The World Bank Report No: ISR9056 Implementation Status & Results Kenya Energy Sector Recovery Project (P083131) Public Disclosure Copy Operation Name: Energy Sector Recovery Project (P083131) Project Stage: Implementation Seq.No: 17 Status: ARCHIVED Archive Date: 25-Jan-2013 Country: Kenya Approval FY: 2005 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Key Dates Board Approval Date 13-Jul-2004 Original Closing Date 31-Mar-2010 Planned Mid Term Review Date 30-Nov-2011 Last Archived ISR Date 29-May-2012 Effectiveness Date 04-Nov-2004 Revised Closing Date 30-Sep-2013 Actual Mid Term Review Date 28-Nov-2011 Project Development Objectives Energy Sector Recovery Project (P083131) Project Development Objective (from Project Appraisal Document) (a) enhance the policy, institutional and regulatory environment for sector development, including private sector participation;and(b) increase access to electricity in urban and peri-urban areas while improving the efficiency, reliability and quality ofservice to customers. Has the Project Development Objective been changed since Board Approval of the Program? � Yes No Component(s) Component Name Component Cost INSTITUTIONAL AND CAPACITY BUILDING 7.50 STUDIES AND ENGINEERING SERVICES 18.70 GENERATION, OLKARIA II PLANT EXTENSION 119.10 DISTRIBUTION UPGRADING 229.60 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Implementation Status Overview Overall implementation progress of the ESRP towards meeting its project development objectives is satisfactory. The studies and investments under ESRP have contributed to some remarkable achievements including, among others: tariff design that ensures sector financial sustainability, KPLC restructuring, Kenya Energy Generating Company’s (KenGen) Initial Page 1 of 7 The World Bank Report No: ISR9056 Public Offer, establishment of the Geothermal Development Company (GDC), promulgation of regulatory instruments, feasibility studies for Liquefied Petroleum Gas (LPG) and Liquefied Natural Gas (LNG) infrastructure, and wind power development. These institutional and policy achievements have been accompanied by investments in new power generation and in electricity distribution that have improved the quality of electricity service to customers. The cumulative number of households connected to electricity reached 526,000 by June 2012 against a target of 420,000. The third geothermal generating unit of 35 megawatts (MW) at Olkaria II was completed in time in May 2010. It generated 280 Public Disclosure Copy GWh in FY2012 against a target of 276 GWh. Some progress has been made on the pending issues from the previous mission: (i) Gazetting of secondary legislation is nearing completion. Of the twelve regulations (secondary legislation) that remain to be gazetted, (ten for petroleum and two for electricity regulations), all of the regulations on petroleum sector were approved by the Energy Regulatory Commission (ERC) Technical Committee and were submitted through the Ministry of Energy (MoE) to the Attorney General's office for approval; the two regulations in the electricity sector were approved by the Technical Committee and will be published by ERC for public consultation. Gazetting the regulations is expected by March 2013. (ii) Project restructuring was done on May 2, 2012 to reallocate credit proceeds among the categories of eligible expenditures and to harmonize the project's financial covenants with those of Kenya Electricity Expansion Project (KEEP). However, overall disbursement rate for the two credits (CR.3958 and Cr.4572) combined still remains low at 69 percent as of November 19, 2012 with only less than a year remaining before the project Closing Date of September 30, 2013. The distribution component represents the largest undisbursed categories. Moreover, after taking into consideration the actual disbursement and disbursement forecast for each contract, approximately US$14 million cost saving for the distribution component is expected, the large ones of which are in Category 1-B (Works, Supply, and Installation for the distribution component, approximately US$10 million), and Category 2-B (Goods for the distribution component, approximately US$4 million). The mission noted in principle that the savings would be utilized for the following scale up procurements and activities, which will support enhancement of the Project Development Objectives (PDOs) and will be completed before the Closing Date of September 30, 2013: (a) scale up of the Mombasa underground cable; (b) procurement of spare parts under existing contracts, especially Contract VI Lots 1 and 2; (c) procurement of distribution equipment, such as distribution transformers, conductors and cables, overhead line hardware and wooden poles; and (d) procurement of switchgear. This will necessitate restructuring (Level 2) for reallocation of funds across expenditure categories. To expedite the process, the mission agreed that KPLC should submit Bidding Documents for these goods for IDA's no objection, which was given in December 2012, in order that they can be delivered by July 2013. Locations Country First Administrative Division Location Planned Actual Kenya Nairobi Area Westlands Kenya Coast Province Watamu Kenya Coast Province Voi Kenya Coast Province Tana River District Public Disclosure Copy Kenya Rift Valley Province Sondu Kenya Nairobi Area Ruaraka Kenya Rift Valley Province Olkaria Kenya Rift Valley Province Njoro Nyoka Sub-Location Kenya Not Entered Ngong Road Kenya Rift Valley Province Nakuru Page 2 of 7 The World Bank Report No: ISR9056 Country First Administrative Division Location Planned Actual Kenya Rift Valley Province Naivasha Public Disclosure Copy Kenya Nairobi Area Nairobi South Kenya Nairobi Area Nairobi Kenya Coast Province Mombasa District Kenya Coast Province Mombasa Kenya Rift Valley Province Molo Kenya Coast Province Miwani Kenya Eastern Marsabit Kenya Coast Province Malindi Kenya Central Province Makuyu Kenya Rift Valley Province Makutano Kenya Coast Province Likoni Kenya Rift Valley Province Lessos Sub-Location Kenya Rift Valley Province Lanet Kenya Coast Province Kwale District Kenya Nyanza Province Kisii Kenya Not Entered Mount Kenya Kenya Not Entered Republic of Kenya Public Disclosure Copy Kenya Nairobi Area Kariobangi Kenya Nairobi Area Karen Kenya Coast Province Kanamai Kenya Central Province Kamburu Sub-Location Kenya Eastern Embu Kenya Eastern Embori Farm Kenya Rift Valley Province Eldama Ravine Page 3 of 7 The World Bank Report No: ISR9056 Kenya Nairobi Area Dandora Kenya Central Province Chinga Location Public Disclosure Copy Kenya Rift Valley Province Cherangany Hills Kenya Western Province Butere Kenya Nyanza Province Bondo Kenya Coast Province Bamburi Kenya Eastern Athi River Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Energy Law to support implementation of the Text Value Electricity law inadequate to Energy Act is largely Energy Act implemented. National Energy Policy is passed and support envisaged regulatory implemented implemented changes. Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 Comments The remaining regulations targeted to be gazetted by March 2013. Number of Independent Power Producers Text Value 2 6 8 (IPPs). Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 Comments Target is on track. Percentage of disputes & complaints resolved Text Value N/A 87 95 annually by ERC. Date 31-Dec-2004 31-Mar-2012 30-Sep-2013 Comments Target is on track. Public Disclosure Copy Households connected to electricity under the Text Value 0 526,000 450,000 project (cumulative number) Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 Comments Target achieved and exceeded Number of combined monthly distribution line Text Value 4.7 1.2 2 interruptions per 100km for 66kV and 333kV Date 13-Dec-2004 30-Nov-2012 30-Sep-2013 lines Comments Target is on track Page 4 of 7 The World Bank Report No: ISR9056 Number of people in urban areas provided with Number Value 0.00 2630000.00 2250000.00 access to electricity under the project by Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 household connections Comments Estimate. Target exceeded. Assumes average household Public Disclosure Copy size of 5 (5*450,000 =2,250,000 Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Sector regulatory agency is established, fully Text Value No sector-wide energy ERC is fully operational ERC fully operational. staffed, and operational. regulatory agency. Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 Comments Target is met. National energy policy for efficient development Text Value No national energy policy. National energy policy in National energy policy in and operation of the sector is adopted and place. place. implemented by the GoK. Date 31-Dec-2013 30-Nov-2012 30-Sep-2013 Comments Target is met. Annual transmission and distribution losses (% Text Value 18.7 17.3 15.0 of energy purchased by KPLC). Date 31-Dec-2004 31-Mar-2012 30-Sep-2013 Comments There was an increase in losses to 17.3% in FY12 due in part to increased transfers of power between regions. Weaknesses in the distribution network will need to be addressed. Generating capacity added under the project Text Value 0 35 35 (MW). Date 31-Dec-2004 31-Mar-2012 30-Sep-2013 Comments Target met. Olkaria II Unit 3 (35MW) became fully Public Disclosure Copy operational in May 2010. Kilometers of distribution lines constructed or Text Value 0 1,435 1,775 rehabilitated under the project (66kV, 33 kV, Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 11kV) (cumulative). Comments On track Number of substations constructed or Text Value 0 42 45 rehabilitated under the project (cumulative). Date 31-Dec-2004 30-Nov-2012 30-Sep-2013 Comments On track Data on Financial Performance (as of 04-Dec-2012) Page 5 of 7 The World Bank Report No: ISR9056 Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P083131 IDA-39580 Effective 13-Jul-2004 04-Aug-2004 04-Nov-2004 31-Mar-2010 30-Sep-2013 Public Disclosure Copy P083131 IDA-45720 Effective 02-Apr-2009 08-May-2009 03-Jul-2009 30-Sep-2013 30-Sep-2013 P103458 TF-57573 Effective 14-Nov-2006 14-Nov-2006 11-Jun-2010 31-Dec-2018 31-Dec-2018 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P083131 IDA-39580 Effective USD 80.00 80.00 0.00 78.29 6.86 98.00 P083131 IDA-45720 Effective USD 80.00 80.00 0.00 35.14 46.69 44.00 P103458 TF-57573 Effective USD 8.70 6.14 0.00 0.25 5.88 4.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation No decisions for disclosure Restructuring History CD Approved on 26-Nov-2008, Board Approved on 02-Apr-2009, Level two Approved on 02-May-2012 Related Projects Page 6 of 7 The World Bank Report No: ISR9056 P103458-Kenya KenGen Carbon Finance umbrella, P110173-Kenya - Energy Sector Recovery Project Additional Financing Public Disclosure Copy Public Disclosure Copy Page 7 of 7