CP: Solomon Islands: Outer Island Renewable Energy Project · PDF fileSolomon Islands: Outer...

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Concept Paper Project Number: 46014-001 August 2012 Solomon Islands: Outer Island Renewable Energy Project

Transcript of CP: Solomon Islands: Outer Island Renewable Energy Project · PDF fileSolomon Islands: Outer...

Concept Paper

Project Number: 46014-001 August 2012

Solomon Islands: Outer Island Renewable Energy Project

CURRENCY EQUIVALENTS (as of 30 July 2012)

Currency unit – Solomon Islands dollar (SBD)

SBD 1.00 = $ 0.141

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund COBP – country operations business plan CPS – country partnership strategy DMF – design and monitoring framework EA – executing agency IA

ICB – –

implementing agency international competitive bidding

kWh – kilowatt hour MW – megawatt NCB – national competitive bidding OCR – ordinary capital resources PIGGAREP – Pacific Island Greenhouse Gas Abatement through

Renewable Energy Project PMU – project management unit PPTA – project preparatory technical assistance PRIF – Pacific Region Infrastructure Facility PSA – poverty and social assessment PSC – project steering committee RP

SIEA SISEP SREP TA

– – – – –

resettlement plan Solomon Islands Electricity Authority Solomon Islands Sustainable Energy Project Scaling-up Renewable Energy Program technical assistance

NOTE

(i) In this report, "$" refers to US dollars.

Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Director R. Guild, Transport, Energy and Natural Resources Division, PARD Team leader A. Maxwell, Senior Energy Specialist, PARD Team members M. Kunzer, Principal Environment Specialist, Regional and Sustainable

Development Department S. Lee, Principal Social Development Specialist (Gender & Dev’t),

PARD N. Sapkota, Safeguards Specialist, PARD M. Tonizzo, Young Professional, PARD

Peer reviewer A. Jeffries, Senior Energy Specialist, South Asia Department

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

CONTENTS Page

I. THE PROJECT A. Rationale 1 B. Impact, Outcome, and Outputs 2 C. Investment and Financing Plans 2 D. Indicative Implementation Arrangements 3

II. DUE DILIGENCE REQUIRED 3

III. PROCESSING PLAN 4

A. Risk Categorization 4 B. Resource Requirements 4 C. Processing Schedule 4

IV. KEY ISSUES 4

APPENDIXES

1. Basic Project Information 5

2. Problem Tree 6

3. Preliminary Design and Monitoring Framework 7

4. Project Preparatory Technical Assistance 9

5. Initial Poverty and Social Analysis 13

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I. THE PROJECT A. Rationale

1. The proposed Outer Island Renewable Energy Project (Project) will support development of renewable energy in the Solomon Islands. It focuses on the outer islands where the project will (i) decrease the cost of power supply by replacing diesel power generation with hydropower,1 (ii) increase access to power through expansion of existing distribution grids, and (iii) reduce greenhouse gas emissions through development of renewable energy. The Project will support development of small hydropower at provincial centers, and extension of the grid.2 2. Electricity is generated and supplied by the Solomon Islands Electricity Authority (SIEA), which is a state-owned electricity utility that provides power across the country, including the national capital (Honiara) and eight outstations (Auki, Buala, Gizo, Kirakira, Lata, Malu’u, Noro-Munda, and Tulagi). The Government manages sector policy through the Ministry of Mines, Energy and Rural Electrification. Installed capacity in Honiara is 26 MW (peak load 14.3 MW, all diesel generated) and installed generation capacity in the outer islands is 4 MW. Provision of electricity services is concentrated on Honiara in Guadalcanal. While 87% of the installed power generation is located in Honiara, Guadalcanal accounts for only 12% of the national population of 553,000. Electricity in the outstations is 100% diesel generated except mini-hydropower in Malu’u and Buala. There is anticipated to be significant unmet demand in the outer islands. 3. The high cost of electricity and the limited reach of the distribution grid is negatively impacting economic growth in the outer islands. Due to the reliance on diesel generation, power tariffs in Solomon Islands are high. SIEA charges a national uniform tariff, which in 2010 was $0.59/kWh to residential customers and $0.63/kWh to commercial customers. Due to the high cost of diesel transportation, generation costs in the outer islands are considerably higher than Honiara ($0.53/kWh in Honiara compared to $0.94/kWh in Lata)3 which has a negative financial impact to SIEA’s operations and has impeded grid expansion. The high cost of electricity is a disincentive for new businesses. In particular, the agricultural and tourism industry are impeded. 4. Solomon Islands has relatively low electricity access rates. Nationwide electricity is supplied to approximately 14% of the population. Access rates in Guadalcanal (Honiara) is 20% and Western Province is 17%, however access rates in the remaining provinces is extremely low, for example Malaita 3%, Temotu 3%, Choiseul 2%. The high cost of diesel power generation in the outer islands provides a disincentive to the corporatized SIEA to expand the distribution network. 5. The current electricity tariff does not allow full cost recovery4 for SIEA. As a result investment in maintenance and expansion of core power infrastructure has been lacking. Revenue collection is relatively low (estimated 80–90%), however SIEA is undertaking an ambitious effort to install prepayment meters on all consumers in parallel with an overhaul of the billing, accounting, and data management systems.5 SIEA is currently undergoing a restructuring program supported by the World Bank (Solomon Islands Sustainable Energy

1 RETA-7329 Promotion of Renewable Energy in the Pacific – Solomon Islands screened renewable energy

resources in the outer islands and identified hydropower as the priority renewable energy for five outer islands. 2 PPTA design is in Appendix 4. The PPTA will be approved by the vice-president concurrently with concept paper.

3 Calculations are based on SIEA’s generation records and RETA-7329 analysis.

4 SIEA Corporate Plan 2010–2015. A tariff study is proposed under Solomon Islands Sustainable Energy Project.

5 SIEA has limited capacity to manage multiple construction projects. The PPTA will assess optimum implementation

models and assess procurement, project management and financial management capacity.

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Project). There is currently no private sector participation in power generation, however the Government has indicated a preference for private sector development of generation assets.6 6. Grid connected renewable energy is limited to mini-hydropower at Buala and Malu’u and a SIEA trial to replace diesel with coconut oil in the second largest outstation (Auki, Malaita).7 Wind monitoring is also proposed at three sites.8 The Tina River Hydropower Project (14 MW) is currently being assessed to supply the Honiara grid.9 Excellent hydropower resources exist in the outer islands near demand load centers. It is estimated that hydropower could deliver electricity at a levelized cost of energy of 6–12c/kWh to a number of outstations. ADB supported RETA-732910 assessed alternative renewable energy technologies and recommended that, where available, hydropower represents the least cost capacity expansion option. 7. The project is included in the ADB’s country partnership strategy (CPS) 2012–201611 for Solomon Islands. The CPS supports the Solomon Islands National Development Strategy 2011–2020, which prioritizes development of reliable and affordable power supply in urban centers through renewable energy and prioritizes increasing electricity access. The proposed project supports the Solomon Islands National Energy Policy Framework, 2007 which prioritizes development of renewable energy for urban areas. Solomon Islands is currently considering development of a national Renewable Energy Development Plan supported by Scaling-up Renewable Energy Program (SREP). B. Impact, Outcome, and Outputs

8. The impact of the Project will be improved economic condition in the targeted provincial centers. The outcome of the Project will be an increased supply of reliable, cleaner power to provincial centers by SIEA. The outputs of the Project will be (i) hydropower plants put into operation by SIEA,12 (ii) extension of distribution by SIEA,13 (iii) capacity building undertaken for implementing agency and project beneficiaries, and (iv) the Project Management Unit (PMU) renders efficient project management services. C. Investment and Financing Plans

9. The tentative project cost is estimated at $9.0 million14 and the Project will be implemented over a 5-year period. The Solomon Islands Government has included a loan from ADB’s Special Funds resources of $2.0 million (“ADF loan”) for the project in the ADB’s country partnership strategy (CPS) 2012–201615 for Solomon Islands. An additional $1.0 million in ADF grant has also been allocated to the Project. The government will be the Borrower and will

6 The project will assess private sector engagement options.

7 The Auki pilot project was supported by ADB RETA-7329 Promotion of Renewable Energy in the Pacific.

8 Three wind monitoring stations are proposed (2012) on outer islands financed through Pacific Island Greenhouse

Gas Abatement through Renewable Energy Project (PIGGAREP), implemented by UNDP. 9 Tina River Hydropower Project is supported by AusAID, European Investment Bank, International Finance

Corporation and World Bank. Private sector financing is proposed through an independent power producer. 10

GHD, Solomon Islands Mini Hydro Pre-feasibility Studies, 2012, ADB financed under RETA-7329 Promotion of Renewable Energy in the Pacific

11 Solomon Islands Country Partnership Strategy 2012-2016, February 2012; refer Linked Document 15 Table A3.1 Small Hydropower Project.

12 PPTA will screen 5 sites and prepare full feasibility studies for 3 sites. Available financing will determine which projects are implemented.

13 Preliminary estimates indicate that access rates could be increased from 3% to 8% in Malaita, 3% to 18% in Temotu, 17% to 27% in Western Province, and 2% to 12% in Choiseul.

14 The prefeasibility screening identified 5 sites (0.2–4.3 MW, combined cost of $22 million).

15 Solomon Islands Country Partnership Strategy 2012-2016, February 2012; page 6, para. 27.

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provide counterpart funding of $1.0 million equivalent, including all local taxes and duties. The borrower will assume the foreign exchange variation risks. The ADB loan would be used for civil works, provision of equipment and supplies, provision of consulting services, interest during construction and commitment charges during implementation of the loan. An application for grant cofinancing has been submitted to Pacific Region Infrastructure Facility and discussions are ongoing with other potential co-financiers.

Table 1: Tentative Financing Plan

Source Amount

a

($ million) Share of Total (%)

Asian Development Bank (ADF Loan) 2.0 22.2

Asian Development Bank (ADF Grant) 1.0 11.1

Pacific Region Infrastructure Facility (Grant)b 5.0 55.6

Governmentc 1.0 11.1

Total 9.0 100.0

Sources: Government of Solomon Islands and ADB estimates. ADF = Asian Development Fund, OCR = Ordinary Capital Resources. a Firm financing requirements will not be finalized until completion of the feasibility studies.

b A grant application has been submitted to Pacific Region Infrastructure Facility (PRIF).

c Includes all taxes and duties.

D. Indicative Implementation Arrangements

10. The executing agency (EA) will be the Ministry of Mines, Energy and Rural Electrification and the implementing agency (IA) will be Solomon Islands Electricity Authority (SIEA). A Project Steering Committee (PSC) will be established to review project progress, coordinate inter-ministerial activities and guide the Project Management Unit (PMU), which will be established within SIEA and supported by implementation consultants. All equipment and civil works procurement will be carried out in accordance with ADB's Procurement Guidelines (2010, as amended from time to time). Consultants will be recruited in line with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time), through consulting firm or individual selection method. The procurement method would be international competitive bidding (ICB), national competitive bidding (NCB) or shopping procedures. Advance contracting and retroactive financing up to 20% of the loan amount will be considered. Extensive consultations have been held with stakeholders in developing the Project scope.

II. DUE DILIGENCE REQUIRED

11. Various aspects of due diligence will be conducted through the project preparatory TA:

(i) Technical. Appropriate technology for hydropower will be assessed, particularly related to operating and maintenance requirements. The IA’s technical capacity will be assessed, and options for long-term maintenance contracts assessed.

(ii) Economic and financial. Economic and financial analysis will be undertaken of the project in accordance with ADB’s financial management and analysis16 and economic analysis17 guidelines.

(iii) Procurement. Procurement capacity assessment of SIEA will be undertaken.

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The analysis will be guided by ADB’s (i) Financial Management and Analysis of Projects (2005), (ii) Financial Due Diligence Methodology Note (2009), (iii) Financial Management Assessment Questionnaire, and (iv) Technical Note of the Preparation and Presentation of Cost Estimates for Projects Financed by ADB (2008).

17 ADB. Guidelines for the Economic Analysis of Projects (1997).

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Procurement packages will be prepared. (iv) Institutional Capacity. Capacity assessment of SIEA will include procurement

capacity, project management capacity and financial management capacity.18 (v) Safeguards, Social, Poverty and Gender. Safeguards will be assessed

according to ADB Safeguard Policy Statement, June 2009. Environmental impacts will be assessed. Resettlement and indigenous peoples plans prepared, as required. Social, poverty and gender analysis will be conducted and a gender action plan prepared.

12. Previous infrastructure projects indicate that major risks to timely implementation could be anticipated from landowner issues and low capacity within implementing units. Due diligence will focus on landowner engagement processes and design of implementation mechanisms.

III. PROCESSING PLAN

A. Risk Categorization

13. The project is classified as complex due to lack of sound record of ADB experience in the energy sector, and low EA capacity in terms of externally financed project administration. B. Resource Requirements

14. A total of 9.5 person-months of staff resources will be required for team members as follows: Anthony Maxwell, team leader, 4 person months (pm); Martina Tonizzo, financial and economic analysis, 2 pm; Jean Williams, environmental analysis, 1 pm; Nogendra Sapkota, social safeguard analysis, 1 pm; Sunhwa Lee, gender analysis, 0.5 pm; OGC (tbd), legal counsel, 0.5 pm; and Andrew Jeffries, 0.5 person months. The PPTA will require 9 international consultants (23 months) and 4 national consultants (13 months), refer to Appendix 5. C. Processing Schedule

15. The proposed processing schedule is described in Table 2.

Table 2: Proposed Processing Schedule

IV. KEY ISSUES

16. Key risks are (i) land negotiations/acquisition delaying schedules, (ii) capacity constraints within SIEA, and (iii) delays associated with development partner cofinancing.

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Assessment will include Government proportion of outstanding receivables and mechanisms for debt recovery.

Milestones Expected Completion Date

Loan Fact Finding April 2013

Management Review Meeting May 2013

Loan/Grant Negotiations July 2013

Board Consideration September 2013

Loan/Grant Signing November 2013

Loan/Grant Effectiveness December 2013

Source: Asian Development Bank estimates.

Appendix 1 5

BASIC PROJECT INFORMATION Aspects Arrangements

Modality Project loan

Financing ADF Loan: $2.0 million ADF Grant: $1 million Cofinancing (PRIF Grant): $5.0 million Government: $1.0 million

Classification Sector (subsectors): Energy (Renewable energy) Themes (subthemes): Economic growth (promoting macro-economic stability) Environmental sustainability (natural resources conservation) Capacity development (institutional development) Targeting classification: General Intervention Gender mainstreaming category: Effective Gender Mainstreaming

(EGM) Location impact: rural (medium), urban (medium) Safeguards: Proposed to be Environment Category B, Involuntary Resettlement B, Indigenous Peoples B (all are proposed categories to be confirmed with RSDD)

Risk categorization Complex

Partnership(s) An application for cofinancing has been submitted to Pacific Region Infrastructure Facility (PRIF)

Use of a PBA Not applicable

Parallel PIU Not applicable

Department and division Pacific Department/Transport, Energy and Natural Resources Division (PATE)

Mission leader and members Mission Leader: Anthony Maxwell Mission Members: Paul Hattle Sunhwa Lee Nogendra Sapkota Martina Tonizzo Jean Williams OGC TBD Sector-Focused Peer Reviewer: Andrew Jeffries, SAEN

ADB = Asian Development Bank, COBP = country operations business plan, PBA = programmatic based approach, PIU = project implementation unit, RCOBP = regional cooperation operations business plan.

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Ap

pe

ndix

2

PROBLEM TREE

High reliance on imported fuel for power generation

(core problem)

Low penetration of renewable energy

Low efficiency power generation

Poor maintenance of power infrastructure

Limited technical capacity

Limited access to financing

Reduced options for household income generation

High power tariffs Low access rates due to high generations costs

Exposure to supply disruptions

High household expenditure on electricity

High cost to commercial and industrial sector

High cost to tourism

Low living standards due to lack of access to power

Negative impact on balance of payments

Economic exposure to oil price shocks and rising oil prices

Appendix 3 7

Preliminary Design and Monitoring Framework

Design Summary Performance Targets

and Indicatorsa

Data Sources and Reporting Mechanisms

Assumptions and Risks

Impact The economic condition in the targeted provincial centers has improved.

All indicators are relative to January 2013 Household access to energy increased from X% to X% in targeted provinces by January 2016 Increase in PPL customers (business and industrial) by 20% in target provinces by end 2016 Reduced self power generation by customers (business and industrial) by 20% in target provincial centers by end 2016 (measured in MWh)

SIEA annual corporate report

Risks Reduction in diesel use by power sector is offset by increase in use in other sectors e.g. transport Economic development will create power demand exceeding installed hydropower generation

Outcome SIEA has increased supply of reliable, cleaner power to targeted provincial centers

All indicators are relative to January 2013 Renewable energy generation increased as a percentage of targeted provinces power generation by X% by January 2016 CO2 emissions reduced by X tCO2e by January 2016

SIEA annual corporate report SIEA annual corporate report Project Administration Manual

Risk Utilities do not maintain sufficient technical staff to operate and maintain hydropower plants

Outputs 1. Hydropower plants put into operation by SIEA

All indicators are relative to January 2013 SIEA generates XGWh per annum of hydropower by January 2016 Reduced diesel importation into targeted provinces for power generation by X% by January 2016 relative to January

SIEA annual corporate report SIEA annual corporate report

Risk Land ownership and environmental issues delay feasibility studies

8 Appendix 3

2. Extension of distribution by SIEA 3. Capacity building undertaken for implementing agency and project beneficiaries 4. The Project Management Unit (PMU) renders efficient project management services

2013 baseline SIEA connects X new customers in targeted provinces by January 2018, including subsidized connections to X female headed households Conduct 10 training workshops for newly connected households including power safety, household utility budget and business skills training (including 50% women participation). PMU meets annual target contract awards and disbursements Conduct training activities for PMU staff and SIEA management, including gender awareness training

SIEA annual corporate report Project Administration Manual

Activities with Milestones (Overall Project) Inputs

SIEA installs hydropower plants 1.1 SIEA completes detailed design of hydropower plants by February

2014 1.2 SIEA completes land acquisition by June 2014 1.3 SIEA commissions hydropower plants by June 2016 SIEA extends electricity distribution 2.1 SIEA completes detailed design of grid extension by February 2014 2.2 SIEA completes land acquisition by June 2014 2.3 SIEA commissions distribution extensions (including female headed

households) by December 2014 SIEA undertakes capacity building 3.1 SIEA conducts 10 training workshops for newly connected households including power safety, household utility budget and business skills training (including 50% women participation) by December 2014 Efficient project management services 4.1 PMU established within SIEA by December 2013 4.2 Short-listing of consultants by August 2013 4.3 Award consulting contract by November 2013 4.4 Fielding of implementation consultants by December 2013

ADB (ADF-Loan): $2 million ADB (ADF-Grant):$1 million Pacific Region Infrastructure Facility (Grant): $5 million Government: $1 million

ADB = Asian Development Bank, MWh = megawatt-hour, PMU = Project Management Unit, SIEA = Solomon

Islands Electricity Authority. a

Values will be determined during the PPTA.

Source: Asian Development Bank.

Appendix 4 9

PROJECT PREPARATORY TECHNICAL ASSISTANCE A. Justification

1. A project preparatory technical assistance (TA) is required to (i) assess technical alternatives to ensure selected investments are least cost, (ii) prepare feasibility studies for selected investments, (iii) conduct due diligence, (iv) undertake capacity building analysis for SIEA, (v) assess options for involvement of private sector, and (vi) familiarize the implementing agency with ADB’s procurement and disbursement procedures, and safeguard requirements.

B. Major Outputs and Activities

2. The major outputs and activities are summarized in Table A4.1.

Table A4.1: Summary of Major Outputs and Activities

Major Activities Expected

Completion Date Major Outputs Expected

Completion Date

Conduct Stakeholder Workshop

October 2012 Consensus is reached between stakeholders regarding sites Draft safeguard due diligence reports/plans

December 2012 December 2012

Conduct due diligence on technical, economic, financial, environment, governance, procurement, and safeguards.

August 2012 – January 2013

Loan Covenants agreed upon with Borrower Final due diligence completed to provide justification

February 2013 January 2013

Source: Asian Development Bank

C. Cost Estimate and Proposed Financing Arrangement

3. The TA is estimated to cost $750,000 equivalent which will be financed on a grant basis by ADB's Technical Assistance Special Fund (TASF-IV). The government will provide counterpart support in kind. The detailed cost estimate is in Table A4.2.

Table A4.2: Cost Estimates and Financing Plan ($'000)

Item Total Cost

A. ADB Financinga 1. Consultants a. Remuneration and per diem i. International consultants (23 person-months) 480.0 ii. National consultants (13 person-months) 70.0 b. International and local travel 60.0 2. Equipment (computer, printer, etc.)b 10.0 3. Workshops, training, seminars, and conferencesc 10.0 4. Surveysd 100.0 5. Contingencies 20.0 Total (A) 750.0 B. Government Financing 1. Office accommodation and transport

10 Appendix 4

2. Remuneration and per diem of counterpart staff a Financed by the Asian Development Bank's Technical Assistance Special Fund (TASF-IV).

b Equipment

Computers 5 $5,000 Office Furniture - $3,000 Printer 1 $2,000

c Workshops, training, seminars, and conferences includes village capacity building and landowner consultation in

provincial centers (administered by the Consultant). d

Including flora/fauna surveys, stream gauging, climate change modeling and social surveys. Sources: Asian Development Bank and Government estimates.

D. Consulting Services

4. The TA will require 9 international consultants (23 person-months) and 4 national consultants (13 person-months) to be hired through a consulting firm. Consultants will be engaged by ADB in accordance with the Guidelines on the Use of Consultants (2010, as amended from time to time). The consulting firm will be engaged through quality- and cost-based selection method (quality-cost ratio of 90:10)1 using simplified technical proposal. The procurement of equipment by consultants under the TA, will follow ADB’s Procurement Guidelines (2010, as amended from time to time). The proceeds of the TA will be disbursed in line with ADB’s Technical Assistance Disbursement Handbook (2010, as amended from time to time). The equipment procured under the TA will be turned over to the Government upon TA completion.

Table A4.3: Summary of Consulting Services Requirement International Specialists Person-Months

1. Team Leader 3 2. Civil Engineer (hydropower) 3 3. Hydrologist 2 4. Electro-mechanical engineer (hydropower) 3 5. Transmission Engineer 2 6. Private Sector Development Specialist 1 7. Economic and Financial Specialist 3 8. Environment Specialist 2 9. Social, Poverty and Gender Specialists 2 10. Social Safeguard and Resettlement Specialists 2 Total 23

National Specialists

1. Power Sector Specialist 4 2. Social, Poverty and Gender Specialists 3 3. Social Safeguard and Resettlement Specialists 3 4. Environmental Specialist 3 Total 13

5. Pre-feasibility studies have been completed for 4 proposed hydropower sites (Auki, Lata, Ringii/Noro/Munda,2 and Taro).3 A separate pre-feasibility has also been prepared for a site in Kira-kira. Pre-feasibility studies will be provided to shortlisted companies. The consulting company will (i) undertake a desktop study to confirm the proposed sites are the optimum hydropower sites for each of the 5 provincial centers, (ii) screen the 5 proposed sites and prioritize 3 sites, and (iii) prepare feasibility studies of the prioritized 3 sites. The outline terms of

1 90:10 is considered suitable as the project requires specific technical capacities for design of small hydropower in

remote island locations. 2 The pre-feasibility study for Ringii/Noro/Munda identified a number of development options. The consulting

company will assess the options for Ringii/Noro/Munda, and proceed with feasibility study for the priority option. 3 GHD, Solomon Islands Mini Hydro Pre-feasibility Studies, 2012, ADB financed under RETA-7329 Promotion of

Renewable Energy in the Pacific.

Appendix 4 11

reference for the project preparatory TA consultants are described in paras. 6 to 15.

6. Team Leader (international, 3 person-months [pm]). The team leader will have a minimum of 15 years experience in design and implementation of hydropower projects, including in developing countries. The team leader will be responsible for managing the Consultant team and coordinating the overall PPTA implementation. The international team leader will be either the civil engineer or the electro-mechanical engineer and will be supported by the national power sector specialist (4 pm). The team leader will (i) review background data, (ii) confirm power demand forecasts, (iii) carry out least cost power sector planning, (iv) assess levelized cost of generation, (v) implement a consultation and participation plan, (vi) prepare detailed work program and schedule, (vii) coordinate deliverables, (viii) assess affordability issues, (ix) prepare the detailed design and monitoring framework (DMF), (x) undertake a procurement capacity assessment and prepare a procurement plan, (xi) assess SIEA operation and maintenance capacity and recommend capacity building, and (xii) prepare project performance indicators.

7. Civil Engineer (hydropower) (international, 3 pm). The civil engineer will have 10 years demonstrated experience in design and implementation of hydropower projects, including in developing countries. The civil engineer will conduct the following (i) determine scope of survey, (ii) develop preliminary routings, (iii) develop preliminary designs for infrastructure, (iv) prepare cost estimates, and (v) develop construction schedules.

8. Hydrologist (international, 2 pm). The hydrologist will have a minimum of 10 years demonstrated experience in design and implementation of hydropower projects, including in developing countries. The hydrologist will conduct the following (i) review available hydrological data, (ii) assist in optimizing design of the hydropower plants, and (iii) perform an assessment of hydrological risks including flooding during construction and operation.

9. Electro-mechanical engineer (hydropower) (international, 3 pm). The engineer will have a minimum of 10 years experience in design and implementation of hydropower projects, including in developing countries. The engineer will conduct the following (i) determine required capacities, (ii) prepare preliminary design for electromechanical components of the plants, (iii) optimize designs, (iv) determine sequencing of installations, (v) analyze required diesel back-up for hydropower plants, and (vi) prepare cost estimates for all electromechanical components.

10. Transmission/distribution engineer (international, 2 pm). The engineer will have a minimum of 10 years demonstrated experience in design and implementation of hydropower projects, including in developing countries. The engineer will conduct the following (i) determine transmission voltages for plants, (ii) determine routings for power extraction lines, (iii) prepare design of transmission lines, (iv) design expansion of distribution systems, (v) prepare cost estimates for all transmission/distribution components of the projects, and (vi) prepare schedule.

11. Private Sector Development Specialist (international, 1 pm). The specialist will have a minimum of 10 years experience in developing private sector, including private sector investment in infrastructure in developing countries. The specialist will develop options for private sector involvement in all 4 hydropower sites.

12. Financial/Economic Specialist (international 2 pm). The specialist will have a minimum of 10 years background in financial and economic analysis of renewable energy projects in developing countries, preferably in the Pacific. The specialist will be experienced in ADB

12 Appendix 4

financial and economic analysis procedures. The specialist will (i) undertake financial analysis including calculation of the financial internal rate of return and weighted average cost of capital, (ii) identify project risks, conduct relevant sensitivity analyses, (iii) prepare a financing plan, (iv) review audited SIEA financial statements, (v) prepare projected financial statements (10 years), (vi) complete sections of the RRP, (vii) review tariffs, (viii) conduct financial management assessment, and (ix) conduct economic analysis.

13. Environment Specialists (international 2 pm, national 3 pm). The environment specialists will each have at least 10 years experience in environmental assessment of infrastructure projects, preferably in the power sector. The specialists will (i) prepare the environmental assessment, (ii) consult with stakeholders, (iii) incorporate mitigation measures into design, (iv) quantify environmental benefits, (v) develop a grievance redress mechanism, (vi) manage environmental surveys, and (vii) estimate CO2 emissions.

14. Social, Poverty and Gender Specialists (international 3 pm, national 3 pm). The Consultants’ work will consist of the following, (i) collect available background data; (ii) organize and conduct surveys; (iii) develop and implement a stakeholder and community consultation plan; (iv) assess the pro-poor impacts of the project; (v) assess the gender impact of the project; (vi) prepare Poverty and Social Assessments (PSA) and Summary Poverty Reduction and Social Strategy (SPRSS); (vii) assess vulnerabilities and risks associated with HIV/AIDS and other

possible health impacts; (viii) prepare socioeconomic monitoring and management plans; (ix) prepare a gender action plan; and (x) assist the EA undertake consultations.

15. Social Safeguard/Resettlement Specialists (international 2 pm; national 3 pm) will have 10 years of experience in conducting social assessments and preparing resettlement plans (RP) in developing countries. The specialists will undertake due diligence/assessment on involuntary resettlement and indigenous peoples. The specialists will (i) review the country systems on land acquisition/ resettlement, (ii) assess land acquisition/resettlement impacts; and (iii) develop an RP, and (iv) prepare an indigenous peoples plan.

E. Implementation Arrangements

16. The Executing Agency (EA) will be the Ministry of Mines, Energy and Rural Electrification and the Implementing Agency (IA) will be SIEA. A Program Management Unit (PMU) will be established within SIEA and will be supported by implementation consultants. The EA and the IA will provide support to the consultants, including (i) arranging meetings with stakeholders, (ii) access to relevant data, and (iii) furnished office with utilities and telecommunications access. The TA will be implemented over a 12-month period, will commence in 31 October 2012 and be completed in 31 October 2013.

Table A4.4: Proposed Technical Assistance Processing and Implementation Schedule

Major Milestones Expected Completion

Date

Consultant Recruitment July – September 2012

Inception Report November 2012

Draft Final Report April 2013

Final Report June 2013

Financial Closure October 2013

Source: Asian Development Bank.

Appendix 5 13

INITIAL POVERTY AND SOCIAL ANALYSIS

Country: Solomon Islands Project Title: Outer Island Renewable Energy Project

Lending/Financing Modality:

Project Department/ Division:

PATE/PARD

I. POVERTY ISSUES

A. Links to the National Poverty Reduction Strategy and Country Partnership Strategy

The proposed project is in line with the ADB’s country partnership strategy (CPS) 2012-20161

for Solomon Islands, which prioritizes energy as a key area of support. The CPS supports the Solomon Islands National Development Strategy 2011–2020, which prioritizes development of reliable and affordable power supply in urban centers through renewable energy and prioritizes increasing electricity access. The proposed Project will contribute to poverty reduction through improved economic conditions in provincial urban areas resulting in:

(i) Increased economic activity resulting in increased household income generation opportunities. (ii) Improved quality of supply to urban areas will improve power supply to areas such as education and health. (iii) Reduced generation costs will provide an indirect incentive to SIEA to connect more customers resulting in

reduced household expenditure on energy services (power would often be replacing relatively expensive kerosene), improved security in the evenings, reduced labor required to collect biomass for household energy requirements, improved social opportunities, and ability for elderly to return to villages to retire (bringing back capital).

B. Targeting Classification

General Intervention Individual or Household (TI-H) Geographic (TI-G) Non-Income MDGs (TI-M1, M2, etc.)

The Project will reduce poverty in an indirect manner by improving quality and access to power by improving income generation options.

C. Poverty Analysis

1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed? Not applicable.

2. What resources are allocated in the PPTA/due diligence?

Social, Poverty and Gender Specialists (international 2 person-months, national 3 person months) and Social

Safeguard and Resettlement Specialists (international 2 person-months, national 3 person months)

3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor

governance, and pro-poor growth)? Pro-poor design will be incorporated into the project design and may

include, (i) confirmation of lifeline tariffs, (ii) targeted connections to poor areas, including women headed

households, and (iii) targeting areas where power supply may promote household income through household-

based income generating activities.

II. SOCIAL DEVELOPMENT ISSUES

A. Initial Social Analysis

1. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from the project?

The primary beneficiaries are the people of the Solomon Island provinces who will benefit from increased access to power and cheaper power tariffs. Private sector will also benefit from a reliable supply and relatively stable power tariff. The local communities in the project site will benefit from the project through provision of unskilled and semi-skilled labor work during project implementation.

1 Solomon Islands Country Partnership Strategy 2012-2016, February 2012; page 6, para. 27.

14 Appendix 5

2. What are the potential needs of beneficiaries in relation to the proposed project?

The potential needs of beneficiaries are improved access to power for (i) education, (ii) recreational/social activities, (iii) cooking (replacing biomass), and (iv) improved household income generation. The newly connected households will require training regarding health and safety aspects of electricity use as well as increased potential for generation of income from increased access to power.

3. What are the potential constraints in accessing the proposed benefits and services, and how will the project

address them? No constraints identified. The PPTA will further assess.

B. Consultation and Participation

1. Indicate the potential initial stakeholders. Potential stakeholders include national and provincial Government officials, SIEA (including Board), business groups, civil society organizations, and community groups (including women groups).

2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops, community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)? Consultation through workshops will be undertaken during the implementation of the project preparation TA and project processing. The PPTA will identify stakeholders, undertake consultations during project preparation and identify consultation and communication activities for the project.

3. What level of participation is envisaged for project design?

Information sharing Consultation Collaborative decision making Empowerment

4. Will a C&P plan be prepared during the project design for project implementation? Yes No

C. Gender and Development Proposed Gender Mainstreaming Category: Gender Mainstreaming

1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program? The key gender issues associated with improved access to power are as follows: (i) Reduce household work required to source biomass for energy needs, usually a task for women. (ii) Increase opportunities (mainly for women) for household income generation. (iii) Reduce household expenditure on energy, which allows reallocation to other purposes such as food, health

and education.

The PPTA will assess gender issues and prepare a Gender Action Plan. 2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by improving women’s access to and use of opportunities, services, resources, assets, and participation in decision making?

Yes No Please explain. The Gender Action Plan to be prepared under PPTA will provide details on gender mainstreaming measures.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality?

Yes No The proposed Project will improve women's access to power services.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS

Issue Nature of Social

Issue Significant/Limited/ No Impact/Not Known

Plan or Other Action Required

Involuntary Resettlement

The project will require acquisition of land for infrastructure development, however is not expected to require physical displacement of people and structures.

Expected to be limited (to be confirmed during PPTA)

Resettlement Plan

Indigenous Peoples

To be assessed during the PPTA

Not known – to be assessed during PPTA

Uncertain

Appendix 5 15

Labor

Employment Opportunities

Core Labor Standards

Project is expected to generate a small number of employment opportunities in project sites during construction and operation.

Limited Plan Other Action No Action Uncertain

Affordability Project will improve affordability through stabilizing tariffs by replacing high cost diesel generation with renewable energy. Willingness to pay will be conducted during PPTA

Not known – to be assessed during PPTA

Action No Action Uncertain

Other Risks and/or Vulnerabilities

HIV/AIDS Human Trafficking Others (conflict, political instability, etc.), please specify

Project will involve inflow of construction workers which will require management of AIDS

Not known – to be assessed during PPTA

Plan Other Action No Action Uncertain

IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT

1. Do the TOR for the PPTA (or other due diligence) include poverty, social and gender analysis and the relevant specialist/s?

Yes No

2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender analysis, and C&P during the PPTA/due diligence? Yes The PPTA includes Social, Poverty and Gender Specialists (international 2 person-months, national 3 person-months) and Social Safeguard/Resettlement Specialists (international 2 person-months, national 3 person months).