Document of The World Bank FOR OFFICIAL USE ONLY ReportNo: 31844-SL PROJECTAPPRAISALDOCUMENT ON A PROPOSEDIDA PARTIAL RISK GUARANTEE INSUPPORTOFA LOANINANAMOUNT OFUPTO US$38 MILLIONINPRINCIPAL GRANTEDBY A COMMERCIALBANK TO BUMBUNA HYDROELECTRICCOMPANYLIMITED AND A PROPOSEDIDA GRANT INTHE AMOUNT OF SDR8.3 MILLION (US$12.5 MILLIONEQUIVALENT) TO THE REPUBLICOF SIERRA LEONE FORTHE COMPLETIONOF THE BUMBUNA HYDROELECTRICPROJECT UNDERA PUBLIC-PFWATEPARTNERSHIP("PPP") MAY 20,2005 Energy Group ProjectFinanceand Guarantees InfrastructureDepartment InfrastructureEconomicsandFinance Africa Region This documenthas a restricteddistributionandmay be usedby recipientsonly inthe performanceo ftheir official duties. Its content may not otherwise be disclosedwithout WorldBankauthorization. CURRENCYEQUIVALENTS ExchangeRateEffective: April 30, 2005 Currency Unit = Leone (SLL) SLL2835 = US$1 US$1.51209 = SDR1 FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS AfDB AfricanDevelopmentBank BCA BumbunaConservationArea BHC BumbunaHydropowerCompany BHP BumbunaHydroelectricProject BOT Build-Operate-Transfer BWMA BumbunaWatershedManagementAuthority BWMP BumbunaWatershedManagementPlan CAP CommunicationActionPlan CAS CountryAssistance Strategy CDD Community-DrivenDevelopment CDM CleanDevelopmentMechanism CFB CarbonFinanceBusiness CFAA CountryFinancialAccountabilityAssessment cu CommunicationUnit DECSEC DecentralizationSecretariat DGA Development Grant Agreement DP DevelopmentPartners DRP DamReviewPanel EA EnvironmentalAssessment EL4 EnvironmentalImpactAssessment EIRR Economic InternalRate ofReturn EMF Electro-magneticField EMP EnvironmentalManagementPlan EO1 Expressiono fInterest EPC Engineering/Procurement/Construction ERPA EmissionsReductionPurchaseAgreement ESAP Environmentaland SocialAdvisory Panel ESKOM Electricity Company o f SouthAfrica FMR FinancialMonitoringReport GDP Gross Domestic Product GoSL Government of Sierra Leone GWh Giga-wattsper hour IBRD InternationalBankfor Reconstruction andDevelopment IDB IslamicDevelopment Bank ICB InternationalCompetitiveBidding FOR OFFICZAL USE ONLY IDA InternationalDevelopmentAssociation IDC Interestduringconstruction IEC InternationalElectrotechnicalCommission IEC Information, Educationand Communication ISA InternationalStandardsof Auditing ISWL InsulatedShield Wire Line IUCN InternationalUnionfor ConservationofNatureandNatural Resources kV Kilovolt LAIR Livelihood AssessmentandIncomeRestoration LAWCLA The LawyersCentre for Legal Assistance M & E Monitoring and Evaluation MDGs MillenniumDevelopmentGoals MFO Marine Fuel Oil MLGCD Ministry of Local Governmentand CommunityDevelopment MOEP Ministry o f Energy and Power MOU Memorandumof Understanding MVA Megavoltampere MW Megawatt NaCSA National Commissionfor SocialAction NCP National Commissionfor Privatization NCRRR National Commissionon Resettlement,Rehabilitationand Reconstruction NEPPCU National Energy Policy Planningand CoordinatorUnit NGO Non-GovernmentalOrganization NPA National Power Authority NPV Net PresentValue O & M Operations and Maintenance OPBP OperationalPolicy/Bank Procedures(World Bank) OPEC Organization o f PetroleumExporting Countries PAP Project Affected Persons PDO ProjectDevelopmentObjective PIP ProjectImplementationPlan PIU ProjectImplementationUnit PPA Power Purchase Agreement PPIAF Public-PrivateInfrastructureAdvisory Facility PPP Public PrivatePartnership PRG PartialRisk Guarantee PRSP PovertyReductionStrategy Paper PWP Power and Water Project RAP ResettlementAction Plan RO ResettlementOfficer ROW Right o f Way RU ResettlementUnit SAP Stabilized Agriculture Program SLL SierraLeoneLeone (currency) SRBDA Seli River Basin DevelopmentAuthority TA Technical Assistance TL PAP TransmissionLine ProjectAffected Persons TOR Terms of Reference TSP Total Suspended Particulates This document has a restricted distribution and may be usedby recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization. USCDI Upper Seli Community Development Initiative VRC Village Resettlement Committee Vice President: GobindNankani Country Managermirector: Mats Karlsson Sector Manager: Yusupha Crookes Task Team Leader: Dona1O'Learv SIERRALEONE COMPLETION OF THE BUMBUNAHYDROELECTRICPROJECT CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE. ................................................... 10 1. Country and Sector Issues ..................................................................................... 10 2 . Rationale for Bank Involvement............................................................................ 12 3 . Higher Level Objectives to which the Project Contributes................................... 12 B. PROJECT DESCRIPTION .................................................................................... 12 1. Instruments ............................................................................................................ 12 2. Project Development Objective (PDO) andKey Indicators.................................. 13 3. Project Components............................................................................................... 13 4 . Lessons Learned andReflectedinthe Project Design .......................................... 16 5 . Alternatives ConsideredandReasons for Rejection ............................................. 17 C. IMPLEMENTATION ............................................................................................. 18 1. Partnership Arrangements ..................................................................................... 18 2 . Institutional and Implementation Arrangements.................................................. -19 3. Complementary Projects.,...................................................................................... 23 4 . Communication Program....................................................................................... 24 5. Monitoring and Evaluation of OutcomesResults ................................................. 25 6. Sustainability ......................................................................................................... 25 7 . Critical Risks and PossibleControversial Aspects................................................ 27 8 . Grant andGuarantee Conditions and Covenants................................................... 29 9. MainFeatures ofthe ProposedFinancing P-ackage............................................... 31 10. Project Cost Estimate............................................................................................. 32 D APPRAISAL SUMMARY . ...................................................................................... 32 1. Economic andFinancial Analyses......................................................................... 32 2. Fiduciary................................................................................................................ 37 3. Social ..................................................................................................................... 37 4. Environment .......................................................................................................... 38 5. SafeguardPolicies ................................................................................................. 39 6 . Political and Other Risks....................................................................................... 42 7. Policy Exceptions and Readiness.......................................................................... 42 Annex 1: Country and Sector or Program Background .............................................. 44 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies .....48 Annex 3: Results Framework and Monitoring ............................................................. 51 Annex 4: Detailed Project Description .......................................................................... 55 Annex 5: Project Costs .................................................................................................... 64 Annex 6: Implementation Arrangements ...................................................................... 65 Annex 7: Bumbuna Communication Action Plan (Summary) ................................... 71 Annex 8: Financial Summary for RevenueEarning Project Entities. BHC. and the Project Company ............................................................................................................. 75 Annex 9: Salini Construttori. S.p.A.: Technical and Financial Capabilities ...........83 Annex 10: Project Implementation Schedule ............................................................... 84 Annex 11: Financial Management and DisbursementArrangements ..................... 3 5 Annex 12: Contractual Arrangements ......................................................................... 91 Annex 13: Letter of Sector Policy ................................................................................ 92 Annex 14: Procurement Arrangements ......................................................................... 94 Annex 15: Economic and Financial Analysis .............................................................. 100 Annex 16 .IDAGuarantee Structure .......................................................................... 113 Annex 17: Safeguard Policy Issues ............................................................................... 117 Annex 18: Information Sharing and Public Consultation ......................................... 145 Annex 19: Dam Safety Issues ........................................................................................ 159 Annex 20: Project Preparation and Supervision ........................................................ 160 Annex 21: Documents inthe Project File .................................................................... 161 Annex 22: Statement of Loans and Credits ................................................................ 162 Annex 23: Country at a Glance .................................................................................... 164 MAP IBRD33984 MAP IBRD33985 SIERRA LEONE COMPLETIONOF THE BUMBUNA HYDROELECTRICPROJECT PROJECT APPRAISAL DOCUMENT AFRICA AFTEG Date: May 21,2005 Team Leader: Dona1O'Leary Country Director: Mats Karlsson Sectors: Energy Sector MangerDirector: Yusupha Crookes Themes: Public-privatepartnership in infrastructure financing Project ID'S:(P086801); (P086903) Environmental screening category: Category A Lending Instrument: Technical Assistance Grant Safeguardscreening category: S2 and Partial Risk Guarantee ProjectFin ata [ ] Loan [ ] Credit [ X ] Grant [ X ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m equivalent.): 50.5 (12.5 Grant +38.0 PRG) Proposed terms: StandardGradstandard PRG FACILITY OPEC DEVELOPMENT FUND 0.0 8.4 8.4 COMMERCIAL BANK (IDA Guarantee) 0.0 38.0 38.0 Total: 18.8 73.0 91.8 For IDA Guarantee: Partial Risk Guarantee (PRG) ProposedCoverage:Sierra Leone sovereign risks as defined in(i) Concession Agreement, including the 7 issuance and renewal of permits, change in law, termination events, etc.; and (ii) the guarantee of the obligations of the off-taker ("NPA") under the Power Purchase Agreement; which result in a breach of the BHC's obligationsto repay the IDA guaranteedloan. Project Sponsor: SaliniCostruttoriS.p.A.("Salcost") Nature of the underlying financing: private commercial Euro denominated debt providedby a prime internationalbank. Terms of financing for IDA Guarantee: Principalamount (US$): Upto 38.00 million Finalmaturity:Upto 15 years Amortizationprofile:tailor made Financingavailablewithout guarantee:No IEstimateddisbursements(BankFY/US$m) FY 2006 2007 2008 2009 Annual 6.0 4.0 2.0 0.5 Cumulative 6.0 10.0 12.0 12.5 Does the project depart from the CAS in content or other significant respects?ReJ PADA.3 [ ]Yes [XINO Does the projectrequireany exceptions fromBank policies? ReJ PAD D.7 [XIYes []No Havethese beenapprovedby Bank management? [XIYes [ ] N o I s approval for any policy exception sought fromthe Board? [ ]Yes [XINO Does the projectincludeany critical risksrated"substantial" or "high"? Re$ PAD C.5 [XIYes [ ]No Does the project meet the Regional criteria for readiness for implementation?Re$ PAD D.7 [XIYes [ ]No Projectdevelopment objective Re$ PAD B.2, TechnicalAnnex 3 The main development objective of the proposed Project is to expand the capacity of Sierra Leone to increase the supply of electricity services at least-cost, and in an efficient and environmentally and socially sustainablemanner. ProjectdescriptionRe$ PAD B.3.a, TechnicalAnnex 4 The IDA PRG will facilitate commercial financing of component Al. The IDA grant will fund componentsB and C. Component A -Hydroelectricand Transmission Infrastructure. This component will complete the 50 MW Bumbuna Hydropowerproject. Component A1 will consist of (i)an 88 m high asphalt concrete faced rock fill dam with a 440 m crest-length; (ii)a water intake structure; (iii)two "morning glory" spillways with associated tunnels; (iv) an above-ground powerhouse with two 25 MW turbo-generator units; and (v) a 30 km narrow Y-shaped reservoir with 445 million m3storage capacity. Component A2 8 will consist of: (i)a 13.4 kV/161 kV switchyardto transmit electricity to Freetown through a single- circuit 200 km long transmission line on self-supportingsteel towers; (ii)a 161/33/11 kV substation linking with the distribution system; and (iii)an energized insulated shield wire scheme to supply provincialtowns alongthe transmissionroute with 5 MVA ofpower. Component B - EnvironmentalMitigation, Resettlement, Watershed Management and Benefit Sharing. This component will fund implementationof: (a) the Dam/Reservoir Resettlement Action Plan with livelihood restoration and agriculture stabilization subcomponents and the Transmission Line Resettlement Action Plan; and (b) a comprehensive EnvironmentalManagement and Mitigation Plan (EMP). The EMP includes: (a) constructionphase mitigationand monitoring activities associated with Component A, including monitoringo f public health impacts on diseases such as bilharzia and malaria; (b) preparationand initiationo f the Bumbuna Watershed Management Plan (BWMP) with a Land and Soil Management,Agro-forestryand Forestry, AgriculturalDevelopment and Downstreamand Reservoir Fisheries Management Programs; (c) establishment and managemento fthe Bumbuna ConservationArea (BCA) to preserve and protect biodiversity in the Bumbuna watershed as a Conservation offset. This component also includesthe Upper Seli Community DevelopmentInitiative(USDCI), which will benefit indirectly affected communities in the project area; and (d) capacity buildingfor relevant ministriesand agencies for sustainableimplementationofthe projectsafeguardmeasures. Component C -Technical Assistance. This component will fund: (i)management and supervisionof the activities under Component B; (ii)support for the Bumbuna ProjectImplementationUnit (PIU), the Dam Review Panel (DRP), and the Environmentaland Social Advisory Panel (ESAP); and (iii)support for the CommunicationsActionPlan. Which safeguardpoliciesare triggered, ifany? Re$ PAD D.5, TechnicalAnnex 17 EnvironmentalAssessment, OP 4.01 NaturalHabitatsOP 4.04 InvoluntaryResettlement,OP 4.12 ForestsOP 4.36 Safety of Dams OP 4.37 Boardpresentation:June 16, 2005 Loan/Granteffectiveness:August 31, 2005 Covenants applicableto project implementation:Ref.DGA 9 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and Sector Issues 1.1 The main development objective o f the proposed Project is to expand the capacity o f Sierra Leone to increase the supply of electricity services at least-cost, and in an efficient, environmentally, and socially sustainable manner. This would enable Sierra Leone to overcome one o f the key constraints on growth, as well as on its ability to improve the quality and impact on social services. The Project will mobilize private capital, promote private sector involvement inmanagement o f the power sector and encourage sector reforms to underpinthe efficiency and effectiveness o f the sector. 1.2 Sierra Leone has embarked on a transition from a nation focused primarily on post-conflict needs to a nation poised for long-term growth and the implementation o f a full Poverty Reduction Strategy (PRS). The civil war ended in January 2002, just over three years ago. Since then, Sierra Leone has made substantial progress in consolidating social and economic security for its people. This has been complemented by its efforts to promote transparent and inclusive governance to address the root causes o f the conflict. While there is a continued need for rehabilitation and recovery, people are now increasingly looking ahead to the economic growth and public service delivery that will help them escape poverty, and for many in the project area, absolute extreme poverty. 1.3 Sierra Leone's economy contracted by 30 percent duringthe decade o f conflict. Since 2001, there has been substantial recovery, averaging about 7 percent per annum growth. Prospects for continuing growth beyond the immediate post-conflict recovery period are however, constrained by the absence or the poor condition o f infrastructure. As a major side effect o f the civil war, much o f the country's infrastructure was damaged, destroyed, or neglected. Existing power infrastructure was deeply affected: projects under implementation, including a major hydropower development at Bumbuna were stopped and power sector assets fell into disrepair. In parallel to the deterioration in infrastructure, the conflict took a huge toll on the population. The 10 years o f civil war and unrest resulted in 2 million o f Sierra Leone's inhabitants being rendered homeless, about 500,000 people being driven into internal exile, and the estimated death o f 20,000 people. Three years after the conflict and despite the tremendous gains made by the government, the 2004 Household Survey indicates that 70 percent o f Sierra Leone's population lives on less than US$1 per day. 1.4 Electricity services in Sierra Lone are provided mainly by the National Power Authority @PA) within an interconnected system, centered around the capital city o f Freetown, in the western part o f the country. The installed generation capacity of the system i s 27 MW. Much o f this capacity is obsolete, and available capacity has now declined to around 11 MW. There is a number o f isolated systems serving provincial centers and mining areas in the east. Available generating capacity in these centers is small and subject to erratic supplies o f high cost diesel fuels. Total electricity supply in the western interconnected system was 79 GWh in 2004, and accounted for about 85 percent o f electricity publicly provided in the country, Overall, total publicly delivered electricity translates to a per capita electricity consumption of around 18 kWh. This is well below the sub-Saharan average o f 460 kWh per capita. 1.5 Lack o f electricity i s a serious impediment to economic growth, particularly in the industrial and service sectors. For Sierra Leone, the economic value o f lost output today as a consequence o f unavailable electricity is substantial. The suppressed demand of the industrial sector has been estimated at about 29 GWh, or around 35% o f 2004 electricity supply, at a base cost o f unserved energy o f 36 USgYkWh. Suppressed demand inthe commercial sector i s at about 9 GWh, or around 11% o f 2004 electricity supply, at a base cost o f unserved energy o f around 31 US#/kWh. Suppressed demand in the domestic sector has been 10 estimated at about 48 GWh, or 57% of 2004 electricity supply, at a cost o f unserved energy o f around 15 US$/kWh. 1.6 The cost o f electricity is also a major issue. Sierra Leone is one o f a small number o f countries in West Africa with some o f the highest costs o f electricity generation and delivery in the world. Even with varying degrees o f subsidies, these high costs translate into very high tariffs relative to regional and global benchmarks. Together with unreliable service and poor quality o f supply, these tariffs translate into major competitive problems for commercial and industrial enterprises. At present, the cost o f electricity generation, transmission, and distribution is 29 US$/kWh with average tariffs set at 22 US$/kWh. But the first phase o f exploitation o f the country's hydrological resources (such as the delayed projects in Bumbuna) holds the potential to reduce underlying weighted costs of supply to between 13 US$/kWh and 16 US$/kWh, or one half o f current costs. 1.7 Finally, with extremely low coverage, access confined largely to the capital city, high costs and poor cost recovery, equity issues loom large in the sector. Tariffs for residential consumers cater somewhat for the poor as a lower rate applies to those customers consuming the smallest amount. Up to a consumption level of 30 kWh, for example, residential customers only pay about 10 US$/kWh. However, for much o f the few level urban poor with access, this is still largely unaffordable. More broadly, the more significant challenge is to expand access substantially beyond the 5 percent o f the population, largely in the Freetown area, that now enjoy it, to the rest of the population in other urban areas and in the rural areas. In this regard, recovery of NPA's financial position through the exploitation o f sources o f lower cost electricity, performance improvement measures and more appropriate sector policies and regulatory approaches and mechanisms should enable the company and the government to respond better to equity issues, without undermining NPA's efficiency and financial objectives. 1.8 The key elements of the GoSL's strategy for the sector seek to address the sector issues defined above (see Annex 13 for a summary o f GoSL goals and strategies). First, the Government seeks to enhance the efficiency and effectiveness o f the management and operations o f the western interconnected system through bringing best practices into operations, including complementary systems and business processes, Second, while best practices will contribute to gains in efficiency, the system's physical deficiencies after years o f deferred maintenance are a key bottleneck to large improvements in performance. Third, beyond expertise and short-term investments, the completion o f the project at Bumbuna, which has been delayed by conflict, needs to be resumed. In particular, this project will provide, a relatively large addition to available supplies as well as dramatically transform the structural cost o f electricity supplies in the country. Finally, GoSL recognizes that the expertise on best practices and power utility management as well as a critical share of the capital needed to meet the challenges o f reviving and expanding the sector will have to come from the private sector. In concrete terms, these strategies translate into four key actions that GoSL has already embarked upon: (i)to attract donor support for key activities to stem the decline in existing power capacity and electricity output; (ii)to put in place a management contract inthe utility; (iii)to step upthe mobilization of public and private capital to complete the project at Bumbuna; and (iv) to accelerate the passage of legislation and the formulation o f sector policies and regulatory instruments to create an enabling environment for private participation in the sector. 1.9 The Bank and Sierra Leone's other development partners have started to support GoSL's efforts to implement these four key actions. The Power and Water Project (PWP, Credit 3945-SL) was approved by the Board on July 1, 2004. Under this project, which is co-financed by a number o f other donors, GoSL has started to implement three of the four key actions. This proposed completion o f Bumbuna Hydroelectric project (BHP) responds to the request for support by GoSL for assistance in designingand mobilizing private and public capital for the completion o f the long-delayed project at Bumbuna. 11 2. Rationalefor BankInvolvement 2.1 The rationale for Bank involvement in the BHP is fourfold: (a) to act as a catalyst for resource mobilization and donor coordination; (b) to promote public-private partnerships in developing and operating infrastructure projects; (c) to develop customized risk mitigation instruments under the PRG to facilitate implementation o f major infrastructure projects; and (d) to ensure application o f appropriate safeguards to mitigate the impact on the population and the environment. In addition, under the power component o f the Sierra Leone Power and Water Project, the Bank is bringing its experience in supporting power sector reform and utility enhancement programs. 3. Higher LevelObjectivesto which the Project Contributes 3.1 The GoSL's "Sierra Leone Vision 2025" summarizes the development principles that will guide its efforts to reduce poverty and facilitate economic growth. These principles are to: (i)achieve competitive private sector-led economic development with effective indigenous participation; (ii)create a high quality o f life for all Sierra Leoneans; (iii)create a well-educated, enlightened, tolerant, secure, stable, and well- managed society based on democratic values; (iv) ensure sustainable exploitation and effective utilization o f the country's natural resources while maintaining a healthy environment; and (v) become a science and technology-driven nation. One o f the keys to achieving this vision is carefully targeted electrification interventions, which will facilitate the delivery o f more effective education and health services and support the development o f small enterprises. Also, part o f the GoSL's social sector development program focuses on increasing access to reliable least-cost electricity. 3.2 The BHP will support this vision through improved access to essential infrastructure services, particularly least-cost renewable power generation capacity. The Country Assistance Strategy (CAS), scheduled for Board presentation June 16, 2005, will focus on the Bank's comparative advantage in supporting each o f the three PRSP pillars. The project thus would contribute to achievement o f CAS objectives through directly supporting the PRSP's Economic Growth pillar. Indeed, the CAS notes that the BHPwill play an essential role inresponding to the urgentneedfor power. 3.3 The project will reduce greenhouse gas emissions by displacing the use o f diesel generating power plant through hydroelectric power. This inturn contributes to the mitigation o f the effects o f climate change, a major global environmental problem. B. PROJECT DESCRIPTION 1. Instruments Two IDA instrumentswill be usedto finance the BHP: (a) A US$38 million Partial Risk Guarantee (PRG), to mobilize a commercial loan for the completion o f the BHP (two major physical components o f the project: (I) Contract A2/B comprising the BHP civil works and hydraulic structures; and (11) Contract C comprising the electromechanical equipment); and (b) A technical assistance grant to finance the other project components including the Environmental Management Plan (EMP); the Resettlement Action Plans (RAPs) for the dadreservoir and the transmission line; supervision o f the EMP and the RAPs; support for 12 the Bumbuna Project ImplementationUnit (PIU); the Dam Review Panel (DRP) of Experts; the Environment and SocialAdvisory Panel (ESAP) of Experts; USCDI, the Communication Action Plan(CAP); and capacity building for relevantministries and agencies for sustainable implementation ofthe project's safeguard measures. 2. ProjectDevelopmentObjective (PDO) and Key Indicators' 2.1 The main development objective of the proposedProject is to expand the capacity of Sierra Leone to increase the supply o f electricity services at least-cost, and in an efficient and environmentally and socially sustainable manner. This would enable Sierra Leone to overcome one of the key constraints on growth, as well as on the effective delivery o f social services. The key outcome indicators are listed below (see Annex 3 for details): e Electricity sales (GWh) increasingfrom 68.9 GWh in2003 to 230 GWh in2008; e Percentage reductionof average electricity tariffs; e A bio-diversity index to be establishedunder the Additional Environmental Studies, acceptable to the Association, does not reduce by the end of the Project; e Sixty percent increase o f the targeted watershed area under improved agricultural conservation practice by the end of the Project; e Sustainablefishery practicesin60 percento fthe reservoir and downstreamofthe dam; e One hundred percent of Affected Persons resettledas per definition in OP 4.12 by the end o f the Project; e Eighty percent increase of income of involved householdswith new income generating activities (forestry, fisheries, agriculture, soap making, carpentry, etc.) by the end of the Project; e The BumbunaWatershedManagementPlan(BWMP) developedby March 1,2007; e Environmental and Social Management Unit in the Ministry of Energy and Power (MoEP) created and operational by December 1, 2008; e The BumbunaConservationArea establishedby October 31,2006 and management plan adopted by March 1,2007; and e Environmental management monitoring system developed by the date o f effectiveness of the Grant. 3. ProjectComponents Component A -Hydroelectricand Transmission Infrastructure, 3.1 The BHP will consist o f an 88 m high rockfill dam with an asphalted concrete upstreamface with a crest-length o f 440 meters, two "morning glory" spillway intakes leading to a spillway tunnel and combined powerlauxiliary spillway tunnel, a gated power intake incorporated in the spillway tower for the combined tunnel, and an above-ground powerhouse with two 25 MW turbo-generator units. A narrow Y-shaped reservoir between0.2 and 1 km wide and 30 km in lengthwill form inthe river behindthe dam. It will have a capacity of 445 million m3and a surface area at the maximum operating level of 21 km2. The energy from the hydroplant will be stepped up with a 13.4 kV1161 kV switchyard and transmitted to Freetown through a single-circuit 200 km-long transmission line on self-supportingsteel towers. At Freetown, the energy will be steppeddown with a 161kVI34.5 kV111kV substation, for distribution inthe WesternArea. Power serviceto ' ThisPDO assumes that all energy generated by the BHP is sold to NPA and that NPA functions properly, as described under the PWP (Cr. 3945-SL). 13 Makeni, Lunsar, andPortLoco will be providedby means of an insulatedshield wire above the 161kV line conductorsthat will be energized at 34.5 kV. 3.2 Although preliminary works have been undertakenas early as in the OS, constructiono f the project began in the early 90s. Before the inception of the civil war the major civil structures were in place (spillways, intake, tunnel, gates) andthe rockfill dam hadbeenfinished. Whenthe damwas about 85 percent complete in May 1997, construction hadto be suspendedas a resultof civil-armedconflict. The existingpre- civil war contracts cover the completionof civil works (Contract A2), the hydraulic steel structures (Contract B), the electro-mechanicalequipment (Contract C), and the transmission line (Contract D). Contracts A2, B, and C will inthe remainder of the text be referredto as the HydroelectricProject Contracts. These contracts and contract D are to be completedunder the Project. Component B EnvironmentalMitigation,Resettlement,Watershed Managementand BenefitSharing - EnvironmentManagementPlan(EMP) 3.3 The EnvironmentalManagementPlan andthe ResettlementAction Plans are prepared, approvedand disclosed, both in-country and at the World Bank's Inforshop. The oversight arrangement for ensuringthe implementationof these plans rests with the Bumbuna Project ImplementationUnit (PIU). The PIU will supervise the transmission and the main civil contractors, who will be contractuallyobligatedto implement and report on environmentaland social mitigationmeasures for their respective constructionactivities. In parallel, the PIU will also be responsible for coordinating with local government councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP studies and activities funded by the project (in particular the Environmentand Agriculture Departments), and for the hiring and supervision of consultants, NGOs and contractors for their implementation. During the life of the project, this component will provideassistanceto develop an Environmentaland SocialManagement Unit, within the Ministry o fEnergy and Powerto take over the oversightfunctionfromthe PIUuponcompletionof the BHP. 3.4 The PIU will initiate all legal and administrative activities needed to establish the Bumbuna Watershed Management Authority (BWMA) and the Bumbuna Conservation Are (BCA) as a Conservation Offset. These organizations will be established shortly after the test reservoir impoundment, and will undertake implementationofthe EMP. The RAPSwill be implementedby the PIUundera separatecontract, 3.5 The BWMA will beresponsible for the BumbunaWatershed ManagementPlan(BWMP) that aims to protectthe reservoir from excessive sedimentationthrough improvingagriculturalpractices in the Bumbuna catchment area, improving the livelihood of farmers, and protecting the remaining animal and plant biodiversity inthe catchment, which includesthe chimpanzee and other primate communities (see sections on Environmentand SafeguardPolicies, andAnnex 17). 3.6 The BWMP has several sub-programsfor: (i)community awareness; (ii) landand soil management; (iii)agro-forestryandforestry;(iv) agriculturaldevelopment; and(v) downstreamandreservoirfisheries management. The PIU will also initiateand graduallytransfer to the BWMA other EMP activities funded by the project, includingactions for: (i)monitoringof public health impacts on diseases such as bilharziaand malaria; (ii)establishment o f an environmental and social amenity flow; (iii) managementof water quality in the reservoir area; and (iv) preparation and implementation o f a comprehensive environmentalmonitoring program. 3.7 All ofthese actions are necessaryto protectthe BumbunaReservoir from sedimentation, improvethe livelihood of farmers in the catchment area, increase economic opportunities for communities in the area, protect biodiversity, ensure adequate water quality for users of the reservoir and downstream users, ensure sufficient water quantity for downstream uses, and protect the downstream environment. After 14 commissioningo f the BHP, a special-purposeprojectcompany, the BumbunaHydropowerCompany will be contractuallyresponsible for, among other obligations, and, pursuant to an O&M management contract to be entered into between BHC and an operator ("the Operator") maintaining ongoing environment and management programs for the operation of the dam and reservoir andthe transmission facilities and right-of- way. These responsibilitieswill be specified inthe O&M management contract for the internationaloperator for the damheservoir andthe transmission facilities. Land Acquisition, Compensationand Rehabilitation 3.8 Reservoir Area: Laser images, GPS positioning and socio-economic impact surveys have determined varying degrees of impact in the damheservoir area. The Dam/Reservoir Resettlement Action Plan includes resettlement and compensation measures for: one village, which will be physically relocated; one village, which will lose almost all its farmland; and 31 villages which will lose a substantialpart of their farmland (approximately 40 percent). In addition, four villages will be compensated, through community development compensation, for losses that occurred during the constructionof the dam, the camp, access roads and the quarry in the 1980's and 1990's. All project-affected people will receive appropriate compensation as per impact category, i.e. new housesand other structures, new farmland, assistanceto move andto preparenew farmland, andcompensationfor other property suchas shrines. 3.9 Technical assistance and funding will be providedunder this project to ensure: (a) that farmers are able to reinstallthemselves on their new farms and with better agriculturaltechniques, throughthe Stabilized AgricultureProgram; and(b) that individualhouseholdincomes are restoredto at leastpre-resettlementlevels throughthe LivelihoodAssessmentandIncomeRestorationProgram. 3.10 Transmission Line: A Transmission Line Resettlement Action Plan has been developed, even though only very limited land acquisition and resettlement is required. In line with public consultations which expressedan unwillingnessto resettle and conformingto accepted utility practice in many developed and developing countries, an approach will be adopted which retains existing land use and permits transmission lines to overpass existing building and houses, provided that there is a minimum clearance between structures and the lowest conductor of 7.0 meters. Otherwise houses have to be moved and people compensated and resettled. One school near Makeni needs to be moved to an area adjacent to the present building, Inaddition, five dwellings will needto be movedout of the right-of-way(ROW) to adjacent areas. Provisionswill be made to control future buildingand land use in the ROW, with the guiding principle of maintainingthe minimumclearance. The transmission line RAP will be implementedprior to the energizing of the transmissionline. 3.11 Implementation of the Two Resettlement Action Plans (RAPS): There will be a common resettlementplanimplementationarrangement for bothparts ofthe project. The Dam/Reservoir RAP andthe Transmission Line RAP will be implemented under the responsibilityo f the PIU, by a unit of international and nationalresettlement consultants. The Resettlement Unit will also providecontinuous legalassistanceto the project affected people and will therefore include a legal counsel in the form of a local NGO - The Lawyers Centre for Legal Assistance. The project-affectedpeople will participate fully in the process and each village will form a Village Resettlement Committee. The overseeing and monitoringfunction will be ensuredby a ResettlementAdvisory Group in which all stakeholders at all levelswill be represented, and by an independent observer inthe form o f a WitnessNGO. 3.12 Benefit Sharing: USCDI will develop and test an innovative institutional model for the proposed BumbunaTrust, withthe aim of sharing benefits with the indirectlyaffectedpopulationinthe areaaroundthe reservoiranddownstreamofthe dam. It consists oftwo activities: 15 Ward and Community Sub-projects. Communities will receive development benefits, basedon their demands for improved public services, throughsub-projectsimplemented by them in collaboration with ward development committees and in harmony with overall district development plans. Public services could include clearing and rehabilitation of smaller access roads, hand dug community wells and construction of latrines, management o f organic waste, rehabilitation o f existing school buildings and healthcenters. Youth Capacity Building. Young women and men will receive training in marketable trade skills as well as business and life skills, and small grants will be given to community-basedyouthorganizations. A Catchment Stakeholder Forumwill enable a wider group o f stakeholders to have a say inthe formationof the Trust, and a Advisory Group will provide overall strategic directionfor the Trust. USCDI will provide technical assistance for the establishment of the BumbunaTrust, in additionto its role in helpingit develop approachedand processesfor benefitsharing. Component C -TechnicalAssistance 3.13 This component comprises management and supervision of the activities under Component B; and support for the Bumbuna ProjectImplementationUnit (PIU), the Dam Review Panel of Experts (DRP), the Environmental and Social Advisory Panel of Experts (ESAP), the RAP Implementation Team and the Communications Action Program. 3,14 An internationaland national EnvironmentalManagement TechnicalAssistance team will assist the PIU in implementing the EMP, in collaboration with the Department o f Environment and other Sierra Leonean agencies. The PIU will also establish its own environmental management structure to oversee implementationof EMPspreparedby the contractors for the damandtransmission line. 4. LessonsLearnedand Reflectedin the ProjectDesign 4.1 The design and development of this project has benefitedfrom a rich menu of lessons learnt from: (a) hydropower operations, (b) the findings and recommendations of the Bank's Dam Planning and Management Action Plan(DAMAP), which supportedthe Water Resource Sector Strategy in 2003; and (c) other similarly complex partial risk guarantee operations. Lessons from reconstruction of post-war economies and urgent restoration of economic infrastructure are also relevant and have been taken into account. The following is a summary of the key lessons, andthe design features of the projectthat addresses them: a. Alternative designs and options to minimize impacts: In line with prior experience, the project development has considered alternatives and design options and environmental and social mitigatiodenhancementin an integrated way with economic, technical and financialdimensions ofthe project. Eventhoughthe BHPwas identifiedas the least-cost generation option in the feasibility study in the early 1980's, this was re-validated through a retrospective options assessment carried out in 2005. While the physical design options were fixed (e.g. dam height and location, transmission line routing), project preparation evaluated alternative designs for the environment and social management components. These actions improvedthe overall project design, leadingto a reductionin involuntaryresettlementand introductiono f provisionsfor benefitsharing. b. Impact Assessment and Mitigation Measures: Many o f the implementation and mitigation strategies are directly derived from the recommendations contained in the 16 DAMAP. These include: careful identification and assessment o f downstream ecology and habitat impacts, extensive formal and informal stakeholder and project-affected- persons (PAP) consultations and participation in preparation and implementation o f plans, provision o f external independent monitoring, mechanisms for sharing project benefits with PAPS, adequate funding for EMP implementation and clear impact mitigation indicators. C. Mitigating Project and Country Risks: The contractual arrangements for the completion o f the BHP works are based on fixed price, date specific contract, with a guarantee to deliver 90% o f the nameplate capacity o f the BHP generation units. This arrangement, together with the coverage o f political and non-commercial risks through the Bank's PRG, has proved to be an effective risk mitigation package in similarly complex projects implemented in challenging political-economy environments with low capacity, such as the Haripur Power Project in Bangladesh (2000) and the Azito Power Project in Cote d'Ivoire (1999), and more recently the Nam Theun 2 hydropower project in Laos. The partial risk guarantee has made it possible to raise US$38 million in commercial financing - a significant achievement for a high-risk, post-conflict country - and enabled private sector participation. The project has contractual arrangements that provide an equitable and bankable risk distribution among the various parties in a public-private sector project; and features appropriate management o f sector revenues by an independent trustee, to ensure that payment obligations to different parties are met in a timely fashion. d. The importance o f community participation: The project incorporates a participatory approach involving recently elected local councils, traditional leaders and communities to design and implement o f mitigation, compensation and livelihood restoration packages, and introduce piloting and feedback mechanisms to enhance effectiveness o f the proposed measures; all done in a post-war context. e. The project supports the establishment o f a watershed management authority to introduce transformations in agriculture and land use practices in the Bumbuna watershed that will both reduce potential soil erosion and address unsustainable agriculture in a manner that advances poverty reduction inthe Bumbuna catchment, the poorest region inthe country. f. Protection o f the Biodiversity Inheritance: The project supports a biodiversity conservation area in Bumbuna catchment to provide an environmental offset that will reduce pressure on habitat and species, particularly chimpanzees (an endangered species), which would otherwise not survive inthis area with current human pressures. g- Need for Effective Communication with Stakeholders: The project includes a significant communications and consultation component targeted to project stakeholders. The results o f initial consultations during project preparation have been taken into account in the project design. An indication o f broad public support for the project is that it is featured on the SLL 5000 bill. 5. AlternativesConsidered and Reasonsfor Rejection 5.1 A number o f analyses, including least cost analyses, have beencarried out on the possible alternative energy sources to accommodate the suppressed demand and expected demand growth in Sierra Leone. The conclusion is that the proposed BHP i s the best alternative to meet the double objectives o f improving energy access and reliability in support o f economic growth and poverty alleviation. 5.2 The two major alternatives for power generation in Sierra Leone are limited to thermal power and hydroelectric power. Except for small non-commercial deposits o f coal, Sierra Leone is not endowed with 17 fossil energy resources. The total hydroelectric potential is significant and has been estimated at 1,200 MW. Other renewable energy sources such as wind, solar and biomass do not present any large-scale potential source o f electricity, although they are potentially cost-effective sources o f electricity for smaller scale schemes for electricity supply in areas not currently served by the grid. Interconnection with neighboring countries will only be an option in the medium-term. The West African Power Pool (WAPP) Masterplanhas studiedan interconnection with Guinea, but this is not scheduled before 2015. The link with Guinea would go through BHP to Linsan in Guinea. In the end, three specific alternatives to the project were considered and rejected. 5.3 Alternative 1: The least-cost all thermal diesel generator alternative that was considered involves the construction o f additional diesel power plant. Although this alternative benefits from not having to construct a transmission line (plant can be located closer to Freetown), and the capital costs o f diesel generators is lower per kW installed, the lifetime O&M and fuel costs outweigh these benefits compared with BHP. The cost differential between the all thermal least cost and BHP least cost scenario is about 25% for all demand scenarios that were considered. 5.4 Alternative 2: Alternative hydropower sites or a set o f small-hydroelectric sites for which the aggregate power would add up to the size o f BHP could also present an alternative. In total, 22 potential hydroelectric sites have been identified in Sierra Leone. Preliminary design and cost estimates were prepared to rank the sites in their economic merit order. Bumbuna Falls, the site o f BHP, offers the most attractive hydroelectric option to expand and diversify power supply on the basis o f hydrology, head and other technical characteristics, and its proximity to the load center, Freetown. An alternative o f choosing a subset of small-hydroelectric sites was discarded due to the added institutional challenges it imposes at a time when NPA faces fundamental operational problems. With the addition o f revenues from carbon finance, the hydropower cost alternative is made more attractive and sustainable on its margins. 5.5 Alternative 3: A thermal coal plant that would be operated on the basis o f imported coal was also found not to be least cost compared with BHP. C. IMPLEMENTATION 1. PartnershipArrangements 1.1 Inorder to qualify for an IDA PRG, the Project hadto be restructured as a public-private partnership (PPP). The financing o f the BHP involves a number o f other donors, including AfDB, the Government of Italy, and the OPEC Fund. In addition, the GoSL is providing funding toward the local cost o f project completion, These arrangements were confirmed at a donors' meeting, chaired by the Vice President o f Sierra Leone, on September 11, 2003. It is estimated that 64 percent o f the cost o f completion o f the project will be financed by the public sector with the remaining 34 percent to be provided by the private sector. 1.2. Under the PPP, BHC, a special purpose company, will be created with Salcost and GoSL as shareholders holding 95 percent and 5 percent o f the equity respectively. B H C will negotiate and obtain a commercial bank loan, and, inparallel, will be awarded a concession by the GoSL for operating, maintaining and managing the project for a period o f 20 years. The BHC, through Salcost will assume: the completion risk, under a lump sum, date-certain contract. BHC by itselfwill assume: (a) the interest rate risk, since the commercial loan will carry a floating interest rate; (b) the operational risk, which is significant given the legacy of project implementation (e.g., potential malfunctioning o f equipment, which has been lying 18 uninstalled for approximately 7 years); and (c) a substantial non-payment risk, resulting from the weak financial situation ofNPA, the offtaker. These points are further elaborated inTables 1 and 2 below. 1.3. The completion of the construction of the BHP is not included in the concession agreement. It remains the responsibility of the GoSL and is not a risk borne by BHC. However, the GoSL will enter into a Wrap Up Agreement under which the private sector constructor will bear the construction risk. 2. Institutionaland ImplementationArrangements 2.1 The institutional arrangements for government direction, cross-sector coordination and management of the BHP implementation are at three levels: (1) a special Cabinet Sub-committee to provide policy oversight; (2) a Technical Committee reporting to the Cabinet Sub-committee and providing inter-agency coordination for all aspects o f the project implementation and supervision o f the PIU; and (3) the Bumbuna Project Implementation Unit (PIU). All contracts related to the completion o f the project, including those for construction contractors under Component A and the safeguard studies and project activities under Component B and Component C, will be administered by the PIU. The PIU will have a team o f national and international staff led by a Sierra Leonean Director and an expatriate Manager. Annex 6 provides further details on the responsibilities and composition o f the Committees and the PIU staffing. The institutional and implementation arrangements for the operation phase o f the project are described below. ComponentA BHP (ContractsA2/B and C) 2.2 Construction of the BHP initially began on the basis o f the Hydroelectric Project Contracts. Following the restructuring of the BHP, the private sector, through BHC/Salcost, will bear the construction risk of the BHP. Salcost will enter into a Wrap Up Agreement (the "Wrap Up Agreement") with GoSL, pursuant to which the three agreements included in the Hydroelectric Project Contracts will be complemented, by Salcost's undertakingto complete the construction o f the BHP for (i)a fixed cost, (ii)on a fixed date o f commissioning, and (iii)with a guaranteed capacity on the date o f commissioning. The completion of the construction is expected to take 24 months. 2.3 BHC will be established between Salcost, holding 95 percent o f its shares, and GoSL, holding the balance 5 percent o f BHC's shares. This new company would have a small amount o f new equity as most of the new financing will be in the form of debt. B H C will be paid a concession fee for the operation o f the BHP. Itwould also be the borrower ofthe new commercial debt requiredto complete the project. 2.4 BHC will enter into a Concession Agreement for a term longer than the term o f the repayment o f the debts incurred for the financing o f the BHP. Under the Concession Agreement, BHC will operate, maintain, and manage o f the BHP. The concession fee will be structured so as to enable the GoSL to comply with a number of obligations incurred for the construction o f the BHP, both before and after this restructuring (including a number o f households affected duringthe initial constructionworks (See Section D paragraphs 3 to 5 and Annex 17). Through the Concession Agreement, the GoSL will assume the risk o f force majeure, including political force majeure (currency convertibility and transferability) or natural force majeure, 2.5 BHC will enter into an Operating and Maintenance Agreement. Because Salcost is a hydropower plant builder and not an operator, an international operating utility will be competitively selected under Bank procurement guidelines to maintain and operate the completed project on behalf o f BHC (the "Operator"). The Operator will assume part o fthe operating and maintenance risk. 19 2.6 BHC will enter intoa Power PurchaseAgreement (PPA) withNPA. The GoSLwill guaranteeNPA's obligations under the PPA. Accordingly, the power generatedwill be suppliedto NPA, andNPA will cover all operation and maintenance costs (includingthe constitutionof contingency reserves) and all debt service of BHC not otherwise covered. The term o f the PPA will be consistent with the terms of the debts to be repaid. Throughthe PPA,NPA will bear part of the operatingrisk relatedto hydrologywhich traditionally is taken by the utility. 2.7 The market risk will be borne by NPA and by the GoSL, through its guarantee o fNPA's obligations underthe PPAa2 2.8 Part of the GoSL's obligations regarding safeguard measures, to be implemented in connection with the construction o f the BHP, will be passedon to Salcost through the Wrap Up Agreement, and part of its obligationsto be implementedin connectionwith the operation ofthe BHP will be passedonto BHCthrough the Concession Agreement, andto the Operator through the O&M Agreement. 2.9 BHP's risk allocation differs from most projects for which IDA usually provides a PRG, because it must take into account the following legacy issues: (i)the project was 85% complete, when it was interruptedby the civil war; (ii) the electro- and hydro-mechanicalequipment has been stored for the past 7 years; (iii) original supply contracts are no longer in force and all warranties or performance guarantees all are void; (iv) the original constructioncontracts are still in force; (v) the principalcontractor Salcost is owed approximatelyUS$45 millionfor delayedpayments and interest, whichthe GoSL has agreedto pay out ofthe project revenues; and (vi) the two main risks associated with any hydropower project investment, the geotechnical and hydrologicalrisks, which are normally addressedthrough design and construction, can no longer be changed. Nevertheless the project contracts allocate the commercial, technical, and political risks amongthe parties best able to managethem. * The strengtheningofNPA's managementthrougha managementcontract, underthe IDA supportedPower andWater Project (Cr. 3945 SL), shouldresult in improvedoperational and commercialperformance. - 20 Fig.1 Contractual Structure - 5% Equity / $z Ownership @ Project Cash Flow Application 2.10 It is expected that BHP's cash flow will provide a substantial source o f Project financing revenue. The tariff paid by N P A under the PPA will be determined so as to cover the operating costs and the debt service o f BHC, including the constitution o f the necessary contingency reserves (for maintenance and debt service) that are not financed from other sources (such as insurance indemnities). However the tariff will not enable BHC to generate distributable profits. On an annual basis BHC and NPA will agree on the correct tariff setting in order to enable BHC to operate in an efficient manner. The level o f tariff payment will be synchronized with the seasonal pattern of electricity generation (dry season; rainy season). An operational risk management plan, satisfactory to IDA, will be prepared in consultation between BHC and NPA. Inthe event that all contingency reserves are exhausted, BHC would raise its bulk power tariff to cover incremental requirements. Because the Bumbuna generated power will be substantially less expensive than any other available alternative option it is expected that the resulting increase o f the Bumbuna power price will be acceptable to the rate payers. Should BHC's situation deteriorate significantly, BHC and N P A would also consult in order to avoid placing excessive hardship on NPA. 2.11 A payment waterfall mechanism, involving all interested parties, will be put in place in order to ensure that the tariff is allocated to the payment of expenditure and debts according to an agreed upon order of priority: (1) operating and maintenance fees and expenses would be paid first, prior to (2) the senior debt owed to the IDA guaranteed lender, prior to (3) the amount o f the concession fee intended to enable to GoSL to service the debt owed to Salcost for works completed duringthe initial construction and not paid, and last (4) the amount o f the concession fee intended to enable the GoSL to repay other debts incurred during the initial construction phase (consultants and affected persons). Category 3 and 4 are subordinated to other categories interms o f repayment and termination payments. 21 RiskAllocation under ComponentA Table 1:ProjectRisks Allocation ProposedIDA GuaranteeCoverage 2.12 The proposedIDA PRG will guarantee the debt service of the IDA guaranteed commercial loan. It will be callable by the IDA guaranteed lender only. The IDA Guarantee will cover any outstanding scheduled payment of principal and interest (excluding default interest and breakage costs) when the borrower(BHC)'s failure to make such payment in a timely manner is a direct resultof GoSL's breachof its payment obligationsunder the ConcessionAgreement or the guarantee of NPA's obligationsunder the PPA. Therefore not every defaulto fthe GoSL will trigger the IDA PRG, but only a default ofthe GoSL that causes a default by BHC towards the IDA guaranteed lender (exclusive o f other creditors). The amount payable underthe IDA PRGwill be determined by expert or by an arbitrationaward renderedagainst Sierra Leone in accordance with the provisions of the Concession Agreement, or the government guarantee, undisputed by the GoSL. As all IDA guarantees,the proposedPRGmay not be accelerated. 2.13 ReportingRequirements and ProjectMonitoring. Under the project contractual agreements, BHC will be required to make available the following reports and any other data that the lenders and IDA may reasonablyrequest: a) Quarterly operation reports; annual risk managementhnsurance reviews; and annual operating plans andmaintenanceprograms; b) Annual monitoring reports on compliance with applicable national and local environmental requirements; and with environmental and social policies, including: the World Bank Group's safeguardpolicies; environmental, healthandsafety guidelines; andEnvironmentalActionPlans; and c) Yearly audited financial statements for BHC. 2.14 Auditing Arrangements. BHC will have its financial statements for each fiscal year audited in accordance with internationally acceptable accounting and auditing standards, by an independent auditor satisfactory to the lenders and IDA; and will ensure that IDA receives the report from the auditors and the auditedfinancial statements. Incase of ForceMajeure(andother standardexceptions)only. 22 Component A: 161kV Transmission Line (ContractD) 2.15 It is anticipated that Contract D will be implemented by SAE Power Lines s.r.1. (formerly ABB Power Technologies S.p.A.) under a contract to be signed with the GoSLPIU. The OPEC Fundwill provide financingfor this component. Oncethis component is completed, the transmission line and substation will be addedto the BHP concession. Component B 2.16 The PIU will be responsible for managing all Component B activities and report to the Technical Committee on the progress in project implementation. The ESAP will formally comment on the Terms of Reference for all services and procurement contracts requiredto implement the subcomponent activities for the Resettlement Action Plans (RAPs), the Dam sitemeservoir and transmission line, the Environment Management Plan (EMP) studies and mitigatiodmonitoringactivities, as well as the contractor EMPs incorporated in Contract A2/B and C. Annexes 6 and 17 provide more details on the implementation arrangementsfor the EMP andthe RAPs. 2.17 The PIU Environmental Specialist and the PIU Environmentteam will supervise and monitor the implementationof, and compliance with, the Contractor EMPs that start immediatelywith the resumptionof the construction under Component A. In parallel, the PIU will supervise teams preparing the additional baseline studies requiredbefore reservoir impoundment and initiatethe other EMP activities in Component B through subcontracts and coordinatingactions. Similarly, the Resettlement and Social specialist in the PIU will supervisethe consultant teams implementingthe RAPs. 2.18 The PIUwill subsequently leadthe effort to establishan administrativelylean entityreferredto as the Bumbuna Watershed Management Authority (BWMA). This will be a small organizationresponsible for implementation o f the Land Management Strategy and Action Plan designed to introduce integrated watershed management practices in the Bumbuna catchments that involve agriculture transformations, together with reservoirand downstreamfisheries programs and the biodiversity conservation measures. The PIU would then gradually transfer responsibilities for these startup activities funded by the project under ComponentByincludingthe establishment o fthe BCA. A trust, provisionally calledthe BumbunaTrust, will be established before commissioning the BHP to provide a longer-termsustainable financingmechanismfor continuedwatershed management, conservationand benefit-sharingin the basinthroughthe mechanisms and source o f funds described inAnnex 2. Component C 2.19 The Bumbuna PIU will also manage this capacity building component. The ESAP and the Dam Review Panel (DRP), which were constitutedwith Project PreparationFacility funds, are functional and the hydropower engineer who will also performas the manager of the PIUhas beenrecruited. The activities for implementingthe CommunicationsProgramare definedinthe CommunicationsActionPlan(see section 4). 3. ComplementaryProjects Severalcomplementaryprojectswill enhance the BHPimplementationandperformance. 23 BumbunaTrust 3.1 Prior to commissioning of the BHP project, the Government of Sierra Leone will establish the BumbunaTrust. It is anticipatedthat the Trust will have differentwindows to fund: 0 The ongoingbenefitsharingwith communities inthe basin(Le. continuationof the USCDIactivities, extendedto other communities inthe BumbunaCatchment and Seli RiverBasin); 0 The BWMA, as identifiedinthe EMP; 0 The BCA as identifiedinthe EMPas a conservation offset;and 0 Potentially,the Seli RiverDevelopmentAuthority (SRDA). 3.2 The Trust will also havea short-termwindowto fund legacy compensationpaymentsto communities whose land and assets were acquired in the 1990s during construction o f the transmission tower pads, as identified in the Transmission RAP. These will be paid through Project revenues into the Trust. It is anticipated that each o f the programs financed by the Trust windows will be administered and managedby separate legalentitieswith their own governance andmanagementteams. 3.3 Financing sources of the Trust will be: (i)a small portion of the BHP power sales, and (ii)the BumbunaCarbonProject (see below). It is anticipatedthat GoSL will be ableto leveragecontributionsfrom Trust Partners (such as interested internationalNGOs, private sector interests or bilateraldonors) who are interested in supportingone or more financingwindows. Bumbuna CarbonProject 3.4 The World Bank's CarbonFinance Businesshas agreedto providefunds to the GoSL for the avoided thermal generation (greenhouse gas emission reductions in the power sector) that the BHP will deliver through the Netherlands. Funds from the EWA would be deposited in the Bumbuna Trust in an account to fund ongoingbenefit-sharingwindows. Power and Water Project(PWP, Cr. 3945-SL) 3.5 The IDA Power and Water Credit (IDA Cr. 3945-SL: US$35 Million) is financing activities to establishthe enabling policy and institutionalenvironment and physicalprovisions to successfully integrate the electricity supplied by BHP into the Western Area Grid system. These are discussed in Annex 2, and include regulatory reforms and investments in the restoration o f thermal capacity and transmission and distributioncapacities, which are essential to enable a mixedhydro-thermaloperationandto deliver power to gridconsumers inan efficient and sustainablemanner. 4. CommunicationProgram 4.1 The inclusive communicationprocess initiated during project preparationhas been included in the project as a comprehensive CAP, to ensure that two-way communication with the various stakeholders - project-affected communities, traditional community leaders, town and district councils, women, youth, elders - continues, and that their concerns are promptly and transparently addressed. This communication processis key to maintainingconsensus for the projectandthus for ensuring its success. 24 4.2 CAP consistsof the followingmainactivities: (a) Communication and consultations with residents of the project area, including regular interaction with local authoritiesand establishmento fcommunity radio; (b) Coordination of and assistance to involved institutions, includingthe PIU and the relevant ministries and authorities; (c) Relations with the mass media and NGOs, includingthe productionof radio and televisionprograms andthe organizationofworkshops to shareexperiencesand information;and (d) Communication with the international community, particularly donors and internationalNGOs, to disseminatepositiveinformationand lessons aboutthe project. 4.3 The Communications Unit (CU) will: (i)set up monthly working plans, to be discussed and approved by the TechnicalCommittee, (ii) assess the degree of participationof the key stakeholders during implementation;and (iii)provide project updates and status reports. All of the project's public documents will be made availablethrough a website and at suitable locations at the central and provincial levels. The CU will coordinate consultationactivities with Environmental Impact Assessment (EIA) and RAP teams involvedinthe reservoirandtransmissionline areas and will sustaindialogue aimedat encouraging informed decision-makingand stakeholderownership. 5. Monitoring and Evaluationof Outcomes/Results 5.1 Carefill and comprehensive monitoring and evaluation (M&E) is essential for the success o f the project. The PIU will monitor and evaluate the indicators and results for each component as outlined in Annex 3. 5.2 Inaddition, data from the PIU, the NationalCommission for Privatization(NCP), the CU, and other implementingagencies will be aggregatedat the project levelto give a holistic picture of progress inall areas of the project. M&E reports will be delivered in the first year of implementationon a quarterly basis (baseline confirmation). Thereafter such reports will be submitted biannually until the completion of the Project. The mid-termreviewwill be heldinNovember2007. 5.3 The key performanceindicators usedto monitorBHF' performancewill include: 0 GenerationAvailability,ForcedOutage Rates andDuration 0 TransmissionAvailability, ForcedOutage RatesandDuration 0 PlantEfficiency 0 OperatingBudgetPerformance EnvironmentalCompliance 0 EmployeeandPublic Safety 5.4 There will also be a monitoringand(periodic)verificationplanfor the purposes o f carbon finance. 6. Sustainability 6.1 The economic andpoliticalimplicationsofthe proposedprojectare considerable as it is importantfor redressingimbalances in the economic and social development o f Sierra Leone. Inaddition, because it is the 25 country's priority infrastructure project, it receives close attention at the highest decision-making levels in Freetown as well as extremely high public interest and scrutiny o f its progress. Hence, the Government's commitment to and sense o f ownership o f the BHP is extremely high. 6.2 Government commitment to power sector reform and to the completion of the BHP. The sustainability o f the BHP is primarily supported by GoSL's commitment to complete the project and let the private sector operate it until, at least it, pays back its debts. The BHC is beingcreated solely for the purpose of being responsible for the management o f the BHP's operations, including contracting out its operations and maintenance to a very experienced international hydropower utility, so as to enable it to pay back the Commercial Loan and other project obligations. Project sustainability also rests with the implementation o f a number of policy actions and effective achievement o f their respective objectives. These actions include the selection o f a management contractor for NPA and the promotion o f economic tariffs for sales o f power to improve both the efficiency o f the management o f its operations and the long-term financial viability o f the company. 6.3 Other important policy actions contributing to the sustainability o f the project include: (a) the Amendment o f the existing NPA Act to allow for a private entity to run the BHP; (b) the enactment a new 2005 Electricity Law and NPA Act and the establishment o f a sector regulatory framework, which will help create an enabling environment conducive to transparent private sector participation in the energy sector; and (c) the creation o f a National Energy Policy Planning and Coordinator Unit (NEPPCU) within the MoEP to better plan for the least cost development o fthe sector. Finally, the transmission and distribution investments to reduce technical losses, as well as the commercial actions taken by the new management contractor to significantly reduce technical and non-technical losses and improve collection losses, are expected to yield substantial improvements to ensure the longterm viability o fthe power systems o fNPA. 6.4 Community willingness and capacity to manage and sustain services in relation to the safeguard mitigation actions: to help communities manage their services inthe long-term, the institutional capacity o f community-based organizations will be strengthened through hiring consultants in: operations and maintenance, financial management, hygiene, education, and effective use o f electricity services, as appropriate. This will be done through sensitization sessions by teams composed o f Bumbuna district level staff in association with the consultants' sociologist and community development specialists (recruited specially for that purpose). Management o f operation and maintenance o f completed community facilities will be the sole responsibility o f the community. 6.5 Because o f the impoundment o f the reservoir, people and fauna (including chimpanzees) will likely be limited to a smaller area, which will cause a habitat squeeze. This will further decrease the sustainability of the present agricultural shifting cultivation system as well as increase the pressure on the chimpanzee habitat. The project will finance the development and implementation o f a Land Management Strategy and Action Plan, a Land and Soil Management Program, an Agro-forestry and Forestry Program, and an Agricultural Development Program for the Bumbuna Watershed. The potential for ecotourism development will be studied and an action plan developed. These activities will be executed by the BWMA and financed through the establishment o f a Bumbuna Watershed Management Trust Fund, partly financed from the electricity tariff, to fund the activities o f the Authority, including the proposed environmental offset (Bumbuna Conservation Area). 6.6 It is expected that these mitigation measures will improve the livelihood o fthe extremely poor farmer population, reduce siltation o f the reservoir, protect the habitat for the chimpanzee population, other primates and other biodiversity, and ensure the overall sustainability o f the project. Additional measures to be taken 26 under the project that will strengthensustainabilityinclude: (a) an Emergency PreparednessPlan (EPP) will be prepared to warn and protect people downstream in case o f an emergency; (b) an aerator mechanismto reduce the chance of stratificationo f the reservoir and improve water quality will be includedinthe reservoir design; and (c) a benefit-sharing mechanism will be established in the form o f the USCDI (see Annex 4) through which indirectly affected communities around the reservoir can benefit from social and economic development activities. The Government's commitment to implement all these mitigation measures constitutesanother strengthon whichthe project's sustainabilityis founded. 7. CriticalRisks and Possible ControversialAspects 7.1 The country context in Sierra Leone poses four fundamental risks to the implementationand completion of the Bumbuna Hydroelectric Project. These are: (i)limited institutional capacity; (ii) weakness in governance resultingin poor service delivery; (iii)internal economic shocks that could lead to resurgenceof violence in Sierra Leone, also fueled by unemploymentamongthe youth; and (iv) escalationin regionalturmoil, especiallywith respectto the situationinneighboringLiberia. 7.2 Bank interventionsin Sierra Leone, includingthe PRSP, are designed to mitigate and limit exposure to these risks, Enhancedpartnershipand participationby civil society organizations, the private sector, other donors, and academic institutionsindevelopmentprograms, as well as in analyticalwork, are key elements in enhancing the sustainability of Bank interventions.Sierra Leone's very impressive post-conflictreformtrack recordhas dependedon strong politicalandparticipatoryconsensusbothwithin and outside government. 7.3 The BHP is designed to limit the impact of these risks on the project. It is planned as a PPP, to be implementedand managedby the privatesector throughthe BHC. As a result, the risks of weak governance and limited institutional capacity that would otherwise constitute key performance risks for a public sector entity are mitigated. The constructionof the dam will bringabout some economic growth inthe country (see Section Dl), and thus help mitigate, to some degree, the risk o f an internaleconomic shock. Moreover, the USCDI will provide for community development activities around the site where the hydroelectric dam is being constructed and includes among others ward and community subprojects and youth capacity building activities. This will additionally mitigate the risk of internal economic shocks. See table 2 for a detailed breakdown. 27 Table 2: Risks and RiskMitigationMeasures Low commitmentof GoSL to the project andthe power sector, including the reform agenda Non-reductionof the GoSL's role in the managementof sector operations BHP, upcomingmanagementcontract for NPA. Failureto create a conducive environment for sector generation and investment. Inability ofNPA to honor the PPA and thereby frustrate the BHC to service putting in place a managementcontract.The projectdebt. paymentprocedures(including the 'lock-box' and Failure to provide a sustainableprogramof community development initiatives for the people indirectly affectedby the Project. The constructionof largedams projects involving resettlementare very sensitive for their possiblenegativesocial and 1 NGOsto understandand address environmentalimpacts. This may make see Annex 7) This will, inter alia, gettingmulti-stakeholders supportfor the IdBank commitment toward the introductionof fair projectdifficult unless disclosureo f initiatives that promotehigh standardsof social information and transparencyare properly ,environmentalprotectionandpovertyalleviationlinkedto handled. Lack of long-termsustainabilityof the EMP and the USCDI suoervision I Lack ofon-eoine.support for maintenance - .. Subprojectsbased on community demand and managedby Moderate I and operation ofUpperSeli subprojects. communities; links to relevant sector ministriesestablished Limited market for youth trained inthe Immediatejob opportunities with subprojects and linkagesto other Substantial Upper Seli Initiative work uroerams in the area I r L , Riskto ComponentResults Ristk.\litigation Measures RiskRating Non -completion/commissioningofthe Seasoned norld-class contractors under the SuDervision an 1Low'Modcrate civil works, the hydraulic structuresof the experiencedengineering consultantare undertakingthese activities.In dam, the electromechanicalequipment and addition, this work will be under the overall supervision o fthe BHP- the transmissionline on time and within PIU, which is being assistedby aworld-class hydropower utility budget (Contracts M/B,C and D). (Hydro Quebec International - HQI).The scope o fwork has been defined in condition assessmentsundertakenby the contractor and reviewed by the engineeringconsultant. In addition, HQI is undertakingan independentassessment ofthe scope and terms o f the proposedcontracts, on behalfofthe BHP-PIU. These project componentswill be closely monitoredby the GoSL and the donors. Unsatisfactory implementation o fthe An experienced internationalconsultantwill be hired in the BHP-PIU EnvironmentalManagementPlan(EMP). to managethe EMP, which is adequatelyresourced. The status o fthe EMP will be reportedmonthly by the BHP-PIU and will also be Unsatisfactolyimplementation o f the RAPSincluding landacquisition, to manageimplementationofthe RAPS,which are adequately compensationand rehabilitationsystem for resourced. The status of implementationofthe RAPSwill be reported the dadreservoir areaand the on monthlyby the BHP-PIUandwill also be closely monitoredby transmissionline. the ESAPas well as the GoSL and the donors. Interalia, a witness NGO will be hired to monitor activities such as compensation arrangementsand signingof agreements. OverallRiskRating Substantial 28 8. Grant and GuaranteeConditions and Covenants 8.1 Conditions for effectiveness of the Development Grant Agreement and the IDA Guarantee Agreement (beyond standardIDA guaranteeconditions) are as follows: For the IDA Grant: The GoSLhas adoptedandfurnished to IDA the PIP, inform and substancesatisfactory to IDA; The GoSLhas openedthe Project Account andcreditedit with the Initial Deposit; The GoSL has enacted amendments to the NationalPower Authority Act, a new electricity law, and regulationssetting up the GoSL's regulatorybody for the electricity sector, all acceptableto IDA; The GoSL has established a fully operational financial management system and procedures satisfactoryto IDA; The PIU has been staffed with personnel in numbers and with qualifications and terms of reference satisfactory to IDA, andthe GoSL has appointedthe independentauditors; and IDA has received a legal opinion in form and substance acceptable to IDA, from counsel acceptable to IDA that the DGA and the IDA Guarantee Documents have been validly entered into amongtheir respectiveparties; For the IDA guarantee (usual and customary conditions precedent for a financing of this type, including but not limitedto the following): BHC, with Articles of Associationacceptable to IDA, has been duly established in accordance with the laws of Sierra Leone; The Guarantee Agreement, the Indemnity Agreement and the Project Agreements (collectively the "IDA Guarantee Documents") have beenexecuted and deliveredand all conditionsprecedent to their effectiveness have beenfulfilled; Executionof all TransactionDocuments andFinanceDocuments; Deliveryof all legalopinions; Effectiveness of insurance requiredby the Finance Documents to be in effect at FinancialClose and the naming o f finance parties as co-insuredunder those insurance policies and of IDA as namedinsuredunder third-party liability insurances; Creationo fthe Security package infavor ofthe IDA guaranteed lender; Awardandsignature ofthe O&M Agreement; Completion of the contractual arrangement for the flow of funds during the constructionand operation periods, includingthe PaymentWaterfallAgreement; Effectiveness of all required insurance (to include IDA as an additional insured on third-party liability insurance); and 29 (g) Payment of the InitiationFee, the first installmentof ProcessingFee, and the first installmentof Standby Feeandthe GuaranteeFee. Datedcovenants and conditions for the Grant are as follows: 8.2 Forenvironmentaland socialsafeguard issues: Before impoundment of the reservoir, the following should be completed: (i)one village (Matombe) that will be physicallyrelocatedto a new site shouldhave received new landand the first crop should have been planted; (ii)one village (Waia) that will lose almost all their land should have received new land and the first crop planted; (iii)villages that will lose a substantial part of their land (in the RAP identifiedas losingapproximately 40 percent), will havereceivedandplantednew land; Setting up of the Bumbuna Watershed Management Authority after test impoundment and beforefinal impoundment; The gazettingofthe BumbunaConservationArea (BCA); Satisfactory completionofthe GoSL, Salcost, andBHC's respectiveEMPs; The setting up of the Bumbuna Trust, using proceeds o f the sales of Bumbuna for the purposesdescribedinpart3 ofthis Section; and Award and signature of the O&M Agreement and satisfaction of its conditions of effectiveness. 8.3 For public expenditure and revenue managementarrangements: The GoSL shall establish and maintain a financial management system, including records, accounts, and financial statements in accordance with consistently applied accounting standards acceptable to IDA, adequateto reflectthe operations, resourcesand expenditures relatedto the Project. 8.4 Forfinancialmanagement arrangementsthe GoSL shall: Have the financial statements referredabove for each fiscal year (or other periodagreed to by IDA), audited, in accordance with consistently applied auditing standards acceptable to IDA, by independent auditors acceptableto IDA; Furnishto IDA as soon as available, but in any case not later than six months after the end of each such year (or such other period agreed to by IDA), (A) certified copies of the financial statements referredto inparagraph(a) of this Section for such year (or other periodagreedto by IDA), as so audited, and (B) an opinion on such statements by said auditors, in scope and detail satisfactory to IDA; Furnishto IDA such other informationconcerning such records and accounts, and the audit of such financial statements, and concerning said auditors, as IDA may from time to time reasonablyrequest; and For all expenditures with respectto which withdrawalsfrom the Grant Account were madeonthe basis of statements of expenditure,the GoSL shall: 30 (i) retain,untilatleastoneyearafterIDAhasreceivedtheauditreportfor,orcovering, the fiscal year in which the last withdrawal from the Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (ii) EnableIDA's representativesto examine suchrecords; and (iii) Ensure that such statements o f expenditure are includedin the audit for each fiscal year (or other periodagreedto by IDA); 8.5 For implementation,monitoringand evaluation arrangements: (a) Without limitationupon the GoSL's progress reporting obligations,the GoSL shall prepare and furnishto IDA a financial monitoringreport, in form and substance satisfactory to IDA, which: (i) SetsforthsourcesandusesoffundsfortheProject,bothcumulativelyandforthe period covered by said report, showing separately funds provided under the Grant, and explains variances betweenthe actualandplanneduses of such funds; (ii) DescribesphysicalprogressinProjectimplementation,bothcumulativelyandforthe periodcoveredby saidreport, and explains variances betweenthe actual and plannedProject implementation; and (iii) Sets forth the status o f procurement under the Project, as at the end o f the period coveredby saidreport. (a) The first FMR shall be furnishedto IDA not later than 45 days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Projectthrough the end of such first calendar quarter; thereafter, each FMR shall be furnished to IDA not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter. 8.6. For operationand maintenance: Satisfactionof the conditions of effectiveness o f the O&M Agreement no later than 12 to 15 months after notice to start the works issuedin accordance with the Wrap-Up-Agreement. 9. Main Features of the ProposedFinancingPackage 9.1 In view of the substantial amounts previously invested, the parties are reluctant to inject additional equity intothe BHP. BHC's equity willtherefore remainsymbolic. 9.2 The main financing of the restructuredBHP consists in a new loan (the "Commercial Loan") to be providedby a commercial bank to BHC with the support of the IDA guarantee. The terms and conditionsof the Commercial Loan are yet to be finalized. The Commercial Loan will be denominated in Euro, for an amount equivalent to US$38 million, and have a final maturity comprised between 10 and 15 years. The commercialbank's remuneration(fees and interest rate) is yet to be determined, to IDA's satisfaction. 9.3 Additionalresourcesneededfor the financingo fthe BHPover time will be providedby its cashflow. 31 10. ProjectCost Estimate 10.1 The project cost estimate to completion is set out in Annex 5. It covers all the project components described in Section B3 and Annex 4. For each component, the cost estimate is broken down into the base cost (2004 prices), physical contingencies, and price contingencies and interest duringconstruction (IDC) for Contracts A2/B and C. ComponentA -Hydroelectric and Transmission Infrastructure 10.2 The cost estimates for Contract (A2/B); Contract C and Contract D are based on the results o f the condition assessments that were undertaken by the contractors (Salcost in the case o f Contracts A2/B and C, and ABB - now SAE - in the case o f Contract D) under the supervision o f the engineering consultant. In addition, the cost estimate for Contract A2/B reflects the recommendations o f the DRP in relation to an additional asphalt layer for the dam and slope stabilization above and below the dam crest access road and the test impoundment. Independent reviews o f the cost estimates for Contracts A2/B and C have been undertaken on behalf o fthe BHP-PIU by their consultants, Hydro Quebec International(HQI),o f Montreal. 10.3 The cost estimates for Contracts A2/B and C, prepared by the consultant, already include price contingencies. Preliminary results o f the HQIreview indicate that the cost estimates for these components also include a sufficient cushion to cover physical contingencies in the range o f 5-10 percent. Because the defects liability period for the electromechanical equipment has expired, a special reserve fund o f US$0.97 million will be established for Contract D. Inaddition, an interest during construction (IDC) allowance o f 10 percent has been included for Contracts A2/B and C. For Contract D, physical and price contingencies o f 5 percent each have beenallowed. Component B - Environmental Mitigation, Resettlement, Watershed Management, and Benefit Sharing 10.4 The cost estimates for the physical components and implementation o f the EMP and the RAPs are based on the recommendations o f the EL4 and the RAP studies for the dadreservoir area and the transmission line. Physical and price contingencies o f 5 percent each have been applied. ComponentC -TechnicalAssistance 10.5 The cost estimate for the construction supervision o f the Project is identical to the contract signed between the PIU and the engineering consultant. Inter alia, this contract requires the consultant to prepare an impoundment plan, an Emergency Preparedness Plan (EPP) and an O&M plan. The cost estimates for the management and supervision o f the EMP and the RAPs are based on the EIA and RAP study estimates. The cost estimate for the support for the PIU is based on information provided in the AfDB appraisal document. The cost estimates for the DRPandthe ESAP are based on the number o f meetings to be organized (1 for the DRP and 6 for the ESAP). Physical and price contingencies o f 5 percent each for the DRP and the ESAP have been applied. D. APPRAISAL SUMMARY 1. Economic and FinancialAnalyses Economic Summary 1.1 The analysis o f economic justification was carried out inthree steps: (a) confirmation o f the need for the Project, based on assessment o f the current situation o f power market and its future prospects as well as the role o f the existing supply infrastructure to meet demand; (b) verification o f the project as the least-cost 32 means o f meeting the projected future demand; and (c) the profitability, from the viewpoint o f the country, o f the investment in the project, as measured by the economic rate o f return. The results o f this analysis confirmed: (i) existenceofamarketfortheBHPpower;(ii)thattheBHPistheleast-costproject,when the compared with the alternatives considered; and (iii)that the BHP has an EIRR o f approximately 41 percent based on the costs to complete the project. When the full costs o f implementing the project are considered, the EIRR is estimated to be approximately 15 percent. The economic analysis includes environmental mitigation costs. 1.2 The total costs of BHP as per its financing plan are US$92 million. To arrive at the economic costs, any costs o f financing are deducted as the project is to be assessed according to the project's quality independent o f the type of financing. Thus, the debt service reserve, interest during construction and other price contingencies need to be deducted to arrive at the project's economic costs o f US$83 million. At a total economic cost for completion o f US$83 million, the completion o f the BHP plant (to be commissioned in 2007) is part o f the least-cost expansion plan o f Sierra Leone's power system. Costs incurred until the cessation o f construction ahead o f the civil war amount to around US$200 million. This amount can be considered as sunk. The EIRR is robust at 41%, which compares favorably with the opportunity cost o f capital at 10%. Table 3 gives an overview o f the key economic data. 1.3 The primary quantifiable economic benefits o f the project include: (i)the revenue generated from the sale of electricity; and (ii)the revenue generated from the sale o f carbon credits. Environmental benefits have not been quantified. 1.4 The primary quantifiable economic costs: are (i)the total investment costs to complete the hydroelectric and transmission structures; (ii) O&M costs; (iii) o f environmental mitigation and area the costs development, and (iv) technical assistance. Table 3: EconomicAnalysis (in US$ million,NPV at 10%) PresentValue o fEconomicFlows Base Case (Pre-civilwar costsare sunk) Includingpre-civilwar costs Benefits 517 517 InvestmentCosts 83 283 O&M Costs 79 79 Net Benefits 355 155 EIRR (in'30) 41 15 1.5 The major macroeconomic impacts o f the project are expected through the reduction o f the fuel costs for thermal power especially during the wet season. Once the hydroelectric plant is operating in 2008, the annual fuel bill will be reduced by US$12 million or 15% compared with an all-thermal scenario. By 2019 the decrease in the annual fuel bill would be even higher at US$17 million or 34% compared with an all- thermal scenario. This in turn would reduce Sierra Leone's trade deficit in 2008 by 5 to 6%. But the reduction in the use o f mineral fuels will lead to a reduction in Government tax revenue o f around US$0.77 million per year, which is equivalent to 1% o f Sierra Leone's aggregate tax revenues in2003. 1.6 The impact o f the completion o f the Bumbuna hydroelectric dam on the local economy would, however, be more limited. Total local costs o f the project amount to US$18 million. OLS regression analysis for the period from 1980 to 1997 (excluding thus the civil war period) indicates that the multiplier effect o f investment in Sierra Leone is about 2.29. During the two-year construction period, the (Gross Domestic Product) GDP can be expected to increase by US$22 million in each year, representing an increase inGDP of about 2% (evaluated on the basis o f Sierra Leone's year 2003 GDP). 33 1.7 The annual payment to be made under the PPA are based on the annual costs that the BHC is incurring and covers debt service, payments to the debt service reserve, and O&M costs o f BHP plus the Concession Fee, which will enable the GoSL to repay its debt to Salcost (for the construction works carried out under the Hydraulic Project Contracts and not paid, and fundingo f the affected persons legacy mitigation debt. The value o f the PPA payments in the first year are US$18 million, and over time come down to about US$16 million annually. Expressed in costs per kWh generated this corresponds to approximately US$9 in the first year, and comes down over time to about US$6 from 2013. This compares with the current costs of electricity generation of US$29, and an average tariff o f US$22. This not withstanding, the total fixed costs represent a substantial amount inthe context of Sierra Leone`s economy and correspond to about 2% o f Sierra Leone's 2003 GDP (in current US$). 1.8 The overall impact o f the project on the achievement o f the MillenniumDevelopment Goals (MDGs) in Sierra Leone is expected to be positive. Where negative impacts are likely such as the increase o f the incidence o f HIV/AIDS and malaria, these are expected to be minimized through the Trust Fund to be established for Bumbuna. The Trust aims at providing a stable, sustainable financing mechanism for benefit sharing and a local development plan for the project. FinancialSummary 1.9 The financial aspects o f the project appraisal refer to the revenues and generating costs incurred by the BHC, as well as the financial flows o f NPA; the payment process and associated risks; and the proposed mitigation measures. In addition, the financial situation o f N P A - the single buyer o f the BHP power - is reviewed and an action plan to strengthen NPA's performance is proposed. The Project'sRevenueRequirements 1.10 An analysis o fthe project's revenue requirements was carried out to determine the average tariff per kWh that would be required for BHPs sales to NPA. The estimated average annual output available from the BHP will be 300 GWh. Based on the ability o f the system to absorb this new generation source, the annual generation is expected to be 195 GWh beginning in 2007 increasing to 300 kWh in accordance with load growth projections. The required tariff per kWh o f sales is based on the annual fixed costs o f production, which include the operating and maintenance costs o f the BHP (BHC costs plus O&M costs); the provisions for reserve in case o f equipment failure; and debt service payments associated with the completion o f the BHPandthe concession fee, as presentedinTable 4, below. Table 4: Base Case Year One (2007) with CommercialLoan at 4.5% - 1.11 The debt service component includes: (i)the US$38 million equivalent commercial loan, at 4.5 percent over a 10 tol5-year repayment period; (ii) debts to the contractor and the consultant, estimated to the 34 be US$49.6 million at 4.5 percent over a 15-year repayment period4; (iii)the AfDB consolidated loan o f US$71.4 million at 1 percent interest rate, repayable over 40 years, including a 10 year grace period; and (iv) the long-standing debt o f US$1.2 million owed to people affected by the transmission line component o f the project, which i s assumed to be repaid over 5 years with no interest charge: Inaddition, an estimated amount of US$2.3 million a year over 15 years is expected to be covered out o f the revenue stream o f the BHP to fund the Bumbuna Trust. Grant elements o f Euro18 million from the Government o f Italy (GOI), US$12.5 million from IDA, US$8.4 million from the OPEC Development Fund,' and US$1.9 million from the AfDB are not included in the revenue requirement calculations as BHC is not required to repay them. Similarly, US$6.9 million from the GoSL has not been included in the calculation. (See Annex 8 for the detailed assumptions underlying the revenue requirementcalculations and the estimated cost per kWh sold). Based on the debt service profile and increases in sales, the tariffs to NPA are projected at US$O.O873/kWh inthe first year of operation (2007), gradually decreasing to US$0.0589/kWh by 2016. Sensitivity analysis was carried out to test the impact o f changes in interest rates on the project's revenue requirements. The analysis showed that a 1% increase in interest rate would result ina US$O.O038/kWh increase inthe average tariff to NPA. FinancialAnalysis of the NationalPower Authority 1.12 An assessment o f the financial condition and future prospects o f the NPA, the single buyer o f the electricity to be produced by the BHP, was carried out during preparation o f the Power and Water Project (Credit 3495-SL, approved by the Board in 2004). The assessment identified the following key constraints to NPA's healthy financial performance: (a) increases in unscheduled outages o f NPA's generating capacity; (b) increases in the level o f system losses, including generation auxiliary consumption, technical and non- technical losses (about 33 percent at end-2004); and (c) the system inefficiency resulting from the age o f the installations, leading to high operating costs, including fuel and lube oil consumption. Additional factors exacerbating NPA's financial situation included: (i) the historical cost accounting inan environment of high inflation, which makes inadequate provision for the replacement o f NPA's fully depreciated assets; (ii)an uneconomic tariff-setting structure; and (iii) the absence o f experienced staff to manage the Kingtom power station (NPA's only generating plant) and improve the plant's efficiency. 1.13 Measures for addressing these issues were identified and key financial performance indicators and targets agreed as follows: (i)NPA's total revenues should be equivalent to not less than the sum of cash operating expenses and interest and other charges on debts; (ii)an annual rate o f return o f approximately 4 percent on NPA's average fixed assets in operation; and (iii)a debt service coverage ratio whereby the net revenues of NPA should be at least 1.5 times the estimated debt service requirements. 1.14 These measures and performance targets will form the basis for monitoring NPA's financial capacity to meet the project revenue requirements as described above and in the Power Purchase Agreement, During the preparation o fthis project, analysis was carried out to determine the impact o f the completion of the BHP on the financial performance o f NPA and, in particular, on its ability to achieve these targets. The analysis indicates that N P A will record some modest improvements in profitability in 2006 as a result of: (i)the increased generation from anticipated capacity additions (13 MW in January 2006 with ESKOM support, 10.8 MW in September with financing from BADEA); and (ii)improved availability o f the units at the existing power plant. The commissioning o f the BHP in 2007 is projected to substantially boost NPA's profitability as reflected in net profit margins, returns on equity and on average historical assets, The substantial improvement in performance would arise primarily from the introduction o f much lower cost energy at US$O.O873/kWh (compared to the current average cost o f production o f US$0.29/kWh) from Bumbuna which would account for about 70% o f the total energy production. The impact o f the operation o f Bumbuna on NPA's financial performance reflects the structure o f the transaction under which the assets will be owned by the Government, and, therefore, not reflected in NPA's assets base and its operating costs The debts have beenaudited bythe Auditor General of SierraLeone and by an international reputable consulting firm, and acceptedbythe GoSL and the parties. The provision ofthis funding on a grant basis is being negotiatedbetweenthe GoSL and the OPEC fund, 35 through depreciation charges. In addition the tariff at which N P A will purchase electricity from the BHC includes, debt service charges based on original and highly concessional terms on which they were extended to GoSL. 1.15 The projected strong financial returns for NPA have implications for future Government policies on electricity pricing, taxation, and dividends, and for financing o f investments inthe sector. The options for the Government would include reducing tariffs for final consumers, withdrawing surpluses from the sector through taxation and/or dividend policy, and/or requiring the sector to finance a share o f its investment program through internal cash generation. The future arrangements should include a mechanism for the Government to claw back the large effective subsidy provided to N P A through the soft terms o f the public debt passed inthrough inthe bulktariffs. 1.16 The projected financial performance shows that the risk o f NPA not having the capacity to meet the project's revenue requirements is minimal, absent the occurrence o f very adverse or unusual events. The effect o f some such adverse events (e.g. failure o f the BHP plant) is already substantially mitigated through the Project structure. There are also other factors which mitigate against these risks, namely: (i)the fuel savings from non-operation o f some diesel power plants and/or reduced operation o f others which exceed the estimated project revenue requirements on a per kWh basis; and (ii)the planned engagement o f a management contractor for N P A who is expectedto improve its operational performance. Financial Flows of the PowerPurchase: the PaymentProcessand AssociatedRisks, and Proposed Mitigation Measures 1.17 When consideringthe institutional arrangements for the O&M and management o f the BHC and the concession to the BHP, attention will be given to the financial transaction flows to ensure that the selected arrangement i s able to function effectively. This is also, o f course, dependent on the uninterruptedflow of funds from consumer to producer. 1.18 The major risk inherent in the proposed arrangement is the payment risk associated with the PPA. This is not covered by the PRG, which is directed only at supportingthe mobilization of commercial finance for the funding gap. The PRG provides some insurance against non-payment by NPA, to the extent that they result inthe inability o fthe BHC to service the commercial debt, but the PRG does not guarantee the payment of N P A to cover ongoing operating costs for the maintenance o f BHC or the payments owed to the O&M contractor. The failure or inability o fN P A to make PPA payments to the BHC has more far-reaching impacts than just the debt service. Failure to pay the B H C and therefore its O&M contractor could result in abandonment o f their obligations and the project being left without a manager or operator. This would result not only in a loss o f generation, but also a potentially dangerous situation with respect to the plant equipment and dam safety. 1.19 It is therefore critical to put in place payment mechanisms that are, to the extent possible, automatic, and sheltered from any kind o f interference, actions, or inactions o f the bureaucracy. The payment risk can be significantly reduced by establishing a fixed remuneration schedule, with pre-agreed remittances managed by a reputable local and international bank that would maintain NPA's revenues account. 1.20 The BHC payment schedule would be updated annually to reflect any changes in the project's operational needs. Foreign currency-denominated components o f the payments would be converted at the applicable foreign exchange rate at the time o f transfer to BHC's account. Transfers to the B H C account should be provisioned four times per month (48 installments per year). The balance after each such provisioning being transferred to N P A operating accounts to finance its ongoing operations, It is possible to use the same mechanism to allow for funding o f a Special Account to collect funds required by the GoSL to service debt to the A D B and other creditors. 36 1.21 Inconnection with the above, the PRGwill stipulate that a pre-agreed, locked-inpaymentprocess is put in place, not only to ensure against default on the commercial debt repayment, but also to ensure uninterruptedoperation o fthe project. 2. Fiduciary 2.1 The PIU, which is now staffed with eight full time staff, will have responsibility for ensuring that procurement is handled under the BHP in accordance with GoSL and World Bank requirements, and will maintain a complete procurement tracking and filing system. Likewise, the Financial Comptroller who is being hired by the BHP-PIU will bear responsibility for maintaining the project accounts and preparing projectreports. ProcurementandFinancialManagementassessmentsofthe PIU have beenundertaken inthe context of the ProjectPreparationFacility (PPF), andhavenotedthat the PIUhas the capability to adequately discharge these responsibilities. Independent consultants and auditors will perform regular reviews o f the BHP's procurementandfinancial managementsystems duringBHP's implementation. 3. Social 3.1 The project will providepower to a large populationin Sierra Leone (the WesternArea), comprising Freetownand the smaller towns of Makeni, Lunsar, Bumbuna, Magburaka, Port Loko, Kambia, and Lungi. The additionalpower supply will ensure a better willingness for investment andthereby will provide a boost to the local and national economy, improved health care by supply of electricity to hospitals and health clinics, better educationby providingelectricityto schools andto homes (so that childrencan study at night), a safer environment because of street lights, etc. The project also provides for development opportunitiesin the rural areas. The DamReservoirResettlement Action Plan includes extensive agricultural programs as well as income restorationprograms, which will assist the project affected communities to improve their livelihoods. In addition, the USCDIwill provide benefit sharing throughruralcommunitydevelopment on a smallscale to the indirectlyaffected communities inthe Bumbunacatchmentandimmediatelydownstreamof the dam. 3.2 Inthe dadreservoir area, 33 villages (518 households) will be affected by the impoundment. One village will needto be physicallyrelocated, one village will lose almost all its farmland, and 31villages will lose a substantial part of their farmland (approximately 40 percent). Four villages will be compensated, through community development compensation, for losses which occurred during the construction of the dam, the camp, access roads and the quarry. All project affected people will receive appropriate compensation as per impact category, i.e. new houses and other structures, new farmland, assistance to move and to prepare new farmland, and compensation for other property such as shrines. In addition, technical assistance and funding will be providedto ensure that farmers are able to reinstall themselves on their new farms and with better agriculturaltechniques (throughthe StabilizedAgricultureProgram) and to ensure that individual household incomes are restored to at least pre-resettlement levels (through the Livelihood Assessment andIncomeRestorationProgram). 3.3 The completionof the transmission line will also cause resettlement, but on a very small scale. The original RAP, disclosed in January 2005, identified 367 households in the right-of-way of the transmission line, which wouldhaveto resettle if clearing of the 30 m right-of-wayhadbeenenforced. Alternatively, 137 households would have been affectedhadthe alternativeexclusionzone concept beenadopted. However, in order to further minimizeresettlement, in line with public consultations which indicatedan unwillingnessto resettle and accepted internationalpractice, an approach will be adopted that retains existing land use and permits transmission lines to overpass existingbuildingand houses, subject to a minimumclearance between structures and the lowest conductor o f 7.0 meters. Thus, only 6 structures will needto be relocated, basedon a field study conducted inFebruary 2005. 37 3.4 The DammeservoirRAP and the Transmission Line RAP will be implemented by a Resettlement Unit (RU), under the responsibilityo f the PIU. The RU consists of internationaland national resettlement consultants who will work closely with Village Resettlement Committees. A legal councilwill providelegal services to Project Affected Persons (PAP) throughout the process. A witness NGO and a Resettlement Advisory Group will provide the independent monitoringand oversight functions. Externalmonitoringwill also be providedby the ESAP. 3.5 Key stakeholders have been given opportunities to provide input to the project throughan extensive public consultation process. The views of PAP, civil society, business, public sector, non-governmental groups, and individuals have been sought during the process of project preparation. Members of local communities in the project area have been participatingin the preparation of RAPs, and will also be fully involved in implementationof the EMP and the RAPs. For example, local community members, both the people affected by loss of land andthe host communities, will be involvedinthe selection of new land and in the physical relocationand preparation of farmland, as well as in the constructionof houses and buildings throughpaidlabor. Civil society will be providinglegalservices to PAP, non-governmentalgroups will have an importantfunction in monitoringand evaluation, and there will be a witness NGO. With the preparation o f the safeguard studies (EIA, EMP, Dammeservoir and Transmission Line RAPs) public consultation processes were initiated in communities in the reservoir area and along the transmission line. After the disclosure of the EIA, the EMP and the RAPs on January 26, 2005, a second round of public consultation took place in a total of 16 strategicallylocated communities. This process was completed in May, 2005. A CommunicationUnit inthe PIU, together with internationalconsultants, not only prepareda Communication ActionPlan(CAP), which provides the framework for the public consultations process, but the unit is also in charge of and leadsthe consultations inthe field. 3.6 Potential social risks associated with the project include the potential risk of food shortage and impoverishment o f PAP in the DamReservoir area, if the Resettlement Action Plan is not implemented timely andconscientiously. 4. Environment 4.1 The major environmentaland social impacts, as identified in the 2005 EnvironmentalAssessment, are summarizedbelow. Formore detail, see Annex 17 (and its Appendix 1. "Clearance and inundationof the riparian (gallery) forests along the Seli River in the reservoir area". Reservoir clearance to be completed before reservoirfilling): The 1996 EIA and the 2005 EIA both identifiedthe presence of some chimpanzee communities in the wider reservoirarea. The chimpanzee is considered an endangeredspecies. There are no indications at present that the area to be inundated contains any other endemic or endangered plant or animal species. The area to be inundated is not considered a critical naturalhabitat as perthe definitioninthe Natural HabitatPolicyOP 4.04; The project will finance mitigationmeasures to protect the remaining chimpanzee communities, other primates, and other biodiversity inthe Bumbunacatchment. Additionalbiodiversitystudies are underway, and reservoir filling will only start when recommendations o f these studies are known; Impactson fish as a consequenceof the closure o fthe dam andthe impoundment ofthe reservoir are expected to be limited. Duringthe preparationof the 1996 EIA and 2005 EIA, fish surveys were carriedout. The results of these surveys indicate that the Seli River does not contain any 38 endemic or endangered fish species. An additional fish species study is underway. Reservoir filling will only start whenthe recommendationso fthis study are known; The annual filling of the reservoir will result in some changes in the hydrologicalregime of the Seli River downstream of the dam. Reservoir operationwill regulate flow inthe river, whichwill alter the hydrologicalregime downstream (see also Annex 17); An amenity or environmental flow will be maintained during all phases: pre-impoundment, impoundment, and operation. The amenity flow duringthe dry season will be equal to or larger than 6 m3. Duringthe rainy season the flow will be 100m3. The operation o fthe reservoirwill result inan increasein dry seasonflow; Hydropower development in Africa always has public health impacts. The prevalence of bilharzia and malaria might increase. The prevalence of river blindness (onchocerciasis) will likely decrease, becauseo fthe inundationof a number of rapids inthe reservoirarea; Because of the impoundment of the reservoir, people and chimpanzees will likely be squeezed into a smaller area. This habitat squeeze will further decrease the sustainability of the present agricultural-shiftingcultivation system, and will increase pressure on the chimpanzee habitat. The project's EMP includes appropriate mitigation measures (see Annex 17), partly financed from the electricitytariff; An Emergency Preparedness Plan (EPP), to warn and protect people downstream in case of an emergency, will be preparedandoperational beforereservoirfilling; A benefit sharing mechanismwill be providedwith the establishment o f the USCDI (see Annex 4), through which indirectly affected communities around the reservoir can benefit from social andeconomic developmentactivities; and The Government is committedto implementingthese mitigationmeasures. 5. Safeguard Policies 5.1 The project has considerable environmental and social impacts. It is designated a category "A" project and has a safeguard classificationof S2. The following safeguard policiesare triggeredby the BHP: EnvironmentalAssessment (OPBP 4-01), Natural Habitats (OPBP 4-04), Forests (OPBP 4.36), Cultural Property (OPN 11-03),Involuntary Resettlement (OP/BP 4.12) and Safety of Dams (OPBP 4.37). The environmentalimpacts and resettlement issues raisedby the BHP have been addressedinthe 1996 and 2005 EAs, in the Dam and Reservoir Resettlement Action Plan (RAP), in the Transmission Line RAP, and by instituting a Dam Review Panel (DRP) and an Environmentaland Social Advisory Panel (ESAP). The Safeguard Policy on Projects in InternationalWaterways OPBP 7.50 has not been triggered, since the Seli River is not an internationalriver. 39 The Safeguard Policy issues raised by the projectare briefly discussed below and are detailed inAnnex 17. 5.2 Environmental Assessment The Government o f Sierra Leone prepared EAs in 1996 and 2005. The 2005 EIA includes a comprehensive Environmental Management Plan (EMP), which will be implementedduringproject construction and operation. 5.3 Analysis of Alternatives. The 2005 EL4 includes a comprehensive Retrospective Analysis o f Alternatives (Options Assessment). This analysis indicates clearly that the BHP is the preferred option to provide electricity to Freetown and intermediate towns at the least cost. 5.4 Natural Habitat. The 2005 EIA, the ESAP, and qualified Bank Safeguard Policy staff concluded that the area to be inundated is not a critical natural habitat under the definition inthe Bank's Natural Habitat Policy OP 4.04 (see section Environment C). The reservoir area to be inundated falls under the definition o f natural habitat in OP 4.04. The Bank can only finance projects that involve the significant conversion o f natural habitat under certain conditions. In such cases, an environmental offset will be required (see Appendix 1to Annex 17). 5.5 Cultural Property. The 1996 and 2005 EAs investigated the Cultural Property aspects o f the Bumbuna reservoir area. The 2005 EIA included an archeological survey and interviews with the local population. This survey did not reveal any evidence o f cultural property in the area to be inundated, An additional survey will be carried out once the reservoir area has been cleared, but before reservoir filling. A "chance find" procedure will be enforced during construction. Cultural property in the dadreservoir area also includes sacred sites (that belong to "secret societies") and graveyards, which may disappear due to the impoundment, The dadreservoir RAP includes provision for relocation o f and compensation for sacred sites. 5.6 Resettlement. Two Resettlement Action Plans (RAPs) were prepared in 2005, one for the dam and reservoir area and one for the transmission line. Both RAPs have been approved by the Bank Safeguard Policy staff and were disclosed incountry and inthe Infoshop inWashington DC on January 26,2005. 5.7 RAP for the Transmission Line. Practices in countries such as Canada, New Zealand, Spain, and Mexico have demonstrated that from a safety and public health point o f view, it i s an acceptable standard to build a high voltage power line over houses, as long as the required safety clearance is observed. An international expert has verified the acceptability o f this practice in regard to safety and Electro-magnetic Field (EMF) guidelines. Therefore, the resettlement along the transmission line has been minimized to * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties` claims on the disputed areas. 40 include only six structures. This is in line with the results of public consultation, which demonstrated that PAPwere unwilling to relocate. 5.8 Legacy Issues (Background and Approach) When the transmissionlinefoundations were constructedin 1994-1995,448 householdswere affectedby loss of land and property. The impact was documentedand a resettlement plan was preparedby the construction contractor (ABB). The RAP was not implemented. The resettlement plan, which includes individual compensation contracts for each affected household, will be implemented by the PIU during a five-year period, starting in 2007. Reveneues from the project (3%) will be allocated to a special account for the purpose ofRAP implementation. The totalcost, includingescalation, is approximately US$1.2million. 5.9 Implementation of the RAPS. Both the RAP for the Daaeservoir and the RAP for the Transmission Line will be implemented by the RU, which is a unit under the responsibility of the PIU composedof internationaland nationalconsultants. The RUwill implement the RAPSinclose collaboration with the Village Resettlement Committees. It will also use the services of a legalassociation in Sierra Leone for the purpose of providing legal assistance to the PAP. A Witness NGO will ensure independent monitoring and evaluation and the Resettlement Advisory Group, composed of representatives from all stakeholder categories, will have a general oversightfunction. 5.10 Forests. The riparianforest patches inthe reservoir areawill be clearedbeforethe inundationof the reservoir. Riparian forest areas are under increasing human pressure in West Africa. The patches in the reservoir area were not considered critical naturalhabitat areas by the 2005 E M (see Appendix 1to Annex 17). The remainingriparianforests inthe Bumbunawatershed will be protected as describedinthe EMP (see also Annex 17). 5.11 Safety of Dams. The Government of Sierra Leone constituteda DRP in 2004 to comply with the World Bank Dam Safety Policy OP/BP 4.37. Althoughthe findings o f the DRP indicatedthat the dam is a safe dam, the review o f the consultant's report, ("Bumbuna FallsHydroelectricproject Phase 1, Dam Safety - Program, BroadFramework, October 2004), recommendsthat the EmergencyPreparednessPlan(EPP) needs significant improvement. The findings of this panel indicatedthat the dam is a safe dam. The panel also indicated that the hydrology in the Seli River had not changed in the past decades, but recommended the collection of additionalhydrologicaldata. The panel also indicatedthat at presentthe sediment loads in the Seli River do not pose a risk to the lifetime of the Bumbuna reservoir. Further information on the DRP Recommendationsrelatingto the O&M Plan, the EPPandother issues is providedinAnnex 19. 5.12 Borrower Capacity. Borrower capacity to implement the safeguard policy recommendations is at present insufficient. The project will finance environmental management and resettlement implementationas well as capacity building through technical assistance. The TA will consist of on-the-job training and capacity building in environmental management and monitoring by international consultants and national experts within the responsible Sierra Leonean institution, the Department o f Environment. The TA will be handledby the PIU. 5.13 Implementationof the EMP. The TA will be financed throughan IDA TA Grant and implemented in close collaboration with Sierra Leonean partners such as the Department of Environment, a team of international and national experts in the Bumbuna PIU, the future Bumbuna Watershed Management Authority (BWMA) and others satisfactory to IDA, will be engaged to monitor the implementationof the EMP, the contractors EMP, andprovidelegalaidto PAPS. 41 5.14 Public Consultations. The TOR for the 2005 EIA was submitted through public scoping sessions with primaryand secondary stakeholders, to ensurethat all relevant stakeholder concerns wouldbe addressed in the 2005 EIA. Extensive stakeholder consultations have been carried out on the Draft Final 2005 EIA. The minutes of these public meetings have been includedin the Final2005 EL4 report. Public consultations carriedout for the 1996EIA influencedthe designof the EMP, and elements from the 1996EMP have been carried over into the 2005 EMP (See Annex 18 for an accounting of public participation related to the preparationofthe EMPandthe RAPS). 5.15 Disclosure of the 2005 EIA Report The Final 2005 EIA and EMP, includinga budget, have been approved by the World Bank and subsequently disclosedinthe project areas, nationallyand inthe Infoshop inWashington on January 26,2005. The mainfindings ofthe EIA arepresentedinAnnex 17. 6. Politicaland Other Risks 6.1 Large dam projects involvingresettlementare very sensitive due to their possiblenegative social and environmental impacts. This may impede multi-stakeholder support for the project if disclosure of information and transparency is not properly ensured. Given this potential risk, a communications needs assessment was carried out through extensive one-on-one meetings, interviews, and focus groups with the national media, NGOs operating in Sierra Leone, opinion leaders, and the general public. The assessment found that overall there was broad politicalsupport for the project among all groups interviewed. A smaller risk was associatedwith the lack of government communications, as well as adequate andtimely information dissemination. 6.2 The assessment concluded that the political and other risks associated with the project could be mitigatedthrough a communication program aimed at ensuring interaction with national and international NGOs and national media. The program would explain the project's commitment to fair, transparent, and proactive initiativesaimed at promotingthe high standards of social inclusion, environmental protection,and poverty alleviationattachedto the projectobjectives. 7. Policy Exceptionsand Readiness 7.1 The Chairman of the Operations Committee has approved the exception to OP 4.12 and has also instructedthat this decision be fully disclosedinthe PAD. The rationale for seekingthe exception to OP 4.12 was threefold: (a) Giventhat the loss of propertyand farmlandoccurredwhen the transmission line foundations were constructed, approximately 10years ago, duringa civil war, which concluded in 2002, the situation is very different from the normal situation where involuntary resettlement occurs. The affectedpeoplehave movedand are not inimmediateneedof compensation. (b) Given that Government is normally responsible for payment o f compensation related to resettlement and the unique circumstances prevailingin Sierra Leone (post conflict), use of projectrevenues is appropriateto enable the compensationbe paidover five years. (c) The same procedures will be followed to pay the legacy compensation as are contemplated for the payment of compensation of people affectedby the filling of the reservoir. This will includethe hiring of a 'witness NGO' to verify that compensation has, in fact, been paid to the affectedpeople. Giventhe unique nature of the project and country circumstances, the Regionfeels that an exception to OP 4.12 is justifiable and that the proposed compensation structure for the legacy issue discussed in this notewill eventually meetthe objectives of OP 4.12. 42 Otherwise the project is in full compliance with the requirements of all other triggered World Bank safeguards. 43 ............................ Nstim:rlPower Gunrtr \tilt?Water \llll? .\lltllt,llly Co. and 4irr rd I.cone Gcrrzraturs I.................................................. f 44 3. The Bumbuna Amendment to the NPA Act. The NPA Act is being amended to authorize the operation of the BHP by the Bumbuna Hydropower Company (BHC). This amendment will, inter alia, authorize: (a) the Republic of Sierra Leone to enter into a ConcessionAgreement with the BHC pursuantto which the BHC will be granted concessionary and exclusive rights and the responsibilityfor the operation, maintenance and management of the BHP (the "Concession Agreement") subjectto certainterms andconditions specified inthe ConcessionAgreement; (b) the Republic of Sierra Leone to participatein the share capital of the BHC whose purpose will be to operate the BHP and service the debts but not to accumulate distributableprofits for its shareholders; and (c) NPA to enter into a power purchase agreement with the BHC pursuant to which the BHC will supply the power generatedto NPA, andNPA will pay to the BHC the amount required to cover the BHC's operatingcosts and debts service, for a periodconsistent with the term o f the ConcessionAgreement. 4. Sector Issues. The major sector issues include: (a) the high cost and very poor reliability of power supply, particularlyin the Western Area of Sierra Leone; (b) the poor technicaland financial performance of NPA; (c) under investment in the development of the power sector; (d) the macroeconomic impacts of the needfor Governmentto providefinancialsupportto the sector, whenNPA is unableto cover its costs; and (e) poor coordinationandoversight ofthe sector by the Government. 5. Policy. Current policy in the power sector is guided by a major sector study (Restructuringand Private Sector Participationin the Sierra Leone Electricity Sector) that was undertaken and published in October 2002, with the support o f the World Bank administered Public-Private Infrastructure Advisory Facility (PPIAF). Among the key recommendations o f the report are: (a) reform the electricity sector to increase privatesector investment and participationthrough involvementin public-privatepartnerships, such as a performance-oriented management for NPA; (b) establishing a unit within the MoEP charged with improvingenergy sector coordinationandplanning;and (c) completingthe Bumbunahydroelectricproject. 6. The Power and Water Project (Cr. 3495-SL) is addressing electricity policy sector issues as follows: (i)underthePowerSectorReformcomponent,providingsupportforrevisionsoftheElectricityCode/NPA Act, The first stage of this reform is the drafting o f the Bumbuna Amendment to the NPA Act; and (ii) establishment of an energy regulatory function for which an organization study has been completed and secondary legislation has been drafted to set up a multi-sectoral regulatory agency (including power, telecommunications and transportation); (iii)establishment of a Policy, Planning and Coordination Unit within MoEP. A director o f the Unit has been appointed and its work plan and staffing is being advanced; and (iv) institutinga four-year performance contract for NPA. Biddingdocuments are beingissuedto a short list of potential contractors, selected on the basis of expressions of interest (EOIs). These policies are expectedto contribute towards an improvement in sector performance and provide the platformto assist in the implementationofthe Bumbunahydroelectricproject. 7. The project will reduce greenhouse gas emissions by displacingthe use o f diesel generating power plant through hydroelectric power. This is in turn mitigates the effects of climate change, a major global environmentalproblem. Although methane emissions will be generated in the reservoir,their effect will be more than compensatedthrough the reductionof carbon dioxide (COZ) emissions. For example, in the first year of BHP operation(2008) C02 emissionsfrom diesel plantare estimatedto be reducedby 136,000 tons of C02equivalent, andmethaneemissions are estimatedto be increasedby 17,000 tons o f COz equivalent. The net reductionfrom Bumbuna is thus estimated to amount to 119,000 tons of COz equivalentinthe first year, After an initial2-3 year pulsereservoiremissions are expectedto decline. 45 Sector Background Specific to the Project 8. The hydroelectric potential of Sierra Leone, now estimated at 1,200 MW, was first assessed in a report for the United Nations prepared in 1970-1971. The 1971 Report recommended three sites as warranting detailed investigation: Bumbuna Falls (72 MW), 40 km north east o f Makeni; Benkongor Falls (15.2 MW) inthe east 40 km west of Koidu; and Goma(18 MW) 30 kmnorthof Kenemainthe southeast of the country. Bumbunawas identifiedas the most attractive scheme to supply the Western Area, the major load center where much o f the country's commerce, government, light industry and non-agriculture employment is concentrated, as well as towns alongthe transmission routeto Freetown. 9. The 1980 Feasibility Study recommended a 275 MW project to be developed in five phases, the initial development consistingof a dam at the current site with a 2.5 km pressure tunnel leadingto a 72 MW powerhouse downstream of BumbunaFalls. Subsequently,the government commenced work on Phase 1 of the projectawardingcontracts for the constructionof camps and access roads andthe maindiversiontunnels; this work was completed in 1985. Meanwhile, IDA expressed reservations about the economic viability of Bumbuna at that time, against the background of the depressed Sierra Leone economy and falling internationaloil prices, after 1981. Subsequently, in 1984, to minimizecapitalexpenditurewithout detracting from the viability of the subsequent development,the designof Bumbunawas scaled-downto 47 MW (from 72 MW). That design was the basis for the 50 MW Project subsequently financed by AfDB and the Government o f Italy, where the maincivil construction was startedin 1990. At that time there was a general suspensionof IDA Creditsto Sierra Leone. 10. IDA has been involvedin the power sector in Sierra Leone since the mid-1970s through a series of Credits. These were concerned with diesel rehabilitation and strengthening of the Western Area grid network, as well as power sector reform and capacity strengthening. IDA Credit 734 SL supportedthe 1980 Feasibility Study of Bumbuna and supplemental studies that led to the present project design and layout. Under the 1993 Power Rehabilitation Credit (IDA-23560) IDA financed the Project EIA, the hiring of a board of consultants and other measures to provide NPA with technical capacity to supervise Project, then under construction. However, these activities were partially completed, or not undertaken by the time the Creditwas suspendeddue to the conflict, and later restructuredto addressthe post-war situation. 11, Inparallelwith the PPFstudies, the IDA Power and Water Credit (IDA Cr. 3945-SL: US35 Million) i s financing activitiesto establishthe enablingpolicy and institutionalenvironment andphysicalprovisionsto successfully integrate Bumbuna supply into the Western Area Grid system. Among the physical measures are rehabilitation of the Kingtom diesel generation station in Freetown (to make 24 MW available), completion o f the sub-transmission project and refurbishment of the distribution network and low voltage system in Freetown. These representshort-termmeasuresto restore essential power services, and at the same time are essentialstepsto enablereliablecombinedhydro-thermaloperationof the power system, particularly inthe dry seasononce Bumbunais on-line. 12. Hydropower development is well-founded in the national development policy and energy policy framework. Consistent policy themes since first nation-wide hydropower inventory completedwith UNDP support in 1970-71, include: 0 Expanding electricity services to catalyze development, growth andjob-creation in the modern sectors o fthe economy; 0 Reducingthe nation's heavy relianceon high-costimportedfossil fuels; 0 Developingand utilizing indigenous renewableenergy resources, particularlyto develop a hydro- basedpower system; 0 Improvingthe reliability o f power supplies in the interior of the country through interconnection of provincialcenters, and as a basis for widespreadruralelectrification. 46 13. The BHP is envisaged as the first phase of the Bumbuna-Yiben hydropower development scheme with an ultimatepotentialof270 MW. The 9 mainriver systems(800 km) in Sierra Leone havean estimated 1,200 MW economic potentialo f hydropower. 47 Annex 2: Major RelatedProjectsFinancedby the Bank and/or Other Agencies SIERRA LEONE:Completionof the BumbunaHydroelectricProject Project Name ID IBRDlIDA Product Status Approval (US%million) Line Date Rating Sector issues Power and Water PO87203 35 IDA Active 07.01.2004 S Improved, sustainable Project access to essential power, water supply and sanitation, and urban solid waste managementservices Power Sector PO02411 28.89 IDA Closed 04.21.1992 U Improvedpower Rehabilitation services, strengthening Project of sector institutions EuropeanDevelopment Fund "WesternArea EmergencyRehabilitationof Transmission& Distribution Network" A grant of 2.0 million to the NationalPower Authority for infrastructureimprovement. 1. Several activitiesunder the Power and Water Project(PWP, Cr. 3945-SL), which was presentedto the Boardon July 1, 2004, create an enablingenvironment for the BHP implementationand directly support its operation. Enablingactivities that facilitate the BHP include: (i)revision of the NPA Act (1982); (ii) establishment of an independent regulatory framework for the sector, and o f a Policy, Planning and CoordinationUnit within the MOEP; and (iii)institutiono f a performance-orientedmanagement contract for NPA. The infrastructurecomponents of the Power and Water Credit, includingthe Kingtom thermal plant refurbishment and spare parts and distribution system reinforcement and rehabilitation will enhance the ability o f NPA to deliver Bumbuna power to end-users, and otherwise enhance capacity for NPA to operate as a mixedhydro-thermalsystem, particularly inthe dry seasonmonths when power from Bumbunadrops to 18 MW continuous. 2. In addition, the projects listed above, there are other planned activities. These interrelated complementaryactivitieswould enhancethe success ofthe Projectand contributeto its effectiveness andrisk reduction. They are describedbelow. 3. The Bumbuna Trust: prior to commissioningof the BHP project the Government o f Sierra Leone will establish the Bumbuna Trust. The Trust is an innovative mechanism to sustainably fund the ongoing environment managementandbenefit sharingarrangements inthe longer-termoperationphaseofthe BHP. 4. The Trust will have differentwindows,specificallyto fund: 0 The ongoing delivery of benefit sharing to communities in the basin (Le. continuation of the Upper Seli Community Development Initiative activities, extended to other communities in the Bumbunacatchment and Seli River Basin); 0 The BumbunaWatershedManagementAuthority (BWMA); 0 The BumbunaWildlife ConservationAuthority (BWCA); and 0 Potentially,the Seli RiverDevelopment Authority (SRDA). The Trust will also have a short-term window to finance the government's commitment to make b 5. legacy compensation payments to communities whose land and assets were acquired in the 1990's during constructionofthe transmissiontower pads, as identifiedinthe Transmission RAP. 48 6. The establishment ofthe Trust is a practicalmeasurethat recognizes the GoSL has limitedbudgetary capacityto fundthe ongoing environmentalmanagementand social sustainabilitydimensions o fthe BHF,the country's first major hydropower development. The activities that it funds involve local capacity development o f Sierra Leonean professionals and practitioners as well as the Local Councils and sector agencies that have support offices in the basin who would be involved in the implementationactivities as stakeholders or participants. The Trust and its activities will also be an important step to foster support for and prepare for further hydropower development in the Seli River (see section A5 on the future development of the 275 MW Bumbuna-Yibenschemeand Governmenthydropowerdevelopment policy,Annex 1). 7. The detailed institutional arrangements for the Bumbuna Trust will be finalized during the implementation of the Upper Seli Community Development Initiative in collaborative processes with the various basin interests and stakeholders including the multi-agency Advisory Group and the Catchment Stakeholder Forum. A Trust deed will be prepared and legally registered and an independent Board of Trustees would be constituted representing different stakeholder interests including national and local government, traditional leaders, civil society and the private sector. A Stakeholder Forum would be constitutedto providewider inputanddialogue onthe Trust formationand operation. 8. It is anticipatedthat each of the programs financed by the Trust windows will be administered and managedby separate legal entities with their own governance and management teams (e.g. the BWMA and BCA). Considerationwill also be given to strengthening the Seli River Development Authority to act as an umbrella organizationto ensure synergy and coordinationof activities where required. The Bumbuna PIU will have overall coordinationresponsibilityfor the steps to establishthe Trust, working in conjunction with the USCDI Advisory Group. Component B o f the grant will provide seed financing to establish the key entities that the Trust will fund, includingthe BWMA andthe BCA, while the USCDIwill fundthe prototype arrangements for the deliveryo fthe benefits sharingwindow ofthe Trust. 9. It is anticipatedthat the Trust would grant finance the administrativecost of the BWMA and BCA institutions(non-program costs), generally an amount sufficientto guaranteetheir existence; and beyondthat to partially, or fully, finance the operational programs of these institutions. The programs that the BWMA and BCA would deliver are identifiedinthe EnvironmentalManagement Plan (EMP). Component B of the Project will finance the initiationoftheseactivities(see Annex 17). 10. The benefit sharing window of the Trust will enhancethe distributionof the hydroprojectbenefits to local communities inthe form of non-power benefits. This is important giventhe lessons drawn from the 11- year civil war where a major contributingfactor to the conflict was the marginalizationof a large section of the rural populationfrom political processes, with the result that most rural areas were deprived of social services and economic development opportunities. The benefitsharing mechanismwould allow communities in the basin ranging from small, scattered subsistence agriculture settlements to larger rural towns with formative local markets, to set their own priorities for more immediate use of their monetary share of the benefits that derive from hydroelectric generation intheir basin. Moreover, many o f these communities will not receive direct power benefits until ruralelectrificationis possible. 11. The financing for the Trust will come from two primary sources: (a) the Bumbuna Carbon Project and (b) a percentageof the BHP power sales, equivalent to a royalty that is distributedto local communities and environment agencies. There are many precedents and examples in other countries, such as in Latin America, Europe and NorthAmerica. The funds from the Bumbuna Carbon Project would be "ring-fenced" for the delivery of benefits window. Conceivablyit will also be possible to leveragecontributionsfrom Trust Partners (interested internationalNGO, private sector or bilateral donors) interested in supporting one or more financing windows under the Bumbuna Trust. Here it is anticipated that partnership approaches to development would be a strategic priority o f the Trust itself. The presence of the transparent and inclusive governance, management arrangements, and accountability provisions for the Trust and the entities it supports is anticipatedto reinforce donor confidence ininvestmentsinthe Basin. 49 12. Bumbuna Carbon Project: the Netherlands Clean Development Facility (NCDF) has agreed to provide funds to the GoSL for the avoided thermal generation (greenhouse gas emission reductions in the power sector) that the BHP will deliver. An EmissionReductionPurchaseAgreement (ERPA) will be signed betweenthe Government andthe World Bank. This ERPA will commit the CFB to purchase a part, or all, of the certified emission reduction units (tons of COZequivalent) due to the BHP that are estimated to be 119,000 tons of COZequivalent in the first year, up to 2012, the term of the Kyoto Protocol to the Untied Nations Framework Convention on Climate Change. After 2012 new arrangements would be made with post-Kyotomechanisms. The MOEPwould bethe seller ofthe emissionreductionunits(ERs) andthe World Bank Carbon Fund would be the buyer. Funds from the ERPA would be ring-fencedin the Trust to fund ongoingbenefitsharing arrangements inBasin. 50 Annex 3: Results Framework and Monitoring S I E R R A LEONE: Completion of the BumbunaHydroelectric Project Results Framework This Annex assumes that all energy producedby the BHP is sold to NPA andthat NPA functions properly as described in details under the PWP (Cr. 3945-SL). PDO Outcome Indicators Use of outcome Information The PDO of the proposed Project is: Categoriesof Indicators The maindevelopmentobjectiveo f the Electricity sales (GWh) increasing From 68.9 Provideclear indication o fwhether proposed Project is to expandthe' GWh in 2003 to 230 GWh in 2008. service is improved and whether capacity of Sierra Leoneto increase the :orrective actions needto be taken. supply of electricity servicesat least- Percentagereductionof average tariffs of cost, and inan efficient and electricit)'. Use of Projectmonthly/quarterly environmentallyand socially ,eportingsystemto assess the availability sustainablemanner.. ifleast-costelectricity andreliable iupply o f powerto the consumers and :akecorrective actions ifnecessary. Number o f animal and plantspecies in Monitoringreportsusedto adjustEMP the BumbunaWatershedremains andRAP implementationas needed. unchanged; Sustainableagricultureinuse in 60 percent of BumbunaWatershed; Sustainablefishery practices inuse in 60 percent ofthe reservoir and downstream o f the dam; All Project Affected People(PAP) resettled on new landwhich has been planted; All ResettlementAction Plan (RAP) communitydevelopmentprojects completed; 80 percent ofPAP involved in new incomegeneratingactivities. Intermediate Results Results Indicators for Each Component Use of Results Monitoring One per Component Component A : Hydroelectric and Component A :Hydroelectric and Component A :Hydroelectric and Transmission Infrastructure Transmission Infrastructure Transmission Infrastructure Intermediate Results Categoriesof Indicators Delivery of electricity at the power In kWh generated out ofthe substationto be Use o f Project monthly/quarterly substationin Freetownin line with deliveredto NPA reportingsystem to assess how many PPA. kWh are delivered to NPA and take corrective actions ifnot meetingthe target set Operation o faprivately managedpower generationcompany (the Special Private Participationinthe sectorthrougha Use ofPIUprogressmonitoring and ;oncession contractto BHC to run and manage PurposeCompany, the BHC). evaluationreportsto assessthe the BHP. effectiveness of: (a) the private companiesinvolved inthe BHP Establishmento f the Regulatory function for operations and maintenance; and (b) the the energy sector; enactmentofthe 2005 New regulatory function and appropriatelegal Electricity Law; Amendment ofNPA Act; environment; and take correctiveactions as necessary; Intermediate Results Results Indicators for Each Component Use of Results Monitoring One per Component Comoonent B: Environmental Component B: Environmental Mitigation, Component B: Environmental Mitiiation, Resettlement, Watershed Resettlement, Watershed Management, and Mitigation, Resettlement,Watershed Management, and Benefit Sharing; Benefit Sharing; Management, and Benefit Sharing; Intermediate Results Categories of Indicators EnvironmentalManagement and Percentage increasein income levels of Use of the BHP progressmonitoring 51 Mitigation Plan(EMP) is being farminghouseholds; reportto assess whether all the targets for implementedas agreed, leadingto the Numberof animaland plant species in indicators set for measuringthe Efficient Operation of the Bumbuna the Biodiversityinthe Bumbuna efficiency o fthe management of the WatershedManagementAuthority Watershed; BWMAare met or whether corrective [BWMA). Percentageannualreductionin incidence actionsshouldbe taken of water-borndiseasesor trend(malaria, bilharzias,andonchocerciasis); Change inwater quality (levels of oxygen, hydrogensulfate, pH), and incidenceof phytoplanktongrowth (algal blooms, macrophyta,such as water hyacinthand Salvinia)inthe reservoir anddownstreamo fthe dam inboththe dry andwet seasons. ResettlementAction Plan (RAP) for the Amount o fnew landidentified; Use o f the PIUreportand other RAP Dam& Reservoir andthe Rap for the Percento fPAPresettledand engaged in implementationavailablereportsto transmission line, are being improvedfarmingtechniques; assess complianceof the compensation implementedinaccordancewith RAP Number of training sessions for income for landacquisitionand transmissionline implementationschedules. restorationactivities ; with OP4.12. Number of RAPcommunity projects underway. Effectiveestablishmentand Percentageof indirectly affected demonstrationof the basic institutional communities benefitingfrom improved Useofresultsmonitoringreportsto modelfor the proposedBumbuna Trust public servicesandyouthcapacity assess adequacy o f implementationof for local resourcedevelopment. building; Upper Seli Initiative'sCDDactivities Establishmento fthe legal entity "The andestablishmentofthe BumbunaTrust, BumbunaTrust"; and adjust strategy as needed. Performanceo fInitiativeAdvisory Stakeholdersas well as independent Group andCatchmentStakeholder consultant assessments usedto measure Forum. the performanceandtake corrective actions. Intermediate Results ResultsIndicatorsfor EachComponent Use of Results Monitoring One per Component Component C: TechnicalAssistance Component C: TechnicalAssistance Component C: Technical Assistance Results Indicators Ensuresatisfactory implementationof Evaluationof consultants' performanceby the Adjust consultants' staffingas the project includingmeetingIDA PIU appropriate safeguardpoliciesand promotingsector capacity building Adjust communicationactionplanas Levelofpublic awareness o f basic information appropriate about the BHP Levelof public support for the BHP 52 Arrangementsfor ResultsMonitoring Values Data Clectionand R orting Baseline YR1 YR3 YR4 Frequency Data Responsibility 2005 2006 2007 2008 and Reports Collection for Data Instruments Collection Electricity sales (GWh) 68.9 70 70 150 230 BHP PIU NPA BHP PIU increasing from 68.9 GWh in GWh quarterly periodic 2003 to 230 GWh in 2008. (in xtivity accounts 2003) reports book 0 0 10% 15% Percentagereductionof 0 averageelectricity tariffs. Results Indicators for Each Component Component A: GWh generated out of 0 0 0 150 300 Monthly BHP PIU Bumbunaand delivered to the BHC reports NPA at the substation in Freetown. 0 0 0 BHC BHC Contract BHP PIU operational operational documents Private Participationin the sector throughaconcession contract to BHC to run and 0 0 Regulator Regulator Regulator BHP PIUand BHP PIU managethe Bumbuna inplace in place in place NPA reports PWD imply HydropowerProject. progress reports Establishmento f an independentregulatory function for the energy sector. 445 Nil Nil Nil Nil Annual BWMA and Mm' monitoring Project I reports (or Sediment operating period load entity ComponentB recommended measurement Reduction in live storage 0 by BWMA) and capacity of reservoir due to calculations erosion and sediment. Nil Nil Nil Nil TBD~ Annual BWMA, BCA Percentage increasein the Reporting(as and level of incomefor farming recommended SurveyI Environment households in 9 ongoing monitoring Agencies baseline procedures Percentagereductionin surveys) of habitat number of animal, fish and and species plant species inthe established Biodiversity inthe Bumbuna 5% 10% 10% 10% in baseline BWMA and Watershed 32% stabilize stabilize down down surveys. Ministry of rising 5yo 10% 10% 10% Annual Healthand 48% reporting Sanitation (combined impact of Statistics programs) from health Percentageannual reduction in postsand incidenceof water-bom Govemment diseases or trend: TBD TBD Program Malaria (% outpatients) 2004 TBD' TBD targeting Bilharzia (rate o f none specific BWMA and disease Operator 'TobeestablishedinsupplementalPhytoplanktonBioassaystudyas establishedinthe programo f9 BiodiversityBaseline Studies underway in2005/2006. To be part of AdditionalSafeguardStudies before start of final reservoir impoundment. 53 Targ Values Data ( lection and R Irting Baseline YR1 YRZ YR3 YR4 Frequency Data tesponsibility 2005 2006 2007 2008 and Reports Collection for Data Instruments Collection vectors and population) improved healthposts/ 100% facilities. 100% Chemical Change inwater quality from water quality pre-impoundment and monitoring incidence ofphytoplankton and growth: bioassays 1 levels o f BOD, hydrogen and nutrient sulfate, pH analysis. incidencealgal blooms, macrophyta,such as water hyacinthand Trust Trust 80% Salvinia in the reservoir TBD Deed Start 3HP PIU and down stream o f the BHP PIU `eports dam in both the dry and reports wet seasons Formed Meeting Formed in Meetingas NA as the BHP required required Trust 3HP PIU Numberof affectedpeople BHP PIU compensated(YO) reports Number of affected people USCDI physicallyrelocated(%) reportsfrom DECSEC Levels ofhouseholdincomes comparedto before resettlementkompensation BHP PIU reports Percentage o f indirectly affected communities benefitingfrom improved public services and youth capacity building Establishmentofthe legal entity "The BumbunaTrust" Performance o f Initiative Advisory Group and Catchment Stakeholder Forum. Evaluationo f consultants' N A Adequate Adequate Adequate Adequate BHP PIU Consultant BHP PIU performanceby the PIU reports reports Level of public awareness of TBD +5% +IO% +20% +20% BHP PIU basic information about the BHP PIU Consultant BHP (% increase in reports reports populationaware of the online TBD 0% 0Yo +5% +5% BHP PIU date) BHP PIU Consultant Level of public support for the reports reports BHP ("YO change in proportion o f support from those interviewed) 54 Annex 4: Detailed Project Description SIERRALEONE: Completion of the Bumbuna Hydroelectric Project ComponentA: Hydroelectric and Transmission Infrastructure ProjectLocationand Summary 1. The Bumbunadam site is located onthe upper reaches o f the Seli (Rokel)River, inthe valleys ofthe Sula Mountains about 200 km northeast of the capital city Freetown. The dam site is 2.5 km upstream of Bumbuna Falls close to the town o f Bumbuna(populationof 3,000) in Tonkolili District. The Seli (Rokel) River is the third largest of nine major river systems in Sierra Leone and has a drainage area of 10,620 km2. A regionalroad from Freetownthat was recently upgraded provides access to Bumbuna Town and the dam site. 2. The project was to be commissioned in 1998 but due to the rebel war, work was abandoned in May 1997 when it was 85 percent completed. The completed project will consist of the 88m high asphalt faced rockfill dam now in place; two freestanding bell-mouthspillways upstream of the dam, one leading to the primary spillway tunnel on the left bank of the dam and one to a combined power and auxiliary spillway tunnel on the right bank; a single inlet tower intake; a 50 MW surface power station and associated works; and 200 km of 161 kV transmission line linking the power station to the Western Area grid network at a substation in Freetown. The shieldwires abovethe 161kV conductors will be energizedat 35.5 kV to supply loads up to 5 MW at the provincialtowns of Makeniand Lunsar along the transmission route. A narrow Y- shapedreservoir30 km longwith two upstreambrancheswill be createdat full impoundment. Power and energy production from the Projectis estimatedas follows: InstalledPower 50 MW FirmPower 18MW TotalAverage AnnualEnergy Production 315 GWh AnnualFirmEnergy Production 158GWh AnnualAverage Secondary Energy Production 157GWh 3. The project is envisaged as the first phase o f the Bumbuna-Yibenhydropower development scheme with an ultimatepotentialof 270 MW. The subsequent phases of this development envisage the construction of a multi-annualregulationdam at Yiben, 28 km upstream of the existingBumbunadam, and the extension ofthe Bumbunapowerhouse with two additionalturbine unitsto raise its output to 100MW. Further options includeconstructionof additionalpowerhousesat the Yiben dam and downstreamof BumbunaFalls. HydroelectricComponent 4. Hydrology: The Bumbunaproject is a run-of-riverfacility with a drainage area o f 3,240 km2(2,635 mm average annual precipitation at Bumbuna). The Seli River has its sources in the northeast of Sierra Leone. For about 100 km, it flows across the Interior Plateau in a southwestern direction. About 30 km upstreamof Bumbunanear the village o fYiben, the Seli river flows out ofthe interiorplateaucuttingthrough the Sula Mountains. After a fall of about 40m over Bumbuna Falls and the adjoining rapids it reaches the interior lowland floodplains and subsequently flows to a second fall, about 30km upstream of the estuary northo f Freetown. 5. The hydrologyreflectsthe seasonal rainfallpatterncharacterizedby very wet winters followedby 4-5 months of markedly dry periods. Since 1970, the stages o fthe Seli River have been recordedat Badela and 55 recorded at Bumbuna for the period 1970 - 1979 shows a mean annual discharge o f 122.8 m3/s,with a Bumbuna by two gauges installed under a UNDP Program. The intake flow regime of the Seli River maximum of 331 m3/sin September and a minimum o f 6.1 m3/sin March. The highest peak flows are reached betweenAugust and October and normally range between 600 and 1200 m3/s. The maximum-flow was recordedin September 1970 at 1,052 m3/s.The designflood determined in the feasibility study through analysis o f precipitationrecords for stations south of the catchment area and by infiltration measurements correspondsto a probable maximumfloodwith a peakflow of2,970 m3/s. 6. Geology and Seismicity: The Seli River runsnorthto souththrough a relativelydeep, narrowvalley in the Sula Mountains, cut into pre-Cambrian, crystalline basement rock. The region is characterized primarily by gneissose granite and granodiorite o fthe West AfricanCraton. The Bumbunadam site itself lies on the western edge of a Precambriancurvilinear greenstone belt locallyreferredto as the SulaGroup, which is surroundedby basement granitoids and late kinematicgranites. Residuesof weathered granite overliemost o f the Precambrianrock formations. 7. A comprehensive investigationwas made of the geologicaland geotechnicalconditionsat the Yiben and Bumbuna dam sites from 1972 to 1973 and again from 1977 to 1979. The Bumbuna dam site has firm bedrock at the surface inthe center o fthe riverbedand at depths varyingto 30m inthe extremes of the flanks, Onthe right side, the rock is mainly granite and granodorite and the overburden is weathered granite. Onthe left side, the rock i s mainly amphibolitewith a similar o f overburden of weathered rock. Alluvium is nearly absent in the riverbedat the dam site, where bedrock outcrops are fresh and sound. A hard granodioritesill crosses the river about 2 km downstream o f the dam site formingBumbunaFalls. 8. Most o f the potentialgeotechnical risks associatedwith constructionhave beenmitigatedas the dam andthe maincivil works are in place. 9. The project area is consideredto have very low naturalseismicity. The crystallinerock o f the West African Craton on which the Bumbuna project is located, have been geologically stable since the Pre- Cambrian, Faults identifiedin this basement complex are not consideredto be planes o f weakness that could reactivate due to seismic forces and there is no evidence of movement of any faults within the craton since the Cretaceous Periodsome 65 million years ago. There is a slight risk of induced seismicity. Considering experience o f reservoirs impounded on Pre-Cambrian Cratons around the world an earthquake o f 4.5 magnitude on the Richter scale with a hypocenter at a distance of 5 km from the site was incorporatedin the Projectdesign criteria. 10. Sedimentation: To date there has been no comprehensive, nationwide sediment survey of Sierra Leone's river systems. Sediment loads inthe Seli river at the dam site, as determined by measurementstaken from 1978 to 1979 as part of the 1980 Feasibility Study activities indicated monthly suspended concentrations, at that time, varied from 1.1milligram per liter (mg/l) inthe dry seasonto 105.3mg/l in the wet season. The mean annual transport was estimated at about 90,000 m3. Recent measurement (EIA Update, 2004) suggest that the amount of suspended sediment inthe river may be increasing(over 100 mg/l was recorded in 2004 near the end of the wet season). The indicationof higher levels in the recent survey likely reflects land use changes after 25 years a result of the slash and burn agriculture, where trees and shrubs are replaced by crops (or grasses in areas left fallow), which are shallow-rootedwith little ability to retainthe soil, that inturn increasesedimentyield. 11. The analysis ofthe IDA-supportedDamReview Panel(2004) indicatethat a conservative estimate of bed load could be about 20 percent o f the suspendedload, about 18,000 m3. The total sediment inflow was thus estimated at about 108,000 m3(suspendedplus bed load). As most o f the suspended sediment would pass throughthe Damthe ReviewPanel (DRP) concluded that depositedsediment would be small compared to the reservoirs inactive storage o f 95 million m3. To address the potentialrisk accelerated soil erosion, a watershed managementplanhas beenproposedas a component of the Projectto improve vegetation and land 56 management practices. The downstream channel consists o f boulders, cobbles and gravel but its generally coarse superficial materials have produced a natural armored layer reducing erosion. Key Physical Components and Technical Aspects 12. Asphalt-faced Rockfll Dam: The Bumbuna dam is an 88m high asphalt faced rockfill structure with a dam crest elevation at 244.00 m a.s.1. The total embankment volume o f 2.5 million m3consists o f crushed granitic rock. The crest is 440m long and 4 m wide. The dam axis is curved and shifted to upstream at the right bank. The upstream face has a 1:1.65 slope and is covered with an impervious asphalt concrete membrane covering an area o f approximately 51,000 m2, The dam is founded on sound to moderately weathered bedrock with a cut-off to sound rock at the upstream toe o f the dam in the form o f a reinforced concrete plinth. 13. Multipurpose Tunnels: Two diversion tunnels each 620m long and 9m in diameter are provided around the left and right flanks o f the dam. Duringthe operation o f the Project the concrete-lined left tunnel will be utilized as the primary spillway discharge. The right tunnel will function as the combined power tunnel and auxiliary spillway. In normal operations a radial gate (7.4m high x 7.0 wide) installed at the downstream end o f the right tunnel will be closed. Water will be diverted into the powerhouse through a left branch in the tunnel 30m from the downstream end. The headrace is designedfor a total discharge o f 80 m3/s feeding two, short steel penstocks. The radial gate at the end o f the right tunnelwill open automatically when incoming floods peak over 1,000 m3/s-1,500 m3/s. During these occasions there will be a short-term interruption o f power plant operation to release the flood peaks. 14. The right tunnel is concrete-steel lined for a distance o f 205m upstream o f the radial gate to enable it to sustain high internal pressures when the gate is closed. The right tunnel will also serve as the bottom flow outlet to drain the reservoir should that become necessary. Provisions are made for a possible future connection o f Bumbuna to a powerhouse sited downstream o f Bumbuna Falls. Presently both tunnels are used to divert the river around the dam, the righttunnelonly duringthe rainy season. 15. Morning Glory Spillways: Two Morning Glory (bellmouth) spillway towers located upstream o f the dam have a combined capacity o f 3,000 m3/s,corresponding to the PMPRMF estimate. The bellmouths have a crest diameter o f 31.6m and sit on 36m towers constructed o f reinforced concrete. The structures continue an additional 30m as shafts until they discharge into the tunnels about 170 m downstream o f the diversion portals. The spillway over the left abutment tunnel has a crest at El. 236.0 m a d . , which is 2m lower that the crest o f the right spillway (238.0 m a d ) to ensure the right tunnel remains under pressure flow conditions. 16, Innormal operations, floods will discharge through the left spillway untilthe reservoir level reaches El. 241.5 m a.s.1. corresponding to a discharge o f 1,000 m3/s. As this reflects a 10-year return period, the right tunnel will not be called upon to perform as an auxiliary spillway every year. Above 1,000 m3/sthe radial gate at the end o f the right tunnel will opened automatically to enable the facilities to discharge floods up to the PMF o f 3,000 m3/s.Further studies and operational trials will determine ifthe 1,000 m3/svalue can be increased closer to the 1,500 m3/sdesign flow o f the left tunnel. The release o f spillages to the downstream river reach i s accomplished by means o f a flip bucket dissipater located at the downstream end of each tunnel. The plunge pool will develop by natural scouring inthe riverbed. 17. Tower Intake Structure: The intake to the righttunnel (Le. the power tunnel) is a freestanding 93m concrete tower with an internal diameter o f 7.5 m located about 22 m downstream o f the diversion portal. The intake, which is essentially a single level intake, consists o f six inlet openings with sill elevations at El. 182.0 m a.s.1. leading to a steel-lined elbow into the right tunnel. A removable trash rack protects each opening and a single trash rake is provided to clean debris from all the trash racks without removal. A 7.5m diameter cylindrical gate will allow closure o f the inlet for inspection and maintenance o f the tunnel. A 100 57 m reinforced concrete footbridge in four spans connects the operating platform on the intake tower to the service road onthe right abutment ofthe dam. 18. Surface Power House: The surface power house is situated at the toe of the dam adjacent to the right tunnel outlet. The concrete Machine Hall is a compact arrangement with an overall length of 41.0 m, width 17.0 m, and depth 24.0 m housingthe maingenerationequipment, galleries, draft tubes, butterfly inlet valves and auxiliary services. Penstocks and draft tubes have been installedfor two generating units. A 115 ton gantry crane has been assembledto the right o f the Power House and will be installedto assemble power house equipment and for maintenance purposes. Excavationhas beenmadeto the left of the Power House to allow future expansionfor two additionalunits. 19. The Power House will house two vertically mounted Francis Turbines directly coupled to vertical shaft synchronous generators. The design head is 70 m and the rated power from each unit is 25 MW, operating at a discharge o f 40 m3/sand a speedof 333.3 revs/min. The maximum and minimumnet heads of 80m and 47m have a rated power o f 30 MW and 14.8 MW respectively. The synchronous generators will supply 33.7 MVA at a voltage of 13.8 kV that will be steppedup to 161kV by two three-phasetransformers o f 33.7 MVA each. 20. The Control Buildingwill be sited above the right tunnel outlet, in the area between the radial gate and the excavated slope. The 600m2building will be a two-story reinforcedconcrete structure divided into areas for central operations, storage, and workshops. Control equipment will be installed for the two generation units (turbines, generators, main transformers), the MV and HV switch gear, to auxiliary diesel generation sets and the low voltage installations. A protective system and instrumentationand metering equipment will be installedto cover this equipment. 21. Switch Yard and E&M Equipment: The 161kV Switchyardwill be locatedjust downstream o f the power house. HV Switchgear including 161kV circuit breakers, disconnectors and groundingswitches, voltage and current transformers, surge arrestors, insulators, and bus work will be installed for the connectionsbetweenthe step-uptransformers andthe 161kV transmission line. 22. Reservoir: The valley of the Seli where the reservoir will form is deeply cut into the crystalline bedrock of the Sula Mountains. The reservoir impoundedby the dam will be Y-shaped with a total surface area of 21 km2and a volume 445 million m3at the maximum water level(241.96 m a.s.1.). The mainsection of the reservoirforming inthe mainriver stem will be containedby the steep slopes of the valley and extend 30 km upstream, where it then branches in two. The two upstreambranches that are 7 km and 11 km long will form inflatter landandrolling hills. The reservoirwidth will vary between200 m and 1km. 23. The maximum storage capacity o fthe reservoirwill be 350 million m3,equivalent to about 50 days o f full generationoutput. This includes a flood routingcapacity o f 35 million m3. The inactiveactive capacity (dead storage) will be 95 million m3. The maximumseasonal drawdownwill be 3lm (betweenthe maximum operating levelo f 241.25 m a.s.1. and minimumoperation levelo f 210.00 m ad.). Actual daily fluctuations from peakingoperations are notexpectedto be greaterthan 0.1 m. 24. Geotechnical investigationsindicate that the degree o f fracturing present in the upper strata of the bedrock on which the reservoir is formed gradually reduced with depth until it is practically nil after 10 m. This combined with other factors such the high piezometric pressure in the slopes above the reservoir indicatedthat water tightness is assuredalongthe bottomand sides o fthe reservoir. 25. The impoundment of the reservoirwould be undertakenintwo stages. The first stage would involve partial impoundmentup to about 40-50 percentof the total heightof the dam at the advance ofthe dry season (December-January) to avoid the risk o f sudden flood inflows. Testing of dam seepage and deformation behavior would be carried out with provision of environmental flow releases. Once other construction elements of the project are sufficiently advanced, the reservoir will be filled to its full level and 58 commissioning trials will follow. Subsequent operation of the reservoir under normal and exceptional conditions would conform to a detailedreservoiroperationplan. Transmission Component 26. The interconnection of the Bumbuna to the Western Area grid is provided by the 200 km single- circuit 161 kV line from the switchyardto a substation in Freetown. This will enable a hydro-thermal on the grid to optimize the power available from Bumbuna on a seasonal basis with thermal generation from the Kingtom diesel station. Diesel generation will be particularly important when output from Bumbuna falls progressively to 18 M W (equivalent continuous) during the dry season, depending on whether it is a wet or dry year. At other periods of the year the full output from Bumbunawould satisfy all load demand, certainly inthe initialyears untilfurther supply incrementsare required. 27. 161 kV Line and 34.5 kV ISWL: The 161 K V line will be equipped with 400 mm2 ACSR conductors arranged in a triangular configuration with two shield wires above the conductors stung from 560 towers. To supply Makeniwith the "Insulated ShieldWire Line" (ISWL) single-phase service, the two shield wires betweenthe Bumbunaswitchyardand Makeniwill be insulatedand energizedat 34.5 kV. Similarly, to supply Lunsar the two shield wires between the Freetown substation and Lunsar will be utilized. The shield wires alongthe remaining line betweenMakeniand Lunsar will be galvanizedsteel strand. 28. Transmission Towers: the Towers are standard design made of galvanized steel. Structuraldesign was based on the basic assumptions of wind speed (112 kdhr inland and 137 kdhr near Freetown) and safety factors of 1.60 with all conductors and shields unbroken and 1.10 with one conductor or shield wire broken. The tower foundations are designed for the worst combination of the loadings relative to the soil conditions. To address potential EMF and electric field concerns inthe right-of-way the existing tower were raisedfor critical line sections inurbanareas of Freetownand Makeni. 29. Substations: The project includesthe two main 161kV substations at the end points Bumbuna and Freetown located near the existing Kingtom diesel generation station. At Freetown there will be two three- winding step down transformers 161/34.5/11kVYrated at 40/30/15 MVA. The step down transformers in Makeni and Lunsar operating off the energized shield wire will be single 34.5/11kV units, rated at 3,500 kVA. Component B: EnvironmentalMitigation, Resettlement,Watershed Management,and BenefitSharing EnvironmentalManagement 30. The completion phase environmental mitigation, management and monitoring activities will be coordinated and supervisedby the Bumbuna Project Implementation Unit (PIU). The PIU will supervisethe transmission and the main civil contractor who will be contractually obligated to establish their own units to implement and report on environmental and social mitigation measures for their respective construction activities. These will be basedon the Bank-approvedEMP inthe 2005 Environmental Assessment (EIA). 31. In parallel, the PIU will also be responsible to effect coordination actions with local government Councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP studies and activities funded by the project (in particular the Environment and Agriculture Departments), and the hiringand supervisionof consultants, NGOs and contractors for their implementation. 32. Similarly the PIU will initiate all legal and administrative activities neededto establishthe Bumbuna Watershed Management Authority (BWMA) and the Bumbuna Conservation Authority (Bumbuna Conservation Authority) as a Conservation Offset. These organizations will be established shortly after the test reservoirimpoundment. 59 33. The BWMA will be responsible for the BumbunaWatershedManagementPlan(BWMP) that aims to protect the reservoir from excessive sedimentation through improvingagriculturalpractices inthe Bumbuna catchment area, improving the livelihood o f farmers, and protecting the remaining animal and plant biodiversity inthe catchment, which includes the chimpanzeeand other primate communities (see sections on Environment and Safeguard Policies, and Annex 17). The BWMP has several sub-programs for: (i) community awareness; (ii)land and soil management; (iii)agro-forestry and forestry; (iv) agricultural development; and (v) downstream and reservoir fisheries management. The PIU will also initiate and gradually transfer to the BWMA other EMP activities funded by the project, including actions for: (i) monitoring o f public health impacts on diseases such as bilharzia and malaria; (ii)establishment of an environmental and social amenity flow; (iii)management o f water quality in the reservoir area; and (iv) preparationand implementationof a comprehensive environmentalmonitoringprogram. 34. After commissioning of the BHP, the Special Project Company (BHC) will be contractually responsiblefor maintainingongoingenvironmentandmanagement programs for the operation o fthe dam and reservoir and the transmission facilities and right-of-way. These responsibilities will be specified in the O&M management contract for the international operator for the dadreservoir and the transmission facilities. 35. All these actions together needto result in an appropriate protectionof the BumbunaReservoir from sedimentation, improved livelihoodof farmers in the catchment area, increased economic opportunities for communities in the area, appropriate protection of biodiversity and adequate water quality for users of the reservoir and downstream users and sufficient water quantity for downstream uses, including the environment, Social Mitigation Implementationof DammeservoirRAP 36. A total of 33 villages (corresponding to 518 households) will be affected by the impoundment throughwhich they will be losingfarmlandand access to river and forest resources. It is estimatedthat only one village, Matombe, with 16 households, will need to be physically relocated. One other village, Waia, with 80 households, will lose almost all their farmland, approximately 80 percent, and depending on where their new landwill be located, they may needto physicallyrelocatealso. The remaining31villageswill lose less land (17 villages will lose less than 20 percent and 14 villages will lose approximately 40 percent). In additionto these 33 villages, another four villages were affectedinthe past when the quarry, the construction camp, the dam itselfand the access roads were built. The four villages, which are situated close to the dam site anddownstream, will be compensatedthroughcommunity development projects. 37. The PAP in the dam and reservoir area will be compensated through a resettlement program which has several components, each of which responds to the determined impact, the specific needs of the PAPS, and the mitigationmeasuresneededin order to reduce physicaland psychologicaldiscomfort. Landfor land and in kind compensation is the basic rule which will be adopted. Because of the fact that the area has already reachedits carryingcapacity due to slash and burncultivationandpopulationincrease), landwhich is already degradedor situated too far away, may not always be the best option. For this purpose, a "Stabilized Agriculture Program" (SAP) and a "Livelihood Assessment and Income RestorationProgram" (LAIR) will accompany the traditionalcompensationpackage of land, housing, income rehabilitation,assistance, etc. 38. The DadReservoirRAP will be implementedthrougha contract with a resettlement unit, composed of internationaland national resettlement consultants, which will report to the PIU. The PIU will have the major and overallcoordinatingfunction while the RUwill be the implementingunit inthe field. The RUwill have its main offices in Kafogo and Bumbuna and a coordinating office in Freetown. The two major components inthe resettlement and compensationpackage, the SAP and the LAIR, will, althoughpart of the RAP, be implemented by national consultant contracts and will be closely coordinatedwith other activities 60 within the resettlement program. A LegalCouncilwill be providedcontinuously throughout the resettlement process and is included in the RU contract (through sub-contract to the "Lawyers Centre for Legal Assistance"). On the local level, Village Resettlement Committees (VRC) will represent the PAPSand will fully participate in all activitiesthroughout the resettlementprocess. Internalmonitoringwill be carried out by the RU. External monitoring and evaluation of the process will be carried out continuously by an independent "witness NGO" as well as by the panel o f experts. A Resettlement Advisory Group will be composed of and representall stakeholdersandthis group will have an oversight andadvisory function. Implementationof the Transmission Line RAP 39. The existingtransmission line is 255 kilometerslong and includes about 550 towers. It starts at the switchyard at the project site in Bumbuna and ends at a substation in Freetown. The completion of the transmission line will also cause resettlement but on a very small scale. The original RAP, which was disclosed in January, 2005, determined 367 households in the ROW of the transmission line which would have to be resettled should the ROW have been enforced. Alternatively, 137 households would have been affected had the alternative exclusion zone concept been adopted. However, in order to further minimize resettlement, in line with the public consultations which expressan unwillingnessto resettle, an approachwill be adoptedwhich retains existingland use and permits transmission lines to overpass existingbuildingsand houses, providedthere is a minimum clearance between structures and the lowest conductor of 7.0 meters. Thus, only six structures will needto be relocated, basedon a field study inFebruary 2005. 40. The Transmission Line RAP will be implemented by the same RU that will implement the DamkeservoirRAP, andthe same institutionalarrangementswill apply. Benefit Sharing 41. The Upper Seli Community Development Initiative (USCDI) will develop and test an innovative institutional model for the proposed Bumbuna Trust, and, in so doing, provide benefit sharing to the indirectly affected population in the reservoir area and the area immediately downstream of the dam (the directly affected area will be covered by the RAPS). It responds to growing internationalcalls for explicit forms o f local-benefit sharing to broaden the development effectiveness of water resource infrastructure projects (World Commission on Dams, Summit on Sustainable Development) and subscribes to the World Bank Water Sector Strategy 2003. The initiative will be implemented inthree districts: Bombali, Tonkolili and Koinadugu, and will cover a population of approximately 150,000 people in 9 wards (each district in Sierra Leone is dividedup into a number o f wards). 42. It will enable benefit sharing to begin as completion of the dam is underway, and will enable mechanismsto be developedandtested for a long-term,sustainable Trust which canprovideon-goingbenefit sharing in the area. The plan is for the Trust to provide benefit sharing to directly and indirectly affected communities inthe reservoirareaas well as the area downstreamofthe dam. This initiativewill focus on two activities: Ward and Community Sub-projects 43. Communities will receive development benefits basedon their demands for improvedpublic services through sub-projects implemented by them in collaboration with ward development committees and in harmony with overalldistrictdevelopment plans. An initial menuof sub-projectoptions has beendetermined duringthe planningprocess throughdiscussions with communities, wards, and districts. This menu includes the following: clearing and rehabilitation of smaller access roads, hand-dug community wells and constructionof latrines, management of organic waste, rehabilitationof existingschool buildingsand health 61 centers. Communities will apply for sub-project funding by completing simple, sub-project application forms, based on their already revealed priorities. 44. Applications will be reviewed and approved by ward development committees, based on simple feasibility criteria, to ensure that the proposed sub-project is from the approved menuo f options, is viable and will not duplicate existing or planned development interventions. Wards will send their package o f approved applications to the district council for final approval, in coordination with the district-level staff o f the relevant line ministries (for example, a proposal for a school will be checked by staff o f the Education Ministry, to ensure that the Ministry can provide adequate teaching staff and equipment. A similar process will be undertaken for water projects, health projects, etc.). Districts will send a consolidated list o f ward packages o f sub-projects to the USCDI Advisory Group, for their information and approval on a no-objection basis, as long as the sub-projects are on the approved menuo f options and the total estimated budget for each district does not exceed the associated ward budget envelopes. 45. Once final approval is given, project coaches (one per district) will help communities prepare sub- project plans and assist them with implementing their sub-project, in collaboration with the line Ministry staff at the district level. Communities will contribute in cash, kind, and labor. Communities will also receive training needed for sustainable operation o f facilities (such as community managed water systems). Local NGOs may be contracted to provide this training. A sub-project committee will be formed o f users o f the prospective public services, under the supervision o f the ward development committee. This sub-project or users committee will be elected by the respective communities and membershipwill be composed at least 30 percent female and will include at least two youth representatives (one female, one male). Each user committee will contain at least one ward development committee member on it, to facilitate coordination. 46. Overall funds flow is from a project account in the Decentralization Secretariat to accounts in the three District Councils that would be under the Chief Administrator. Funds will be released in tranches to Districts based on cash flow projections and allocations among the Districts and approved packages o f sub- projects. Funds will be released from the District account in tranches to sub-projects accounts, on a performance basis, after sub-project milestones stipulated in a MOU for each sub-project are met. The MOU will typically involve the 3 parties: the User Group, the Ward and the Council. The ward development committee member on the user committee will work with the user committee to manage any sub-project contracts, purchase o f materials, etc. All accounts and expenditures will be subject to transparent community accountability and audit procedures and will be in accordance with the recently passed Decentralization Act and Procurement Law. Youth Capacity Building 47. Training in marketable trade skills a local firm (possibly an NGO) will be hired to implement an outreach training program for youth intrade skills for which viable markets exist. In other words, youth will be trained in practical skills for which there is a market demand. Priority skills mentioned in community consultations have included: roads construction, tailoring, blacksmithing, carpentry, masonry, catering, petty trade and soap making. Instead o f bringing large number o f youth to a large town such as Makeni, groups o f youth will be trained in `strategic villages'. There will be five or six strategic villages dispersed throughout the wards in the project area. Up to 25 youth from nearby villages will participate in a course. Orientation, theoretical training, and sharing o f experiences will be held in the strategic village. Practical on-the-job experience will be obtained by participants through working throughout the course period with `mentors' (local trades people - carpenters, masons, etc. who will take on participants as apprentices). Mentors will be provided with orientation and training to understand and be capacitated intheir role as mentors. These skills should be of use in the sub-projects component, and so an initial market for these skills will be found there. At the end o f the training courses, trainees will be given starter kits o f tools to capacitate them for self- employment and community work. 62 48. Trainingin business and life skills: another local firm (possibly an NGO) will be hiredto implement an outreachtrainingprogramfor youth in the areas o f business and life skills. This will includedbasic skills for running a small business, literacy and numeracy, as well as `life' and `civic' skills such as leadership, communityorganization,conflict resolution,knowledge of basic health issues such as HN/AIDS, etc. This trainingwill be held in the strategic villages in conjunctionwith the trade skills program, so that participants will all three skill areas duringa three-monthtrainingprogram. (It is possiblethat one firm couldbe hiredto develop and implement both programs; initial investigations have indicatedthat it might be difficult to find one firm skilled in all three areas, but this will be done if possible, as it would be institutionallysimpler and more efficient). 49. Small grant allocation scheme targeted at community-based youth organizations: this scheme will provide a limited amount of funds to which community-based youth organizations can apply, using a simple application form. These grants would be for community-based development initiatives, to be implementedby the youth organizations. Ward development committees would review and make decisions on these applications. The compensation due to the persons affected by the original resettlements is dealt with separately, in section D.1.11, D.7.1 because, as an exception to OP 4.12, it will be financed from the proceedsofthe BHPover 5 years after its commissioning. Component C: TechnicalAssistance 50. This component comprises management and supervision of the activities under Component B; and support for the Dam Review Panel (DRP), the Environment and Social Advisory Panel o f Experts (ESAP), andthe CommunicationsActionProgram. 5 1, An internationaland national EnvironmentalManagement TechnicalAssistance team will assist the PIU in implementing the EMP, in collaboration with the Department of Environment and other Sierra Leonean agencies. The PIU will also establish its own environmental management structure to oversee implementationof EMPspreparedby the contractorsfor the dam andtransmission line. 52. Project costs are presentedinAnnex 5. 63 Annex 5: ProjectCosts SIERRALEONE:Completionof the BumbunaHydroelectricProject Sierra Leone: Completion of the Bumbuna Hydroelectric Project Components Project Cost Summary (including physical and price contingencies) Total Project Project Cost, incl% Foreign % Total Local Foreian Cost IDC IDC ExchanaeBaseCost A. Hydroelectric Project Contracts Civil and HydraulicSteel Structures (ContractA2/B) 7.274 34.011 41.285 3.979 45.264 82% 48% ElectromechanicalEauiDment (Contract C) 0.479 16.051 16.530 1.301 17.831 97% 19% .. Transmission LinelSubstation(Contract Dj 0.000 8.778 95Y 1O0o Sub-total HvdroelectricProiect Contracts ::%. 588.34; 3 6861757983 5.280 71.873 88; 7760 B. Environmental MitigationlArea Development EnvironmentalManagement 2.806 0.528 3.334 0.000 3.334 16% 4% Land Acquisition,Compensation& Rehabilitation(Reservoir Area) 3.487 0.000 3.487 0,000 3.487 0% 4% Land Acquisition,Compensation& Rehabilitation(Transmission Liar75 0.000 0.175 0,000 0.175 0% 0% Upper Seli Community Development Initiative 1.225 0.075 1.300 0.000 1.300 6% 2% Sub-total EnvironmentalMitigation/AreaDevelopment 7.693 0.603 8.296 0.000 8.296 7% 10% C. Technical Assistance Construction Supervisionfor HydroelectricProjectContracts 0.107 3.515 3.622 0.000 3.622 97% 4% Support for the Bumbuna PIU 0.600 1.210 1.810 0.000 1.810 67% 2% Dam Safety Panel of Experts 0.000 0.110 0.110 0.000 0.110 100% 0% Environmentand SocialAdvisory Panel of Experts 0.000 0.696 0.696 0.000 0.696 100% 1% CommunicationsAction Plan Project Management and Supervision- Component B 0.147 0.017 0.164 0.000 0.164 10% 0% 2.085 1.129 3.214 0.000 3.214 35% 4% Sub-totalTechnicalAssistance 2.939 6.677 9.616 0.000 9.616 69% 11% Total BASELINE COSTS . 4 5.280 9.785 78% 98% TotalRepaymentofCOST PPF la8.:;0 0.000 82.000 100% 2% PROJECT 18.824 625:%67.681 824;%-86.505 5.280 91.785 78% 100% 64 Annex 6: ImplementationArrangements SIERRA LEONE:Completionof the BumbunaHydroelectricProject 1. The primary institutional arrangements for government direction and cross-sector coordination for management o f the BHP are at three levels: a special Cabinet Sub-committee; an Inter-Departmental Technical Committee; and the Bumbuna Project Implementation Unit. The Cabinet Sub-committee established in December 2003 has a mandate to decide national energy policy with specific reference to BHP and provide oversight of a Technical Committee to help expedite decision-making. Membership consists of: 0 The Vice-president o fthe Nation 0 The Minister o f Finance 0 The Minster o f Energy and Power 0 The Minister o f Works, Housing and Technical Maintenance 0 The Minister o f Lands, Country Planningand the Environment 0 The Minister o f Local Government and Community Development 2. The Technical Committee established at the same time as the Cabinet Sub-committee has eight officials, collectively mandated to translate government approved policies into objectives and plans to be implemented by the Bumbuna PIU. It reports to the Cabinet Sub-committee on project progress including technical and financial matters and the performance o f the PIU. Its mandate i s to develop and promote appropriate mechanisms for all aspects o f the project including those that require inter-agency coordination such as compensation issues, communications, watershed management, wildlife management and public health and safety. Membership includes: 0 The Finance Secretary 0 The Development Secretary 0 The General Manager o fN P A 0 The Professional Head, The Ministero f Works, Housingand Technical Maintenance 0 The Chief Environment Officer, The Minister o f Lands, Country Planning and the Environment 0 The Bumbuna Project P I U Head 0 A Representative from Professional EngineersAssociation and University 3. The Bumbuna PIUprofessional staff coordinatingthe safeguard and project preparation study teams. The PIU will be staffing up in late 2005 with AfDB financial support. It will continue to function as the focal point for communications with national, local and international stakeholders and supervise the contracts with the project contractor and consultant. The figure at the end o f this annex indicates the overall institutional and staffing arrangements for function o f the PIU Component A. Hydroelectric and Transmission InfrastructureProject The implementation arrangements for Component A are set out in Section C.2 o f the PAD. The GoSL, represented by the MOEP will implement the construction phase, through a series o f construction contracts with private contractors, and will enter into a concession agreement to transfer the implementation of the operation phase to the concessionaire (BHC). Component B: EnvironmentalMitigation, Resettlement, Watershed Management and Benefit Sharing 65 EnvironmentManagement Implementationof the EMP: 4. When completion works resume the constructioncontractor and transmission line contractors will implement immediate EMP measures under the supervision and monitoring o f a PIU Environmental Specialist and the PlUEnvironment team. Inparallelthe PIUwill contract and supervise teams preparingthe additional baseline studies required before reservoir impoundment.The PlU will then lead effort to establish an administratively lean organization institution referred to as the Bumbuna Watershed Management Authority (BWMA). The BWMA will be a small organization establishedafter test impoundmentresponsible for implementationof the LandManagement Strategy and Action Planthat is a key component to introduce integrated watershed management. The PIU would then gradually transfer responsibilities for watershed management activities funded by the grant including the establishment of the Bumbuna Conservation Authority. The institutionalarrangementsthus include: 0 The BumbunaPIU 0 Contractor (pursuant to the Wrap Up Agreement, Salcost will undertake to prepare and comply with an EMPunder the supervision o f the PIU) 0 The BumbunaWatershedManagementAuthority 0 The BumbunaConservationAuthority 0 The Seli River Development Agency 0 The Concessionaire(BHC). 5. The BWMA, will be a small and lean organization, and will be established under or with linkageto Seli River BasinDevelopmentAuthority (SRBDA) an existingorganizationcreated in 1999 although it is not active at present, which itself will be revivedon a modest scale initially by involving it in the Project and specifically component B andC activities. 6. It is envisagedthat underthe aegis ofthe MoEP(whichhas the pemitfor water resource development in Sierra Leone), the SRDA would be positionedto oversee or implement a strategic EIA of the Seli River Basintaking into account the BHP andthe plannedfuturehydroelectricdevelopment inthe basin. Eventually, the SRDA would serve as a river basin organization (RBO) in a similar manner to RBOs in other jurisdictions. It would for example, establish collaborative mechanisms for the water use interests to advise on water allocation policy and related matters, coordinate the provision o f training, capacity building and institutionalstrengthening, and assist in the provisionof funding for the local-level catchment management organizations (such as the BWMA) for the integratedlandand water managementat the Seli basinlevel. Implementationof the ResettlementAction Planfor the Reservoirand DamArea and the Transmission LineArea 7. Both Resettlement Action Plans (Dammeservoir RAP and the Transmission Line RAP) will be implemented by the same RU which will be composed of internationaland nationalresettlement specialists. The institutionalarrangements are as follows: a. The Project ImplementationUnit (PIU) will be responsible for implementingthis RAP. This unit already exists. However, it requires additionalstaffing and institutionalstrengthening, which will be providedunderthis component. b. The LAIR (LivelihoodAssessment and Income Restoration)program, will be accompanying the RAP and will be carried out by an NGO qualified for such work. This program will be under a separatecontract with the PIU. 66 c. The SAP (Stabilized Agriculture Program) will also accompany the RAP and will provide technical assistance to PAP and help introduce new farming techniques. This program will be under a separate contract with the PIU. d. Implementation will be contracted out to a Resettlement Unit (RU), staffed and equipped to carry out the work. This RU should have offices in Bumbuna and Kafogo in order to be able to deal directly and on a local basis with all issues at hand and a coordinating office in Freetown, This unitwill be created andthe requiredpersonnelhired. e. An estimated total of 15 Resettlement Officers (RO) will hired, each o fthem dealing with 4 to 5 villages inthe project area. f. Legal counsel to PAPs will be provided continuously throughout the process. The Lawyers Centre for Legal Assistance (LAWCLA) is an organization that has been identified for this task, g. Village ResettlementCommittees (VRC), one per affected village, will be organized as a direct representation o f the PAPs. It is important that representatives o f vulnerable, often excluded groups (especially women and young people) are adequately represented. A VRC will be set up ineach o fthe affected villages inthe dadreservoir area. The villagers will choose who should be on the committee. Membership should not exceed twelve, o f which one third should be women. In general, the VRC will advocate for the interests ofthe village and its primary purpose will be to work out how the village will be included in resettlement implementation and monitoring. Most importantly, it will be involved in compensation o f lost land and identification and preparation o f replacement land. Specific duties include: (i) agreement with villagers on location site of village (ifthere is physical relocation); (ii)agreement with PIU on design o f village; (iii) agreement on compensation o f assets, crops and trees; (iv) contribution to the development o f infrastructure lost (roads, paths), (v) first instance for receiving and listening to villagers' concerns and grievances about the project; (vi) contact point with villagers on status o f the resettlement; (vii) continuous monitoring o f Resettlement implementation. h. The role o f a Advisory Group will be assumed by the ResettlementAdvisory Group,where all stakeholders will be represented. Members o f the RAG include representatives from: the PIU, Government (ministry departments), NGO involved inresettlement, vulnerable groups (Women's groups, orphans, HTV/AIDS etc), villages, and host communities. The RAG will convene once a month during implementation to ensure regular exchange o f information between all parties. The RAG will also review the resettlement strategy and results and advise and inform government o f possible regulatory or legal actions to take. i. Monitoringwillbeanimportantpartofthefollow-upwork. Differentmonitoringtaskswillbe carried out by different actors, including the RU itself (for routine day to day monitoring); a witness NGO for witnessing and monitoring specific activities, e.g. compensation payments or signingo f agreements; and a Panelof Expertsfor periodic external monitoring. BenefitSharing 8. The Upper Seli Community Development Initiative would have a Advisory Group which would provide: (1) overall strategic direction for the initiative; (2) coordination among the 3 Districts and Bumbuna project entities and any problem resolution required, and; (3) strategic direction on transitional planning for a longer-term Trust. The Project Advisory Group would also ensure a fair and equitable balance for allocations among the three districts and a mechanism for discussion o f common interests. The coordinator for the initiative will be based in the Decentralization Secretariat (in the Ministry o f Local Government and Community Development). The coordinator will work with one other person to form a team based in the Freetown office. In addition, there will be one coordinator (or `coach') based in each o f the three participating districts. The coaches will report to the coordinator and to their respective district administrators. 67 9. The compositionof the Advisory Group would be confirmedduring the project set-up. Membership wouldbe 12-15 membersandwouldminimallyinclude: a 3 District CouncilChairpersonand 3 ParamountChiefs (fromKoinadugu, Tonkolili andBomboli Districts) a Directoro fthe DecentralizationSecretariat; a Director o fCommunity Development (MLGCD) a A senior representativeofthe Ministry of Energy andPower a Director o fYouth, Ministryo fYouth and Sports a ManagingDirectorofNaCSA; a Director o fthe PIU a Chairmano fthe Seli RiverBasinDevelopmentAuthority; a A representationof JICA (SierraLeone) and a WorldBankCountry Manager, or a designatedrepresentative 10. The Advisory Group would be co-chairedby the Director of the DecentralizationSecretariat and the Director of CommunityDevelopment. 11, The Directors or Head of the BumbunaWatershed Management Authority (BWMA) and Bumbuna Conservation Authority (BCA) and a representative of the BHC would be invited to the Advisory Group, when these organizations are established (Le., the BWMA and BCA as recommended in the Bumbuna EIA Update). 12. The Catchment Stakeholder Forumwould meet once a year on the day preceding a Advisory Group meeting. The Forum would consist of government, non-government and civil society stakeholders from the three districts and nationalstakeholders. Subject to the Advisory Group and Paramount Chiefs' discussion on the matter, the Forumwould be convenedby a 3-member panelofthe Chief Administratorsof the 3 districts, The Forum would entertain discussion of concerns and issues on the current progress on the Project and transitionalarrangementstowarda Trust. 68 OrganizationChart for the Upper Seli Community DevelopmentInitiative (JSDF) I Steering Committee I ............................................ ii Independent ii ................,............. Stakeholder i.................,.......................i AudrforsandM&E Experts Advisory Forum I District Coach District Coach District Coach Based ln BasedIn Based In BombaliDistrict Tonkolili Distnct KoinaduguDistrict - Steering Committee Composition Advisory Forum Composition 3 District Council Chairpersonand 3 ParamountChiefs Representativegovernment, civil society andprivate sector -. * Decentralization SecretariatDirector (DecSec) stakeholders60mthe threeDistricts inthe Catchment Community Development Director (MLGCD) * Interested national stakeholders(e.g. NGOs active inthe 3 Districts) Representative ofEnergy andPower (MoEP) * Representativesof Community User Committees Director o f Youth. MinistryofYouth and Sports * Forum convenedby Chief Administrators (CAS) ofthe 3 Districts - Managing Director ofNaCSA Bumbuna Project Implementation Unit (PIU) Director Note: Representativesof the Bumbuna WatershedManagement Seli River BasinDevelopment Authority Chairman Authority (BWMA), Conservation Authority (BCA) and Special JICA (Sierra Leone) representative Project Company (SPC) would be invited to the Forumor Steering * World Bank Country Manager, or a designatedrepresentative Committee when these organizations are established. Component C 13. Borrower Capacity: Borrower capacity to implementthe safeguard policy recommendations is at present insufficient.The project will finance EnvironmentalManagement and MonitoringCapacity building throughTechnicalAssistance. The TechnicalAssistance will provide on the on-the-jobtrainingand capacity building in environmental management and monitoring, for the responsible Sierra Leonean institution, the Departmentof Environment.The Technical Assistancewill be basedinthe PIU. 14. Capacity building will be needed to ensure those institutions with responsibilities for environment and social managementare capable of executing their responsibilitiesbothinthe completionstage and for the longer term. On-jobcapacity buildingactivitieswill be directedat: 0 The PIU(existingbut not fully staffed) 0 The Department ofEnvironment(existing) 0 The Wildlife ConservationBranch(existing) 0 The BumbunaWatershedManagementAuthority (to be established) 0 The BumbunaConservationAuthority (to be established), and 0 The Seli RiverDevelopmentAuthority (existingbutnot functional) 69 r Bumbuna Hydropower Project - Project ImplementationUnit (PIU) - Organization and Staffing Government of Sierra Leone Ministry of Energy and Power Bumbuna Hydropower Guidance/Direction Government Ministries 1 Technical Committee F - R e p o r t i n g ~ProjectLDirector s o n j Approvals S i a Project Donors - Resident ' b ConstructionSupervision 1Hydro Quebec Hydropower (Studio Pietrangeli) Home Ofice Support 4 Project Engineer Specialists (Hydro Quebec) -3 Civil Contractor ---- Mechanical -- Environment Resettlement Dam Safety (Salini Costrutton) Electrical II I 1 Civil E/M Contractor O&M (European Consortium) 4 Transmission Line Contractor (ABM PIU Staff I ResidenWisitingSpecialists Local Staff - Contracts Expert ------ Resettlement Technical - Resettlemenffsocial Expert - Financial Controller/Administrator Financial Administrative --- StabilizedAgriculture - EnvironmentalExpert Environment Cost and Schedule Expert LivelihoodAssessment and Income Restoration Expert - StabilizedAgriculture Program Manager Program Expert Communications Unit - Livelihood and Income Restoration Program Manager 70 Annex 7: BumbunaCommunicationAction Plan (Summary) SIERRA LEONE:Completionof the BumbunaHydroelectricProject Introduction 1 Rationale: The need for a communication program stems from the importance o f the BHP project and its impact on the different stakeholders that are directly or indirectly affected by it. The development o f a communication program responds to the need for an open, transparent and inclusive dialogue among stakeholders. Developing a holistic approach to communication aims at ensuring that economic, political, social and environmental concerns relatedto the project are properly addressed and will help explain how the completion o f the Bumbuna project is economically viable, environmentally sustainable and socially equitable. 2. Objective: The communication program shall contribute to the achievement o f the project's development objectives by setting up two-way communication mechanisms and carrying out grass roots activities inorder to: a) provide adequate and timely information dissemination to all stakeholders and ensure the transparency o f the process; b) ensure that opinions and concerns o f all stakeholders are taken into account and raise their level o f participation in the decision-making; c) ensure public acceptance and endorsement o f the project and d) make certain that the development opportunities linked to the project are fully understood and exploited. 3, CommunicationActionPlan Design: The project has dedicated significant effort to: (i) identifying the main stakeholders affected by the project and analysing their position inrelation to it; (ii) uncovering the most relevant attitudes and beliefs that influence the stakeholders perception towards the project (iii) understanding the most relevant concerns and expectations; (iv) identifying ways to effectively communicate with various stakeholders; (v) building mechanisms into the project that will sustain the dialogue among stakeholders throughout the project cycle. A communication specialist was part o f the project preparation team to ensure the involvement o f key stakeholders inall project phases. 4. A thorough qualitative and quantitative communication researchphase has been carried out to design a comprehensive Communication Action Plan (CAP) in support o f the completion o f the BHP.The CAP has been developed into five main components tailored to address the communication needs o f different audiences, In particular: (i)capacity building to support the Communication Unit o f the PIU; (ii)inter- institutional coordination to ensure that involved ministries and authorities at central and regional level are regularly informed about relevant facts and decisions and have a unified approach to communication; (iii) grassroots communication to involve communities in the decision making process through a participatory approach and to support the community development plan; (iv) media relations to provide correct information to the media; (v) external communication to explain the benefits o f the project and ensure transparency within all members o f national and international interest groups with interests inthe project. 5. CommunicationAction Plan Implementation: A Communication Unit (CU) responsible for the management and implementation o f the communication activities described in the CAP has been created within the PIUand CAP implementation has started. The C U is supported by the World Bank's Development Communications Division and benefits from the experience o f the IEC Unit o f NaCSA that has developed important experience in development communication in Sierra Leone. Extensive consultations with project affected communities, indigenous leaders, town and district councils along the reservoir and transmission line areas have been carried out in coordination with the EIA and RAP teams (see Annex 18). Two-way communication mechanisms are planned to support project completion by sustaining dialogue, information sharing and facilitating grievance procedures. At the project site community radio activities are being created to promote community discussion o f project-related issues. Information dissemination activities through print 71 and broadcastmediaare ongoing. Public opinionresearchhas beencarried out to establish a baseline on the level of informationand the perceptions of the general public toward the BHP and the power sector reform. This study focused on: i)perceptionsof stakeholders concerningthe projectand private public partnership in the power sector, ii)existing communication channels and systems, and iii) communication needs at communityandnational level. 6. Additional communication activities will be implemented by the CU as described in the CAP throughout the life cycle ofthe project.The CUwill carry out CAP implementationthroughmonthly working plans to be discussed and approved by the Technical Committee under the supervision of the project team, Monitoringand evaluationactivities are embedded in the CAP so as to assess the degree o f participationo f the key stakeholders during implementation and provide project updates and status reports. All project's public documents will be made available through a project website as well as at suitable locations at the central andprovinciallevel. 7. Monitoring and Evaluation: Adequate qualitative and quantitative communication research is embedded in the CAP implementation throughout its life to ensure informeddecisionmakingand constant monitoringand evaluation. A monitoringmechanism will identify trends in attitudes and behaviors among different groups and will assess the impact of the various communication activities. The CAP shall be regularly adapted to take into consideration changing communication needs. The public opinion research study shall be replicatedduringprojectimplementationto monitor and evaluate the impact of communication activities carried out until that moment and identify the necessary adjustments and integrations to the CommunicationAction Plan. Additional methods to monitor the impact of communicationactivities are: i) the monitoringo f media outputs, ii) radio phone-inprograms, and iii)public consultations with the different stakeholders. Audiences 8. Severalpublic,privateand internationalplayers are involvedinthe completionof the BHP, each one holding different interests and playing different roles, with different tasks and responsibilitiesat different levels (political, economic, and technical). The CAP will involve the strategic use of several communication approaches, techniques andtools to reachthe largestpossible audiences and will ensure close coordinationof informationflows amongall the key players at all levels. Mainaudienceshavebeen identifiedas follows. 9. Institutions Directly Involved in the Project as Partners: All institutions participating in the project will be involvedinthe communication programandprovidedwith adequate andtimely informationto ensure good coordination and the sharing of a clear and comprehensive understanding. In addition to the Ministry of Energy and Power, these institutions include: the Office o f the President; Office of the Vice President; Ministry o f Finance; Ministry o f Development and Economic Planning; Ministry o f Land, Housing, Country Planning and Environment; Ministry of Works; Ministry of Local Government and Community Development; Ministry of Information and Broadcasting; NationalPower Authority; National Commission on Privatization; the BHC; operator; contractors; engineering consultants; and the donors (Government o fItaly,African DevelopmentBank, IDA, andthe OPEC Fund). 10. The CU will provide communication support and will seek coordination among all project team experts working in the different components of the project, (social, environmental, economic, and engineering). 11. Project Area Residents and Project Affected People: Resettlement and regional development programs involvingPAP will be supportedby the communicationactivities and by coordinationbetweenthe CU andthe implementationteams. 72 12. General Public: Sierra Leone citizens have heard about Bumbuna for more than 30 years, On the one hand they pin many hopes on it, but on the other hand they lack confidence in the completion o f the project. Over the years much disinformation and erroneous beliefs have affected public opinion. 13. Local Authorities and Local Power Elite: these include local authorities in affected areas, Paramount Chiefs, village chiefs, local district councils, community elders and other influential people. 14. The National Media: Interactionwith print and broadcast media is essential to reach the public at large (this includes newspapers, magazines, radio and TV.) Newspapers: About 20 newspapers are printed in Sierra Leone, Every day an average o f ten newspapers are printed, each one producing approximately 1000 copies on average. It is estimated that each copy is read by an average o f 5 persons. The printed press is therefore a limited media. However, newspapers have highcirculation within ministries,business and affluent circles, and will be considered an effective tool for reaching this constituency. Radio is the most effective media to reach the general public. The majority o f the people have radio receivers and are regular listeners. There are currently 6 FM radio stations in Freetown, two radios with a national coverage (Radio UNAMSIL and SLBS) and several community radios. Television can have a high impact but on a very limitedaudience as few households have TVs and power generator. TV will therefore be considered only as a mediumto reach affluent citizens o f Freetown. 15. Development Agencies, International and National NGOs, Civil Society Associations: These include the development agencies working in Sierra Leone, such as UN Agencies, bilateral agencies, local NGOs, other professional and non professional civil society associations, religious groups and community leaders. BriefDescriptionof Components and Actions 16. Capacity Building to Support the Communication Unit: This component aims to support the Communication Unit created within the PW. Media training and technical support by the World Bank's Development Communication Division and the IEC Unit o f NaCSA will be sustained throughout the project cycle to support the C U to design and carry out all communication activities related to the BHP and act as source of information for all stakeholders while encouraging cooperation among all key members. The C U office has been established, one communication officer appointed, the furniture and equipment purchased and two media training activities have beenconducted. 17. Inter-institutionalcoordination: The activities envisaged for this component are: a) establishing communication procedures/protocols to share information and opinions among involved institutions. This includes: mailing lists, face to face and group meetings, written briefs distributed to all involved institutions; b) developing information material (leaflets, briefs, press releases, information kits) to support the mandate and tasks of PIU member's or o f other involved institutions; c) managing PIU media relations; d) producing the BHP newsletter every trimester describing project progress; and f, organizing workshops involving different stakeholders on strategic communication, or other relevant issues. 18. Grassroots Communication: The C U will act as a link between the local communities and the decision-makers to ensure two-way communication. This component entails providing local communities with adequate and timely information on the project and on its impacts, helping the community committee, facilitating grievances procedures during resettlement, and involving communities in consultations through a participatory approach to support the regional community development plan. 19 The main activities o f this component include: a) direct proximity communication through regular visits and public consultations; b) public consultations that include (i)religious leaders, (ii) paramount and village chiefs (iii)youth, (iv) women, and (v) elders. Particular attention is paid to ensure that all groups are given a chance to speak and those important differences in perspectives are captured; b) regular interaction with local authorities; c) communication activities such as community theatre, short video documentary 73 screening in support of the RAPS and the EMP, d) production o f communication tools and activities in support o f the Dam Safety Plan and dissemination o f information related to "emergency preparedness"; and e) creation o f a community radio activity in Bumbuna which will serve as a medium to foster dialogue, support regional development activities and promote community discussion o f project-related issues. A committee representing all ethnic groups has already beenestablished. 20. Media Relations:The objective o f this component is to provide correct information to the media so as to disseminate adequate and timely information to the general public about: i)the progress o f the BHP, ii) its benefits and opportunities, iii)the role o f the different actors involved (government, donors, contractors). Media relations will also help identify and address specific misinformation and erroneous perceptions concerning the BHP. Radio programs as well as the interaction with journalists will help not only to inform and sensitize but also to listen to different audiences perceptions through a bottom-up communication approach. 21, Activities o f this component include organizing informationto be released officially and coordinating official spokespersons, identifying and training key staff who will be chosen to become active spokespersons and communications "champions" for Bumbuna. A focal point for media relations has been established as well as the creation o f a media directory and database. Activities tailored to building good relations with journalists of the printed and broadcast media will include producing and disseminating Information Packages (press-kits) for journalists that will include: i)information notes on different aspects o f the BHP (description, progress, role o f involved organizations, expected benefits, social and environmental issues etc.); ii)synopsis o f statements or speeches o f the President and other personalities, iii)graphics, vi) audio and video material (interviews to the different stakeholders). These Information Packages will be regularly updated. In addition press conferences and field visits to Bumbuna will be carried out. Monitoring o f mass media output, producing radio programs (phone-in programs, panel discussion, news reports, radio theatre, etc.) are underway together with TV programs. Production o f printed material and collection o f audio, photo and video documentation o f the project will be usedto develop radio and TV programs throughout the project cycle. 22. External Communication:This component aims to explain the benefits o f the project and ensure transparency within all members o f national and international interest groups with interests or concerns in relation to the project. Large infrastructure projects are in fact closely monitored by development agencies and NGOs that are active in the social and environmental sector in Africa. Main activities o f this component include the ongoing design and managing o f a project website. The website describes the BHP, highlights positive impacts on living conditions and economic development in Sierra Leone and explains the role o f the World Bank. The website includes all relevant project documents, a "Questions and Answers" section and will be enriched with additional information, articles, interviews, photos, video etc. during the course o f the project. The CU is also responsible for nurturingthe relations with national NGOs working in the project areas. It is important to establish a dialogue with those NGOs and civil society organizations already active in the project area that could become partners in the development o f local initiatives. These institutions can provide valuable information and feedback on project activities, and can be partners in the information dissemination process. 74 Annex 8: FinancialSummary for RevenueEarningProjectEntities,BEC, and the ProjectCompany SIERRA LEONE: Completionof the BumbunaHydroelectricProject BumbunaHydropowerProject SpecialPurposeCompany (SPC) Revenuesand Cost of Production BumbunaPhase 1 - BHC Bulk Tariff per per kWh 1. Operatlon and Maintenance Costs 4(a) Orlglnal AfDB Loan as of 01/01/07 -(mil USD) 1(a) EstimatedAnnual Escalation -1 4(b) Consolldated AIDE Loan ab of 01/01/07 -(mil USD) l(b) Annual OBM Costs Generation -(mil USD) 4(c) Total AfDB Debt as of 01/01/07 v l ( m i l USD) 1(c) Annual OBM Costa Transmlsslon v l ( m i l USD) l(d) Total Annual QBM Costs 3.00 (mil USD) 6(a) 1996 Protocol Debts Value Jan. 1,2007 -1(mIl USD) 6(b) Annual Prlnolpal Repayment -1 2. SPC Annual Management Costs ((mil USD) 6(c) Interest Rate 4.6%1 6(d) % o f Debt to be Repald From Revenues -(mil USD) Repalr Reserve 6(a) Commercial Loan Principal Repalr Reserve -(mil USD) 6(b) Annual Prlnolple Repayment 6(c) Interest Rate 7. Debts to TL PAP and Annual Trust Fund Contr. -(mil USD) 8. Total Project Debt January 1,2007 - -1(mil USD) 7 2008 2009 2010 2011 2012 2013 2014 2016 2016 0 17.32 17.18 16.79 17.33 16.39 16.01 16.10 16.97 16.86 q n n n ? ? ? C C 75 Background: 1. The tariff per kWh of Bumbuna output to be paid by the NPA to the BHC will be based on the annual operating costs and debt service. The following assumptions form the basis o f the financial model that defines (i) expected revenues and costs for BHC; and (ii)the estimated the tariff per kWh of electricity produced by the BHP. The model uses the output of a dispatch simulation based on demand projections from the BHP Economic Analysis to determine the annual output. The developed tariff model allows for sensitivity analysis related to the terms and conditions o f project loans and existing debts as well as ongoing operating costs. The following assumptions guide the modeling process. Operationand MaintenanceCosts 1.1 The annual costs of operating and maintaining the Generating Station, appurtenant structures, town site, roads, transmission line and associated switchyards, includes the O&M contractor's fixed and variable fees, and all local work force, material, expenses and spare parts. It does not include any allowance for the cost o f major breakdown or repairs, which will be covered by a reserve account. (see 3 below). 1.2 EscalationRate-The escalation rate can be adjusted for the combined local and foreign escalation. The majority o f operating costs are fareign costs. The sensitivity range is presently set at 1%to 6% per annum. It is considered that 4% per annum i s a reasonable assumption. 1.3 Annual O&M Costs for Generation. The sensitivity range o f the model allows for a selection ranging from US$1 million to US$3 million annually. It is considered that US$2.5 million per annum is a reasonable assumption for all O&M costs including expatriate management and technical staff, which can be reduced over the first five years, as training o f local staff increases local skills. 1.4 Annual O&M Costs for Transmission. The sensitivity range o f the model allows for a selection ranging from US$0.25 million to US$1.25 million annually. It i s considered that US$0.5 ' million per annum is a reasonable assumption for annual maintenance o f the line and substations. The largest proportion will be spent on annual Right o f Way (ROW) vegetation clearing by local villagers. 1.5 Total O&M Costs= l(b) l(c) adjusted annuallyby l(a) + 2. Annual Management Costs of BHC. The sensitivity range o f the model allows for a selection ranging from US$0.25 million to US$1.25 million. It i s considered that US$0.5 million annually will cover the cost o f BHC management labor, expenses, housing, transport, insurance, office rent, equipment, and consulting, accounting and legal fees as required. It is expected that BHC will have a professional manager, an administrative assistant and secretary. 3. Annual Contributionto CapitalMajor Repair ReserveAccount. Total ProjectAsset Value 3.1 The sensitivity range o f the model allows for a selection ranging from US$lOO million to US$190 million. A base amount o f US$lOO million is used for calculating the annual contribution. 3.2 The sensitivity range o f the model allows for a selection ranging from 1%to 2.5% of the asset value for calculatingthe annual contribution. 76 3.3 Initially the allocationshould start at about 2% or US$2 million a year for at least three years and then taper off over three years to US$1 million a year. A minimumreserve of about US$6 million should be maintainedinorder to cover the cost of repairs due to at least two major equipmentfailures in one year, andto support senior debt servicingduringrepairs. 4. African DevelopmentBankLoans 4.1 Original AfDB Loan. The original 1991AfDB loan No. F/SIL/H-ELC/91/8for UA32 million or US$43 million, is currently being serviced by the GoSL. This Loan will have an outstanding principle of approximately US$43 million at the start o f Bumbuna operations. The modelassumes that this debt will be servicedby Bumbunarevenuesafter January 1,2007. 4.2 F/SIL/LCA/HYD-ELC/95/15- Loan ConsolidationAgreement - October 7, 1995) amounting to Loan ConsolidationAgreement. This is a consolidation of five existingloans (LoanNo about UA18million or US$28.4 million in 1995. This Loanwill have an outstandingprincipleof approximatelyUS$28.4 million at the start of Bumbuna operations. The model assumesthat this debt will be serviced by Bumbunarevenuesafter January 1,2007. 4.3 Total AfDB Loans = 4(a) 4(b), or US%71.4million + 5. Contractor and the ConsultantDebts. 5.1 Based on the Protocolof Agreement (1995) betweenthe GoSL and the Civil Contractor and the Project Engineer, outstanding certifiedpayments were to be rescheduledfor repayment during commercial operations. These combined debts will be US$49.6 million as of December 3 1, 2006, basedon the current methodso f calculatinginterestandcompoundingintervals. AnnualPrincipleRepayment 5.2 It is anticipated that the principle will be repaid over a period o f fifteen years, coincidentalwith the repayment ofthe commercial debt. Interest Rate 5.3 It is considered that the interest rate payable should reflect the Contractor's cost of capital,representedby the rate establishedfor its commercialfinancingof the projectcompletion. The rate is expectedto be 4.5%. Amount to be Repaidfrom ProjectRevenues 5.4 Provision is made in the model to allow for adjustment from 0% to 100% of the full amount and interest projected to January 1 2007, based on the amounts certifiedby the Auditor General of Sierra Leone in June, 2002. The amounts to be repaid is subject to negotiation betweenthe GoSL andthe Contractor andProjectEngineer. 6. CommercialFinance PrincipleAmount 6.1 The principle of the Commercial Loan, to bridge the financing gap, is expected to be approximately US$38 million. 77 PrincipleRepayment Schedule 6.2 The principle repayment schedule is yet to be determined with a maximumterm of 15 years. A grace periodis beingnegotiatedby BHC. InterestRate 6.3 The interest rate is expectedto be 4.5% per annum. 7. Debts to TransmissionLine ProjectAffected People (PAP) As of March2005, this debt is estimatedto be US$1.2 million. It is expectedthat this debt will be dischargedduringthe first five years of operations from BumbunaRevenues.Also includedis the annual contributionto the BumbunaTrust FundofUS$2.3 million. 8. Total ProjectDebts. The totalproject debt = 4(c) + 5(d) + 6(a) + 7, or U S $161.5million. 9. Project'sFixedCosts For Debt Service and OperatingCosts. The annual fixedcosts of debt service andoperations is expectedto be approximately US$17 million, reducingto US$15.5millionafter 10years. 10. Expected Cost ofProductionper kWh. The expected cost of production per kWh is based on the annual fixed costs divided by the projectedannual energy output of approximately 195GWhin 2007 and increasing in accordance with projected demand. 11. The Cost ofProducinga kWh. On the basis o f the above assumptions, a number of options have been run to determine the impact ofvarious contributingcoststhat influencethe PPA tariff. 12. The BHC's Revenuesand GeneratingCosts of 1kWh 12.1 The Generating Cost of 1 kWh. The average annual output available from the BHP is 300 GWh. The tariff per kWh of Bumbuna output will be based on the annual fixed costs of production,which in turn, would includethe operating and maintenance costs of the BHP (BHC costs plus O&M costs); the provisions for reserve for equipment failure; and the repayment (principal, interestrates over a givenrepayment period) of debt associatedwith the completionof the BHP. 12.2 The project debt is comprised of: (i) the US$38 million equivalent CommercialLoan, at 4.5 percent over a 15 year repayment period; (ii)the debts to the contractor and the consultant, estimated to be US$49.6 million at 4.5 percent over a 15 years repayment period. The private debt has been audited by the Auditor General of Sierra Leone and accepted by GoSL and the parties; (iii) the AfDB loans of US$71.4million at 1percent interest raterepayable over 40 years; (iv) the long-standingdebt o f US$3.5 million owed to people affected (TL PAP debt) by the transmission line component o f the project, which has been assumed to be repaid over 5 years with no interestcharge. 78 13, FinancialFlows of the Power Purchase:The PaymentProcess and AssociatedRisks, and Proposed Mitigation Measures 13.1 When considering the institutional arrangements for (i)the operation and maintenance management o f BHC, and (ii)the concession to BHC for the BHP, attention i s given to the financial transaction flows to ensure that the selected arrangement is able to function effectively, This is dependent on the uninterruptedflow offunds from consumer to producer. 13.2 The major risk inherent in the proposed arrangement is the Power Purchase Agreement (PPA) payment risk. The PRG will provide insurance against non-payment by NPA, and therefore the inability o f BHC to service the Commercial Loan. However failure or the inability o f NPA to make PPA payments to BHC has more far-reaching impacts thanjust the debt service. Failure to pay BHC and therefore its O&M contractor could result in abandonment o f their obligations and the project being left without a manager or operator. This not only results in a loss of generation, but also could represent a potentially dangerous situation with respect to the plant equipment and dam safety. The PRG provides no coverage for payment o f ongoing operating costs for the maintenance o f BHC as well as the O&M Contractor. 13.3. It is then critical to ensure that payment mechanisms are in place that are, to the extent possible, automatic, and sheltered from any kindo f interference, and/or the actions or inactions o f an inefficient bureaucracy. The payment risk can be significantly reduced by establishing a fixed remuneration schedule, with pre-agreed remittances managed by a reputable local bank, which will have direct access to NPA' s revenues account. 13.4. The tariff payment schedule would be updated annually to reflect any changes in BHC operational costs. Foreign currency denominated components o f the payments due, would be converted at the applicable foreign exchange rate at the time o f payment transfer to BHC's account, Transfers to the BHC's account (at the same bank should be made four times per month, (48 installments per year) in order to free up cash flows for NPA' s ongoing operations. This is due to the PPA payment having to be set aside first, before the balance o f the revenue account is transferred to N P A operating accounts. Monthly transfers would tie up to much o f NPA's operating cash flow. It is possible to use the same mechanism to allow for funding o f a special account to collect funds requiredby the GoSL to service the AfDB and other debt. 13.5. In connection to the above, the legal documentation will stipulate that a pre-agreed, locked in payment process, is put in place, not only to mitigate the risk o f default on the Commercial Loan, but also to ensure uninterrupted operation o f the project. 13.6. The Tariff in year one (2007) will be made up o f the following cost components as indicated inthe pie chart below: r- Tariff Annual Cost Components (2007) Tariff Annual Cost Components (2007) (Millions) I A% (%of Costs) fl7 V I 0 50 0 Reselves 0 AfDB Loans W Contractor Debts W Contractor Debts ElCommercial Debt BCommsrclal Debt A R W TL PAP Debts 79 The following spreadsheet describe the changes incash outflow over the first tenyears of operations and the impact o f debt reduction and growth indemand on the average tariff. 80 $ N co 0 0 N t r m r 2 0 N N t r 5 P W N W r! r m r i? 0 N 5 r E m W m N ? r z r l- $ N n! r 0 .r m 3 0 m W 00 N 7 r 8 01 0 34 N 7 r co 0 $ 0 N OD 9 r 0 IC 0 0 N P 9 r BHP Debt Service and PPA Payment Process Electricity NPA Energy Payments Consumer Customer Bills Bill Existing BankAccount for AggregatingAil Customer Remittances(RevenueAccount) Standing Lettersof Instructionto transfer scheduled payments to joint accountsweekly. Localcurrencycomponent,and Bank Account foreign currencycomponentsat actual exchange rates. Balanceof funds transferredto NPA OperatingAccount Weekly. Standing Letterof Instructionto NPA Operating NPNBHC transfer amountsto BHC accordingto Accounts Weekly Joint Account PPA (agreedschedule). Tra!sf er Joint Account Leone and Forex Bank Accounts SLL Accounts Taxes Equivalent UA c I / I I I SLL E E, 1 I 1 Foreign 1 Reserve Account -1 Commercial Concession GoSL IDA Transmission ksLL+ Line PAP Contractor Local Fee 1Cl:fes 1 1 Debts Operating Taxes ~ ~ 1--I-- 1 uu Accounts u Local Goods and Services Contractor I Consultant Private Debt costs & Profit Provision is also made for funding a foreign reserve account for the sole purpose o f ensuring funds are available for future procurement of offshore goods and services required for major maintenance and repairs. 82 Annex 9: Salini Construttori, S.p.A.: Technicaland FinancialCapabilities SIERRA LEONE:Completionof the BumbunaHydroelectricProject 1. Technical: Salini Costruttori, S.p.A. ("Salcost") i s a leading Italian contractor with over thirty years of international construction experience. Over the years, Salcost has acquired considerable experience in dam construction and hydroelectric projects, both as sole contractor and as a joint venture leader or partner. Salcost has a successful construction track record on the African continent and in Italy where it has successfully built various types o f dams (concrete, earth and rockfill). Salcost's geographical experience in Africa includes Ethiopia (Legadadi Dam, Little Beles Dam, Gilgel Gibe Dam), Ghana, Guinea (Garafiri Dam), Malawi (Kapichira Hydroelectric project), Sierra-Leone (Bumbuna Falls hydroelectric project) and Zimbabwe (Zhove Dam, Osborne Dam), Salcost's experience inthe Middle East and Asia includes two dams in Jordan (Karameh and Kafrein) and a participation in the CGIC joint venture implementing the large Xiaolangdi Multipurpose Dam project in China. In addition, Salcost has more than fifty years of experience in construction o f large engineering projects: roads, highways, bridges, railroads, ports, airports, aqueducts, water treatment plants, industrial plants, and multipurpose integrated agricultural projects. 83 -I v) Annex 11: FinancialManagementand Disbursement Arrangements SIERRA LEONE:Completionofthe BumbunaHydroelectricProject 1. Under the Bank's OPBP 10.02 with respect to projects financed by the Bank, the borrower and the project implementing agencies including the concessionaire are required to maintain financial management systems - including accounting, financial reporting, and auditing systems - adequate to ensure that they can provide the Bank with accurate and timely information regarding project resources and expenditures. The guidelines issued by the Bank's Operations Policy and Country Services regarding Financial Monitoring Reports (FMRs) require adequate financial management arrangements, including the ability to produce timely FMRs, to report on implementation progress, project component by component. 2. A Financial Management evaluation of the PIU, the entity responsible for coordinating the implementation of the Bumbuna Hydropower Project, was conducted during the February-March 2005 pre-appraisal mission to determine whether this entity has acceptable financial management arrangements in place. The evaluation includes reviews o f the PIU' systems o f accounting, reporting, auditing and internal controls (to be used for transactions recording). The reviews indicated that these are based on the same principles as for the NPA-PIU, for which a full Financial Management Assessment was conducted during the appraisal of the Power and Water Project (PWP, Cr. 3945-SL) inMay 2004. The PIU's existing systems and relatedprocedures and reportingarrangements, though not formalized, were found acceptable, as they are capable o f recording correctly all transactions and activities, supporting the preparation o f regular and reliable financial statements, safeguarding the project' assets, and will be subject to transparent and internationally acceptable auditing processes. 3. The Financial management assessment for the NPA-PIU was carried out jointly by a World Bank Financial Management team and persons responsible for financial management within the NPA- PIU. Financial management internal control questionnaires and interviews o f key financial personnel were used as part of the assessment. The NPA-PIU, which was established to implement the PWP i s being using the accounting system o f NPA, which is fully documented in an accounting procedures manual. The accounts unit o f the NPA-PIU has the full complement o f staff headed by a Financial Accountant, who is a qualified accountant, and is reporting to the Financial Comptroller o f NPA on matters o f finance. 4. Similarly, the PIU's accounting systems is being currently maintained by an accountant, who currently reports to the PIU Coordinator in the absence o f a Financial Comptroller. While the accountant has worked on previous Bank funded projects, it is expected that more training will be provided to enhance its performance. Based on the mission review, even though the financial management system for the PlU, as discussed above, i s adequate and meets the minimum requirements o f the World Bank, more capacity is needed to further strengthen the financial management o f the project. 5. Therefore, under the agreed upon arrangements, a Financial Comptroller is being recruited under the AfDB financing. Also, a full computerized management information system will needto be put in place, as well as a manual of procedures. These are de facto conditions o f effectiveness of the proposed project, which should be met by end-August 2005. Country Accountability Issues 6. The Bank has carried out a limited scope Country Financial Accountability Assessment (CFAA) for Sierra Leone. The report documents the public financial management system architecture, identifies weaknesses and makes recommendations to address them. A stakeholders workshop was organized by the Government o f Sierra Leone in June 2002 to discuss the CFAA report 85 and agree on actions to address the identified weaknesses. An action plan was agreed upon at the end of the workshop and i s presently under implementation. 7. The summary risk analysis is based on this work and our FM assessment o f the entity which will be responsible for the implementation ofthis project. Summary of RiskAnalysis Risk RiskRating p kMitigationMeasures InherentRisks: Country a) Weakness in legislative scrutiny ofBudgetand Audited rocessingof all itemswill be done at Accounts. The Chairmanof Parliamentary Finance M Headoffice locatedin Freetown. committee (Budget) is the same as Chairmanof Public accountscommittee(Audit). b) Weakness inthe Banking sector and limited bank branches at District andprovincial levels, leadingto large center to the movement of provinces cashwith from the risks associated with cashholding. Most banks are located S mainly in the capital, Freetownand major Regions. c) Inadequacyof remunerationof public sector financial staff. ere there is critical need for high S eve1staff, agreements would be eachedwith Governmentto recruit the eededqualified staff. Overall InherentRisks 86 RiskRating Pisk Mitigation Measures ControlRisk: Implementing Entity. Projectwill helpfund cost of qualified a) Limitednumberof accountsstaff staff recruitedto assist in project M implementation.Thejob functionsof accounts staff, includingjob descriptio] ofstaff, functional responsibilitiesand reportingrelationshipswill beclearly spelledoutto ensure adequateinternal controls. The PIUwould be assistedto documen their systems inAccounts Procedures Manual.Projectspecificrequirements will be incorporatedto ensure effective project management. b) Accountingsystemand ProceduresManualare not M current andup to date. Risk Risk Rating Risk Mitigation,Measure FundsFlow Staffofthe accountsunit will be M trainedpriorto effectivenessof project Delays in submissionof withdrawal applicationsto the Bank on WorldBankdisbursement procedures. InternalAudit Assistance will be providedwithinthe M proiectto helpthe BHP-PIUimprove their internalaudit functions Ejctemal Audit It is notexpectedthat the Audit report M will belate, butto ensureits timely submission,the selection of independentauditors would be completedbeforethe projectbecomes effective Information Systems The BHP-PIUwill receiveassistance S to improvethe controlenvironment over its computerized systemto improvecontrols Overall Control Risk S 87 Financial Management System for the Project 8. The implementing agency, the PIU has been created for the purpose o f managing the main components o f the project. The PIU, which is being staffed with key qualified staff, including a Financial Comptroller, will assist other BHP' s entities to implement the respective components. 9. The PIU will be headed by a Coordinator who will have overall responsibility for project management. The Financial Comptroller, will be responsible for the day-to-day management o f the of project funds, including that o f the Special Accounts. H e will be assisted by the present accountant, a support accounting officer. This accounting team will be responsible for maintaining adequate accounting records, preparing financial reports and statements, and ensuring that the project's financial management arrangements are acceptable to the Government and the World Bank at all times, The team will also be responsible for ensuring that the project financial reports, including the financial monitoring reports, are submitted to Government and World Bank on time and in accordance with the financial covenants o fthe financing agreements. The PIU 10. The PIU manual o f procedures will ensure the incorporation of the World Bank's disbursement policy and procedures, and project-specific activities. The manual, which will be part of the implementation manual, must be satisfactory to the World Bank and its production will be a condition o f effectiveness of the project. The accounting staff will be provided appropriate training on World Bank disbursement policy and procedures prior to project effectiveness to ensure that all staff perform their functions adequately. Flow of Funds 11. The project will have one (1) special account (SA). The PIU will operate a funds management system. All requests for major payments by entities implementing activities or subcomponents within the BHP shall be submitted to the PIU accounts unit for processing and payment. However, to facilitate smooth implementation, and to avoid all minor payments being sent to the PIU and to minimize the frequency o f requests from the participating entities, these entities will operate an imprest account. The imprest account will be used to finance their operating cost expenditures, such as travel and transport, minor stationery purchases, etc. On the basis o f the operating cost budget, approved by the Advisory Group, the accounts unit o f the PIU will release funds from the project accounts (Le. counterpart funds allocated to the project) to the entities to meet their operating cost activities for the quarter. On submission o f returns, the eligible expenditures will be reimbursed with funds from the SA o fthe project at the eligible percentage. Auditing Arrangements 12. Independent and qualified auditors acceptable to the Bank would be selected to carry out annual audits o f the project, including the Special Account and statements o f expenditures for each financial year. The selection o f auditors shall be on a competitive basis and in accordance with the Bank's new "Guidelines-Annual Financial Reporting And Auditing For World Bank-Financed Activities ",issued by the Bank on June 30, 2003, and would be inplace before the project becomes effective. 13. For the Special Account, the project financial statements will be audited in accordance with International Standards of Auditing (ISA) and a single opinion will be issued to cover the project financial statements, SOEs and the Special Account, in accordance with the Bank's new audit policy, The audited financial statements o f the entity and the project, including the auditors' management report, would be furnished to the World Bank within six months o f the close o f each fiscal year. 88 Reportingand Monitoring 14. The P I U will prepare quarterly financial monitoring reports (FMRs)' in the areas o f finance, procurement (including complaints from bidders), and project progress. The PIU will be required to prepare this report on a quarterly basis as part o f project quarterly implementation progress reports. The two Financial Specialists within the PIU will have the responsibility o f ensuring that the systems put inplace are capable of producingthese reports on a timely basis. The reports are: (a) The Quarterly Financial Report, which would consist of a statement o f cash receipts by sources and expenditures by main expenditure classifications for the period and cumulatively; cash balances o f the project and supporting schedules comparing actual and budgeted expenditures; (b) Quarterly Physical Progress Report, including narrative information and output indicators, linking financial information with physical progress, and reporting on issues that require attention; (c) Quarterly Procurement Management Report would consist o f information on procurement for goods and works and for consultant services and compliance with agreed procurement methods. The report compares procurement performance against the plan agreed at negotiations and appropriately updated at the end o f each quarter. The report should also provide any information on complaints by bidders, unsatisfactory performance by contractor, and any contractual disputes. DisbursementArrangements 15. The proceeds o f the Grant would be disbursed over a four-year period. Disbursements under this credit will be transaction based, however it is envisaged that within a year after project effectiveness the decision to disburse on the basis o f FMRs will be revisited The projected disbursement over the duration o f the project will be as follows: Annual 6 4 2 0.5 Cumulative 6 10 12 12..5 Statement of Expenditures (SOEs) 16. Disbursements for all expenditures would be against full documentation, except for items o f expenditures under contracts and purchase orders below US$200,000 equivalent for works, US$150,000 for goods, US$lOO,OOO for consulting firms, and US$50,000 for consultant services (individuals), training and incremental costs for which disbursements would be based on statement o f expenditures (SOEs). Supporting documentation for SOEs would be retained by the PIU for review by officials or representatives o f the Government of Sierra Leone, IDA missions, and external auditors. 89 Special Account (SA) 17. The PIU already has a Special Account inconjunction with its management ofthe Bumbuna PPF; it is operated inUS$ at a local commercial bank, under terms and conditions satisfactory to the IDA, UponGrant effectiveness, a sum ofUS$1000,000 would be depositedby IDA into the SA Allocationof Grant Proceeds Amount o fthe Grant Allocated Yo of (Expressed in Expenditures Category SDREquivalent) to be Financed Goods and services other than US$ $2,511,804 100 % of foreign consultants' services expenditures and 90% of local expenditures Works US$ 1,698,866 100% Consultants' services US$3,387,513 100% Training and audit US$732,561 100% Community Grants US$830,000 100% of amounts disbursed Operating costs US$696,856 90% Refunding of Amount due pursuant Project Preparation to Section 2.02 (c) of Advance this Agreement Unallocated TOTAL US$ 12,500,000 90 Annex 12: ContractualArrangements SIERRALEONE:Completionof the BumbunaHydroelectricProject The contractual arrangements of the BHP are presented as follows: 1. In April 2003, the Government of Sierra Leone (GoSL) requested IDA to support the completion o f the Bumbuna hydroelectric project (BHP). In order to qualify for an IDA PRG, the project had to be structured as a private public partnership, inpartnership with the private sector and a number o f other donors, including AfDB, the Government o f Italy (GOI) and the OPEC Fund. In addition, the GoSL i s providing funding towards the local cost o f the project completion. These arrangements were confirmed at a Donors Meeting, chaired by the Vice President o f Sierra Leone on September 11, 2003. Since April 2003, the project has been designed as a public private partnership. At the approval of the OC to proceed with the project, the cost o f completion o f the project was estimated to be approximately 62 percent public-sector financing and 38 percent private-sector financing. Today, this relation is very similar: 64 percent public and 36 percent private; 2. B H C will be granted a concession for operating, maintenance and management the project (Concession Agreement) for a term which is exceptionally long in a post-conflict country. Since the contractor does not have experience inhydro-plant operation, an O&M Agreement will be signed with an experienced hydropower utility. A Power Purchase Agreement will also be entered into between B H C and N P A for the supply to NPA o f the power generated by the BHP. Some o f the risks that B H C will be responsible for managing include: (a) interest rate risk, since the commercial loan will carry a floating rate of interest; (b) operational risk in a post-conflict country e.g. 300 out o f 560 o f the transmission towers were damaged to varying degrees according to a recent condition assessment, o f which 256 will be rehabilitated; and (c) due to the weak financial situation o f NPA, there i s a substantial risk o f non-payment. I lndemnlty Agreement 91 Annex 13: Letter of Sector Policy March31, 2004 Mr.James D.Wolfensohn President, World Bank, 1818 HSt. NW Washington DC. 20433 Dear Mr.Wolfensohn Re: Sierra Leone: Power and Water Project (PWP - Power Component) Letter of Sector Policy Inconjunction with the presentation ofthe above-captionedproject to IDA'SBoard, Iwould like to set out for you briefly the Government's policy for the reform o f the power sector as Sierra Leone moves out o f its post-conflict stage o f its development. With the support o f the PublicPrivate Infrastructure Advisory Facility (PPIAF) that is managed by the World Bank the Government of Sierra Leone (GoSL) commissioned a study in 2002 to identify the constraints facing the development o f the power sector and propose appropriate remedial measures focusing on the role of the private sector. The major policy recommendations o f this study, which have been accepted by Government, were to: i)reform the power sector to enable private sector participation and establish a national sector regulator; ii)reform the National Power Authority (NPA) and in particular reassign policy formulation to the Ministry o f Energy and Power; and iii)complete the 50 MW Bumbuna hydroelectric project (BHP). We would like to draw your attention to the fact that in addition to financing the urgently needed rehabilitation o f the NPA's generation, sub-transmission and distributions system in the Western Area, the PWP is supporting the restructuring o f the power sector inaccord with the recommendations of the PPIAF Study. The PWP i s also supporting measures to improve NPA's financial viability through the implementation o f a performance-oriented management contract for NPA. We also strongly believe that the PWP will provide the platform to enable the nation and especially the Western Area, enjoy the full benefits o f the Bumbuna Hydroelectric Project, the commissioning o f which we have awaited for so many years and now with the assistance o f the World Bank and other donors we expect inlate 2006. We are pleased to note the support from the World Bank, which is pivotal for reviving and completing the BHP, will comprise the provision o f a Partial Risk Guarantee that will enable the project financing gap to be closed and facilitate its early commissioning in 2006. We acknowledge that a number o f important environmental and resettlement matters need to be investigated and addressed prior to the commissioning o f Bumbuna, which as you may know is 85 percent complete. The relevant studies would be undertaken soon and the Government pledges to address these matters in the most appropriate manner. 92 At a recent Cabinet Meeting, Government reaffirmed its commitment to the power sector reform program, specifically comprisingthe following elements: i. Reaffirmed Government's decision to reform the power sector to enable private sector participation including enabling private sector investment in the sector. To facilitate this directive, Government is committed to reforming the NPA Act and setting up a regulator for the power sector by June 2005. ii.Governmentisalsocommittedto facilitatingprivate-public partnershipsintheprovisionof services and specifically to contract out the management o f NPA inthe first quarter o f 2005. iii.Pledgestobudgetfor theneededcounterpartlocalfundsneededtoaccomplishtheworksfor which the foreign component is to be provided by the World Bank. Inter alia, this means putting in place timely tariff adjustments to enable NPA be converted into a financially sustainable utility, and iv. A commitment to address all the environmental and resettlement issues and development opportunities regarding the Bumbunaproject. We appreciate very much the support o f the World Bank to the development o f Sierra Leone's power sector and look forward to continued close cooperation inthe future. Sincerely Emmanuel 0.Grant Minister o f Energy and Power 93 Annex 14: ProcurementArrangements SIERRALEONE:Completionof the BumbunaHydroelectricProject Introduction 1. The Implementing Agency (IA) under the project is the PIU (which is located in the Ministry of Energy and Power MOEP). For the IA,the Procurement Proceduresunder the project will be described in a Project Implementation Plan (PIP) and finalized by project effectiveness. The procurement arrangements in the PIP for the IA will be harmonizedto the extent possible with the current procurement practicesto ensure that the BHP-PIP is not overburdenedwith the use of different procedures,depending on the source of funding. Inaddition, the MOEP is preparinga Project ImplementationManual(PIM) for its various units, which will be adoptedy the PIU. Use of Bank Guidelines 2. All works and goods financed under the IDA grant will be procured in accordance with the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004. Consultants will be selected in accordance with the Guidelines: Selection and Employment of Consultants by World Bank Borrowers, May 2004. National Competitive Bidding (NCB) procedures will include: (a) an explicit statement to bidders of the evaluationand awardcriteria; (b) national advertising with public bid opening; (c) awardto the lowest evaluated responsive and qualified bidder; (d) foreign bidders would not be precluded from participation in NCB; and (e). registratiodclassification of contractors may be used for establishing bidder qualification or for preparinga list for use under price comparisonprocedurebut not as criteria for bidding, With the exception of complex information systems, the merit point system shall not be used as the basis of bid evaluation. "Bracketing" or rejection of bids outside a range or "bracket" of bid values shall not be permitted. 3. The Bank's Standard Bidding Documents (SBD) will be used for all International Competitive Bidding (ICB), and, with appropriate modification, for all NCB. The Bank's Standard Request for Proposals(SRFP) would be used for all consulting assignments. The IA should ensure that eachtime it is using the most current version of the appropriate SBD or SRFP and standard forms of evaluation. Less competitive bidding and selection procedures should not be used as an expedient to by-pass more competitive methodsand fractioning of large procurementsinto smaller ones should not be done solely to allow the use of less competitive methods or to avoid administrative (including the MOEP) or IDA review. Advertising 4. A General Procurement Notice (GPN) i s mandatory and will be published in the UN Development Business as provided under the Guidelines and inDevelopmentGateway Market (Dg Market).The GPN would show all ICB and all consulting services estimated to cost USD 100,000 or more. Specific ProcurementNotices (SPN) will be required for contracts to be procuredunder ICB andNCB procedures and for consultant contracts (estimated to cost more than USD 100,000) to obtain expressionsof interest (EOI) prior to the preparationofthe shortlist. The SPNs will (as a minimum) be published in a newspaper of wide national circulation. All ICB and Consultant contracts estimated to cost USD 200,000 or more shall be advertisedin Development Business online and in Dg Market. Sufficient time would be allowed (not less than six weeks for ICB and not less than 30 days for NCB and 14 days for EOI) to allow adequatetime for biddersand consultantsto obtain documentsandrespondappropriately. 94 Procurement Capacity 5. Under the BHP PPF (Q 4390-SL), the PIU has gained extensive experience and now has adequate capacity to carry out procurement under the project. However, in order to further strengthen their procurement capacity, provisionhas beenmadeunderthe projectfor key staff ofthe two IAsto be trained in procurement under Bank financed projects. Special emphasis will also be placed on procurement planning, supply chain management, specification writing, preparation of bidding documents, bid evaluationand contract management. 6. The summary assessment shows an "Average Risk" for the project and the prior review thresholds have been set to reflect this rating. Procurement Post Reviews (PPRs) will be carried out annually by Bank staff and/or independent auditors and based on the findings o f the reviews, the prior review thresholds will be reviewed. The main risks identified in previous procurement reviews are: (i)poor procurement planningand monitoring; (ii) poor recordkeeping; (iii) contract managementand poor weak quality control; (iv) poor commitment control; (v) contract splitting; (vi) inadequate procurement capacity; and (vii) delays in processing procurement and payments. The actions planned to address the deficiencies are included in the project activities and include (i)further training of the IAs, in the application of the procurement procedures - this training will complement the nationwidetraining effort to be launchedas part o f the implementationof the Public ProcurementLaw; (ii) specializedtraining for IA staff in preparationo f BiddingDocuments and Request for Proposals, due diligence, verification o f bidder's qualifications, contract management and quality control; (iii)setting o f standard processing times; (iv) establishment of semiannual reporting requirements; (v) establishment of a contract performance support system; (vi) annual procurement post reviews; (vii) annual review of prior review thresholds basedon finding of the procurement post reviews; and (vi$ enforcement of remediesavailable to IDA, if Government does not take appropriate sanctions against officials who flout the agreed procedures. 7. The project launch workshop will, inter alia orient key staff on the principles of good public procurement practice and to discuss the procurement arrangements under the project. The project also includes fundingfor key staff inthe IA to attend the Bank supported regionalprocurement course at the Ghana Institute for Management and Public Administration (GIMPA) or the East and Southern Africa Management Institute (ESAMI). Other areas of training supported under the project include contract management,recordkeepingandprojectmanagement. ProcurementPlans 8. The PIU will prepare an annualwork planconsisting of a procurement planfor the first 18 months of the project showing individualcontract packages, and for each package its estimated cost, procurement method and processing times for key activities until completion.The procurement plan for the first 18- monthperiodhas beenpreparedand agreeduponbetweenGoSL and IDA. Three months prior to the start of each subsequent fiscal year, the PIU will submit updatedversions o f the procurementplans inrespect o f the followingeighteenmonths for IDA review. 9. Any revisions to the formally agreed procurement plan shall requirethe concurrence of IDA, The IA shall apply the most competitive method of procurement appropriate to the circumstances of the specific procurement as described in the PIP and the Table below. Implementing agencies may select a more competitivemethodfor a particularprocurement ifthey wish to do so, however, IDA concurrence will be required to use a less competitive method other than the one set out in the agreed Procurement Plan, Absence of this concurrencemay result inmis-procurement. 95 10. Training, workshops, conference attendance and study tours will be carried out on the basis of approved annual programs that will identify the general framework of training and similar activitiesfor the year, including the nature of trainingktudy tours/workshops, the number of participants, and cost estimates. ContractManagementand ExpenditureReports 11. As part o f the FMR, the IA will submit a semi-annualreportto the MOEP, which will submit the FMR to IDA not more than three calendar months after the end of every semester. In addition to accounting information, the FMR will includethe status o f (i)implementationof the procurement plan, and (ii)progressandexpenditureson individualcontracts. ProcurementImplementationArrangements 12. See the institutional responsibilitiesfor implementationin Annex 6. As a rule, the IA will be responsible for its own procurement. The PIM will as a minimum include: (a) a descriptionof the roles and responsibilities of the various procurement functions; (b) authorizationthresholds for department heads, the managing director, the procurement committee for the IA, the Board of Directors, and the Ministry o f Energy; (c) IDA prior reviewthresholds, (d) standardprocessingtimes; (e) a statement to the effect that the procurement committee will be responsible for executive procurement and will constitute ad hoc specialized panels of experts to preparebiddingdocuments, RFPsand evaluation reports; and (0a statement to the effect that the role of the Boardof Directors & the Ministry of Energy will be limitedto the approval of procurementplans, and ifrequired, the review of the recommendationsfor the award of large value contracts whichshouldexceed or coincide with IDA prior reviewthresholds. Scope ofProcurementand Procurementmethods The scope of procurement is coveredunderthe descriptionofthe projectcomponents. 13. Contracts for civil works estimated to cost individually USD 250,000 or more will be procured using ICB procedures. Works estimated to cost between USD 50,000 and USD 250,000 equivalent per contract; shall be procured using NCB procedures. Very small contracts estimated to cost less than USD50,OOO equivalent may be procuredby way o f solicitingquotations throughwritten invitations from not less than three qualifiedcontractors.RegistratiodClassification o f contractors may be usedto identify contractors for such very small contracts.The invitationshall include a detailed descriptiono fthe works, basic specifications, the required completiondate, a simple form o f agreement acceptable to the Bank, and relevant drawings. In all cases the award of contract shall be made to the contractor who offers the lowestpricefor the requiredwork, andwho hasthe experience andresourcesto successfully complete the contract within the contract period taking into consideration all current/future commitments. All procuringentitieswill be requiredto carry out due diligence and verify that the qualificationinformation providedby the contractor recommendedfor the works is accurate. 14. To the extent possible, goods (and services that do not involve consultant services)that could be procuredfrom one supplier would be grouped into contract packages, and packages estimatedto cost the equivalent o f USD 150,000 or more would be procuredunder ICB procedures. Procurement of goods packages estimated to cost more than USD30,000, but less than USD50,OOO would be procuredusing NCB procedures.Goods packagesestimatedto cost less than USD30,OOO wouldbe procuredby shopping on the basis of comparison of quotations from at least three eligible and qualifiedsuppliers. Requests for such quotations shall be inwriting andwill includea clear descriptionand quantity of the goods, basis of quotations, payment terms, as well as requirements for delivery time, point of delivery and warranty requirements, ifany. 96 15. Software, spare parts andaccessories which are of proprietary nature may, with IDA concurrence, be procured under contracts negotiated directly with the manufactures/suppliers or their authorized agents. 16. Consultingservices andtraining will consist o fvarious planning, engineering and design studies, construction supervision and technical assistance to be carried out by both national and international consultants as well as workshops and group discussions. The preferred method for selecting consulting firms will be Quality and Cost Based Selection (QCBS). Alternatively, Quality Based Selection (QBS), Selection Under a FixedBudget (SFB) or Least-Cost Selection (LCS) procedures may be used provided the assignment meets the requirements of paragraph 3.2 in the case of QBS; paragraph3.5 inthe case of SFB; and paragraph 3.6 in the case of LCS. Assignments estimated to cost the equivalent of USD 100,000 or more would be advertised for EO1in Development Business (UNDB), in DGMarketand in at least one newspaper of wide national circulation. In addition, EO1for specialized assignments may be advertised in an internationalnewspaper or magazine. In the case of assignments estimated to cost less than USD 100,000 the assignment may be advertised only nationally and the shortlist of firms may be made up entirely o f nationalconsultants, ifat least three qualifiedfirms are availableat competitivecosts in Sierra Leone. However, foreign consultants who wish to participate should not be excluded from consideration. Consultant services estimated to cost less than the equivalent o f USD 100,000 may be contracted by comparing the qualifications o f consultants. Auditors would be selected using LCS procedures. In case of assignments requiring individual consultants, the selection will follow the procedures stipulated in Section V of the Consultants Guidelines. For assignments involving NGOs, selection will be in accord with paragraph3.16 ofthe Guidelines. 17. Trainingprograms and workshops wouldbe packagedinthe project's work plans and budget and items therein procuredusingappropriate methods. IDA will review and clear training packages as found appropriate. 18. Contracts which meet the requirements of paragraph 3.15 of the Procurement Guidelines may be procured usingCommunity ParticipatiodForceAccount. The detailed procedures when usingcommunity participationwill be detailed inthe PIP. IDA Review 19. All works contracts estimatedto cost USD200,OOO or more and goods contracts estimatedto cost USD150,OOO or more will be subject to the Bank's prior review in accordance with the procedures in Appendix Io f the ProcurementGuidelines.Any amendments to existingcontracts raisingtheir values to levels equivalent or above the prior review thresholds are subject to IDA review. All contracts awarded on basis of directcontractingwill requirepriorreviewandclearance ofIDA. 20. All single source selection will be subject to IDA prior review.Consultancy contracts with firms with estimated value of USD 100,000 or more, and consultancy contracts with individuals with an estimatedvalue of USD 50,000 or more will be subject to prior reviewby the IDA in accordance with the procedures in Appendix Io f the Consultants Guidelines.All out of country trainingjworkshops will be subject to IDA review. 21. Contracts which are not subject to prior review will be selectively reviewed by IDA during project implementationand will be governed by the proceduresset forth in paragraph4 o fAppendix Ito the relevant Guidelines. Monitoring and evaluation of procurement performance at the IA would be carried out for procurement during IDA supervision missions and through annual ex-post procurement audits. At a minimum, 1 out o f 5 contracts will be subject to post review. Inaddition, post-reviews o f in- 97 country training will be conducted from time to time to review the selection o f institutions/facilitators/course contentshrainees and justifications thereof, and costs incurred. Annual independent technical audits (ex-post procurement audits) would: (a) verify that the procurement and contractingprocedures and processesfollowedfor the projects were in accordance with the Development Grant Agreement (DGA); (b) verify technicalcompliance, physicalcompletionand price competitiveness of eachcontract in the selectedrepresentativesample; (c) reviewand commenton contract administration and management issues as dealt with by the IA; (d) review capacity of the BHP-PIU in handling procurement efficiently; and (e) identify improvements in the procurement process in the light of any identified deficiencies. The Borrower and IDA will review all thresholds stated in this section on an annual basis, Amendments may be agreed upon based on performance and actual values of procurement implemented.Amendmentsto the DGA may be proposedaccordingly. Publicationof Resultsand Debriefing 22. Publicationof results of the biddingprocesswill be required for all ICBs, NCBs, LIBs andDirect Contracting. Publication should take place as soon as the no objection is received, except for Direct Contracting and NCB which may be done quarterly and in a simplified format. For selection of consultants disclosure of results is also required. All consultants competing for the assignment should be informed of the result of the technicalevaluation (number of points that each firm received) before the openingof the financialproposals, and at the end of the selection processthe results should be published. The publicationof results inselection of consultantsappliesto all methods; however, for SBCQ and SSS, the publication may be done quarterly and in a simplified format. The IA shall debrief losing bidders/consultants on the reasons why they were not awarded the contract, if the losing bidders/consultantsrequestanexplanation. Fraud,Coercion and Corruption 23. All implementingagenciesas well as biddershuppliershontractors shall observe the highest standardof ethics duringthe procurement and executiono fcontracts financed underthe projectin accordance with paragraphs 1.15 and 1.16ofthe ProcurementGuidelines andparagraphs 1.25and 1.26of the Consultants Guidelines. (US$ million equivalent) Table A: Thresholds for ProcurementMethods and Prior Review' ExpenditureCategory ProcurementMethod 'Thresholdsgenerallydiffer by country andproject. ConsultOD 11.04 "Review o fProcurementDocumentation" andcontactthe RegionalProcurementAdviser for guidance. 98 24. Frequencyof procurementsupervisionmissionsproposed: One every six months (includes specialprocurementsupervisionfor post-review/audits). 99 Annex 15: Economic and FinancialAnalysis SIERRA LEONE: Completionof the BumbunaHydroelectricProject Background 1. The 50 MW Bumbuna Hydroelectric Power Plant project is located 2.4 kmupstream o f Bumbuna Falls on the Seli River in Sierra Leone. The project infrastructure consists o f an 88 meter high asphalt- faced rockfilled dam with a 50 MW powerhouse (2x25 M W ) at the foot o f the dam. Once completed, the dam will function at its full 50 MW capacity during the wet season and will be used for peak production (with thermal-power baseload) during the 3-4 months dry season, equivalent to 18 MW o f continuous capacity. The maximum seasonal drawdown o f the reservoir will be about 31 meters, and the daily fluctuation o f reservoir level is expected to be 0.1 meters duringthe dry season. The electricity generated at Bumbuna will be supplied to a substation in Freetown Peninsula via a 200 km 161 kV single-circuit transmission line. 2. Construction of the dam commenced in 1988 and slowed down in the early nineties due to a shortfall in financing. Construction stopped inMay 1997 due to security problems at the onset o f the civil transmission line between Bumbuna and Freetown was constructed in the period 1994 - 1996. By the war in Sierra Leone. By this time the hydroelectric plant was 85% complete. The 161 kV single circuit cessation o f the construction most o f the 540 towers had been built and approximately 80 km o f the line had been strung. At the end o f the hostilities, 29 o fthe towers had been destroyed or badly damaged, The entirety o f the line will have to be restrung with cables. Following the end o f the civil war in January 2002, discussions on the completion o f Bumbuna resumed. Commercial production o f hydroelectric power is set to beginby the middle o f 2007. 3. Given that the plant is complete at 85% most risk inherent in hydropower are minimized. This includes both the geological and technical risks as the dam has beenbuilt. The risk o f construction time is also minimized at this stage with two more years fully sufficient to complete the plant. On the other hand the risk at reservoir filling and hydrological risks remain. Least CostProperties 4. The least cost analysis was undertaken by Power PlanningAssociates (PPA) (2005), which shows that Bumbuna Hydroelectric plant i s least cost. The least cost analysis is based on demand projections up to 2020. Supply options come in at least cost such that supply satisfies a minimum level o f technical hours is adopted for 2005 - 2009, which is reduced to 240 hours from 2010 to 2014, and further reduced security in this analysis taken to be the Loss-of-load expectation (LOLE). For the analysis a LOLE o f 480 to 94 hours from 2015 onwards. This puts the value on the low-end for developing countries, with, for example, Ethiopia at 240 hours, Bangladesh at 96 hours, and Botswana at 94 hours. While the Loss of Load Probability (LOLP) is currently unknown for Sierra Leone, it is likely to be in excess o f 50%. For the least cost analysis the assumption was made that Sierra Leone will aim to reach Ethiopia's current standard o f 240 hours inthe next 5 years, and Botswana's standard o f 94 hours inthe next 10 years. These targets appear realistic in the context o f Sierra Leone. Relaxing the LOLE standard will delay commissioning o f thermal units inthe least cost analysis, but not affect the least cost property o f BHP. 5. Rather than adopting a deterministic (n-1) criteriodreserve margin approach, a probabilistic method was used, wherein dispatch was simulated using a Monte Carlo approach to the availability of generation units. The benefit o f this approach is that it facilitates expansion wherein customer and system costs are jointly minimized, whereas deterministic approaches simply aim to achieve compliance with technical standards 100 6. The Bumbuna Hydroelectric Plant was found to be least cost in all model runs and enters as a supply option as soon as this is technically feasible. The issue o f seasonality o f hydroelectric supply is fully internalized. The alternatives to hydropower inSierra Leone are diesel or heavy fuel oil power plant inthe near-term (5 years), and other hydropower plant, including small and medium-sized hydropower in the longer-term. All thermal alternatives are assumed to be located as closely as possible to the Freetown load center in order to minimize the cost o f transmission. 7. To estimate the demand, two different methodological approaches were used: a top-down approach and a bottom-up approach. Two sets o f demand projections were made in order to verify their respective results. The top-down approach projects unconstrained demand from 2005 to 2020 using an econometric technique, based on actual data for 2003, GDP projections, estimates o f technical losses, and an income elasticity value of 1.2. The bottom-up approach looks at each o f the three main economic sectors separately and projects their likely demand, subject to the constraint o f the maximum number of new connections that NPA is able to handle in any one year. It evaluates carefully what potential future clients are currently spending on off-grid applications with the aim o f clearly determining affordability o f electricity. Under both methods three different demand scenarios are analyzed: a base case, a high case, and a low case. These scenarios have different underlying assumptions o f economic growth and o f suppressed electricity demand inthe industrial, commercial and domestic sectors. 8. Table 1 presents the least cost all-thermal expansion sequence and the least cost hydro-thermal expansion sequence. Total system costs and total economic costs are approximately 25% lower for the least cost hydro-thermal expansion sequence than for the least cost all-thermal expansion sequence, An additional least cost sequence was undertaken with Bumbuna beginning exploitation in 2010 only. The system costs and economic costs increase by about 15% compared to the case where Bumbuna is connected in2007. Table 1: Least Cost Expansion Sequences for Sierra Leone 101 Summary of Benefitsand Costs 9. The total costs o f BHP as per the financing plan are US$92 million. To arrive at the economic costs, any costs o f financing are deducted as the project is to be assessed according to the project's quality independent o f its financing mode. Thus, the debt service reserve, interest during construction and other price contingencies need to be deducted to arrive at the project's economic costs at US$ 83 million. Whether or not the debt service reserve could be considered as economic costs is a borderline case. Traditional economic analysis suggests that any debt service facility should be excluded from economic analysis as it is a cost associated with the financing mode and does not affect the quality of the project. However, arguably the debt service reserve is necessary to render the project financeable and therefore feasible in the context o f Sierra Leone, and inthe absence o f any equity from private investors. As part o f the sensitivity analysis the debt service reserve is thus considered. Total costs including the debt service reserve are US$88 million. 10. At a total economic cost o f US$83 million, the Bumbuna hydroelectric plant is part o f the least cost expansion plan o f Sierra Leone's power system. Costs incurred until the cessation o f construction ahead o f the civil war amount to around US$200 million. This amount can be considered as sunk. The EIRR is robust at 41%, which compares favorably with the opportunity cost of capital at 10%. Table 2 gives an overview o f the key economic data. 11, The primary quantifiable economic benefits o f the project include: (i)the revenue generated from the sale of electricity; and (ii)the revenue generated from the sale o f carbon credits. Environmental benefitshave not been quantified. 12. The primary quantifiable economic costs are (i)the total investment costs to complete the hydroelectric and transmission structures; (ii) the O&M costs; (iii) costs o f environmental mitigation the and area development; and (iv) technical assistance (see table below). Environmental damage costs have not been quantified. Table 2: EconomicAnalysis (in US$ million,NPV at 10%) Present ValueofEconomic Flows Base Case (Pre-civilwar costs are sunk) Includingpre-civilwar costs Benefits 517 517 InvestmentCosts 83 283 O&M Costs 79 19 Net Benefits 355 155 EIRR(in %) 41 15 MainAssumptions 13. World Bank 2004 projections for crude oil prices were used for the analysis. The prices projections assume a value o f US$ 36.00 for 2005, a value o f US$ 25.49 for 2010, and a value o f US$ 25.70 for 2015. From 2015 onwards the prices are assumed to remain at US$ 25.70. The hydrological data on which the analysis is based provides monthly firm values that exceed the 95% significance level. Construction o f BHP is phased over 24 months with 25% completed in 2005, 50% completed in 2006, and the remainder (25%) completed in2007. Generation o f power is firm from mid-2007. 102 BenefitStream 14. The bene@ from served electricity: There are two ways by which the benefits from served electricity can be evaluated. First the benefit from electricity can be evaluated on the basis o f the revenue stream generated evaluated on the basis o f average tariff. The average tariff in Sierra Leone i s at about US1522 (or L e 619). Alternatively, the value o f unserved energy can be evaluated on the basis o f the costs o f serving the demand through autogeneration. PPA (2005) evaluated the willingness-to-pay for unserved electricity in Sierra Leone at US1531.8. This is a weighted average o f suppressed demand in the industrial sector (28.9 GWh at a base cost o f unserved energy o f 36.2 US$/kWh), the commercial sector (9.3 GWh at a base cost o f unserved energy o f 30.6 US#/kWh), and the domestic sector (47.5 GWh at a base cost o f unserved energy o f 14.9 US$/kWh). PPA's value for unserved energy is used for the purposes o f sensitivity analysis. Bulk supply costs are currently US$ 29 (or Le 807). 15. The revenue generatedfrom the sale of carbon credits: The value o f carbon credits is evaluated at the unit price o f U S 4 per ton of C02, which is the expected value at which the carbon credits may be sold on the carbon market. The quantities o f carbon units generated is evaluated by taking the difference o f C 0 2 emissions generated under the all-thermal least cost expansion plan and the C 0 2 emissions generated under the combined hydro-thermal least cost expansion plan. This leads to credits in 2008 of US$ 530,000 and reaches US$ 620,000 in the year 2012. The total NPV o f carbon credits is in the order of US$ 2 million. Carbon credits are only attributed from the onset o f operation o f the hydroelectric dam untilthe end o fthe crediting period under the Kyoto Protocol, which is 2012. While the expectations are that the Clean Development Mechanism (CDM) under which C02 emission reductions may be credited is to continue, this is pending the outcome o f UN negotiations in the coming years. The estimate of C 0 2 emission reduction under this project is conservative. 16. Environmental benefits: the main environmental benefits o f the Bumbuna Hydroelectric power plant comprise: 0 Reduction o f the threat o f climate change by reducing C02 emissions and maintaining Sierra Leone's positive carbon balance; 0 Reduction o f Total Suspended Particulates (TSP), S02, NOx and CO compared with diesel- fueled power plant; 0 Increases in dry season flows, which will be beneficial by avoiding severe reductions in river area that occurs naturally and which will enhance Bumbuna Fall's attractiveness as a waterfall for tourists; 0 Reduction o f river blindness incidence along a 30 km stretch o f the Seli River due to permanent removal o f black fly habitat. 17. The benefits of reducing C02 emissions are assumed to coincide with the revenue from carbon finance, The other elements have not beenquantified. Table 3: DetailedBenefit Breakdown (in US$ million) BenefitComponents PresentValue Benefitsof servedenergy 515 Benefitsfrom the Sale of CarbonCredits 2 Total Benefits 517 103 Cost Stream 18. The costs consist o f investment costs, O&M costs, costs o f environmental mitigation and area - development, and environmental damage costs. A breakdown o f quantifiable costs is presented in Table 2. (a) Total investment costs to complete the hydroelectric and transmission structures: The flow o f capital investments was taken from the base cost estimate for the project, excluding taxes, duties and contingencies. Timing was based on the implementation schedule, which assumes that 50% o f the construction will be undertaken in year 1 and the remainder o f the investment will be undertaken inthe following year. The completion o f the project involves the completion o f the civil and hydraulic steel structures, electromechanical equipment, and the transmission line and two substations. As a result o f the civil unrest and the long lag time in project finalization additional costs occur. (b) These include remobilization o f equipment including for completing excavation, items that were stolen or damaged during the civil war, and a number o f design changes as a result o f recommendations made by the Dam Safety Panel and the Environmental and Social Advisory Panel. Other design changes include the relocation o f the diesel building and locating the contol building on top o f the powerhouse. The remaining work is aggregated in three contracts that deal with the outstanding work as follows (i)Contract A2/B on civil and hydraulic steel structures; (ii)Contract C on electromechanical equipment, and (iii)Contract D on the transmission line and substations. (c) O&M costs: The operating and maintenance costs incurred cover the operation and maintenance costs for the hydroelectric dam estimated at US$3 million per year. Incremental distribution costs are estimated at US$ 1.14 million when operation commences in 2008, and stabilize at the level o f US$5.22 million from the year 2020 onwards. The O&M costs associated with new connections amounts to US$ 0.21 million at the onset o f operation, and will stabilize at US$ 0.55 million by 2020. The recurrent costs associated with the community development program and the Environmental Monitoring Plan amount to US$ 1.16 million annually. The recurrent cost o f managing the BHC is estimated at US$ 0.5 million annually. (d) Costs of environmental mitigation and area development: Operation o f Bumbuna Hydroelectric plant requires the prior resettlement o f people from the reservoir basin and the transmission line route. As a result 135 people will lose their homes equivalent to one village. 3,648 others will lose land and assets. The economic analysis implicitly assumes that the activities under the mitigation program will fully offset any damage that displaced people or people losing agricultural land would incur. (e) Environmental damage costs, which are not easily quantified and are not evaluated include: 0 Increased incidence o f malaria through standing water (although this will be mitigated through the establishment o f health centers by the operator); 0 The displacement o f several communities o f chimpanzees and other primates; 0 The reduction o f riparian forest inthe Upper Seli catchment area. 104 Note that the effects are mitigatedthrough the Environmental Management Plan, and that the costs o f the plan reduce the likely environmental damage cost o f the above. (0 Technical assistance: The technical assistance provided under the project includes the construction supervision for hydroelectric projects contracts, support for the project implementationunit (PIU), the Dam Safety Panel o f Experts, the Environment and Social Advisory Panel o f Experts, and the project management and supervision associated with the program on environmental mitigation and area development. Table 4: DetailedEconomic Cost Breakdown (in US$million) TotalProject Costs 83.23 87.69 Sensitivity Analysis/Switching Values of Critical Variables Input Switchingvalue (Change YO) Investment costs 1-400 Total Benefits - 68 Total Costs (investmentand O&M) +210 Electricity tariff (switches at US$7) - 69 The table demonstrates that even significant changes o f costs only affect the EIRR marginally. A sensitivity analysis was also carried out to quantify the impact o f alternative cost and benefit assumptions on the EIRR. When usingthe value o f unserved energy for Sierra Leone, which is based on the cost and 105 usage of alternative sources of electricity (small diesel generators), the EIRR is significantly increasedto 58%. The results are summarizedbelow: Change(%) EIRR (Yo) Total InvestmentCosts +25 34 Total Costs(investmentandO&M) i 2 5 33 -..&-I n..--C&- - s i 1, Value of unservedelectricity(US#31.8) +45 58 20. As discussed above, inclusionof the debt reserve account increases the project costs to US$ 88 million. The EIRR for this case remainsa robust 40%. 21. Changing the LOLE in the least cost analysis does not affect the least cost properties of the Bumbuna significantly. This follows, because changing the value of the LOLE will only impact the timing o f the introductionof thermal power, and will affect both all-thermaland hydro-thermalplanting sequences to a similar degree. The NPV of the least-cost hydro-thermal sequence will remain substantially lower (approximately 25%) thanthe least-costall thermal sequence. 22. Increasingthe price of oil will augment the EIRR andNet Benefitsof the project even further,A decreaseinthe oil pricebelow the levels projectedby the WorldBankappears unlikely. Macroeconomic Impacts 23. The major macroeconomic impacts of the project are expected through the reduction of thefuel costs for thermal power especially during the wet season. Once the hydroelectric plant is operating in 2008, the annual fuel bill will be reduced by US$11.5 million or 15% compared with an all-thermal scenario. By 2019 the decrease in the annual fuel bill would be even higher at US$ 16.5 million or 34% compared with an all-thermal scenario. This in turn would reduce Sierra Leone's trade deficit in 2008 already by 5 to 6%. Butthe reductioninthe use of mineralfuels will leadto a reductionintax revenueof the Government o f around US$0.77 per year, which is equivalent to 1% of Sierra Leone's aggregatetax revenuesin2003. 24. The impact of the completion of the Bumbuna hydroelectric dam on the local economy would, however, more be limited. Total local costs of the project amount to US$19.40 million. Regression analysis for the period from 1980 to 1999 (excluding thus the civil war period) indicates that the multiplier effect o f investment in Sierra Leone is about 2.29. Duringthe two years of construction, the GDP can be expected to increase by US$22.21 million in each year, representing an increase of GDP of about 3% (evaluatedonthe basis o f Sierra Leone'syear 2003 GDP incurrent US$). 25. The annual payment to be made under the PurchasingPower Agreement (PPA) are basedon the annual costs that the BHC is incurringand covers debt service, payments to the CapitalReserveFund, the BHC administrationfee, and O&M costs o f BHP. The value o f the PPA payments in the first year are US$ 17.5 million, and over time come down to about US$ 15.5 million annually.Expressedin costs per kWh generatedthis corresponds to approximately US$9 in the first year, and over time comes down to about US$ 6 by 2013. This compares with the current costs of electricity generation of US$ 29, and an averagetariff of US622. This not withstanding, the total fixed costs represent a substantial amount in the context of Sierra Leone's economy and correspond to about 2% o f Sierra Leone's 2003 GDP (in current US$). 106 Implicationsfor Millennium DevelopmentGoals 26. The overall impact of the project on the achievement o f the Millennium Development Goals (MDGs)in SierraLeone is expected to be positive. Where negative impacts are likely such as the increase o f the incidence o f HIV/AIDS and malaria, these are expected to be minimized through the Trust Fundto be established for Bumbuna. The Trust aims at providing a stable, sustainable financing mechanism for benefit sharing and a local development plan for the project. This overall impact not withstanding, Sierra Leone is far from reachingthe MDGs. (a) MDG 1: The Goal 1 targets are to halve, between 1990 and 2015, the proportion o f people whose income is less than one dollar a day, and to halve, between 1990 and 2015, the proportion o f people who suffer from hunger. In Sierra Leone, the proportion below the national poverty line (defined at US$ 1 per day) is inordinately large, estimated at 70% o f the population in Sierra Leone. Some 26% o f the population may be classified as extremely poor, i.e. unable to meet 50% o f their daily needs. There is ample evidence to establish that providing adequate electricity and energy services can help raise GDP, productivity and employment, all o f which create a positive environment for reducing poverty (Brenneman and Kerf, 2002). The magnitude o f impact is, however, subject to highuncertainties. Canningand Bennathan (1997) lookedat the rate o freturnto electrical generating capacity as measured by increases in GDP for 51 developing countries. Values ranged from 5% for Zimbabwe and 6% for Senegal to 106% for Indonesia and 114% for Congo. The overall impact o fthe project on achievingMDG 1 is expectedto be positive. (b) MDG2: The Goal 2 target is to ensurethat, by 2015, children everywhere, boys and girls alike, will be able to complete a full course o f primary schooling. The Interim PRSP notes that the primary school enrolment rate in Sierra Leone is amongst the worst in the world. A survey conducted by NCRRR in March 1998 established that 1270 primary schools were destroyed during the Civil War. The consequences o f this damage and deterioration are reflected in a UNDP Human Development Report, in 1998. The report shows that only three out o f every ten Sierra Leoneans can read and write compared to a sub-Saharan average o f 6 out o f 10 persons. Research has shown that electrification can increase household income and decrease time spent on collecting traditional fuels, which increases the time available for children to attend school. For example, a survey undertaken in 1980 o f 631 households in the Indian states o f Punjab, Andhra Pradesh, Maharashtra and West Bengal showed that the percentage o f eligible children attending school was strongly and positively correlated with the percentage o f households with electricity, when controlling for the distance from schools, agriculture innovation index, double-cropping, yield per acre, proximity to services, and distance from mass media (Barnes 1988). The overall impact o f the project on achieving MDG 2 i s expected to be positive. (c) MDG 3: The Goal 3 target is to eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels o f education no later than 2015. The InterimPRSP notes that the primary school enrolment for girls is 38% against 52% for boys. Of the nearly 80% o f the population is illiterate. Illiteracy among females stands at 89% and for men it is 69%. Over time, increased household incomes and the availability o f electrical appliances will help reduce the need for female children to assist with domestic chores. Perhaps a greater impact o f BHP-related electrification, however, will be increased access to radio and television, through which public awareness campaigns 107 addressing gender issues will have greater prospects o f success. Khandker et a1 (1994) show for Morocco, for example, that a 10% increase in the presence o f electricity in a (rural) village would lead to a 4.8% increase inschool participationfor boys, and an 8.2% increase in school participation for girls. The overall impact o f the project on achieving MDG3 is expected to be positive. (d) MDG 4: The Goal 4 target is to reduce by two-thirds, between 1990 and 2015, the under- five mortality rate. In 2002 the under-5 mortality rate (U5MR) for Sierra Leone stood at 284 per 1000, which is among the highest in the world. In this context Brenneman and Kerf(2002) note that the lack o f modern energy sources negatively affects health centers. Without electricity for refrigeration, clinics cannot safely administer vaccines. Without a constant source o f good lighting, doctors cannot safely perform operations or even adequately examine a patient at night. A further factor is that many doctors and nurses will not serve at health centers that don't have security lightingprovided for their safety. The impact o f the Bumbuna project on this MDG will follow from the increased availability o f electricity for health centers and the planned establishment o f health centers around Bumbuna as part o f the development plan. The overall impact of the project on achieving MDG4 is expected to be positive. (e) MDG 5: The Goal 5 target is to reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio. A study in the Philippines suggests that electrification can lead to a decline in fertility rates, and consequentially on maternal mortality (Herrin 1979). The study indicated that households affected by a rural electrification project reported a 9.2% decline in fertility over two years, compared to a 0.5% decline inthe previous year. This was attributed to increased economic prospects, which placed lower benefits on children. The overall impact o f the project on achieving MDG 5 is expected to be positive. (f) MDG 6: The Goal 6 targets are: to have halted by 2015, and begunto reverse, the spread o f HIV/AIDS, and to have halted by 2015, and begunto reverse, the incidence o f malaria and other major diseases. According to the Interim PRSP o f 2001 for Sierra Leone, the estimated national prevalence o f HIV/AZDS is 4.9%, although in the Western Area where the project is located it is 6.1%. Construction camps for large civil engineering projects are often linked with high incidence o f IV/AIDS, due to large numbers o f male workers being away from their homes for extended periods. Although a substantial camp will be re-established for the completion o f Bumbuna, the number o f camp residents will be significantly lower than during the earlier phases o f the project. Most o f the major civil engineering project components are at least substantially completed, and the majority o f the outstanding works will involve the erection and commissioning o f plant and equipment. The focus will largely be on shorter assignments for a relatively small number o f skilled erection workers, rather than on extended assignments for large numbers o f unskilledhemi-skilled workers. The potential for the spread o f HIV/AIDS in the Bumbuna area will probably be lower than it was at the time that construction works were suspended. Project completion will, however, still be likely to increase the spread o f HIV/AIDS. Malaria i s prevalent and widespread in the country, and that a large proportion o f the poor and extremely poor do not buy the drugs to prevent the disease. 46% o f the national child morbidity rate is due to malaria. The new reservoir will create additional breeding sites for the mosquito vectors o f malaria around the site o f Bumbuna. This could be particularly prevalent during drawdown, in the dry season, which can be expected to leave a number o f small isolated pools o f water. In general it appears that BHP may increase the incidence o f malaria in the Bumbuna area. The area development 108 plan for Bumbunaforesees measuresto mitigatethese impacts. The overall impact ofthe projecton achievingMDG6 is expectedto be negative. (g) MDG 7u: The Goal7atarget is to integratethe principlesofsustainable developmentinto country policies and programs and reverse the loss of environmental resources. The establishment of a Trust Fund is basedonthe ideato enhance sustainable development in the context o f the project. Essentially, the Trust would provide a stable, sustainable financingmechanismfor benefitsharingand local development components of the BHP. The overallimpact ofthe projectonachievingMDG 7a is expectedto be positive. (h) MDG 7b: The Goal 7b target is to halve, by 2015, the proportion of people without sustainable access to safe drinking water. According to the Interim PRSP, only around 34% of the population of Sierra Leone has access to safe drinking water. In the area around Bumbuna the project might lead to gastro-intestinalproblems due to changes in water quality and usage.These effects are plannedto be mitigatedby the Trust Fund.The overall impact ofthe projecton achievingMDG 7b is expectedto be neutral. (i) MDG 7c: The Goal 7atarget is that, by 2020, to haveachieveda significantimprovement inthe livesof at least 100million slum dwellers.The Civil War imposedgreat pressures on housing in the Westem Area, as rural dwellers sought refuge in Freetown. High- density squatter camps and temporary housing are common in Freetown, with extremely low standards of living available to the residents. The Government of Sierra Leone has undertakenthat funds generated from the proceeds of the divestiture of state enterprises, includingthe gains from ending current subsidies to prop up non-performingenterprises, will be redirected to finance socio-economic development and the extension of services to the poor, particularly in the slums and deprived rural areas. The BHP should lead to cheaper and more abundant electricity supplies. Ifthe Bumbuna hydroelectricplant is as a result taken up under the Government's scheme, the overall impact of the project on achievingMDG 7c wouldbe positive. (j) MDG8a:The Goal Sa target is, incooperationwith developingcountries, to develop and implement strategies for decent and productive work for youth. Unemployment and under-employment is a major problem in Sierra Leone, and has been exacerbatedby the influx o f refugees from rural areas to Freetown and the Western Area. The unemploymentrate is highest amongthe youths and those aged between 18 and 35. The informal sector accounts for at least two-thirds o f the labor force and over 70% of the urban labor force. The step-change in electricity availability, to be brought about by Bumbuna, will inevitably increase employment opportunities in the Western Area. As much o f the energy produced by Bumbuna would be displacing diesel generation by industrial and commercial auto-generators, in the short-term new employment opportunities would not be created. In the medium-term, however, the improved reliabilityand lower cost of electricitywouldhelp to attract inwardinvestmentandwould enable industrial and commercial companies to divert the resources that they may otherwise have devoted to backup generation facilities, into product, service or market expansion, thus creatingemployment opportunities.The overall impact of the project on achieving MDG Sa is expectedto be positive. (k) MDG 8b: The Goal Sb target is, incooperation with the privatesector, to make available the benefits of new technologies, especially information and communications. The absence o f these technologies will inhibit such growth. Sierra Leone generally has poor penetration levels of key technologies, especially outside the Westem Area. The BHP 109 should make grid supplies considerably more reliable, especially if parallel investments are made inthermal generationfor dry seasonduty. FinancialAnalysis NPA'sPastPerformance. - 27. The financial issues that been identified during the various Bank missions as critical to the successful implementationof the BHP on NPA' s side include: the increase in the downtime of NPA' s generating capacity; the new increase in the level o f system losses, including generation auxiliary consumption, technical and non-technicallosses (about 33 percent, at the end of 2004), and the system inefficiency resulting from the very aged status of the installations leading to high operating costs, including fuel and lube oil consumption. Inaddition,a number of factors have contributedto exacerbate the already precarious financial situation o f the utility: the historical cost accounting in an environment with high inflation resulting in making inadequate provision for the replacement of NPA's fully depreciated assets, and uneconomictariffs setting structure andthe absenceof a very experiencedstaffto managethe KingtomPower station @PA' s generatingcapacity) to improvethe plants efficiency. 110 28. Gross energy produced in 2004 decreased by 22.5 percent to 84.8 kWh million from 109.4 kWh million in 2003. The decrease is due mainly to the breakdown o f Mirrlees and the Mitsubishifor about six months (10.3 MW). At the same time, the production cost increased by 4 percent in 2004 from Le28.37 billion to Le29.50 billion. This could be attributed to the increase in price o f Marine Fuel Oil (MFO) from Le3340 to Le3715 per gallon. In addition, most of the generation was done through the two aging Sulzer generators (about 15 MW, procured in 1975), which are not economical to run because o f highspecific fuel consumption and increased repair cost. 29. The number o f customer accounts increased from 42,069 in 2003 to 43,406 in2004, representing 3.2 percent increase. However, the average number o f paying customers dropped from 19,158 in 2003 to 16,013 in 2004 (a drop by 16.2 percent). The reason for the drop could be attributed to the unwillingness of people to pay their bills because o f the unavailability and unreliability o f the power supply. 30. Revenue collection was impressive despite the poor generation experienced. 102 percent o f sales were collected in the year 2004, 7 percent higher than the percentage collected in 2003. Management in its strides to meet its target o f 120 percent has put strategies in place to ensure the NPA targets for revenue collection are achieved. 31, The ratio o f gtross energy produced per employee increased by 4 percent in 2004 compared to year 2003 due to a reduction inthe number o f employees. Review of ManagementAccounts for 2004 Year-End 32. The total sales for the year amounted to L e 33.760 billion for a budgeted sales figure o f Le53, 601 billion, or a reduction o f Le19, 841 billion (37 percent). The reason for the decrease in sales is attributed to the poor generation experienced duringthe year and the increase in systems losses. 33. The Authority net operating loss for the year was Le2.727 billion (or about US$1 million) as compared to a budgeted profit o f Le7.305 billion (or about US$2.65 million). This excludes interest on existingloans from foreign donors. 34. The following reasons are attributed to the loss: highsystems losses; high cost o f generation; high fixed cost; low volume o f generation; high cost o f repairs on generating plants. The average cost per kWh of electricity generated is presently higher than the tariff for the year. This cost is Le807 per kWh (or about US29 cents) compared to the tariff o f Le619 per kWh (or US22.5 cents), which entails a structural loss o f Le188 (or US6.5 cents) for every 1 kWh generated. 35. Thus, in 2004, the base year for the financial projections, NPA's financial performance was particularly weak as indicated by a net profit margin o f only 6.8 percent, return on total assets o f about 5.8 percent and a return on equity o f 2.2 percent amongst others. NPA's Future FinancialPerformance : Review of the ProjectedKey Performance Indicators 36. As indicated above the NPA's present financial situation threatens its "going concern" status. Nevertheless, this project, together with a number o f other measures, present an opportunity for a substantial recovery o f NPA's financial health The project will contribute to NPA's recovery through injection o f lower cost energy which will partially displace outputs from high cost diesel generators. Other measures include the following: 111 (a) Installation o f a 2 X 6.8 MW o f medium speed generation plant by end-December 2005 as per the ESKOM's "Report on Improvements in Power Utility in Freetown, Sierra Leone", dated December 20, 2004 , Funding for this activity has been provided by the Government o f South Africa inthe amount o f US$10 million; (b) Further additionalgeneration capacity (about 10.8 MW) is contemplated to be fundedout o f the proceeds of the upcoming BADEA financing and about 20 MW more from IDB financing (other than the PWP's IDB/BADEA-financed program); (c) continued implementation o f the loss reduction program and revenues collection programs, amongst other performance improvement measures. Expected benefits include: increased and reliable power supply that will impact positively on the confidence o f NPA' s customers; increased sales and profitability; improvements inNPA' s financial covenanted ratios and performance indicators; improved cash flow to meet operating costs; and increased contributionto fixed costs. 37. In addition to these the following specific assumptions have been used in the preparation of financial projections for N P A (a) Gross energy produced increased by 70 percent to 144 kWh million in 2005 from 84.8 kWh million in 2004. It is expected that by 2006 - 2008 gross energy produced would increase progressively by 93 percent, 43 percent and 7 percent respectively. (b) The system losses ratio is expected to drop from 33 percent in 2004 to 25 percent in 2006. A further decrease inthe system losses would be achieved in 2007 (to 19 percent) when the rehabilitation o f the transmission line is completed. (c) the four base load machines and the three caterpillars will be operational by June 2005; (d) Only about 30 percent o f the total output in 2007 and 2008 would come from existing Thermal Plants, as some o fthe very aged o fthese generators would be decommissioned (e) Energy tariffs for purchases from Bumbuna would be about US$O.O873/kWh in the first year o f operation, gradually decreasing to about US$O.O74/kWh by 2010 ( f ) Energy tariffs for purchases from Bumbuna would be about US$O.O873/kWh in the first year o f operation, gradually decreasing to about US$O.O74/kWh by 2010 (8) The introduction o f Pre-paid meters is also reflected in the improvement in expected revenue collection from sales. This will also help to reduce systems losses and to improve collection o f receivables. (h) Cost o f sales would increases at the rate o f domestic inflation 38. The financial covenants for the power component o f the Power and Water Project (PWP) have beendesigned to appropriately address the above-mentioned issues. The covenants include the following ratios: (i)total NPA's revenues should be equivalent to not less than the sum o f cash operating expenses and interest and other charges on debts; (ii)the annual rate o f return o f approximately 4 percent on average current value o f NPA' s fixed assets (or on revalued fixed assets) in operation; and (iii) debt the service coverage ratio whereby the net revenues o f NPA should be at least 1.5 times the estimated debt service requirements. 112 Annex 16. IDA GuaranteeStructure REPUBLIC OF SIERRA LEONE BumbunaHydroelectricProject INDICATIVE TERMS AND CONDITIONSOF THE IDA-GUARANTEED FACILITY Borrower: [Bumbuna Hydropower CompanyLtd (BHC)] (the "Company") GuaranteedLender: Commercial Bank Loan Amount: Up to US$38,000,000.00 The loan will benefit from the IDA Guarantee (as describedin Schedule 1 (Indicative Terms and Conditions ofthe IDA Guarantee) Purpose o f the Loan Financing part of the construction and start up costs of BHP. Guarantor: InternationalDevelopmentAssociation ("IDA") Use ofproceeds: To fund IDA eligible costs ("IDA Eligible Costs") only. Proceeds of the IDA-Guaranteed Facility may only be used to fund Project Costs incurred for assets located in Sierra Leone and may not be used for: - Costs, charges and expensesrelatingto the acquisition, leasing or use of land for the Project; - Costs inconnectionwith the acquisitionofthe existingfacilities and plantsites; - Value-added tax or other taxes payable by the Company and levied in Sierra Leone or in connection with goods and services, or on the importation, manufacture or procurement thereof; - Costs inconnectionwith the acquisitionor use of nuclear, military or luxury items; - Fees, commissions, expenses or other financing costs (including interest) unrelated to the IDA-GuaranteedFacility or the IDA Guarantee; - Development fees; and - Any payment or expenses incurred in respect of, goods or services supplied from the territory o f any country, which is not a member of the InternationalBank for Reconstruction and Development("IBRD") or IDA. Availability Period: The period ending the earlier of [TBD] months from signing of the IDA GuaranteedFacility agreement, or [TBD] months from financial close. Maturity & GracePeriod: [Up to 151years, including [TBD] monthsof grace Repayments: [TBD] quarterly [or semi-annual] installments commencing on the first repayment date; [TBD] months grace after commercial operations date. The principal component o f the installments will vary to reflect the seasonal pattern of the Company's power generation and cash flows throughout the calendaryear. Margin: [TBD] % per annum [to be satisfactory to IDA] InterestRate: Applicable Euribor plus the Margin. Euribor is the rate at which euro inter-bank term deposits are offered by one prime bank to another prime bank and is published at 11.OOAM Central EuropeanTime for spot value (T+2)). InterestPeriod: Three or six monthperiod. Up-front Fees: [TBD] % [to be satisfactoryto IDA] Commitment Fee: [TBD] %per annum [to be satisfactory to IDA] Debt Service ReserveAccount: To cover aminimum of [I21 months principal and interest ConditionsPrecedent to each Disbursement: As specified in the condition precedent of the commercial loan facility provided to the Company. Inter alia, all transaction documents and IDA Guarantee documents in full force and effect. GoverningLaw: English 113 Schedule1. IND ATIVE TERMS AND CONDITIONSOF THE IDA GUARANTEE Beneficiary: Lender Guarantor: InternationalDevelopmentAssociation ("IDA") Maximum Aggregate Liability under the Up to US$ 38,000,000.00 of principal plus interest (excluding any default interest and Guarantee: breakagecosts) accruedon suchprincipalamountunder the IDA GuaranteedFacility CoveredObligations: Except for Provisional Payments and Excluded Obligations (see items below), the IDA Guaranteecovers defaults of the Borrowerin the payment of scheduled payment o f principal and interest(excludingdefaultinterestand breakagecosts), resultingfrom a breachof GoSL's obligations to the Borrower under the concession agreement or its guarantee of NPA's obligations under the PPA. The Guarantee would be callable by the Lender following the occurrence o f a covered GoSL's event of default. Covered GoSL's event of default will include Termination Payment by GoSL to BHC following the issuance of a Termination Notice causedby the occurrenceandcontinuationo f(i)a Direct or Indirect PoliticalEvent, (ii) a GoSL Event o f Default, or (iii) a Change in Law, or breach of the GoSL's guarantee obligationsunderthe PPA,that adverselyaffects BHC's ability to servicethe IDA-Guaranteed Facility. ExcludedObligations: The IDA Guarantee will specify GoSL payment obligationsunder the ConcessionAgreement that will not be covered by the Guarantee, including: (i)certain obligations such as compensation payment upon termination of the Concession Agreement resulting from any General TerminationEvent; (ii) a naturalforce majeure event; (iii)a BHC termination event; and (iv) other BHC defaults. ProvisionalPayments: IDA will makeProvisionalPaymentsfor scheduledpaymentsif: (a) the Company or the IDA GuaranteedLender is unable (within an agreed time period) to commenceor proceedwith disputeresolutioninaccordance with the relevant provisionso fthe Concession Agreement or the GoSL Guarantee Agreement (of NPA's obligations under the PPA), by reason o f court decision,judgment or order in Sierra Leone (whether temporary or permanent, and whether commenced by GoSL or arising from third party legal action) to: (i) prevent or impede the dispute resolution process; (ii)have the dispute transferred to or determinedby the courts in Sierra Leone;or (iii) otherwise pursue the dispute in a manner not consistentwith the agreeddisputeresolutionmechanismandnot agreedby the Company, and (b) the IDA GuaranteedLender and/or the Companyhave agreed with IDA that they will use their best efforts to resolvethe dispute andthe IDA GuaranteedLender has providedIDAwith irrevocable stand-by letters o f credit to repay IDA on call the amount o f the provisional payment and interest thereon in the event that the award subsequently determines that the liability o f the GoSL is less than the full amount o f the provisional payment. The IDA I GuaranteedLender's obligation to repay the Provisional Paymentsexpires after three years if dispute resolutioncontinuesto be interrupted. No Acceleration o f Guarantee: The Beneficiarymay not acceleratethe IDA Guaranteeevenifthe underlyingpayment obligationsofthe IDA-GuaranteedFacilityarethemselvesaccelerated. The IDA Guarantee will cover paymentofprincipal and interestpayable in accordancewith the originalpayment scheduleapplicable to the IDA GuaranteedFacility. GuaranteeRelatedFees: Guarantee Fee ("Guarantee Fee"). 0.75% per annum on the aggregate disbursed and outstanding principal amount o f the IDA Guaranteed Facility, payable semiannually in advance of each Interest Period, with the first installment due on the earlier of: (x) the effective date of the IDA Guarantee, and (y) sixty (60) days after signature of the IDA GuaranteeAgreement; and Standby Fee ("Standby Fee")).0.35% per annum during the period when the IDA Guarantee i s in effect. This fee would be calculated on the aggregate un-disbursed principal amount of the IDA GuaranteedFacility and is payablesemiannually in advance o f each InterestPeriod, with the first installmentdue on the earlierof: (i) the effective date o f the IDA Guarantee,and (ii)sixty(60)daysaftersignatureoftheIDAGuaranteeAgreement; Initiation Fee ("Initiation Fee")). US$ 100,000 payable by the Company following IDA'S BoardApproval, uponthe Company's receiptof written demand from IDA; and Processing Fee ("Processing Fee")). US$ [TBD] up to 0.50% o f the guaranteed amouni payable in equal annual installments with the first payment due at Financial Close and subsequent installmentson their succeedinganniversarydates. 114 ConditionsPrecedent: Usual and customary conditions precedent for a financing of this type, including but not limitedto the following: Executionof all TransactionDocumentsandFinanceDocuments; Deliveryo fall legal opinions; Effectiveness of insurance required by the Finance Documents to be in effect at Financial Close and the naming of the Lender as co-insured under those insurance policies and o f IDA as named insuredunderthird-party liability insurances; Approvalofthe ExecutiveDirectorsof IDA; Execution, delivery and effectiveness of the Indemnity Agreement and the IDA Project Agreement(s); Effectivenessofthe IDA Technical AssistanceGrant Agreementwith Sierra Leone; and Payment of the InitiationFee, the first installmento f ProcessingFee, and the first installment o f Standby Fee andthe GuaranteeFee. Exclusions: The Guarantor(IDA) is not liablefor the paymentof any amountwhich is due to: The Company's failure to comply with any law, decreeor regulation in force in Sierra Leone as o f the date o f the GuaranteeAgreement; Any action or omissionagreedto by the Beneficiaryor the Company. Any action or omission caused by a proscribed conduct of the Beneficiary, the IDA GuaranteedLenderor the Company. Any failure of the Beneficiary, the IDA GuaranteedLender or the Company to comply with applicablelaws or regulations o f Sierra Leone; Any breachby the IDA GuaranteedLender or the Companyoftheir materialobligationsunder the ConcessionAgreementand relatedTransaction Documents,and failure to fulfill their other agreed obligationstowards, or assurances givento, SierraLeone; or Any act by the IDA Guaranteed Lender or the Company, that constitutes a Corrupt Practice, FraudulentPractice, HarmfulChildLaboror ForcedLabor(ProhibitedActivities) CorruptPractices: Means: (a) the offering, promising, or giving of any undue pecuniary or other advantage, whether directly or through intermediaries to any official o f the government, for that official or for a third party to influence the official to act or refrain from acting in relation to the performanceof official duties, with the purposeof obtaining or retainingbusiness or any other improperadvantage; or $1 the acquisition, possession, use, conversion, transfer, or concealment of the true nature of propertyof any description, and legal documents or instruments evidencingtitle to, 3r interest in, such property, knowingthat suchproperty i s an economic advantage in any way relatedto or arising from criminal offenses, for the purpose of (i)concealing or disguisingthe illicit origin of the property or (ii) assisting any personwho is involvedinthe commission o f a ximinal offense as a resultof which suchpropertyis generatedor sustained, to evade the legal :onsequences of suchactions; SuspensionofAdditional Coverage: [fanv of the following events occur and is continuing, IDA may. bv written notice to the Beneficiary,deny guarantee coverageto subsequentdraw downs, incase o f 4ny material default by the parties under any other Transaction Document, or Events of Defaultunderthe IDAGuaranteedFacilityAgreement; Breach by any o f the parties (excludingIDA) of any of its material obligationsto IDA under :he IDA Project Agreement@)which breach, in the opinion o f IDA, is continuing after the :xpiry ofthe relevantcureperiod(ifany) specifiedtherein; 4n installmentof the GuaranteeFee or Standby Fee is not paid when due, after expiration of he relevant cure period; Suspensiono f lendingby IDA or IBRDto SierraLeone; or Sierra Leone's suspensionor lapse of from membership in IBRD, IDA or the International MonetaryFund. rerminationby IDA: The IDA GuaranteeAgreement may be terminatedimmediatelyif ' The IDA GuaranteG Lender inientionally makes an untrui statement in, or intentionally Imitsmaterialinformationor evidencefrom, a demand; 'The IDA GuaranteedLender, or the Company or any o f its privateshareholders or affiliates, mgages inProhibitedActivities; Any material change is made without IDA's consent to those provisions o f the Project or :inancing Documentsfor which IDA's consent is requiredfor changes; or Ifany installmentofthe GuaranteeFee is notpaidwhendue, after expirationofthe relevant :ure period. The IDA GuaranteeAgreement will also beterminated: Upon IDA's notice of termination ifthe Company is in materialviolation of the IBRD/IDA 3nvironmental Guidelinesand SafeguardPoliciesapplicableto the Company;or Effective as o fthe date any IDA GuaranteedLender transfers, assigns or encumbers, without DA's prior consent, any rights under the IDA Guarantee Agreement, the IDA Guaranteed ,oan, or an Award. 115 Subrogation: Ifand to the extent IDA makes paymentunderthe IDA Guarantee and is not reimbursedby GoSL under its Indemnity Agreement within 60 days o f notice from IDA, then IDA will be subrogated immediately to the IDA Guaranteed Lender`s rights under the IDA Guaranteed Facility. UntilIDA has beenfully paidout underthe IDA GuaranteeAgreement, IDA will not realize on security underthe IDA-GuaranteedFacility. Right to Offer to Purchase the IDA Ifthere is a call on the IDA Guarantee, IDA shallhavethe right, at its sole discretion,to limit GuaranteedLoan: its obligationto guarantee interest paymentsby acquiringthe IDA GuaranteedLoan from the IDA Guaranteed Lender for an amount equal to the then unpaid principal and interest (not includingdefault interest). Inthe event that IDA acquiresthe IDA GuaranteedLoan, IDA, at its discretion, will have the right under its Indemnity Agreement with Sierra Leone, to cause Sierra-Leoneto make immediate payment to IDA o f the outstanding IDA GuaranteedLoan amounttogether with interestthereon. Claims Process: IDA will pay within sixty days after IDA's receipt of a Demand Notice or Demand for Provisional Payment. Demands must be made not less than thirty days and not more than ninetydays from the date on which an Award is rendered. Demandsfor ProvisionalPayments must be made no later than nine months after the due date of the scheduledpaymentthat is in default. DisputeResolution: Dispute settlement by arbitration in accordance with the UNCITRAL Arbitration Rules (or other internationalrulesacceptableto IDA). Governinglaw: English Schedule 2. KEY TER S ASD COSDITIOSSOF THE IKDE\ISITY AGREEllEST (GoSL-ID.1) Parties: IDA and Sierra Leone. ~~ ~~ Indemnity: Sierra Leonewill reimburseand indemnify IDA, on demand or as IDA may otherwise direct, for all losses, damages, costs, expenses, etc. incurred by IDA relating to or arising from paymentsunder the IDA Guarantee. Key Covenants Sierra Leonewill covenant. inter alia,that it: will comply with all its .obligations under the Transaction Documents, including all its environmentaland social obligations; will obtain IDA's consent prior to agreeing to any change to a Transaction Document which would materiallyaffect the rights or obligations o f IDA under the IDA GuaranteeAgreement, the IDAProjectAgreement(s) or the Transaction Documents; will provide certain notices to IDA, including any proposed notice of termination of the ConcessionAgreement togetherwith all underlyingreasonstherefore; will take all action necessary on its part to enable the Company to obtain any required approval or environmentalauthorizationfor the Projectand to perform all of the Company's obligationsunderthe IDA ProjectAgreement@)andthe Transaction Documents; will not create or permit to exist or occur any circumstances or Change in Sierra Leone Law which would render obligations under the Concession Agreement illegal, invalid, unenforceable, ineffectiveor void inwhole or part; and will comply with all its obligationsunder the Technical Assistance GrantAgreements. Remedies: If Sierra Leone fails to perform under its indemnity or any other obligation under this agreement, IDA may suspend or cancel, in whole or in part, Sierra Leone's rights to make withdrawalsunder any other loan with the IBRDor developmental credit agreement with IDA or any IBRD loanADA credit to a third party guaranteedby the Government. IDA may also declare the outstanding principal and interest o f such loadcreditimmediatelydue and payable inthe circumstancespiovided-forinthe IndemnityAgreement. Choice of Law: The Indemnitv Aereement will follow the usual legal regime and include disoute settlement , - I I provisionscustomaryfor agreements betweenmember countries and IDA. Schedule3. KEI 'ERMS AND CONDITIONSOF THE IDA PROJECTAGREEMENT Parties: IDA andthe Company [and Salcost]. Representationsand Warranties: The Company [and Salcost] will represent, inter alia, that it is in compliance with applicable World Bank-Environmental Guidelines, Safeguard Policies, and Fiduciary Policies. The Company [and Salcost] will also represent that it has not been engaged in Prohibited Activities. Key Covenants: The Companywill covenant, inter alia, that it: will usethe proceedsofthe IDA GuaranteedLoanonly for the agreedpurposes; will use the portion o f the Technical Assistance Grant for the purposes agreed by IDA and GoSL inthe Grant Agreement; Eachofthe Company [and Salcost] will covenant, inter alia, that it: will comply with applicable World Bank EnvironmentalGuidelines, Safeguard Policies, and Fiduciary Policies (including all o f its environmentaland social obligations included in the ConcessionAgreement); will enforce the contractor's obligations included in the Transaction Documents regarding environmentaland socialmatters; will not engage in any Corrupt Practices or hire any individualor firm included in the World Bank group's list of firms barredfrom WorldBank-financedcontracts; and will provideregularaccounts andreports to IDA. Governinglaw: 116 Annex 17: SafeguardPolicyIssues SIERRA LEONE: Completionof the BumbunaHydroelectricProject 1. The BHP Project is classified as a "Category A" operation under the World Bank environmental screening procedures specified in OP 4.01. The package o f safeguard documents prepared for the project comprises three primary reports: (i)the Environmental Assessment (EIA) containing and Environment Management Plan (EMP); (ii) the ResettlementAction Plan for the 161kV transmission line, and; (iii) the Resettlement Action Plan for the dam site and reservoir area. The EIA and RAPSaddress the World Bank Safeguard Policies that are triggered by the project (see D6). The proposed activities for management and mitigation o f the Project impacts are in compliance with the following World Bank Safeguard Policies: EnvironmentalAssessment Policy OP/BP 4.01, Natural Habitat Policy OP/BP 4.04, Forests Policy OP/BP 4.36, Involuntary Resettlement OP/BP 4.12, Cultural Property Policy OPN 11.03 and Safety o f Dams OP/BP 4.37 (see also the EIA (2005) Executive Summary). 2. The Bumbuna project has been under development since the early 1980's when GoSL initiated the site preparation works. Construction o f the dam and transmission lines started in 1990 and was 85 percent completed when abandoned in 1997 due to the intensifyingrebel war. The World Bank was not involved in the project construction from 1990 to 1997, although the Bank had financed the original feasibility studies in the early 1980's under a Power Sector Credit. The Bank became involved in the Project again in 1994 through a new Power Sector Credit that included provisions to support the Government in preparing an EIA for the project (then under construction) that had not been prepared to that point. The Credit was also to fund a Panel o f Experts and a Water Resource Engineer and support the GoSL in preparing a Power Sector Master Plan. However, these activities were not fully implemented due to the security situation. 3. The present World Bank supported project will finance the environment and social management activities for completion of the remaining 15 percent o fthe BHP including the hydroelectric infrastructure works, reservoir clearing and rehabilitation and completion o f the transmission line.The World Bank will also be involved in establishing the social and environmental management activities for the operation phase and capacity strengthening for these activities. 4. Because the BHP is a "Category A" project, an Environmental and Social Assessment Panel (ESAP) and a Dam Review Panel (DRP) composed o f experienced international experts were constituted by the Government o f Sierra Leone. Analysis of Alternatives 5. As described in Section A5, the Bumbuna site was first identified in a national hydropower inventory financed by the UNDP in 1971, where a hydroelectric development o f Bumbuna Falls emerged as the best way to supply the Western Area grid, the country's main load center. The design o f the BHP project was subsequently based on a feasibility study completed in 1980 and a supplemental feasibility study in 1984, whereinthe BHP was conceived as the first stage o f a potential 275 MW Bumbuna-Yiben hydropower development on the Seli River. The BHP was reconfirmed as the least-cost option to supply electricity to Freetown and intermediate towns along the transmission routing by an ESMAP team (Sierra Leone: Issues and Options in the Energy Sector, 1987), in a report issued before the Government secured financing from the Government o f Italy for the civil works in 1988. 6. A retrospective options assessment was prepare as part o f the EIA (2005) for this project. This confirmed the decision parameters both for the selection o f the BHP and the main within-project 117 alternatives. The options assessmentalso compiled informationand analysis on wind, solar and biomass generation options in Sierra Leone. The analysis indicatesthese options have limitedpotentialinthe near term to meet grid supply needs in the Western Area o f Sierra Leone, in terms o f specific energy costs, quantum of supply, and experience with the technology in Africa relative to hydropower. These non- hydro renewable alternatives nevertheless have immediate and longer term potential for displacing thermal generation in the up-country diesel power plants (to be considered in reviving the stand-alone provincial supply networks and generation capacity destroyed during the war), particularly the small hydro option andbiomass generation, where there is an assuredsupply of biomass. 7. A StrategicmegionalEnvironmentalAssessment (EM) at the basinscale will be carriedout as an up-frontstep in future planningof further hydropowerdevelopment onthe Seli River.Developmentof the multi-annualstorage dam at Yiben located30 km upstream of the existingBumbunadam (completionof the Yiben dam was identified in the 1996 Master Plan as the next major hydropower project in Sierra Leone) would for example, involve significantly higher flow regulation of the Seli River and higher resettlementimpactsthanthe BHP. EnvironmentalImpacts 8. The area of the BHP reservoir is relatively small (21 km2) as compared to many other hydropowerreservoirs inAfrica andthe world. The reservoirwill have a maximum drawdown of 31m in the dry season.Ifthe upstreamYiben reservoiris built the inflowsto the Bumbunareservoirwill be such that Bumbuna will have no drawdown and operate rim full all year round. A major consideration in moving forward today is the dam is already in place and the transmission system exists, but needs rehabilitation. The main environmental and social impacts due to past constructionof 85 percent of the hydropowerfacilitiesandtransmissionlinehavealready takenplace; however, no environmentalor social mitigationactions were implemented, or at leastnot formally recordedandmonitored. 9. The adverseenvironmental and social impactsofthe BHP completionmainly resultfrom clearing and impoundmentof the reservoir area and operationo f the reservoir, and where possible, addressingthe legacy compensation issues. Potential water quality issues are associated with the decomposition of organic matter in the reservoir, creating conditionso f low oxygen and high nutrient levels, especially in the lower strata of the reservoir. The downstream impacts due to flow regulation are expected to be limited due to several factors, namely: (i)the presence of the BumbunaFalls 2.5 km downstream of the dam; (ii)the increase in the dry season flow that Bumbuna will provide; (iii)the limited nature of downstream water use impacts because the Seli river is not relied upon for irrigation or community / urban water supply off take; and the low population density in the lower flood plain. Alteration to the flow regime will have some positiveand some adverse consequencesthat will be monitored. Completion of the existingtransmissionline will have limitedenvironmentaland social impacts. 10. The E M (2005) undertaken by GoSL provides survey information and comprehensively documents the expected impacts o f the remainingconstructionactivities and operation of the BHP; the mitigation and compensation measures proposed; the implementation arrangements, including institutional responsibilities, budgets and timelines; and the monitoring and supervision programs designedto ensurecompliance safeguardpoliciesand GoSL requirements. 11, A summary of the expected impactsand proposedmitigationmeasuresis providedbelow: (a) Clearance and inundation o f the riparian (gallery) forests along the Seli River in the reservoir area. These riparian forests are under heavy human pressure and these, and many other forest areas in the catchment, would disappear within 10 to 20 years given demographic trends and land use practices. The reservoir slopes need to be cleared of 118 those forests that will be submerged before impoundment in order to maintain water quality inthe narrow reservoir.About 1590 haof the total 2100 haofthe reservoir areais forested, including approximately 450 ha of these fringing (riparian) forest containing bothcommercial andnon-commercialtrees, 510haofmixedtree savannahand 630 ha o f forest re-growth(fallow) areas. The projectotherwise provides an opportunity to protect the remainingriparianforests inthe wider projectarea. (b) Communities around the reservoir will be heavily engaged in and benefit from the clearingo f the trees in the reservoir area. This will provide immediate economic relief to these communities who are among poorest in the country through the injectionof cash into the local economy. It would also reduce immediate pressure on the remainingforests outside reservoir area, at least inthe short term (as fuel wood representsthe major energy source in rural areas) while the main forestation and land use reforms as part o f the watershed management activitiesthe projectsupports are introducedandtake effect; (c) It is anticipated that only one village will need to physically relocate, involving 16 houses. However, the reservoir impoundment will affect the farmlands of 33 communities located in the reservoir area. It will affect their farms and their access to river and forest resources. A Resettlement Action Plan has been prepared and which implementation will ensure that the livelihood o f the affected communities will be restored. A Stabilized Agriculture Program and a Livelihood Assessment and Income RestorationProgramare part of the compensationpackage.The most importantaspect of the RAP will be to ensure that project affected people's livelihood are restored to pre- impoundment levels, i.e. that people relocated or people affected by loss o f farmland have been able to harvest the last harvest at their original location and are able to plant their crops at the new locationbefore impoundment. Internalmonitoringby the RU and external monitoringby the Witness NGO will ensure that the RAPSare implementedina satisfactorymanner.The most importantobjectiveis to ensurethat the incomes of project affectedpeople are restoredand avoidfood shortage during or after the critical periodof landacquisition,relocationandresettlement. (d) The affected communities will also lose cultural property in the form of sacred sites in the forests, intheir fields and alongthe river. Some sites are shrines to which membersof the communities offer contributions and respect and which are associated with "secret societies". Other sacred sites are graveyards, which may risk flooding and therefore would needto be moved. Otherwise it is not traditionalpractice to move graves when a village relocates (under the system of shifting agriculture dominant in the area). The appropriate mitigation measures will be applied as described in the RAP, An archaeological survey was carried out as part of project preparation. While no archaeological artifacts or sites were identifies in the project area, it was recommended that a more extensive study be carriedout. That study has been included inthe program of additionalpre-impoundmentstudies. (e) Completion of the 200 km transmission line from Bumbuna to Freetown will result in limitedresettlement. In line with public consultations which expressed an unwillingness to resettle and conformingto accepted utility practicein many developed'anddeveloping countries, the transmission lines will be permitted to overpass existing building and houses, providedthat a minimumclearance between structures and the lowest conductor of 7.0 meters is maintained at all times. Otherwise houses have to move and people compensated and resettled. Of the total of 367 houses in the transmission right-of-way identifiedinthe RAP and basedon a tower-by-towerfield survey undertaken inFebruary 119 2005, only 6 structures that encroach the 7.0 m minimum clearance will need to be relocated; (f) Some legacy issues remainfrom the construction activitiesin the 1980's and 1990's that result in pre-existingGoSL liabilities in connection with the project. These relate to: i) 428 households who lost land and property for constructionof tower foundations and erection of towers along the transmission right-of-way in the mid 1990's, and ii) compensation for the loss of agricultural land at the dam site and for involuntary resettlement caused by quarrying and excavations twenty-five years ago when the site preparationworks started, and iii)compensation for additional property and lands lost due to constructionof the dam between 1990 and 1997. A compensation plan for the affected households along the transmission line was prepared by the PIU in 1994, but compensation was never paid. The compensation amounts to equivalent of $US 1,265,295 today (including an escalation factor of 10 percent). It is proposed that this compensation will be paidout of projectrevenues inthe first years of the BHP operation. The old agreements will be reconfirmed and upgraded to current price levels in consultationwith the affectedhouseholds. The four villages affected inthe damheservoir area by quarry, dam, camp androad construction, were not compensated at the time they were impacted in the 1980's and 1990s, and no compensation plan was prepared. Communal compensation to these four villages in the dadreservoir area is included in the DamReservoirRAP. (g) The EL4 (1996) and the EIA (2005) both identified the presence o f chimpanzee communities in the wider reservoir area. The chimpanzee is considered an endangered species inthe IUCN's 2003 RedList. The riparianforests to be clearedfrom the reservoir might be part of the range of some o f the chimpanzee communities. There are no indications that the chimpanzees use the area to be impounded as a nesting area. They might however use the riparianforest area duringa part of the year for feeding. The EIA (2005), the ESAP and World Bank Safeguard Policy staff identifiedthe riparian forest areas as non critical habitat in the definition of the World Bank Safeguard Policy on Natural Habitat OP/BP 4.04 (see Appendix 1 to Annex 17). Continued baseline monitoringofthe chimpanzeepopulationinthe wider reservoir areawill be carriedout to be able to design mitigation measures for their protection. Surveys were carried out as part o f the 1996 and 2005 EAs to identify the presence o f other endangered, or rare species o f plants, amphibians, reptiles, birds and small mammals. There are no indications at present that the area to be inundated contains any endemic or endangered plantor animalspecies; (h) The project will finance mitigation measures in order to protect the remaining chimpanzee communities, other primates and other biodiversity in the wider reservoir area. As a mitigationmeasure the remainingchimpanzee communities will be protected by the establishment of a BumbunaConservation Area (BCA) and area o f approximately 17 km2(EnvironmentalOffset for lost biodiversity as requiredby OP/BP 4-01), and by including strong wildlife and conservation measures in the Bumbuna Watershed Management Plan (see Appendix 1 to Annex 17). The best way to protect these chimpanzee communities can only be decided after the chimpanzee and other biodiversity studies have been carried out (these started in May 2005 and are part of the Environmental Management Plan (EMP)). These studies will generate specific and concrete recommendationson how to best protectthe chimpanzee communities and other biodiversity in the BCA before the reservoir is impounded utilizing project funds initially, and sustainablefinancingfromthe BumbunaTrust inthe longerterm. 120 (i) Impacts on the fish fauna as a consequence o f the closure of the dam and the impoundment of the reservoir are expected to be limited. During the preparation o f the 1996 EIA and 2005 EIA fish surveys were carried out. The results of these surveys indicatethat the Seli Riverdoes not contain any endemic or endangeredfish species. The impacts of the dam closure on the fish faunas downstream, in the reservoir area and upstream of the reservoirwill be moderate, since no true migratory fish species, such as the salmon in NorthAmerica have been identified.The Bumbuna Falls, located 2.5 km downstream o f the dam is an effective fish barrier. Fish surveys and results o f other studies did not indicate the occurrence of any significant fish migration upstream or downstream. For these reasons the dam is expected not to have a significant impact on fish migrationupstream. Downstream and upstream fish faunas are largely similar. It is expected that downstream fish migration will not be affected. The fish fauna in the reservoir area will adapt itselffrom riverineto lake conditions, which has been observed in many manmade lakes in Africa. This change is oftenbeneficialfor the local fishermen and would increase catches and income from fisheries. A monitoring plan has been designed in order to provide a tool for fisheries management. The EMP includes a downstreamandreservoirfisheries managementprogram; ('j) Reservoir operation will regulate flow in the river, which will alter the hydrological regime downstream o f the Seli River downstream of the dam. There are adverse and positive aspects to the change in the downstream flow regime. The annual filling of the reservoirwill reducinga portionof the normal wet season flow inthe downstream of the dam for about the first 5 weeks of the rainy season, as water is retained to refill the reservoir.For the balance of the wet seasonthe flows and floods will be assednormally. Inthe dry seasontherewill be anincreaseinthe averagelow flow of 6 m /s to aregulated ? flow o f 33 to 40 m3/s. Inthe months whenthe reservoiris full there will be no change to the flow regime downstreamofthe dam. (k) An amenity or environmental flow will be maintained at all times during the pre- impoundment, impoundmentand operation phases of the BHP. The amenity flow during the dry season will be equal or greater than 6 m3/sand duringthe rainy seasonthe flow will be 100m3/s.The operationofthe BHPwill be subject to the environmental/ amenity flow requirements specified by the ESAP for the wet and dry seasons. Operation o f the BHP will result in the following physicalchanges to the downstream river flow regime: (i)anincreaseinriverflowtoabout33 to40 m3/sduringtheJanuary-May dryseason period (average minimum naturalflow in this periodis 6 m3/s in March); (ii)a delay o f about five weeks in the onset o f flood conditions at the start of the rainy season, as the reservoiris re-filledto FSL; (iii)dependinguponoperating rules for the scheme, possible reductions inflow at night and weekends due to retentionof water to meet peak demand. All of the water released from the powerhouse at the base of the dam during operation will flow over the Bumbuna Falls 2.5 km downstream of the dam and therefore the aesthetic value of the Falls will not be reduced. Further study will be carried out to determine more precisely the environmental, social and ecological flow needs. When more detailed informationbecomes available amenity flow levels will be adapted. The borrower agrees with this environmental, social and amenity flow requirement and will implement it. (1) Hydropower development in Africa has always led to impacts on public health. Prevalence rates o f intestinal and urinary schistosomiasis (bilharzia) might increase, as well as the prevalence rate of malaria. The EIA (2005) indicatedthat the prevalence of 121 river blindness (onchocerciasis) will likely decrease because of the inundation of a number of streams flowing into the reservoir area reducing disease vectors. A health protection program will be implemented in the immediate catchment with additional support from the BHP operator and BWMA in coordinationwith the Ministry of Health. Measures will include: functioning and well equipped and staffed health centers providing free healthcare; improved drainage and flattening of land where needed to eliminate pools o f standing water in the reservoir draw down area; a public education program on water bome diseases and the prevention of infection; and, actions to break the parasite-host cycle includingremoval of aquatic vectors and public health treatment covering the main diseases prevalent in the area including schistosomiasis, onchocerciasis andmalaria." (m) Because o f the impoundment of the reservoir, people and chimpanzee will likely be squeezed on a smaller area, which causes the so-called habitat squeeze. This habitat squeeze will further decrease the sustainability of the present agricultural shifting cultivationsystem and will increase the pressure on the chimpanzee habitat.The project will finance the development and implementationof a Land Management Strategy and Action Plan, a Land and Soil Management Program, an Agro-forestry and Forestry Program and an Agricultural Development Program for the Bumbuna Watershed. The potentialfor ecotourism developmentwill be studiedandan actionplandeveloped.These activities will be executedby the BumbunaWatershed Management Authority (BWMA) and financed through a trust, partly financed from the electricitytariff (3 percent), to fund the activities of the Authority, including the proposed environmental offset of the Bumbuna Conservation Area (see Appendix 6 on implementing arrangements for the Trust). It is expected that these mitigation measures will improve the livelihood of the extremely poor farmer population, reduce reservoir siltation and protect the habitat for the chimpanzeepopulation, other primatesand other biodiversity; (n) An Emergency Preparedness Plan will be prepared to warn and protect people downstream in case of an emergency. The Plan will be operational before the impoundmentofthe reservoir starts; (0) A benefit sharing mechanism will be the establishment of the Upper Seli Community Development Plan (see annex 4) through which indirectly affected communities around the reservoir can benefit from social and economic development activities. This will be the basis for testing institutionalarrangementsand community development mechanisms for delivery of ongoing benefit sharing programs through a window in the Bumbuna Trust (see Annex 2). (p) The borroweris committedto implement these mitigationmeasures. ESAPand DPRPanel 12. The Environmental and Social Advisory Panel (ESAP) consisting o f experience international experts has visitedthe site, consulted with stakeholders and issued their first report in November 2004. The ESAP reviewed the impact assessments and initial mitigation proposals of the EIA team and made further conclusions and recommendations on the priorities that should be reflectedin the EM, with due consideration of the project engineering schedule. These included: (i)to start the additionalbiodiversity field surveys as soon as possible to firm up the EIA conclusions and fill gaps on the baseline data for future impact monitoring, where these studies needed to be completedbefore test impoundment of the reservoir;(ii) verification, and ifnecessarymodificationo fthe gates o fthe dam, or other measures during 122 the physical completion works, to ensure the provision o f a minimumenvironmental flow o f 6 m3/s at all times during impoundment and dry season operation; (iii)in the transmission line RAP, to avoid and minimize involuntary resettlement in urban areas consider the alternative o f raising existing transmission towers, where needed, to overpass existing houses while providing a safe clearance between structures and conductors, and conforming to accepted international practice. 13. The Dam review panel also visitedthe site inNov 2005, consulted with stakeholders issued their first report also in November 2005 related to the continuation o f investigations, planning and design, construction and operation and maintenance o f the BHP. The DRP concluded the design and construction o f the dam was sound. Major conclusions o f the DRPon design and engineering components were: (i) on hydrology, the hydrology analysis corresponded to good practice and was adequate; (ii)on geology and geotechnics, the scope, quantity and quality o f the investigations were adequate for the type and size o f the Bumbuna dam and appurtenant facilities; (iii)on the asphalt concrete faced rock fill dam, the design of the embankment dam and the instrumentation, as well as the installation o f a separate monitoring center inthe powerhouse control room corresponds to good engineering practices and meets international standards; (iv) on hydraulic structures, the quality o f the final design and construction o f the civil works and choice/specification o f equipment o f these facilities is acceptable; (v) on tunnels; structures would require final inspection;(vi) on spillways, use o f the left spillway as the service spillway for more frequent floods to limit the occurrence o f unfavorable flow conditions affecting the right tunnel and the radial gate; (vii) on intake radial control gate structures, the executed activities o f inspection and verification o f operation conditions o f the metallic structures (trash racks, linings etc.) and equipment (cylindrical gate, trash rack cleaning equipment etc.) were acceptable; (viii) on generation facilities, the quality of design and construction o f the civil works is appropriate and corresponds to good engineering practices; (ix) on the reservoir, adoption o f a 2-stage impoundment plan with the first partial impoundment up to about 40-50 percent o f the total height o f the dam; and (x) on operation, the need for preparation of a Reservoir Operation Plan Operation andMaintenance Plan. 14. Several specific recommendations were made to follow-up the main conclusions. For example, on hydrology, the Panel recommended: (i)an additional review o f the PMF should be made to see if recent records altered the design PMF; (ii)three gauging stations should be rehabilitated or installed at the Bumbuna site, two upstream and one downstream o f the dam.; (ii)further analysis o f power and energy usingone month data should be carried out. The Panel noted the reason for the two-phase impoundment, which is not uncommon in the case of large dams, is to provide a real test o f the water tightness and deformation behavior o f the dam intime to take action should excessive leakage occur SafeguardImplementationSchedule: 15, Figure 1 below illustrates the implementationschedule for safeguardactivities inrelation to the key project milestones. Schedule of Activities Safeguardand RelatedStudies 123 Schedule of Activities Safeguardand RelatedStudies 16, The schedule for reservoir impoundment (both test impoundment and start of final filling) impacts on the timing of the initial stages o f a number of safeguard activities. On the basis of the EIA (2005) and the ESAP and DRP recommendations, the activities to take place prior to the test impoundment o fthe Bumbunareservoir, would include: the implementationof all compensation and resettlement measures includedin the Dam andReservoir ResettlementActionPlan; the completionof biodiversity baseline studies (to the satisfactionof the ESAP) required to firm upthe EIA (2005) conclusions andprovidebaseline for future impact monitoring; completion o f all environmental and social safeguard measures included in the overall EMP and civil contractor's EMP required to be completed prior to inundation of the reservoir; Completion o f and adoption of an impoundment plan that specifies activities to be undertakenprior to impoundment and impoundment procedures; Completionof an EmergencyPreparednessPlan(EPP) to establish a warning system for downstream users and rules to prevent sudden changes in flow rate (either increases or decreases)as well as extreme event of a dam failure; Clearance of the trees from the reservoirprior to impoundment trees to reduce biomass decompositioninthe reservoirandthe potentialfor eutrophicationofreservoirwaters; The DamReviewPanel (DRP) andthe Environmentaland Social Advisory Panel(ESAP) have formally commented on the impoundment plan, the status of the biodiversity studies,the reservoirclearingandthe reservoirresettlement. 124 17. The requirements for the start of full impoundment will be identified in the impoundment plan and reflect the comments o f the ESAP and DRP. 18. The biodiversity baseline survey program on the critical path started in May/June 2005. The program includes a further year o f study o f the chimpanzee population and other primates in the wider reservoir area and additional fish surveys, as well as separate one-month field surveys ledby international experts to firm up baseline data for flora, amphibians, reptiles, birds, and small mammals. An invertebrates/butterflies baseline survey will be added that was not done in 1996. A desk study for the B C A will also be prepared. The schedule for the biodiversity studies, particularly those activities in the primate study concerned with the reservoir area will be coordinated with the schedule for clearing forests before test impoundment. EnvironmentManagementPlan (EMP) 19. The Bumbuna Project Implementation Unit (PIU) has overall responsibility for coordination and supervision of all EMP related studies for the BHP as well as the mitigation and monitoring actions required to successfully implement the EMP. The Ministry o f Environment has oversight responsibilityto ensure compliance with national environmental regulations. An environment specialist with international experience will be appointed in the PIU and supported by local experts for the coordination and implementation tasks. They will work in close cooperation with the PIU communication unit to ensure that all stakeholders and affected communities are fully involved in a two-way dialogue on the EMP, and with the team o f environment specialists at Ministry o f Environment operating under the Chief Environmental Officer o f Sierra Leone, who is also a member o f the Intergovernmental Technical Committee for the BHP (See Annex 6). 20. The specific mitigation/ monitoring measures to be taken are identified in EMP presented in the EIA (2005). These measures will be supplemented with those that are recommended in the Additional Studies that are acceptable to the Bank and adopted by GoSL. The transmission contractor and main civil contractor will be contractually obligated to implement and report on environmental and social mitigation measures for their respective construction activities closely supervisedby the PIU environment team. The PIU will also be responsible to effect coordination with local government Councils, traditional authorities and with line Ministries and agencies who are involved in specific EMP activities (in particular the Environment Department). Similarly the PIU will initiate all legal and administrative activities needed to strengthen the Seli River Basin Authority (SRDA) and establish the Bumbuna Watershed Management Authority (BWMA) and Bumbuna Conservation Area (BCA). 21. It is expected the BWMA will be established in October 1996 before the start o f final filling o f the reservoir. As the BWMA and the BCA become fully operational, the PIU will gradually transfer responsibilities for implementation o f the watershed management activities indicated in the EMP that are supported by the project and the conservation activities (see schedule in Figure 1). The Bumbuna Trust will then fundthese activities. 22. After commissioning o f the BHP, the Special Project Company (SPC) will be contractually responsible for maintaining ongoing environment and management programs for the operation o f the dam and reservoir and the transmission facilities and right-of-way. These responsibilities will be specified in the O&M management contract for the international operator for the dam / reservoir and the transmission facilities. 23. The construction and operation o f the BHP will be carried out in compliance with the World Bank Safeguard Policies, the EIA (2005) and the Environmental, Health and Safety Guidelines (Electric Power Transmission and Distribution; Occupational Health and Safety, and General Environmental 125 Guidelines and Monitoring as well as those presented in the World Bank Pollution Prevention and Abatement Handbook (1998). Environmental management clauses, for instance with regard to environmental, social and amenity flow requirements, water quality monitoring and destruction o f mosquito breeding sites in the drawdown area of the reservoir, will be reflected in the Concession Agreement to the SPC who will be responsiblefor contractualundertakingof the operators. The PIUwill monitorthe establishment ofthese contractualobligations. Contractorand Operator EMPs 24. The civil and transmission contractors will prepare their own EMPs and establish their own environmental management and monitoring capacities that will be implemented under the PIU supervisionand monitoringby the Ministry of Environment.The contractors EMP have beenoutlinedin the EMP in the EIA (2005) in the following categories: (i) managementof constructionareas and camps; (ii)management of constructionsolid wastes and toxic wastes; (iii)management of land; (iv) management o f transport; (v) community facilities; (vi) health and safety; and, (vii) emergency plans. They includethe development of policiesfor local training and hiring. Standardprovisionsfor healthand safety are provided, such as: all construction workers must be given a medical examination(including sight and hearingtests) before beingaccepted for employment repeatedannually and all employees must be given printed information on the health implications of their work and how to avoid problems includingadvice inthe field of sexually transmitted diseases (STDs andHlV / AIDS). 25. The civil contractor EMPs (Contract A2B) will includeactions to mitigateimpacts such as: safe storage and preventionof spillage into the river channel of chemicals and toxic materials; soil disposal; waste management and vegetation clearing; monitoring of reservoir slopes during impoundment for detectionof instabilityandprovisionof environmental flows duringimpoundment of the reservoir. 26. The transmission contractor (Contract D) will be responsible for measures that conform to accepted utility practice environment management of transmission construction and World Bank Safeguard Policies. The ESAP and the Bank will formally comment on provisions in the construction contractor EMPs. Monitoring and consultationwith affected communities will be essential to ensure the success o f the detailedthe contractor EMPs. 27. Similarly once the project is operational the O&M contractors for the transmission line and hydroelectricfacilities will be contractuallyresponsibleto prepare EMPsto an acceptable standard, prior to commissioningof the BHP. The EMP will include the elaboration of reservoir operating rules and emergency procedures.The Dam ReviewPanel (DRP) andthe Environmentaland Social Advisory Panel (ESAP) andthe Bank will formally comment on these plans andthe operationphaseEMPbeforethey are finalized. 28. Other measures in the EMP include the rehabilitation of river flow gauges at Bumbuna and Badela. These are specified as an obligation of the civil contractor. The O&M contractor will have an obligation to maintain these gauges. Both the construction contractor and O&M operator would be responsible for water quality monitoring in their respective EMPs and submitting reports on a pre- established schedule. The program of water sampling and physico-chemical analysis for the O&M operator will monitor the occurrence of detrimental effects such as eutrophicationo f the reservoir and water pollution,through water quality measurements, particularlyof nutrientlevels and dissolved oxygen as well as other parameters specifiedinthe EIA (2005). 126 Watershed ManagementPlan 29. An importantaspect of the EMP to promotethe longer-termsustainable managementof the BHP is the Bumbuna Watershed ManagementPlan (BWMP). This planwill set out an integrated approach to influence agricultural improvement, soil conservation, forest conservation, river water quality protection andwildlife managementinthe Bumbunacatchment.This strategy andactionplanwill be initiatedby the Bumbuna PIU and will be gradually handed over to the administratively `lean' BWMA. It is envisaged that the BWMA would also undertake the initial steps to establish the proposedBumbuna Conservation Area that will providethe BHP environmental offset, under the supervision of the PIU environment team andoversight from the EnvironmentDepartment. 30. Once established the BWMA will serve as the facilitator for the delivery of the Land Management Strategy and Action Plan financed by the project that include: (i)a Land and Soil Management Program - consistingof soil conservation measures to reduce soil erosion, sediment load Agro-forestry and Forestry Program - to improve land use systems and the sustainable benefits arising and potentialfor landslips into the reservoir (important for the long-termviability of the BHP); (ii) an from agriculture and forestry that entail action to improve agricultural techniques and improve yields, introduce ago-forestry methods, establish community forests, and improve forest use; and (iii)an Agricultural Development Program - to develop and implement measures such as crop husbandry techniques, basic farm management, crop diversification,harvesting and post-harvesttechniques, use and care of farm tools and improvement in managementtechniques to reduce bushfires and enhance pasture quality. These measures will be promotedthrougha combinationof awareness, extensionworker inputs, and on-farmdemonstrationplots. 127 n Bx a% c b 3t: d m m -aw -a S > 00 0 N se3 e a2 El 0 M E .I m G 5 =2 % .I c, .I v1 0 El 4 h W M $1 El .I h c) 0 z .I El W El Q .I s c) cd M .I 3 Y W cd El aJ Ev1 .I c) $ 2 .I h 0 2. 8Eia I v1 Q m .I 3 s s a2 a% - e, 0 8 9 3 N 3 a9 i Y 3 Y Pa 9 B s 1 a3 i s3 2 a2 3 > 3 i i a2 Resettlementinthe DammeservoirArea 3 1. The filling of the reservoir will cause impact on a total o f 518 households in 33 villages who will be affected by filling of the reservoir.Of these, only one village (Matombe) with 16 households will need to physically relocate. A second village (Waia) with 80 households will loose a considerable part of their land, approximately 80 percent, but it i s hopedthat this village will not need to move their houses.The other 31 villages are affected by losing < 40 percent of their total land.Another 4 villages were affectedby loss of land inthe past when the dam, access roads, the quarry and the projectcamp were built.New land, stabilizedagricultureand livelihood restorativeinitiativeswill ensure appropriate compensationandrestoredhouseholdeconomies. 32. The mainarea for compensationis the area of the future reservoir, which will be covered by water once the reservoirhas beenfilled. Compensationwill bemade as well for landoriginally used for dam construction (including access roads, quarry, camp, etc.). This land has been expropriated without compensationhavingbeenmade so far. In order to get information on the affected population,a householdsurvey was carriedout, andfocus group discussions were heldin the villages potentiallyaffected be the project.Ina first phase, 27 villages were covered. During this and subsequent fieldwork, during which 57 villages were surveyed, 6 more villages were found to be affectedand were includedin the survey in a second phase of fieldwork. At a later stage, information was obtained concerning the existence of a total o f 19 additional villages. These were then surveyed inNovember. One part of the projectarea, inthe far north-eastof the future reservoir,with at least one village knownto exist (Yiben), couldnot be reachedduringthe whole periodofthe study do to highriver discharge. 33. Most of the project affected people will experience loss of their plantations -meaning their rice fields, oil palmtrees, bananas,vegetables, pineapples, etc. Agriculture is by far the most important activity, and the most important livelihoodbasis, in the project area. For this reason, restorationof the farming potentialwill be the top priority of RAP implementation.This will be achievedby provisiono f support andtraininginagriculturalproduction,settingup demonstration farms and providing tools, which could be some of the options. Also training farmers in new methods o f farmingtechniques and extension services will be offered. Therefore the purpose of the Stabilized Agriculture Program is to provide an alternative conservation farming extension strategy, which will balance the need of productiono f subsistence and commercial commodities with the needto conserve and protectthe environment and the ecosystem. This will be achieved by overcomingthe conditions, which force poor people to take a short-termview and live from hand-to-mouthor day-to-day. The livelihoodlevels will be raised above the poverty line as well as above a security line, which provides for savings and household"contingency funds" that can betapped for investments or intimes o fdisasters. 34. The most important aspect of the RAP will be to ensure that project affected people's livelihoodare restoredto pre-impoundment levels, i.e. that people relocated or people affectedby their crops at the new location- beforeimpoundment. loss o f farmland, have been able to harvest the last harvest at their original location and to plant 35. The overall impact of BumbunaHEP on the populationinthe reservoirarea is shown in the followingTable. 130 Table 4: Number ofAffected Villages, Householdsand Personsinthe ReservoirArea 36. The project affected people in the dam and reservoir area will be compensatedthrougha resettlement program which has several components, each of which respond to the determined impact, the specific needs of the PAPSand to what mitigationmeasure will be implemented in order to reduce physical and psychologicaldiscomfort.Land for land and in kind compensation i s the basic rule which will be adoptedbut becauseof the fact that the area hasalready reached its carryingcapacity (because of slash and burn cultivationand populationincrease), land which is already degraded or situated too far away, (i.e. further up the hills) may not always be the best option. For this purpose, a "Stabilized Agriculture Program" (SAP) and a "Livelihood Assessment and Income Restoration Program" (LAIR) will accompany the traditional compensationpackage of land, housing, income rehabilitation,assistance, etc. 37. The StabilizingAgriculture Program (SAP) will be implemented in all the 33 villages that are affectedby the project in the damkeservoir area. There are two villages (Matombe and Waia), which are most critically affected by physical relocation (Matombe) and will lose approximately80 percent oftheir land(Waia). The remaining31villages will lose between20-40 percent of their land (see Table A). The SAP will providethe basis for stabilizingthe prevailing system of shifting cultivationby replacing it with a more stable, less land-consuming form of agriculture which will only be possible by two means: firstly by making best use of water resourcesduringthe dry season, i.e. by tryingto retainas muchwater as possibleon its way from the catchmentareas through the fields to the reservoir.Secondly, the fertility ofthe soil has to be maintained or improved by different means so that an abandoning of plots is not necessary anymore. This maintenanceof fertility also includes erosion protection.The programwill needto focus on the following themes: Terrain Management - Operation and maintenance of the various terrain modifyinginfrastructuresinstalledfor control of irrigationwater, rainfall runoff and soil erosion e.g. flooded and piped irrigation systems, self-build bunded terraces, gully stops, fishponds, protectivevegetation. Soil Management Maintenanceof soil structure andfertility throughappropriate - zero tillage, fertilizing, composting, mulching, green manuring, cover-cropping, ally cropping, incorporationof unburnedcrop andweed residues. Agricultural Crop Management - Production and procurement of high quality diversifiedplantingmaterials, environmentally and ecologicallycompliant weed and pest controlpractices e.g. biopesticides, insectrepellentintercrops, sacrificial planting, integrated pest management, crop rotation and diversification, crop sanitation, crop field dispersion, post-harvestweed control. Water Management - Economical and timely application of water to crops and drainage through management of the timing, quantity and distribution o f water applied through basin, mini-terrace, bed-and-ditch, drip, soaker, mini-sprinkler water applicationsystems, as appropriate 131 (m) Livestock Management - nutritional enhancement including cut-and-carry composting, local quarantine, vaccinations, breed improvement, housing, controlled grazing from fencing, tethering, confining etc. and pond and cage (n) Forest management - inventory,determination and controlo f sustainable harvest aquaculture. rates, guarding and fire control, silviculture practices (weeding, thinning, pruning, cullingandreplanting). (0) Minor infrastructureasset management - operation, maintenance and repair of communal access routes, bridges, landings, irrigation and water supply systems, erosion control works, windbreaks, gully-head erosion control structures, machinery,equipment, buildings,communalfencingplananderection. (p) Labor Management- introductionand familiarizationwith labor-savingcultural practices,advancedprogrammingof seasonaloperations. (9) Commodity Management - secure storage o f inputs and produce and in-village processing and pre-sale value-adding (brewing, distilling, textile and mat weaving, basketry, paper making, bamboo and wood working, sericulture, apiculture, fungiculture, food preservation, charcoal production, oil extraction, sticklac production, brick making, pottery, blacksmithing, smelting, "sa-paper" making), bulking-up,contract farming(e.g. oilseeds) and group marketing. 38. The activities under the StabilizedAgriculture Program will be synchronized with the LAIR Program and the agricultural program under the EnvironmentalManagement Plan, to a large extent possible. However, the primary focus of LAIR and SAP should be on the directly affected villages (33) inthe reservoir area 39. The Livelihood Assessment and Income Restoration (LAIR) Program will serve the purpose of providingincome generation alternatives to the project affected people. The program will be implemented in all 33 villages that are affected in the dadreservoir area. There are two villages (Matombe and Waia) which are most critically affected in the way that they will needto relocate physically (Matombe) and will lose approximately 80 percent of their land (Waia). The remaining31 villages will lose up to 40 percent of their land. It will therefore be important to assist the communities in identifying different skills and training which can assist them in increasingthe householdincomes. The programwill also providedirect assistance in creatingjob opportunities.The scope o f work will be to focus onthe followingthemes: (a) Detailed economic surveys of the villages to determine and reconfirm baseline income levels, the level o f dependence on agriculture by households for both food supply andincome source andother existingsources of livelihood. (b) Identification o f social, economic, logistical or technical restrictions that limit potential food security, economic growth or the development of other income sources. (c) Design o f models that define existing systems o f agricultural production, models on how to intensify use of land and increase productionvalue e.g. via irrigation, new techniques, improved crop species, increased cash cropping and possibility of product processing for added value; and the estimated household incomes through these opportunities. (d) Design o f models for alternate income and livelihood sources, defining the existing option and those that can be introduced, estimated household incomes through different sources and the means and actions that will be needed to expand the identified opportunities, e.g. credit, market development, skills training, access to transportation. 132 (e) Preparation of detailed program proposals including goals and objectives, implementation plans, budgets, schedules and measurement tools for monitoring achievementlsuccess. 40 The LAIR Program itselfwill be developed in cooperationwith the internationalstaff in RUwith assistance and input from other parties such as VRCs, government agencies, NGOs and technical experts. To date a number of possible programs and projects for community development and the LAIR Programhave been identifiedbasedon the concerns and priorities of the affectedvillages during interviewsand surveys and focus group discussions.PotentialLAIR activities are the following: Agricultural Support 41. Most of the affected persons interviewedby the RAP team have mentioned loss of their plantations -meaning their rice fields, oil palm trees, bananas, vegetables, pineapples, etc. Agriculture is by far the most importantactivity, and the most importantlivelihoodbasis, in the projectarea. Provisionof support andtrainingin agriculturalproduction, setting up demonstration farms and providingtools could be some of the options, (includingimprovingmarket facilities). Also training farmers in new methods o f farming techniques and extension services, which are foundwanting should be offered. Budgets andan action planwill be preparedas part ofthe LAIR Programandwill be synchronized with the SAP Supportof Alternative Economic Activities 42. One of the income generation activities insome ofthe communities is the miningof gold and its sale. Alternative activitieswill be identifiedand taught to especially the youth who feel they have no other means of earning an income. Some have mentioned carpentry as an option, together with all round education and vocational training. Budgets and an action plan will be preparedas part ofthe LAIR Program. Women's Savings Pool and Training 43. A micro-credit loan scheme is found to be taxing as no NGO is prepared to deal with loans, but a saving scheme is more appealing and will be establishedto allow women to increase their income generating capability. Women will be encouraged to form groups to access the savings and borrow from it on a rotational basis or as the need arises, this makes them accountable as a group in paying back the "loans" and encourages them to carry out the chosen activities as a group. The program will target at least 10 groups o f women with ten women per group as pilot and then expanded later. Women will be trained in simple book keeping and financialmanagementandother skills. Literacyand Skills Development 44. Literacy levels are low in the surveyed villages and the youth are also affected. Establishing adult literacy and skills development has been identified with the targeting of disadvantaged girls and women (e.g. tie & dye, tailoring, other income generating activities) in particular.Menhave expressedinterest to learn skills as carpenters, blacksmiths, masons etc. The youth identified fish farming and running a boat transport business to ferry people across the river, as possible activities. Budgets and an action plan will be prepared as part of the LAIR Program. 133 ImprovedAccess and Transportation 45. Most of the affected communities are located very far from access roads and the inhabitants need to walk long distances in order to reach markets and services. It is therefore important to identify means of transport, which can be introduced and improved in these communities, and to link them to their neighbors and larger villages and towns. Such initiatives can be for example, boat service up and down the rivedlake, ferry service across the rivedlake, andthe introductionofbicycles. Fisheries and AquacultureDevelopment 46. Fish is an important part of the diet in Sierra Leone, supplying about 80 percent of the total animal protein consumption. The introduction of fish farming and the construction of fishponds is totally in line with the necessities pointedout inthe FoodVulnerability Assessment (FA0 2002). Fresh water fish consumption in the riverine villages provides the main source of animal protein.Villagers use scoop nets, fencingtechniques and traps to capture fish from these water bodies. Inlarge rivers, gillnet fishing is practiced. Presentannualyieldof inlandfisheries is estimated at 20'000 tonnes, of which about 5'000 tonnes are from lakes and 15'000tonnes from rivers and floodplains.There is still roomfor increasingproductionto an estimated40'000 tonnes annually. Finfish culture started in 1977, in the town of Makali, and 10 years later in Bo town. Earthen ponds were constructed and used for production of fingerlings and harvestable Tilapia nilotica. Menmostly construct the fishponds, while the day-to-day maintenance is carriedout by women and children.Farmers own 1to 4 fish ponds with surface areas rangingfrom 100to 500 mzper pond. The yield from these ponds ranges from 1'500 to 2'500 kg/ha/year, which is 50 percent o f the maximum attainable under these conditions. Trials with local freshwater fish species were done and the productionyields were very encouraging (source: Interim Fisheries Policy o f Sierra Leone, Ministryof Fisheries andMarineResources, 2004). 47. The followingtasks are necessary for the fishingcomponent: e Establishscientific basis for fishfarminginspecific locations. e Traincommunities in fishfarmingtechniques andpondmanagement. e Construct community fish farms in 10 selectedvillages. e Establishmonitoringsystem. e Enhancethe growthperformance of culturedspecies. e Promoteappropriate fishingtechnology for capture. e Trainfishfarmers inpreservationandmarketingo ffish. e Involvemento f farmers in constructionof ponds 48. BothRAPSwill be implementedby a ResettlementUnitwhichwill reportto the PIUwho will have the major and overall coordinatingfunction. The Resettlement Unit will be composed of internationaland national consultants, local specialists and field assistants who participatedin RAP preparation, Village Resettlement Committees for each affected village, legal council, and independent observer. The RU will have its main offices in Kafogo and Bumbuna and with a coordinating office in Freetown. A Resettlement Advisory Group will have an advisory and oversightfunctionandwill be composedof andrepresentall stakeholders. 49. Two critical components in the resettlement and compensation package, are the SAP and the LAIR, which will also be implemented by consultant contracts but will sort under the RU. The SAP agricultural specialist, who will be recruited under a direct contract with PIU, will 134 technicallyalso sort under the Ministry of Agriculture, Forestry and Food Security and the Block representatives in the project area. The SAP consultant will establish a full team of agricultural extension workers and other specialists who will be necessary in order to implement this program. The specialist group, which will be in chargeof the LAIR program, couldbe one o f the NGO's in Sierra Leone that has significant experience with livelihood assessments and income restorationprograms. The NGO, which will also be recruitedunder a direct contract with PIU, will sort under that same unit. The specialist group should establish a full team of extension workers andother specialists who will be necessary inorder to implementthis program. 50. The RU will be composed by an international consultant with extensive experience of resettlement in Sierra Leone and who also previously has trained local specialists and field assistants (students in legal and social sciences for example). The Village Resettlement Committees will be crucialinthat they will participateinthe entire process, representthe interest of the project affectedpeople and ensure that the resettlement process is transparent and fair. A Legal Council will be providing legal assistance to project affected people continuously throughout the resettlement process and will also be included in the RU contract (through sub- contract to the "Lawyers Centre for LegalAssistance") Internalmonitoringand evaluationwill be carriedout by the RU and external monitoringand evaluation of the resettlement process will be carriedout by an independent "Witness NGO" as well as by the Panelo f Expert Resettlementalongthe TransmissionLine 5 1. The existingtransmission line is 200 kilometersconsisting o f 565 transmission towers in a 30-meter right-of-waylongstartingat the switchyardat the project site inBumbunaand ending at a substation in Freetown near the Kingtom thermal power station. The transmission RAP disclosed in January 2005 determined that 367 households were in the 30 m right-of-way. In keeping with World Bank OP/BP 4.12 on Involuntary Resettlement where involuntary resettlement should be avoided where feasible, or minimized, three alternatives were exploredin the RAP, namely: Alternative1 Relocating the end-of line-substation in Freetown to the city perimeter (i.e. moving the right-of-way) and rerouting the line around Makeni town. This would avoid involuntaryresettlement and social disruptionin urban sections of the line where the bulk o f the resettlement would occur; Alternative2 Defining an exclusion zone within the ROW on the basis of vertical and horizontalclearances of 7.0m from the conductors, or effectively reducingthe area within the ROW where houseswould be moved(to 35 percent) andthus minimizingresettlement; and Alternative3 Raising the transmission towers in critical sections (Le. increasing conductor heights) to provide a minimumvertical clearance of 7.0m and allowingthe lines to overpass existingcommercial buildings,households and other structures inthe ROW. 52. Efforts to consider these alternatives responded to strongly expressed views o f the affected communities in the public consultationmeetings during the RAP. Most of the families living in the ROW do not want to relocate or experience social disruption, particularly those households residing inthe more populated sections of the right-of-wayin Freetown and Makeni, where unoccupied urban land is scarce. A field survey program was undertaken as part of a comprehensive Condition Assessment o f the entire transmission line that involved a tower-by- tower inspectionandphoto documentation(of all 565 towers). 135 53. Inthe course of the survey it was establishedthat no existingbuildingsviolate the 7.0m clearance criteriaFreetownand Makeni, where most of the resettlement would occur ifthe ROW were cleared. Over the entire line, a total of 6 structures encroach with 7.0m o f the conductors, mostly between Waterloo and Lunsar.These are five houses and the secondary school block,All remaining households in the 30m ROR (all 132 houses) are more than 7.0m from the lowest conductor, and in majority o f cases well exceed this minimumrequirement. It is anticipatedthat all structures can be built only meters away, on the same plot of land. 54. The results suggestedthat rather than raisingtowers in critical sections, a more practical and cost-effectiveapproach would be to relocate only those structures that violate the minimum clearance. After considering all the factors the alternative advanced by the PKJas most feasible was to allow existing land use to remain in the right-of-way,subject to the minimum vertical clearance between conductors and structures applied consistently over the full length of the ROW. The approach: (i)meets the World Bank's safeguard policy on involuntaryresettlement, where involuntary resettlement should be avoided where feasible, or minimized, exploring all viable alternative project designs; (ii) responds to the desire of households not to move and avoids unnecessary social disruption; (iii)conforms to accepted international practice for management o f transmission right-of-ways and does not impose higher standards on Sierra Leone. 55. Incountries inEurope, as well as other developedanddevelopingcountries, it is accepted practice to allow permanent structures, including homes to remain under medium and high voltage transmission lines, provided safe minimum clearances are maintained. In developing countries often the need is to expandelectricalservices inurban areas where electrificationratios were previously low, particularlyamonglow-incomeandpoor segments ofthe populations. 56. Where a house or other structure must be moved, the Bank's Involuntary Resettlement Policies would be applied in consultation with the affected household. In the case o f the secondary school the concernedschool authorities wouldbe involved.All resettlement provisions that are identifiedin the RAP would be providedfor the affectedhouseholds (e.g. access to legal advice, disturbance compensation, grievanceprocedures). 57. These arrangements were discussed in public consultation meetings and were highly welcomed. Inthese consultations it was discussedthat public safety is addressedby the conductor andtower design standards.The field effects resultingfrom the voltage and current flow (electric field and electromagnetic field) were explained. These had been calculated for the 7.0 m minimumclearance as well as for other clearances. Analysis shows the EMF exposures conform to internationalguidance and even the strictest emerging guidance inthe EuropeanUnion.These results were review by ESAP and an independent expert who concludedthey reflectedaccepted practice. 58. The status of land ownership in the 30-meter right-of-wayunder the transmission line would not change. Households with title deeds would retain ownership of land. Similarly, there would be no change in rural areas for community property managed under the under the traditional system of community land ownership. Provisions will be made to control any future alterationto existingstructures or new building and land development in the right-of-way,such that the minimum clearances are always maintainede.g., restrictingbuilding heights, restricting erection of antenna / metalpoles, tree planting, etc.) This will require appropriate authorities to be assignedto a government regulator(to be established with support from the Power and Water Credit) and MoEP in conjunction with the transmission O&M contractor responsible for 136 maintainingthe right-of-wayto approvealterationsto existingbuildingsor new developmenton a case-by case basis. These provisions will be establishedduringthe RAP implementation. 59. The transmission resettlement will be implemented under the same contract as for the Daaeservoir RAP, Le. the same international consultant firm will assist the PIU with implementationofbothRAPSthat are supervisedby a resettlementspecialist inthe PIU. 137 Appendix 1to Annex 17 Sierra Leone Bumbuna Hydroelectric Project Note to the Operations Committee on CriticalNatural Habitat and Chimpanzees April 9,2005 1. Role of the Bank and Project Status. The Bank is preparing a Partial Risk Guarantee and an IDA technical assistance grant to allow completion o f the Bumbuna Hydroelectric Project (BHP).Completion costs are estimated at approximately US$83.6. The safeguards documentation (Environmental Assessment and two Resettlement Action Plans for the reservoir and the transmission line) was disclosed in country and in the Infoshop on January 26, 2005. Pre- appraisal o f the project took place during the second half o f February 2005 and the first two weeks o f March 2005. The task team seeks to appraise the project inApril 2005, and i s returning to the OC, based on their request o f April 7,2004, to provide an update on the status o f questions about critical natural habitat raised at the OC meeting. 2. Locationand Background: The BHP is located on the Seli River, 200 km northeast o f Freetown, the capital o f Sierra Leone (see Map 1.). Project construction was stopped in 1997 due to civil war. At that time, the project was and remains approximately 85 percent complete. The dam is largely built, but the reservoir has not yet been filled and the turbines and ancillary equipment have not been installed. The civil war has caused demographic instability throughout Sierra Leone and contributed to considerable environmental degradation throughout the country. The Bumbuna area has also been affected by these population movements and consequent negative impacts on the environment. The BHP will flood an area o f 21 km2,comparatively small for a hydropower reservoir. The inundated area contains approximately 450 ha o f degraded, closed riparian (gallery) forests, which are part o f the most northern extensions o f the tropical rainforests o f southern Sierra Leone. These riparian forests (upstream o f the reservoir, in the reservoir area itself and downstream o f the dam) are at present under heavy human pressure and without the project are likely to disappear over the coming decades. 3. Project Alternatives. The Seli River site is the best alternative to supply power that is urgently needed in Sierra Leone and the only feasible site for the BHP, as confirmed by a retrospective alternatives analysis (2005 EIA, Appendix C1 ). This analysis has confirmed that the scaled-down Bumbuna project from the 1984 Supplemental Feasibility study (followed by thermal plants) was the most economically attractive o f the four sequences. Out o f the 16 combinations o f future oil prices, discount rates and load growth examined, the reduced Bumbuna was the least-cost solution in 12 cases (including the base case) (Appendix C1 paragraph 85 page 120). 4. World Bank Natural Habitats Safeguard Policy (OP/BP 4.04). This policy states the following: i)"The Bank does not support projects, that in the Bank's opinion, involve the significant conversion or degradation o f critical natural habitats." (see also paragraph 8 and 138 footnote 1 for the definition); ii) "The Bank does not support projects involvingthe significant conversion o f natural habitats unless there are no feasible alternatives for the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweighthe environmental costs. Ifthe environmental assessment indicates that a project would significantly convert or degrade natural habitats, the project should include mitigation measures acceptable to the Bank. Such mitigationmeasures include, as appropriate, minimizing habitat loss (e.g., strategic habitat retention and post-development restoration) and establishing and maintainingan ecologically similar protected area" (Natural Habitats OP 4.04 paragraph 5). The World Bank was not involved in the financing o f the present construction phase before 1997, although the Bank was involvedinstudies andplanningthe BHP since 1977. 5. 1996 Environmental Assessment (1996 EIA). An Environmental Assessment (EIA) was carried out in 1996 (Electrowatt Engineering Services Ltd. and Techsult Co. Ltd.) for the African Development Bank, which together with the Italian Government was involved in financing the 1997 construction phase. At the time the 1996 EIA was finished the BHP construction was close to 85 percent completion. The 1996 EIA identified the presence o f chimpanzees (Pan troglodytes verus or Western chimpanzee) in the reservoir area, as did the 2005 EIA. The 2005 EIA states further: "The only other endangeredprimate which could live in the wider BHP area is the red colobus (Procolobus badius) (see Table 1.). This species was not encountered during the surveys, although this species was once widespread in northern Sierra Leone. The yellow-backedduiker (Cephalous sp.) is a near threatened species in the wider BHP area. This species was encountered during the field surveys. The wider BHP area contains no unique features of ecology and geography, so it is unlikely that the fauna (and flora) would differ significantly from those found in similar regions of Sierra Leone. The data suggest that many species are under continuingthreat o f habitat loss and hunting, but there is no evidence that any are endemic to the immediate catchment or are endangered requiringimmediate protection. All animal species appear to be adapting to changing vegetation zones, although some populations are becoming locally unviable, from the reductionand fragmentation of habitats, caused mainly by the clearance of landfor agriculture.The latest available data indicatethat from 1975 to 1987 the riparianforest cover decreasedwith approximately one percent." Fieldobservations by World Bank safeguard policy staff indicate that since then the riparian forest cover and its quality is further decreasing and it is expectedthat the riparian forests will largely disappear in the coming decennia. 6. 2005 EnvironmentalAssessment (2005 EIA). The Torso for the 2005 EIA, carriedout for the Government of Sierra Leone by an internationalconsulting firm, specifically required a special chimpanzee study as well as investigation o f other endemic or endangered species identified inthe 1996 EIA in order to provide updates o f the existingstatus ofthe habitatin and aroundthe areato be inundated.These studies were carriedout in2004 by Dr. Janette Wallis, an internationally known primatologist, in collaboration with Sierra Leonean primatologists and biodiversity specialists. The study foundthat chimpanzeesdo live inthe vicinity of the BHP, but concluded that areas affected by reservoirinundationare not critical naturalhabitat, as defined in OP 4.04, and are not critical for the chimpanzees, as further discussed inthis note. Results of the 2004 field studies are detailed in Appendix J to the 2005 EIA. The study methodology entailed interviews with local hunters and farmers, assistance from local people to guide researchers to nest sites and reconnaissance walks in areas where chimpanzees would be expected. Chimpanzees were sighted in the hills above the dam site. These reconnaissance walks also confirmed the existence o fchimpanzeepresenceandnests inother areas (see Maps 2 and 3.). No signs of chimpanzee presence were observed in the area to be inundated, includingthe gallery forests. Nevertheless, the possibility that chimpanzees might use the gallery forest at certain times of the year cannot be ruled out, as the gallery forest contains fruit trees on which 139 chimpanzees feed. These same fruit tree species also grow on the hillsides. The 2005 EM concluded that five chimpanzee communities and possibly more inhabit the area around the proposed reservoir. 7. Status Chimpanzee Communities in Wider BHP Area. The 2005 EM survey team found physical evidence o f at least three communities o f chimpanzees living in the southern portion o f the project area (two to the west o f the Seli River, and one to the east), and received verbal reports o f at least two additional communities further north (see Maps 2 and 3,). Because the entire project area could not be surveyedwithinthe timeframe ofthe 2005 EMstudy, the total number o f chimpanzees inhabiting the area was not determined. The 2005 EIA states further: vegetation, ten to fifteen chimpanzee communities may utilize the area. . The chimpanzee "Based on the evidence o f the chimpanzee communities observed and the nature o f the community observed nearest to the dam site was estimated to consist o f at least twelve individuals. These chimpanzees were recorded above the future full supply level (FSL) o f the reservoir. They may range around the project area, including visits to the riverine forest (gallery forest) at certain times o f the year according to food availability, unless human foot traffic may be a sufficient disturbance to keep them away from the river itself." 8. Critical Natural Habitat Evaluation. Based on the field studies, the researchers concluded that the reservoir area cannot be considered critical natural habitat8as defined by the World Bank Safeguard Policy on Natural Habitats (OP 4.04). The 2005 EIA states: "the vegetation has been greatly altered by man and natural habitats remain as small isolated fragments within an expanse o f cultivated and fallow land and as yet there are no designated or proposed protected areas recognized by the communities, the Sierra Leone Government, or the World Bank. The small areas o f gallery or riparian forest alongside the river are also not critical habitat, because they are largely altered by human activity over a long period o f time, although chimpanzees might use these areas occasionally to search for food. These riparian forests could, however, be considered as natural habitat, despite disturbance by humans. While there was some natural habitat clearing due to the dam construction in 1994 [70 percent o f the forest below FSL in 1992 (Appendices page 238 and Figure l.)], the major part of naturalhabitat destruction by far was due to human activities over last decades." Most o f the area to be inundated is now part o f the shifting cultivation system and natural vegetation has been largely modified by human interference and the subsequent invasion o f non-indigenous species. Thus, the area to be inundated cannot be considered critical natural habitat according to the definition o f the Bank's Natural Habitats Policy OP 4.04 and the value o f the remaining natural habitat is largely diminished. * The Bank does not support projectsthat, inthe Bank'sopinion, involve the significant conversionor degradationof critical natural habitats (see OP 4.04 paragraph 4.). OP 4.04 Annex A Definitions 2001 defines critical natural habitat inparagraph 1. as follows: (b) Critical natural habitats are: (i) existing protectedareas and areas officially proposedby governments as protected areas (e.g., reservesthat meet the criteria o fthe World ConservationUnion [IUCN] classifications), areas initially recognizedas protected by traditional local communities (e.g., sacred groves), and sites that maintainconditions vital for the viability of these protectedareas (as determinedby the environmental assessment process);or (ii) sites identified on supplementary lists prepared by the Bank or an authoritative source determinedby the Regional environment sector unit(RESU).Suchsites may include areasrecognizedbytraditional local communities (e.g., sacredgroves); areaswith known high suitability for bio-diversity conservation; and sites that are critical for rare, vulnerable, migratory, or endangered species. Listings are based on systematic evaluations of such factors as speciesrichness; the degree of endemism, rarity, andvulnerability of component species; representativeness; and integrity of ecosystem processes. (c) Significant conversion is the elimination or severe diminution o f the integrity of a critical or other natural habitat caused by a major, long-term change in land or water use. Significant conversion may include, for example, land clearing; replacementofnatural vegetation(e.g., by crops or tree plantations); permanent flooding (e.g., by a reservoir); drainage, dredging, filling, or channelizationof wetlands; or surface mining 140 9. Ecological Flexibility of Chimpanzees, Chimpanzee communities are found in many regions o f Sierra Leone. They have been sighted or observed at the edge o f Freetown in the Western Area Forest Reserve on the Freetown Peninsula and near the Freetown Lungi airport, which demonstrates that chimpanzees are adaptive to a variety o f habitats (personal communication from Sierra Leonean primatologists involved in the chimpanzee study to World Bank safeguard policy staff, 2004). Given the relative behavioral and ecological flexibility o f this species and its general distribution in the Guinea-Sierra Leone region, it is likely that a chimpanzee population would survive inthe absence o f the gallery forest (ESAP page 23, 2004). Nevertheless, existing information is not sufficient to determine the precise impact o f the loss o f this habitat on the population (ESAP page 23, 2004). There is, however, no question, that the chimpanzee as a species will not be threatened by the inundation o f the reservoir area (personal communication 2005 EL4 consultants, Sierra Leonean primatologists to World Bank safeguard policy staff, 2004). 10. PotentialImpactson Chimpanzees. The potential impacts o f completion and operation o f the BHP on chimpanzees inthe project area, as determined inthe 2005 EM, are as follows: 0 Chimpanzees will not likely be drowned during inundation, because the water level will rise slowly. However, the prior removal o f large trees, as recommended in the EIA report, will helpto prevent the stranding o fchimpanzees inthe risingwater; 0 Filling o f the reservoir may remove part of the chimpanzee's range, and, at the same time, cause further degradation o f chimpanzee habitat, when the area usedby humans i s reduced and local people move their activities into formerly marginal forest fragments; 0 A consequence o f this habitat `squeeze' will be to bring humans and chimpanzees into closer proximity, with an increased likelihood o f conflict, i.e. hunting by humans, and crop-raiding or physical attacks by chimpanzees. 11. Status of Other Primates and Potentially Endangered Species. The 2005 EIA also found that other primates inhabit the project area. (see Table 1). . SeveralCercopithecine species were observed or heard by the primate survey team; vervets, mangabeys, patas, spot-nosed monkeys, and Campbell's monkeys were located in various parts o f the surveyed area and are likely to occur inthe non-surveyed areas, as well. [Cercopithecinae store food insidetheir cheeks and typically eat fruits, leaves and other plant parts, and even some animal products. Because o f their ability to store food, the Cercopithecinaes are more likely to be crop-raiders.] Although informal interviews provided reports that black and white colobus are in the BHP area, no sightings by the team were recorded. [Colobinae are leaf-eating monkeys and have a chambered stomach adapted to allow digestion o f leaves. They are less likely to be crop-raiders and spend more o f their time high in the trees.] Because their skin is highly sought after for use in ceremonies, this species is likely on the decline in the Bumbuna area. The endangered bay colobus or red colobus (Procolobus badius) appears to be absent. The red colobus, once found throughout much o f northern Sierra Leone, was expected to be encountered duringthe survey, but there have beenrecent huntingpressures on this subspecies. Of the nine globally threatened bird species living in Sierra Leone none has beenrecorded inthe study area (1996 EIA).Also no other endangered animal and plant species were recorded inthe study area by the 1996 and 2005 EAs. 12. Review by Environmental and Social Advisory Panel. Following World Bank practices for a potentially controversial Category A project, an Environmental and Social Advisory Panel (ESAP) was convened to review and advice on safeguard related issues. The task team determined that one o f the three ESAP members should be a primatologist. The selected 141 primatologist, John Oates, is an internationally renowned expert on chimpanzees and he has worked extensively on primate issues in SierraLeone. The draft 2005 EIA was submitted to and reviewedby the Panel inNovember2004. Concerningthe adequacy of the chimpanzee and other primate surveys in the 2005 EIA, the Panel concluded: "Surveys of chimpanzees, and monkeys have been adequately conducted within the constraints of time and resources available." The ESAP notes on page 6 of their 2004 report: "The Panel finds that the consultant demonstrated well that the project area is home to several communities of chimpanzees. However, the ESAP also agrees with the EIA consultant that further study (preferably for one full year) is neededto obtain better knowledgeof the size, distributionand socio-ecologyof the chimpanzeepopulation. This study should pay particular attention to the importance, or otherwise, o f the riparian forest habitat for this species, and to the likely impacts of human resettlement (including changes in agricultural patterns) on chimpanzee food supply and rangingbehavior." The ESAP agreedthat the area to be inundated is not critical naturalhabitat as defined by the Bank's NaturalHabitats Policy OP 4.04, but that further investigationwas neededto evaluate the ecologicalimportanceof the gallery forests for the chimpanzee populationinthe area. Bank environmental safeguard staff with ecological and biodiversity expertise agree with the conclusions of both the 2005 EIA and the ESAPreview. 13. Additional Investigation. Both the 1996 and the 2005 EAs carried out biodiversity baseline surveys on all fauna and vegetation elements, with the exception of butterflies. The ESAP recommended additional biodiversity studies to complete the baseline and start the biodiversity monitoring program. These additional biodiversity studies are the following: one year chimpanzee and other primate study, one year fish study, a limited smallmammal survey, a limited amphibian and reptile survey, a limitedtree and other plants survey, a limited butterfly survey and a limited bird survey. These biodiversity surveys will start in April 2005. The Panel proposes that these studies be regarded as the initial components of a monitoringprogram. The ESAP agreed that constructionwork could start and continue while these studies are inprogress, but reservoirimpoundmentshouldnot take placebeforethe recommendationsofthese studies are known and their implementationagreedwith the government. Furthermore, these studies will be valuable to the work entailed in creating an environmentaloffset because the habitat, while not critical habitat, falls under OP 4.04's definitionof natural habitat.See paragraph 15. 14. Natural Habitat Mitigationand Protectionof Chimpanzees. The area to be inundated does meet the criteria for significant conversion of natural habitat under the Natural Habitat Policy OP 4.04 (OP 4.04 paragraph 5)'. The Bank can support significant conversion of natural habitatonly when there are no feasible alternatives for the project and its siting(see paragraphs4 and 3 above, and 2005 EIA Appendix C1 paragraph 85 page 120) and the overall benefits from the project substantially outweighthe environmentalcosts. Concerning the overallbenefits vis a vis the environmental costs, it must be emphasized that almost the entire country will be dependent on the BHP for their electricity supply and economic development. The provision of electricity will also be a stabilizing factor in helpingto prevent the country from slipping back ~~ Wherever feasible, Bank-financedprojects are sitedon lands already converted (excluding any landsthat inthe Bank'sopinion were converted inanticipationofthe project). The Bank does not supportprojects involvingthe significant conversion of naturalhabitatsunless there are no feasible altematives for the project and its siting, and comprehensiveanalysis demonstrates that overall benefits from the project substantially outweigh the environmental costs. Ifthe environmental assessment indicates that aproject would significantly convert or degrade natural habitats, the project includesmitigation measuresacceptable to the Bank. Such mitigation measuresinclude, as appropriate, minimizinghabitat loss (e.g., strategic habitat retention and post-development restoration) and establishing and maintaining an ecologically similar protected area. The Bank accepts other forms of mitigation measuresonly when they are technically justified. 142 into another civil war. The policy also requiresmitigationmeasuresto compensatefor the loss of the natural habitat. The ESAP Panel and the 2005 EL4 report both recommend protectingthe remaining chimpanzee communities through establishing the Bumbuna Conservation Area (BCA) and including strong wildlife and conservation measures in the Bumbuna Watershed ManagementPlan. 0 A centerpiece of the EnvironmentalManagement Plan (EMP) of the 2005 EIA is the creationofthe BCA, whichwill be the environmentaloffsetfor the loss ofbiodiversity in the area to be inundated. The area of the BCA will initially be 17 km2,but an additional year-long study will be carried out to identify the best area to be protected and to establish the most appropriate boundaries for the protected area. The first step is to execute a desk study on the BCA.This step will start inMay 2005. The second step will be the establishment and the administrationof the BCA. This step is planned in the first year of projectimplementation. 0 The 2005 EIA also proposesamitigationplanto protectthe remainingpatchesof riparian forests and chimpanzee communities and other biodiversity in the wider project area and the inclusion o f strong wildlife and conservation measures in the Bumbuna Watershed Management Plan. This mitigation plan will be further refined based on the recommendationso fthe baselinesurveys startinginApril 2005. 0 The Bumbuna Catchment Management Activities, the WLMSAP (Water and Land Management Strategy and Action Plan), the BCA and the BWMA mitigation measures will be financed from a small levy on the electricity bill (approximately3 percent of the tariff per kilowatt-hour) and is expected to provide a maximum annual recurrent contributionofUS$1,575,000 (page 200 inthe 2005 EIA report). 0 The Borroweris committedto implementthe mitigationmeasures. 15. BHP as an Opportunity for Chimpanzee Protection. The BHP will provide the opportunity to promote conservation of the chimpanzee communities that remain in the project area. The first step, as noted above, is to conduct further field studies on the Bumbuna chimpanzeepopulationover a periodof at least one year to enable their numbers, distributionand movements to be better defined. Such data will, in turn, provide the information needed to elaborate the mitigation measures. The mitigation measures that have been recommended include: 0 Long-termmonitoringo fthe chimpanzeepopulation; 0 Declaring the most important chimpanzee habitat(s) in the Bumbuna Catchment as protectedarea(s); 0 Improving chimpanzee habitat by the management of adjacent areas, including reforestation, and encouragingcorridorsthat connect to other chimpanzee habitats inthe BumbunaCatchment; 0 Creating local public awareness concerning the need to protect and not decimate the chimpanzee population;and 0 Encouraging the development of the BHP as a centre for ecotourism and chimpanzee research, with the beneficialafter-use o fthe constructioncamp. 16. Conclusion: Basedon studies to date and independentevaluationo f these studies by the ESAP, the areato be inundatedis not deemedvital for the survival o fthe chimpanzee population remaininginthe Bumbunaproject area. Further, inundationof the Bumbunareservoirarea is not vital for the survivalofthe chimpanzee populationin Sierra Leone. Increasinghumanpressure, in the without projectsituation,will eliminatethe chimpanzee populationand the remaininggallery 143 forests in the Bumbuna area in the coming decades (see Figures 2 and 3). The project poses an opportunityto protect: 0 the chimpanzees andthe remaininggalleryforests inthe Bumbunaarea; 0 at the same time, improve the livelihoodofthe farmers inthe area; and 0 provideelectricityto SierraLeonefor economic development. 144 Annex 18: InformationSharingand PublicConsultation SIERRA LEONE: Completionof the BumbunaHydroelectricProject 1. Public Consultation and InformationDissemination: the public consultation process undertaken during preparation o f the Completion o f the Bumbuna Hydroelectric Project has provided an opportunity to engage project affected people and concerned stakeholders at the village, district and national levels. The principal objectives o f this process have been to ensure that: (i)adequate and timely information was provided to project-affected, `primary"' stakeholders as well as `secondary'" stakeholders who have legitimate interests in the project at the national level; (ii) these stakeholders are given sufficient opportunity to voice their opinions and concerns; (iii) poor and vulnerable groups are given an opportunity to voice their opinions as legitimate stakeholders; and (iv) their concerns are factored into the EM and the RAPSas well as the complementary Upper Seli Community Development Initiative. 2. Consultations were carried out in compliance with the World Bank safeguard policies on Environmental Assessment (OP 4.01) and Involuntary Resettlement (OP 4.12) which require that the project affected people and other stakeholders are consulted in a meaningful way. To accommodate these policies, a three-step approach was followed inthe safeguard studies (the EIA Update study and the two Resettlement Action Plans) to involve and consult with stakeholders at national, district and village levels. The general approach is noted in Table 1, which provides more detail on the type o f stakeholder engagement on these studies. Table: 1 Three-step processin stakeholder interactionson safeguardstudies in 200 and 2005 Step 1: Introductionand eliciting concerns Initial presentationswere made to stakeholdergroups on the purposeand processo f each study in order to elicit their concerns on the key issues andthe proposedapproachfor the study. For example, in preparingthe EIA Update, a scoping meetingfor national stakeholderswas heldbased on a ScopingReport and draft PublicConsultationPlan. Subsequently, on-site meetingswere held with community members ,traditional leaders and local government authorities to discussthe same agenda. 1 For the RAPS,a strategy for public consultation and information disclosure was prepared, followed by a series of meetingswith local communities at different locations, including presentationand discussion sessions with district and local government agencies, the Paramountand Village Chiefs, and elders. m Issuesof concern such as the processsteps and specific compensationpoliciesand grievanceprocedureswere discussed. Methods for stakeholder involvement in the processwere agreed. Step2: Active involvement in the data collection, surveysand evaluation The field teams for each study then met individually with the affectedcommunities and local leaders in group meetings, focus groups, and in interviewswith individual householdsto establishbaselinedata, attitudes and expectations,and areas of concern in carrying forward the analysis. 1 Inthe case of the RAPS,this involvedthe delineation ofthe areas impactedby the projectand the documentationof affected families' situation, livelihoodsand amenities, etc. impactedby the project. The analysis was made in relationto codified and traditionalrights and entitlements. 1 Forthe EIA Updatethis involvedsurveysand field data collection, consultingwith local resourcesusers and collecting local knowledge. National level stakeholdersin the environment and resource management agencieswere interviewedand consulted throughoutthe process. Step3: Presentation, Stakeholder Review and Feedback The results of the analyses and interactionwith stakeholderswere then presentedfor discussion. These meetingswere initially held with local government officials and ParamountChiefs, followed by open community meetings. Feedback on the outcome of the local meetingswas providedto the inter-agencyTechnicalCommittee for the projectand national stakeholders(some o fthese steps are still in progress andthe resultswill be includedin the disclosureo fthe safeguardreport drafts). Dependingon the particularstudy, this ledto further negotiation, or steps to presentthe findings and recommendationsto decision- makers (national-levelor local decision makers dependingonthe issue), and to preparefor subsequent public consultations. lo Primary stakeholders are traditional authorities, women, elders, local authorities, community youth, religious leaders, Secondary stakeholders are civil society organizations,NGO community, central governmentministries, parastatalorganizations, academidresearchinstitutes,the media. 145 3. While each safeguard study team interacted directly with target stakeholder groups, a Communications Action Plan was developed to provide an overall communications framework for the PIU. This will help the PIU to provide consistent information and messages to the different stakeholder groups during the completion phase and as the project moves into the commissioning trials and operation stages. 4. The Communications Action Plan outlines a series of media and outreach programs with public dialogue forums to raise issues and debate concerns as they arise. There will be on-site information offices in the project-affected areas (e.g. both sides o f the river in the reservoir area and at convenient locations along the 200 km transmission route) that will be proactive in providing the affected communities with timely information and also serve as a centre where people can receive detailed information and support services as well as register and resolve any grievances that arise. These arrangements are set out inthe Communications Action Plan (Annex 7,) and the more specific provisions and mechanisms are contained inthe RAP documents. 5. Engagementof LocalAuthoritiesand ProjectAffected Communities: The RAPs and EIA Update studies are the main platforms for interaction with affected communities. Those responsible for decision-making at this level include the local government and traditional authorities in the affected areas, e.g. Paramount Chiefs o f Bumbuna, Fadugu, Kondembaia and Makeni, and the Local District Councils o f Bombali in Makeni, Koinadugu in Kabala, and Tonkolili in Magburaka, as well as the Village Chiefs, community elders and other influential people in the communities, such as teachers. The RAPs and the EL4 update collectively recommend mechanisms that are appropriate for the completion phase and for subsequent operation phases o f the project. 6. Engagement of National Stakeholders, Other Audiences And Interested Parties: National stakeholders and the public (as consumers) have a major stake in the successful completion o f the project and the promised delivery o f affordable power services. Print media, radio and television programs have been developed to inform the public o f the project status and provide a forum for public debate (the first Radio Q&A was held on 26 Sept 2004, 8 additional national radio programs have been produced between Sept 2004 and May 2005). 7. The Other Audiences Addressed by the CommunicationActionPlanInclude: Development Agencies and NGOs: this includes the development agencies active in Sierra Leone and particularly in the region, as well as the local and national NGOs and civil society groups to be contacted with information throughout the project implementationperiod and subsequently inthe BHP project management and monitoring phases. International Stakeholders: The PIU is currently preparing material for a website that will provide international NGOs, other development agencies, civil society and professional associations with access to all safeguard studies and project implementation documents, as well as the Dam Review and Environmental and Social Advisory Panel reports as they become available. 8. Summary of EIA Scoping Consultations: Various meetings were conducted between August and September 2004 at the local level and a workshop was organized inFreetown for the national stakeholder group. The views and concerns o f individual stakeholders were noted and compared separately for local and national stakeholders and were subsequently summarized for each stakeholder group. The consultations were undertaken in Krio, Limba, Koranko and in the English language. The EIA and RAP studies were disclosed in the World Bank Infoshop on 146 January 26, 2005 and reports were made available for comment in various sites in Sierra Leone and by providing notice, to that effect, in the government Gazette and two issues o f a national newspaper. 9. The main questions raised during scoping consultations centered on ten issues: 1) Livelihoods (compensation): compensation arrangements for resettlement o f communities, individual houses, and plots and/or economic displacement caused by the hydropower project and the 161 kV transmission line; 2) Livelihoods (Zandtake): loss o f areas for mining o f gold and sand gold and sand mining and access prevented to land and other natural assets by `new' water levels in the river; 3) Livelihoods (severance): access made more difficult to land and other natural assets and to markets and social infrastructure facilities in neighboring communities, in particular village children attending secondary school in Bumbuna and village patients visiting the dispensarylclinic in Bumbuna; 4) Livelihoods (changes in occurrence and abundance in natural assets): possible restrictions on huntingand reduction innumbers o f key species in area; 5) Hydrological regime changes (upstream): effects on tributaries flowing into reservoir backing up in highrainfall and possible localized flooding invicinity o f villages. Likelihood o f flooding ifthere istoo largearelease ofwater incaseofexceptionally heavyrains andeffectoncrops, houses and other assets; 6) Hydrological regime changes (downstream): changes in flooding pattern in Seli floodplain and effects on those farmers benefiting from the annual flooding; changes in downstream flows creating areas o f water with more limited flushing and increased risk of exposure to waterborne diseases to those usingthe river for bathing and washing clothes etc.; 7) Health and threats to life: increase in STDs and other infectious diseases from influx o f workers. Increase in water- borne diseases such as malaria and onchocerciasis. Increased habitat for crocodiles from changes in hydrological regime; 8) Food security: effects o f loss o f assets such as crops and farmland and inadequate or delayed compensation. Also, issue o f time period for economic trees to reach fruit bearing potential in relocation areas. Links to potential nutritional health consequences, numbers o f in-migrants, and local infrastructure capacity. Increase in crime rates for theft, fraud, assault and domestic violence. Increase in prostitution; 9) Social changes: inflation in housing market with locals unable to afford the higher rents for accommodation. Potentialdamage to infrastructure such as roads and water supply network from increase inheavy vehicles. Effects on sacred sites areas such as `society bush'. Compensation for cost of performing `abandoningtmoving' rituals. 10) Cumulative impacts: agricultural land `squeeze' due to removal o f land near river from production, movement uphill to farm (less fertile), decreased fallow periods, and land exhaustion. Growing rural population. Food security. Effects of developingmultiple areas for relocationwith farmland renovated or improved access. Table 6.2-3 below provides additional details on the scoping consultations. 147 Table 6.2-3: ScopingConsulntionSIPctings Stakeholder(s) Loerrion Date Typeof 30,of ?iouo. -omen of meeting attendees Acme ProliucdSecretary.Northem bl&m 23.08 03 Pnvate 1 Not spplicable R o n " Village &ref elders andluhabirauts Kadala 24.0804 F'ubhc 11' 6 1 teacher. one retuedteacher Police ( 0 f f i c e r m " b g . $emor I Bubuna Tom'. I 26.08.W I h v a t e I 3 1 Not apphcabh CID officer andstanon sergeat) RommCatholic pnest I Not apphcebk Tomsfup chefdmspeaker, elders and I F a d u p - I 26.08.03 I Pubhc I 31 I 10. Summary Results of Draft EIA and Reservoir RAPPublic Consultations: Following the scoping consultations and those carried out during the studies update, a third wave o f consultations with primary and secondary stakeholders has been carriedout by the PIU of BHP, the EL4 team, and the RAP teams involved in the project preparation and safeguard studies at local, districtandnationallevels. 11. The consultationsfor the EIA draftreportand Reservoir RAPswere undertakenas ajoint exercise. Three open public meetings and one meeting with a women farming association were held in Bumbuna, Kasasi and Fadugu (with attendants representing 13 additional villages) and one national level workshop was held in Freetown. The third wave was conducted from April 13ththrough April 20th, 2005 and involvedthe communities and stakeholders groups consulted inthe earlier phasesofthe EIA andRAPprocess. 12. The overall program for the consultationstarted with a radio program talk show called "Night Line" at Radio UNAMSIL FM103, in late March 2005. The discussion covered all aspects o f the Project including the project background and the EL4 and RAPs, followed by questions and answers from listeners around the country. Subsequently, confirmation letters setting the time, date, and venue for local consultations were sent to the local authorities in the project areas. A weeklong radio announcement o f the commencement o f the consultation exercise was also provided. Onthe day o f consultations, meetings were preceded by megaphone announcements. 148 13. Consultations discussed the purpose o f the EM and RAP reports followed by the presentation o f findings and recommendations, followed by a question and answer session and closing remarks by the dignitaries present. Many o f the participants had previously attended scoping consultations. This allowed the collection o f additional feedback on the EIA and the RAP and ensured continuity with the previous discussions. Methods used included workshop or conference, focus groups, household surveys and semi structured interviews. The consultations were undertaken inKrio, Limba, Koranko and inthe Englishlanguage. 14. All meetings were recorded and photographed; verbatim notes of the proceedings are beingprepared. All questions and comments raised duringconsultations are being grouped into topics and summarized in a standard format composed o f issues raised, consultation team responses, and follow up action as to how this feedback will be reflected in the joint final EIA/RAP consultationreport. A total o f more than 1,200 people have participated inthe consultations. MainFindings: 15. National Level Consultations: The national level workshop was held in Freetown on Wednesday the 20th o f April, where EL4 and RAPS issues were addressed from a wider perspective. The specific issues raised were similar to those raised in local consultations, (potential heath hazards related to water borne diseases, electromagnetic radiation from the transmission line, hydrological and aquatic ecological impacts.) However, the most pertinent comments and suggestions related to ensuring that the overall EIA mitigation actions are designed in a cost-effective manner, and secondly, that all ministries and government officials actively participate in the design, and where appropriate implementation, so as to avoid duplication, mismanagement and uncoordinated actions. Table 2 provides additional information on the reservoir RAP consultations carried out inthe period from August to October 2004 and on the category o f stakeholders involved. 16. Bumbuna and Reservoir Area: the discussions in the Bumbuna consultation centered on local employment opportunities and local hiringpolicies for the project completion and operation phase. Several speakers requested additional benefits for the townspeople, for instance roads to other communities. Two main concerns were raised on potential heath hazards related to water borne diseases and electromagnetic radiation from the transmission line. Stakeholders also expressed concern about prohibition o f slash and burn activities and the risk to farming opportunities. Additional concerns were expressed about the relationship between primates and humans in light o f the squeeze on cultivable land and chimpanzee habitat, and the possible o f crocodile numbers increasing thus affecting public safety inthe reservoir. 149 Table 2: Reservoir RAP ConsultationsMeetingsAugust/October 2004 Stakeholder (9) Location Date Type of Meeting Zonsultation team ParamountChief of Fadugu 13.OS.04 ReconnaissancePrivate ream o fExperts doing first Kassunko .econnaissance field trip Chiefdom, with 'IU. Makeni 13.OS.04 ReconnaissancePrivate ream of Expertsdoing first Chief Security Officer .econnaissance field trip with ?IU. Bumbuna ~ 13.08.04 ReconnaissancePrivate ream of Expertsdoing first Bumbuna ParamountChief, ,econnaissance field trip with 'IU. Kadala Ms.I.Yhr, MM.R. ~ 14.08.04 Public KadalaCommunity Zwahlen, C.J.Thomas, S. Weekes, H.H.Walker Kasasi 14.08.04 Public MS.I.Yhr, MM.R. Kasasi Community Zwahlen, C.J. Thomas, S. Weekes, H.H.Walker KayakalaVillage Chief and Kayakala 14.08.04 Public Ms.I.Yhr, MM.R. inhabitants. Zwahlen, C.J.Thomas. S. Weekes, H.H.Walker Gbulia Public Ms.I.Yhr, MM.R. Village chief and elders 15.08.04 Zwahlen, S. Weekes, H.H. Walker Fula 16.08.04 Public Ms.1.Yhr, MM.R. Zwahlen, S. Weekes Kakekor Community Kakekor 16.0S.04 Public Ms.I.Yhr, MM.R. Zwahlen, S. Weekes Kanu Village Chief and Kafogo Public elders, FulaVillage Chiefand inhabitants 16.08.04 Ms.I.Yhr, MM.R. Zwahlen, S. Weekes Chiefof Limba community o fFula Town. NationalRepatriation& Freetown Private ReintegrationOfficer, 30.08.04 Imelda Yhr NaCSA Freetown Driven Program, NaCSA 30.08.04 Private ImeldaYhr Freetown 7.09.2004 Private Imelda Yhr 150 Location Date Type of Meeting Zonsultation team Freetown 7.09.2004 Private melda Yhr Kamankay: Public vls. K. Ivarsdotter, WB sections opposed to the 2onsultant: Ms.I.Yhr; MM. Bumbuna 19.09.04 1. ParamountChief Cwahlen, C.J.Thomas. Bumbuna Public vls. K. Ivarsdotter,WB Bumbuna ParamountChief 2onsultant:Ms.I.Yhr; MM. and inhabitants 19.09.04 1. Cwahlen, C.J. Thomas, H.H. Walker. Director o f LAWCLA Freetown 23.09.04 Private vl. Gelbert, Musa Bai Sesay Kanu Village Chief and Kafogo Public elders 24.09.04 vl. Gelbert, Musa Bai Sesay Fula Village Chief Fula 24.09.04 PubliciExcursion vl. Gelbert, Musa Bai Sesay Village Chief, elders and Kakekor: Public inhabitants. 24.09.04 M. Gelbert, Musa Bai Sesay Village Chief, elders and Camayimbo Public inhabitants 24.09.04 M. Gelbert, MusaBai Sesay 3eremakono-Kamayimbo community teacher 24125.9.04 Private M.Gelbert, MusaBai Sesay Camaron, Kasulubaand Excursion (onteya 25.09.04 M.Gelbert, MusaBai Sesay 3umbuna Pietrangeli 27.09.04 Private M.Gelbert, MusaBai Sesay 3bulia 27.09.04 Private M.Gelbert, MusaBai Sesay