PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Project Name Region Sector Project ID Borrower(s) Implementing Agency Report

No.: AB6594 Support to the Electricity Emergency Plan Project AFRICA Power (100%) P125565 REPUBLIC OF SENEGAL APIX (the national investment promotion agency) for the fiduciary aspects and safeguards, SENELEC (the National Electricity Utility of Senegal) for the operational and technical aspects of the project; and SPE (the Permanent Secretary for Energy) for the coordination, monitoring and evaluation. [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) May 30, 2011 October 17, 2011 December 15, 2011

Environment Category Date PID Prepared Estimated Date of Appraisal Authorization Estimated Date of Board Approval

1. Key development issues and rationale for Bank involvement

The development of energy infrastructure represents a key component of the Governments strategy to ensure economic development. Electricity is a fundamental block for economic growth and the price, reliability and quality of electricity service affect all economic activities directly or indirectly. Aligned with the February 2008 Letter for Energy Sector Development Policy (LPDSE), several institutional reforms have been conducted and massive financial resources have been invested in the energy sector. Nevertheless, the energy sector as a whole is facing a major crisis with the sub-sector of the electricity as the most affected area. This crisis was periodic over the last four years but it increased in intensity and frequency in 2010 causing repetitive nationwide blackouts. The appointment in October 2010 of a new Energy Minister brought a new impetus, vision and direction for energy sector recovery and reform. The Minister mandated the preparation of a major restructuring and recovery plan for the whole energy sector, based on a 360 degree diagnostic and several technical and financial audits, with support from international and national consulting firms. The diagnostic pointed to two main issues of the power sector in Senegal: one is the growing gap between fast growing demand and a limited, costly and unreliable supply of electricity and the other are SENELECs persistent financial difficulties with a significant operating deficit and high indebtedness. The Governments most immediate effort has been to prepare a 2010-2014 electricity emergency plan1 aimed at (a) removing the above mentioned electricity supply bottlenecks by securing sufficient additional power generation capacity prior to the commissioning of a 125 MW coal-fired power plant contracted as an IPP and scheduled for commissioning in 2014/2015; and (b) addressing SENELECs cash-flow and financing constraints. The proposed operation will support the governments overall plan for the recovery of the electricity sector. The main distinguishing feature is the recognition of the crisis by the Senegalese authorities; this
1

The Takkal plan

recognition has allowed a thorough diagnosis without concessions. The Government is now talking with a single voice; there is no more dissonance between the Minister of Finance and the Minister of Energy as was the case previously. The plan and proposed solutions take into account both the technical, financial and budgetary matters. This has enabled the establishment of a comprehensive and programmatic approach to address the crisis in all its dimensions. The establishment of a specific financing mechanism (FSE) and of a specific organization (SPE) should enable an effective oversight and implementation of the plan.

2. Proposed objective(s) The proposed project development objective is to reduce SENELECs technical and commercial losses by rehabilitating/upgrading transmission and distribution grids and installation of smart meters, in selected zones.

3. Preliminary description The proposed project development objective is to reduce SENELECs technical and commercial losses in some selected zones. C. Project Description [from section 3 of PCN] The proposed project whose cost is estimated at about US$ 88 million (IDA: US$ 80 million) will have the following components: Component 1: Transmission and distribution: (around US$45 million) This component includes the upgrading, rehabilitation and replacement of new transmission lines and substations, the upgrading of the distribution network from 6.6 kV to 30 kV, the construction of new transformers, network protection and control, the extension and densification of the distribution network. Although the envelope is limited to about US$45 million, a larger volume of investment has been identified and a full feasibility study will be carried out during project preparation, together with associated environment impact assessments. The final choice will be made based on several criteria, particularly economic attractiveness and urgency. Overall, the current choice is dictated by the priorities established by SENELEC into its Distribution and Transmission Investment Program for the 2011/2014 period. This program results from the Transmission and Distribution Master Plans recently financed under the Electricity Sector Efficiency Enhancement Project supported by IDA, which ended December 31 2010. The cost of this Program is estimated at approximately 150 billion CFA francs (or about US$350 million).

Component 2. Electronic and Pre-paid Meters Program: (around US$40 million) The policy of installing either pre-paid or electronic meters (for large customers) for all SENELECs consumers has been adopted by the government after all other attempts at reducing losses and securing SENELECs revenue have failed. The metering program will be deployed in phases with due regard to meter standardization and their interface with the customer management system. The component proposed to Bank financing is only the first phase of the program. Other meter acquisition and installation will be financed through own resources and by other donors yet to be identified. The introduction of electronic and pre-paid meters will necessitate a revision of the current tariff level and structure. Through this component it is also proposed to finance the installation of a new customer management system. The current system has been in operation since 1994 and is now obsolete. This situation also causes difficulties for obtaining support in case of malfunction or breakdown of equipment or software that are no longer manufactured or serviced. The acquisition of a modern customer management system will therefore: (i) replace the current system that has become obsolete both technically and operationally; (ii) encompass all commercial processes and re-orienting the customer information system on the client; (iii) improve sales and cost recovery for low and medium voltage customers through better customer management, billing and cash receipts; and (iv) bring flexibility to allow for adjustment in the future to deal with tariff changes, incentives for energy efficiency and the promotion of renewable energy. Component 3. Institutional Support: (around US$8 million) By addressing, through a set of coherent measures, the main causes of the crisis in the electricity sub-sector, the plan is positioned in the short term. However, it is necessary to conduct, in parallel, comprehensive analytical work on the strategic outlook in the medium and long term. (Indeed, the sector's problems are largely due to poor planning and realization of investments). Therefore, the proposed operation plans to support the GOS in these prospective analytical works. Among the studies to be undertaken: (i) energy mix: medium and long term diversification into coal, gas, renewable energy and regional integration, and (ii) private sector participation, sector governance and SENELEC restructuring. This component will also support the coordination/implementation organization of the project, through the financing of specific expertise to the SPE, APIX and SENELEC and operational costs. The French Development Agency (AFD) will also support the SPE with funding of about 1 million Euros. A Monitoring and Evaluation system is under preparation and should allow the SPE to monitor the results of the Takkal plan (and therefore of the proposed project) and take the necessary corrective actions as necessary. This component proposes to support the implementation of the system and to support activities: (i) to monitor and assess the impacts of the activities supported by the project and (ii) to carry out project related external audits by auditors acceptable to IDA. Finally, a communication strategy to mitigate the opposition to the introduction of prepaid meters will be developed under this component.

4. Safeguard policies that might apply

OP/BP 4.01 and OP/BP 4.12 might apply. A complete environmental and social impact assessment will be completed during project preparation and disclosed before appraisal.

5. Tentative financing
($m.) Source: BORROWER/RECIPIENT International Development Association (IDA) Total 8 80 88

6. Contact point
Contact: Stephan Claude Frederic Garnier Title: Senior Energy Specialist Tel: 5352+4185 / 221-33-859-4185 Fax: 5352+4283 Email: sgarnier@worldbank.org Location: Dakar, Senegal (IBRD)