PROJECT INFORMATION DOCUMENT (PID)



PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB3176

|Project Name |WAPP APL 3 (INTER-ZONAL TRANSMISSION HUB) |

|Region |AFRICA |

|Sector |Power (100%) |

|Project ID |P094919 |

|Borrower(s) |BURKINA FASO, GHANA |

|Implementing Agency | |

| |Republic of Ghana |

| |Ghana |

| |Government of Burkina Faso |

| |Burkina Faso |

| |SONABEL |

| |01 BP 54 Ouagadougou 01 |

| |Ouagadougou |

| |Burkina Faso |

| |Tel: 226-50306100 |

| |Volta River Authority |

| |EleP.O. Box M.77ctro-Volta House |

| |Accra |

| |Ghana |

| |Tel: (233) 21 221124 Fax: (233) 21 662610 |

|Environment Category |[X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) |

|Date PID Prepared |June 11, 2007 |

|Estimated Date of Appraisal Authorization |March 17, 2008 |

|Estimated Date of Board Approval |June 17, 2008 |

1. Key development issues and rationale for Bank involvement

1.1 Regional Overview: The 15 member states[1] of the Economic Community of West African States (ECOWAS) occupy some five million square kilometers and are currently home to about 250 million people. Half of the present population lives in poverty, with per capita income barely above US$300 per year. Despite the region’s large energy endowment, the per capita consumption of electricity is among the lowest in the world with approximately 160 kWh per capita. Faced with this power system expansion challenge, ECOWAS Member States have acknowledged that past efforts to achieve national self-sufficiency in electricity supply have been uneconomical due to the high cost of establishing power generation and transmission infrastructure. They also acknowledge two major shortcomings in the region at the present time: (a) over-reliance on hydro-based power systems will not provide sufficient regional security of electricity supply, and (b) the lack of adequate transmission infrastructure (within and between national power systems) is the weakest link in the drive towards greater cooperation in power sector development. The vision of ECOWAS is to develop and put in place the West Africa Power Pool (WAPP) – a cooperative power pooling mechanism for integrating national power system operations into a unified regional electricity market – with the expectation that such mechanism would, over the medium to long term, assure their citizens a stable and reliable electricity supply at affordable costs.

1.2 WAPP Cooperation Framework: ECOWAS Member States are facing up to the challenge ahead by taking collective action to mobilize financing on a larger scale than has hitherto been forthcoming to establish, inter alia, a robust infrastructure platform for the WAPP. They have recognized that a pre-condition for successful regional energy integration in West Africa is the establishment of a transparent and harmonized policy, regulatory and commercial framework for cross-border electricity trade throughout the community. Accordingly, the community’s highest decision-making body – the Summit of the Heads of State and Government of the ECOWAS Member States – is pursuing a deliberate, step-by-step approach to forge consensus, put in place the core (legal, regulatory, technical, investment programming) building blocks for the WAPP initiative, so as to provide prospective donors and financiers with clear evidence of the collective ownership by ECOWAS member states.

1.3 As a “flagship infrastructure project” of the New Partnership for African Development (NEPAD), [2] the WAPP directly contributes to the broader ECOWAS agenda to establish an open, unified, regional economic space in West Africa. The vision for WAPP is also embodied in the EOWAS Energy Protocol (EEP) – that of creating a "level playing field" to facilitate the balanced development of diverse energy resources of the ECOWAS Member States for their collective economic benefit, through long-term energy sector co-operation, unimpeded energy transit and increasing cross-border electricity trade. Implementation is entrusted to a WAPP Steering Committee (SC) composed of the “Meeting of ECOWAS Energy Ministers”, assisted by a WAPP Project Implementation Committee (PIC) composed of Chief Executives of the region’s national power utilities.[3] In July 2006, the "WAPP Organization" was formally inaugurated as an all-inclusive organization of (public and private) electric power utilities based in ECOWAS member states.

1.4 World Bank support of the WAPP: On June 30, 2005, the Bank’s Executive Board of Directors endorsed the application of the adjustable program lending (APL) instrument, within the framework of the World Bank’s RIAS for West Africa, as the vehicle for providing IDA credit support to the WAPP initiative. The Bank has earmarked substantial IDA resources (USD 350 million equivalent, under the IDA Regional Pilot Program) to put in place a multi-year programmatic framework to help close the financing gap and thereby ensure timely implementation of priority WAPP investments and technical assistance activities of the Revised ECOWAS Master Plan. The APL instrument would enable IDA credit support to be provided in a flexible manner – when borrowers have satisfied the policy triggers (country commitments under the EEP) and when individual WAPP priority investments are ready to receive IDA credit support.[4] The figure below illustrates the APL phases envisaged under the WAPP program.

[pic]

1.5 Given the large diversities among power systems of the ECOWAS Member States, the WAPP SC and PIC have drawn up an implementation “road map” which follows a two-track approach:

Zone A – Benin, Burkina Faso, Côte d’Ivoire, Ghana, Niger, Nigeria and Togo; and

Zone B - The Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Senegal and Sierra Leone.

Over the medium term, the “road map” will guide the development of two distinct but mutually reinforcing cooperative power pooling mechanisms, each of which would combine investments to develop the necessary generation and transmission infrastructure with the introduction of common “rules of practice” covering the institutional, regulatory, technical/operational and commercial pre-requisites for promoting cross-border electricity trade – WAPP Cooperation Agreements. Although tailored to specific power system configurations of each zone (Figure 1 below), each WAPP Cooperation Agreement will be formulated based on the core principles embodied in the EEP. Over time, the expectation is that two zonal power pooling mechanisms will converge into a unified, well functioning regional power pooling mechanism.

1.6 Inter-zonal Transmission Hub: The first step of linking Zones A and B targets the provision of lower cost electricity from the generation hubs Ghana and Côte d'Ivoire to be transmitted through secure transmission corridors into the Sahel (Burkina Faso, Mali). The first phase of the establishment of the Inter-zonal Transmission Hub (APL3 - Phase 1 of Inter-Zonal Transmission Hub) is the subject of the proposed project. It proposes to link Burkina Faso and Ghana through the 225 kV Bolgatanga (Ghana) - Ouagadougou (Burkina Faso) Interconnection project. Under a second phase, which is not part of the proposed project, an interconnection between Côte d'Ivoire and Mali is envisaged (WAPP APL 3 – Phase 2 of Inter-Zonal Transmission Hub.) This phase will primarily involve the construction of the Laboa – Ferkessedougou - Sikasso – Segou Transmission Lines to establish a robust interconnection between Cote d’Ivoire and Mali, and also reinforcing supply reliability on the existing interconnection between Côte d’Ivoire and Burkina Faso. Whenever IDA operations resume in Côte d’Ivoire, co-financing will be provided for a proposed WAPP APL3, Phase 2 project. Further ahead in the future a direct interconnection linking Ghana (Han), Burkina Faso (Bobo Dioulasso) and Mali (Sikasso, Bamako) is being studied by the WAPP Organization.

1.7 The APL3 - Phase 1 of Inter-Zonal Transmission Hub project is accorded high-priority in the Revised ECOWAS Master Plan for the Generation and Transmission of Electrical Energy. The transmission line will extend from the Bolgatanga substation in northern Ghana to the Ouagadougou substation in Burkina Faso. It will help to significantly reduce the cost of electricity supply in Burkina Faso and facilitate future unconstrained cross-border electricity exchanges across WAPP zones. Currently, for example, the cost of generation of thermal power in Ghana is estimated at US¢10/kWh compared to US¢19/kWh for diesel-generated power in Burkina Faso. Once the gas from the West African Gas Pipeline becomes available or thermal power generation, unit costs from thermal power are expected to go down to US¢4/kWh. The access to additional power from Ghana and Côte d'Ivoire will also allow Burkina Faso to help meet its growing demand, which in 2011 is expected to reach 178 MW from 105 MW in 2003. Ongoing efforts to improve electrification rates in Burkina Faso, including rural electrification, require additional power. The project will also enhance the reliability of cross-border transmission operations in compliance with N-1 planning criteria (especially for Burkina Faso) and improve the dynamic response of the national power systems in reaction to faults and outages.

1.8 Partnership of WAPP Donors: The WAPP is a partnership of ECOWAS Member States, donors and IFIs, including the World Bank and the African Development Bank (AfDB)[5] The ECOWAS Secretariat is responsible for coordination of the partnership through the “Meeting of WAPP Donors” which convenes regularly to reviews and update financing commitments for WAPP priority investment projects.

2. Proposed objective(s)

2.1 WAPP APL: The goal of West Africa Power Pool (WAPP) is to establish a well-functioning, cooperative, power pooling mechanism for West Africa, as a means to increase access of the citizens of the Economic Community of West African States (ECOWAS) to stable and reliable electricity at affordable costs.

2.2 The developmental objective of the Inter-Zonal Transmission Hub WAPP APL3 (Phase 1) project is to lower the cost of and improve access to electricity supply to Burkina Faso through avoided diesel generation, and to increase the overall reliability and stability of the Burkina Faso and Ghana grid. The avoidance of diesel generation also generates a global benefit, as it potentially reduces the emission of carbon dioxide. A carbon finance component for this project is being considered. Project outcomes will be measured in accordance with the Results Framework as developed for the WAPP APL program.

3. Preliminary description

3.1 The Inter-Zonal Transmission Hub WAPP APL3 (Phase 1) project, will finance the following complement of investments and technical assistance:

Component 1: 225 kV Transmission Line between Bolgatanga, Ghana, and Ouagadougou, Burkina Faso (US$ 75 million). This component involves the construction of a 225 kV transmission line from Bolgatanga in the northern part of Ghana to the capital of Burkina Faso. It includes the following elements:

• Construction of 198 km of 225 kV transmission line;

• Construction of one new 225/90/33 kV substation in Ouagadougou (Burkina Faso);

• Extension of the 161 kV substation in Bolgatanga (Ghana);

• Construction of one new 225/161 kV substation in Bolgatanga (Ghana).

Component 2: Reinforcement of Domestic Networks (US$ 25 million). This component involves the construction of a 161 kV line of a length of 133 km between the north-western Ghanaian cities of Tumu, Han and Wa - the 161 kV Tumu-Han-Wa Transmission Line (Ghana). Without the construction of this line, Ghana's export capacity to Burkina Faso would be limited to 20 MW (Volta River Authority Masterplan, 2001). The line also closes the northern loop of Ghana's transmission system, thereby providing an (N-1) reliability level to the loads in this area, which is required for power voltages in the northern part of Ghana in excess of 100 MW. Under this component complementary investments in Burkina Faso's distribution network to allow for evacuation of power from the transmission line is also envisaged. The scope of this investment is to be confirmed at pre-appraisal.

Component 3: Implementation of "WAPP Action Plans"(US$ 10 million). This component will provide (i) necessary complementary investment for system control, communication and SCADA, to be confirmed by the updated feasibility study for the 225 kV line, once completed. The use of a Optical Transmission System (OTS) based on optical ground wire on the 225 kV line is being considered as primary communication channel; (ii) technical assistance to upgrade the existing power supply agreement between VRA and SONABEL to allow for trades of up to 100 MW.; and (iii) technical assistance for the WAPP Expert Advisory Panel to be expanded to the Intra-zonal Transmission Hub with the aim of developing and implementing an Operational Security and Mitigation Plan for the Inter-Zonal Transmission Hub WAPP APL3 (Phase 1).

3.2 Burkina Faso will cover about 60% of the overall project cost, and Ghana will cover about 40% of the overall project costs. The feasibility studies, Environmental Impact Assessment and Resettlement Actions Plans, and the bidding documentation are being financed by USAID and the NEPAD IPPF. The project is being developed to complement the Burkina Faso Energy Access project (P078091), which is at appraisal stage.

4. Safeguard policies that might apply

The project involves among other the construction of a Greenfield transmission line, and may therefore be rated Category A. Environmental Impact Assessments and Resettlement Action Plans for the respective parts will be prepared and disclosed.

5. Tentative financing

|Source: |($m.) |

|BORROWER/RECIPIENT |15 |

|International Development Association (IDA) |60 |

|African Development Bank |35 |

| Total |110 |

6. Contact point

Contact: Fanny Kathinka Missfeldt-Ringius

Title: Energy Economist

Tel: (202) 458-9645

Fax: (202) 614-1337

Email: fmissfeldt@

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[1] Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

[2] NEPAD was established to implement an integrated socio-economic development framework for Africa, and was formally adopted at the 37th Summit of the Organisation for African Unity in July 2001.

[3] The Chief Executives of national power utilities of ECOWAS Member States subsequently signed an Inter-Utility Memorandum of Understanding (March 2001).

[4] On June 30, 2005, the Board approved the first constituent lending operation under the WAPP APL facility – an IDA credit to Ghana (USD 40 million equivalent) for development of the first phase of the Coastal Transmission Backbone Project (WAPP APL 1 –Phase 1 of Coastal Transmission Backbone). Subsequently, on June 29, 2006, the Board approved two sets of IDA credits: (i) USD 45 million equivalent to Ghana and (ii) USD 15 million equivalent to Benin for the second phase of the Coastal Transmission Backbone Project (WAPP APL 1 – Phase 2 of Coastal Transmission Backbone); and (iii) USD 25 million equivalent each to Mali, Mauritania and Senegal (OMVS countries) to develop the 60 MW OMVS Felou Hydroelectric Project (WAPP APL 2 - OMVS Felou HEP).

[5] The African Development Bank (AFDB) is the lead co-financier of the 330 kV Ikeja West (Nigeria) – Sakété (Benin) Segment of the 330kV Coastal Transmission Backbone which is currently under construction. As the administrator of the NEPAD Infrastructure Project Preparation Facility (IPPF), the AFDB has provided two project preparation facilities to the ECOWAS Secretariat to support pre-investment activities for the Volta (Ghana) – Momé Hagou (Togo) - Sakété (Benin) Segment of the 330kV Coastal Transmission Backbone, sourced as follows: (a) US$500,000 from the NEPAD – IPPF, and (b) US$300,000 from the AFD-DBSA-PPF. The BOAD is also providing a grant of US$500,000 to CEB as a project preparation facility for the Volta (Ghana) – Momé Hagou (Togo) - Sakété (Benin) Segment of the 330kV Coastal Transmission Backbone.

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