Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD856 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR32.40 MILLION (US$50 MILLION EQUIVALENT) TO THE PLURINATIONAL STATE OF BOLIVIA FOR A ACCESS AND RENEWABLE ENERGY PROJECT APRIL 25, 2014 Energy Unit Sustainable Development Department Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April, 2014) Currency Unit = US$ BOL$6.91 = US$1 US$1.54 = SDR1 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS BOL$ Bolivian boliviano CESSA Compañía Eléctrica Sucre S.A. COSERCA Cooperativa de Servicios Eléctricos de Camargo CUT Cuenta Única del Tesoro (Treasury Single Account) DGAA Dirección General de Asuntos Administrativos (MHE’s Administrative Unit) Dirección General de Energías Alternativas (Alternative Energy General DGEA Directorate) EA Environmental Assessment Electricidad Descentralizada para el Acceso Universal (Decentralized Electricity EDAU for Universal Access Project) EIA Environmental Impact Assessment EMF Environmental Management Framework EMP Environmental Management Plan ENDE Empresa Nacional de Electricidad Bolivia ERR Economic Internal Rate of Return FM Financial Management ft. Feet GDP Gross Domestic Product GiZ Deutsche Gesellschaft für Internationale Zusammenarbeit GoB Government of Bolivia GPOBA Global Partnership for Output-Based Aid IDB Inter-American Development Bank Infraestructura Descentralizada para la Transformación Rural (Decentralized IDTR Infrastructure for Rural Transformation Project) Infraestructura Descentralizada para la Transformación Rural II (Access and IDTR II Renewable Energy Project) IFR Interim financial reports IPP Indigenous Peoples Plan IPPF Indigenous People Planning Framework KfW Kreditanstalt Für Wiederaufbau km. Kilometer kWh Kilowatt hour LCSEG Energy Unit, Latin America and the Caribbean LED Light-emitting diode M&E Monitoring and evaluation Ministerio de Economía y Finanzas Públicas (Ministry of Economy and Public MEFP Finance) MHE Ministerio de Hidrocarburos y Energía (Ministry of Hydrocarbons and Energy) NGO Non-governmental Organization NPV Net present value O&M Operation and maintenance O&M&R Operation, maintenance and replacement PCU Project Coordination Unit Programa Electricidad para Vivir con Dignidad (Living with Dignity Electricity PEVD Program) PFM Public Financial Management PV Photovoltaic RAP Resettlement Action Plan RE Renewable energy RPF Resettlement Policy Framework Ley de Administración y Control Gubernamentales (System of Financial SAFCO Administration and Control) SE4All Sustainable Energy for All Sistema de Ejecución de Planes de Adquisiciones (Procurement Plan Execution SEPA System) SEPSA Servicios Eléctricos Potosí S.A. SHS Solar home systems SICOES Sistema de Contrataciones Estatales Sistema Integrado de Gestión y Modernización Administrativa (integrated financial SIGMA management system) SIN Sistema Interconectado Nacional (National Interconnected System) UNDB UN Development Business US$ / USD United States dollar Vice-Ministerio de Inversión Pública y Financiamiento Externo (Vice-Ministry of VIPFE Public Investment and External Finance) Vice-Ministerio de Electricidad y Energías Alternativas (Vice-Ministry of VMEEA Electricity and Alternatives Energy) W Watt Wp Watt-peak Regional Vice President: Hasan A. Tuluy Acting Country Director: Livia M. Benavides Sector Director: Ede Jorge Ijjasz-Vasquez Sector Manager: Malcolm Cosgrove-Davies Task Team Leader: Lucía Spinelli PLURINATIONAL STATE OF BOLIVIA Access and Renewable Energy Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context................................................................................. 2 C. Higher Level Objectives to which the Project Contributes .......................................... 3 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4 A. PDO............................................................................................................................... 4 Project Beneficiaries ........................................................................................................... 4 PDO Level Results Indicators............................................................................................. 5 III. PROJECT DESCRIPTION ..............................................................................................5 A. Project Components ...................................................................................................... 5 B. Project Financing .......................................................................................................... 6 Project Cost and Financing ................................................................................................. 7 C. Lessons Learned and Reflected in the Project Design .................................................. 7 IV. IMPLEMENTATION .......................................................................................................8 A. Institutional and Implementation Arrangements .......................................................... 8 B. Results Monitoring and Evaluation .............................................................................. 9 C. Sustainability............................................................................................................... 10 V. KEY RISKS AND MITIGATION MEASURES ..........................................................11 A. Risk Ratings Summary Table ..................................................................................... 11 B. Overall Risk Rating Explanation ................................................................................ 11 VI. APPRAISAL SUMMARY ..............................................................................................11 A. Economic and Financial Analyses .............................................................................. 11 B. Technical ..................................................................................................................... 12 C. Financial Management ................................................................................................ 13 D. Social........................................................................................................................... 14 E. Environment................................................................................................................ 15 Annex 1: Results Framework and Monitoring .........................................................................16 Annex 2: Detailed Project Description.......................................................................................21 Annex 3: Implementation Arrangements ..................................................................................25 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................47 Annex 5: Implementation Support Plan ....................................................................................54 Annex 6: Economic and Financial Analysis ..............................................................................58 . PAD DATA SHEET Bolivia Access and Renewable Energy Project (P127837) PROJECT APPRAISAL DOCUMENT . LATIN AMERICA AND CARIBBEAN LCSEG Report No.: PAD856 . Basic Information Project ID EA Category Team Leader P127837 B - Partial Assessment Lucia Spinelli Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 01-Dec-2014 01-Dec-2021 Expected Effectiveness Date Expected Closing Date 30-Nov-2014 01-Dec-2021 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Malcolm Cosgrove- Ede Jorge Ijjasz- Livia M. Benavides Hasan A. Tuluy Davies Vasquez . Borrower: Ministry of Finance Responsable Agency: Ministerio de Hidrocarburos y Energía, Vice Ministerio de Electricidad y Energías Alternativas VMEEA Contact: Hortensia Jiménez Title: Vice Ministra de Energías Alternativas y Electricidad Telephone No.: 59122110887 Email: hjimenez@hidrocarburos.gob.bo . Project Financing Data(in USD Million) [ ] Loan [ ] Grant [ ] Guarantee [X] Credit [ ] IDA Grant [ ] Other Total Project Cost: 59.15 Total Bank Financing: 50.00 Financing Gap: 0.00 . Financing Source Amount BORROWER/RECIPIENT 5.15 International Development Association (IDA) 50.00 New 35.83 Recommitted 14.17 LOCAL BENEFICIARIES 4.00 Total 59.15 . Expected Disbursements (in USD Million) Fiscal Year 2015 2016 2017 2018 2019 2020 2021 2022 Annual 0.50 3.00 7.00 15.50 16.50 5.50 1.50 0.50 Cumulative 0.50 3.50 10.50 26.00 42.50 48.00 49.50 50.00 . Proposed Development Objective(s) The proposed Project development objective is to expand access to electricity in unserved areas of Bolivia under a model of electricity access expansion that supports the implementation of the national decentralized framework. . Components Component Name Cost (USD Millions) Electricity Services for Unserved Areas 43.30 Support to Access and Clean Energy Strategies 2.00 Project Management 4.70 . Institutional Data Sector Board Energy and Mining . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co- Co-benefits % benefits % Energy and mining Other Renewable 40 Energy Energy and mining General energy sector 60 100 Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Rural development Rural services and infrastructure 100 Total 100 . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency PCU X Continuous Description of Covenant Schedule 2. Section I.A.1.(a) The Recipient, through MHE shall maintain, throughout Project implementation, a unit (“PCU”) with structure, functions and responsibilities acceptable to the Association as set forth in the Operational Manual, including inter alia, the responsibility of the PCU to implement, monitor and supervise the carrying out of the Project (including its financial and procurement aspects) Name Recurrent Due Date Frequency PCU Staff X Continuous Description of Covenant Schedule 2. Section I.A.1.(b) The Recipient, through MHE shall ensure that (i) the PCU is, throughout Project implementation, headed by a Project coordinator, and staffed with adequate professional, fiduciary, administrative and technical personnel (including social and environmental specialists), all with qualifications, experience and terms of employment acceptable to the Association Name Recurrent Due Date Frequency Photovoltaic Subproject Agreements X Continuous Description of Covenant Schedule 2. Section I.B.3 Prior to the implementation of any Photovoltaic Subprojects under the jurisdiction of a Participating Municipality, The Recipient, through MHE, shall enter into an agreement with said Participating Municipality (the “Photovoltaic Subproject Agreement”), under terms and conditions acceptable to the Association. Name Recurrent Due Date Frequency Environmental Management Framework X Continuous Description of Covenant Schedule 2. Section I.E.1 The Recipient, through MHE, shall: (a) implement the Project in accordance with the Environmental Management Framework (EMF); and (b) implement and/or cause to be implemented the pertinent environmental management plan, in accordance with its terms and in a manner acceptable to the Association Name Recurrent Due Date Frequency Resettlement Policy Framework X Continuous Description of Covenant Schedule 2. Section I.E.2 The Recipient, through MHE, shall: (a) implement the Project in accordance with the Resettlement Policy Framework (RPF), including the procedures detailed in said RPF; and (b) implement and/or cause to implement the pertinent resettlement action plan in accordance with its terms and in a manner acceptable to the Association Name Recurrent Due Date Frequency Indigenous People Planning Framework X Continuous Description of Covenant Schedule 2. Section I.E.3 The Recipient, through MHE, shall: (a) implement the Project in accordance with the Indigenous People Planning Framework (IPPF); and (b) implement the pertinent indigenous peoples plan in accordance with its terms and in a manner acceptable to the Association. Name Recurrent Due Date Frequency Safeguards Review of Terms of X Continuous Reference Description of Covenant Schedule 2. Section I.E.4 The Recipient shall, through MHE, ensure that the terms of reference for any consultancies related to the technical assistance provided under the Project, shall be acceptable to the Association and, to that end, such terms of reference shall require that the advice conveyed through such technical assistance be consistent with the requirements of the Association’s Safeguard Policies . Conditions Source Of Fund Name Type IDA Inter-Institutional Agreement with Chuquisaca Effectiveness Description of Condition Article 4.01.(a) The Inter-Institutional Agreement with the Gobierno Autónomo Departamental de Chuquisaca has been: (i) executed on behalf of the Recipient and the Gobierno Autónomo Departamental de Chuquisaca; and (ii) duly ratified by the Gobierno Autónomo Departamental de Chuquisaca. Source Of Fund Name Type IDA Inter-Institutional Agreement with Potosí Effectiveness Description of Condition Article 4.01.(b) The Inter-Institutional Agreement with the Gobierno Autónomo Departamental de Potosí has been: (i) executed on behalf of the Recipient and the Gobierno Autónomo Departamental de Potosí; and (ii) duly ratified by the Gobierno Autónomo Departamental de Potosí. Source Of Fund Name Type IDA Operational Manual Effectiveness Description of Condition Article 4.01.(c) The Operational Manual has been adopted by the Recipient, through the MHE. Team Composition Bank Staff Name Title Specialization Unit Enrique O. Crousillat Consultant Consultant LCSEG Noreen Beg Senior Environmental Senior Environmental LCSEN Specialist Specialist Luisa F. Pacheco de Senior Program Senior Program Assistant LCSEG Vincenzo Assistant Patricia De la Fuente Senior Finance Officer Senior Finance Officer CTRLN Hoyes James Victor Pannett Operations Officer Operations Officer LCSEG Maria Virginia Finance Analyst Finance Analyst CTRLN Hormazabal Lourdes Consuelo Sr Financial Sr Financial Management LCSFM Linares Management Specialist Specialist Alvaro Larrea Senior Procurement Senior Procurement LCSPT Specialist Specialist Victoria Minoian Consultant Consultant SASFP Lucia Spinelli Senior Energy Specialist Team Lead LCSEG Elena Segura Labadia Senior Counsel Senior Counsel LEGLE Janina Andrea Franco Energy Specialist Energy Specialist LCSEG Salazar Andrea Maria Castro Program Assistant Program Assistant LCSEG Astudillo Francisco Sebastian Consultant Consultant GEEES Rodriguez Sanchez Cesar Adrian Arreola Consultant Consultant LCSEG Croda Wendy Claribel Guerra Consultant Consultant LCSEG Navarro Adam John Behrendt Social Development Social Development LCSSO Specialist Specialist Juan Carlos Cardenas E T Consultant E T Consultant LCSEG Valero Non-Bank Staff Name Title Office Phone City . Locations Country First Location Planned Actual Comments Administrative Division Bolivia Potosí Departamento de X Potosí Bolivia Chuquisaca Departamento de X Chuquisaca I. STRATEGIC CONTEXT A. Country Context 1. Bolivia’s strong economic performance over the past decade is likely to continue into the coming years. Annual gross domestic product (GDP) growth has averaged 4.8 percent over the last ten years and is likely to remain above 5 percent in 2014. Furthermore, rapidly increasing public investment has spurred growth in the construction, manufacturing, finance, transport, and communications sectors. Current account and fiscal balance surpluses have prevailed over the last ten and six years, respectively. This has allowed Bolivia to accumulate sizable buffers in order to face eventual negative external shocks. Similarly, Bolivia’s relative isolation from international financial markets has helped the country withstand the international crisis whilst continuously accumulating buffers. Assuming commodity prices will remain stable and no new international crises occur, Bolivia will likely maintain its robust economic growth and healthy macroeconomic balances during upcoming years. Nevertheless, Bolivia is still exposed to shifts in international commodity prices as low investment rates could constrain its longer term growth prospects. 2. Although Bolivia has been able to substantially reduce both poverty and inequality, poverty remains high – particularly in the rural area – and varies widely across regions. According to the national poverty line measure, poverty markedly decreased from 63 percent of the population in 2002 to 45 percent in 2012, while extreme poverty reduced from 37 percent in 2002 to 22 percent in 2012. Inequality—as measured by the Gini coefficient—has decreased from 0.60 in 2002 to 0.47 in 2011. Moreover, between 1994 and 2008, the Human Opportunity Index rose from 45 percent to 66 percent due to improvements in children’s access to health, education and other basic services. Nevertheless, poverty still affects more than 61 percent of the rural population, almost twice the urban poverty rate. According to the Human Opportunity Index, the largest constraining factor regarding access to opportunity for children and youths is living in rural areas. Moreover, the level of poverty varies widely across regions, ranging from more than 60 percent in the Autonomous Departments 1 of Potosí and Chuquisaca, to 20 percent in Tarija 2, underlining the prevalence of marked regional gaps. 3. Access to electricity has a direct impact in alleviating poverty and boosting shared prosperity. It also enhances social inclusion by improving the lives of the poor, in particular of the rural poor. In rural areas, lack of access to electricity and other infrastructure results in a lower quality of life, poor medical care and education, and limited opportunities for economic development. Schools have less or no access to modern educational resources (videos, audio systems, computers, etc.) and students less time available to read or do homework at home, after finishing other domestic tasks. Health clinics do not have adequate access to light, water pumps, refrigeration for drugs and vaccines, medical instruments or fans, and sterilizers. Without electricity, women have limited hours to complete their indoor work or undertake educational and employment possibilities and limited participation in community affairs. Mobile phone 1 Bolivia counts with nine Autonomous Departments, first territorial and jurisdictional subdivision of the country. 2 According to the 2012 census, 66 percent of the population in Chuquisaca is poor (46 percent is extremely poor) while 63 percent of people in Potosí live in poverty (50 percent in extreme poverty), well above national averages. 1 coverage, if available, cannot be leveraged as there is no way to recharge mobile phone batteries. In addition, a lack of public lighting contributes to a lack of security at night, particularly for women and children. Furthermore, families that do not have electricity services usually cover their energy needs with batteries (for flashlights and radios), kerosene burners and candles, and wood (for cooking and heating), which have high relative costs for the low-income segment and contribute to respiratory illnesses that affect households, especially women and children. B. Sectoral and Institutional Context 4. Bolivia’s electricity sector is composed of a National Interconnected System (Sistema Interconectado Nacional, SIN) and isolated systems. Most generation, transmission and distribution activities are unbundled. Hydroelectricity represents roughly 40 percent of generation, and thermal almost 60 percent. Typically, Autonomous Departments are served by one Distribution Company. In addition, the Empresa Nacional de Electricidad Bolivia (ENDE, a state-owned, vertically-integrated corporation) manages several small-scale utilities. 5. Through its Bicentennial Patriotic Agenda 2025 (adopted in 2013), Bolivia aims to eradicate extreme poverty by providing universal basic services such as access to electricity. The Agenda intends to share the benefits of prosperity and defines criteria for the provision of basic services including aspects such as: universality, responsibility, accessibility, continuity, quality, efficiency, effectiveness, equitable and necessary coverage rates, with participation and social control. In order to meet the mandate on energy access, Bolivia has updated its Programa Electricidad para Vivir con Dignidad – PEVD (Living with Dignity Electricity Program, established in 2011), with the objective of achieving universal access 3 to electricity by 2025. The Program shall provide access to electricity to roughly 600,000 households, of which 350,000 are located in the most remote rural areas of the country. These initiatives have set the framework for the development of electrification projects in the country. 6. The Vice Ministry of Electricity and Alternative Energy (Vice-Ministerio de Electricidad y Energías Alternativas – VMEEA), under the Ministry of Hydrocarbons and Energy (Ministerio de Hidrocarburos y Energía, MHE), is in charge of implementing the PEVD. Its responsibilities include delineating electricity sector policy and strategy for planning and monitoring, setting technical regulations and quality of service standards, and also developing new programs which support access to the electricity agenda and foster the use of renewable energy. In addition, the Rural Electrification Regulation (approved by Supreme Decree No. 28567/2005) provided the legal framework to support renewable energy development. The unit in charge of operationalizing the access agenda under the VMEEA’s is the Alternative Energy General Directorate (Dirección General de Energías Alternativas – DGEA), which is implementing electrification and alternative energy projects. 7. The 2010 Autonomy Framework and Decentralization Law establishes the need to include other actors in the access agenda. The Law has granted entities such as Autonomous Departmental Governments (Gobernaciones) and Municipalities new responsibilities, including: 3 In the Bolivian context, this is defined as access to sustainable, reliable and affordable electricity that can satisfy basic lighting and communications needs. 2 (i) design and implementation of investments; (ii) asset ownership; and (iii) operation and maintenance (O&M). This framework changes from a utility-owned and user-owned approach to one in which the subnational governments are responsible for rural and peri-urban electrification. 8. According to the 2012 Census, electricity coverage in the country has reached 80.95 percent but with significant variations across regions. A large share of the unserved population is concentrated in the poorest Autonomous Departments. These are: Chuquisaca (46,000 households still lack access, which represent 31 percent of total dwellings), Pando (7,100 households, 28 percent), Beni (16,600, 18 percent) and Potosí (71,300, 30 percent). Chuquisaca and Potosí represent the largest share of unserved households in Bolivia (roughly 117,000 households). 9. The World Bank has supported the Government of Bolivia (GoB) in pursuing its electrification agenda since 2003. Recent operations include: (i) the Decentralized Infrastructure for Rural Transformation Project (Infraestructura Descentralizada para la Transformación Rural, IDTR, P073367), which closed on May 2011 and financed the provision of access to electricity to over 30,000 families; and (ii) the Decentralized Electricity for Universal Access Project (Electricidad Descentralizada para el Acceso Universal, EDAU, P102479), supported by a Global Partnership for Output-Based Aid (GPOBA) Grant that closed on June 30, 2013 which benefitted 12,000 households. These projects supported an approach that focused on utility–owned grid extension, and user-owned off-grid systems (individual solar photovoltaic – PV – systems). C. Higher Level Objectives to which the Project Contributes 10. Access and renewable energy have been mainstreamed within the national legal framework and the national development agenda. The 2009 Constitution introduced the unwavering obligation of the Bolivian Government to eradicate extreme poverty and develop a pathway to shared prosperity for the forthcoming years. Through Article 20, the energy dimension was included by establishing universal access as an obligation. 11. The proposed Project’s relevance and alignment with Bolivia’s development goals is clear as it will also support the implementation of the decentralization framework through capacity building activities, knowledge transfer, tools, and methodologies. The proposed Access and Renewable Energy Project also known as Infraestructura Descentralizada para la Transformación Rural II (IDTR II) will assist in the implementation of the Gobernaciones’ and Municipalities’ roles under the Decentralized Framework. Working with many actors (Gobernaciones, Municipalities, beneficiaries, Distribution Companies, etc.) creates the opportunity to enhance ownership and build capacity of local agencies, improving the likelihood of a sustainable O&M framework. 12. IDTR II will be one of the main instruments towards achieving universal access in the near future as part of PEVD (which includes KfW-supported for renewable mini-grids and IDB-funded transmission and distribution activities), the proposed Project will help expand electricity coverage mostly in rural areas by increasing electricity connections to the SIN and by installing off-grid PV systems. 3 13. The objectives of the proposed Project are also fully aligned with the Bolivia Country Partnership Strategy for fiscal year (FY) 2012-2015 4 under the prioritized areas of “sustainable productive development” and “human development and access to basic services”. In addition, the Project is contributing to the Sustainable Energy for All Initiative (SE4All) 5, in particular to its objective of achieving universal energy access. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 14. The proposed objective of the Project is to expand access to electricity in the Plurinational State of Bolivia’s unserved areas under a model of electricity access expansion that supports the implementation of the national decentralized framework. Project Beneficiaries 15. The Project will benefit a large number of households and public institutions (mostly schools, and may include others, such as health centers) in predominantly rural areas of Bolivia. The Project will target beneficiaries from unserved households in areas with the highest levels of poverty and lowest electricity coverage and will focus on electrification activities in Chuquisaca and Potosí given the size of their unserved populations, their poverty rates as well as their capacity to repay Project-related debt. 6. Capacity building activities will also benefit existing institutions, both at the Central (such as the MHE) and subnational levels (Gobernaciones and Municipalities) as well as Distribution Companies. 16. It is expected that by 2021, the Project will have supported the provision of electricity to roughly 27,000 households in unserved areas of Bolivia, of which 14,500 would be connected to the grid and 12,500 would obtain solar PV home systems (SHS). Of these, almost 14,400 would be located in Potosí (10,900 grid extensions and 3,500 SHS) and 12,600 in Chuquisaca (3,600 grid extensions and 9,000 SHS). Furthermore, roughly 130 public facilities in these two Autonomous Departments (around 85 in Potosí and 45 in Chuquisaca) will obtain access to electricity. Pilots (for so called “Pico PV home systems”) will also provide services to more beneficiaries in other unserved areas of Bolivia. In addition the Project would finance roughly 35 capacity building activities for subnational entities, 70 outreach and training activities (for beneficiaries, Distribution Companies, contractors, and other relevant stakeholders) and 5 energy sector studies. 4 Bolivia Country Partnership Strategy for FY2012-2015 Report No. 65108-BO, discussed by the Bank’s Executive Directors on November 1, 2011. 5 SE4All has three main objectives: (i) providing universal access to modern energy services; (ii) doubling the global rate of improvement in energy efficiency; and (iii) doubling the share of renewable energy in the global energy mix. It was launched by the United Nations’ Secretary-General in September 2011, who co-chairs its Advisory Board together with the World Bank Group President. 6 See “Implementation Arrangements” Section (paragraphs 28-34) and Annex 3. 4 PDO Level Results Indicators 17. Progress towards achieving the Project Development Objective (PDO) will be assessed through the following performance indicators: (a) People provided with access to electricity by household connections 7 (b) Community electricity connections constructed–Other renewable energy: Off-grid (c) Capacity building activities for subnational entities implemented under the Project III. PROJECT DESCRIPTION 18. The Access and Renewable Energy Project aims to provide access to modern electricity services 8 in mostly rural (but also peri-urban) areas in Bolivia, focusing on those with the highest poverty and lowest electrification rates. The Project will also support capacity building under the new decentralized framework. The proposed Project will be national in scope, but focus first on Chuquisaca and Potosí. A. Project Components 19. The proposed Project is comprised of three components: 20. Component 1: Electricity services for Unserved Areas (US$52.45 million, of which US$43.30 million: IDA). This component would finance subprojects to provide electricity services to households and social institutions (mainly schools) in rural areas and villages. It would be developed through grid extensions or the installation of photovoltaic systems. It includes the following sub-components: (a) Sub-component 1.1 – Grid extension (US$39.05 million, of which US$30.00 million: IDA). Extension of low voltage distribution lines and grid densification and extension of medium voltage distribution lines and grid densification including if applicable the provision of small works and goods as in-kind compensation under the relevant resettlement plan, all in unserved areas. 21. The Credit will fully finance the subprojects (including main electrical materials needed to connect households to the grid 9) and supervision costs. Users will pay a standard fee 10 established by law to obtain their connection to the grid, and part of the connection costs 11. 7 This indicator includes two sub-indicators: (i) people provided with access to electricity by household connections- grid; and people provided with electricity by household connections–offgrid/minigrid–only renewable sources. 8 In the Bolivian context, this is defined as sustainable, reliable and affordable electricity services that can satisfy basic lighting and communications needs. 9 This may include items such as: grounding rod, meter cables and box, among others which will be detailed in the Project’s Operational Manual. It is expected all these materials would cost around US$40. 10 As beneficiaries would become regulated electricity users, they could benefit from the Tarifa Dignidad, which provides a 25 percent discount if household consumption is less than 70 kilowatt hour (kWh) per month. 5 (b) Sub-component 1.2 – Individual Solar Photovoltaic Systems 12 (US$12.70 million: IDA). Installation of solar photovoltaic systems in selected households in unserved areas, and provision of support for the operation and maintenance of the systems mentioned above, through the acquisition and utilization of the goods required. (c) Sub-component 1.3 – Solar Photovoltaic Systems in Public Institutions (US$0.70 million, of which US$0.60: IDA). Installation of solar photovoltaic systems in selected schools, health centers and other public institutions in unserved areas, and provision of support for the operation and maintenance of the systems mentioned above, through the acquisition and utilization of the goods required. 22. In the case of sub-component 1.2 subprojects will be fully financed by the Credit, while for sub-component 1.3 the operation will finance ninety percent of subprojects’ cost, and the rest will be funded by Municipalities. Beneficiaries will pay a fee to be determined by Municipalities, which may be recollected by these or other entities, such as Distribution Companies. 23. Component 2: Support to Access and Clean Energy Strategies (US$2.00 million: IDA). Provision of support to Bolivia’s strategies on energy access and clean energy through, inter alia: (i) design, installation and evaluation of pilot energy access systems in unserved areas through new technologies, including Pico-PV systems; (ii) design and carrying out of training and capacity building activities targeting Departments, participating Municipalities, qualified service providers, selected households and public institutions, and other relevant stakeholders, all participating and/or benefitting under Component 1 of the Project; (iii) support the preparation of indicators, baselines and methodologies for Project monitoring and evaluation, and carrying out of periodic evaluation of progress toward achieving the Project’s result indicators; (iv) design and carrying out communication strategies and other dissemination tools to inform Project stakeholders on the progress achieved during Project implementation; v) design and carrying out of studies to assess Bolivia’s progress in providing access to modern energy services; and (vi) design and carrying out studies on clean energy. 24. Component 3: Project Management (US$4.70 million: IDA). Provision of support to the MHE for the implementation, monitoring and evaluation of the Project, including for the carrying out of Project audits. B. Project Financing 25. Total Project costs will be US$59.15 million, of which US$5.15 million will be provided as counterpart funding by the recipient, US$4.00 million by local beneficiaries and SDR32.40 million (US$50 million equivalent) will be financed by the IDA Credit. The Credit includes recommitments in the amount of SDR2,496,437 cancelled from the Investing in Children and Youth Project (Credit No. 4396-BO/P101084), SDR4,850,000.00 cancelled from the Expanding Access to Reduce Health Inequalities Project - APLIII (Credit No. 4382-BO/P101206) and 11 All “pilastras” must be built in advance, while meters and cables will be installed by Distribution Companies and charged to customers. 12 It is expected the installed capacity of the SHS systems should be around 50 Wp and should have the capacity to power – for example – at least three LED (light-emitting diode) lamps, one radio and one mobile charger. 6 SDR1,778,004.50 cancelled from the Emergency Recovery and Disaster Management Project (Credit 4377-BO/P106449). Project Cost and Financing 26. Project cost and allocation for IDA financing are provided in the table below: Project Components Project cost (US$M) IDA Financing (US$M) % Financing 1. Electricity services for unserved areas 52.45 43.30 82.55% 2. Support to Access and Clean Energy Strategies 2.00 2.00 100.00% 3. Project Management 4.70 4.70 100.00% Total Costs Total Project Costs Total Financing Required 59.15 50.00 84.53% C. Lessons Learned and Reflected in the Project Design 27. The operation incorporates lessons learned from the implementation of projects in Bolivia and elsewhere. These include: (a) Local commitment (from implementing agencies and subnational stakeholders) from the early stages of a rural electrification effort is paramount in improving project design, contributing towards financing and improving sustainability. In the case of Bolivia, the active involvement of Gobernaciones and Municipalities has proven to be instrumental in the successful implementation of previous operations, through the provision of better information on community needs and additional financing. (b) Adequate training of customers, especially women, in the effective use of SHS is essential to fully achieve the benefits of electrification. Experience from several projects (in LAC and other regions) confirms the importance of familiarizing customers with the correct use and basic maintenance of photovoltaic equipment, to ensure full advantage of the electrification effort. This training should be incorporated into the obligations of the service provider and the entities responsible for monitoring longer-term operation and maintenance. (c) As demonstrated by several projects in the region and elsewhere a flexible and adaptable design to the conditions found in each community helps to maximize the benefits of the electrification effort and facilitates deployment. (d) Pico PV (below 16 watt-peak – Wp) have the potential to address the electricity needs of the poorest rural households. Past experiences in Bolivia have shown that Pico PV systems are a viable solution to primary lighting needs of rural households in spite of their provision of a very limited Wp capacity. (e) Ensuring there is greater involvement from Government institutions – or other actors that can act as energy services providers and quality of service regulators – is necessary to ensure sustainability. As shown by the IDTR and GPOBA projects, guaranteeing long-term sustainability of SHS is a challenge that requires long-term efforts and commitment from relevant stakeholders. 7 IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 28. The Project will be implemented over a seven-year period. Overall coordination and implementation of the Project will be the responsibility of the MHE. The Project Coordination Unit (PCU) lies within the Programa Electricidad para Vivir con Dignidad (PEVD, program which coordinates the country’s electrification agenda and whose objective is to achieve universal access to electricity by 2025) under the Alternative Energy General Directorate (Dirección General de Energías Alternativas, DGEA, unit which is in charge of operationalizing the access agenda). All procurement, financial management and technical design responsibilities will be carried out by the PCU, which will be staffed with appropriate specialists (including staff that is already in place that participated in the implementation of the IDTR and GPOBA projects). Gobernaciones and Municipalities will a designate a Project team responsible for day- to-day cooperation with the PCU, mostly focus on identifying suitable subprojects and trying to ensure their operation and maintenance (with support from Distribution Companies). 29. The MHE will sign inter-institutional agreements with Gobernaciones and Municipalities. These agreements will explicitly delegate subnational competencies on electrification to the MHE and indicate roles and responsibilities. This will allow the Ministry to implement subprojects in Chuquisaca and Potosí. The debt related to Component 1 of the Project will be assumed by benefitted Gobernaciones. Debt related to Components 2 and 3 would be undertaken by the Treasury. Specific arrangements per component are presented below: 30. Component 1: Electricity services for unserved areas: MHE – through the PCU – will: (i) establish the technical, social and environmental eligibility criteria for subprojects; (ii) review, formalize and prepare the final subproject portfolio that would be initially prepared by the Gobernaciones and Municipalities with the participation of the Distribution Companies; (iii) support and advise these subnational entities on the identification of suitable subprojects (even through the design of specific templates for their preparation); (iv) coordinate with relevant agencies and stakeholders and; (v) design and disseminate educational material for users. The Gobernaciones will participate in the preparation, selection and prioritization of subprojects, while Municipalities would be responsible for identifying the demand and, together with the Distribution Companies, would be involved in the design and preparation of subprojects. 31. For sub-component 1.1 (Grid extension) Gobernaciones will commit to repay the debt incurred through the Credit to the GoB and transfer resources to the MHE for implementation. The Ministry (through the PCU) will be responsible for launching bidding processes (including construction and supervision), sign contracts, monitor their compliance, and authorize payments to contractors and asset transfer (subprojects) to Gobernaciones, which will delegate (through a contract) the operation, maintenance and management of subprojects to Distribution Companies currently serving the two Autonomous Departments. These include SEPSA (Servicios Eléctricos 8 Potosí S.A.) in Potosí, CESSA (Compañía Eléctrica Sucre S.A.) and COSERCA (Cooperativa de Servicios Eléctricos de Camargo) 13 both in Chuquisaca. 32. In the case of sub-component 1.2 (Individual Photovoltaic Systems) and sub- component 1.3 (Solar Photovoltaic Systems in Public Institutions) Gobernaciones will commit to repay the debt incurred through the Credit to the GoB and transfer the resources to the MHE for implementation. Only in the case of sub-component 1.3, Municipalities will transfer resources to the MHE to cover ten percent of subprojects’ cost through an inter-institutional agreement. For both sub-components, the Ministry, through the PCU, will be responsible for the procurement processes and would be responsible for signing and monitoring contracts and making payments to selected construction firms. Through an inter-institutional agreement, MHE would transfer the PV Systems to Municipalities (individual and social systems), which will be responsible for their operation, maintenance and replacement (O&M&R). For these tasks, Municipalities will contract Distribution Companies (specific stipulations of these contracts will be included in the Operational Manual). 33. For Components 2 and 3, all activities will be implemented directly by the MHE through the PCU, and in coordination with the relevant areas within the Ministry. Given the strong focus these Components will have on transferring experience, knowledge and capacity to subnational entities, the PCU will involve these in their design, planning, implementation and monitoring. The MHE will also seek further collaboration from other donors and partners for the development of these activities. 34. The Credit funds will be disbursed into the designated accounts (DAs) opened within the country´s Treasury Single Account (TSA, or Cuenta Única del Tesoro – CUT-ME) under the name of the Project and which will be managed by the MHE. Funds deposited in the DAs will be used to process payments to contractors, suppliers and consultants through the country’s budget system and TSA. Counterpart funding provided by Municipal governments for sub-component 1.3 will be deposited in a specific bank account (Libreta CUT) opened and maintained by MHE from which payments will be made following established arrangements 14. B. Results Monitoring and Evaluation 35. Overall responsibility for monitoring and evaluation (M&E) will lie with the PCU, which will report results, taking advantage of experiences and lessons learned from previous operations. Under its guidance, Gobernaciones, Municipalities and Distribution Companies will collect data on subprojects and from beneficiaries. The Project will also support the enhancement of the PCU’s – and other stakeholders’ – M&E capacities through activities to be funded by Component 2. These will be ellaborated in the Operational Manual, but could include developing additional indicators, surveys and new data collection approaches as well as integrating gender sensitive indicators into the monitoring and evaluation approach. 13 COSERCA is run by ENDE. 14 See Annex 3 (“Implementation Arrangements”). 9 C. Sustainability 36. Achieving sustainability of grid extension, densification and off-grid systems under the decentralization framework will be a main priority of the proposed Project. The operation has been designed to support a viable and sustainable model of electricity access expansion that is consistent with the national decentralized framework and national targets for universal access and poverty alleviation also considering a gender approach. 37. The participation of Gobernaciones and Municipalities will contribute to the sustainability of subproject investments. As Gobernaciones will assume the debt incurred for Component 1, their financial capacity has been confirmed. Furthermore, implementation arrangements have included specifications for operation and maintenance and replacement (O&M for grid extensions and densifications, O&M&R in the case of SHS) of subprojects. These include, in the case of sub-component 1.1 (Grid extension), agreements with Distribution Companies (and contractors) as needed. For sub-components 1.2 (Individual Solar Photovoltaic Systems)and 1.3 (Solar Photovoltaic Systems in Public Institutions), Municipalities would be in charge of sustainability of PV systems by signing O&M&R contracts with local Distribution Companies. Municipalities will also sign contracts with beneficiaries (or delegate these to Distribution Companies), charging a fee to cover the cost of replacement of equipment such as batteries, regulators and converters. This fee is expected to be lower than what beneficiaries are currently spending on energetics and related goods 15. 38. The overall program was structured to last 15 years and the financial model already incorporates operation, maintenance and replacement costs. The model takes into account that sustainability of SHS is a challenge that requires long-term efforts with a greater involvement of local communities and/or utilities or electricity services providers. This has been considered by including training and outreach activities to relevant stakeholders (such as beneficiaries) and capacity building activities with subnational entities and distribution companies. 39. Sustainability will also be bolstered through ongoing programs. These include a US$60 million IDB-supported project that focuses on the construction of transmission lines and grid extension. IDTR II will complement this investment by expanding network densification and off- grid electrification. 40. Finally, the Project’s comprehensive operational communication plan focuses on informing beneficiaries about potential benefits of electrification, and their rights and obligations as customers. It will enhance existing dialogue, contributing to an overall successful preparation and implementation, and enable buy-in and sustainability of the operation from the direct beneficiaries’ perspective. 15 See “Economic and Financial Analyses” Section (paragraphs 42-46) and Annex 6. 10 V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Risk Category Rating Stakeholder Risk Substantial Implementing Agency Risk High - Capacity High - Governance Substantial Project Risk Substantial - Design Substantial - Social and Environmental Moderate - Program and Donor Moderate - Delivery Monitoring and Sustainability Moderate Overall Implementation Risk Substantial B. Overall Risk Rating Explanation 41. The overall risk for Project implementation is rated Substantial. The Project design incorporates lessons learned from previous and similar projects. However this new design requires the full participation of Gobernaciones and engaged Municipalities, and includes cumbersome arrangements from a financial management point of view. Stakeholder risk is rated substantial, as the country faces numerous institutional challenges, including weak public sector capacity. Institutional strengthening and performance enhancement activities aim to manage these risks. Even though most of the activities to be funded have already been supported in the past (and constitute a high priority for the Government and have high-visibility within civil society, increasing the social accountability which is itself a mitigating force), the substantial rating is further justified as clarifying roles and responsibilities under the decentralized framework has been an issue during preparation. This risk will be mitigated by establishing clear implementation arrangements in Project design. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 42. The economic analysis focuses on the two main investment components which account for 98.7 percent of total project investment. They will provide benefits to mostly rural households and public institutions linked to savings in the use of traditional or less efficient energy sources (e.g. kerosene, batteries, candles) as well as offering opportunities for productive activities and enhancing the quality of life and services. These components involve the provision of electricity services to: (i) new consumers connected to the grid through grid extension/densification; and (ii) dispersed and isolated individual households primarily through solar home systems (SHS). 43. The economic analysis uses cost estimates for investment and O&M based on the most recent experience in rural electrification in Bolivia and neighboring countries. Costs are adjusted to reflect economic values, excluding taxes and duties and using border prices when relevant. Benefits are estimated on the basis of savings to users in traditional energy sources and expected 11 electricity consumption levels obtained from surveys carried out during the implementation of IDTR and GPOBA projects. Details of the analysis are presented in Annex 6. 44. The economic internal rate of return (ERR) of the aggregate Project is estimated at 17.7 percent and its net present value (NPV) US$17.2 million (for a 10 percent discount rate considered to reflect the economic opportunity cost of capital in Bolivia). That is, it is estimated that the Project will generate a net economic benefit of the said amount in increasing and improving access to sustainable modern energy services in rural and peri-urban areas of Bolivia. Economic returns of the Project differ from component to component. While the grid extension component would yield an ERR of 19.7 percent, the off-grid SHS economic return would be 12.6 percent, thus reflecting the challenge of providing access to more remote and poor households. 45. There are uncertainties associated with the institutional capacity for implementing the Project, as well as on the future consumption of electricity, particularly of the poor and isolated households which can reflect on variations in costs, number of households served and consumption levels in dispersed areas. A sensitivity analysis considering variations +/- 10 percent in costs and the number of households connected, and -10 percent in electricity consumption indicated that the Project economics are quite robust with respect to the first two variables, since upon the adverse scenario of higher cost and lower connections it would yield an ERR of 15.7 percent and a NPV of US$13.7 million. The economics of the SHS component are more sensitive to a drop in household consumption; however, this is mitigated by the grid extension component. 46. A financial analysis was conducted in order to assess the Project’s impact on the Distribution Companies that will be responsible for the operation of sub-component 1.1 (Grid extension). The analysis concluded that the grid extension sub-component will yield, as an aggregate, a financial return of 10.2 percent. Sensitivity analysis revealed that the financial impact of the Project is highly sensitive to unit O&M costs and distribution losses, being necessary a moderately efficient performance to minimize the risk of financial losses. B. Technical 47. The Project relies on the deployment of well-known and proven technologies that have already been used in Bolivia. Planned activities do not represent challenging construction or operational situations. Subprojects will be implemented in accordance with internationally accepted technical standards with support from staff and other experts as needed, and in accordance with existing guidelines created for past operations. Technologies, technical parameters, key design features and estimated costs for each component have been proposed by the MHE and discussed with officials familiar with these. Preparation of technical specifications, bidding processes, contractual negotiations and supervision will be carried out by the PCU and supported by the Association. 48. The options considered under Component 1 (traditional grid extension and SHS systems) were accepted due to the PCU’s technical capacity and experience to prepare and design subprojects, conduct associated fiduciary tasks and support their deployment and installation. Other technologies were considered for support under the Project, including Pico PV home systems. As these are relatively new in the market, and their use in massive rural electrification 12 projects in the region remains to be tested (Pico PV home systems), these will not be supported under Component 1. But given the value they have in providing electricity to those located further away from the grid and where lack of access roads prevents the use of larger systems, this solution (a “pre-electrification” of sorts) is being tested and analyzed under Component 2. 49. The Project would also finance consulting services, training courses, communication, capacity building and feasibility studies (through Components 2 and 3). These tasks will be centrally coordinated and executed by the PCU. This approach was chosen as the Central Government has the capacity to set national targets and policies and disseminate lessons learned and best practices to a plurality of stakeholders. C. Financial Management 50. The proposed financial management arrangements are considered acceptable to the Bank. A financial management capacity assessment was carried out by the Association to review the adequacy of the financial management arrangements under the Ministry of Energy and Hydrocarbon (MHE), through the Project Coordination Unit (PCU). Financial management arrangements, described in Annex 3 are based on the existing capacity and performance under IDTR and GPOBA projects. However, the decision on the Credit repayment responsibility of the Chuquisaca and Potosí Gobernaciones for activities financed under Component 1, poses significant additional challenges to the PCU for Project operational arrangements, mainly as it relates to budgeting, and accounting arrangements. The mechanism to interact with subnational governments is quite new to the country and the required rules for its operationalization are not clearly defined. Based on the information available, basic arrangements have been discussed and agreed with both Chuquisaca and Potosí, but adequacy will have to be closely followed up on during implementation. 51. Project implementation would benefit from the use of the Government’s integrated financial management system, SIGMA (Sistema Integrado de Gestión y Modernización Administrativa – integrated financial management system) and Treasury Single Account (Cuenta Única del Tesoro, CUT) for disbursement processing, which have worked well for other projects. Internal processes and procedures within the MHE and PCU have been revised and streamlined mainly as they relate to the coordination between the PCU and the MHE’s Administrative Unit (Dirección General de Asuntos Administrativos, DGAA) for payment processing. Coordination mechanisms with the Gobernaciones of Chuquisaca and Potosí, and participating Municipal governments, have been discussed and are reflected in the Operational Manual and respective inter-institutional agreements. 52. With the information available regarding Bolivia’s public financial management systems, the entities involved and Project features, the Project’s financial management (FM) faces several challenges, mainly due to: i) weaknesses in the public sector to attract and maintain qualified staff with subsequent high staff rotation; ii) complex implementation arrangements which require that participating Gobernaciones (which assume responsibility for debt repayment) transfer responsibility for Project execution to the Central Government (PCU), under not fully developed rules or mechanisms; and, iii) complex budgeting, payment and accounting arrangements that require coordination between Gobernaciones and PCU; and which may affect Project implementation.Procurement 13 53. Procurement will be conducted according to the World Bank’s 2011 “Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD [International Bank for Reconstruction and Development] Loans and IDA Credits & Grants by World Bank Borrowers” issued in January 2011 for the supply of goods, civil works and non-consulting services, and the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” issued in January 2011 for technical assistance and other consultant assignments. It is foreseen that the procurement related activities for the Project will be implemented using the existing structures that are in place at the MHE and the PCU, which will be solely responsible for carrying out all the procurement processes. A capacity assessment was performed, and concluded the PCU has an overall installed capacity suitable to successfully carry out the procurement function for the Project components they will manage. An acceptable procurement plan covering the first eighteen months of Project implementation has been prepared. D. Social 54. The Project is expected to result in positive and gender sensitive social outcomes. Both the grid extension and the installation of solar home systems for unserved areas will be carried out in some of the least accessible and poorest areas in Bolivia, largely inhabited by highland, indigenous peoples. These groups, as well as Municipalities and other citizens, are being informed through site visits and consultations, and are supportive of the Project, as the provision of electricity can result in major benefits. Given differences in community and indigenous organization in the Autonomous Departments of Chuquisaca and Potosí, it will be important to engage with representatives of social organizations throughout the life of the Project to effectively manage risks and assure maximum benefits to different types of populations in these areas. 55. A social assessment has been carried out by the client and reviewed by the Association. The draft document has been consulted and published. The document is complemented by an Indigenous People Planning Framework (IPPF) and a Resettlement Policy Framework (RPF). Initial consultations as part of the preparation of these documents have been conducted in Chuquisaca and Potosí. 56. Indigenous Peoples. Given the predominance of indigenous peoples and the lack of details at this point concerning specific subprojects OP/BP 4.10 (Indigenous People) has been triggered and an Indigenous People Planning Framework has been prepared. The framework analyses potential impacts and affected groups, and proposes a plan for consultations and engagement with these groups. The IPPF has been consulted with a variety of stakeholders and published by the Association and Recipient. The IPPF will be implemented through Municipal level Indigenous People Plans (IPPs). Further details will be included in the Project’s Operational Manual. 57. Involuntary Resettlement. The Project has triggered OP/BP 4.12 (Involuntary Resettlement) given potential affected persons and communities primarily under sub-component 1.1 (Grid extension). A resettlement framework has been prepared, reviewed by the Association and consulted and disclosed through the World Bank’s and the MHE’s websites. The RPF will be implemented through Resettlement Action Plans (RAPs) as needed. The grid extension sub- 14 component includes the provision of small works and goods as in-kind compensation under the relevant resettlement plans. 58. Gender and Energy. The social analysis includes preliminary assessments on issues such as gender inclusion, access and others, relevant to the sector and targeted groups. It is expected these will be enhanced and further developed through additional studies financed by the World Bank. The aim of such a report would be to better understand how women access, benefit from and use energy resources. It is expected the document will suggest strategies and activities to enhance gender-differentiated benefits during Project implementation. E. Environment 59. The Project has received an Environmental Assessment (EA) Category of B and will have a largely positive impact on the environment, by improving the supply of electricity, initially in the heavily underserved areas of Potosí and Chuquisaca, thereby reducing the use of fossil fuels. Physical interventions resulting from the implementation of investments in mostly rural areas could have low to moderate negative impacts on the environment, depending on their locations. The most significant impacts will result from the construction of low-voltage distribution lines and construction of related infrastructure. Appropriate mitigation measures will be followed to limit the impact on local fauna and to protect indigenous plant and tree species. 60. Given that the location of a majority of subprojects was not identified prior to appraisal, an Environmental Management Framework (EMF) has been prepared. A draft of this framework document was consulted upon prior to appraisal, and includes documented evidence of informed and transparent consultations with stakeholders. The EMF was disclosed through the MHE’s and the World Bank’s websites. It is also available at the PEVD’s offices and will also be available at participating Municipalities. 61. Environmental Assessment. OP/BP 4.01 (Environmental Assessment) has been triggered as civil works resulting from the implementation of investments under Component 1 will lead to relatively minor air and water pollution during construction and, once the works are completed, limited loss of non-critical animal and plant habitats. These impacts will be assessed through a screening process and appropriate mitigation measures will be proposed. Battery disposal plans, including consumer training and monitoring of disposal, will be incorporated into sub-components 1.2 (Individual Solar Photovoltaic Systems) and 1.3 (Solar Photovoltaic Systems in Public Institutions). 62. Natural Habitats. While the Project will not support or lead to the conversion of natural habitats, OP/BP 4.04 (Natural Habitats) is triggered to ensure that Environmental Management Plans (EMPs) to be prepared for civil works, adequately protect biodiversity and water resources. 63. Physical Cultural Resources. Given Bolivia’s rich cultural background and the potential for the works to require movement of earth or excavations OP/BP 4.11 has been triggered (Physical Cultural Resources). Chance finds procedures will be inserted into construction contracts and have been included in the EMF. 15 Annex 1: Results Framework and Monitoring PLURINATIONAL STATE OF BOLIVIA: Access and Renewable Energy Project Project Development Objectives . PDO Statement The proposed Project development objective is to expand access to electricity in unserved areas of Bolivia under a model of electricity access expansion that supports the implementation of the national decentralized framework. These results are at Project Level . Project Development Objective Indicators Responsibility Cumulative Target Values Data Source/ for Unit of End Methodology Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Measure Target Collection People provided PCU, with access to Gobernaciones, electricity by Number 0.00 0.00 11000.00 21500.00 33000.00 43000.00 24000.00 2500.00 135000.00 Annual Municipalities PCU household and Distribution connections Companies People provided with access to PCU, electricity by Number Gobernaciones, household Sub-Type 0.00 0.00 6000.00 12000.00 15000.00 22000.00 15000.00 2500.00 72500.00 Annual Municipalities PCU Breakdown and Distribution connections– Companies Grid People provided with electricity PCU, by household Number Gobernaciones, connections– Sub-Type 0.00 0.00 5000.00 9500.00 18000.00 21000.00 9000.00 0.00 62500.00 Annual Municipalities PCU Offgrid/minigrid Breakdown and Distribution –Only renewable Companies sources Community PCU, Number 0.00 0.00 0.00 50.00 80.00 0.00 0.00 0.00 130.00 Annual PCU electricity Gobernaciones, 16 connections Municipalities constructed– and Distribution Other Companies Renewable Energy: Off-grid Capacity building PCU, activities for Gobernaciones, subnational Number 0.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 35.00 Annual Municipalities PCU entities and Distribution implemented Companies under the Project . Intermediate Results Indicators Responsibility Cumulative Target Values Data Source/ for Unit of End Methodology Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Measure Target Collection PCU, Gobernaciones, Direct project Number 0.00 0.00 11000.00 32750.00 46500.00 43000.00 24000.00 2750.00 160000.00 Annual Municipalities PCU beneficiaries and Distribution Companies PCU, Percentage Gobernaciones, Female Sub-Type 0.00 50.00 50.00 50.00 50.00 0.50 0.50 0.50 50.00 Annual Municipalities PCU beneficiaries Supplemental and Distribution Companies PCU, Number of off- Gobernaciones, grid systems Number 0.00 0.00 1000.00 3400.00 5100.00 4200.00 1800.00 0.00 15500.00 Annual Municipalities PCU installed and Distribution Companies PCU, Number Gobernaciones, Number of SHS Sub-Type 0.00 0.00 1000.00 1900.00 3600.00 4200.00 1800.00 0.00 12500.00 Annual Municipalities PCU systems installed Breakdown and Distribution Companies 17 PCU, Number of Pico Number Gobernaciones, PV home Sub-Type 0.00 0.00 0.00 1500.00 1500.00 0.00 0.00 0.00 3000.00 Annual Municipalities PCU systems installed Breakdown and Distribution Companies PCU, Distribution Gobernaciones, lines constructed Kilometers 0.00 0.00 65.00 130.00 165.00 245.00 165.00 30.00 800.00 Annual Municipalities PCU or rehabilitated and Distribution under the project Companies PCU, Distribution Kilometers Gobernaciones, lines constructed Sub-Type 0.00 0.00 65.00 130.00 165.00 245.00 165.00 30.00 800.00 Annual Municipalities PCU under the project Breakdown and Distribution Companies Number of outreach and training activities PCU, implemented Gobernaciones, (for Number 0.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 70.00 Annual Municipalities PCU beneficiaries, and Distribution Distribution Companies Companies, contractors, and other relevant stakeholders) PCU, Number of Gobernaciones, energy sector Number 0.00 1.00 1.00 1.00 1.00 1.00 1.00 0.00 5.00 Annual Municipalities PCU studies and Distribution supported Companies . 18 Annex 1: Results Framework and Monitoring PLURINATIONAL STATE OF BOLIVIA: Access and Renewable Energy Project Project Development Objective Indicators Indicator Name Description (indicator definition etc.) People provided with access to electricity by household This indicator measures the number of people that have received an electricity connections connection under the project via new household connections. The baseline value for this indicator is zero. People provided with access to electricity by household This sub-indicator measures the number of people that have received an electricity connections–Grid connection under the project via new household connections to the grid. The baseline value for this sub-indicator is zero. People provided with electricity by household This sub-indicator measures the number of people that have received an electricity connections–Offgrid/minigrid–Only renewable sources connection under the project via new household connections to the grid. The baseline value for this sub-indicator is zero. Community electricity connections constructed–Other This indicator measures the number of new off-grid community connections under the Renewable Energy: Off-grid project when the source of power is renewable energy, other than Hydropower. This indicator is used as off-grid connections are from stand-alone systems that are not connected to the interconnected transmission system. “Community connections” are electricity services provided to health post, hospitals, schools, community centers, or other establishments that provide services to a larger pool of people in remote areas. The baseline value for this indicator is zero. Capacity building activities for subnational entities Number of activities targeting the strengthening and development of local capacities implemented under the Project for Municipalities and Gobernaciones. These could include workshops, training sessions and others. . Intermediate Results Indicators Indicator Name Description (indicator definition etc.) Direct project beneficiaries Direct beneficiaries are people or groups who directly derive benefits from an intervention. Female beneficiaries Based on the assessment and definition of direct project beneficiaries, this sub- indicator measures what percentage of the beneficiaries is female. 19 Number of off-grid systems installed This indicator measures the number of systems installed to provide access to electricity through off-grid household connections, when the source of power is renewable energy, other than Hydropower. Number of SHS systems installed This sub-indicator measures the number of SHS systems installed to provide access to electricity through off-grid household connections, when the source of power is renewable energy, other than Hydropower. Number of Pico PV home systems installed This sub-indicator measures the number of Pico PV home systems installed to provide access to electricity through off-grid household connections, when the source of power is renewable energy, other than Hydropower. Distribution lines constructed or rehabilitated under the This indicator measures the length of the distribution lines constructed or project rehabilitated/upgraded under the project. The baseline value for this indicator is zero. Distribution lines constructed under the project This sub-indicator measures the length of the distribution lines constructed under the project. The baseline value for this sub-indicator is zero. Number of outreach and training activities implemented This indicator measures the number of outreach and training activities performed by (for beneficiaries, Distribution Companies, contractors, the PCU and stakeholders through Components 2 and 3 to inform and train and other relevant stakeholders) beneficiaries, Distribution Companies, contractors, and other relevant stakeholders on the Project’s scope, activities, methodologies and other. Number of energy sector studies supported This indicator measures the number of studies, analyses and assessments performed by the Project through Component 2. 20 Annex 2: Detailed Project Description PLURINATIONAL STATE OF BOLIVIA: Access and Renewable Energy Project 1. The proposed objective of the Access and Renewable Energy Project is to expand access to electricity in unserved areas of Bolivia under a model of electricity access expansion that supports the implementation of the national decentralized framework. It aims to provide access to modern electricity service in mostly rural areas throughout the country, focusing on those with higher poverty and lower electrification rates. Considering these factors, and even though the Project will be national on its scope, it will focus on the Potosí and Chuquisaca Autonomous Departments, which better fit these criteria and which are also capable of repaying Project- related debt incurred for Component 1 to the Central Government 16. The Project will also pilot new approaches to increase access to energy in Bolivia and support the development of clean energy strategies. Capacity building activities will also benefit existing institutions; both at the Central (such as the MHE) and subnational levels (Gobernaciones and Municipalities).Even though the Project builds on the experiences from the IDTR 17 the GPOBA 18 projects, it varies considerably from these as it will be implemented under the framework of the Decentralization Law. 2. It is expected the Project will support the provision of electricity for roughly 27,000 households in unserved areas of Bolivia, of which 14,500 would be connected to the grid and 12,500 would obtain SHS PV systems. Of these, almost 14,400 would be located in Potosí (10,900 grid extensions and 3,500 SHS) and 12,600 in Chuquisaca (3,600 grid extensions and 9,000 SHS). Furthermore, roughly 130 public facilities in these same Autonomous Departments (around 85 in Potosí and 45 in Chuquisaca) will also obtain access to electricity. Pilots (for so called “Pico PV home systems”) will also provide services to more beneficiaries in other unserved areas of Bolivia. As other operations have demonstrated, such a Project could have the following impacts: (i) increase the quantity and quality of energy used for lighting and improving living and working conditions; (ii) increase disposable income by enabling productive activities; (iii) allow more flexible working hours including evening work; (iv) improve access to news, information, entertainment and mobile phone use; (v) allow children to study and adults to read in the evenings; (vi) enhance public safety through street lighting; and (vii) reduce household air pollution from the use of candles and kerosene. 3. The overall Project model consists of an experienced PCU 19 (Unidad Coordinadora de Proyecto) located in the MHE and which will coordinate electrification activities and procure, goods, works and services on behalf of subnational entities. The Unit will also coordinate all activities with relevant stakeholders – namely, Gobernaciones and Municipalities – in order to identify, prepare, execute and monitor subprojects and planned activities and directly execute non-investment related activities. 16 See Annex 3 (“Implementation Arrangements”). 17 Decentralized Infrastructure for Rural Transformation Project (IDTR US$20 M), which closed in May 2011 and provided access to electricity to over 30,000 families across the country. 18 Decentralized Electricity for Universal Access Project (US$5.17 M), a GPOBA grant that closed in June 30, 2013 and benefitted 12,000 households. 19 Which implemented the IDTR and GPOBA projects. 21 4. The proposed Project is scheduled to be completed over a 7 year period. Project implementation would start on December 1st, 2014 and end by December 1st, 2021. It is also expected the Project will become effective by no later than November 30, 2014 and close by December 1st, 2021. It is comprised of three components: 5. Component 1: Electricity services for unserved areas (US$52.45 million total, of which US$43.30 million: IDA). This component will finance subprojects to provide electricity services to households and social institutions (mainly schools) in rural areas and villages. It will be developed through grid extensions or the installation of SHS. It includes three sub- components: (a) Sub-component 1.1 – Grid extension (US$39.05 million, of which US$30.00 million: IDA). This sub-component aims to provide electric power to the unserved population through subprojects consisting on the extension of electricity grids. It will include two main activities: (i) extension of low voltage distribution lines and grid densification; and (ii) extension of medium voltage transmission and distribution lines and grid densification. It would include, if applicable, the provision of small works and goods as in-kind compensation under the relevant resettlement plan, all in unserved areas. 6. The first activity – extension of low voltage distribution lines and grid densification – will target communities closely located to medium voltage distribution lines. Under this scenario, the Project will take advantage of existing infrastructure and focus on the construction of low voltage lines. In the case of the second activity – extension of medium voltage distribution lines and grid densification – communities located close to medium voltage transmission lines will be targeted. It is expected this sub-component could benefit about 14,500 households. 7. Specific criteria for defining targeted households will be included in the Operational Manual. However, it is expected the main eligibility criteria for the sub-component could be as follows: Investment costs per connection should not be higher than US$1,900 20. In the case of the first activity, subprojects would have at least 4 users per kilometer of grid extension; the provision of the service should require the installation of only one transformer for every 4 connections; and the distribution line length may not exceed 1,000 meters. For the second activity, subprojects would have at least 6 users per kilometer; the length of the medium voltage line to be built should not exceed 1,000 meters per every 6 connections, and the subsequent densification (through low voltage lines) should not exceed 1,000 meters. The Credit will cover 100% of the initial investment and supervision costs. Users will pay the standard fee established by law to obtain their connection to the grid, as well as part of the connection costs 21. (b) Sub-component 1.2 – Individual Photovoltaic Systems (US$12.70 million: IDA). This sub-component will focus on financing subprojects for the installation of individual photovoltaic systems. Even though specific criteria for defining targeted 20 This has been estimated taking into account current and expected connection costs in targeted municipalities as well as to determine which households could be served by grid extensions or PV systems. 21 All “pilastras” must be built in advance, while meters and cables will be installed by the Distribution Companies and be charged to customers. 22 households will be included in the Operational Manual it is expected this sub- component would target households in those areas that are not envisioned to be connected to the grid in the next 5 years. Such systems will be mainly installed in communities with high rates of poverty. The capacity of the photovoltaic systems would be around 50 Wp 22. The sub-component would target households in communities located 5 kilometers (or more) away from medium voltage distribution lines, that are at least accessible by motorcycle, or that are located closer to the grid but present a very low density (less than 3 users per lineal kilometer – km.). These initial criteria will be revised after implementation and could be updated or modified through the Operational Manual. 8. Approximately 12,500 households are expected to obtain access to modern electricity services through this sub-component, which would also provide support to Distribution Companies for the operation and maintenance of the systems, through the acquisition and utilization of goods (such as motorcycles and others). The initial investments to be made will be fully financed by the Credit. (c) Sub-component 1.3 – Solar Photovoltaic Systems in Public Institutions (US$0.70 million, of which US$0.60: IDA). This sub-component aims to support the provision of electricity in schools or other public institutions in unserved and impoverished areas. Specific criteria for defining targeted institutions will be included in the Operational Manual (according to specific parameters and needs). However, it is expected the sub-component will target mostly schools that have not benefitted from electrification projects in the 5 previous years. 9. The Credit will finance 90% of the initial investment, while the rest will be funded by the Municipalities (which would transfer the resources to MHE through an inter-institutional agreement). The capacity of PV systems to be installed in each institution is still being analyzed, but is expected to take the form of standardized packages for the various types and sizes of institutions to be served. The sub-component would also support Distribution Companies for the operation and maintenance of the systems, through the acquisition and utilization of goods needed to perform these tasks (such as motorcycles and others). 10. Component 2: Support to Access and Clean Energy Strategies (US$2.00 million: IDA). This component will support capacity building as well as the drafting, implementation, and the strengthening of national energy-sector strategies, programs and policies. In particular, it will reinforce the existing universal access to modern energy services programs, support the homologation and design of standard approaches to electrification and new regulatory capacities, promote the development of pilot projects based on the use of innovative technologies, and advance clean energy within the country. The component will also finance the development and implementation of a comprehensive operational communication plan to support awareness creation and feedback on the main activities that the Project will be supporting. 22 With capacity to power – for example – at least three LED lamps, one radio and one mobile charger. The capacity could be upgraded to meet an additional decoder and one (1) television, if necessary. 23 11. Such a Component is being proposed taking into account Bolivia’s: (i) need to strengthen the instruments and institutions responsible for providing basic services to the population, and in particular the electricity service; (ii) regulatory framework under which the country expects to achieve universal access to this service by 2025; (iii) current decentralization vision in which the development of these tasks is set to be led by subnational entities with great knowledge of potential beneficiaries (which can lead to the creation and deployment of new models that are adapted to local needs and practices); (iv) need to transfer these responsibilities in an orderly manner; and (v) desire to transfer knowledge and experience to these new players , so that through them the goals set by the country can be achieved (vi) desire to promote gender sensitive approaches that benefit the poorest households. 12. The activities this component would support will be included in the Operational Manual. Some of these could be: (a) Design, implementation and evaluation of pilot energy access projects through new technologies, such as Pico PV home systems. The pilot will focus on providing access to energy (basic lighting and communications needs - i.e. cell phone charging) to remote communities with limited or precarious access roads. The pilot will finance the installation of easily transportable photovoltaic systems, as well as portable and rechargeable lamps. (b) Development of outreach, training and capacity building activities for relevant stakeholders (Gobernaciones, Municipalities, Distribution Companies and beneficiaries). (c) Preparation of guidelines, manuals and relevant documents to facilitate Project implementation. (d) Development of monitoring and evaluation frameworks and their implementation. (e) Drafting and implementation of communication strategies and development of dissemination tools. (f) Preparation of analyses focused on access to modern energy services and development of proposals to nurture the sector strategies. (g) Conception of evaluations and studies on clean energy (which may include renewable energy resources and potential energy efficiency measures), strategies and enhancement activities. (h) Development of standardized models and methodologies for electrification and homologation of current initiatives, as well as design of structures, guidelines and processes to create regulatory structures for electrification. 13. Component 3: Project Management (US$4.70 million: IDA). This component will support the overall management of the Project and its PCU. It will finance staff, operational costs, goods and equipment for supervision tasks, audits and monitoring and evaluation activities. Further details are being included in the Project’s Operational Manual. 24 Annex 3: Implementation Arrangements PLURINATIONAL STATE OF BOLIVIA: Access and Renewable Energy Project Project Institutional and Implementation Arrangements 1. The Project will be implemented over a seven-year period. Overall coordination and implementation of the Project will be the responsibility of the MHE. The Project Coordination Unit lies within the PEVD, under the Alternative Energy General Directorate (DGEA). All procurement, financial management and technical design responsibilities will be carried out by the PCU, which will count with appropriate specialists (including staff that is already in place and which participated in the implementation of the IDTR and GPOBA projects, including a Project coordinator to whom all staff will report to directly). Gobernaciones and Municipalities will mostly focus on identifying suitable subprojects and taking care of their operation and maintenance (with support from Distribution Companies). 2. The debt related to investments in grid extension and solar home systems (Component 1 of the Project) will be assumed by Gobernaciones benefitted under the program, according to the level of investments in each jurisdiction. The debt related to Components 2 and 3 would be assumed by the Treasury. However, the GoB will be responsible vis-à-vis the Bank for the overall Credit. Project administration mechanisms 3. The implementation of the Project will require strong coordination between the stakeholders. Considering the 2010 Autonomy Framework and Decentralization Law, and in general the country’s institutional environment, the implementation of the Project will require the active involvement of the following institutions: (a) Ministry of Hydrocarbons and Energy (MHE) (b) Autonomous Departmental Governments (Gobernaciones) (c) Municipalities (d) Distribution Companies (e) Contractors (f) Beneficiaries 4. The MHE will sign inter-institutional agreements with participating Gobernaciones and Municipalities. These agreements will explicitly delegate the subnational competencies on electrification to the MHE, and indicate roles and responsibilities for each institution. The following inter-institutional agreements or contracts – which will be detailed and confirmed through the Operational Manual – are expected: (a) MHE and participating Gobernaciones for activities under sub-component 1.1. 25 (b) MHE and Municipalities for activities under sub-components 1.2 and 1.3. (c) Gobernaciones and Distribution Companies to transfer the operation of sub- component 1.1 and delegate O&M to the Distribution Companies. (d) Municipalities and Distribution Companies to delegate O&M&R of solar home systems and depending on each municipality, fee recollection. (e) Muncipalities and/or Distribution Companies with direct beneficiaries for the provision of the electricity service. 5. Specific arrangements per component and sub-component are presented below: (a) Component 1: Electricity services for unserved areas; sub-component 1.1- Grid extension. (i) The Ministry of Hydrocarbons and Energy – through the PCU –will: (i) establish the technical, social, environmental and gender-sensitive eligibility criteria for subprojects; (ii) review, formalize and prepare the portfolio of subprojects that would be originally presented by the Gobernaciones and Municipalities with the participation of the Distribution Companies; (iii) support and advise these subnational entities on the identification of suitable subprojects (even through the design of specific templates for their preparation); (iv) coordinate implementation with Gobernaciones, Municipalities, Distribution Companies and contractors and all relevant agencies and stakeholders; and (v) design and disseminate educational resources for users, prepare training materials, conduct dissemination and communication tasks and coordinate with relevant stakeholders. It would also register the necessary resources in its budget to implement the sub-component. Finally, the MHE – through the PCU – would also be responsible for launching the bidding processes (including construction and supervision), conduct supervision of all contracts, authorize payments to contractors and transfer assets (subprojects) to Gobernaciones once these have been finalized. (ii) Gobernaciones will participate in the preparation and selection of subprojects, consolidate and prioritize the subproject’s portfolio and coordinate with the PCU their evaluation. These subnational entities will also register the debt incurred in their budgets and transfer to MHE resources for each activity. The Gobernaciones will also monitor that each contractor complies with their contracts and will receive the assets to be transferred to them by MHE (once these – the subprojects – have been found acceptable). Finally, they will also sign contracts for the operation, and maintenance and management of the new grids with the Distribution Companies operating in the area. (iii) Municipalities’ role under this sub-component will focus on informing costumers; identifying demand and potential subprojects together with Distribution Companies; and to provide this information to relevant stakeholders. 26 (iv) Distribution Companies will participate in the design of subprojects, accompany the supervision of works and will be responsible for operation, and maintenance and management of subprojects (as agreed with Gobernaciones) as well as for collecting established electricity rates. The Distribution Companies to be involved in these activities would be SEPSA (Potosí), CESSA and COSERCA 23 (Chuquisaca). As beneficiaries of this sub-component would become regulated electricity users, they could benefit from the Tarifa Dignidad, which provides a 25 percent discount if household consumption is less than 70 kilowatt hour (kWh) per month. (v) Contractors will build the grid extensions and distribute didactic materials prepared by the PCU for the beneficiaries. During construction they will follow the guidelines established in the safeguard documents prepared by the PCU. (vi) Beneficiaries will express their interest in benefitting from the Project, will become a public service user, paying established rates for both the connection and electricity consumed, and will be trained to make good use of all infrastructure installed and to consume in an efficient and rational manner. 6. The Credit will finance the subprojects (including main electrical materials needed to connect households to the grid 24) and supervision costs.) and supervision costs. Users will be responsible to pay the standard fee established by law to obtain their connection to the grid, as well as part of the connection costs 25. (b) Component 1: Electricity services for unserved areas; sub-components 1.2 and 1.3 Individual Photovoltaic Systems and Solar Photovoltaic Systems in Public Institutions (i) For both activities under this sub-component, the MHE – through the PCU – will: establish the eligibility technical, social, environmental and gender- sensitive criteria for subprojects; (ii) review, formalize and prepare the final portfolio of subprojects originally presented by Gobernaciones and Municipalities with the participation of Distribution Companies; (iii) support and advise these subnational entities on the identification of suitable subprojects (even through the design of specific templates for their preparation); (iv) coordinate implementation with Gobernaciones, Municipalities, Distribution Companies and contractors and with all relevant agencies and stakeholders; and (v) design and prepare training materials, conduct dissemination and communication tasks and coordinate with relevant stakeholders and beneficiaries. The MHE will also register the necessary resources to implement the sub-component in its budget. The Ministry through 23 COSERCA is ran by ENDE. 24 This may include items such as: grounding rod, meter cables and box, among others which will be detailed in the Project’s Operational Manual. It is expected all these materials would cost around US$40. 25 All “pilastras” must be built in advance, while meters and cables will be installed by the Distribution Companies and be charged to customers. 27 the PCU will also be responsible for all procurement processes (including goods to support the Distribution Companies that would be in charge of the operation, maintenance and replacement of SHS), supervising all contracts, making payments to firms and transfer assets (subprojects) to Municipalities. Finally, it will also monitor that Municipalities’ enhance sustainability of the subprojects by funding the O&M&R of equipment (batteries, regulators and converters in the case of domestic systems). In case of any default, the MHE would start a process to automatically deduct any outstanding debt from the Municipalities’ accounts at the Central level. (ii) Gobernaciones will participate in the selection and participate in the preparation of subprojects, consolidate and prioritize the subproject’s portfolio and coordinate with the PCU their evaluation. They will also register the debt incurred in their budgets and transfer to MHE resources for each activity. (iii) Municipalities’ roles under these sub-components will start with the identification of potential demand. Municipalities will also monitor the compliance of contracts and receive and own assets to be transferred to them by the Ministry. They would also be responsible for O&M&R of the systems. To perform this responsibility, Municipalities will sign a contract with Distribution Companies (specific stipulations will be included in the Operational Manual) to delegate these tasks and will remunerate these companies for their services, verify the service quality and cover the first replacement of batteries, regulators and converters (depending on the specific agreements between Municipalities and Distribution Companies). Municipalities will determine a fee to be paid by beneficiaries to help cover the O&M&R costs but could delegate its collection to Distribution Companies as well, and will transfer to these companies the goods procured by the MHE to support operation and supervision tasks, as applicable. In the case of systems to be installed in public institutions, Municipalities will also cover 10% of the initial investment costs and transfer these resources to the MHE (through an inter-institutional agreement). The capacity of PV systems to be installed in each institution will be determined in the Operational Manual but it is expected it will range between 75 to 300 Wp. The capacity of Municipalities to perform these tasks will be strengthened by the PCU through training activities and support to be financed under Component 2. (iv) Distribution Companies will participate in the design of subprojects, charge the Municipalities for their services and be in charge of O&M&R as agreed with them. They may also recollect the fees established by Municipalities. (v) Contractors will install the equipment; distribute didactic materials prepared by the PCU and train beneficiaries. (vi) Beneficiaries will be able to express their interest in benefitting from the Project, sign contracts with Municipalities or Distribution Companies and pay the agreed rate as well as use the equipment in an appropriate manner. 28 7. For Components 2 and 3, all activities will be performed directly by the MHE through the PCU, and in coordination with the relevant areas within the Ministry. Given the strong focus these Components will have on transferring experiences, knowledge and capacities to subnational entities, the PCU will involve them in their design, planning, implementation and monitoring. The MHE will also seek further collaboration from other donors and partners for the development of these activities. 8. The Project has also developed a comprehensive and gender sensitive operational communication plan for the early and opportune awareness of the main activities that each Project component will be delivering on the ground and that Project beneficiaries and other stakeholders (community leaders, town majors, Distribution Companies and sales and maintenance teams, etc.) need to know ahead of time and during the implementation of the Project. After a review of prior lessons learned from pre-existing projects, the IDTR II aims at enhancing the communicational endeavor from an operational perspective - by providing better explanations about the Project arrangements in detail, technologies available to the beneficiaries, how to care and maintain equipment, as well as producing better outreach material. Informative meetings at the Municipality and commune levels or installation of new electricity systems, to quote a few, are critical communication moments which require careful attention during Project implementation. 9. The overall communication plan – for both preparation and implementation stages- is being developed following the Project’s timeline, and thus the plan embeds itself into the Project’s implementation moments at the field level. Currently the plan is contributing to the Project preparation by aligning a unified discourse from the PCU at their first showcase meetings with Gobernaciones and Municipalities in Chuquisaca and Potosí. The plan will follow these types of exercises in such manner that the different actors in their dialogue chain have a unified and consistent messaging throughout the whole implementation timeline. Financial Management, Disbursements and Procurement Financial Management 10. A financial management capacity assessment was carried out to review the adequacy of the financial management arrangements under the MHE, through the PCU. The purpose of this Annex is to spell out the main features of financial management arrangements, which are widely based on the existing capacity and performance under IDTR and GPOBA projects, strengthening them as needed. 11. Even though Project design is based on its predecessor (IDTR), the decision of passing on the Credit repayment responsibility to the Departments of Chuquisaca and Potosí for activities financed under Component 1; while responsibility for Project implementation is delegated to PCU, poses significant additional challenges to PCU for Project operational arrangements, mainly as it relates to budgeting, and accounting arrangements. While the PCU has developed experience with Output Based Disbursement (OBD) contracts and Bank requirements during the implementation of IDTR, the proposed mechanism to interact with subnational governments is quite new in the country and the required rules for its operationalization are not clearly defined. Based on the information available, basic arrangements have been discussed and agreed with 29 both Chuquisaca and Potosí, but need to be finally reflected in respective Inter-institutional agreements, and more important, its adequacy will need to be carefully followed during Project implementation. 12. Project implementation, as managed by PCU, would benefit from the use of Government’s integrated financial management system, SIGMA and Treasury Single Account (CUT) for disbursement processing, which have worked well for other projects. Based on lessons learned from IDTR, internal processes and procedures within the MHE and PCU, are being revised mainly as it relates to the coordination between PCU and the MHE’s Administrative Unit (DGAA) for payment processing, with the main purpose of having more agile and simplified procedures. As it relates to the coordination mechanisms with the Chuquisaca and Potosí Gobernaciones, and participating Municipal governments, even though some mechanisms are being discussed and designed, which will be formalized through inter-institutional agreements, its effective operation will depend highly on political will to avoid conflicting situations that may affect Project implementation. 13. With the information available of Bolivia’s public financial management systems, the involved entity and Project features, the Project’s FM risk is rated as substantial, mainly due to: i) weaknesses in the public sector to attract and maintain qualified staff with subsequent high staff rotation; ii) complex implementation arrangements which require that participating Gobernaciones (which assume responsibility for debt repayment), transfer responsibility for Project execution to Central Government (PCU), under not fully developed rules or mechanisms; and, iii) complex budgeting, payment and accounting arrangements that require coordination between Gobernaciones and PCU; and which may affect Project implementation. 14. The proposed financial management arrangements are considered acceptable to the Bank. Summary of Financial Management Arrangements: Use of Country Public Financial Management (PFM) Systems 15. Similar to other projects in the Bolivia portfolio, projects to be executed by PCU will be fully integrated and executed through the National Budget, in compliance with local regulations established by the Ministry of Economy and Public Finance (Ministerio de Economía y Finanzas Públicas, MEFP) 26, as well as instructions issued by the Vice-Ministry of Public Investment and External Finance (Vice-Ministerio de Inversión Pública y Financiamiento Externo – VIPFE). Accordingly, Project transactions will be accounted for in accordance with Governmental Accounting Standards, and would use the Chart of Accounts established by the Accountant General’s Office (Dirección General de Contabilidad Fiscal). Project execution under the responsibility of PCU will benefit from the use of those well-functioning PFM elements including SIGMA and the Treasury Single Account (CUT). These basic arrangements will be supplemented, where needed, to make sure Project needs and risks are adequately addressed, mainly as it relates to internal controls, financial reporting and auditing. 26 Law No. 2042, Supreme Decree No. 29881 dated January 7, 2009 – Regulations for Budgetary Modification. 30 Ministry of Energy and Hydrocarbon (MHE) – PCU: Organizational arrangements and staffing 16. The PCU is a deconcentrated 27 unit within the MHE’s PEVD Program. Within such structure, financial management arrangements are shared between MHE’s administrative unit (Dirección General de Asuntos Administrativos – DGAA) and PCU’s FM team, which currently includes an FM Specialist and an Accountant. It has been agreed that day to day tasks related to budget execution and payment processing will be delegated to PCU mainly, with PEVD Coordination undertaking an authorizing role to avoid delays. To that end, and taking into account the need to count with timely coordination and interaction with Municipal and Departmental governments, it has been agreed to strengthen the team with additional FM staff. Programming and Budget 17. For Components 2 and 3, budget recording would follow standard mechanisms and be recorded and executed as part of the MHE’s institutional budget. Funds required for the implementation of Component 1 (for which the related debt would be paid by the Gobernaciones), would require to be recorded by each Gobernación –as debt received from external financier (source) and as a transfer to the Central Government (expenditure) - and in the MHE’s budget as a transfer received from Gobernaciones (source) and detailed expenditures classified by object of expenditure. The proposed arrangement has been confirmed with respective Gobernaciones including a discussion on the level of approval required at different stages (e.g. budget formulation, budget approval, and execution of budget transfer from Gobernaciones to the Central Government) as well as details of budget execution, and they will be reflected in the Project Operational Manual and key obligations and responsibilities in the inter-institutional agreements. Project annual budget –as classified by Project component/sub- component would be consistently used for monitoring purposes. Accounting – Information system – Financial reporting 18. Project execution will benefit from the use of SIGMA and the TSA (CUT in US dollars and local currency) to process payments. From thereon, Project execution will be fully integrated in the Central Government accounting, and Gobernaciones accounting, for debt purposes. The use of SIGMA will be complemented with a management information system previously implemented under IDTR that allows contract monitoring, recording of Project transactions by Project component/sub-component/activity, for automatic issuance of financial reports and statements of expenditures. Under the proposed arrangements, chart of accounts used by said information system will have to be adjusted to allow the recording of expenditures by Gobernaciones and Municipal governments, as well as to permit the control of Municipal counterparts; and accordingly permit the issuance of budget execution reports for each Gobernación reporting on the execution of their respective activities. As the information system is upgraded, there is need to review the adequacy of said reports. 27 A deconcentrated unit can be granted with some level administrative and operational autonomy, but does not have its own budget and it is not an independent legal unit per se. 31 19. Similar to IDTR; it has been discussed that interim financial reports would provide information on: i) sources (IDA Credit, and Municipal contributions) and uses of funds, reconciling items (as needed), and cash balances, with expenditures classified by Project component/sub-component/Gobernación; and ii) a statement of investments reporting the current semester and the accumulated operations against ongoing plans, as well as footnotes explaining the important variance. Interim financial reports (IFRs) described above would be submitted on a semi-annual basis within one month after the end of each calendar semester. Processes and procedures (including internal controls) 20. Overall, the PCU has to comply with local requirements related to administrative and control systems (SAFCO Law – Ley de Administración y Control Gubernamentales – System of Financial Administration and Control), which are partially integrated into the operation of SIGMA, as they relate to budget preparation and execution. Internal processes and procedures followed by IDTR were to some extent lengthy and cumbersome due to the required interaction between PCU and MHE’s administrative unit (DGAA). Based on lessons learned, it has been agreed that routine tasks for payment processing are fully delegated to PCU, while PEVD Coordination exercises an authorizing role. Accordingly, internal processes and procedures have been revised and adjusted. Additionally, the PCU has worked on detailed procedures for payment approval, including the role of the respective Gobernación for activities financed under Component 1. Such approval/authorizing role will be reflected as well in the inter-institutional agreement. Those revised procedures have been reviewed during appraisal and will be reflected in the Operational Manual. Audit arrangements 21. PCU will provide the Bank with annual audit reports on Project financial statements, and management letter. Said reports would be submitted to the Bank, within six months of the end of the Recipient’s fiscal year 28 (December 31). The audits should be conducted by an independent audit firm acceptable to the Bank and under terms of reference approved by the Association. Audit cost would be financed out of Credit proceeds and selection would follow standard Bank procedures. The scope of the audit would be defined by PCU in agreement with the Bank based on Project specific requirements and responding, as appropriate to identified risks. Audit requirements would include the following: Audit type Due date Project financial statements June 30 Special Opinions – statement of June 30 expenditures (SOE) 22. In accordance with the World Bank’s (WB) Access to Information Policy, Project audited financial statements will be made publicly available through MHE’s website. 28 In accordance with Bank’s Guidelines, the first and last audits may cover a period of up to 18 months. 32 Disbursements Flow of Funds and Disbursement Arrangements 23. Following the general practice of the current portfolio, the following disbursement methods may be used to withdraw funds from the Credit: (a) reimbursement, (b) advance, and (c) direct payment. Taking into account that each Gobernación will require accurate information on the amount disbursed by the Association for activities under its jurisdiction for debt repayment purposes; it has been agreed the use of three Designated Accounts (DA), in US dollars to be opened and maintained by PCU as follows: DA-A for Category 1(a) - Potosí, DA-B for Category 1(b) – Chuquisaca; and DA-C for Category 2. Funds deposited into each DA as advances would follow Bank’s disbursement policies and procedures, to be described in the Financing Agreement and in the Disbursement Letter. 24. Funds flow of the Project is diagrammed below: Credit Account WB Designated Account A Designated Account B Designated Account Category 1(a) Potosí Category 1(b) Category 2 (Libreta CUT – ME) Chuquisaca (Libreta CUT – ME) (Libreta CUT – ME) Operational Account A Operational Account B Operational Account C Libreta CUT Bs Libreta CUT Bs Libreta CUT Bs (For Category (a)) (For Category 1(b)) (For categories 1(c), 2 and Suppliers, contractors and consultants 25. In keeping with current arrangements established by the Vice-Ministry of Treasury and Public Credit for the operation, and use of a Single Treasury Account in US dollars (CUT- ME) 29, the DAs would be opened and maintained as a separate Libretas within the CUT in US dollars. Following the existing treasury arrangements, funds from CUT-ME are periodically transferred to CUT in Bolivianos into a separate Libreta under the Project name, from which all payments will be processed through direct transfers into beneficiaries’ bank accounts. 26. The ceilings for advances to be made into each DA are reflected in the Disbursement Letter. Documentation of eligible expenditures paid out of the DAs is expected to be on a 29 Decreto Supremo No. 29236 dated August 22, 2007. 33 quarterly basis. The supporting documentation requirements to document Project expenditures (thresholds for the use of SOE), as well as the minimum value for direct payments and reimbursements will be defined in the Disbursement Letter. 27. Municipal contributions. Funds flow mechanisms for participating Municipalities to provide their counterpart contributions have been defined; it has been agreed that a separate Libreta within CUT would be opened and maintain to administer Municipal contributions. PCU will make the arrangement to maintain adequate records to control and report on those contributions. 28. Credit proceeds will be disbursed against the following expenditure categories: Category Amount of the Credit Percentage of Expenditures Allocated (expressed in to be Financed SDR) (inclusive of Taxes) (1) (a) Goods, works and consultants’ services for the Subprojects to be carried out 16,500,000 100% of the amount in the jurisdiction of disbursed by the Recipient Gobierno Autonomo under the Subprojects Departamental de Potosí, and goods under Parts I.2 (b) and 3 (b) of the Project (b) Goods, works and consultants’ services for the 11,520,000 100% of the amount Subprojects to be carried out disbursed by the Recipient in the jurisdiction of the under the Subprojects Gobierno Autonomo Departamental de Chuquisaca and goods under Parts I.2 (b) and 3 (b) of the Project (2) Goods, consultants’ services (including audits), Training and Operating 4,380,000 100% Costs for Parts II and III of the Project TOTAL AMOUNT 32,400,000 34 Procurement General 29. Procurement will be conducted according to the World Bank’s 2011 “Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” issued in January 2011 for the supply of goods, civil works and non-consulting services, and the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” issued in January 2011 for technical assistance and other consultant assignments. 30. For each contract which would be financed by the Credit, the applicable procurement methods or consultant selection methods, the need for pre-qualification, when necessary, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank in the Procurement Plan that is described in the Operational Manual. Goods and works and non-consulting services 31. Procurement of Goods. Goods to be procured would include: provision and installation of photovoltaic systems for Component 1 and goods for institutional strengthening of the Units on Component 2. Procurement of goods will be done using Bank’s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) processes; procurement of goods under National Competitive Bidding (NCB) and Shopping procedures shall be done using SBD agreed with, or satisfactory, to the Bank. Such SBD will be included as annexes in the Project’s Operational Manual. 32. Procurement of Works. Civil works procured under this Project would include network densification. Procurement of works will be done using Bank’s SBD for all ICB processes; procurement of works under NCB and Shopping procedures shall be done using SBD agreed with, or satisfactory, to the Bank. Such SBD will be included as annexes in the Project’s Operational Manual. 33. Procurement of non-consulting services. Non-consulting services under this Project would include contracts for logistics services to support training. Procurement of non-consulting services will be done using Bank’s SBD for all ICB processes; procurement of non-consulting services under NCB and Shopping procedures shall be done using SBD agreed with, or satisfactory, to the Bank. Such SBD will be included as annexes in the Project’s Operational Manual. 34. Advertisement. All procurement notices shall be advertised in the SICOES (Sistema de Contrataciones Estatales) web page or in at least one local newspaper of national circulation. In addition, the ICB procurement notices and contract award information shall be advertised in the UN Development Business online (UNDB online). The SICOES web page shall also be used to publish information on awarded contracts in accordance with provisions of paragraphs 2.60 of the Procurement Guidelines and as mandated by local legislation. 35 Selection of consultants 35. Firms: Selection of consultant firms will be needed on Component 1 to supervise the works to be procured and in Component 2 and 3 to support the national and subnational strategies of energy access and institutional strengthening of the Units. Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Regardless of the method used or the estimated cost of the contracts, selection and contracting of consultant firms will be done using the Bank’s Standard Request for Proposals (SRfP). 36. Individual Consultants: Most of the consulting services to be contracted would be related to supervision, training and technical assistance. The consulting services mentioned above may be provided by individual consultants selected by comparison of qualifications of at least three candidates and hired in accordance with the provisions of Section V of the Consultant Guidelines. Selection and contracting of Individual Consultants will be done using a simplified request for curriculum vitae (CVs) and a contract model agreed with, or acceptable, to the Bank; if feasible, processes for the selection of Individual Consultants shall be made public. Such documents shall be part of the Project’s Operational Manual 37. Individual consultants for services with an expected duration of six months or more would be selected as a result of a request of expressions of interest advertised in a national newspaper and/or SICOES, and contracts would be signed for the expected duration of the assignment, subject to annual reviews for performance. Contracts with individuals may only be terminated for poor performance or for non-completion of the work with Bank’s prior agreement. The Bank would not agree to the replacement of individual consultants terminated for other than the aforementioned reasons. 38. Advertisement: The SICOES web page and/or a national newspaper shall also be used to advertise a request of expression of interest for consulting firms or individuals, and to publish information on awarded contracts in accordance with provisions of paragraphs 2.31 of the Consultants Guidelines and as mandated by local legislation. Contracts expected to cost more than US$200,000 shall be advertised in UNDB online. Operating Costs 39. The Credit would finance operating costs that would be procured using simplified procedures agreed with, or satisfactory to the Bank that will be included in the Operational Manual. Special Procurement Provisions 40. The following shall apply to procurement under the Project: (a) Goods, Works and Non-consulting Services: Without limitation upon the provisions of the Procurement Guidelines, the following additional provisions shall apply to all goods, works and non-consulting services procured for the Project under contracts awarded on the basis of National Competitive Bidding ("NCB"): 36 (i) A merit point system shall not be used in the pre-qualification of bidders. (ii) The award of contracts for goods, works and non-consultant services shall be based exclusively on price and, whenever appropriate, shall also take into account factors similar to those referred to in paragraph 2.51 of the Guidelines, provided, however, that the bid evaluation shall always be based on factors that can be quantified objectively, and the procedure for such quantification shall be disclosed in the invitation to bid. (iii) All bids shall be opened at the stipulated time and place in accordance with a procedure acceptable to the Association. (iv) The single envelope procedure shall be used. (v) Whenever a discrepancy shall occur between the amounts in figures and the amounts in words of a bid, the amounts in words shall govern. (vi) No prescribed minimum number of bids shall be required to be submitted for a contract to be subsequently awarded. (vii) Foreign bidders shall be allowed to participate. (viii)Foreign bidders shall not be required to legalize any documentation related to their bids with Recipient's authorities as a prerequisite for bidding. (ix) No margin of preference shall be granted for any particular category of bidders. (x) In the event that a bidder whose bid was evaluated as the bid with the lowest evaluated price withdraws its bid, the contract may be awarded to the second lowest responsive evaluated bid. (xi) Foreign bidders shall not, as a condition for submitting bids, be required to enter into a joint venture agreement with local bidders. (xii) No procurement rules or regulations of neither of the Recipient's agencies, nor of any state-owned entity shall apply without the prior review and consent of the Association. (xiii)Recipient State-owned enterprises shall be allowed to participate in bids only upon their compliance with the provisions of paragraph 1.10 (b) of the Procurement Guidelines. (xiv) No contractor or supplier shall be denied fair and equitable treatment in any resolution of dispute with the Recipient and/or any of its executing agencies. (xv) No reference value shall be required for publication in the bidding documents or used for the purpose of evaluation. 37 (xvi) Bidding documents for NCB shall include anticorruption clauses that shall be substantially identical to those pertaining to the Association Standard Bidding Documents for ICB. (b) Selection of Consultant Services: The following additional provisions shall apply to all consultants' services procured for the Project: (i) Foreign consultants shall not be required, as a condition for participating in the selection process, to enter into a joint venture agreement with local consultants, unless the conditions stated in paragraph 1.15 of the Consultant Guidelines are met. (ii) Foreign consultants shall not be required, as a condition for participating in the selection process, to legalize their proposals or any documentation related to such proposals with Recipient's authorities. (iii) Foreign consultants shall not be required to be registered in the Recipient's National Registry of Consultants (Registro Nacional de Consultoría). (iv) Consultants, either firms or individuals, shall not be required to present performance securities as a condition to present proposals and sign an award contract. (v) Consultant, individually or as a firm, shall not be denied a fair and equitable treatment in its resolution of dispute with the Recipient and/or any of its executing agencies. Assessment of the agencies’ capacity to implement procurement 41. Procurement activities will be carried out at the National Level by the Project Coordination Unit (PCU) under the Programa Electricidad para Vivir con Dignidad within the Ministry of Energy and Hydrocarbon (MEH). Representatives of Chuquisaca and Potosí will take part as observers in the procurement processes. 42. Assessments of the capacity of aforementioned Implementing Agencies to implement procurement actions for the Project have been carried out by Álvaro Larrea on October 2013. The assessments reviewed the organizational structure for implementing the Project, the quantity and capacity of relevant staff responsible for procurement, the relationship between the procurement office and the technical, administrative, and financial offices, the administrative and Operational Manuals and standard procurement documents used, and the filing capacity and the support systems used for supervising and controlling the whole procurement cycle, and concluded that the PCU has an overall installed capacity suitable to successfully carry out the procurement function for the Project components they will manage. 43. The Unit has previous experience with Bank’s financed projects through the implementation of IDTR and EDAU (Electricidad Descentralizada para el Acceso Universal – Decentralized Electricity for Universal Access Project) and will keep the responsibility for procurement implementation. The Unit is solid enough to carry out processes with Bank’s 38 financing and has an experienced procurement specialist. The main risk in this opportunity is the interaction with the subnational governments to coordinate their requests with the actual procurement and to strengthen the Unit’s staff. To mitigate this risk, it has been agreed with the PCU to (i) develop ToRs (terms of reference) and hire a Procurement Coordinator that will support with the Procurement Specialist and (ii) create a new position called “Linking Consultant” for each of the Gobernaciones. This consultant will participate without vote on the procurement processes carried out by the PCU. 44. The overall Project risk for procurement is Moderate. 45. Procurement records. Detailed procurement records, reflecting the Project’s supply of goods, civil works construction / rehabilitation and consultant services, including records of time taken to complete key steps in the process and procurement activities related to supervision, review, and audits, would be maintained by the PCU. These records would be maintained for at least two years after the Project’s closing date. The records for civil works and goods would include public notices, bidding documents and addenda, bid opening information, bid evaluation reports, formal appeals by bidders and outcomes, signed contracts with related addenda and amendments, records on claims and dispute resolutions, and any other useful information. The records for consultant services would include public notices for expression of interest, request for proposals and addenda, technical and financial reports, formal appeals by consultants and outcomes, signed contracts, addenda and amendments, records on claims and dispute resolution and any other useful information. The filing, record keeping, auditing, reporting, post-review, and monitoring of the smaller procurement activities are crucial for the successful application of the funds to enable economy, efficiency, and transparency. Procurement Plan 46. The implementing agency will develop a detailed Procurement Plan for the first 18 months for each of the Project components’ implementation; said Plan will provide the basis for the use of different procurement methods, and for the Bank’s review process. This plan has to be agreed between the Recipient and the Project Team before negotiation of the Credit’s Legal Agreement. As soon as the Project is declared effective, all of the aforementioned Procurement Plans will be available at the SEPA’s (Sistema de Ejecución de Planes de Adquisiciones – Procurement Plan Execution System) portal; the Plans will also be available in the Project’s database and on the World Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. Frequency of Procurement Supervision 47. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agencies has recommended annual supervision missions to visit the field to carry out post-review of procurement actions. One out of every 10 contracts should be post-reviewed when applicable. The Bank’s Project supervision would review procurement reports and would carry out procurement reviews in the participating Autonomous Departments. 39 Details of the Procurement Arrangements Involving International Competition 48. Thresholds for the use the different procurement methods and recommended thresholds for Bank prior review are given in Table A8.1. Table A8.1: Thresholds for Procurement Methods and for Recommended Bank Review Estimated Value Contract Threshold Procurement Method Bank Prior Review Works: >=US$3,000,000 ICB All =US$250,000 NCB First =US$200,000 ICB All = US$50,000 NCB First =US$200,000 QCBS, QBS, FBS, All LCS, CQS =US$50,000 IC All