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Unserved Areas Electrification Programme

Objective

The objective of the Project is to support the Government’s socio-economic development and proverty alleviation strategy, through strengthening the legal, regulatory, and institutional framework and providing the financial resources required for accelerated electricity sector development and extention of service to currently unserved consumers.

Description

The Project will focus on: (a) consolidating structural reforms in the electricity sector; (b) maximising the impact of Bank operations overall, including their catalytic impact, through carefully selecting the design, scope, and timing of interventions; (c) promoting the development of markets for energy efficiency; (d) promoting rural energy development through adopting innovative mechanisms and maximizing the potential for self-sufficiency and replication; and (e) putting proverty alleviation and socio-environmental protection at the center of its interventions in the sector.

The Project comprises three (3) components, all of which will be implemented over a five-year period, 2004 – 2009:

1. Investment component

This component will finance feasible and sustainable investments in GPL’s distribution system in the context of its Development and Expansion Programme (D&E) and Project management and other support as follows:

Grid Connections. This subcomponent will finance the Borrower’s contribution as part of the 75% supplementary funding to a self-contained programme to provide 30,000 connections in currently unserved areas over the 2004-2009 period, as stipulated in GPL’s License. These areas comprise new housing schemes including township developments, peri-urban squatter settlements in the process of rehabilitation, villages and other settlements, which are in the process of being regularised. Activities under this component comprise: (a) the extention of 13.8kV dirtribution lines totaling about 200 kilometers and their connection to the 69kV transmission system, but excluding investments in associated transmission lines; (b) service connections for 30,000 housing lots in the vicinity of Georgetown and other coastal areas close to existing grids; and (c) Project administration activities including a dedicated unit with implementation and construction managers, construction supervisors, procurement, accounting and administrative support, and design, drawing and surveying services. Total investment cost include connection costs (meters, meter boxes and service lines); distribution network costs ( poles, transformers, conductors, connectors, medium volts switched, low voltage cut outs, insulators, performed wraps and general line hardware); and project administration and contingencies. Connections would initially be in built-up and populated areas where relative to other areas, connection costs are on average about US$517, economic activities bouyant, and consumers’ ability and willingness to pay assured, even though most new customers would be low-income.

This subcomponent is aimed at optimising investments, by ensuring that: (a) least-cost solutions are applied and sub-projects are selected based on proper economic-financial analysis including consumers’s ability and williness to pay and the sub-projects’ Economic Internal Rate of Return (EIRR); and (b) subsidies to consumers are limited to a portion of investment costs, with tariffs fully covering operating and maintenance costs, consistent with the Bank policy on subsidisation and cost recovery. Estimates confirm that additional generating capacity required to supply new customers would be in the range of 15 – 20 MW, and would be provided by GPL as part of its ongoing D&E Programme.

Loss Reduction. This subcomponent will finance: (a) an assessment/feasibility of non-transmission loss reduction investments that will serve as the basis to structure a loss reduction investment programme and the respective selection criteria to ensure the feasibility, sustainability and prioritisation of these investments; define the base line for mid-term and end of programme; and establish the institutional arrangement required for the timely execution of this loss reduction investment programme and required staffing; and (b) the non-transmission loss reduction investment programme and management services resulting from (a) above, and ensuring that: (i) least-cost solutions are applied and sub-projects are selected based on proper economic-financial analysis including consumers’ ability and willingness to pay and the sub-projects’ EIRR; (ii) subsidies to consumers are limited to a portion of the investment costs, with tariffs fully covering operating and maintenance costs, consistent with the Bank policy on subsidisation and cost recovery, and (iii) no environmental studies, permits, and/or licenses are required.

Project Management and Other Support: This subcomponent will finance: (a) support for GPL to negotiate power purchase agreements to ensure that these are economically viable and do not affect the sustainability of the utility or its future reprivatisation. Consultants hire under this subcomponent will carry out the corresponding activities according to the terms or references previously agreed upon the Executing Agency and the Bank; (b) the institutional and technical advisory services and support required to assist GPL in overcoming its overall loss reduction challenges; and (c) the financial and operational audits.

2.   Hinterland project preparation component

This component will ascertain a set of technical, institutional, and socio-environmental guidelines, procedures, and criteria, following EPA guidelines, in order to establish a sustainable institutional framework for the electrification of isolated and remote areas where the extention of grids would not be feasible. To that end, this component will finance: (a) studies of options and requirements for economically, socio-environmentally, and institutionally-administratively viable schemes for serving isolated communities with electricity, that take full account of the basic socio-ethnic and cultural features of the local populations, with a view to recommending sustainable institutional and financing schemes for future project development; (b) based on the results of the evaluations, up to four demonstrative projects in selective areas and applying representative technologies and locally available energy resources, with a view to testing their feasibility and possible replication at a later stage; (c) measures necessary to comply with the requirements for consulting local populations and other stakeholders on relevant projects to ensure that social, cultural and ethnic characteristics of the population are properly addressed, and that these communities participate in the decision-making throughout the project cycle; (d) creation and operation of mechanisms for monitoring and evaluating the implementation of the technical, economic-financial, and socio-environmental aspects of the demonstration projects, including technical assistance to OPM, EPA, and other relevant institutions to coordinate these tasks and eventually carry them out; and (e) outside supervision of the environmental and social aspects of this component especially the demonstration projects through qualified independent specialists. The studies under this component will include the review of various ongoing methodologies and best practices for community participation in the country. They would also assess the applicability of the current legal, regulatory and institutional framework to hinterland schemes, identifying any modifications needed to adapt this framework to different requirements, and would include, if necessary, a socio-environmental evaluation following country legal and regulatory requirements.

3.   Institutional strengthening and capacity-building component

This component will finance: (a) Project management activites at OPM, including the creation and operation of mechanisms to monitor and evaluate the implementation of the technical, economic-financial, socio-environmental, and institutional-administrative aspects of the individual grid extention and loss reduction project subcomponents, the Hinterland demonstration projects; and the strengthening of the PUC, EPA; and the Electric Inspection Division (“EID”); (b) training required for UAEP’s successful implementation (c) if necessary, legal, regulatory, and institutional reforms to support the viability of UAEP; and (d) the preparation of a GPL reprivatisation policy and strategy. The sector agencies will receive technical and institutional assistance so that they consolidate their capacity to comply with their current obligations and effectively support Project implementation. Since GPL’s workforce supported by contractors currently is primarily engaged in rehabilitating the existing system and executing related investments, this component would also support relevant vocational training to meet the proposed electrification targets.



Category/ies:Guyana Projects.
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