Network

58. The establishment of a sub-regional market for electricity is conditioned by the interconnection and synchronous operation of transmission networks. Frequency and load/supply

control is one of the challenges of a synchronous interconnection. The proposed synchronization

component will address this issue, thereby reducing supply costs and increasing supply volume

in the WAPP. The WAPP will implement this component in at least five power utilities in the

ECOWAS region. An updated feasibility study will determine the equipment needs. Then a

single contractor will install the equipment. WAPP will retain ownership of this equipment and

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lease it on a „gratis‟ basis to the power utilities subject to them adequately undertaking the O&M

of the equipment.

Sub-Component B-2: Strengthening of the WAPP

59. This sub-component aims to speed up WAPP project implementation by strengthening the Planning, Investment Programming and Environmental Safeguards (PIPES) Department and

for the Information and Coordination Center and build capacity. Technical assistance will also

include supporting the certification process of network operators and will assist the development

of standardized market operating rules for the WAPP zone.

60. The project costs (see further below) also include provision for an unallocated amount, which reflects both physical and price contingencies for the project.

B. Project Financing

Lending Instrument

61. The proposed lending instrument is an Adaptable Program Lending (APL). This project is a natural continuation of the previous West African Power Pool (WAPP) Adaptable Program

Lending (APL) that was developed in 2006 as part of the World Bank‟s support to the regional

program of the WAPP. It is a horizontal APL4, which covers the sub-region of the CSLG

countries and connect previously not yet interconnected countries in the sub-region. It is also the

first phase of a vertical APL. Phase 2 of the APL 4 is expected to be the Mount Coffee

Hydropower Plant, which is a regional hydropower resource located in Liberia along the CLSG

Power Interconnection. Principles for advancing to the next phase of an APL within the

geographical area that delineates the APL‟s (for example APL 4 covers the CLSG countries), are

(i) the readiness of the subsequent project; (ii) the level of advancement of the preceding phases

within the geographical area; and (iii) the adherence to WAPP principles, such as the ECOWAS

Energy Protocol (EEP).

Project Cost and Financing

62. The table below presents a summary of the project costs in thousand US$ and the percentage contribution of IDA financing per component. Annex 3 includes a more detailed cost

breakdown by component. The co-financiers for this project are AfDB, EIB, and KfW. The

Governments will also contribute to the project.

Table 1: Project Cost and Financing

Project Components Project Cost

(US$ thousand)

IDA Financing

(US$ thousand)

% Financing

Project 1

Component 1.A: Power interconnection

between Côte d‟Ivoire, Liberia, Sierra Leone,

and Guinea.

321,948

8

84,800

26%

16

Component 1.B: Support for the institutional

framework and project oversight.

Project 2

Component 2.A: Supply Alternatives Studies

and Project Preparation Support.

Component 2.B: Technical Assistance and

Integration of WAPP Network.

Total Baseline Costs

Physical and Price Contingencies

45,420

10,000

21,500

398,867

77,018

45,070

10,000

21,500

161,370

14,630

99%

100%

100%

40%

19%

Total Project Costs 475,885 176,000 37%

63. The table below gives a more detailed breakdown of the project costs and the financing by respective co-financier.

Table 2: Breakdown of Project Costs and Financing

64. Indicative terms for the financing are shown in the table below:

Table 3: Indicative terms of Financing

Lender Amount

(US$ 000)

Tenor

(Years)

Grace Period

(Years)

Interest

Rate

Service

Charge

On-lending

Term

EIB 105,180 18 5 1.4% 2 Mil

Euro Same as

Gov.

AfDB(Loan) 28,831 50 10 0.75% 0% Same as

Gov.

AfDB EIB KfW WB Governments Total

[kUS$] [kUS$] [kUS$] [kUS$] [kUS$] [kUS$]

Component 1.A

Power interconnection between Côte

d‘Ivoire, Liberia, Sierra Leone, and Guinea 106,986 82,951 37,067 84,800 10,143 321,948

1-A-1 Transmission Interconnection 58,793 60,748 0 73,200 0 192,740

1-A-2 Substations 41,773 22,204 37,067 10,100 0 111,144

1-A-3 SCADA 6,420 0 0 0 0 6,420

1-A-4 Compensation and frequency control measures 0 0 0 1500 0 1,500

1-A-5 Implementation of the ESMPs and RAPs 0 0 0 0 10,143 10,143

Component 1.B

Institutional framework and project

oversight 350 - - 45,070 - 45,420

1-B-1

Establishment of the Regional Transmission

Company 350 0 0 19,170 019,520

1-B-2 Owner's Engineer 0 0 0 25,900 0 25,900

25,758 22,228 3,707 14,630 10,695 77,018

133,094 105,180 40,774 144,500 20,837 444,385

Component 2.A Studies and Project Preparation Support 0 0 0 10,000 0 10,000

Component 2.B

Technical Assistance and Integration of

WAPP Network 0 0 0 21,500 0 21,500

2-B-1 Technical Integration of WAPP Network 0 0 0 18,000 0 18,000

2-B-2 Technical Assistance to WAPP 0 0 0 3,500 0 3,500

0 0 0 31,500 0 31,500

133,094 105,180 40,774 176,000 20,837 475,885

Note: The project financing costs include 10% of phys ica l contingencies and 4.5% of price contingencIes for the World Bank financed parts .

Component Activity

WAPP CLSG Power Interconnection Project

WAPP Integration and Technical Assistance Project

Total Costs WAPP Int. and Tech. Assist. Project

Unallocated and Interest During Construction

Overall Costs

Total Costs WAPP CLSG Power Interconnection Project

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Lender Amount

(US$ 000)

Tenor

(Years)

Grace Period

(Years)

Interest

Rate

Service

Charge

On-lending

Term

AfDB (Grant ) 104,263 - - - - -

IDA 176,000 40 10 0% 0.75% Same as

Gov.

KfW 40,774 - - - - -

65. The four governments have agreed to finance the cost of implementation of the Environmental and Social Management Plans (ESMPs), including the Resettlement Action Plans

(RAPs) (US$ 10.1 million), and the Interest During Construction (IDC) (US$5.5 million) as part

of their counterpart financing. The Government of Liberia will also provide about US$5.1

million for cost contingencies. The table below shows the indicative amount per country and the

expected timeline for disbursement:

Table 4: Counterpart Financing

Country ESMP

(US$ mil.)

IDC

(US$ mil.)

Unallocated

(US$ mil.)

Cote d‘Ivoire 2.19 1.38 -

Liberia 2.39 1.38 5.15

Sierra Leone 3.40 1.38 -

Guinea 2.16 1.38 -

C. Program Objective and Phases

66. The project is part of a wider program by the Bank to support the WAPP priority projects. The goal of the WAPP APL program is as stated earlier, to establish a well-functioning,

cooperative, power pooling mechanism for West Africa, as a means to increase access of the

citizens of ECOWAS to stable and reliable electricity at affordable costs. The WAPP has a

rigorous process of selecting priority projects on the basis of a regional Masterplan (last updated

in 2011), which uses least cost expansion principles.

67. Support under the program is accorded in four WAPP zones as follows: (i) WAPP zone A core countries; (ii) WAPP zone B core countries; (iii) interconnection of zone A and zone B

countries; and (iv) targeted support of most vulnerable WAPP countries. The WAPP CLSG

project inscribes itself in the support of the most vulnerable countries. Next WAPP possible

candidate projects include the Mount Coffee Hydropower Plant in Liberia, the Adjarala

Hydropower Plant between Benin and Togo, and the Gouina Hydropower Plant in Mali.

D. Lessons Learned and Reflected in the Project Design

68. The WAPP CLSG project has been designed taking into account broad lessons from the the setting up of the SIEPAC project in Central America (Sistema de Interconexión Eléctrica de

18

los Países de América Central or Central American Electrical Interconnection System), which

has similarities with the proposed WAPP CLSG project, especially with regard to the

arrangements for the creation of a cross-border transmission infrastructure. In addition, lessons

learned from the design of comparable Bank financed regional APLs for Southern Africa Power

Pool (SAPP), the Energy Community of South East Europe (ECSEE), and the existing WAPP

program have been applied. The project has also benefitted from lessons learned from a five

decades long evolution of the best known regional power market - the Nordic power market

which is operated by NordPool.

69. Lack of transmission line usage: lessons of experience from projects show that the construction of cross-border transmission line is a necessary condition for trades to take place,

but not a sufficient condition to enable the flow of trades when excess power is not available to

be traded on the line. The demand-supply balance for Côte d‟Ivoire and Ghana indicate that both

countries would be able to export power in direction of Liberia, Sierra Leone, and Guinea.

Moreover, Côte d‟Ivoire‟s Minister of Energy confirmed in a joint Memorandum of the four

CLSG Ministers of Energy dated 5 and 18th

of March 2012 the availability of 83 MW for the

export along the transmission line once the construction is complete. In the medium term, Guinea

can also become a large exporter through development of its hydropower resources. Annex 8

gives a detailed breakdown of availability of power along the CLSG line.

70. Even if supply is available in principle, as the demand-supply balance seems to indicate, the question is how power trades can best be incentivized due to a sound institutional framework

and market design. Beyond the mere availability of trade, the WAPP JIC is envisaging the

incorporation of the following mechanism in the institutional framework in order to incentivize

trade:

Establishing a clear and transparent framework for trades along the line with required use of a standardized Transmission Service (TSA) by including a standard form for this

agreement in the International Project Agreement of the RTC;

A simple, yet effective, method to price transmission whose main objective to ensure transmission cost are recouped. The more complex the tariff methodology, the more

difficult it is for future investors in power generation to anticipate transmission costs. A

postage-stamp methodology is easier to understand and apply by the entity determining

prices. A postage stamp tariff methodology has indeed been adopted to determine

transmission usage costs under the WAPP CLSG Project.

As part of the tariff methodology, the Gove