Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 36364-HT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF SDR 4.1 MILLION (US$6.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF HAITI

FOR AN

ELECTRICITY LOSS REDUCTION PROJECT

June 29,2006

Central Amer ica Management Unit Finance, Private Sector and Infrastructure 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. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 13,2006) = Gourdes (HTG) = US$1 = US$1.5054

Currency Unit 43.29 HTG 1 SDR

FISCAL YEAR October 1

ABBREVIATIONS AND ACRONYMS

AFD

B P M

BRH

CBO CMS CDD CIDA

CMEP

EGRO

ESMAP

ESW EU EDH GOH

GRET

IDB ICF ICR IDA I M F IPP L A C L C A L C M

Agence Franqaise pour le Dtveloppement Bureau du Premier Ministre (Office o f the Prime Minister) Banque de la Republique d'Haiti (Haiti Central Bank) Community Based organization Customer Management System Community-Driven Development Canadian International Development Agency Conseil de Modernisation des Entreprises Publiques Economic Governance and Recovery Operation Energy Sector Management Assistance Program Economic and Sector Work European Union Electricit6 d 'Hai'ti Government of Hait i

Groupe pour la Recherche et 1 'Echange Technologique Inter-American Development Bank Interim Cooperation Framework (CCI) Implementation Completion Report International Development Association International Monetary Fund Independent Power Producers Latin America and Caribbean Local Commercial Agency Large Customer Unit Manager

September 30

L C U

LICUS

MEF

MIS M o U

MTPTC

N C

NGO

OED

PADF PCU PDO PPIAF

PREPSEL

PTUiEDH ssc TSE TSMS USAID

Large Customer Unit

Low-income Country under Stress

Ministry o f Economy and Finance

Management Information System Memorandum o f Understanding

Ministkre des Travaux Publics, Transports et Communications Neighborhood Committees

Non-Governmental Organization

Operations Evaluation Department (World Bank), now named IEG Pan American Development Foundation Project Coordination Unit Project Development Objective Private Participation in Infrastructure Advisory Facility Projet pour la reduction des pertes dans le secteur klectrique Project Technical Unit in EDH Strategic Steering Committee Table Sectorielle de I'Eltctricite Technical Service Management System United States Agency for International Development

V i ce President: - PamelaCox Country Director: - Carol ine Anstey Sector Director: - M a k h t a r D i o p Task Team Leader: - Clemencia Torres de Mast le

HAITI Electricity Loss Reduction Project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 8

1.

2 . 3 . 4 .

Country and sector issues .................................................................................................... 8

Mul t i -Donor Support Strategy to the Electricity Sector ................................................... 10

Rationale for Bank involvement ....................................................................................... 11

Higher leve l objectives to which the project contributes .................................................. 12

B . PROJECT DESCRIPTION ............................................................................................... 13

I . 2 . 3 . 4 . 5 .

Lending instrument ........................................................................................................... 13

Project components ........................................................................................................... 14

Alternatives considered and reasons for rejection ............................................................ 23

Project development objective and key indicators ............................................................ 13

Lessons learned and reflected in the project design .......................................................... 21

C . IMPLEMENTATION ........................................................................................................ 24 Coordination w i th the IDB Project ................................................................................... 24

Institutional and implementation arrangements.. .............................................................. 25

I . 2 . 3 . Moni tor ing and evaluation o f outcomes/results ................................................................ 27

4 . Sustainabillty ..................................................................................................................... 27

5 . Crit ical risks and possible controversial aspects ............................................................... 28

6 . Grant conditions and covenants ........................................................................................ 29

. .

D . APPRAISAL SUMMARY ................................................................................................. 30 Economic beneficiaries ..................................................................................................... 30

Economic and financial analyses ...................................................................................... 32

1 . 2 . 3 . Technical ........................................................................................................................... 33

4 . Fiduciary ........................................................................................................................... 33

5 . Social ................................................................................................................................. 34

6 . Environment ...................................................................................................................... 36

Safeguard policies ............................................................................................................. 36 a . b . Policy Exceptions and Readiness ...................................................................................... 37

Annex 1: Coun t ry and Sector or Program Background ......................................................... 38

Annex 2: M a j o r Related Projects Financed b y t h e Bank and/or other Agencies ................. 45

Annex 3: Resul ts Framework and Moni tor ing ........................................................................ 49

Annex 4: Detailed Project Description ...................................................................................... 53

Annex 5: Project Costs ............................................................................................................... 86

Annex 6: Implementation Arrangements ................................................................................. 87

Annex 7 : Financial Management and Disbursement Arrangements ..................................... 90

Annex 8: Procurement Arrangements ...................................................................................... 95

Annex 9 : Economic and Financial Analysis ........................................................................... 100

Annex 10: Safeguard Policy Issues .......................................................................................... 106

Annex 11: Project Preparation and Supervision ................................................................... 107

Annex 12: Documents in the Project F i l e ............................................................................... 109

Annex 13: Statement o f Loans and Credits ............................................................................ 110

Annex 14: Country at a Glance ............................................................................................... 111

Annex 15 : Maps ......................................................................................................................... 113

HAITI

HT ELECTRICITY PROJECT

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSFE

Date: June 29, 2006 Team Leader: Clemencia Torres De Matle Country Director: Caroline D. Anstey Sectors: Power (1 00%) Sector ManagedDirector: Susan G. Goldmark Themes: Infrastructure services for private

Project ID: PO98531 sector development (P) Environmental screening category: Not Required

Lending Instrument: Specific Investment Loan Project Financing Data

[ ] Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 6.00 Prouosed terms:

Financing Plan (US$m) Source Local Foreign Total

BORROWEWRECIPIENT 1.47 0.00 1.47 IDA Grant 0.57 5.43 6.00 Total: 2.04 5.43 7.47

Borrower: Ministry o f Economy and Finance (MEF) Palais des Ministeres Port au Prince, Haiti

Responsible Agency: Project Coordination Uni t : (TBD)

EDH's Project Technical Unit: ELECTRICITE D'HAITI (EDH) Mart in Camille Cange, Directeur de Planification et Chef de Projet, EDH Angle Rue Charenton et H, Truman Port au Prince, Haiti B.P 1753 Tel: (509) 223 2201 email: <mcangec@yahoo.fr>

5

FY 2007 Annual 2.88 Cumulative 2.88

Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 None.

2008 2009 2010 2.83 0.26 0.03 0.00 0.00 0.00 0.00 0.00 5.71 5.97 6.00 6.00 6.00 6.00 6.00 6.00

6

I

Loadcredi t effectiveness: The Subsidiary Agreement has been executed on behalf o f the Recipient and o f EDH. The Government o f Hai t i has adopted the operational manual in terms and scope

The P C U has been constituted and i s operational; EDH has appointed the Project Chief, acceptable to the Bank.

and a consultant has been recruited to prepare the terms o f reference and the recruitment guidelines for the manager and staff o f the local commercial agency in the selected mixed project area, and for the manager and staff o f the Large Consumer Un i t in EDH.

expenditures fo l lowing the format specified in the operations manual, has been established in the PCU.

A financial management system, capable o f recording and reporting on the project?s

Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: None.

Covenants applicable to project implementation: Disbursement conditions

appointed before disbursement takes place for sub-component 2.2

signed before disbursement takes place for sub-components 2.3.2 and 2.3.4

The staff and the manager o f the Local Commercial Agency will have been selected and

The manager for the Large Customers U n i t (LCU) wil l be appointed and his contract

Dated Covenants The Strategic Steering Committee wi l l convene its f irst meeting not later than 2 weeks

after project effectiveness and, thereafter, quarterly during the course o f Project implementation.

The MEF will provide a written report with supporting documents, satisfactory to the Association, about the status o f its payments to EDH, including the amounts b i l led by EDH for the Government's consumption o f electricity, the transfers f rom the MEF to cover the purchase of the fuel and the costs o f energy paid to independent power producers, as we l l as the net amount effectively transferred to EDH, (i) not later than 2 weeks after effectiveness, and, thereafter (ii) semiannually during the course o f Project implementation;.

The Board o f EDH wi l l provide not later than 2 weeks after effectiveness for the first year during project implementation , and thereafter, 4 months prior to the beginning o f each subsequent fiscal year during the course o f project implementation, an annual plan previously agreed upon w i th M T P T C and EDH and presenting the minimum electricity supply o f hours per day that i t intends to finance and that will be supplied either by EDH or by third parties to serve customers (i) in the capital c i ty o f Port-au-Prince, w i th further details showing the electricity provided to Port-au-Prince mixed neighborhood and the industrial zone and (ii) in the ma in cities o f the Provinces.

7

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Haiti i s the poorest country in the Western Hemisphere and one o f the most disadvantaged countries in the world. Average per capita income i s comparable to the poorest countries o f Sub-Saharan Africa, and Hai t i ranks 153 out o f 177 countries in the Human Development Index. About 78 percent o f its population o f 8.6 mi l l ion lives below the poverty line, with 54 percent in extreme poverty. Income inequality i s among the highest in the world, with the poorest 20 percent accounting for 1.5 percent o f total income and the wealthiest 20 percent accounting for 68 percent.

2. The economic situation i s worsening. Over the past twenty years, Hai t i has struggled to emerge f rom a cycle o f polit ical instabil ity and internal conflicts that has devastated i t s economy, further weakened state institutions, exacerbated poor governance practices and augmented levels o f poverty. Throughout the 1990s and early 2000s, this socio-economic situation continued to worsen, and external assistance to the government withdrew to a large extent. Between 1980 and 2003, the economy declined by a real average annual rate o f about 0.8 percent.

3. Key elements of the Government and donors’ development strategy. In March 2004, fo l lowing the resignation o f President Jean Bertrand Aristide, a Transition Government headed b y President Boniface Alexandre and Prime Minister Gerard Latortue was put in place. The Transition Government, w i th the donor community, prepared the Interim Cooperation Framework (ICF), which set a strategy for increasing polit ical and social stability and promoting economic growth. The Framework guides investments o f the international community unt i l September 2007. The Government’s immediate priorities were: (i) strengthening polit ical governance and promoting national dialogue; (ii) strengthening economic governance and contributing to institutional development; (iii) promoting economic recovery; and (iv) improving access to basic services. Under i tem (iv), the Haitian Government (GoH) singled out the re-establishment o f continuous and reliable electricity services as a top priority.

4. Implementation of Government’s strategy. According to the ICF report o f October 2005, progress has been mixed and slower than expected, mainly due to a lack o f resources. This i s particularly true of the electricity sector. Whi le the needs were assessed at US$ 92 mil l ion, less than US$ 20 mi l l ion has been disbursed by the international donors since the end o f 2004. Progress was the highest in economic recovery, thanks to the good performance o f the agriculture sector and the generation o f new employment with the support o f micro-finance activities. Polit ical governance was the second area where progress has been the greatest, fol lowed by the promotion o f access to basic services. Nevertheless, this performance was offset by mixed results in the infrastructure sectors, in environmental protection and in the promotion o f private sector development. In the electricity sector, the above mentioned report noted that on ly 25% o f objectives were met. Finally, the fourth pi l lar o f the Government’s strategy, economic governance and institutional development, showed the least progress in terms o f implementation performance.

5. The institutional framework of the electricity sector i s weak. The Ministry o f Public Works, Transport and Communications (MTPTC) i s the responsible entity for the sector, and the Minister i s the President o f the Executive Board for the state-owned power company, Ha i t i Electricity Company (EDH). Since the position o f Secretary for Energy, Mines and

8

Telecommunications (SEEMT) was eliminated in M a y 2005, the absence o f a technical unit responsible for the electricity sector within the M T P T C has hindered the Government’s capacity to design and implement measures to address the crisis in the sector in a t imely manner. With i t s broader and long-term vision o f the sector, but no supervisory responsibility, the role o f the Bureau o f Mining and Energy (BME) could be further developed in the future.

6. On the other hand, the Counsel o f Modernization o f Public Enterprises (CMEP), which was created as a technical entity to oversee the reform process o f publ ic enterprises, i s off icial ly in charge o f fo l lowing up on the medium term program to rehabilitate EDH. A technical expert for the electricity sector was recently appointed to CMEP. Finally, since September 2005, the Board o f Directors o f EDH has formed again, and meets on a regular basis, creating the foundations for better transparency for the management o f the public utility.

7. Electricity services reach only a small fraction o f the Haitian population, and are o f poor quality a n d often unreliable. Less than 10 percent o f the Hait ian population has access to electricity and those who have access received on average 10 hours o f electricity a day in the last two years, with very large disparities among the areas covered. Over the past 20 years, EDH, which holds the monopoly o f electricity generation, transmission, and distribution, has been unable to meet demand. Electricity coverage and quality o f service are unsatisfactory.

8. Despite the paucity o f the service, the Electricity sector represents a heavy burden for the State budget. EDH has a negative cash f low and could not function without government financial transfers. I t i s technically bankrupt since assets are smaller than liabilities. The Government o f Haiti, through the Min is t ry o f Finance i s assisting the sector by paying for the monthly purchase of fuel and for the purchase o f electricity f rom two Independent Power Producers (IPPs). The resulting heavy fiscal burden makes this situation very costly and unsustainable for the Government. In FY2005, Government budget support for EDH was US$47 mi l l ion, just below the budget earmarked for debt service at USSS 1 mi l l ion.

9. Organizat ional weaknesses, f inancial insolvency and poor asset maintenance are the main problems faced by E D H . A l imi ted pool o f sector experts in Haiti, pol i t ical interference, weakness in the institutional framework, fragmentation o f the ma in actors and lack o f strategic coordination and leadership remain some o f the crucial problems o f this sector. Historic causes may be a combination o f lack o f investment, poor management practices, cases o f fraud or corruption that reduce the collection rate and/or increase the costs o f electricity services for the country, polit ical interference and others. For the country as a whole and for Port-au-Prince in particular, structural problems translate into poor and unreliable provision o f electricity services to end users. The terms of the contracts w i th third parties for purchase o f energy (PPAs) inherited f rom past governments were very onerous for the company, part ly due to a poor negotiation strategy and partly reflecting the risk o f the country for private investors. Lack o f willingness o f affected consumers to pay for mediocre or at t ime non-existent services i s a natural consequence. A notable exception has been the case o f Jacmel, where since 1998, CIDA has financially supported a new semi-autonomous management scheme. The Canadian agency started by repairing the production capacity, and offered technical assistance focusing o n the guarantee o f a high-level o f service and continuous dialogue with the customer base. This has allowed the center to balance revenues and operating costs since March 2000, although this equi l ibr ium i s currently been jeopardized by ta r i f f adjustments that are lagging behind the increase in cost, ma in ly due to higher o i l prices. For the country as a whole, a “low level trap” or vicious circle i s therefore present and progressively reinforced: poor quality o f

9

service discourages customers to pay for electricity, leading to increase in fraud and reduction in EDH revenues, leading to worse maintenance, reduced operating capacity and further service deterioration.

10. High electricity losses affect directly EDH’s financial situation. The uti l i ty bills cover less than 50 percent o f energy generated. In some instances third parties install transformers to steal electricity f rom EDH high voltage l ines and charge consumers for the stolen electricity. A potent combination o f a culture o f non-payment for electricity services, relatively high consumer tariffs, a l o w base o f metered customers, a lack o f support f rom the authorities to combat corruption and fraud, a weak anti-fraud uni t in EDH and rampant theft o f electricity has led to extremely l o w levels o f cost recovery, an inefficient and dilapidated electricity network, and a high level o f financial losses.

11. The most urgent task should be to have a power sector providing an acceptable service to EDH customers, which could lend credibility to the other equally urgent task of improving the financial health of the firm to alleviate the fiscal burden that i t represents. Improving the level and quality o f electricity services in Hayti i s essential for the economic recovery o f the country, the improvement o f the standard o f living o f i ts population and the level o f security in public areas. However, achieving this turn around wi l l require resources and a cultural change in the habits o f both users and employees o f EDH. Improvement o f services to end users can be expected to bring about a higher rate of cost recovery because satisfied users wi l l be more willing to pay for the services, but this satisfaction in turn wi l l on ly happen if there are deliberate efforts to change things wi th in the firm. This i s why efforts in the electricity sector would need first to show tangible benefits for the population, albeit modest ones, and then almost simultaneously focus o n improving EDH’s internal, operational and financial performance through better governance and the adoption o f a coherent result driven, medium term strategy for the firm. This wi l l require short term measures, but wi th in a longer term perspective o f structural changes w i th in the firm. The current non-existent commercial orientation o f the company’s management needs to be reversed.

2. Multi-Donor Support Strategy to the Electricity Sector .

12. Multi-donor approach. To support the electricity sector, the international community, the Government and EDH developed in July 2004 a multi-donor strategy under the Interim Cooperation Framework (ICF). An essential part o f the approach was based on the decision to coordinate al l the actions financed by the donors w i th in a wider sector strategy with both short term and longer term objectives. T o facilitate this coordinated approach, an Electricity Sector Work ing Group (Table Sectorielle d’Electricite, TSE) has been meeting o n a month ly basis, to exchange information and facilitate better communications between the parties involved (amongst Haitian agencies and international donors alike).

13. Short term support. In the short term, the donors in i t ia l ly focused on the generation segment and on the purchase o f o i l to maintain some level o f electricity services in the cities. USAID subsidized o i l purchases for EDH from M a y 2004 to February 2005 and several donors (AFD, USAID) started the rehabilitation o f generation units. Nevertheless, i t became obvious that a more articulated strategy was needed in order to move beyond the cycle o f recurring crises and alleviate the fiscal burden o f the sector to the State. As a result, a “Memorandum o f Understanding o n a Rescue Strategy for the Electr ici ty Sector” (MoU) was signed in Brussels on October 21, 2005. Under this M o U , the Government and EDH committed to implement specific actions that wou ld

10

improve the transparency o f the sector and increase the efficiency o f the investments while the donors committed resources to finance a minimum package o f investments and technical assistance requested by EDH to emerge f rom the current catastrophic situation. A t the time o f the signing, US$ 14.6M had been secured out o f a request o f approximately US$ 27.7M, and subsequently other funds have been committed. The Haitian government (MEF, MTPTC, Planning), C IDA, AFD, USAID, the EU and the WB signed the M o U . Soon after, the IDB expressed interest in supporting the sector w i th in the framework o f this M o U . In parallel, the dialogue o f the Government with the IMF has also included some o f the actions stated in the M o U that have a direct impact in reducing the financial burden o f the sector for the Government.

14. Medium Term Support. In parallel with the short-term actions described above, there was a consensus o n the need to have a clearer assessment o f the situation in EDH and a better understanding o f the conditions o f the sector in Hai’ti in order to design a credible medium term solution for the sector. The EU agreed to finance the reconstruction o f EDH’s financial accounts (which has not had standard financial statements for many years), and C I D A committed to finance the financial audit o f the resulting accounts by a reputed international firm. In addition, the Private Public Infrastructure Advisory Faci l i ty (PPIAF) approved the financing o f a series o f studies under the supervision o f the Wor ld Bank, in order to understand the environment in which EDH operates and explore the viabi l i ty o f long-term solutions for the uti l i ty, such as the option o f a management contract. T o date, the account reconstruction i s completed, save for the inventory and the valorization o f technical assets; the auditing firm for EDH accounts o f 2004-2005 has started; and several o f the PPIAF studies have been launched. Last, i t i s important to note that other efforts by different donors are also under way to assist the Government in the broader agenda o f the Energy Sector, exploring h o w to expand access to electricity services through renewable sources (EU, UNEP), and addressing the pressing problems o f use and production o f woodfuels (Wor ld Bank, ESMAP). A pr ior i ty in the near future should be for al l actors involved to bring those additional initiatives within the coordinated framework already in place, and develop a comprehensive national strategy for the Energy Sector in the country.

3. Rationale for Bank involvement

15. The World Bank proposed project (PREPSEL, Projetpour fa Reduction des Pertes dans le Secteur Efectrique), for reduction of electricity losses in Port-au-Prince and in the main cities, fits the Bank strategy outlined in the Transitional Support Strategy (TSS), which was endorsed by the Bank’s Board of Directors on January 6, 2005. The TSS includes up to $150 m i l l i on in credit and bank commitments over a two-year period. A key aspect o f the Bank’s transitional strategy i s poverty alleviation through improved access to basic services and infrastructure. The two-year strategy aims at restoring hope by supporting: (i) basic services provision; (ii) j o b creation; (iii) rehabilitation o f areas devastated by floods in 2004; (iv) community initiatives in local development. The strategy also seeks to restore credibil i ty in Hait i ’s publ ic institutions by strengthening economic governance and institutions, bolstering efforts to fight corruption, improving transparency and promoting inclusion and consensus-building on development priorities. PREPSEL fits into this strategy by focusing on: (i) improv ing the quality of electricity services to selected consumers; (ii) fostering the development o f community init iatives in the bidonvil les through a partnership with neighborhood communities in those areas; (iii) concentrating a component o n large customers, who sustain economic activity; (iv) contributing to the improvement in the operational and financial performance o f EDH, thereby helping to restore credibil i ty in public services; and (v) enhancing transparence and reducing incentives for fraud

11

wi th in EDH through the implementation o f a new customer oriented approach supported by clear procedures and automated systems, and a broad training program wi th new career opportunities for the staff.

16. The Wor ld Bank proposed project i s an integral par t of the multi-donor coordinated efforts to exit the crisis. The Wor ld Bank init ial ly focused on the medium-term strategy through the preparation and supervision o f the PPIAF studies. However, in the face o f the crisis, the Government and EDH requested short-term actions to show tangible results o f a better service from EDH to the population, particularly in Port au Prince. In this context, the WB and IDB have decided to focus on the distribution and commercialization issues o f EDH in Port-au-Prince and in the main cities in the Provinces, while USAID and AFD have been working on the rehabilitation o f various diesel units in the capital, and CIDA, w i th EU, have focused o n repairing EDH’s generation capacity in the Provinces.

17. The Wor ld Bank’s proposed project i s an integral par t of the multi-donor coordinated strategy of support to the electricity sector. Whi le advancing the specific activities described in the previous paragraphs (PPIAF studies and PREPSEL project), the Wor ld Bank has also played a key role f rom the donors’ side, in the practical fol low up o f the activities currently in place or committed in the MoU. Such fo l low up i s essential, not on ly for its impact o n the electric sector in general, but also for the success o f the specific actions to be financed by the Bank. Indeed, as spelled out below in the ‘risks’ section, the actual pace o f implementation o f some o f the projects developed by other donors, and the Government’s commitment to implement the measures agreed upon under the MoU have a direct impact o n the Bank’s interventions. T w o cases in point are the need to ensure a minimum o f reliable electricity supply in the country and the inclusion by the Government a budget l ine for the consumption o f energy for al l public entities in the next national budget (FY07) so that EDH can have a better track record o f one o f its most important large customers, the Government.

18. The Wor ld Bank’s comparative advantage in the project i s d rawn f rom i t s experience and leverage capacity wi th other donors. The Bank has a comparative advantage for implementing the commercial reorientation o f a publ ic u t i l i ty company because of: (i) the know-how gained f rom similar projects, such as the power projects in the Dominican Republic, (ii) its experience in post confl ict countries through L I C U S trust funds, that have financed projects in Ha i t i in other infrastructure sectors such as water, and projects for the electricity sector in other countries similar to Haiti, (iii) its knowledge o f EDH and the many lessons learnt through f ive power projects f rom 1976 to 1998, (iv) the use o f Wor ld Bank’s procurement rules, which wi l l improve transparency and governance within the management o f EDH; and (v) its considerable leverage in the sector, that stems f rom a constant interaction with the other donors involved in the project and f rom the availability o f highly-powered tools in our dialogue w i th the Hait ian authorities, such as EGRO I and other possible forms o f support. A direct result o f this jo in t effort was the signature o f the MoU that leveraged a total o f $14.6 m i l l i on additional financing f rom donors, including the Bank. Furthermore, after the Bank announced i t s intention to undertake the proposed PREPSEL, the IDB indicated i t s intention to finance a similar project but on a larger scale.

4. Higher level objectives to which the project contributes

19. The project wi l l contribute to the improvement of living standards of a representative sample of EDH’s customers that could be replicated on a larger scale. I t wi l l have a positive

12

impact on the economic activity in the main urban areas of the country and it will help restore the image of public services among the general population. The project wil l constitute a first step to improve the quali ty o f service to regular customers and offer electricity services for those EDH customers that today st i l l lack electricity, including the residents o f some bidonvilles. This wil l contribute to the improvement o f the living standards o f the population within the socio- economically m ixed area o f the project in many aspects, from longer study periods in the evening to greater opportunities for undertaking productive activities. Furthermore, the focus o f one component on large customers could positively affect employment and economic activity in Port-au-Prince and in the main cities in the Provinces, since out o f the 2,208 customers targeted in the selected zone, 52 percent are commercial or industrial customers. Furthermore, by demonstrating that EDH can deliver better services, the project i s l ikely to help restore the image o f publ ic services among the general population. An improvement in the perception o f what a publ ic u t i l i ty can achieve would l ikely benefit al l programs aimed at improving public services.

20. The success of the project will help to alleviate EDH’s financial burden for the State. If the project i s successful and i t lends itself to replication, and if the conditions are given to ensure the sustainability o f the results beyond the l i fe t ime o f the project, then i t i s more l ike ly that other donors, wil l step in, as IDB i s doing already, and assist EDH in replicating the strategy for the firm as a whole. This outcome should allow EDH to improve i t s overall financial and operational performance, thereby increasing the generation o f i t s own revenues, as wou ld be expected for a firm that i s collecting revenues by providing a service to customers. It should also attract other donor support by building the credibil i ty o f EDH and the Government as serious partners in development. This, in tum, should allow the MEF to reduce its subsidies to EDH, which represented 7 percent o f the total budget in 2005.

B. PROJECT DESCRIPTION

1, Lending instrument

21. An IDA-funded grant o f US$ 6.00 m i l l i on equivalent i s proposed to finance the proposed project and EDH will contribute with US$ 1.47 M, bringing the cost o f the project to a total o f US$ 7.47 M.

2. Project development objective and key indicators

22. Project Development Objective. Contribute to the sustainable improvement in the quality o f electricity services to customers and to the strengthening o f the financial and operational performance o f the electricity publ ic u t i l i ty (EDH).

23. for reduction o f technical and non-technical losses w i th the fo l lowing objectives:

SpeciJic Objectives. T o this end, the proposed Project wil l design and implement a strategy

Adopt and implement modem commercial and service management systems for EDH as the basis for a more customer-oriented approach to prov id ing electricity services. Improve services to clients in a selected socio-economically m ixed area in Port au Prince with a view to broader replication nationwide, and increase EDH’s revenues w i th higher collection rates f rom more satisfied customers. Improve service to, and increase revenues b i l led and collected from, large customers.

0

0

0

3.

0

0

0

24.

Improve customers’ perception o f EDH through t imely dissemination o f information on the project and continuous attention to publ ic opinion. Establish trustful relationships among EDH’s management, staff and workers to ensure commitment towards implementation o f the project’s approach and sustainability o f the results. L a y the foundation for replication o f the approach and results o f this project to the rest o f the country.

Key indicatovs

Improved quality o f service provided by EDH to the socio-economically mixed zone and to large customers.

Number o f consumers regularized in the socio-economical1 y mixed area and among large customers.

Improvement in customer satisfaction in the socio-economically mixed zone and among large customers.

Satisfaction with and ownership o f the project by EDH employees as measured by periodic surveys and focus groups throughout project implementation.

Increase in the revenues b i l led and collected by EDH in the socio-economically mixed zone and among large customers.

Endorsement by EDH and the Government o f a final proposal on how to replicate the pi lot project to reduce losses in the other areas deserved by EDH.

Number o f consumers in the whole country incorporated in the new customer database and served w i th the support o f the Customer Management System (CMS) and Technical Service Management System (TSMS).

Number o f EDH employees successfully trained in the use o f the new CMS and TSMS.

Project components

25. The project adopts a strategic approach to improve the quality o f electricity services to end users and increase revenues o f EDH through the reduction o f technical and non-technical losses in the firm, whereby i t focuses on: (i) achieving quick substantive success that wi l l have a demonstration effect; (ii) preparing the ground for replication o f the approach on a greater scale; and (iii) ensuring sustainability o f the results through systematic training o f EDH’s employees in each o f the project components, and through a communication strategy aimed at bo th employees and EDH customers.

26. Project Rationale and Overview: The three-prong focus o f the project described in the previous paragraph i s reflected in the design o f the various components o f the project. Quick results and demonstration effects are achieved with Component 2, which adopts a selective approach. In one case, the focus i s on a particular area o f Port-au-Prince with a sample o f EDH customers f rom varied socio-economic backgrounds and electricity consumption patterns-a socio-economically mixed zone- where a p i lo t project wi l l be developed (Component 2.2.). In the other, the focus i s on a category o f clients, namely large consumers, who are the most promising group in terms o f capacity to pay (Component 2.3.). In parallel w i th this selective approach, the project also implements

14

activities that benefit EDH as a whole because they cannot be implemented in a piecemeal manner. This refers to the acquisition and implementation o f modern tools for managing commercial activities and client accounts (Component 1) . Wi th these new systems, the project wil l already be taking a step to building up a favorable environment to replicate the results o f the pi lo t project on a broader scale. This ultimate objective o f scaling up the results o f the project i s taken further under a separate component, aimed at preparing a detailed plan to replicate the approach o f the p i lo t project in the other areas served by EDH, taking into account the lessons learned during the implementation o f the project (Component 3.3). Additionally, to facilitate effective results o f the various components already described, the Project includes a communication component that wi l l provide the necessary support to achieve effective dissemination o f information on the project among al l relevant actors and t imely feedback from these actors throughout the design and implementation o f the project (Component 3.1). Finally, the Project comprises a component for Project Management and Moni tor ing and Evaluation, which will support the implementation o f the Project and monitor i t s impact on the services for electricity users and on the financial and operational performance o f EDH (Component 3.2).

27. The Project wil l implement the fo l lowing three components over a three year period:

28. Component 1: Improvement in EDH management systems and practices towards a more customer oriented approach (US$2,640,000). The objective o f this component i s to improve the operational (technical and commercial) performance o f EDH in a sustainable manner, by giving the company the information tools for a modern and efficient management o f the customers and o f the services that i t provides. N e w operational procedures for a more customer oriented approach in the execution o f activities using these new systems will also be developed, and EDH’s employees wil l be trained in the use o f the system and in the uti l ization o f these new procedures. The project wi l l also finance technical assistance to guide EDH in h o w to build the corresponding reliable databases. Since these are highly specialized systems, the project wi l l finance two experts in customer and technical service systems for uti l i t ies to assist EDH in the procurement o f the systems and in the supervision o f the work o f the selected provider. Finally, as part o f its contribution to the project, EDH wi l l finance the construction, next to its headquarters, o f separate facilities to locate the hardware necessary to the operation o f the CMS and TSMS, as wel l as the call center, which wil l be implemented as part o f Component 2.2. (See paragraph 3 1).

29. The first system financed by the project wil l be a new “state o f the art” corporate commercial management system (CMS) al lowing proper execution and monitoring al l o f the commercial activities in the firm. This will strengthen the commercial division o f EDH which n o w suffers f rom inadequate operational procedures and poor information on commercial the situation o f customers. The second system wil l be a new Technical Service Management System (TSMS), aimed at optimizing attention to customer claims. Current management o f the claims i s precarious, based o n manual records and procedures that are poor ly organized and dif f icult to moni tor and supervise. This will help reduce the t ime between receipt o f the claim and restoration o f regular electricity supply, which i s the critical parameter defining quality o f electricity supply. A t the same time, EDH’s efficiency in execution of these activities wil l be maximized. Development o f new procedures, training o f employees and assistance to build up the data bases wil l ensure that the project provides al l the means to EDH for making the best use o f the new information systems. At the same time, due to the size o f the project, further follow up on h o w these systems wil l be actually used to better serve

15

clients and help in increasing billing and collection wi l l be done not for the whole company, but specifically for some targeted customers, as explained below.

30. As part o f the objective to improve management o f clients’ accounts, i t i s important to actively support the strengthening o f EDH’s Anti-Fraud Unit, under the new procedures described above. T o this end, the same approach as the one adopted in Component 2 w i th the Unit o f Large Users and the Personnel o f the Local Commercial Agency (see below) for the selection o f personnel wi l l be used for this unit. Appropriate training and improvement in procedures applied by such Un i t wi l l also take place. In defining this activity, i t wi l l be important for the Project to benefit f rom the experiences learnt in the going effort o f the Central Government for stepping up the fight against corruption. I t wi l l be equally useful to incorporate the recommendations developed for the same purpose in other infrastructure projects supported by the Bank, such as the Hai t i Transport and Territorial Project.

31. Component 2: Improvement in quality and reliability of services and increased revenue collection of EDH for selected groups of customers (US$ 3,245,000). The objective o f this component i s three fold. First, i t intends to have a demonstration effect o f the benefits o f adopting this new ‘customer management approach’ on the quality and rel iabi l i ty o f services to end users, w i th two groups o f customers: a socio-economically mixed zone in Port-au-Prince, and the group o f large customers in the ma in cities. Second, i t intends to show how to increase the revenues o f EDH, thereby lessening the fiscal burden o n the State, by targeting those who account for 70% o f EDH’s total revenues. i.e. the large customers. Indeed, the reduction o f non-technical losses (non-payment and/or fraud) wil l focus especially o n the large customers, both because they represent the largest share o f EDH’s potential revenues, but also because, contrary to what i s usually thought, non- technical losses are a more important problem for the firm amongst this type o f customers than among the poorest segments o f the population which does not weigh much in terms o f revenues and which in various instances pays already for their electricity, albeit not to EDH but to middle-men. Third, this component aims to provide an intensive training opportunity and career development alternatives to EDH’s employees as we l l as to recruit new personnel, for the use and application o f more modern commercial and technical practices in the area o f distribution and commercialization o f electricity.

32. Sub-Component 2.1. Selection of personnel for the socio-economically mixed zone and for the Large Customers Unit (LCU) (US$ 80,000) This sub-component seeks to ensure that component 2 wi l l be implemented by a qualified and motivated group o f EDH employees, because this i s the first necessary step for the viability, let alone the success, o f the project. This i s why a transparent and competitive recruitment process wi l l be init iated by the administrative unit o f EDH with the assistance o f a top senior level consultant hired by the project to select the employees in charge o f the various activities o f the component. EDH has recently inaugurated a new commercial agency in this socio-economically mixed zone and has appointed temporary personnel. The process o f selection o f the manager o f the local agency and o f i t s personnel wi l l constitute the first activity to start the implementation o f the component. All employees o f EDH wil l be able to compete, and the current employees o f the zone wil l be relocated to other agencies in the event that they do not apply or are not selected. If vacancies remain to be f i l led after the first round o f hiring, then external candidates wi l l also be accepted. The recruited employees wi l l receive the appropriate training that wi l l enable them to efficiently assist consumers in the area.

33. Similarly, the selection o f a ski l led manager and o f the staff o f a unit exclusively devoted to large consumers that wi l l be created within EDH, i s essential to start implementing the new approach

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for the large customers. The importance o f large consumers in EDH’s revenues justifies the creation o f a new organizational un i t within the commercial department for the specific purpose o f managing al l aspects o f the relation (technical and commercial) o f the utility with i t s large consumers. The uni t wil l be embedded in the normal practice o f the firm. The manager o f that un i t must be an expert with wide professional expertise in commercial management o f large customers. Potential candidates for the position should be EDH managers and external experts, as experience in the electricity business i s desirable, but no t a requirement. The first round o f the selection process will be reserved for EDH employees only. If no suitable candidate i s found, external candidates wil l be considered. Once appointed, the manager o f LCU will elaborate a proposal for the organizational structure o f the uni t and related human and material resources needed, and a plan on how to implement the rest o f the sub-component, and submit them to EDH’s top management. The first task o f the Large Customers manager (LCM) will thus be in turn to supervise the selection o f the personnel for the uni t w i th the assistance o f the consultant cited above. Since large customers also include al l public entities, the manager o f the LCU will also have the responsibility to liaise w i th the work ing group in the Min is t ry o f Finance wh ich would be implementing the inclusion o f a specific l ine for consumption o f electricity in the annual budget o f each public entity (action in the MOU).

34. Sub-component 2.2. Improve quality of service to, and increase EDH’s revenue f rom the socio-economically mixed zone through the application of a new customer oriented management approach (US$ 1,620,000) This subcomponent aims to improve the quality o f the service provided to EDH’s users and increase the revenues for the firm in a specific zone o f Port-au- Prince, T o this end, the new systems and procedures developed under Component 1 wil l be implemented and monitored in EDH’s local commercial agency. Equally important, the design o f this component emphasizes the need for a cultural change both f rom EDH’s employees and f rom the customers in the zone, as the only effective way to effect and sustain a change in commercial practices o n bo th sides. This sub-component also includes investments in equipment and tools required in the commercial agency o f the zone to optimize execution o f the activities re-engineered following the new procedures. There wil l be some investments in the distribution network and connections to the clients needed to ensure reliabil i ty o f the supply. Specific approaches would be defined and implemented according to the socio-economic characteristics o f the users, including those in the poor, marginalized neighborhoods o f the selected zone (“bidonvilles”). Activi t ies focusing on the latter wil l be financed by IDA and by EDH, who wil l invest US$ 100,000 in investment benefit ing these poor neighborhoods. This component constitutes a p i lo t project whose success could later be replicated on a larger scale.

35. Selection of the project socio-economically mixed area. The project zone sits in a vibrant and socio-economically diverse area o f Port-au-Prince, consisting o f medium and small size businesses, poor and affluent residents, private and public universities, hospitals and government institutions. This zone was selected for project execution based o n various indicators that wou ld maximize the l ikelihood o f successful implementation o f the project. These criteria included, among others: the access to a continued and reliable supply o f electricity, the existence o f a distribution network in sufficiently good condition, the presence o f different types o f customers including poor areas (bidonvilles) that could benefit first hand f rom the Bank’s support t o EDH through this project, and the absence o f negative externalities such as safety constraints. O f the 16 areas scrutinized, on ly this one met al l the criteria.

36. EDH’s local commercial agency. As mentioned above, a new commercial agency has recently been installed in the area where the p i lo t project wil l be implemented. The objective o f this

17

sub-component i s to show how the local presence o f EDH can be put to best use to improve the f i r m ’ s technical and financial performance which should result in a better provision o f services to end users. This said, if EDH i s performing well, there i s no reason for regular customers to go to a commercial agency. This i s why the sub-component includes also, as a test, the creation o f a call center for the attention o f customers by phone. The scope o f this service addresses customers’ claims related to both bad quality o f electricity supply and commercial matters, supported by the new CMS and TSMS.

37. EDH’s Partnerships with Neighborhood Committees. Contrary to general belief, EDH has an ongoing relationship w i th customers in many o f the marginalized zones, (it has in fact a unit specifically to address those clients). Neighborhoods Committees (NC) have served as intermediaries managing electricity operations and collecting bills in these marginalized areas. The project wil l build o n this model, and on other experiences such as the work already done by GRET (Groupe pour la Recherche et I’Echange Technologique) for the provision o f water to poor neighborhoods, to improve electricity service and build a stable commercial relationship w i th those clients. More specifically, the project wi l l seek to (i) establish new contracts to guarantee service standards by EDH and payment collection by the NC; (ii) strengthen partnerships between these communities and EDH; (iii) assist and train community members to improve the managerial capacity o f NC, namely to improve collection methods and accounting; and (iv) strengthen the capacity o f the community l iaison office in EDH to better respond to this type o f customer.

38. Sub-Component 2.3: Regularization o f EDH’s large consumers through the application o f the new customer-oriented management approach (US$ 1,545,000). The dollar amount currently b i l led to around 2,350 customers (1.3 percent o f total) in the whole country w i th a monthly unit consumption above 1,000 kWh represents close to 70 percent o f EDH revenues (in most other countries, large customers amount to 30 percent o f total bil l on average). Furthermore, EDH databases show more than 1,300 “non-active” customers and around 1,500 “0 kWh recorded consumption” large customers (December 2005 figures). I t i s therefore crucial for EDH’s financial health to regularize the commercial condition o f 100 percent o f i t s large consumers, regardless o f their current situation. Since many o f these customers have opted for self-generation, EDH would need to convince them o f the quality and rel iabi l i ty o f i t s service before they agree to subscribe or re- subscribe as regular customers. A t the same time, experience shows in Hayti and in other countries that the decrease of non-payments by these types o f customers can lower significantly non-technical losses o f the company. A significant improvement in the billing coverage and collection rates o f large customers has been achieved by almost al l the utilities in Lat in America, through a combination o f good management practices and application o f IT tools, which facilitates better services and better attention to the client, and also leads to greater transparency and accountability o f clients accounts, making fraud and non-payment practices much more dif f icult to conceal.

39. There wi l l be a detailed f ield assessment o f the situation o f al l large consumers, an activity that wil l provide a good opportunity to revitalize EDH staff and, at the same time, improve the company’s publ ic image. It i s proposed to organize special purpose crews, formed by a student o f the school o f engineering or o f business administration and an EDH employee with some sk i l ls in customer connections. As the assessment i s not a permanent activity, students should be recruited temporarily (stage regime). Those showing the best performance could be incorporated to the permanent staff, once the assessment i s concluded. Project financing wi l l also include the short-term technical services o f an expert in remote metering to assist LCU in the elaboration o f the technical specifications for a call for bids for supply, installation and commissioning o f remote metering

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devices. The project will also finance the renovation o f distribution lines and customer connections as we l l as the installation o f remote metering and disconnection and reconnection devices in all points o f supply to regularized large customers. Renovation o f distribution lines and customer connections wil l allow EDH to improve the reliabil i ty o f service. Remote disconnection avoids the usually confl ictive situation created with the customer when this operation must be executed at the site and, by reducing the contacts between the f i rm ’s employees and recalcitrant customers, i t also eliminates potential sources o f corruption. Investing in resilient connection equipment will make i t extremely dif f icult to attach irregular connections to this cable.

40. Component 3: Participatory approach, project management, monitoring and impact evaluation, and replication strategy (US$ 1,579,760). This component groups all the supporting activities necessary for the successful implementation o f the first two components. I t includes a communication strategy w i th a pro-active participatory approach towards clients and employees o f EDH. I t also focuses on the importance o f an efficient project management and careful monitoring and an evaluation o f the results, their impact and their sustainability beyond the duration o f the project. Lastly, i t includes a proposal to be endorsed by the Government and EDH o n h o w to scale up and replicate the project in other zones o f Port-au-Prince and o f the rest o f the country in an effort to expand the benefits o f the model proposed here to EDH as a whole.

4 1, The component includes a pro-active participation and communication strategy towards clients and employees o f EDH intended to promote the behavioral changes to achieve the project’s objectives. This strategy, to be tested under the pilot, comprises a combination o f (i) reaching quality standards for customer satisfaction as identif ied by consumers; (ii) enforcement and social control mechanisms; and (iii) a communication program to reach out to the various stakeholders to obtain their feedback, and disseminate information about the project outcomes.

42. The participation strategy will promote cultural changes to address negative practices both within EDH and among customers, that might hinder project success. Project design includes features to promote this change in culture (competitive selection among EDH’s employees o f key personnel to implement the p i lo t project, remote disconnection, etc.). The ma in actions to be tested under the project are summarized below:

Low-income community residents: (i) to strengthen Neighboring Committees (NC) to play a key role in the establishment o f better practices; (ii) to facilitate complaint processing and responsiveness standards; and (iii) to assess the feasibility to install house-meters in selected neighborhoods. High income residents and businesses: (i) to regularize contracts and ensure service .

standards are reached; (ii) to offer alternatives to save electricity consumption to reduce billing; and to in fo rm them periodically o f improvements and potential savings; (iii) to disseminate good practices and give public recognition to good customers: and (iv) to seek customer collaboration to eliminate i l legal activities with the use o f positive incentives (discount for faster payments, for instance) and w i th the application o f stricter enforcement mechanisms. Government institutions: (i) to include a l i ne in the budget o f each institution for their consumption o f electricity; (ii) to work w i th the authorities, with the support o f the Strategic Steering Committee, to ensure t imely payment o f electricity bills, and corrective measures in case o f delays to avoid a negative impact on EDH’s revenues; and (iii) to give public recognition to good customers.

a

a

0

19

e

43.

Proposed changes in E D H : (i) to promote project ownership through the involvement o f key staff as offering opportunities for career development; (ii) to engage the EDH Union in the proposed changes thereby overcoming fears and conveying the need to embrace the changes as a crit ical step for EDH’s survival; (iii) to establish a recruitment process to hire personnel on the basis o f qualifications; (iv) to define an incentives system based on participation in training, recognition and non-monetary compensation to ensure engagement in the proposed changes; and (v) to establish and enforce a monitoring system to identify and punish il legal activities.

The communication strategy wi l l disseminate the project’s results and good practices among the different customers through newspaper articles and/or press releases that wi l l in form the population in detail about the project. There will also be an information note/brochure for al l targeted EDH customers in the selected zone and for al l larger customers, describing in detail the foreseen implementation process; a dissemination system will be established to enhance community partnerships w i th EDH. Surveys to customers in the project zone of the various income levels, large consumers in the country and EDH’s employees will be undertaken at various stages o f project implementation to define a baseline and then monitor the impact o f the project o n these groups. Other dissemination activities wil l be carried out as required with EDH, customers and other groups o f c iv i l society, including but not l imi ted to the media, government officials, other donors, and other sectors.

44. As part o f the project management sub component, the project wil l finance expenditures for project administration by the PTU/EDH team and the PCU. El igible expenditures wi l l include: (1) consultant costs o f the PCU; (2) studies and consultancies; (3) training activities, and (4) acquisition o f goods and equipment needed for project implementation (computers, software). EDH w i l l contribute to this component by providing logistical support, among which: facilities for the PCU, maintenance o f amenities, payment o f salaries to the PTU-EDH team etc. This component wi l l also finance monitoring and evaluation (M&E) activities others than those already considered under Component 3.2, and the project’s impact evaluation.

45. A long-term strategy wil l be developed to replicate the model described in the three project components above. Through the project’s expected improvements in the areas o f intervention, the credibil i ty o f the sector should be revived, increasing the chances for obtaining additional donor financing for the scale-up. A t the same time, i t i s clear that replication wi l l entail more than just a replication o f what wi l l be done in Component 2, for these other areas face more challenging constraints o f different sorts that the p i lo t project. Thus, the design o f this replication strategy wi l l be based on an evaluation o f the progress in the execution o f the p i lo t project and an analysis o f the project impact, but also o n an assessment o f current conditions o n the key aspects that need to be contemplated to enable a successful replication in the rest o f Port-au-Prince and in the Provinces.

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Component US$ Mn World Bank EDH Total

Component I: Installation of CMSlTSMS 2.19 0.45 2.64 1 .I Incorporation of CMS 1.38 1.38

1.2 Incorporation of TSMS 0.71 0.71 1.3 Application of new procedures and rules 0.05 0.05 1.4. Support for restructuration of EDH anti-fraud unit 0.06 0.06 1.5 Construction of new facilities for CMS, TSMS, call center 0.45 0.45 ‘Component 2: Improvement in quality ot service and increase in 3.15 0.10 3.25 2.1 Selection of personnel for the socio-economically mixed area and 0.08 forthe LCM 2.2: Improve quality of service to, and increase EDH revenue from, the 1.52 0.10 1.62 socio-economically mixed zone 2.3: Regularisation of large consumers through the application if the 1.55 new customer oriented management approach. Component 3: Participatory approach, project management, M&E 0.66 0.92 1.58 and impact evaluation and replication strategy Component 3.1 : Participatory approach (surveys, press releases, round 0.08 tables etc) Component 3.2. Project management, M&E, impact evaluation 0.42 0.92 1.34

0.08

1.55

0.08

Component 3.3: Replication Strategy 0.16 0.16 Continaencies 0.01 0.01

4. Lessons learned a n d reflected in the project design

46. The project design builds on lessons learned f rom the implementation o f previous Wor ld Bank projects in Ha i t i and especially f rom the f ive power projects implemented f rom 1976 to 1999. Out o f the f ive projects, on ly the last one included a component specifically analyzing technical and non-technical losses; the first four projects focused on technical losses, generation capacity and institutional improvement o f EDH. The table below summarizes the main lessons learned from these past Bank interventions in the electricity sector in Hai t i that were incorporated in the design and preparation o f the proposed project.

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Lessons Learned f rom Previoi Need for detailed preparation of the project, from the design of the components and the definition of a procurement p lan to the schedule of implementation and cost estimates. The I C R o f the Fifth Power Project points out that “the failure in achieving the loss-reduction objective in this project and in the previous ones has been due in part to lack o f an adequate preparation o f a comprehensive program which includes detailed design o f i t s components, l ist o f equipment, implementation schedule and complete cost estimates o f the implementation o f fol low up actions”.+ For PREPSEL, a complete procurement plan has been prepared prior to negotiations. In addition, the l i s t o f equipment to be repaired was submitted b y EDH before appraisal. EDH- PREPSEL team has committed to provide semi-annual reports to the P C U on the follow-up o f indicators. Design simple and well-defined operations with modest objectives (OED Report, 2002). The reality and the complexity o f the Haitian environment have demonstrated the importance o f having a clear project design, to facilitate preparation and implementation. + The proposed project keeps i t s objectives simple and well targeted by focusing on one issue in EDH (loss reduction in distribution) and two types o f clients (clients in a pi lot zone and large consumers as a whole). Need to minimize costs of sustaining the new approach. The f i f th power project was able to reduce losses in the zone selected, but not in a sustainable way, notably because o f the h igh supervision costs needed to guarantee its sustainability. + The new C M S and TSMS (for EDH as a whole) wil l be financed by the project, as well as the procedures related to them. Because customer management wil l become automated, costs associated should remain limited. In addition, the replication component w i l l assess the needs for replication o f the strategy throughout EDH, a necessary condition for the sustainability o f the project.

Importance of adopting a gradual and realistic approach for the achievement of results. The I C R for the 1’‘ Power Project notes that “the Bank Group should not hope for major improvements in one operation in institutions, which, like EDH at the time o f project appraisal, are very weak in a l l aspects, Le. technically, financially and organizationally”. + The proposed project is a p i lo t project. I t seeks to demonstrate that with an array of technical and institutional measures, i t i s possible to increase the financial revenues to EDH in the project intervention framework. Nevertheless, given i t s l imited financing, and the stakes involved (in terms of governance for example), the project in itself can not improve the financial performance o f EDH as a whole. I t wil l need to be replicated to ensure that the results affect positively the whole company, in a sustainable way. Need to build realistic expectations about the project outcome to develop credibility and ensure sustainability Unrealistic expectations o f what can be achieved under a

WB Power Projects in Hai’ti Achieving implementation objectives while gradually building institutional capacity. For the third power project, EDH relied heavily on consultants for i t s day-to- day operation, but this did not help the company become more self-reliant. + The project was designed in close collaboration with EDH, which w i l l play a key role during project implementation. This wil l ensure internal ownership o f the project and transfer o f know how. The project also includes training activities to foster wide spread capacity building within E D H . Finally, the Bank i s pursuing discussion with other donors, namely the I,DB, to build a sound financial management system for EDH, which w i l l contribute to enhancing its management capacity. Importance of a strong involvement of E D H for the success of the project. A lack o f involvement from the counterpart, and lack o f incentives for staff seemed to be important reasons for failures o f past projects, and low salaries and polit ical interference were singled out as particularly important issues to address. +The proposed project, through the effectiveness conditions and dated covenants wil l ensure that EDH achieves the key actions needed prior to the detailed implementation o f each component. Regarding staff motivation, the employees directly responsible for the implementation o f the project (in the socio-economically mixed area and in the large customers unit) wil l be selected competitively within EDH, after applying for the different positions available, and there w i l l be an intensive training o f employees through the use o f C M S and TSMS Need for Government effective support to E D H in its fight against fraud and non payment. The I C R o f the fourth Power project highlights as one o f the reasons for fail ing to achieve the expected results the fact that “the Government did not endorse a program to reduce thefts through appropriate legislation and corresponding enforcement”. + The Wor ld Bank has already raised with the authorities the importance o f the role o f the government as an enforcing power. They are fu l ly aware o f the consequences o f theft on EDH’s financial performance, and i t s resulting fiscal impact. Need to improve coordination between donors. The implementation o f the C C I and o f the M o U o f Brussels has shown that substantial progress in the sector require! a coordinated dialogue o f a l l donors wi th the Haitiar authorities and with EDH. + The Wor ld Bank wi l maintain this coordination through: (1) information or the project and dissemination o f the results through the communications component, (2) participation in thc “Table Sectorielle de l’Electricite”, an effective f o r m for communication among a l l parties involved in tht sector, and (3) close collaboration throughout the desigr and implementation phases with IDB to maximize tht synergies between the two projects.

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pilot project can undermine the credibil i ty o f the project and jeopardize i t s sustainability in the long-term. + The proposed project includes a communication strategy aimed at raising awareness among the various groups affected by the project (electricity users, EDH, donors and the public in general) about the objectives o f the project. This communications strategy also emphasizes the responsibility o f each actor in the implementation o f the project and its subsequent replication on a larger scale. In addition, the Wor ld Bank and the Country Management U n i t (CMU) have maintained a continuous dialogue wi th the Sector Min is t ry and the MEF to highlight the expected role o f these institutions and the rest o f the Government to ensure the viabil ity o f the project and the sustainability o f the results. Need for EDH to have adequate customer system. The fourth and fifth power project ICRs mention the poor monitoring o f bi l l ings and collections was identified as one o f the causes for the h igh non technical losses. + PREPSEL i s specifically financing the incorporation o f a new state o f the art customer management system (CMS) and technical service management system (TSMS) to ensure improved monitoring o f and attention to EDH customers, Training to users o f the system will be available so as to ensure sustainability o f the system. In addition, consultants will assist EDH and students in bui lding up a new, reliable database. Support transparent and timely implementation of the project with adequate procurement expertise. Previous projects have shown that the lack o f clarity in procurement procedures and in respect o f WB procurement rules can delay project implementation and eventually undermine i t s success. + The project will provide EDH with the necessary support by hir ing local experts in procurement and financial management, assisted by specialized Bank staff in Headquarters. They wil l ensure t imely procurement and financial . - management o f the project in line with WB rules.

5. Alternatives considered and reasons for rejection

~~~~~

Need for institutional changes within EDH to ensure the sustainability ofproject. The fifth power project outlined that a change in the institutional framework o f EDH was essential to ensure sustainability o f the results. + While the recommendations for an in depth institutional change within EDH can only be achieved through a broader intervention than just a pi lot project as PREPSEL, the proposed project already signals some o f the key issues that EDH’s Board and the Government will have to address to ensure the sustainability o f the results achieved under this project. This i s notably the need for appropriate compensation to attract and maintain skilled workers. Furthermore, to support these efforts, one o f the PPIAF feasibility studies for the establishment o f a management contract, wil l perform an assessment o f personnel within EDH, with the a im to offer possible solutions to revive the weak institutional capability o f EDH. Importance of sector policy objectives in parallel with project. During implementation o f the f i f th project, the deterioration o f the electricity sector made the need for substantial sector po l icy reforms evident. + As stated already, the dated covenants o f the project include actions to be taken by the government seeking to improve transparency o f the sector and greater awareness by the authorities o f their responsibility towards the sector. Furthermore, the project i s part o f a larger multi-donor strategy, promoting better governance and transparency in the sector, through concrete actions by the authorities and EDH outlined in the M o U ol Brussels.

47. Three main alternatives were considered during project preparation:

48. Expansion of Electricity Coverage. Hai t i has a very l o w coverage for the whole country. Most statistics refer to a rate o f IO%, but recent estimates f rom EDH calculate this rate to reach 24.9% percent. Even with the adjusted calculations, the need to expand the services i s obvious in Hait i . Furthermore, the W o r l d Bank has a comparative advantage in executing electrification projects through i t s past experience in similar operations in various other countries. Notwithstanding this acute need, the situation o f the electricity sector in Ha i t i as a whole i s so dire and the needs of the country so pressing, that Wor ld Bank had to establish priorities, and tackle first the sector’s issues that have the strongest impact on the economic potential o f the country. The possibil i ty to develop an electrification project with EDH or w i th other providers was rejected given that EDH i s not even able to service those consumers that are in covered areas, most ly in Port au Prince.

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49. Generation versus Distribution. A key problem in the electricity sector i s the inabil ity o f the public u t i l i t y to provide sufficient and reliable electricity to consumers, mostly due to serious technical issues in EDH’s generation capacity, which needs to be rehabilitated and the high economic burden o f purchase power agreements negotiated under previous governments (see paragraph 9). I t could also be argued that, unless the generation issue i s properly tackled, nothing can be done at the distribution and commercialization levels. Nevertheless, the poor conditions o f the distribution network and the scant attention to the customers are equally important factors to explain the unsatisfactory performance o f EDH. Furthermore, the fiscal burden that EDH, which i s technically bankrupt, imposes on the Government could not ever be reversed unless increased revenues f rom customers allow the firm to generate i t s o w n sources o f funds. This shift, however, wi l l not happen until there i s an improvement o f service to the end users. Solving the generation problems are therefore necessary but not sufficient conditions for a sustainable improvement o f the services and o f the financial health o f EDH. In addition, the rehabilitation o f EDH’s generation capacity i s already being financially supported by many donors. On this basis, the Wor ld Bank adopted a three-prong approach: (1) improve distribution and commercialization through the project itself; (2) maintain a dialogue with the highest authorities and the other donors in the framework o f the MoU, which emphasizes the need to secure reliable generation capacity; and (3) mitigate the r isks associated w i th lack o f adequate generation by focusing within the project, on a zone where supply i s continuous and o n large customers, who can be directly targeted and serviced.

50. Scope: Three possible options: EDH as a whole, a selected zone, or a hybrid project. The decision not to tackle the distribution and commercialization issues for the whole o f EDH was based on the l imi ted resources available for the project. A t the same time, the obvious alternative o f focusing only o n one or several zones was also ruled out, as some o f the core instruments for a successful commercial strategy, namely the new CMS and TSMS, could not be acquired o n a piecemeal basis. Furthermore, as one o f the objectives o f this project was to improve financial resources to EDH, the need to target large customers, who account for more than 70 percent o f EDH bi l led revenues, made it impossible to l im i t the coverage o f the project to a specific geographical area. This i s why a hybrid design was adopted in the project, and particular attention was paid to the selection o f performance indicators o f each component, to make sure that they would reflect accurately the results that can be expected in each case f rom implementing the project.

C. IMPLEMENTATION

1. Coordination wi th the IDB Project

51. The IDB and the WB agreed to work very closely to support EDH’s efforts to improve the distribution and the commercialization o f electricity, as part o f the multi donor strategy for the sector. Given the financing available and the different timing o f project preparation and implementation for the two institutions, the WB grant wou ld be smaller and come first, whi le the IDB project wi l l be implemented later o n a larger scale in other zones o f Port-au-Prince. Project design i s expected to be very similar and special care has been taken during project preparation to maximize the synergies between the two projects. Similarly, the implementation arrangements presented in the fo l lowing section have been discussed with the IDB team, and i t i s expected that a similar approach wil l be adopted for the implementation o f their o w n project, leading even to the sharing o f the same executing uni t by the two projects.

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2. Institutional and implementation arrangements

2.1. Implementation Period: 3 years.

2.2. Institutional and implementation arrangements

52. The approach taken to implement this project wil l be one that combines (i) program management and accountability at the highest level o f Government; (ii) full involvement o f EDH in al l substantial issues pertaining to the design and implementation o f the project to ensure that the project addresses the right issues, that i t has real ownership from the beneficiary and serves the purpose o f building institutional capacity within the firm to strengthen i t s capacity to provide good services in a sustainable manner; and (iii) efficient procurement and financial management arrangements that will guarantee t imely execution and full compliance with the WB rules without imposing an excessive burden on the administrative capacity o f EDH.

53. Based o n the institutional analysis o f the sector to date, i t was agreed that the best way to achieve the various objectives above was to entrust EDH with the responsibility and leadership for the technical content o f the Project and establish a Project Coordination Un i t (PCU) that wi l l gather al l the required fiduciary expertise without diverting too many resources o f the beneficiary, EDH, from the actual implementation o f the project. This P C U wil l be composed o f a project coordinator, a procurement specialist and a financial management specialist. The P C U wil l work throughout the implementation o f the project w i th EDH, who will appoint a team o f experts that wil l fo l low up the project on a continuous basis, the Project Technical Unit (PTU/EDH team). The P C U wil l have the fiduciary responsibility for the project, namely the responsibility for the management o f the funds, and for the compliance o f al l PREPSEL’s transactions w i th the procurement and financial management guidelines o f the Bank. The P C U wil l also have the responsibility to provide support to the PTU/EDH team to ensure that all the progress reports and any project document elaborated by the PTU/EDH team complies w i th the guidelines o f the Bank and the requirements stated in the Operations Manual o f the PREPSEL. Finally, the P C U wil l have to be available, upon requests f rom the PTU/EDH team and/or the Strategic Steering Committee, to provide feedback on a wide array o f issues related to the project, including administrative, technical or publ ic relations aspects and any others that either EDH or the Steering Committee may want feedback on. The capacity o f the P C U to fulfill this latter wider role wil l be ensured through the appropriate selection o f the P C U Coordinator, and with the possibil i ty for this Coordinator to tap on other experts o n a short term basis (either through contact w i th the Bank or other donors, o r through hiring o f short term experts). Given i t s f iduciary responsibilities, the P C U wil l report to the Minister o f MTPTC. T o ensure seamless coordination between the P C U and the PTU/EDH team, and a process o f transfer o f know- h o w during project implementation, i t has been agreed with EDH that the P C U wil l be housed in EDH’s headquarters. Finally, whi le the day-to-day implementation wil l be the responsibility o f the PTU/EDH team and o f the PCU, as explained above, a short term consultant wil l be hired to undertake an independent verif ication o f the progress achieved under the ma in components once per year, and make recommendations on how to remain on track to achieve the objectives o f the project.

54. More specifically, through i t s technical experts, EDH will have the responsibility o f implementing al l substantial matters related to the project, whi le benefit ing f rom the support o f the two experts in fiduciary matters, and f rom the advice o f the Coordinator. The P T U / E D H team wil l be composed o f the Ch ie f o f Project, h idher Assistant Chief, the manager o f the LCU, the manager o f the Local Commercial Agency, and any other EDH specialists that may be required.

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55. W i t h respect to the PCU, the responsibilities o f the Project Coordinator correspond to those already spelled out in the previous paragraph when referring to the P C U as a whole, with the exception o f the specific fiduciary tasks that wil l be the responsibility o f the specialists in the Wor ld Bank. Actual procurement processes and corresponding reporting activities wi l l be the main responsibility o f the procurement specialist, once the TORS and short l is ts are defined by EDH wi th the support o f external consultants as needed. The financial management specialist wil l have the ma in responsibility o f ensuring proper management o f the resources allocated to the project and compliance w i th the required reporting procedures.

56. This simple division o f responsibilities between the PCU and the technical team o f EDH w i l l make i t possible for EDH to focus at this stage on strengthening i t s core business (providing electricity to the people), rather than dispersing their scarce human resources over many important, but competing areas o f expertise. I t wi l l also ensure that al l fiduciary safeguards are respected and that project implementation would happen without undue delays.

57. A high level Strategic Steering Committee comprised o f representatives f rom the main government entities that intervene in the sector: Ministers o f MTPTC, MEF, Planning and External Cooperation; as we l l as EDH and the CMEP, wil l provide guidance to the P C U on strategic issues. Other entities could be part of, or invited to the meetings o f the Steering Committee, if the members o f the Committee so desire. The presence o f this Committee i s particularly important in the context o f the M o U o f Brussels where various actions that are under the control o f either the M T P T C or the MEF rather than o f EDH affect nevertheless the l ikelihood o f success o f the project and the overall performance o f the firm, as indicated in section A.2. and in section C.5. o n risks and mitigation measures o f the project.

58. Financial management and disbursement for the project wil l be handled by the P C U through the recruitment o f a financial management specialist, as indicated above. Funds wi l l be disbursed via a Designated Account opened at the Central Bank (Banque de la Republique d’Hai‘ti or BRH) and managed by the P C U for the small contracts, and through Direct Payments f rom the Wor ld Bank for the largest contracts. T o strengthen transparency and control over the use o f the project’s resources, two signatories to the Designated Account wi l l be required. The detailed financial management arrangements are discussed in Annex 7 .

59. The key issues and risks concerning procurement implementation for the project arise from the many weaknesses in the Hait ian public procurement system. These weaknesses were identif ied by a CPAR prepared by Bank in 1999 and confirmed by the Government and mult iple donors in the context o f the Interim Cooperation Framework (ICF) adopted in 2004. The Bank’s Economic Governance Reform Operation (EGRO) and Economic Governance Technical Assistance grants (EGTAG 1 and 2), seek to address many o f these problems through their procurement components and the Government has already taken several actions to improve procurement institutions and practices. These include the adoption o f a new Procurement Decree wh ich creates a Commission Nationale des March& Publics (CNMP) with a mandate, inter alia, to improve procurement practices and develop standard bidding documents for use in a l l publ ic procurement. The new Decree also formally establishes that competitive bidding practices are the norm and direct contracting the exception for government procurement and includes new provisions governing the procurement o f intellectual (consulting) services.

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60. In addition to the reforms supported by the EGRO and the EGTAG grants, procurement r i sks wil l be mitigated in the case o f the proposed project through the use o f close and frequent supervision, inc lud ing full prior review o f all contracts financed by the grant. Further, as a result o f the Government’s commitment to reform and the application o f the Bank’s Guidelines in various recent Bank-financed operations, some government agencies such as PL-480, the Ministry o f Finance and the Direct ion de la Protection Civile (DPC), are becoming increasingly familiar w i th the basic principles of open and fair procurement. This familiarity, combined with the expected broad dissemination o f information on new procurement procedures to al l purchasing agencies, i s expected to mit igate some risks.

6 1. Nonetheless, the procurement risk i s sti l l considered high. After the P C U staff has been recruited and the project implementation manual completed, the PCU’s capacity wil l be further assessed during the course o f the Bank’s intensive supervision o f the project.

3. Monitor ing and evaluation of outcomes/results

62. A panel o f SMART (Strategic, Measurable, Achievable, Realistic, and Timely) performance indicators wil l be selected as part o f an M&E strategy to track project results. They cover the areas of power generation, distribution services, customer-care services, revenue cycle management, and loss reduction initiatives. It i s proposed to calculate the value o f each parameter on a monthly basis. A crucial element to be contemplated i s to define measurable indicators and, at the same time, provide EDH with the tools to actually measure those indicators. The incorporation o f the corporate commercial (CMS) and technical service (TSMS) management systems wil l measure in a timely manner key performance parameters for the distribution business.

4. Sus t aina bility

63. Sustainability o f the results achieved under the project wil l depend on: (i) reliable electricity supply to the Project zone and to large customers: (ii) capacity o f EDH’s personnel to use and maintain the new equipment and apply the new procedures; (iii) capacity o f EDH’s Board to retain the newly trained managers and employees under the project, by providing remuneration packages competitive with those offered by the private sector, and (iv) capacity o f EDH to expand the customer-oriented approach to EDH as a whole. To maximize the l ikel ihood that these conditions will be met, the project design has been discussed with EDH throughout project preparation and training activities are incorporated in each component o f the project to ensure transfer o f know-how. In addition, the communication strategy aims to ensure local ownership o f the approach by the different stakeholders. The replication component, on the other hand aims to prepare a blueprint o f what would need to b e done to replicate the project o n a larger scale, provided that additional financing i s secured and other requirements are met. This wil l be the case with the IDB project, which wil l start shortly after this proposed Project. Finally, sustainability o f the results achieved under this project wi l l be facilitated by the development o f a long term strategy to strengthen EDH, which wil l be developed w i th the financing o f PPIAF (Feasibility Studies for a Management Contract o f EDH), and by the commitment o f the donors and the Government to the measures included in the M o U of Brussels.

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5. Critical risks and possible controversial aspects

RISK I Risk Minimization Measure(s) I Rating

OVERALL COUNTRY RISK:

Insecurity and civil unrest increase again in the country, delaying project preparation and increasing implementation risks.

Risk largely outside the Bank’s control. Participatory process set by transition Government under the Interim Cooperation Framework F i s building partnerships and mitigating social tensions. New Government expected to pursue the same strategy.

H

To PDO:

Shift of Sector Policy by the new Government away from objectives o f efficiency, cost recovery and financial discipline in the provision o f services.

Disruptions of electricity supply to users due to (i) the failure o f Haitian authorities to pay on timely basis for the fuel (MEF) and (ii) the failure o f the Haitian authorities to secure new and more efficient sources o f supply that w i l l replace the existent contracts once these expire. (Board o f EDH, MTPTC, MEF), (iii) the failure o f the donors to conclude on time the reparations o f EDH’s groups.

Lack of political willingness by the GoH to effectively endorse EDH’s Loss Reduction strategy by (i) supporting efforts to enforce payments f rom users and (ii) giving the example as a user for timely payment and efficient use o f energy.

The new Government, through the President himself, has explicit ly manifested to the Wor ld Bank and i t s Representative in Haiti, his commitment to the objectives o f efficiency, cost recovery and financial discipline advocated in the project. This commitment w i l l become evident once the Government off icial ly endorses the Project, as the Project document includes dated covenants that require an active participation o f the Ministry o f Finance and i t also includes the creation o f a h igh level Strategic Steering Committee f rom the Government that would oversee and guide EDH and the Project Coordination Unit. Ultimately, o f course, i t wil l be the Government’s decisive support throughout project implementation that wil l effectively eliminate this risk.

There has been a continuous dialogue on these topics at the highest level with the Haitian authorities and wi th other donors (CIDA, IMF, IDB, etc ...) in the context o f actions agreed in the MOU o f Brussels. More specifically, the Wor ld Bank w i l l ask Management to raise some o f the issues at a higher level, specifically the need to complete the reparations o f the groups in Port-au-Prince b y eitherior U S A I D and ADF.

In addition, the Wor ld Bank w i l l actively support the inclusion o f the most important o f these actions under the control o f the Government within the ongoing pol icy dialogue with the Wor ld Bank on the energy sector and on economic governance.

The Wor ld Bank has discussed explicit ly during project preparation the content o f the project wi th the different Government entities that could affect the outcome o f the project as explained in the previous column. This dialogue has taken place wi th MEF, MTPC, CMEP during missions, and could be conducted as well in an indirect manner through the C M U s dialogue with the offices o f the Prime Minister and President.

The dialogue with the Haitian authorities and the donors on the M O U includes a condition to add transparency to the role and responsibility o f the Government as a client b y including an energy consumption l ine in the budgets o f the different ministries and public entities. As this wil l represent a change in the current practices, more interaction i s needed to ensure buy-in f rom the authorities. Furthermore, i t wil l need an internal working group (MEF, MTPTC, EDH and others) to start working sufficiently before the Budget i s completed, to fine tune the implementation details and implications o f adopting this measure.

H

H

H

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Lack of willingness of EDH’s Direction Generale to adopt necessary changes in management practices to effectively implement the new customer oriented management approach that i s at the heart o f the proposed strategy to achieve the Project’s objectives.

Lack o f willingness of EDH’s Board to adopt and enforce a structure of wages that could retain the personnel trained under this project to ensure sustainability of the results and possibility of a successful and sustainable replication to EDH as a whole.

Insufficient donors’ coordination hinders the advancement of the mult i- donor strategy to strengthen the sector and al low the sustainability o f the PDO.

To Components:

Insufficient local capacity to implement the Project

Insufficient local capacity to ensure proper application of procurement and financial management WB rules, that could result in unnecessary delays in the implementation, or impose heavy demands on the WB supervision team.

As part o f the pre-appraisal mission, the Wor ld Bank sought EDH’s commitment to undertake the necessary actions to ensure the successful implementation o f the Project. The init ial feedback was positive, and the Bank worked wi th EDH to f ine tune the proposed changes. In addition, these actions will be included as disbursement conditions for the different components directly affected by the changes.

The Wor ld Bank has started to raise this issue w i th the relevant sector authorities and with EDH’s management, while being aware that other factors can intervene (legal constraints, financial ones) that might require a structural change, and thus take time. A t the same time, i t is clear that such a change in wages structures for EDH could be feasible and sustainable if (a) parts o f the increased revenues are allocated to this end; and (b) other expenses are lowered as a result o f a better management, operational and technical performance o f the f irm.

The Wor ld Bank is maintaining a continuous dialogue wi th key donors, around the M O U o f Brussels, the forum provided by the TSE and other means o f communications.

In addition, the WB and IDB teams have been working together during the preparation o f this project to ensure harmonization in the design of the two projects, and maximize the impact o f this coordinated intervention.

As mentioned above, special coordination wil l be needed wi th those donors working on generation, specially in Port-au-Prince (USAID and AFD) because o f the immediate implications for the viabi l i ty o f the project.

Systematic efforts have been made to include in the design o f the project (i) training activities for EDH’s employees to ensure transfer o f know- how; (ii) punctual assistance o f international experts to EDH to assist in the elaboration o f TORS and supervision o f specialized tasks, and (iii) recruitment o f staff by EDH as needed to fill in crit ical positions.

Implementation arrangements wil l ensure that through the PCU, EDH receives the necessary support from local experts in procurement and financial management matters, to ensure efficient and transparent administration o f the Project.

In turn, allowance wil l be made for proper training o f these experts on the WB specific procedures, an investment that should pay o f f as i t wil l alleviate the work load o f WB staff in D C and build local capacity in the long run.

Larger contracts wil l be through direct payments f rom the WB and this should alleviate the need for local expertise in these matters.

Overall risk rating

6. G r a n t conditions and covenants

S

H

M

-

S

H

64. Effectiveness conditions 0 The Subsidiary Agreement has been executed o n behalf o f the Recipient and o f EDH.

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The Government o f Hai t i has adopted the operational manual in terms and scope acceptable to the Bank. The P C U has been constituted and i s operational; EDH has appointed the Project Chief, and a consultant has been recruited to prepare the terms o f reference and the recruitment guidelines for the manager and staff o f the local commercial agency in the selected mixed project area, and for the manager and staff o f the Large Consumer Unit in EDH. A financial management system, capable o f recording and reporting o n the project's expenditures fo l lowing the format specified in the operations manual, has been established in the PCU.

Disbursement conditions The staff and the manager o f the Local Commercial Agency wi l l have been selected and appointed before disbursement takes place for sub-component 2.2 The manager for the Large Customers Uni t (LCU) wi l l be appointed and his contract signed before disbursement takes place for sub-components 2.3.2 and 2.3.4

Dated Covenants

The Strategic Steering Committee wil l convene i t s f i rst meeting not later than 2 weeks after project effectiveness and, thereafter, quarterly during the course o f Project implementation.

The M E F wi l l provide a written report w i th supporting documents, satisfactory to the Association, about the status o f its payments to EDH, including the amounts b i l led b y EDH for the Government's consumption o f electricity, the transfers f rom the MEF to cover the purchase o f the fuel and the costs o f energy paid to independent power producers, as wel l as the net amount effectively transferred to EDH, (i) not later than 2 weeks after effectiveness, and, thereafter (ii) semiannually during the course o f Project implementation;.

The Board o f EDH wil l provide not later than 2 weeks after effectiveness for the first year during project implementation , and thereafter, 4 months prior to the beginning o f each subsequent fiscal year during the course o f project implementation, an annual plan previously agreed upon with M T P T C and EDH and presenting the minimum electricity supply o f hours per day that i t intends to finance and that wi l l be supplied either by EDH or by third parties to serve customers (i) in the capital ci ty o f Port-au-Prince, w i th further details showing the electricity provided to Port-au-Prince mixed neighborhood and the industrial zone and (ii) in the main cities o f the Provinces.

D. APPRAISAL SUMMARY

1. Economic beneficiaries

67. The project i s a p i lo t project, whose final results, if replicated, should improve the provision o f electricity in Haiti, therefore improv ing living standards for the Haitians. Given the importance o f electricity as an input to many economic activities, the improvement o f electricity services that could be achieved by replicating o n a larger scale the approach adopted in this project, would have a significant impact also o n the economic activity o f the country.

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68. M o r e specifically, the project wil l benefit the customers o f EDH as a whole through the expected improvement in quality o f service supported by the incorporation o f C M S and TSMS. In December 2005, EDH registered 184,93 1 active customers, 92% o f which were residential and 6% commercial. I t i s expected that these customers wil l receive better service and attention f rom EDH. Nevertheless, because o f the project design, the customers that wil l benefit most are (1) those located in the socio-economically mixed zone, and (2) the large customers. Thanks to better quality o f service, and physical investments to improve both distribution and commercialization, average consumption i s expected to increase for al l types o f consumers in the two targets described above by 2% to 4% at least every year.

69. In the socio-economically mixed zone, the population i s estimated by EDH at 120,000. In December 2005, there were 9,183 active customers in the zone, a majori ty o f which (87%) was classified as residential, whi le 11% were classified as commercial customers. In addition, a total o f 7,483 inactive clients and 908 “0 kwh” clients were registered, and the project i s expected to regularize some o f them every year. Residential customers in the zone had an average month ly consumption o f 83 kwh, while that o f commercial customers was at 301 kwh, In addition, the project wi l l improve quality o f service in the 9 slums (“bidonvilles”) o f the zone, where EDH estimates a population o f 18,847. Out o f these 9 slums, 5 already have access to electricity services, o r a total o f 7,193 customers. I t i s wor th noting that a large part o f the inactive and 0 kwh customers - in particular the residential customers living in marginalized areas - already pay middle-men to receive a bad service at a price that i s often higher than EDH. The improvement in service should therefore increase general living standards and possibly free budget for other sectors (education, health etc).

70. According to EDH data, in December 2005 there were 2,208 active large customers in Haiti, 33% o f which were classified as industrial customers, 32% as residential and 19% as commercial. Large customers are overwhelmingly located in Port-au-Prince (78%). Cap-Hai’tien, and Gonaives, the two largest cities after the capital, have 130 and 96 large active customers, respectively. Average consumption for the large customers was estimated at 8,551 kwh a month. The project wil l help regularize the currently inactive and 0 kwh active customers, who are double the currently active customers - 2,964 in December 2005. Commercial and industrial clients would be able to increase economic activity - until n o w often l imited by the bad quality o f service, or expensive due to the uti l ization o f autonomous generators, w i th positive consequences o n j ob creation. Public entities wi l l be able to offer their services on a more continuous basis - this i s particularly important for education and health services, and security.

71. The success o f the project should also help improve the financial situation o f EDH, benefit ing EDH employees (2,355 in November 2005). Moreover, i t i s expected that the employees wil l benefit f rom an improvement in their work ing environment. Indeed, the project wi l l offer training to al l users o f the new C M S and TSMS. Also, through the competitive selection o f the employees who will be work ing for the socio-economically mixed zone, and for the large customers unit, the project will offer to some EDH employees new career opportunities, supported by training. The participation o f the union, the conduct o f surveys during preparation and implementation o f the project and the dissemination o f lessons learned o f the p i lo t project through organization o f various participatory events, wil l encourage dialogue and increase employee involvement in to the project, and therefore, in the company’s performance. The P C U wil l discuss on a regular basis the results o f the surveys w i th all parties involved and, when needed, adjust i t s strategy accordingly.

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2. Economic and financial analyses

72. Economic and financial analyses have been performed separately for investment activities to be financed under two components o f the project--investments in the socio-economically mixed zone (Component 2.2) and investments to regularize the situation o f large customers (Component 2.3). Given the p i lo t nature o f this project and the need to collect an enormous amount o f data related to the EDH operation in a short t ime fi-ame, development o f a financial model for the entire EDH has not been possible. Nonetheless, such model i s important in order to present a complete picture o f the financial performance o f the ut i l i ty company and it i s expected to be developed through the full- scale IDB project under preparation.

73. It i s important to note that given the l imited resources available, the project i s designed to focus on the activities w i th maximum benefits. The selected zone and the large customers on which this p i lo t project focuses are considered to have the greatest potential to succeed and to maximize the demonstration effect. The zone was selected based on a set o f criteria as described in Annex 4 to ensure that the component wi l l be implemented successfully in an “externality-free” environment. The large customers w i th b i l led consumption greater than 1000 kWh per month represent close to 70% o f the bills due even though they represent on ly 1.4% o f the total number o f customers. I t i s estimated that there may be another couple o f thousand large customers that are getting the electricity service but are not b i l led or are currently disconnected due to non payment o f bills. Given that large customers provide the majori ty o f EDH’s revenue and the investment needed to regularize them i s not significant, i t makes perfect sense to include them in the p i lo t project. Since the success o f this p i lo t project i s necessary to showcase the l ikel ihood o f transforming the technically bankrupt EDH into an improvement in operational performance, not surprisingly both components are estimated to generate very high financial returns to EDH, as shown in Annex 9. Nonetheless, achieving the expected project outcomes could sti l l suffer f rom the l ikel ihood o f continued power shortage, resistance o f EDH management to changes and sizable non-payment. Such a high financial return may be not replicable as future projects would not have the same favorable environment for implementation and would need to take into consideration other external factors such as high investment, security, and lack o f willingness f rom customers to pay. In addition, the perceived risks in the power sector in Ha i t i are much larger than what this project addresses. This, in conjunction with the lack o f a supporting market-based regulatory framework, rules out the possibil i ty for EDH to raise commercial capital or attract private sector participation. Interventions f rom mult i- and bi- lateral donors are thus much needed.

74. The project i s estimated to y ie ld a net economic N P V o f US$ 0.5 m i l l i on and U S $ 3.9 m i l l i on and an EIRR o f 15% and 42% for the selected zone and large customers, respectively. The EIRRs for both components are above the hurdle rate o f 12%. The NPVs o f the project financial return are estimated to be US$ 7.5 m i l l i on and US$ 13.8 mil l ion, and the FIRRs 49% and 91% for the selected zone and large customers, respectively. Note that part o f the financial benefits to EDH i s essentially a transfer o f financial benefits f rom the customers, thus generating no net benefits to the society as a whole. The sensitivity analysis o f financial rate o f return i s shown in Table 1.1, below.

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Table 1.1: Sensitivity Analysis o f Financial Rate o f Return

Delay in implementation by one year CRI rises 1 O%/year to 50% in 201 2 and remains stagnant thereafter Energy drops 15% in year 3 and picks up thereafter; CRI constant at

36% 15% 17%

year 3 and increases as expected thereafter Delay in implementation by one year; CRI rises to 50% in 201 2 and

C R I = Cash Recovery Index

3. Technical

75. Any workable approach intended to recover the power sector in Ha i t i should focus o n improving EDH’s operational and financial performance through better internal governance and the adoption o f a coherent medium term strategy. The current non-existent commercial orientation o f the company’s management needs to be reversed. In the current context o f the power sector in Haiti, i t i s observed that the reform processes executed in almost a l l Lat in American countries in the 1990s show that the above described vicious circle can be broken if adequate “state o f the art” management strategies and plans are properly designed and executed. These reform measures include some rehabilitation o f the distribution system and implementation o f new approaches for the execution o f the activities o f the commercial cycle (metering, billing and collection) and attention to customers’ claims. Willingness of customers to improve their payment behavior wil l not exist if they do not receive acceptable service. The new management procedures and techniques are supported by the incorporation o f corporate “management information systems (MIS)”. These are powerful tools that al low EDH to properly perform the main functions (operation and maintenance o f electricity networks, commercial activities), handling the related information flow with high transparency. As a consequence, governance i s substantially improved, as accountability can be actually implemented.

4. Fiduciary

76. The assessment o f the project’s financial management capacity assessment was done taking in to account the specific activities and circumstances o f the project to ensure that the entity’s

33

financial management system i s commensurate with the needs and the unique nature o f the project, as we l l as capable o f meeting Bank requirements. The main findings are summarized below.

77. Although there are significant country risks because o f major weaknesses in the public financial management system and also because o f corruption, the impact o f these risks o n the project i s l i ke ly to be l imi ted given the defined implementation arrangements. These arrangements do not rely o n the government’s system. Instead they build on a dedicated implementation unit to be established w i th adequate financial management systems, procedures and staffing. The project i tself does not present any significant risk and i t s overall risk i s rated as moderate.

78. An action plan i s developed based o n the conclusions o f the financial management assessment to ensure that the Project Coordination Un i t (PCU) wi l l be equipped with an adequate financial management system to comply w i th the Bank’s policy. These measures include preparation o f an Operations Manual including financial management procedures, the recruitment o f a qualif ied and experienced accountant, annual audits o f the project’s accounts and o f the annual financial statements o f EDH by an accredited auditing firm acceptable to the Bank.

5. Social

5.1 Summarizes key social issues relevant for the project objectives and specify the project’s social development outcomes

79. The project aims at improv ing the capacity o f EDH to increase the quality o f the service to the users and improve the financial situation o f the firm to ensure sustainable provision o f the services for current and potential users. Currently, EDH reaches less than a mi l l ion consumers f rom a total population o f 8.5 mil l ion; the company has only 184,000 active customers and suffers dai ly blackouts. Poor quality discourages customers f rom paying for electricity thus affecting EDH revenues, furthering the financial deterioration o f the firm. This situation reduces EDH capacity to serve its current customers we l l and to expand services to those, main ly poor populations, who do not have access to the service. Moreover, the poor operational and financial performance o f EDH creates an important budgetary problem for the government thus limiting i t s capacity to promote development; the project wil l help to address this issue.

80. The project wi l l establish a customer-oriented management model that wi l l increase quality and reliabil i ty for customers, reversing current deteriorating trends. This model wi l l be tested in an area which combines different type o f customers, including l o w income populations. The expected social outcomes comprise: (i) improvement o f the quality o f the service in order to achieve a higher customer satisfaction; (ii) definit ion o f a commercial management service model for scale-up and replication taking in to account the needs o f the various income level customers; and (iii) the increase o f EDH’s long term capacity to increase service coverage specifically targeting the poor population. Although the project expects to deliver a better service to large consumers that represent 70% EDH’s income; poor consumers in l o w income neighborhoods in the p i lo t area wil l also benefit. Many families in these communities are already paying for electricity; therefore, they wi l l also receive a higher quality and a more reliable service. The project wi l l strengthen the current model o f EDH partnerships with Neighborhood Committees (NC) to ensure a fair agreement for quality and billing. Many families, which are currently using kerosene or candles, can eventually have access once this model improves. The involvement o f poor neighborhoods in the project wi l l avoid the project be ing perceived as oriented only to affluent customers, therefore reducing possible conflicts.

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8 1. The project foresees managerial and organizational changes to achieve results. State o f the art systems wil l be established to optimize attention to customers and facilitate billing and collection. Workers and staff are involved in this process and wil l receive training to adapt to new technologies and adopt a client-oriented vision.

5.2 Participatory approach

82. Surveys were carried out during project preparation in order to achieve a better understanding o f the characteristics and perceptions o f current and potential customers comprising large consumers, and identif ied consumers in the p i lo t area selected in Port-au-Prince. Surveys in the p i lo t area in Port-au-Prince comprised: (i) business and high-income residents; (ii) government and institutions; and (iii) residents o f l o w income communities. The three groups expressed their support for the project and the urgency for improvement o f service that EDH provides. They acknowledged widespread i l legal practices and willingness to change and pay for the electricity if the service improves. Surveys w i th poor communities, the “quartiers populaires,” were very useful to dissipate misconceptions and improve project design.

83. Staff, high level officials and the union’s representative o f EDH were also consulted during preparation. The Wor ld Bank talked directly with the Un ion representatives and to about 60 high and middle level managers to address their doubts and in i t ia l concerns about the project. During consultation, both EDH staff and the union representatives confirmed the urgency to carry out a change in the enterprise and their support to the project. Moreover, a survey was carried out to obtain workers’ perceptions and recommendations to improve their and EDH performances. These results have been taken into account in the proposals to ensure ownership and reduce resistance to change. The report presenting findings and assessment o f the surveys i s available in the project f i le, and a summary o f the results i s included in Annex 4.4.

5.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations?

84. The project’s communication component comprises an outreach strategy to disseminate the model and progress in i t s implementation among c i v i l society organizations. This effort wil l contribute to improve the image o f EDH and eventually, once results are achieved, re-establish i t s credibil i ty. Special events wi l l be organized to address issues among poor population within the project area to promote social responsibility and reduce fraud. This component comprises also informative meetings w i th key stakeholders seeking to promote support among the donor community to endorse the scale up strategy in the country.

5.4 W h a t institutional arrangements have been provided to ensure that the project achieves i t s social development outcomes?

85. The surveys and consultations carried out during preparation wi l l serve as a baseline to define quality indicators to measure improvements in client satisfaction. The surveys wi l l be carried out three times during project implementation and wil l target customers in the p i lo t zone, large customers and EDH staff. The TSMS will be tested under the project to address customer concerns, to promote regularization o f those i l legal ly connected, or not paying. The capacity to replicate the model and scale-up the operation wil l provide EDH and the Government with the tools to achieve a main social objective o f sector policy, which i s to expand better electricity services to a larger

35

number o f users. The P C U will oversee project execution, assess and analyze lessons learned to be incorporated into the scale-up model. A Commercial Unit wi l l be established to ensure the consumer-oriented strategy i s successfully implemented. The Community Liaison Un i t wi l l be strengthened to improve partnerships w i th poor neighborhoods in general and N C in particular, to ensure they benefit from the project.

6. Environment

86. The project will establish a customer-oriented management model that wi l l increase quality and reliabil i ty for customers and establish a process to improve financial and commercial standards o f EDH. The project's components do not include any activity that might result in environmental impact or require mitigation measures. In fact, to the extent that i t contributes to a more efficient use o f the electricity by reducing the losses in distribution and promoting awareness among the clients o f the cost o f the electricity, the project i s expected to have a small positive environmental impact through the reduction o f SO2 and C02. Therefore i t i s not necessary to prepare an environmental assessment. In this regard the QER meeting has confirmed that the project i s to be rated category C.

a. Safeguard policies

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.01) [I [XI Natural Habitats (OP/BP 4.04) 1 1 [XI Pest Management (OP 4.09) [ I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [XI Involuntary Resettlement (OP/BP 4.12) 11 [XI Indigenous Peoples (OP/BP 4.10) [ I [XI Forests (OP/BP 4.36) [ I [XI Safety o f Dams (OP/BP 4.37) [ I [XI Projects in Disputed Areas (OP/BP 7.60)* [ I [XI Projects o n International Waterways (OP/BP 7.50) [ I [XI

[ ]

a By supporting the proposedproject, the Bank does not intend to prejudice t h e j n a l determination ofthe parties' claims on the disputed areas

36

87. The project does not activate any o f the Bank’s social o r environmental safeguards. The project intends to improve EDH internal operational and financial performance through a new customer oriented management approach comprising a Customer Management System and a Technical Service Management System. Because the project’s components are basically o f a managerial and financial nature, requiring the purchase o f mostly information systems (CMS & TSMS) and equipment (meters), no adverse social or environmental impacts l inked to Bank safeguard policies are expected. Rather than investing in new infkastructure, the proposed model wil l focus o n improv ing the quality o f service, reducing technical and commercial losses and increasing payment collection. This approach wil l be tested in an area in Port au Prince where i t i s possible to achieve these results using existing capacity w i th a minimum o f improvements and no adverse social or environmental impacts.

88. A f ield assessment conducted during preparation in the selected p i lo t area identified as the main investments the fol lowing: (i) renovation o f l o w voltage lines and customers connections; (ii) installation o f new consumption meters; (iii) replacement and installation o f new switchgear equipment; and (iv) replacement o f damaged poles. None o f these actions i s expected, to have any social or environmental impacts l inked to the Bank’s safeguard policies.

89. The project also comprises the design o f a scale-up strategy to replicate the model in selected areas, This strategy wil l select new areas to promote the model, assessing infrastructure requirements and other investments, and selecting those that min imize social and environmental impacts. An environmental and social framework will be prepared, if necessary, as part o f a such scale-up strategy to ensure compliance w i th the Bank safeguard policies. This approach has been discussed already w i th the government and an agreement has been reached about a draft safeguards framework, which will be refined during implementation to be incorporated as part o f the scale-up process.

90. Recipient’s Institutional Capacity for Safeguard Policies. The implementing agency’s institutional capacity for safeguard policies wil l be strengthened under the project. In particular, EDH staff acting as the technical arm o f the project wil l be advised and trained in how to ensure contractor compliance with safeguard policies related to the environment. Capacity building related to safeguards wil l be init iated during preparation and continued during project implementation.

b. Policy Exceptions a n d Readiness

91. comply w i th al l applicable Bank policies.

The proposed project would not require any exceptions f rom Bank policies and would

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Annex 1: Country and Sector or Program Background

HAITI: Electricity Loss Reduction Project (PREPSEL)

Country background

1. Hai t i occupies 27,750 square kilometers o f land in the western third o f the island o f Hispaniola in the Caribbean between Cuba and Puerto Rico. Hai t i sits the mountainous portion o f the island and shares a 360-kilometer border w i th the Dominican Republic. The Caribbean Sea borders Hait i ’s western and southern shores, while the Atlantic Ocean i s to the north. The country’s land area includes numerous small islands as wel l as four large ones. Due to i t s relatively small land area and environmental degradation, Ha i t i has l imited natural resources. The country, however, possesses mineral deposits that include bauxite, cooper, gold and lignite. Haiti ’s rivers give the country access to hydropower, but the fluctuating water volumes make harnessing this resource dif f icult .

2. In 2005, the population o f Hai t i was estimated at more than 8 mil l ion, wi th an annual growth rate o f about 2.2 percent. Among states in the Western Hemisphere, Ha i t i only trails Barbados as the most densely populated country, wi th an average o f 248 persons per square kilometer. More than 1.5 mi l l ion citizens l i ve in Port-au-Prince, the capital and i t s peripheral districts. Haiti ’s l i fe expectancy ranks as one o f the lowest in the world. In 2005, the average l i fe expectancy for a Haitian was about 53 years whi le the country had a birthrate o f 36.6 births per 1000 persons.

3. Haiti ’s economy remains one o f the least developed in the hemisphere, with 80% o f the population living in poverty. The economy shrank an estimated 1.2% in 2001, 0.9% in 2002 and grew 0.4% in 2003. The country’s gross domestic product contracted 3.5% in 2004 f rom the previous year. The country suffers f rom rampant inflation, a lack o f investment and a severe trade deficit. During the past f ifteen years, purchasing power in Hai t i has fluctuated dramatically. In 1994, the rate o f inf lat ion reached forty percent. The inf lat ion fel l to a manageable 8.6 percent in 1999. However, exchange rate depreciation pushed inf lat ion back to 40 percent in 2003. In more recent times, the inf lat ion held steady to an estimated 22 percent.

4. Historically, agriculture i s the dominant activity in Haiti ’s economy. As o f the 1980s, agriculture occupied 35% o f the GDP. The continued migration to the cities, especially Port-au- Prince, and other factors have reduced agriculture’s role in the economy. In 2001, production o f agricultural products declined by 5%. The cash crops o f Ha i t i include coffee, mangoes, sugarcane, rice, corn, sorghum and wood. Coffee i s the primary crop grown among peasants not intended for personal consumption. Though most o f their farming i s subsistence, peasants grow coffee for exporting. By the 1980s, manufacturing became the most pro l i f ic sector o f the Hait ian economy. Growth in the sector was o n average more than 10 percent a year during the decade and replaced agricultural production as Hait i ’s leading export goods. For instance, manufacturing accounted for 17 percent o f GDP and for 53 percent o f exports. By the late 198Os, the manufacturing sector comprised 500 enterprises, most o f which were small o r medium in size and family-owned. During that period, Ha i t i witnessed a proliferation o f assembly industries in the capital ci ty o f Port-au- Prince. When the sector peaked in 1980, an estimated 200 assembly f i r m s employed nearly 60,000 workers. Polit ical instability, increased regional competit ion under the Caribbean Basin Init iat ive (CBI), nascent un ion activity, and the failure o f government institutions to attract further investment al l contributed to a decline in assembly investment and employment after 1986.

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Sector background

5. The public power system i s under the control o f Electricite d’Hait i (EDH), an autonomous institution o f the government o f Ha i t i created in 1971, EDH operates under the supervision o f the Ministry o f Public Works, Transportation and Communications (MTPTC) and holds a monopoly in the generation, transmission, distribution and commercialization o f electricity. As o f December 2005, the u t i l i t y had over 2,300 employees who are categorized as followed: 1,457 regular employees, 225 administrative employees, 340 that are contracted, 247 security agents and about 56 temporary employees.

6. For many years now, the power sector in Ha i t i has been in a state o f decline. EDH has performed poorly, leaving most o f i t s customers unsatisfied. These customers, at least those with sufficient financial means, often seek alternative methods to meet their electricity needs. Haitian households and businesses often resort to the use o f generators, power inverters and solar panels - all costly equipment - instead o f being able to rely upon consistent service f rom the power sector. Roughly ten percent of the population has access to electricity. As such, Hait i ’s poor has had to depend on the harvesting o f trees for the production o f charcoal. In fact, a large proportion o f the country’s energy originates f rom burning wood, the supply o f which has rapidly diminished. Moreover, in various rural and provincial towns, small businesses have had to use wood as a h e 1 in powering their operations.

7. Many factors contribute to the decline o f the power sector in Haiti. An aging infrastructure, financial insolvency, organizational weaknesses and poor asset maintenance are al l factors that have contributed to the decline o f the power sector in recent years. Power outages have become so frequent that many sections o f Port-au-Prince routinely go days without electricity. The fo l lowing graph shows the average number o f hours o f electricity a day that EDH provides to i t s clientele in the zone o f the project (circuits TOB 1-111-2 and TOB 2-2) and in the country as a whole.

Table 1.1: Average number o f electricity hours per day in Ha i t i and in the project zone

1

1 - -cr - Zone - TOB 2-2

Source: EDH

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Government Strategy

8. In the context o f i t s dialogue w i th the international community under the Interim Cooperation Framework (May 30, 2004), and as also highlighted in the Transitional Support Strategy (TSS) (December 10, 2004)) the Government o f Hai t i singled out the re-establishment o f continuous and reliable electricity services as one o f i t s priorities. Indeed, electricity i s seen as a crucial factor for improving the living conditions o f the population, providing means for economic activity to re-start, and contributing to the efforts to improve general public security. The Government has emphasized the need to resolve the problems o f EDH as the most urgent task by involv ing the private sector, whi le i t also seeks to develop a broader Energy strategy for the country as a whole. In this context, the design and implementation o f a management contract o f EDH could be a f i rst hands-on experience o f regulatory by contract that has set the basis for developing later a more comprehensive regulatory framework in accordance with the broader strategy for the Energy Sector.

9. The Min is t ry o f Public Works, Transport and Communication (MTPTC) i s the entity in charge o f the Energy Sector. Additionally, the Conseil de Modernisation des Entreprises Publiques (CMEP), which was created as a technical entity to oversee the reform o f public enterprises, i s in charge o f fol lowing up o n the program to rehabilitate EDH, starting w i th the reconstruction o f the financial accounts, the financial audit and al l the preparatory work for the elaboration o f the management contract.

Donor Community strategy

10. T o support the electricity sector, the international community, the Government and EDH developed in July 2004 a multi-donor strategy under the Interim Cooperation Framework (ICF). An essential part o f the approach was based o n the decision to coordinate a l l the actions financed by the donors wi th in a wider sector strategy with both short term and longer term objectives. T o facilitate this coordinated approach, an Electricity Sector Work ing Group (Table Sectorielle d’Electricite, TSE) has been meeting o n a month ly basis, to exchange information and facilitate better communications between the parties involved (amongst Hait ian agencies and international donors alike).

11. Short term support. In the short term, the donors init ial ly focused on the generation issue. USAID subsidized o i l purchases for EDH from M a y 2004 to February 2005 and several donors (AFD, USAID) started the rehabilitation o f generation units. Nevertheless, i t became obvious that a more articulated strategy was needed in order to move beyond the cycle o f recurring crises and alleviate the fiscal burden o f the sector to the State. As a result, a “Memorandum o f Understanding on a Rescue Strategy for the Electricity Sector” (MoU) was signed in Brussels o n October 21, 2005. Under this MoU, the government and EDH committed to implement specific actions that would improve the transparency o f the sector and increase the efficiency o f the investments while the donors committed resources to finance a minimum package o f investments and technical assistance requested by EDH to emerge f rom the current catastrophic situation. A t the t ime o f the signing, US$ 14.6M had been secured out o f a request o f approximately US$ 27.7341, and subsequently other funds have been committed. The Hait ian government (MEF, MTPTC, Planning), C IDA, AFD, USAID, the EU and the WB signed the M o U . Soon after, the IDB expressed interest in supporting the sector within the framework o f this M o U . In parallel, the dialogue o f the Government w i th the IMF has also included some o f the actions stated in the M o U that have a direct impact in reducing the financial burden o f the sector for the Government.

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12. Medium Term Support. In parallel w i th the short-term actions described above, there was a consensus on the necessity to develop a medium-and long-term strategy for the sector. However, i t was essential to have a clearer assessment o f the situation in EDH and a better understanding o f the conditions o f the sector in Hai'ti in order to design a credible medium term solution for the sector. The EU agreed to finance the account reconstruction o f EDH (which did not have standard financial statements for many years), and CIDA committed to finance the financial audit o f the resulting accounts by a reputed international firm. In addition, the Private Public Infrastructure Advisory Faci l i ty (PPIAF) approved the financing o f a series o f studies under the supervision o f the Wor ld Bank, in order to understand the environment in which EDH operates and explore the viabi l i ty o f long-term solutions for the uti l i ty, such as the option o f a management contract. T o the present date, the account reconstruction i s almost completed, the auditing firm for EDH accounts has been selected, and several o f the PPIAF studies have been launched. Last, i t i s important to note that other efforts by different donors are also under way to assist the Government in the broader agenda o f the Energy sector, exploring h o w to expand access to electricity services through renewable sources (EU, UNEP), and addressing the pressing problems o f use and production o f woodfuels (Wor ld Bank, ESMAP). A pr ior i ty in the near future should be for al l actors involved to bring those additional initiatives within the coordinated framework already in place, and to develop a comprehensive national strategy for the Energy Sector in the country.

13. Production. Hai t i uses very l i t t le energy, about 250 kilograms o f o i l equivalent per head, per year. In 2005, the country produced 653.5 mi l l ion kilowatt-hours o f electricity whi le consuming 522.8 m i l l i on kilowatts-hours. The EDH main grid covers the Port-au-Prince area and i t s peripheries, which are served pr imar i ly by the Centrale de Peligre hydro plant. The Peligre hydro plant possesses a nominal max imum capacity o f 54 MW. I t can effectively deliver a maximum capacity o f on ly 4 8 M W however. The real production capacity o f EDH has considerably diminished during the last two decades. The hydro plant in Peligre, for instance in recent years, has generated o n average lOMW per year. Lack o f maintenance, water scarcity during the dry season and the deteriorating condition o f production and transmission equipment al l contributed in reducing the productivity o f the hydroelectric dams.

14. In addition to the Centrale Hydro Electrique de Peligre, EDH supplies electricity f rom two other centers which are the Groupe Thermique de Carrefour with a 50 MW installed capacity and the Groupes Thermiques in Varreux 1&2 with installed capacities o f 3 2 M W and 21 MW respectively. Between the hydro plant in Peligre and the thermal plants, EDH has an installed capacity o f 157 MW for Port-au-Prince, which falls far below the 2 2 0 M W demand o f that city. The utility routinely operates w i th just 5 M W in Port-au-Prince, leaving a large port ion o f the population without electricity. The table be low summarizes installed and available capacity in Port au Prince in April 2006. Available capacity i s not constant due to seasonal changes (as explained above in the case o f Peligre). In addition, current repairs on the thermal and hydro units (financed by EDH and international donors) wi l l increase capacity in the coming months.

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MW

Carrefour EDH Carrefour Alstom Varreux I EDH Varreux II EDH Varreux Ill Alstom Peiigre ’ Total

15. Theoretically, the ut i l i ty has an installed capacity o f around 221 MW for the entire country. The production and distribution capacity o f EDH has declined to such low levels that two Independent Power Producers (IPPs) were contracted to supply electricity in various sections o f the country. The company Alstom Power Rental supplies 5 0 M W in Port-au-Prince to supplement the existing installed capacity o f EDH. In the provincial towns such as Cap-Haitien, les Cayes, Gonai’ves, Saint-Marc, Petit Gohve and their immediate surroundings, the supply o f electricity i s provided by another private company, SOGENER, which produces about 24MW.

Installed capacity Available capacity Expected capacity after current repair

49.92 4 15

32.05 5 10 30 26

21 0 20 14 54 0 36

206.97 49 61

16. EDH i s operating w i th an aging network. Ma jor renovation to the existing network has not occurred since the 1980s. Further, a lack o f maintenance and an anarchist exploitation o f the network have taken its to l l on the infrastructure. The figures that fo l low provide details about the condition o f the three main power plants o f EDH in Port-au-Prince.

Table 1.3: Condition of EDH plants -January 2006

lplants GR In service Current status since

Carrefour c1 , c 4 1985 Operational c2 , c 3 1984 Not operational c4 , c 5 1985 Not operational C6 1998 Not operational

P3 1973 Not operational

V I 4 1978 Not operational V I 5 1996 Not operational V I 7 1981 Not operational

Varreux 2 V21, V22, 1996 Not operational V23, V24, V25, V26

Peligre P I , P2 1971 Operational

Varreux 1 V l l , V 1 2 1978 Operational

Source: EDH

17. Financial and Commercial Situation o f the Power Sector. The inabi l i ty o f EDH to supply sufficient electricity to i ts customers has had detrimental effects o n the financial and commercial health o f the ut i l i ty. Considering the large pool o f active and potential clients, access to electricity i s very l imited. As stated earlier, roughly ten percent o f the population has access to electricity. Currently, the ut i l i ty i s providing service to over 184,000 customers. Residents constitute a majori ty

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among EDH customers wi th almost 170,000 active clients. The other clients o f EDH consist o f commerce, industries, public and autonomous entities. A large percentage o f EDH core customers, 60%, i s located in Port-au-Prince.

- . ~

'Operating loss (1,243) (28.7) -78% Financial charges 3,272 75.6 204%

18. Additionally, the commercial mechanism currently in use i s vastly inefficient, thus rendering revenue collection very diff icult. EDH has presented net operating losses for over fifteen years. W i t h a loss o f 51%, EDH bills only 49% o f the energy that i t supplies. Current technical losses reach 20% whi le non-technical losses account for 31%. The collection capacity o f EDH has reached such a deplorable state that the ut i l i ty i s incapable o f honoring most o f i t s financial obligations. Revenues do not cover maintenance and operation costs, consisting o f mostly fuel costs and energy purchases f rom private providers (see summary o f prof i t and loss account below). For instance, 50% o f EDH revenues are automatically withdrawn from EDH accounts and transferred directly to Sogener. The u t i l i t y i s incapable o f paying the IPPs.

19. EDH financial insolvency i s further exacerbated by the fact that the u t i l i t y buys i t s electricity f rom private suppliers for more than the price i t in turn charges the general public. For instance, under i t s current contract with Alstom, EDH pays 10.08 gourdes per KWh supplied, and the ut i l i ty resells the KWh for on ly 6.30 gourdes to the public. Payments to Als tom and Sogener average US$ 1.3M and US$ 0 .9M per month, respectively.

Table 1.4: Summary of EDH profit and loss account (unaudited) - 2004/2005

Mn Gourdes Mn US$ YO of revenues Revenues 1.603 37.0 100% Personnel 139 3.2 9 Yo Fuel and purchase of energy 900 20.8 56% Purchase of energy 425 9.8 2 7 '/o Operational expenses 106 2.5 7 '/o Commercial expenses 569 13.2 36% Networksldistribution 64 1.5 4 yo Other 642 14.8 40%

ther non operating 246 5.7 1 5% et loss (4,269) (98.6) -266%

I . . , I

Source: BerlioABCEOM

20. Impact on the Budget. T o survive, the State, through the Ministry o f Finance, has had to provide subsidies and loans to the ut i l i ty. The state allocates a sizable amount o f its budget to help the electricity sector, as illustrated by the table below. For instance, during the 2004-05 fiscal year, more than 7% o f the state budget was allocated to the electricity sector. The table be low highlights the amount o f transfers that the government has had to make to the power sector. These transfers include both the purchase o f fuel for EDH and the payment o f IPPs (see above), but do not comprise the electricity bill paid by the State to EDH. However, given that a compensatory system offsets part o f the bill owed by the State with the transfers, the amount o f subsidies i s l i ke ly to be overstated and i s not necessarily indicative o f the real support o f the State to EDH.

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Gourdes (million)

Total expenditures - actual Electricity subsidy - actual

Share of budget

2 1. At the root o f the EDH crisis i s an institutional arrangement which has allowed the company to reach such a moribund state. EDH i s neither economically nor technically viable. EDH i s unable to maintain generation capacity and keep electrical losses at reasonable levels. The company i s thus incapable o f generating revenues that can be reinvested in order to fund increasing demand.

2000/01 2001/02 2002/03 2003104 2004/05 2005/2006 (1 ) 307 357 616 1,074 1,688 1,454

8,728 10,772 15,084 16,006 23,410 19,358 4% 3% 4 yo 7 yo 7 ‘/o 8 Yo

22. There exist several managerial and technical problems at a l l levels w i th in the ut i l i ty. On the technical side, some o f the problems are: unreliable service w i th frequent and prolonged interruptions; sub-par quality o f electricity service with voltage and frequency variations and inadequate or non-existent maintenance o f equipment, theft o f materials on the network and long delays to repair problems. On the managerial side, some o f the problems are: inadequate and deficient operation and maintenance practices; poor commercial and financial management; lengthy administrative procedures; inadequate information systems and poor long-term planning, lack o f skilled labor in human resources and poor information system and financial management.

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Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies

Project Name

Economical Sovernance Reform 3peration (EGRO)

Economical Sovernance Technical Assistance Grant (EGTAG I)

Haiti Community- Driven Development Project (PRODEP)

H a i t i Transport and Territorial Development Project

LICUS Grant

Emergency Recovery and Disaster Management

HAITI: Electricity Loss Reduction Project (PREPSEL)

A. M a i o r Related Proiects Financed by the Bank

Amount US$ M

61

2.03

38

16

1.5

11.5

Latest supervision (ISR) Rating S S

S

S

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Sector issues

Project to support economic governance reforms identified by the Transitional Government in the ICF, improving the pol icy environment for increased Bank and donor-supported investment lending in key sectors.

Assist the GOH in strengthening its institutional capacity in the areas o f budgetary planning and execution, investment and project planning, internal and external control, procurement, accountability, participatory monitoring, and reform constituency building. Bui lding on the PCF-funded C D D pilot, project w i l l scale-up the direct transfer o f public resources to local community organizations in poor rural and peri-urban communities, by: (i) improving access to basic social and economic infrastructure and support income- generating activities by financing small-scale investments proposed, implemented and managed by community organizations; and (ii) improving governance and building social capital o f communities by increasing citizen participation and transparency in oDen decision-making. Drocesses. The project will promote income-generating opportunities for small farmers, who represent the majority o f the rural productive population. Linking smallholders to markets can lower transactions costs and increase competitiveness, thereby helping them reap the highest returns f rom their l imited assets. There are also consumption-related benefits that translate into increases in household well-being, and improvements in access to social services Project to promote participatory development in basic infrastructure, rural water and sanitation, and solid waste management Project to support the rehabilitation o f the areas affectec by recent adverse natural disasters; strengthen capacitj to manage natural disaster r isks and better respond tc emergencies resulting f rom adverse natural events; anc to reduce the vulnerability o f communities through r isk identification and risk mitigation activities.

Project N a m e

PPIAF Feasibility Study for a management contract o f EDH

Hait i Rural Water and Sanitation Project

Amount US$ M

0.74

10

Latest supervision (ISR) Rat ing NA

NA

NA

NA

Sector issues

In March -2005, a grant was approved to be implemented b y the Bank in order to begin preparing a feasibility study for a medium term management contract for EDH. Under this feasibility study, a thorough analysis o f the state o f the electricity sector w i l l be conducted, including a diagnosis o f EDH existing assets, operations, and human resources, wi th a view to elaborating a long-term investment plan, a market study o f the electricity sector and a study o f the legal framework (already completed). Aims to increase the sustained and effective use o f water and sanitation systems in rural communities in Hait i through providing water services in participating communities, laying the foundations for project sustainability; improving sanitation practices in participating communities; and strengthening the capacity o f Service National d'Eau Potable, local government, local water committees, and professional operators.

46

B. M a i o r Related Proiects Financed by other Donors

Project N a m e

Rehabilitation o f three (3) diesel units in Carrefour

Rehabilitation o f generation groups in the thermal plants o f Cayes and Petit Gorives

Transfer o f Jacmel model to cities in the provinces

International expert based in Hait i to coordinate donors' projects

-EDH accounting reconstruction (excluding technical assets) -Inventory and valuation o f technical assets

Reparation o f Saut Mathurine, phase 1

Small scale design o f a rehabilitation and financial improvement program for electric distribution in Port au Prince Program for the rehabilitation o f energy infrastructure in Hait i Technical Assistance to prepare the Program for the rehabilitation o f energy - infrastructure in Hait i Rehabilitation o f four (4) diesel units in Carrefour and Varreux

Amount US% M 3.0

4.0

16.3

0.25

0.36

0.19

1.5

0.25

14

0.25

2.3

Donor

AFD

C I D A

C I D A

C I D A

EU

EU

IDB

IDB

IDB

U S A I D

Schedule

AFD has run out o f budget to complete the work agreed with U S A I D (group C6), but the World Bank have continued the dialogue with this entity both at a higher management level and on the field to explore the possibility that ADF w i l l provide the additional funding needed to complete the work and allow those 10 MW to be effectively available. The Wor ld Bank will follow-up wi th the French embassy in Haiti. Studies for the evaluation o f works started in March 2006. They are s t i l l being discussed by EDH and C IDA. A work plan w i l l be finalized late June 2006. Approved by the Minister. Evaluation of works to be done i s ongoing; works w i l l start late 2006. Project should last 5 years wi th possibilities o f co-financing from other donors (EU) , C I D A hopes to discuss the choice o f the consultant with the new government (May 2006). -Final report sent o n April 24,2006. -EU has officially informed the WB that it i s preparing a contribution agreement to transfer funds to WB, who would be responsible for the activity. Transfer should be effective by end July 2006. Funds are available, waiting for C I D A to start supervision, probably by June 2006. EU has reiterated in many occasions their concern that the funds can be lost if the work does not start right away. Preparation started in March 2006.

Board approval i s expected in October 2006.

Ready to start, once confirmation letter f rom EDH i s received by the IDB (expected date mid-june 2006). Works are expected to be achieved by end June 2006.

47

Rehabilitation o f four (4) small hydroelectric plants in the provinces

Fuel financing

4.5 USAID Consultants for the study and execution o f works are currently being selected. Study i s expected to start in July, and works in September 2006. Financing i s available until September 2007.

22 U S A I D M a y 2004 through end February 2005.

l l electricity generation, transmission, and distribution projects in EDH.

Diesel unit part financing Feasibility study for the development o f

selected; the contract was signed in May 2006. Study should be finished within 8

0.35 USTDA Consulting firm to perform the study was

48

Annex 3: Results Framework and Monitoring

HAITI: Electricity Loss Reduction Project (PREPSEL)

PDO

Contribute to the sustainable improvement in the quality o f electricity services delivered to customers in Port-au-Prince and to the strengthening o f the financial and operational performance o f the public utility in charge o f providing these services (EDH),

I Components

component 1 Adopt and implement modem commercial and service management systems for EDH as the basis for a more customer-oriented approach to providing electricity services.

Improving service to clients and increasing revenues bi l led and collected for E D H :

Project Outcome Indicators

Improved quality o f service provided by EDH in the project zone

Improved quality o f service provided to large customers

Increase in the revenues billed by EDH in the project zone

Increase in the revenues collected by EDH in the project zone

Endorsement by EDH and the Government o f a final proposal on how to replicate the project pi lot to reduce losses in the other areas deserved by EDH

Component Indicators

+Number o f consumers in the whole country incorporated into the new C M S database.

+Number o f consumers located in the whole country incorporated into the new customer-installations link database and attended through TSMS.

+Number o f EDH employees successfully trained in the use o f the new C M S and TSMS.

+ The number o f interruptions suffered by each customer (interruptionsimonth)

+ duration o f interruptions

+Number o f consumers regularized in the selection zone.

+Amount bi l led in project zone *Amount collected in project zone

+Number o f EDH employees trained to perform commercial activities in the selection zone.

Use of Project Outcome [nformation 4ssess impact o f improved :ommercial practices on the technical ind commercial performance o f E D H .

4ssess impact o f improved :ommercial practices on the financial Jerformance o f EDH.

4ssess the impact o f the results 2btained under the PREPSEL on the xedib i l i ty o f the customer oriented management approach adopted in the project, as an effective solution to achieve the PDO Use of Component Monitoring Information

Ver i fy the appropriate installation and use o f the C M S and TSMS, as tools to build reliable customer and service management data bases.

Measure the effect o f investment and improved attention to customers on the quality o f service.

Measure effectiveness o f the project to increase the credibil i ty o f EDH as a reliable provider o f service

Ver i fy the effectiveness o f improved commercial practices on the capacity o f EDH to increase billing and collection.

Measure the effectiveness o f the project to transfer know-how and build EDH internal capacity

49

b) Among large consumers

I

Component 3 : Execution, evaluation and replication o f project through strategic participation

+ The number o f interruptions suffered by each large customer

+ Duration o f interruption suffered by each large customer

+Number o f large consumers regularized.

+Amount bi l led to large customers +Amount collected f rom large customers

+Number o f EDH employees trained to attend and fol low up on large Consumers.

+ Number o f satisfied customers in the project area as measured by periodic surveys and focus groups

+ Number o f large customers satisfied

+ Number o f satisfied EDH employees

Percentage o f disbursement o f the Project funds in relation to the Project implementation schedule.

Number and frequency o f project progress reports presented to and approved by the Bank in relation to what was agreed upon in the Manual o f Operations.

aeasure the effect o f investment and mproved attention to customers on :he quality o f service.

Measure effectiveness o f the project to increase the credibil i ty o f EDH as a reliable provider o f service

Verify the effectiveness o f improved :ommercial practices on the capacity 3 f EDH to increase b i l l ing and collection.

Measure the effectiveness o f the project to transfer know-how and build EDH internal capacity

Monitor effectiveness o f the project to improve the quality o f service and the image o f EDH.

Monitor effectiveness o f the project tc provide transfer o f know-how tc EDH’s employees, and achieve local ownership o f the proposed customei oriented management approach b] EDH’s employees.

Verify the capacity o f the P C U and of the P T U i EDH team to supervise the project’s implementation in an efficient and timely manner

Arrangements for results monitoring Institutional issues: See description o f the project (Main document: Section 3) and institutional arrangement sections (Main document: Section 2) for a description on how the results and outcomes wil l be monitored. Data collection: Periodic reports f rom the PCU and the EDH-PREPSEL team, periodic surveys, and punctual external verification wi l l provide the data needed for measuring project results and outcomes (see table below). Responsibilities .and costing o f these different activities have been presented in detail under the description o f the Project (See M a i n Text, section 3, and Annex 4) and corresponding Cost Table (Annex 5). Capacitv: A consultant w i l l be hired to assist the EDH-PREPSEL team to monitor indicator performance as defined above at least once a year. In addition, consultants w i l l perform surveys among customers in the project zone, large consumers in the country and EDH’s employees

0

0

50

under the supervision o f the Coordinator o f the PCU and the guidance o f EDH PREPSEL team. The WJ3 supervision team will be available throughout the project implementation to provide assistance to these experts. Finally, data collection will be facilitated by the implementation o f CMS and TSMS and the build up o f a customer database. Training wil l be provided for EDH employees to collect the data and learn how to properly use the database.

51

E 8

1 I -' l 3 @

1

Annex 4: Detai led Project Description

HAITI: Electricity Loss Reduction Project (PREPSEL)

1. The project adopts a strategic approach to reduce technical and non-technical losses in EDH, whereby i t focuses on: (i) achieving quick substantive success that wil l have a demonstration effect; (ii) preparing the ground for replication o f the approach at a greater scale; and (iii) ensuring sustainability o f the results through systematic training o f EDH's employees in each o f the project components,' and through a communication strategy aimed at both employees and EDH customers.

2. Project Rationale and Overview: The three-prong focus o f the project described in the previous paragraph i s reflected in the design o f the various components o f the project. Quick results and demonstration effects are achieved w i th Component 2, which adopts a selective approach. In one case, the focus i s on a particular area o f Port-au- Prince w i th a sample o f EDH customers f rom varied socio economic backgrounds and electricity consumption patterns-a socio-economically mixed zone- where a p i lo t project wi l l be developed (Component 2.2.). In the other, the focus i s on a category o f clients, namely large consumers, who are the most promising group in terms o f capacity to pay (Component 2.3.). In parallel w i th this selective approach, the project also implements activities that benefit EDH as a whole because they cannot be implemented in a piecemeal manner. This refers to the acquisition and implementation o f modern tools for managing commercial activities and client accounts (Component I). With these new systems, the project wil l already be taking a step to building up a favorable environment to replicate the results o f the p i lo t project o n a broader scale. This ultimate objective o f scaling up the results o f the project i s taken further under a separate component, aimed at preparing a detailed plan to replicate the approach o f the p i lo t project in the other areas served by EDH, taking in to account the lessons learned during the implementation o f the project (Component 3.3). Additionally, to facilitate effective results o f the various components already described, the Project includes a communication component that wil l provide the necessary support to achieve effective dissemination o f information on the project among all relevant actors and t imely feedback f rom these actors throughout the design and implementation o f the project (Component 3. I). Finally, the Project comprises a Project Management and Moni tor ing and Evaluation component, which wi l l support project implementation and monitor i t s impact o n the services for electricity users and o n the financial and operational performance o f EDH (Component 3.2).

53

Haiti: Electricity Loss Reduction Project Project Description

-Reparations by donors -Efficient purchase and transport of fuel

EDH’s appropriation of the project and willingness to effect changes

ge Customers in the

BE, Replication

-I mplernentation MBE Replication

- A S a customer

3. period:

The Project w i l l implement the following three components over a three year

4. Component 1: Improvement in EDH management systems and practices towards a more customer oriented approach (US$ 2,640,000). The objective o f this component i s to improve the operational (technical and commercial) performance o f EDH in a sustainable manner, by giving the company the information tools for a modem and efficient management o f the customers and o f the services that i t provides. New operational procedures for a more customer oriented approach in the execution o f activities using these new systems w i l l also be developed, and EDH’s employees w i l l be trained in the use o f the system and in the utilization o f these new procedures. The project w i l l also finance technical assistance to guide EDH in how to bui ld the corresponding reliable databases. Since these are highly specialized systems, the project w i l l finance two experts in customer and technical service systems for utilities to assist EDH in the procurement o f the systems and in the supervision o f the work o f the selected provider. Finally, as part o f i t s contribution to the project, EDH w i l l finance the construction, next to i t s headquarters, o f separate facilities to locate the hardware necessary to the operation o f the CMS and TSMS, as well as the call center, which w i l l be implemented as part o f Component 2.2.

5. Sub-Component 1.1 Incorporation of a new corporate commercial management system (US$ 1,375,000) The project would finance incorporation o f a new “state o f the art” corporate commercial management system (CMS) allowing proper execution and monitoring o f the activities related to: (a) commercial cycle: regular metering, billing and collection; (b) attention o f customers at commercial agencies or by phone (call centers), (c) disconnection and reconnection o f electricity supply related to commercial debts; (d) connection o f new customers. Information collected and missions performed during project preparation verified that commercial weakness o f EDH i s due

54

to the combined existence o f inadequate operational procedures and poor information on the commercial situation o f customers. Both matters are related to l imi ted capabilities o f the completely obsolete existing CMS, which requires urgent replacement by a “state o f the art” system. Project financing would also include execution o f f ield campaigns needed to build a reliable database in the area, as wel l as technical services o f an expert in technical service systems for uti l i t ies to assist EDH in the procurement o f the TSMS.

6. Information Technology (IT) applications developed for uti l i t ies and other massive retail companies include C M S as a key tool aimed at supporting execution and supervision o f al l the processes and activities involved in the commercial relation between the company and i t s customers, described in items (a) to (d) above.

7. CMS should be implemented for the whole company (Port-au-Prince and Provinces) in 9 months after the contract wi th the selected bidder i s signed. This process should invo lve no more than 3 steps: i) for large consumers; ii) for al l customers located at Port au Prince; iii) for al l customers located at the Provinces.

8 . Incorporation o f the new CMS requires building up and keeping constantly updated a reliable customer database. For that purpose, teams conducted by university students should develop a comprehensive f ield assessment, based o n vis i ts to each and al l the points o f supply. N e w contracts wil l be signed with al l EDH customers and they wil l contain al l the relevant commercial information. Those contents wil l be the main source for construction of the new customer database. In a f i rst step, this wil l be done in the area selected for the p i lo t project.

9. case f rom the end o f the previous task, unless otherwise stated):

Sequence o f activities o f this sub-component would be (times computed in each

1-

2-

3- 4-

10.

Appointment o f the consultant who wil l assist EDH in the preparation o f the technical specifications o f the tender documents for procurement o f the C M S and related hardware under the Wor ld Bank rules (before project start-up).

Preparation o f technical specifications for procurement o f CMS (1 month)

Development o f the procurement process for incorporation o f C M S (5 months)

Implementation o f C M S including f ield campaigns for build-up o f a new customer database and training o f users as a permanent activity to be executed during the implementation process (9 months)

Sub-component 1.2 Incorporation o f a new corporate technical service management system (US$ 705,000). The project wou ld also finance incorporation o f a new Technical Service Management System (TSMS), aimed at optimizing attention o f customers claims related to bad quality o f electricity supply. The current situation i s precarious, based on manual records and procedures poor ly organized and dif f icult to monitor and supervise. TSMS and related procedures min imize t ime elapsed between reception o f the claim and restoration o f regular electricity supply, wh ich i s the crit ical parameter defining quality o f electricity supply. At the same time, efficiency in execution

55

o f the activities that EDH performs for that purpose i s maximized. Project financing would also include f ield campaigns needed to build a reliable database in the area, as well as technical services o f an expert in technical service systems for uti l i t ies to assist EDH in the procurement o f the TSMS.

11. T S M S i s another IT application that becomes a highly effective tool for attention o f customers’ claims and improvement o f quality in electricity supply. I t minimizes t ime elapsed between reception o f the claim and restoration o f regular electricity supply and, at the same time, maximizes efficiency in execution o f the activities that the company must perform for that purpose. Conceptual design o f TSMS i s based on setting a link between each point of electricity consumption and the electric networks involved in the supply. This allows quick identification o f the potentially faulty components o f the networks related to a claim presented by a customer and sending the operational crews straight to those installations. A t the same time, this allows proper management o f potential overflows in claims related to faults invo lv ing a large number o f consumers.

12. TSMS should be implemented for the whole company (Port au Prince and Provinces) in 6 months after the contract w i th the selected bidder i s signed. The process should invo lve 2 stages: i) for al l customers located at Port au Prince; ii) for a l l customers located at the Provinces.

13. As in the case o f the CMS, teams conducted by university students should develop a comprehensive f ield assessment, based on visits to each and al l the points o f supply, in order to identi fy network assets involved in electricity supply to each customer. These l i n k s between customers and network assets are the components o f the database o f the TSMS.

14. case f rom the end o f the previous task, unless otherwise stated):

Sequence of activities o f this sub-component would be (times computed in each

1- Appointment o f the consultant who wil l assist EDH in the preparation o f the technical specifications o f the tender documents for procurement o f the TSMS and related hardware under the Wor ld Bank rules (before project start-up).

2- Preparation o f technical specifications for procurement o f TSMS (1 month)

3- Development o f the procurement process for incorporation o f TSMS (5 months)

4- Implementation o f TSMS, including f ield campaigns for build up o f the customer- installations link database and training o f users (4 months)

15. Sub-Component 1.3 Application of new procedures and rules for customer oriented management approach for provision of electric service to EDH customers (US$ 50,000) The project would finance consultancy services to assist EDH in the definit ion and actual application o f new operational procedures for “customer oriented” execution o f al l the activities related to technical and commercial attention o f customers related to incorporation o f C M S and TSMS. Activit ies to be re-engineered include: (a) commercial cycle: metering, billing (including delivery to customers) and collection; (b)

56

detection and regularization o f frauds and not metered connections; (c) disconnection and re-connection o f customers related to debts and/or frauds; (e) attention o f customers at commercial offices; ( f ) attention by phone o f customers claims related to bad quality o f electricity supply and commercial matters through a call center. Reengineering o f commercial processes wil l be driven by the concept “every kWh supplied must be metered, b i l led and collected”. They wil l allow quick recovery o f debts and fast detection and elimination o f losses.

16. The reengineering process applied to the above-described activities should contemplate some specific aspects in each case.

17. Metering; Scope o f the process should include: a) Optimization o f the reading routes; b) Incorporation o f portable reading terminals (PRT) where the consumption data are

stored by the operator and automatically transferred to the C M S database at the end of each work ing day. This minimizes the risk o f mistakes in those operations. In addition, historic consumption data o f each customer stored in the memory o f the PRT allow the reader to perform automatic checks on the consumption being recorded and ensure i t s accuracy. PRTs are comprehensively used for metering purposes by service uti l i t ies in Lat in America since the beginning o f the 9Os, with excellent results.

c) Selection and training o f readers (own staff and/or outsourced). d) Regular monitoring through outsourced audits.

18. Billing; This i s a typical function o f the CMS. Bills are prepared and printed each night fo l lowing the day the data of consumption are collected at the site, stored in the PRT and downloaded to the CMS database. Bills are ready to be distributed 24 hours after related consumption i s metered.

19. Distribution of bills: M a i n issues involved are: a) Optimization o f the distribution routes. b) Potential outsourcing o f the activity. c) Regular monitoring through outsourced audits.

20. reengineering should include:

Detection and regularization of frauds and non-metered connections. Scope o f

a) Optimization o f operational procedures, supported by information provided by CMS.

b) Training o f operators. c) Execution o f f ield campaigns and outsourced audits.

21. Emphasis must be put on the fo l lowing aspects:

Disconnection and re-connection of customers related to debts and/or frauds.

a) Optimization o f operational procedures, supported by information provided by CMS.

b) Training o f operators.

57

c) Execution o f outsourced audits.

22. case f rom the end o f the previous task, unless otherwise stated):

Sequence of activities o f this sub-component would be (times computed in each

1- Procurement under Wor ld Bank rules o f consultancy services for the definit ion and actual application o f new operational procedures for “customer oriented” execution o f al l the activities related to technical and commercial attention o f customers related to incorporation o f C M S and TSMS (3 months f rom project start-up)

2- Development o f consultancy services (simultaneously w i th implementation o f the C M S and TSMS).

23. Training o f staff involved in al l the activities related to technical and commercial attention o f customers related to incorporation o f C M S and TSMS customer service (simultaneously w i th implementation o f the CMS and TSMS)

24. Training activities. Consultancy services related to the incorporation o f CMS and TSMS wil l include systematic training o f EDH employees in the procedures associated w i th an effective application o f these systems in the interface w i th the clients. As mentioned above, the project wil l also finance the technical assistance to guide EDH in how to build the corresponding reliable data bases.

25. Sub-component 1.4: Restructuring of the Anti-Fraud Uni t at EDH (US$ 60,000). As part o f the objective to improve management o f clients’ accounts, i t i s important to actively support the strengthening o f EDH’s Anti-Fraud Unit, under the new procedures described above. T o this end, the same approach as the one adopted in Component 2 with the Unit o f Large Users and the Personnel o f the Local Commercial Agency (see below) for the selection o f personnel wi l l be used for this unit. Appropriate training and improvement in procedures applied by such Unit wil l also take place. I t was also agreed that in defining this activity, i t wil l be important for the Project to benefit f rom the experiences learnt in the going effort o f the Central Government for stepping up the fight against corruption. I t wil l be equally useful to incorporate the recommendations o f the special annex o n Renforcement de la Gestion et de la Transparence, appended to the Operation Manual o f the Ha i t i Transport and Territorial Project.

26. Sub-Component 1.5: Construction of facilities for the CMS, T S M S and the call center (US$ 450,000). EDH wil l finance the construction o f separated facilities for the CMS, TSMS and cal l center. These should be located next to the headquarters, but for reasons o f data security not within EDH main building.

27. Specific outputs o f Component 1. - number o f consumers in the whole country incorporated in the new customer

database and with the support o f the commercial management system

58

- number o f consumers located in the whole country incorporated in the new customer-installations link database and with the support o f the technical service management system

number o f employees trained wi th in the anti-fraud uni t -

28. Component 2: Improvement in quality and reliability of services and increased revenue collection of EDH for selected groups of customers (US$ 3,245,000). The objective o f this component i s three fold. First, i t intends to have a demonstration effect o f the benefits o f adopting this new ‘customer management approach’ o n the quality and reliabil i ty o f services to end users, w i th two groups o f customers: a socio-economically mixed zone in Port-au-Prince, and the group o f large customers in the main cities. Second, i t intends to show h o w to increase the revenues o f EDH, thereby lessening the fiscal burden on the State, by targeting those who account for 70% o f EDH’s total revenues. i.e. the large customers. Indeed, the reduction o f non- technical losses (non-payment and/or fraud) will focus especially on the large customers, both because they represent the largest share o f EDH’s potential revenues, but also because, contrary to what i s usually thought, non-technical losses are a more important problem for the firm amongst this type o f customers than among the poorest segments o f the population which does not weight much in terms o f revenues and which in various instances pays already for their electricity, albeit not to EDH but to middle-men.. Third, this component aims to provide an intensive training opportunity and career development alternatives to EDH’s employees as we l l as to recruit new personnel, for the use and application o f more modern commercial and technical practices in the area o f distribution and commercialization o f electricity.

28. Sub-Component 2.1. Selection o f personnel for the socio-economically mixed zone and for the Large Customers Unit (LCU) (US$ 80,000). This sub-component seeks to ensure that component 2 wil l be implemented by a qualif ied and motivated group o f EDH employees, because this i s the first necessary steps for the viabil ity, let alone the success, o f the project.

29. 2.1.1. Top senior level consultant to assist EDH in the selection of the staff. A top senior level consultant wi l l be hired to assist the administrative direction o f EDH in the transparent and competitive recruitment process o f the staff for the local commercial agency and for a large customer unit.

30. 2.1.1.1. Selection o f staff in the commercial agency. EDH has recently inaugurated a new commercial agency in this socio-economically mixed zone (see below). This new commercial agency wi l l constitute a vital element in the project as i t wi l l house the personnel that wil l have the responsibility to assist the various customer groups in the socio-economically mixed area. In that sense, the selection o f a manager and the personnel for the newly inaugurated commercial agency wi l l be crucial in the success o f the project. In order to select a qualif ied and motivated group o f employees for the new commercial agency, a transparent and competit ive recruitment process wil l be initiated from wi th in EDH. The recruited employees wil l receive the appropriate training

59

that wi l l enable them to efficiently assist consumers in the socio-economically mixed area.

31. 2.1.1.2 Selection of staff for the LCU. The manager o f that unit must be an expert w i t h wide professional experience in commercial management o f large customers. The first round o f the selection process wil l be only reserved to EDH employees. If no suitable candidate i s found, external candidates wil l be considered. Experience in the electricity business i s desirable, but not essential. The project wil l finance the consultancy services o f a top senior consultant who wi l l assist the Administrative Department o f EDH to conduct the recruitment process. Once appointed, the manager o f L C U wil l immediately supervise the selection o f the personnel for the unit w i th the assistance o f the consultant cited above and elaborate a proposal o f organizational structure o f the uni t and related human and material resources needed, and a plan o n how to undertake the other sub-components o f this strategic management o f Large Consumers, and submit i t to the Director General.

32. case f rom the end o f the previous task, unless otherwise stated):

Sequence of activities o f this sub-component would be (times computed in each

1- Appointment o f the first level consultant specialized in selection o f top managers (before effectiveness)

2- Recruitment process for EDH Manager o f L C U (1 month) 3- Elaboration by Manager o f LCU o f the proposal o f organizational structure and

related human and material resources and approval by Director General (1 month) 4- Full implementation o f L C U (2 months)

33. Subcomponent 2.2: Improve quality of service to, and increase EDH’s revenue f rom the socio-economically mixed zone through the application of a new customer oriented approach (US$ 1,620,000). This subcomponent aims to improve the quality o f the service provided to EDH’s users and increase the revenues for the firm in a specific zone o f Port-au-Prince. T o this end, the new systems and procedures developed under Component 1 wil l be implemented and monitored in EDH’s local commercial agency (see below). Equally important, the design o f this component emphasizes the need for a cultural change both f rom EDH’s employees and f rom the customers in the zone, as the only effective way to effect and sustain a change in commercial practices o n both sides. This sub-component also includes investments in equipment and tools required in the commercial agency o f the zone (see below) to optimize execution o f the activities re- engineered fo l lowing the new procedures. There wi l l be some investments in the distribution network and connections to the clients needed to ensure reliabil i ty o f the supply. Specific approaches would be defined and implemented according to the socio- . economic characteristics o f the users, including those consumers in the poor, marginalized neighborhoods o f the selected zone. This component constitutes a p i lo t project whose success could later be replicated on a larger scale.

34. Selection of the project implementation area. The p i lo t project wou ld be developed in the central area o f Port-au-Prince supplied by the circuits TOB 1 - 1, TOB 1 - 2 and TOB 2-2, wh ich includes the Presidential palace and the University Hospital, and

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comprises around 10,000 electricity consumers, o f diverse socio economic background. This zone was selected for project execution based on a systematic assessment developed using a set o f 8 criteria that would make i t possible to successfully implement the customer management oriented approach described under the previous component to achieve the objectives o f the project. These criteria included among others, the access to continuous and reliable supply o f electricity, the existence o f a distribution network in sufficiently good condition to require on ly minimal investments, and the absence o f negative externalities such as safety constraints. The detailed assessment and its outcomes are described in Annex I. Of the 16 areas scrutinized, on ly this one met a l l the criteria.

35. 2.2.1 Improvement of electric network assets and consumer connections required to fully regularize electricity supply meeting acceptable quality standards in the selected zone o f Port a u Prince (US$ 1,120,000). Visual inspections o f the zone selected for implementation o f the project evidenced that medium voltage lines are in a good condition. However, in order to ensure reliable electricity supply meeting acceptable standards on quality, i t wil l be necessary to undertake some investments in renovation o f l o w voltage lines and customer connections, installation o f new consumption meters, replacement and installation o f new switchgear equipment. A detailed field assessment on the condition o f the networks must be undertaken to define the investments actually needed in each specific case to ensure reliable electricity supply meeting acceptable standards on quality

36. High technical and commercial losses are usually l inked to a significant number o f irregular connections to consequently damaged l o w voltage lines, customer connections in poor condition, faulty or non existing consumption meters, etc. Those damaged assets must be replaced by new ones to achieve a sustainable regular electricity supply. However, specific approaches need to be defined and implemented according to the socio-economic characteristics o f the users.

37. For consumers living in areas where EDH can perform regular operations without constraints and showing a regular socio-economic profile, i t wil l be necessary to improve electric networks and install or replace conventional consumption meters that wi l l be read periodically by EDH operators at the site. In those areas, EDH must perform the routine operations (technical and commercial) inherent to a electricity distribution company serving normal zones.

38. The Fol lowing graph shows actual results obtained w i th the coordinated and systematic application of the above described procedures for reduction o f losses in the two electricity distribution companies serving the c i ty o f Buenos Aires, capital o f Argentina, and its surrounding areas.

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Evolution of overal I

I

20

15

10

5 *Record at 10

% (2000)

Following pictures show typical arrangements of the DAT (Distribution Area Transversal) concept.

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39. case f rom the end o f the previous task, unless otherwise stated):

Sequence of activities for this sub-component would be (times computed in each

1 - F ie ld assessment on current condition o f electric networks in the zone selected for the project to be executed by EDH staff (2 months from project start-up).

2- Definit ion o f the investments in renovation o f l o w voltage lines and customer connections, installation o f new consumption meters, replacement and installation o f new switchgear equipment (2 months).

3- Procurement under Wor ld Bank rules o f the materials and works required to execute the investments defined in the previous task (6 months)

4- Execution o f works (9 months)

40. Sub-component 2.2.2 Detailed implementation and follow-up of the application of new procedures and rules for customer oriented management approach for provision of electric service defined in Sub-component 1.3 (US$ 180,000). This sub-component refers to actual and sustainable implementation o f the new operational procedures for “customer oriented” execution o f al l the activities related to technical and commercial attention o f customers in the selected zone. The objective o f this sub-component i s to show h o w the local presence o f EDH can be put to best use to improve the f i r m ’ s technical and financial performance. In that sense, the selection o f EDH’s Manager o f the local commercial agency, and o f its personnel, as we l l as their proper training would be key factors in the success o f this sub-component.

41. Activit ies to be re-engineered are detailed under sub-component 1.3. The sub- component includes also investments in equipment and tools required to optimize execution o f the activities re-engineered fo l lowing the new procedures.

42. A new commercial agency has recently been installed in the area where the pi lot project wi l l be implemented. I t i s a comfortable but not luxurious place that needs to be equipped and connected to the C M S and whose personal needs to be trained for personalized attention o f customers. Scope o f this service comprises both attention to customers claims related to bad quality o f electricity supply and commercial matters, supported by the new CMS and TSMS.

43. Nevertheless, if EDH i s performing well, there i s no reason for regular customers to go to a commercial agency. Thus, the sub-component includes the creation o f a call center for attention o f customers by phone. Scope o f this service comprises bo th attention o f customers claims related to bad quality o f electricity supply and commercial matters, supported by the new CMS and TSMS. Design o f the call center wi l l include installation o f special purpose phones in several places o f the served area, where the customers can make a to l l free call to the EDH call center. Current development o f telecommunications in Port au Prince does this with l o w related costs, using f ixed wireless phones. This option has shown to be an excellent solution to ensure access to call centers o f l o w income people without o w n telephone service.

44. The guiding principle o f phone attention must be: “the customer should be able to do al l that can be done by phone, without needing to go to a commercial agency”. Cal l

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center operators should be young students (first or second year o f university studies). They should work under a regime o f stages and their first training should be in the use o f the new corporate management systems. Those students showing best functional performances should be incorporated to the permanent staff o f the company.

45. Particular emphasis w i l l be put on the creation o f an outsourced network o f collection points, intended to maximize comfortable options available for payment o f bills. Collection i s an activity essential for the survival o f any company, but the expertise required (logistics, safety, etc.) i s very specific, and completely different from electricity supply and should be outsourced to specialized entities, such as the companies handling remittances sent by Haitian people l iving in other countries. This has been done in other Latin American countries with remarkable success.

46. For customers wi th bank accounts and credit cards, payment o f bills through automatic debit w i l l be strongly promoted. For customers wi th bank accounts and credit cards, payment o f bills through automatic debit should be promoted. This has significant benefits for EDH and i s comfortable for the customers, provided that they become convinced that they can rely on the accuracy o f the amounts o f the bills.

47. case from the end o f the previous task, unless otherwise stated):

Sequence of activities o f this sub-component would be (times computed in each

1 - Definition o f the equipment required to execute re-engineered commercial and technical operations (computers, PRTs, equipment for call center and commercial agency, etc.) (2 months).

2- Procurement under World Bank rules o f the equipment defined in the previous task (3 months)

3- Incorporation o f the equipment to EDH regular operations (1 month)

48. Sub-Component 2.2.3. Intervention in the bidonvilles (US$ 320,000). In this sub-component, the approach in the project zone as a whole will be specifically applied to the bidonvilles, wi th additional contribution from EDH (US$ 100,000). An assessment o f the situation w i l l enable the World Bank to determine what needs to be done in each bidonville.

49. For those consumers located in the bidonvilles, but where EDH can perform regular operations without significant constraints, the solution wil l involve improving electric networks and installing electronic consumption meters allowing remote metering, both at each customer connection and at the transformer supplying a group o f consumers. This enables fast detection o f irregular connections and fraud, making possible to undertake immediate corrective actions at the site and thus promoting consumer discipline in electric service. The concept supporting this approach i s to avoid investments in network assets as much as possible and concentrate them in remote metering devices as, once detected, fraud and theft can be eliminated with operations at the site. Comprehensive experience in almost all Latin American countries show that consumer discipline i s achieved in a quite short time if those irregular consumers are aware that the uti l i ty i s able to make fast detection and correction o f fraud and theft

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50. For those consumers located in bidonvilles where EDH cannot perform regular operations due to hostility or other constraints, regularization w i l l be based on the construction o f shielded networks for electricity supply and application o f remote metering, both at each customer connection and at the transformer supplying a group o f consumers. This approach aims at impeding the construction o f irregular connections to the networks and fraud in consumption meters. I t has been recently implemented in dangerous marginalized areas in Brazil with very positive results. Losses were reduced in a sustainable way from 55% to less than 5% in an area where more than 60,000 customers are located, building new shielded networks and metering sets following the concept known as “transverse aerial distribution”. I t i s quite an expensive solution, as i t requires significant investments both in new shielded electric networks and remote metering devices. But i t i s the cheapest actual sustainable solution for electricity supply in those areas. Real experience shows that any other option requiring that the company performs activities at the site i s not valid, as access to the zone i s constrained. To know that there i s fraud and theft in an area i s worthless if corrective actions cannot be adopted.

51. Training activities. Training o f EDH staff and contractors involved in all the commercial and technical operations to be re-engineered following the new procedures and systematic follow-up o f the performance o f those human resources i s a permanent and crucial activity o f this sub-component

52. Specific outputs of Component 2.2

number o f consumption meters installed in the intervention area

km o f low voltage lines improved in the intervention area

number o f new medium voltage (MV) to low voltage (LV) transformers installed in the intervention area

amount o f basic investments financed b y the project

number o f portable reading terminals (PRTs) incorporated in the project zone

number o f telephones connecting with the call center installed in the project zone

- - -

- - -

53. Sub-component 2.3: Regularization o f EDH’s large consumers through the application of the new customer oriented management approach (US$ 1,545,000). The dollar amount currently billed to around 2350 customers (1.3 percent o f total) in the whole country wi th a monthly unit consumption above 1000 kWh represents close to 70 percent o f EDH revenues (in most other countries, large customers amount to 30 percent o f total bill on average). Furthermore, EDH databases show more than 1300 “non-active” customers and around 1500 “0 kWh recorded consumption” large customers (December 2005 figures). I t i s therefore crucial for EDH’s financial health to regularize the commercial condition o f 100 percent o f i t s large consumers, regardless o f their current situation. Since many o f these customers have opted for self-generation, EDH would need to convince them o f the quality and reliability o f i t s service before they agree to subscribe or re-subscribe as regular customers.

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. 54. Experience shows in Ha i t i and in other countries that reducing non-payments by these types of customers can make a significant contribution to the efforts o f reducing non-technical losses o f the company. A significant improvement in the billing coverage and collection rates of large customers has been achieved by almost al l the uti l i t ies in Lat in America, through a combination o f good management practices and application o f IT tools. Th is component will include the fo l lowing sub-components: (a) create a “Large Customers U n i t (LCU)” as an organizational unit w i th in EDH Commercial Direction; (b) design and implement a detailed f ield assessment on the current situation o f al l large consumers; (c) define and execute a plan aimed to regularize supply in al l individual cases where this i s needed; (d) install remote metering and disconnection and reconnection devices in al l points o f supply to regularized large customers and; (e) define and implement operational procedures for systematic monitoring o f the situation o f electricity supply to large customers.

55. As indicated above, a unit exclusively devoted to large consumers wil l be created w i th in EDH, wi th personnel recruited by the administrative direction o f EDH with the assistance o f the top level consultant (2.1 .). The importance o f large consumers in EDH’s revenues justif ies the creation o f a unit within the commercial department for the specific purpose o f managing al l aspects (technical and commercial) o f relations o f the u t i l i t y w i th i t s large consumers. The uni t wil l be embedded in the normal practice o f the firm. Once appointed, the manager o f LCU wil l elaborate a proposal o f organizational structure o f the uni t and related human and material resources needed, and a plan o n h o w to implement the rest o f the sub-component, and submit them to EDH’s top management. Since large customers also include al l publ ic entities, the manager o f the LCU wil l also have the responsibility to liaise w i th the work ing group in the Ministry o f Finance which would be implementing the inclusion o f a specific l ine for consumption o f electricity in the annual budget o f each public entity (action in the MOU).

56. 2.3.1 Design and implementation of a detailed field assessment on the current situation of all large consumers and improvement of the database (US$ 30,000) I t i s crucial to accurately know the current condition o f each and al l o f the active, non active and “0 kWh” large consumers, through a comprehensive f ield assessment, based on visits to each and al l the points o f supply. Execution o f that activity also provides a good opportunity to revitalize EDH staff and, at the same time, improve company public image. I t i s proposed to organize special purpose crews, formed by a student o f the school o f engineering (starting the second ha l f o f their career) and an EDH employee, w i th some ski l ls in customer connections, who wil l assist the student in the f ield assessment and provide logistic support (drive the vehicle, etc.). As the assessment i s not a permanent activity, students should be recruited temporarily (stage regime). Those showing the best performance could be incorporated to the permanent staff, once the assessment i s concluded.

57. A t each point o f supply being visited, the crew must: check the condition o f electric connections (wires, meter, etc.); determine actions to be executed for technical regularization o f the connection; ver i fy commercial condition o f supply (active customer, etc.).

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58. Based o n the conclusions o f the assessment, L C U wi l l design a plan aimed at regularizing al l the points o f supply to large consumers. Special purpose crews responsible for execution o f the works at each connection point wi l l be required. They may be formed with EDH’s o w n staff or outsourced, as i t i s a non permanent activity. Regularization i s not l imited to the condition o f the physical connection for electricity supply. I t also involves commercial aspects. EDH wi l l sign a new supply contract w i th each and al l large consumer, regardless o f his current condition.

59. L C U will previously define standard procedures to be applied in the different cases (active customers in regular condition, regularized consumers found in fraud, etc). For active consumers found in regular condition, the contract wi l l be signed by the inspecting crew performing the first visit. For regularized consumers, this can be done once the physical connection i s restored.

60. A new database for those consumers wi l l be created through execution o f this campaign, and should be kept permanently updated in the future. LCU wil l have a staff o f commercial agents. Each o f these agents wil l manage al l the aspects (technical and commercial) o f the contract between EDH and a specific group o f large consumers (around 500). Each large consumer wi l l be informed by the agent in charge that he wi l l receive personal attention and wil l be encouraged to call him for any issue related to the service provided by EDH. In particular, commercial agents wi l l be responsible for close monitoring o f technical and commercial condition o f the supply to each large consumer in his list.

61. Regularization o f large consumers does not end w i th the execution o f these activities. Periodic and systematic fo l low up o f the condition o f each regularized large consumer i s an absolutely crucial task. Un t i l remote metering i s implemented, i t implies that the crews in charge o f regularization perform periodic visits to customers and check that the actual condition o f connection remains regular. For the first 3 months after regularization, weekly visits are advisable as customers need to perceive that EDH i s paying close attention to their situation. Crews in charge o f inspections should change periodically customers to be inspected, in order to minimize the chance o f collusive behaviors.

62. is , beginning o f month 5 f rom project start-up) and be completed in 3 months

Execution o f this component should start once L C U i s fully implemented (that

1- Appointment o f students and selection o f EDH staff for special purpose crews (before effectiveness)

2- Execution o f f ield assessment and elaboration o f a large consumer database (3 months).

63. Sub-Component 2.3.2 Technical assistance in remote metering. (US$25,000) Project financing would also include short term technical services o f an expert in remote metering to assist LCU in the elaboration o f the technical specifications for a call for bids for supply, installation and commissioning o f remote metering devices, under the Wor ld Bank procurement rules.

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64. implementation o f LCU, that is, beginning o f month 5 from project start-up):

Sequence o f activities o f this sub-component would be (times computed from full

1- Appointment o f the consultant who w i l l assist EDH in the preparation o f the technical specifications for a call for bids for supply, installation and commissioning o f remote metering devices, under the World Bank procurement rules.

2- Preparation o f technical specifications for procurement o f TSMS (1 month)

65. Sub-Component 2.3.3 Installation of remote metering and disconnection and reconnection devices in all points of supply to regularized large customers (US$ 1,000,000). The project would implement electronic devices at each point o f supply to large consumer, allowing remote metering and disconnection or reconnection o f the clients, Remote disconnection avoids the usually conflictive situation created with the customer when this operation must be executed at the site due to commercial debt and eliminates potential sources o f corruptive practices in this very sensitive activity. The Project would also finance investments required to connect each large consumer to an exclusive MViLV supply transformer, or, at least have an exclusive shielded connection to the LV terminals o f a transformer. This w i l l make i t extremely difficult to attach irregular connections to this cable.

66. Current “state o f the art” o f the involved technology allows implementing remote metering o f electricity consumption at each point o f supply with l ow related investments. Functional performance o f the set to be installed includes: permanent electronic metering of all parameters o f electricity supply (voltage, current, power factor); periodic transfer (daily or with any other desired frequency) o f recorded data to a remote point (typically a commercial agency o f the electric company) using existing facilities o f telecommunications company (wired or wireless links). Usually data are transferred once per day during night time, when communications lines are almost unloaded. This allows the electricity company to optimize costs for use o f those facilities. But metering i s done “on line”. This means that the data can be collected at any moment at the remote point (even permanently), if deemed necessary. Remote disconnection and reconnection o f electricity supply, performed from the same point where the metering data are collected and analyzed.

67. Connection o f each large consumer to i t s exclusive M V / L V supply transformer or shielded connection to the LV terminals o f a transformer built using twisted or concentric cable w i l l be clearly identified by EDH and this information wil l be provided to the involved large consumer. The metering and disconnection set w i l l be installed in a shielded panel to be located close to the transformer, between the LV terminals and the connecting cable. Components o f the set are electronic meter, disconnection and reconnection switch, communication modem and auxiliary devices.

68. end o f sub-component 2.3.2 (that is, beginning o f month 4 from project start-up):

Sequence of activities o f this sub-component would be (times computed from the

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1- Development o f the procurement process for installation o f remote metering and disconnection and reconnection devices in all points o f supply to regularized large customers (5 months)

2- Installation o f remote metering and disconnection and reconnection devices in all points o f supply to regularized large customers (6 months).

69. Training activities for EDH employees. Part o f the technical assistance for the application o f new procedures using CMS and TSMS w i l l consist o f training activities to EDH employees to improve attention to Large Clients and achieve effective billing and collection fi-om these clients.

70. 2.3.4. Improvement in networks (US$ 490,000). The project w i l l finance the renovation o f distribution lines and customer connections for large customers. The field assessment o f the situation (2.3.1) w i l l have identified the renovations to be carried out.

71. Specific outputs of Component 2.3

number o f large consumers regularized (new contracts for electricity supply with EDH signed)

number o f remote consumption meters installed for large consumers in the whole country

-

-

72. Component 3: Participatory approach, project management, monitoring and impact evaluation, and replication strategy (US$ 1,579,760). This component regroups all the activities necessary for the successful implementation o f the first two components. I t includes a communication strategy with a pro-active participatory approach towards clients and employees o f EDH. It also focuses on the importance o f an efficient project management and careful monitoring and an evaluation o f the results, their impact and their sustainability beyond the duration o f the project. Last, i t includes a proposal to be endorsed by the Government and EDH on how to scale up and replicate the project in other zones o f Port-au-Prince and o f the rest o f the country in an effort to expand the benefits o f the model proposed here to EDH as a whole.

73. Subcomponent 3.1. Participatory Approach (US$ 75,000). The component includes a pro-active participation and communication strategy towards clients and employees o f EDH intended to promote the behavioral changes to achieve the project’s objectives. This strategy, to be tested under the pilot, comprises a combination o f (i) reaching quality standards for customer satisfaction as identified by consumers; (ii) enforcement and social control mechanisms; and (iii) a communication program to reach out to th,e various stakeholders to obtain their feedback, and disseminate information about the project outcomes.

74. The participation strategy wi l l promote cultural changes to address negative practices both within EDH and among customers, that might hinder project success. Project design includes features to promote this change in culture (competitive selection among EDH’s employees o f key personnel to implement the pilot project, remote

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disconnection, etc.). The main actions to be tested under the project are summarized below:

Low-income community residents: (i) to strengthen Neighboring Committees (NC) to play a key role in the establishment o f better practices; (ii) to facilitate complaint processing and responsiveness standards; and (iii) to assess the feasibility to install house-meters in selected neighborhoods. High income residents and businesses: (i) to regularize contracts and ensure service standards are reached; (ii) to offer alternatives to save electricity consumption to reduce billing; and to in fo rm them periodically o f improvements and potential savings; (iii) to disseminate good practices and give public recognition to good customers: and (iv) to seek customer collaboration to eliminate i l legal activities with the use o f positive incentives (discount for faster payments, for instance) and with the application o f stricter, enforcement mechanisms. Government institutions: (i) to include a l ine in the budget o f each institution for their consumption o f electricity; (ii) to work with the authorities, w i t h the support o f the Strategic Steering Committee to ensure t imely payment o f electricity bills, and corrective measures in case o f delays to avoid a negative impact on EDH’s revenues; and (iii) to give public recognition to good customers. Proposed changes in EDH: (i) to promote project ownership through the involvement o f key staff as offering opportunities for career development; (ii) to engage the Un ion in the proposed changes thereby overcoming fears and conveying the need to embrace the changes as a critical step for EDH’s survival; (iii) to establish a recruitment process to hire personnel on the basis o f qualifications,; (iv) to define an incentives system based on participation in training, recognition and non-monetary compensation to ensure engagement in the proposed changes; and (v) to establish and enforce a monitoring system to identi fy and punish il legal activities.

0

0

0

0

75. The communication strategy wil l disseminate the project’s results and good practices among the different customers through newspaper articles and/or press releases that will in fo rm the population in detail about the project. There wi l l also be an information note/brochure for a l l targeted EDH customers in the selected zone and for al l larger customers, describing in detail the foreseen implementation process; a dissemination system wil l be established to enhance community partnerships with EDH. Surveys to customers in the project zone of the various income levels, large consumers in the country and EDH’s employees will be undertaken at various stages o f project implementation to define a baseline and then monitor the impact o f the project o n these groups. Other dissemination activities will be carried out as required with EDH, customers and other groups o f c i v i l society, including but not l imi ted to the media, government officials, other donors, and other sectors.

76. Component 3.2. Project management, monitoring and Evaluating (US$ 1,344,760). As part o f the project management sub component, the project wi l l finance expenditures for project administration by the PTU/EDH team and the PCU. El ig ib le expenditures wil l include: (1) consultant costs o f the PCU; (2) studies and consultancies;

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(3) training activities, and (4) acquisition o f goods and equipments needed for project implementation (computers, programs). EDH wi l l contribute to this component by providing logistical support, among which: facilities for the PCU, maintenance o f amenities, payment o f salaries to the PTU-EDH team etc. This component wi l l also finance monitoring and evaluation (M&E) activities others than those already considered under Component 3.2, and the project’s impact evaluation.

77. Subcomponent 3.3. Development of a plan to scale up the project model in line with a coordinated medium-term strategy for the electricity sector (US$ 160,000). A long-term strategy wil l be developed to replicate the model described in the three project components above. Through the project’s expected improvements in the areas o f intervention, the credibil i ty o f the sector should be revived, increasing the chances for obtaining additional donor financing for the scale up. At the same time, i t i s clear that replication wi l l entail more than just a replication o f what wi l l be done in Component 2, for these other areas face more challenging constraints o f different sorts that the p i lo t project. Thus, the design o f this replication strategy wil l be based o n an evaluation o f the progress in the execution o f the p i lo t project and an analysis o f the project impact, but also o n an assessment o f current conditions o n the key aspects that need to be contemplated to enable a successful replication in the rest o f Port-au-Prince and in the Provinces.

78. dissemination o f lessons learned within EDH (US$ 100,000). essential feedback for the optimization o f those projects.

3.3.1 Evaluation of the progress in the execution of the pilot project and This wi l l provide

79. 3.3.2. Assessment o f current condition o f the key aspects that need to be considered to enable a successful replication in the rest o f Port-au-Prince and in the Provinces (US$ 60,000). The main aspects to be evaluated in those areas are summarized in the set o f 8 criteria that were used to select the area for the current p i lo t project, namely: (a) current conditions o f electricity supply and operational requirements and related costs to achieve a 24 hours per day service; (b) evaluation o f investments required for restoration o f MV and LV networks; (c) willingness to pay for good electricity supply o f population located in the area; (d) current collection rates in the area and potential for improving billing and collection rates; (e) current condition o f consumption meters; ( f ) externalities such as safety constraints for access o f EDH crews to perform their regular technical and commercial operations; (g) operational condition o f the 69h2.5 kV substations involved in wholesale electricity supply to the area. Assessment on each one o f the above-described aspects wil l invo lve the execution o f specific f ield campaigns and consultancy studies. Outcomes o f those actions wi l l offer a precise definit ion o f the activities to be undertaken in each area to achieve regularization in electricity supply and related costs, t ime and disbursements schedules.

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Annex 4.1 - Selection of the area for the pilot project

4.1.1 Criteria for selection

A set of criteria for the selection of the area for execution of the pilot project was defined and applied to the zones supplied by 16 MV circuits previously defined by EDH top management:

- Criterion 1 :

- Criterion 2:

- Criterion 3:

- Criterion 4:

- Criterion 5:

- Criterion 6:

- Criterion 7:

The area must have permanent electricity supply (24 hours per day) meeting acceptable standards on quality and this should be achieved without significant changes in current EDH operational costs.

Investments required for restoration o f MV networks must be minimum, as budget o f the p i lo t project i s l imi ted and needs to consider key investments for the incorporation o f the corporate management systems and remote metering o f large consumers. Circuits in bad conditions must be restored in the future, but with the revenues collected through better EDH commercial performance. This criterion reflects the key concept: “there i s no money available for investments in networks until the billing and collection indexes reach acceptable figures”. Preliminary information provided by EDH on investments required for restoration o f networks in the different circuits i s included in Annex 111.

A significant percentage o f active customers with we l l demonstrated willingness to pay for good electricity supply must be located in the area.

Collection rates in the area must have average values (neither too good, nor too bad). Potential for improv ing billing and collection rates in the area must be significant, both in relative and absolute terms.

The area must contain a significant number o f defective consumption meters.

No externalities that could potentially affect development o f the project, such as safety constraints for access o f EDH crews to perform their regular technical and commercial operations can exist in the area.

The area must include high, medium and l o w income customers, in order to avoid negative and highly sensitive perception that the project privileges r i ch people and forgets about other customers. One or more small or medium and we l l delimited slums (“bidonville”) should be located inside the area. A special approach for regularization o f electricity supply in that slum will be a component o f the project.

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- Criterion 8: The area should be directly related to the zone o f influence o f a 69/12.5 kV substation in good operational condition, in order to ease metering and energy balance requirements.

4.1.2 Results of the application of the criteria to the zones pre-selected by EDH - Area proposed for execution of the pilot project

Detailed application o f the 8 above-described selection criteria to the set o f 16 circuits previously defined b y EDH leads to the following key conclusion:

Only the central area of Port au Prince supplied by the circuits TOB 1-1, TOB 1-2 and TOB 2-2, with around 10.000 electricity consumers (regular customers and others) gets a positive evaluation in al l the criteria.

In the following paragraphs conclusions o f evaluation o f the area in each o f the 8 defined criteria are presented.

- Criterion 1: The area has permanent electricity supply (24 hours per day) meeting acceptable standards on quality. I t includes the Presidential Palace and the University Hospital, with supposedly obvious unintemptible supply.

- Criterion 2: Investments required for restoration o f MV assets are minimal. MV lines are in a good condition, as a significant percentage o f them was renovated a few years ago, through the execution o f projects wi th the assistance o f EDF and HQI.

- Criterion 3: A significant percentage o f active customers with well demonstrated willingness to pay for good electricity supply i s located in the area, as reported by EDH Commercial Direction.

- Criterion 4: Collection rates in the area have average values. As there i s no reliable information on billing rates compared to injected energy per area, billing rates cannot be used as an evaluation criterion.

- Criterion 5: The area contains a significant number o f defective consumption meters, as reported by EDH Commercial Direction.

- Criterion 6: N o externalities that could potentially affect development o f the project, such as safety constraints for access o f EDH crews to perform their regular technical and commercial operations exist in the area. I t shows a predominantly normal condition, from the points o f view o f access and security.

-Criterion 7 : The area includes high, medium and low income consumers. I t also contains medium well delimited slums (“bidonvilles”).

- Criterion 8: The area 69112.5 kV substation,

i s directly related to the zone o f influence o f the Toussaint Brave which shows a very good operational condition and includes

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active and reactive energy meters installed both at TOB 1-1, TOB 1-2 and TOB 2-2 outgoing feeders. Implementation o f metering and energy balance requirements i s extremely simple. Electric diagram o f the Toussaint Brave substation i s included in Annex IV.

Although information currently provided by EDH for the areas supplied by the other circuits previously defined by that company i s incomplete, available data al low to state that al l o f them fai l to meet at least one o f the 8 above-described criteria.

The fo l lowing table presents some the figures o f a comparison intended exclusively to show the existence o f differences between the areas. The discrete scoring adopted (1: Good, 0: Regular, -1: Bad) should not be interpreted as a quantifier o f the amount o f those differences. This cannot be done with existing information and has n o sense for the purpose o f the selection process.

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Annex 4.4. Communication Survey Results

As part o f the communication strategy, a set o f tools were used in order to assess the project’s major benefits and possible obstacles that i t might face during the implementation phase. To that effect, survey questionnaires, targeting the various stakeholders were designed. The stakeholders include :

0 Electricite d’Haiti staff at large (ranging f rom senior and operational staff to Un ion representatives and service workers, including technicians, maintenance staff, meter readers and others) Business, residents and NGOs including both current EDH customers and potential customers Government institutions, including government agencies, hospitals and universities Low-income communities residents and community organizations

0

0

0

In addition to the survey questionnaire, visits and interviews were conducted w i th the relevant stakeholders.. This analysis involves summarizing the views and opinions o f the stakeholders and examining the institutional, socio-economic and pol i t ical context o f the project. The fo l lowing summary analyzes the results o f the findings.

Interviews with EDH Employees

EDH senior management team expressed optimism regarding the project. The directors understand the success o f the project represents a l i fel ine for EDH, whose conditions have been deteriorating. The senior officers showed a strong willingness to collaborate in order to guarantee the success and sustainability o f the project. They point to an aging infrastructure and organizational weaknesses as the main causes for a decline in revenues and services o f EDH. M a n y o f the directors also attribute the decline to a history o f cronyism and pol i t ical influence that have plagued EDH and many other publ ic institutions in Hait i . They complain that the utility i s routinely forced to h i re people with inadequate qualifications.

Interviews were also conducted with regular employees f rom key departments. M a n y o f the same issues explored above resurfaced in the comments o f the employees. The interviewees acknowledged the existence o f widespread corruption throughout the institution. This corruption takes many shapes - ranging f rom stealing or wasting EDH equipment to employees who clandestinely connect people to the EDH networks for a fee. M a n y interviewees stated that a large poo l o f incompetent employees exists within key departments. They attribute this situation to a hiring practice that i s not based o n merit. Instead, influence and cronyism dictate the recruiting process. Moreover, the employee interviews revealed that EDH faces major operational issues that contribute to the continuing decline in revenues. For instance, the bill distribution mechanism i s so inefficient that many customers do not receive their bills regularly. This irregularity handicaps EDH from collecting payments. Further, customer care agents lack adequate training, which according to some interviewees i s provided rarely.

81

Consultation with the Union of EDH

Percentage o f employees who responded

Yes

N o N o r e m o n s e

The Un ion leaders o n behalf o f their members expressed their readiness to collaborate on the project. They appreciated having been included in the dialogue process. They expressed their optimism and offered their support throughout the process so that the project can fully benefit the institution. During the interviews, un ion representatives conceded that their perception o f the Wor ld Bank i s that o f a powerful international institution trying to privatize the uti l i ty, hence putt ing people out o f work. The meeting with the Wor ld Bank representatives helped erase some o f that perception.

Aware o f Competent Satisfied D o you D o you EDH Employees wi th favor think corruption? a t E D H ? EDH wI3 clients p a y

100 65 0 95 85

0 35 100 2 13 - 0 0 0 3 2

services? project ? enough?

The fo l lowing table highlights the major trends in the answers provided by EDH personnel in the survey questionnaire. One hundred employees fi-om EDH participated in the survey. The interviewees included senior officers and staff fkom a variety o f departments such as Commercial, Networks and Production.

Interview wz2h Busznesses and Reszk'ents

Residents and businesses in the project area were also interviewed. The scarcity o f electricity f rom EDH forces virtually every member o f these groups to find alternative methods to satisfy their electricity needs. T o that effect, a great deal o f investment i s usually made to purchase and maintain power equipment. The most common power equipments ut i l ized include generators, solar panels, power inverters and batteries.

Business owners and many affluent residents stated that they wil l continue to buy fuel despite its high cost because EDH has been unreliable and incapable o f meeting their needs. This group o f consumers constitutes a viable source o f revenue for EDH if the utility were to offer a more reliable service accompanied by an efficient collection mechanism.. Regular collecting f rom large consumers can significantly augment EDH revenues. Most consumers are hoping for an improvement in the quality o f service. M a n y possess the means to pay for the electricity that they are consuming. The interviews demonstrate that most o f them do not object paying a higher price if there were continuity, consistency and rel iabi l i ty in the service provided by EDH.

Stakeholders confirm the existence o f a network o f i l legal activities. M a n y businesses and in some cases prominent residents routinely use fraudulent methods to gain access to EDH electricity. EDH employees had alluded to these activities, and interviews w i th residents and businesses corroborate the claims. These fraudulent activities pose a danger to the networks and to EDH in terms o f

82

revenue generation. One common fraudulent method i s the use o f f ictit ious meters. The business or the resident usually possesses a meter properly installed and monitored by EDH. That meter i s often connected to l o w wattage items such as lights and fans. The high wattage appliances, however, are connected to the EDH network clandestinely. The bill that these consumers receive f rom EDH does not remotely reflect their actual electricity consumption, thus resulting in financial loss for EDH.

Interviews with Government Institutions

The consultations w i th the administrators from al l the various public entities in the project zone revealed that EDH has a relationship that works to i t s detriment. In theory, these public entities are customers o f the ut i l i ty; hence they have the responsibility to pay for their electrical consumption.

The reality i s far more complex, however. In the case o f the government ministries, the bills are often channeled through the finance ministry, which in turn writes a check for EDH. However, the process i s very inefficient. EDH i s at the mercy o f the state in terms o f debt collection. Un l ike private entities, EDH does not suspend services at government ministries regardless o f insolvency. As a result, these agencies routinely ignore their bills.

Further, the state does not have a tradition o f training i t s employees about efficient energy use. Employees routinely fai l to turn o f f electrical appliances, such as costly air conditioner units, at the end o f their workday. Employees at numerous government ministries do not have a tradition o f proper electricity use.

The relationship between EDH and the state universities presents fewer problems. Un l ike government ministries, the universities for the most part pay their bills when they receive them, which do not happen regularly. M a n y university deans point out that EDH has not been a reliable partner in terms o f prov id ing electricity. In fact, l i ke most businesses and some residents, virtual ly al l the universities use alternative methods to meet their electricity needs. For instance, the Institute for International Studies and Management (INAGEI) uses at least two generators daily. This institution i s not located in the pr ior i ty zone. As such, they encounter serious shortages o f electricity.

Interviews with Low-Income Communities Residents

A number o f low-income neighborhoods fa l l w i th in the project area. A neighborhood committee consisting o f residents o f the area often serves as the intermediary between EDH and the community. The partnership usually works as follows: EDH installs a meter at the entrance o f the community. The meter i s commonly referred to as the Compteur de Tkte. The meter serves the entire neighborhood. EDH has n o direct contact w i th individual households. Instead, the neighborhood committee manages the operations. The committee i s responsible for monitoring household consumption,and disconnecting residents if need be for debts. EDH sets a tar i f f scale for the committee to use in evaluating household energy consumption. Residents pay a flat month ly fee depending on the number o f electrical appliances within their individual households.

83

Contrary to popular belief, residents o f low-income neighborhoods have a tradition o f paying their electricity bill. Some residents express their desire to have their o w n meter. The visits and interviews show that some neighborhood committees possess strong organizational and managerial ski l ls . These committees have a good track record o n record keeping. For instance, these committees keep copies o f pay stubs, which highlight the dates and amounts paid by individual households. The organizational ski l ls are such in some neighborhoods that the committees often seek finding f rom donor agencies to purchase their o w n electrical equipment.

Percentage Satisfied Have stolen o f w i t h E D H EDH customers services? Electricity? who responded Yes 0 1

N o 100 97

Overall, interviews and document reviews demonstrate that the partnership, in its infancy between EDH and neighborhoods committees f rom the Quartiers Populaives, work relatively well. The agreement i s simple: EDH provides the electricity, and the committee oversees the operations f rom distribution to collection. There i s evidence, however, that in recent times, the relationship between slum residents, committee members and EDH has deteriorated. Residents complain that the committees try to collect the same flat fee f rom them even though there i s a drastic reduction in the volume o f electricity received. In some neighborhoods, electricity has been practically non- existent for long periods o f time. Residents complain that EDH attempts to collect despite the absence o f electricity. There have been some cases o f violence over collection issues. Some residents now routinely resist paying their bill. As many residents put it, neighborhood committees are demanding money for a service that EDH rarely provides. Many o f these committees conf i rm their uneasiness w i th demanding money when EDH no longer provides electricity. Committee members interviewed expressed their disappointment and frustration w i th EDH in this regard.

Using alternative energy methods?

70

28

Similar to businesses and residents from more affluent neighborhoods, residents in Quartiers Populaires spend some o f their income o n alternative energy methods. The use o f kerosene, candles and other methods clearly shows that people, regardless o f income, are willing to pay to meet energy needs.

Will pay extra for better services?

68

30

This fo l lowing matr ix highlights some o f the answers given by business owners, residents, government institutions and NGOs concerning their views o n various electricity related questions'.

D o you D o youthink understa you're nd your paying a f a i r bill? price for

30 1

68 99

electricity?

1 N o Answer 10 1 2 12 1 2 12 10 I The survey questionnaire and the' interviews showed that the majori ty o f stakeholders favor the Hai t i Electricity Loss Reduction Project. The perception i s that the project wi l l enable EDH to improve the quality o f service.

' Two hundred consumers o f EDH participated in the survey.

84

8.5

Annex 5: Project Costs

HAITI: Electricity Loss Reduction Project ( P R E P S E L )

.I I , , , 1 1 1

3 5 Construction of inew facilities for C M S . T S M S . call center Component 2: Improvement in quallty of SBIYICB and Increase In revenue colleotlon of EDH for selected grou11s of customers 2 1 Selection of personnel for the soci~economical ly mixed area alld tar the 2 1 1 Lmsl Cmmsrcrsl Agency end lo the salsdion of the menage, 01 Ihe large CuSlomtXS unn 2 2 Improve quality of service to, and increase EDH revenue from. the soc~o- economically mixed zone 2 2 1 lmpmvement of network

COnsdlsnt srrlrilog the rerirucretlon 01 EDH BotAlreud unH lntemstlonal

TOP SanlDI level COOSunant 10 BSsis( EDH In the rabctan 01 the l e f f 1- the Intarnetionel

Redona1 2 2 1.1 Renovsllon of low voltage liner and curtomet Eonnodions

2 2 1 2 Purchase of Eonsumption meters, DW1lohgeBI equipment and other cqulpmenl ln ts rnat ione l

2 2 1 3 Stocks and 8upew18~on~

2.2.2 Deteiied implemenlsllon and follow-up of applicstmn of rules and procedures denned m 1 3 2 2 2 1 Purohaso 01 compu1ers, PRTl , ~eneial equipment tor call Center and Local mmma(cls1 sgsncy. phones d c 2 2 2 2 Conwltant to 89sIol In the implementation 01 the procedure. In the soclo- International smnomicsly mixed zone 2.2 3 lmemenllon In the bidonvdles 2.2 3 1 CaNUltant tor the relallons Wlth the bldonvlllDS 2 2 3.2. N&wh renovatlona. replecsmmt 01 meters etc 2 3' Regular~Sal~on Of large consumers through the ~pp l~ca t lon 11 the new customer Oriented managemenl approach 2 3 1 Field assessment of wluation 2 3 1 Student8 Worhlng In line Wlth EDH staff lor 8peual purpose crew$

Local

Local Regional

L O C a

80,OW

3,145,000

1 1 menlhs 80.000 + 3 months 450.000 450.000 100,000 3,245,000

2 3 4 1 Renovetion of the dlrlributlon llner and customer mnnectlons Component 3: Paltlclpatoly approach. project mnnagement, MBE and

Regional

I

80,000 80. ow

3 2 9 Cos1 of equipment of PCU and other BS needed 3 2 10 Logistics/ support (cars, maintenance of fscii!ties e lc )

80 000 80, 000 Effectiveness candflao 4 months

Local

1.520 000

3 2 11 Three e x t e r m audits for the proisct Internatmnal

International 3 2 12 Misc

100 000 1,020,000

1.120 000

7Q0.000

30,000

300,000

180.000

Contingencies I Total I

+ 5 months 8 months

8 monthe + 5 months

+ 5 months Throughout lmplemmtstlon

Cmtrlbutlon (US 5) Tlmellne: From Duratlon of World Bank EDH Total Project effectiveness Contract

I I I I

1,545 000

2,190,0001 450,0001 2,640.0001 1,375,000 1,375,000

25.000 25.000 Effeclhlsnars oondnbn 18 months

1 545.000

25, ow

35 000 9 months

15.000 Q months

2 3 2 TA ,n remote metenng 2 3 2 Con8ultanl asslsl EDH In the preparation ot hey documents (TORS) and rupervis1on Of Installstlo" 2 3.3 lnslailation of remote metenng 2 3 3 2.3 4 ImDrOYement OInetwDIh

PUIoha98 and ln618118110n Of remote metering (incl training 01 users)

lnlsrnati~nal

lntsl"atlonal 1 000 ow 1,000,000

480,000 490,000 655,000

1,000,000 1 000.000 + 5 months

490.000 490.000 + 5 months

924,760 1,579,760

0 months

3 montha

1,120,ow 300 0001

75,000 75,000 At effectiveness Throughout imdemenfelion

I month 108.000 *5 month6 108,000

72,0001 1 i l,0001+5 months I r e s ovty lmplementall~ manthmz

20.000 * 5 months 8 months 220.000 100.000 320 000

3,000 420.000 105,000

50, ow

80, ow

30,OW

15,ow 15,OW

40,OW

50,OW

45.000

10.000

160,000 100,000

80 ow

3.000 924.780 1,344,760

105,000 Before effeclrvsnsss Thioughoul

50,000 Before effeclivensss Throughout

80.000 Before effectiveness Throughout

30,000 + 4 months Throughout

15,000 + 5 monlhs Q months 15,000 At effecliveness 3 months 40,000 + 0 monlhs

implementstmn

rmplementalian

rmplementatron

implemenlstian

Throughoul implemenfstion

815,380 815,380 + 0 monlhs Throughoul implementation

50,000 At effectiveness 3 months 108,400 1OQ.400 AI effectiveness Throughout

45,000 + 9 months Throughout

10.000 Throughoul

mplementstian

mplsmenlarion

mplemenlatron 160,000 100,000 8 months before Bmonths

80 000 Before effectrveness 8 months propc l end

25. ow

Component 3 3 Replication Strategy 3 3 1 Consultent for assessment of lessons learned from first 2 components

3 3 2 Consultant for BSSeSSmenl on current conditmns in rest of EDH for

lnlernstionsi

International 10.000l I 10,0001 I

6,000,0001 1,474,7601 7,474,7601

86

Annex 6: Implementation Arrangements

HAITI: Electricity Loss Reduction Project (PREPSEL)

Institutional and implementation arrangements

1. The approach taken to implement this project wil l be one that combines (i) program management and accountability at the highest level o f Government; (ii) full involvement o f EDH in al l substantial issues pertaining to the design and implementation o f the project to ensure that the project addresses the r ight issues, that i t has real ownership f rom the beneficiary and that serves the purpose o f building institutional capacity within the firm to strengthen i t s capacity to provide good services in a sustainable manner; and (iii) efficient procurement and financial management arrangements that will guarantee t imely execution and full compliance with the WB rules without imposing an excessive burden on the administrative capacity o f EDH.

2. Based o n the institutional analysis o f the sector to date, i t was agreed that the best way to achieve the various objectives above was to entrust EDH with the responsibility and leadership for the technical content o f the Project and establish an Project Coordination Unit (PCU) that will gather all the required fiduciary expertise without distracting too many resources o f the beneficiary, EDH, f rom the actual implementation o f the project. This P C U wil l be composed o f a project coordinator, a procurement specialist and a financial management specialist. The P C U wil l work throughout the implementation o f the project with EDH, who wil l appoint a team o f experts that wil l fo l low up the project on a continuous basis (the EDH-Project Team). The P C U wil l have the responsibility to init iate the implementation o f the various components o f the Project, supervise implementation o f the different activities, and, together with the EDH-Project team, prepare progress reports o n the status o f the implementation and ensure the proper monitoring and evaluation o f the project throughout its implementation.

3. More specifically, The P C U wil l be responsible for the financial management o f the Grant funds in coordination w i th the Min is t ry o f Public Works, Transportations and Communications (see below), and wil l report to the Minister o f MTPTC. Through i t s technical experts, EDH will have the responsibility o f implementing al l substantial matters o f the project, while benefit ing f rom the support o f the two experts in fiduciary matters, and f rom the advice o f the coordinator according to the scope o f his or her responsibilities as already described. Actual procurement processes and corresponding reporting activities wil l be the main responsibility o f the procurement specialist, once the TORS and short l i s ts are defined by EDH with the support o f external consultants as needed. Furthermore, the financial management specialist wil l have the main responsibility o f ensuring proper management o f the resources allocated o f the project and compliance with the required reporting procedures.

4. EDH will appoint a Project Team Leader w i th the sk i l ls that wi l l facilitate the successful implementation o f the project. The EDH Project Team Leader wil l p lay a vital role as he/she wil l have the responsibility to carry out a set o f specific duties. They include but not l imi ted to: a) actively participating in the selection and supervision o f EDH personnel for the project; b) monitoring o f project implementation; c) facil i tating communications between the EDH Project Team and the PCU; d) identi fying and resolving potential problems during implementation; e) preparing periodic reports on project progress; f ) in forming EDH o f the progress o f the project.

87

5. Finally, while the day to day fo l low up and update o f performance indicators wil l be the responsibility o f the P C U staff and o f the EDH- Project Team as part o f the reporting activities o n implementation progress, the P C U wi l l hire a short term consultant to undertake an independent verification o f the progress achieved under the main components every six months, and make recommendations on how to remain on track to achieve the objectives o f the project.

6. This simple division o f responsibilities between the P C U and the technical team o f EDH will make i t possible for EDH to focus at this stage on strengthening their core business (providing electricity to the people), rather than dispersing their scarce human resources over many important, but competing areas o f expertise. I t wil l also ensure that al l f iduciary safeguards are respected and that project implementation could happen without undue delays.

7 . A high level steering committee comprised o f representatives f i o m the main government entities that intervene in the sector: Ministry o f Public Works, Transport and Communications (MTPTC in French), Min is t ry o f Finances (MEF), Ministry o f Planning and External Cooperation, as we l l as EDH and the CMEP (Conseil de Modernisation des Entreprises Publiques) wil l provide guidance to the P C U o n strategic issues. This i s particularly important in the context o f the MOU o f Brussels where various actions that are under the control o f either the M T P T C or the MEF rather than o f EDH affect nevertheless the l ikel ihood o f success o f the project and the overall performance o f the sector, as indicated in further detail in the section C.5 on the risk and mit igation measures o f the project.

8. Financial management and disbursement for the project wil l be handled by the P C U through the recruitment o f a financial management specialist, as indicated above. Funds wil l be disbursed v ia a Designated Account opened at the Central Bank (Banque de l a Republique d’HaYti o r BRH) and managed by the P C U for the small contracts, and through Direct Payments f rom the Wor ld Bank for the largest contracts. T o strengthen transparency and control over the use o f project’s resources, two signatories to the Designated Account wi l l be required (the Project Coordinator and the Minister o f M T P T C for amounts equal and above US $100,000; and the Project Coordinator and the financial management specialist o f the P C U for amounts lower than US$ 100,000). . The detailed financial management arrangements wi l l be finalized by appraisal when the capacity assessment i s completed.

88

The following two graphs give a snapshot of project implementation.

I v EDH PREPSEL team (PTUIEDH)

Technical Responsibility of project Team includes:

- Project Leader - Manager of Local Commercial

- Manager of the Large

- Other Technical Experts

Agency.

Consumer Unit.

Hai'ti: Electricity Loss Reduction Project Project Management

,

Steering Committee MTPTC- MEF- Planning&Ext.Coop. - CMEP - EDH

Monitoring of project implementation and execution of the Br

Designated Account

Supervises the work of the PCU

Direct Payments via WB

Project Coordination Unit (PCU) Fiduciary Responsibility and Procurement Support to EDH Team includes:

- PCU coordinator - Financial Management Expert - Procurement Specialist

Supervises the work of the PTUlEDH

Haiti: Electricity Loss Reduction Project Financial Accounts Management

\ * Project Coordinator (PCU) j - Project Coordinator (PCU) )

89

Annex 7: Financial Management and Disbursement Arrangements

HAITI: Electricity Loss Reduction Project (PREPSEL)

Country Issues

1. The Bank has not carried out a Country Financial Management Assessment in Hai t i which wou ld have provided information o n the performance o f the country’s public financial management. Nevertheless, the information collected through a number o f studies and as part o f the Interim Cooperation Framework exercise and the Economic Governance Reform Operation supported by the Bank, point out significant weaknesses in the budget process, as we l l as internal and external control. Also, Ha i t i ranks very l o w in the Transparency International index, implying that corruption i s an issue o f concern. However, the Government has made some efforts during the past couple o f years at clari fying the framework and improv ing processes and systems for fiscal management and financial control. Furthermore, the implementation arrangements o f the project including procurement and financial management wi l l not re ly on the country’s procedures. As specific procedures complying with Bank’s po l icy wi l l be developed and implemented by a uni t outside the government ministries and staffed w i th adequate staff, the current project wil l not be directly affected by these weaknesses.

Financial management and disbursement arrangements

Key factors affectingfinancial management and disbursement arrangements

2. The activities and implementation arrangements o f the project do not present any particular risk or challenge that warrant specific attention. The main factor that i s l ike ly to affect financial management i s that the P C U which has overall financial management and disbursement responsibility wil l be a newly created entity. As such i t cannot be formally assessed. Instead, the assessment focused o n the arrangements that must be in place when the project implementation starts in order to comply w i t h the Bank’s financial management requirements and the needs o f the project. These arrangements are described below.

3. The financial management assessment also included the review o f the completion reports o f previous projects financed by the Bank in the electricity sector in Hait i . This review did not identify any significant financial management issue, except for some interference in the procurement process and the fact that EDH failed to improve i t s financial management procedures and its financial situation. To a large extent, the problems o f the financial management system and procedures and financial situation persist. They are discussed below.

Entities

4. As indicated above, the entities directly involved in implementing the project are the P C U and EDH. However, on ly the P C U wil l have financial management responsibility. The P C U i s a new entity to be created and as such does not have previous experience that can formally be assessed. However, i t wi l l be staffed with a financial management expert. Furthermore, clear financial management and disbursement procedures wi l l be developed in the operations manual to be fol lowed by the project. These measures wi l l compensate the lack o f previous experience o f the P C U in project implementation.

90

5. The project wi l l benefit EDH although the utility wil l not be directly involved in the financial management. As an autonomous public entity, EDH has not been able to strengthen i t s financial management practices. K e y financial management positions such as Finance Director and Treasurer have remained vacant for over a year; the accounting system i s obsolete; i t s accounts were not prepared nor were they audited for a number o f years; the financial situation i s not viable due to insufficient revenues to cover costs. During the last two years, however, EDH has been receiving technical assistance financed by the European Un ion in collaboration w i th the Bank to restructure i t s accounts, prepare an opening balance sheet as o f September 2004 and auditable financial statements as o f September 2005. This work has recently been completed and wil l be fol lowed by an audit by an international firm.

6. A l though they do not directly affect the project’s financial management due to EDH non direct involvement, EDH financial performance m a y to some extent affect the success o f the project. Given the scope and the relatively small amount o f fund allocated to the project, i t wou ld not be efficient to focus on improving EDH financial management system. Bu t the Bank i s coordinating with the IDB, which has agreed to finance a new financial management system that wil l help sustain the recent efforts to bring the accounts up-to-date and closer to international accounting standards. As part o f the current project, EDH will be required to have i t s accounts audited and submit the audit report to the Bank annually to continuously monitor its overall financial performance.

Flow of funds arrangements

7 . Funds will be disbursed via a Designated Account opened at the Central Bank (Banque de l a Republique d’Hai’ti) and managed by the P C U for the small contracts, and through Direct Payments f rom the Wor ld Bank for the largest contracts. T o strengthen transparency and control over the use o f project’s resources, two signatories to the Designated Account wi l l be required (the Project Coordinator and the Minister o f M T P T C for amounts equal and above US $100,000; and the Project Coordinator and the financial management specialist o f the P C U for amounts lower than US$ 100,000). A local currency project account m a y be opened for payments to be made in local currency.

Financial Reporting and auditing

8. The P C U wi l l be required to prepare and submit to the Bank two sets o f financial reports:

Quarterly interim financial reports to be submitted no later than 45 days after the end o f each quarter. The format o f the Financial Management Reports (FMR) wil l be agreed by the Bank and included in the operations manual.

Annual audited financial statements to be submitted to the Bank n o later than 4 months after the end o f each o f the Recipient’s fiscal year (October-September). These statements wi l l be audited by an independent external auditor acceptable to the Bank. The audit opinion wi l l be on the project’s annual financial statements, the statements o f expenditures, and the designated account.

9 . In addition, and in accordance to i ts bylaws, EDH wil l have i t s annual f inancial statements audited every year. These annual audits wi l l be done by an accredited auditing firm acceptable to the Bank, and the final audit report wi l l be sent to the Bank..

0

0

91

Disbursement arrangements

10. The project wil l be implemented over a 3-year period, from October 15, 2006 to October 31, 2009. Procurement wil l be completed by July 2009. The proposed allocation o f the grant i s shown in the table below.

Allocation of grant proceeds

Goods Consultant Services

Percentage

3.98 100% 1.02 100%

100% Total Project Cost I 5.99 Unallocated I 0.01

100% 100%

1 Total I 6.00 I 100% I

Risk Assessment

H I S I M I N

Designated account

11. The designated account wi l l be opened at the Recipient’s central bank (Banque de l a Republique d’Haiti) and managed directly by the PCU. However, two signatures wil l be required in order to withdraw hnds from the account. The Project Coordinator from the PCU and the financial management expert o f the PCU wil l have the right o f signature for the use o f this account, and the Minister o f TPTC and the Project Coordinator wil l have the right o f signature for requesting to the Association the replenishment o f this account. The authorized allocation i s expected to be US$400,000.

Statements of expenditures (SOE)

12. statements o f expenditures.

Eligible expenditures paid from the Designated Account wil l be reported on the basis o f

Comments

Risk Analysis

The following matrix summarizes the financial management risk assessment for the project.

2. Funds Flow experience. Arrangeinents to be clearly defined in the operations manual to be approved by the Bank

X

92

H - High S - Substantial M - Moderate N - Negligible or Low

Country risks

13. Although a Country Financial Management Assessment has not been carried out in Haiti, information on the performance o f the country’s public financial management points to significant weaknesses in the budget process, as wel l as internal and external control. Also, corruption constitutes a major issue as indicated by Haiti ’s l o w ranking in the Transparency International Index. However, the Government has made some efforts during the past couple o f years at clari fying the framework and improv ing processes and systems for fiscal management and financial control. In addition, the current project wi l l not be directly affected by these weaknesses given i t s institutional arrangements, which re ly main ly o n a donor funded P C U and financial autonomous entities outside the regular government framework. Consequently, although the country fiduciary risk i s high, i t s impact o n the project i s moderate.

Project risk

14. Given the nature o f the project activities and institutional set up, no major inherent f iduciary risk i s identified. The risk i s ma in ly related to the fact that the P C U wil l be newly established which makes i t more dif f icult to anticipate h o w we l l i t will perform in terms o f financial management and control. However, appropriate measures are taken to ensure that an adequate financial management system including internal control i s in place when project implementation starts. For this reason, the risk i s rated moderate.

Summary o f Strengths and Weaknesses o f FM Arrangements

15. The key strength o f the project i s that i t wil l be implemented by a unit especially established for this purpose with adequate financial management system and procedures, and staffing, which will make i t easier to comply w i th the Bank’s fiduciary requirements. The system i s not yet in place, thus i t s future performance cannot be anticipated based on past experience.

93

Action Plan

The fo l lowing financial management system has been agreed upon between the Bank and GOH:

Supervision Plan

16. Supervision o f the project’s financial management wi l l be based o n desk review o f the quarterly interim financial reports and the annual audit reports. Given the risk assessed, the

project should be visited twice a year by a financial management specialist. The first such visit i s expected during the first two months into effectiveness to provide training to the project’s

accountant and ensure that the accounting system i s in place to meet the reporting requirements.

94

Annex 8: Procurement Arrangements

HAITI: Electricity Loss Reduction Project (PREPSEL)

A. General

1. Procurement for the proposed project wil l be carried out in accordance with the Wor ld Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Loadcredi t , the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and t ime frame are agreed between the Recipient and the Bank in the Procurement Plan. The Procurement Plan wil l be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement o f Works: Works procured under this project wil l include repairs to and replacement o f l o w voltage lines and customer connections, installation o f new consumption meters, and replacement and installation o f new switchgear equipment. I t i s expected that these works wi l l be packaged to create two contracts o f roughly $200,000 to $300,000 each to be procured using NCB procedures. For these and any other small works identif ied in the course o f project implementation, procurement will be carried out using national standard bidding documents (SBD) agreed w i th the Bank for NCB and shopping procedures. In the unl ike ly event that the works can be packaged to attract foreign contractors, the Bank's SBD would be used for any ICB procurement.

3. Procurement o f Goods: Goods procured under this project wil l include: consumption meters and switchgear equipment (estimated contract value $790,000), remote monitoring and other equipment to improve the network (estimated value $1,000,000 installed), as we l l as computers, portable reading terminals (PRTs), telephones and other general equipment for the call center, the commercial agency, the PTU/EDH and the P C U (estimated value $108,000). Procurement o f these goods will be carried out using the Bank's SBD for a l l ICB and national SBD agreed with the Bank for other procurement methods.

4. Procurement o f non-consulting services: The project wil l finance the purchase and installatiordimplementation o f software for a Commercial Customer Management System (CMS) and a Technical Service Management System (TSMS). Since these are highly specialized systems and procurement o f non-consulting services i s a complex undertaking, the project wil l finance two experts in customer and technical service systems for uti l i t ies to assist EDH in the procurement o f the systems, in particular the development o f bidding documents for the processes, Non-consulting services may also be required for training events and project information campaigns. These services will be acquired in accordance with the Bank's Procurement Guidelines. In the case o f the C M S and TSMS, the systems wil l be procured through ICB conducted using bidding documents which will be prepared by the above- mentioned consultants, based o n the Bank's Sample Bidding Document for Procurement o f Non- Consulting Services and the Bank's SBD for Goods, and agreed with the Bank. Any smaller

95

contracts for non-consulting services wil l be carried out using National SBD agreed with the Bank.

5. The project wil l finance contracts w i th consulting f i r m s for, inter alia, preparation o f bidding processes, definit ion o f new operating procedures, installation supervision , customer surveys, communications campaigns, monitoring and evaluation, studies, training, and other capacity building activities. Short l i s t s o f consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely o f national consultants in accordance w i th the provisions o f paragraph 2.7 o f the Consultant Guidelines.

Selection o f Consultants :

6. Where teams o f consultants are not required, individual consultants wi l l be hired to provide specialized advisory services and services to support project implementation and monitoring, as we l l as technical assistance to the agencies involved in project implementation. Universities, government research institutions, training institutions, NGOs and other specialized non-commercial organizations may be contracted to provide technical assistance and carry out research in their areas o f specialization. Such service providers wil l be selected, to the extent possible, through competitive processes based o n the Bank’s Consultant Guidelines.

7. Operating Costs: Sundry items, uti l i t ies and other incremental recurrent costs may be procured by the P C U using the administrative procedures o f the entity in which the PCU i s ult imately housed, although these procedures must first be reviewed and found acceptable to the Bank.

8. Procurement Methods and Thresholds: The procurement procedures and SBDs to be used for each procurement method, as we l l as model contracts for works and goods procured, wi l l be presented in the project Operational Manual. Recommended thresholds for the use o f the procurement methods specified in the grant agreement are identif ied in the table below. These thresholds, as we l l as the requirement for Bank prior review o f al l contracts, are common to al l Wor ld Bank projects in Hait i . In the event that i t i s justif ied by a future assessment o f the procurement capacity o f the Project Coordination Unit, thresholds for prior review may be introduced. In any event, the agreed procurement plan wi l l determine which contracts wi l l be subject to Bank prior review. The negotiated version o f the plan provides for Bank prior review o f 100% o f contracts financed by the Grant.

96

Thresholds for Procurement Methods and Prior Review

Expenditure Category

Contract Value Procurement (Threshold) Method US $ thousands

Contracts Subject to Prior Review

1. Works 21,000 ICB All I I 100-1,000 INCB lAll I

2. Goods

<loo Shopping All Regardless o f value Direct Contracting All >loo ICB All 25- 100 NCB All <25 Regardless o f value

Shopping All Direct Contracting All

Note: ICB = International Competitive Bidding QCBS = Quality- and Cost-Based Selection FBS = Fixed Budget Selection CQS = Selection Based on Consultants’ Qualifications

NCB = National Competitive Bidding QBS = Quality-Based Selection LCS = Least-Cost Selection

3. Consulting Services -3.A Firms

-3.B Individuals

B. Assessment of the agency’s capacity to implement procurement

Regardless o f value QCBS,QBS,FBS,LCS All <loo QCB S ,QB S ,FBS ,LCS, and All

CQS Regardless o f value Single Source All Regardless o f value Comparison o f 3 CVs in All

accordance with Chapter V o f the Guidelines

9 . Procurement activities w i l l be the responsibility o f the Project Coordination Unit (PCU). However, the procurement activities w i l l be carried out in close collaboration with the EDH Project Team. The PCU staff w i l l consist o f a project coordinator, a procurement specialist and a financial management specialist. The procurement specialist i s expected to be a consultant, employed under terms o f reference satisfactory to the Bank.

10. An assessment o f the capacity o f the PCU/ Implementing Agency to implement procurement actions for the project has not yet been carried out, as the PCU has not been established. The assessment w i l l review the organizational structure for implementing the project and the interaction (if any) between the project staff responsible for procurement and the relevant central unit for administration and finance in the Ministry to which the PCU reports.

11. The key issues and r i sks concerning procurement implementation for the project arise from the many weaknesses in the Haitian public procurement system. These weaknesses were identified b y a CPAR prepared by Bank in 1999 and confirmed by the Government and multiple donors in the context o f the Interim Cooperation Framework (ICF) adopted in 2004. The Bank’s Economic Governance Reform Operation (EGRO) and Economic Governance Technical

97

Assistance grant (EGTAG), seek to address many o f these problems through their procurement components and the Government has already taken several actions to improve procurement institutions and practices. These include the adoption o f a new Procurement Decree which creates the Commission Nationale des March& Publics (CNMP) w i th a mandate, inter alia, to improve procurement practices and develop standard bidding documents for use in al l publ ic procurement. The new Decree also formally establishes that competitive bidding practices are the norm and direct contracting the exception for government procurement and includes new provisions governing the procurement o f intellectual (consulting) services.

12. An additional procurement risk, specifically related to this project, arises f rom the weak institutional framework in the electricity sector and i s compounded by EDH’s poor operational and financial performance and dysfunctional organizatio?. Whi le this risk i s unl ikely to be reduced until after the proposdd project, and other investments in the sector, have had some effect, i t can be mitigated in part by the establishment o f a relatively independent PCU, insulated as much as possible f rom the bad practices and inertia that have plagued the sector in past.

13. In addition, as a result o f the Government’s commitment to reform and the application o f the Bank’s Guidelines in various recent Bank-financed operations, some government agencies such as PL-480, the Ministry o f Finance and the Direction de la Protection Civile (DPC), are becoming increasingly familiar w i th the basic principles o f open and fair procurement. This familiarity, combined with the expected broad dissemination o f information on new procurement procedures to a l l purchasing agencies, i s expected to mitigate some risks. However, the overall project risk for procurement reniains HIGH.

C. Procurement Plan

14. The Recipient, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan was agreed between the Recipient and the Wor ld Bank o n June 23, 2006 and i s available at EDH Headquarters in Port- au-Prince. I t wi l l also be available in the project’s database and in the Bank’s external website. The Procurement Plan wi l l be updated in agreement w i t h the Wor ld Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency o f Procurement Supervision

15. Supervision wil l be carried out primari ly through the prior review by the Bank o f a l l procurement actions by the PCU. This exceptional level o f Bank oversight may necessitate the engagement by the Bank o f a local consultant to work with EDH and the PCU. In addition, day- to-day procurement supervision wi l l be supplemented by supervision missions at least twice a year.

E. Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

(a) List o f contract packages to be procured fo l lowing ICB and direct contracting (no direct contracting i s foreseen in the agreed procurement plan):

98

2 1 3

Contract (Description)

Customer Management System (CMS)

Estimated Cost

$1,350,000

u Meters,switch $790,000 gear and other

PRTs, call center equipment, phones, etc. I Remote I $1,000,000 metering

Method Preference (yeslno)

1

I I

ICBorNCB No N o

7

Review by Bank (Prior I Post)

Prior

Prior

Prior

Prior

Prior

8 1 9

Expected Bid- Opening

Comments

Month 7 + Month 5

Month 5

Month 5

Method wil l depend on foreign supplier interest

I I

(b) All ICB contracts and all direct contracting w i l l be subject to prior review by the Bank,

2. Consulting Services

(a) No consulting assignments with short-list o f international f i r m s are expected under this project in light o f the small estimated value o f the consulting services contracts.

(b) All selection processes for consultancy services w i l l be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short l i s ts o f consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

99

Annex 9: Economic and Financial Analysis

HAITI: Electricity Loss Reduction Project (PREPSEL)

This Annex provides the detailed computations and explanations o f the assumptions underlying the economic and financial analysis discussed for the Project. The assumptions made are as fol lows :

costs

1. The costs consist o f capital and operating costs. The capital costs wi l l cover 1) the investments needed for renovation o f l o w voltage lines and customer connections, installation o f new consumption meters, replacement and installation o f new switchgear equipment in the selected zone, 2) the investments needed for installation o f remote metering and disconnection and reconnection devices in a l l points o f supply to regularized large customers; and 3) the technical assistance activities supported under the project, without wh ich the project outcomes would not be achieved. The technical assistance activities include corporate commercial management and technical service management systems, creation o f a Large Customers Direction in EDH and technical assistance in remote metering for large customers. The operating costs include the incremental administrative (meter reading, billing etc) costs in a form of in-kind contribution f rom EDH as we l l as incremental costs o f maintaining the network also to be contributed by EDH.

2. The project i s expected to take 36 months to implement during which the capital costs wil l occur. All capital costs are in US dollars. Operating costs wi l l occur over the project l i fet ime o f 10 years. The administrative costs wil l occur o n a yearly basis while there wi l l be no costs for maintaining the metering equipment during the l i fe o f the project as the equipment are expected to be replaced after 15 years.

3. O&M costs are split between (1) maintenance o f software, wh ich accounts for 20% o f software investment cost per year and, (2) maintenance o f network, wh ich accounts for 10% o f network investment every year.

Benefits

4. From the financial po int o f view, the major benefits to EDH for implementing both components proposed under the project wou ld be: 1) increased revenues resulting f rom the increase in b i l led sales o f electricity to customers in the selected zone and to the currently active, large customers in Port au Prince and f rom the increase in collection o f bill payment; 2) increased revenues resulting f rom the increase in average consumption o f the non-active and zero-kWh large customers to be regularized by the project.

5. F rom the economic point o f view, net benefits to the society to be yielded f rom this project include the consumer surplus because o f the expected increased consumption demonstrated by additional electricity to be injected to the network at a price below the consumer’s willingness to pay. Ne t economic benefits do not include the recovery o f commercial loss through improved metering, billing and bil l collection to EDH, because the latter i s

100

essentially a transfer of financial benefits from the customers to EDH. Other economic benefits include more reliable electricity supply and better quality o f customer services which are not quantified in this analysis but will be closely monitored during the project implementation.

6. The consumer surplus calculated using the fo l lowing methodology (see Figure A.1 below). The present situation i s depicted in the graph above with price PO and electricity supply as Qo. A t the current l o w price of Qo, consumers would l i ke to consume Q3, but are on ly able to get Qo, thereby facing a shortage of electricity in aggregate. Present consumers receive gross economic benefits depicted under the demand curve by areas 1+2+3+4, and out o f that gross benefit their f inancial expenditure i s area 1 (Po*Qo). A t the same t ime producers are making a loss of areas 2. Hence the net surplus to society i s 3+4.

7. When the price i s raised to cover the costs o f supply the new price becomes PI and in this case the project expands the quantity supplied to Q,, whereby gross economic benefits are increased by the area 5+6+7. A t the same time since the price i s increased to PI, payments are made o f 1+2+6+7. Hence the new net surplus i s 3+4+5 and the change in net surplus i s 3+4+5- (31-4) = 5.

MWTP

PI

P O

.............................................. ‘1, l 6 2

................................................ ’ 1 ’ Qo QI QI

Figure A.l: Consumer surplus from the Project

In order to estimate this change in consumer benefit, an estimate o f the Marginal Willingness to Pay (MWTP) i s required. Given this value, the area ‘5’ i s given by: 0.5 *(MWTP-PI)*(Q, -Qo)

8. There i s currently n o data available for the consumer willingness to pay (WTP) at the given supply and service provided. There have been some diesel generators used in Port au Prince which could have been an indicator o f the consumer’s W T P for reliable supply and quality service, however such cost data are not available at the project design stage. The communications component supported by this project wil l include a W T P survey, among others, during project implementation. For the purpose o f project economic analysis, we assume the M W T P i s approximately equivalent t o the marginal supply cost o f EDH which i s a very conservative assumption. The marginal supply cost at EDH i s estimated to US$0.25/kWh and i s assumed to increase at a rate o f 5% per year.

101

Other assumptions

9. Other key variables and parameters used in the calculations are as follows:

(i) Selected zone - -

The benefits o f the project occur from the year 2008. The energy supplied to the zone increases by 2% a year in year 2 and 3, and 3% in year 4 and 5, and 4% thereafter. The Cash Recovery Index (CRI) rises from 3 1 % in 2006 and 2007 to 35% in 2008, 5 1 % in 2009,63% in 2010,71% in 2011 and 78% from 2012 on. Tariffs (excluding subscription fees, which remain constant) increase by 2% in real terms on average every year from year 1 o f the project. Since EDH i s making losses and heavily subsidized b y the government, i t currently pays no corporate tax. The corporate tax i s assumed to be 0% throughout the project.

-

-

-

- Discount rate i s 12%

(ii) Large customers - -

The benefits o f the project occur from the year 2008. From year 2 on, 5% o f residential non active and 4% o f Okwh residential customers, 3% o f other non active and 2% o f Okwh customers are regularized (Le. connected to the network, metered and billed) every year. Consumption o f customers increases by 1.5% in 2008, and 1% per year from 2009. Collection rates increase by 1 % per year for all customers. Tariffs (excluding subscription fees, which remain constant) increase b y 2% in real terms on average every year from year 1 o f the project. Since EDH i s making losses and heavily subsidized by the government, i t currently pays no corporate tax. The corporate tax i s assumed to be 0% throughout the project.

- - -

-

- Discount rate i s 12%

Results

10. The project i s estimated to yield a net economic NPV o f US$ 0.5 mi l l ion and US$ 3.9 mi l l ion and an EIRR o f 15% and 42% for the selected zone and large customers, respectively. The EIRR for both components are above the hurdle rate o f 12%. The NPVs o f the project financial return are estimated to be US$ 7.5 mi l l ion and U S $ 13.8 million, and the FIRRs 49% and 91% for the selected zone and large customers, respectively.

1 1. The sensitivity analysis o f the FIRR to the delay in realization o f project benefits, power shortage, and the lack o f willingness to pay by consumers (manifested as no improvement in CRI) shows that the project financial viability in the zone i s very sensitive to variations in these parameters. A combination o f delay in project implementation and no continuous improvement in CRI could reduce the FIRR below the opportunity cost o f capital, making the project financially unjustifiable, not to mention other potential risks associated with the project. The financial viability remains robust in absolute terms for the large customers component for the variations o f the parameters considered. However, i t i s most sensitive to the number of non- active and zero-kWh large customers to be regularized and the collection rate.

102

0 r. r

0 N N

0

- 0 0 0

I

0 r

r n (On -

d 0

Table A.3 Sensitivity Analysis of Financial Rate o f Return

~~~

Scenario 1) Select Zone

Base case Delay in implementation by one year CRI rises 10%/year to 50% in 2012 and remains stagnant thereafter Energy drops 15% in year 3 and picks up thereafter; CRI constant at year 3 and increases as expected thereafter Delay in implementation by one year; CRI rises to 50% in 201 2 and remains

2) Larae customers stagnant thereafter.

FlRR (Yo)

49% 36% 15% 17%

10%

Base case

Collection rates are constant

Delay in implementation by one year Only 1 YO of non active/Okwh customers are regularised every year Because of inadequate supply, consumption drops 15% on year 3, picking up thereafter Delay in implementation by one year; 1 % of customers regularized Collection rates are constant, 1 YO of regularised customers/year.

105

91% 74% 58% 57%

55% 46% 3 0%

Annex 10: Safeguard Policy Issues

HAITI: Electricity Loss Reduction Project (PREPSEL)

The project does not trigger any o f the Bank’s Environmental or Social Safeguard Policies. If any changes o f environmental or social significance should arise during project implementation, Bank policies wi l l apply.

106

Annex 11: Project Preparation and Supervision

Planned Actual PCN review January 19,2006 January 19,2006 Initial PID to PIC Initial I S D S to PIC

Negotiations June 2 1-22,2006 Board/RVP approval August 1 ",2006 Planned date o f effectiveness October 16, 2006 Planned date o f mid-term review April 16, 2008 Planned closing date October 16, 2009

Appraisal April 17-2 1,2006 April 5-8,2006

Key institutions responsible for preparation o f the project: Electricite d'Haiti (EDH) Ministry o f Public Works, Transport and Communications (MTPTC) Ministry o f Economy and Finance (MEF)

Bank staff and consultants who worked on the project included:

Name Title Unit Clemencia Torres de Mastle Senior Regulatory Economist LCSFE Solange Al l ia l i Paul Altidor Pedro Antmann Karen Bazex Hilarion Bruneau Maria Elena Castro Alejandro Cedeiio Charles M. Feinstein Kat h ari n a G amh art er Stephan Claude Frederic Gamier Ghislaine Kieffer Fernando Lecaros Patricia E. Macgowan Ulr ich Myboto Ahmadou Moustapha Ndiaye

Xiaoping Wang

Peer Reviewers Name Reynold Duncan Michel Layec Prasad Tallapragada,

Sr. Counsel Consultant Consultant Consultant Sr. Finance Officer Sr. Social Scientist Communications Expert Sector Leader E T Consultant Power Engineer E T Consultant Sr. Energy Specialist Sr Procurement Spec. Consultant Lead Financial Management Specialist Energy Specialist

LEGLA LCSFE LCSFE LCSFE L O A G l LCSEO LCC3C LCSFP LEGLA AFTEG LCSFR LCSFE LCOPR LCSFE L C O A A

LCSFE

Title Unit Lead Power Engineer MNSIF Lead Energy Economist AFTEG Sr Energy Specialist AFTEG

107

Bank funds expended to date on project preparation: 1. Bank resources: 2. Trust funds: 3. Total:

Estimated Approval and Supervision costs: 1. Remaining costs to approval: 2. Estimated annual supervision cost:

108

Annex 12: Documents in the Project File

HAITI: Electricity Loss Reduction Project (PREPSEL)

1. Hayti: Cadre de Cooperation Intkrimaire: Groupe Thematique Energie- Sous- Secteur Electricite, Ma i 30, 2004.

2. Transitional Support Strategy for the Republic o f Hayti, December 10,2004.

3. Bi lan du CC Juillet 2004-Mars 2006, Axe 3: Relance economique:Table '

Sectorielle Electricite, Rene Jean Jumeau, Pierre Frangois Sildor, April 28, 2005

4. Memorandum o f Understanding for the Rehabilitation o f the Electricity Sector, signed in Brussels on October 2lS', 2005.

5. Survey to a sample o f customers and employees o f EDH: Findings and assessment. - Altidor, P. - March 2006.

6. Diseiio de un Cuadro Institucional para superar la Crisis Electrica-Infonne Preliminar, Cappadoro, Guillermo, CEMEP, Junio 2003,

7. Diagnostic0 Economico-Financier0 de Electricite d'Hai'ti-Informe Final, Zoratti, Alberto, CEMEP, Junio 2003.

8. Project Performance Audit Report: Haiti: First Power Project (Credit 645-HA), December 30, 1980.

9. Project Completion Report: Haiti: EdH: Second Power Project (Credit 895-HA), October 28, 1986

10. Project Completion Report: Haiti: Third Power Project (Credit 128 1-HA), November 30,1990

1 1. Implementation Completion Report: Haiti: Fourth Power Project (Credit 1527- HA), January 22, 1996

12. Implementation Completion Report: Republic o f Haiti: Fifth Power Project (Credit 2053-HA), July 29, 1999

109

Annex 13: Statement of Loans and Credits

HAITI: Electricity Loss Reduction Project (PREPSEL)

Project ID FY Purpose

Difference between expected and actual disbursements Onginal Ainoiint in US$ Millions

IBRD IDA SF GEF Cancel Undisb Ong Fnn Rrv'd

PO80721 2004 6R HIV/AIDS PREVENTION AND 000 0 0 0 000 000 000 748 2 82 0 00

PO73389 2003 GEF MACC 6R Mainstreaining Adapt to 0 00 0 00 0 00 5 00 0 00 3 14 4 44 0 00 CONTROL

Clima

Total: 0.00 0.00 0.00 5.00 0.00 10.62 7.26 0.00

HAITI STATEMENT OF IFC's

Held and Disbursed Portfolio In Mil l ions o f US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1996 ECHMB 0.00 0.37 0.00 0.00 0.00 0.37 0.00 0.00

1997 Scotiabank 25.00 0.00 0.00 25.00 0.00 0.00 0.00 0.00

Total portfolio: 25.00 0.37 0.00 25.00 0.00 0.37 0.00 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

Total pending commitment: 0.00 0.00 0.00 0.00

110

Annex 14: Count ry at a Glance HAITI: Electricity Loss Reduction Project ( P R E P S E L )

P O V E R T Y a n d S O C I A L L a t i n

A m e r l c a Low- H a i t i & Car ib . i n c o m e

2004 Populalion, mid-year (millions) 8.6 GNIpercapita (Atlas method, US$) 390 GNf(AI/asmelhod, US$ billions) 3.4

A v e r a g e annual g r o w t h , 1998.04

Population (%J 19 Laborforce (%j 2.3

M o s t r e c e n t e s t i m a t e ( l a t e s t year a v a i l a b l e , 1998.04)

Poverty /%of population be10 wnationalpovertylinej

Life expeclancyat birth (yaars) 52 Infant mortality (per l,OOOllve births) 76 Child malnutrition (%ofchildren under 5) TI Access l o an improvedwatersource (%ofpopulation) 71 Literacy (%ofpopulation age 159 52 Gross primaryenrollment (%of school-age population)

Urban population (%of fotalpopulation) 38

Male Female

K E Y E C O N O M I C R A T I O S a n d L O N G - T E R M T R E N D S

1984 1994

GDP (US$ billions) 18 2.4 Gross capital formationlGDP 15.9 9.1 Exports of goods and sewiceslGDP 7.5 5.4

Gross nationai savingsiGDP 5.1 Gross domestic savingsiGDP 6.8 2.9

Current account balanceiGDP -4.0 Interest paymentslGDP 0.4 0.0 Total debtlGDP 38.4 26.0 Total debt servicelexports .. 2.7 Present valueof debtiGDP Present valueof debtlexqorts

1984-94 1994-04 2003 (average annualgro wth) GDP -15 0.9 0.4

Emorts of goods and sewices -6.5 9.8 35.6 GDP percapila -3.4 .1.2 -14

541 3,600 1,948

1.4 0.9

77 71 28

89 89 723 726 a2

2003

2.9 31.0 8.4 0.2

27.4

-4.8 0.5

34.1 4.1

32.6 76.5

2,338 5 0

1,B4

18 21

31 58 79 44 75 61 94 0 1 88

2004

3.5 23 3 ?42 .3.7 20.3

-2.8 10

28.0 7.7

2 0 0 4 2004-08

-3.8 3.1 -5.5 1.5 5.7 3.7

D e v e l o p m e n t d i a m o n d '

Life emectancy - 1

GNI Gross per +----------i primary capita enrollment

I Access to improvedwatersource

~ Haiti Lo w-income group

E c o n o m i c rat ios.

Trade

Domestic , 1 *> , Capital savings formation

t Indebtedness

" Haiti Low-income group

111

Haiti

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i c e s (%change) Consumer prices Implicit GDP deflator

G o v e r n m e n t f i n a n c e (%of GDP, includes current grants) Current revenue Current budget balance Overall surplusldeficit

T R A D E

(US% millions) Total exports (fob)

Coffee Sisal and sisal strings Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (2000-00) Import price index(2000=WO) Terms of trade (2000=00J

B A L A N C E o f P A Y M E N T S

(US$ millions) ~ x p o r t s of goods and services Imports of goods and Services Resource balance

1984

11.1

1984

230 46 t3

125 352

80 61 81

1984

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

M e m o : Reserves including gold (US$ millions) 23 Conversion rate (DEC, local/US$) 5.0

E X T E R N A L D E B T a n d R E S O U R C E F L O W S 1984

698 IBRD 0 IDA 150

(US$ millions) Total debt outstanding and disbursed

Total debt Service IBRD IDA

34 0 1

Composition of net resourceflow Official grants 44

Foreign direct investment (net i n f l o w ) Portfolio equity(net i n f l o w ) 0

Official creditors 52 Private creditors -5

5

Wodd Bank program Commitments Disbursements Principai repayments Net f l o w Interest payments Net transfers

0 30 0

30 1

29

1994

42.6 83.0

3.8 -1.1 -14

1994

138 7 1

89 183 67 46

8

1994

u 1 281

-150

2 52

-97

142 -45

41 14.7

1994

631 0

248

4 0 0

598 -3 0 0 0

0 0 0 0 0 0

2 0 0 3

32.5 25.5

9 1 -0.3 -3.7

2 0 0 3

361

330 118

2 0 0 3

46 1 1,400 -939

-a 811

.140

230 M

207 40.5

2 0 0 3

994 0

212

51 0 0

95 15 0 8 0

0 0 0 0 0 0

2 0 0 4

215 23 4

8 9 -0 3 -3 8

2 0 0 4

366

3 7 1 8 4

372

2 0 0 4

502 1456 -953

-t3 863

-98

'66 -59

2 0 39 7

2 0 0 4

990 0

8 4

136 0

33

-56 0

0 0

27 -27

6 -33

99 00 01 0, 03 I] GDPdeflatar A C P I

E x p o r t a n d I m p o r t l e v e l s (US$ mil l .)

1 GOO

500

0

' C u r r e n t a c c o u n t b a l a n c e t o G D P ( O h )

l C o m p o s l t l o n o f 2 0 0 4 d e b t ( U S 0 mill.)

G 124 __ 8 194

1 D 468

1 A . IBRD E . Bilataai 1 8 . IDA

, C - I M F G - Shart-terr D - Other rmllilaterd F . Private

Note:This tablewas producedfrom the Development Economics LDB database. 8/25/05

112

Annex 15: Maps

HAITI: Electricity Loss Reduction Project (PREPSEL)

113

PalaisPalaisdes ministeresdes ministeres

PalaisPalaisNationalNational

Palaisdes ministeres

PalaisNational

Kampech/Kampech/BaillèrgeauBaillèrgeau

DercolineDercoline

RelaxRelaxAnnieAnnie

Cité AndréCité André

La GrotteLa Grotte

ManrèseManrèse

Cité Canada/Cité Canada/GeorgesGeorges

KamoroKamoro

Kampech/Baillèrgeau

Dercoline

RelaxAnnie

Cité André

La Grotte

Manrèse

Cité Canada/Georges

Kamoro

P O R T- A U - P R I N C EP O R T- A U - P R I N C EP O R T- A U - P R I N C E

NORD - OUEST NORD - OUEST

ARTIBONITE ARTIBONITE

CENTRE CENTRE

GRANDE- GRANDE- ANSE ANSE

NORD - OUEST

NORD

NORD- EST

ARTIBONITE

CENTRE

OUEST

SUD - EST SUD

GRANDE- ANSE NIPPES

Jacmel

Hinche

Jeremie

Gonaives

Les Cayes

Cap-Haitien

Fort-Liberte

Port-de-Paix

MiragoânePORT-AU-PRINCE D

OM

INIC

AN

R

EPU

BLI

C

CUBA

H A I T I

Caribbean Sea

Golfe de la Gonâve

ATLANTIC OCEAN20°N

74°W 73°W 72°W

18°N

19°N

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

IBRD 34736

JUN

E 2006

HAITI

PREPSELProject Area

Bidonvilles

Main Roads

Secondary Roads