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Document of

The World Bank

Report No: 115279

IMPLEMENTATION COMPLETION AND RESULTS REPORT (ICR)

ON A

SMALL GRANT1

IN THE AMOUNT OF US$2.9 MILLION

TO THE

KINGDOM OF TONGA

FOR A

ENERGY ROADMAP INSTITUTIONAL AND REGULATORY FRAMEWORK

MAY 26, 2017

Energy and Extractives Global PracticeTimor-Leste, Papua New Guinea & Pacific Islands

East Asia and Pacific Region

1 This ICR satisfies any other requirement for small grants completion reporting

ABBREVIATIONS AND ACRONYMS

ASTAE Asia Sustainable and Alternative Energy Program EMP Environmental Management PlanGoT Government of Tonga IFR Interim Financial ReportsMEIDECC Ministry of Energy, Environment, Climate Change, Disaster Management,

Meteorology, and Information and CommunicationsMTR Mid-Term ReviewMR Medium RangeNDC Nationally Determined ContributionsOPCS Operations Policy and Country ServicesPAD Project Appraisal DocumentPDO Project Development ObjectivePPP Public Private Partnership PRIF Pacific Region Infrastructure Facility PV Photovoltaic SAIDI System Average Interruption Duration IndexSCADA Supervisory Control and Data AcquisitionTERM Tonga Energy Road MapTERM – A Tonga Energy Roadmap Agency TERM – C Tonga Energy Roadmap Committee TERM – IU Tonga Energy Roadmap Implementation UnitTFSU Technical and Fiduciary Services UnitTPL Tonga Power Limited

At Approval At CompletionRegional Vice President: Pamela Cox Victoria Kawaka

Country Director: Ferid Belhaj Michel KerfSector Director/Senior Global Practice

Director:John Roome Riccardo Puliti

Sector Manager/Practice Manager: Charles Feinstein Jie TangTeam Leader: Roberto G. Aiello James Neumann

ICR author: Renee Berthome

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KINGDOM OF TONGAEnergy Roadmap Institutional and Regulatory Framework Strengthening Project

DATA SHEET............................................................................................................................... iiiI. Project Context, Project Development Objectives and Design..............................................11II. Key Factors Affecting Implementation.................................................................................15III. Assessment of Outcomes....................................................................................................19IV. Risk to Sustainability...........................................................................................................24V. Lessons Learned...................................................................................................................25Annex.......................................................................................................................................28

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DATA SHEET

A. Basic Information Region: East Asia and Pacific Country TongaGlobal Practice Energy and Extractives Joint with IFC NoRecipient: Kingdom of Tonga Implementing

Agencies:Tonga Energy Roadmap Implementation Unit andTonga Power Limited

Sector(s)/Theme(s):

Other Energy and Extractives

Environment and Natural Resource Management - Air quality

management- Water Pollution- Soil Pollution

100%

33%33%33%

Executed by: RecipientProject ID: P131250 TF Name and

Number(s):ASTAE: TF12318PRIF: TF12699

Original Grant Amount:

US$2.9 million Donor(s): Asia Sustainable and Alternative Energy Program (ASTAE) and Australian Aid

Revised Amount: US$2.9 million Disbursed Amount:

US$2,631,087.99

Environmental Category:

B Safeguards Triggered:

OP4.01

B. Key Dates Process Date Process Date Concept Review:

4 May 2012 Effectiveness: 25 September 2012

Appraisal: 15 May 2012 Restructuring(s): 18 December 201421 December 2015

Approval: 25 June 2012 Closing: 31 December 2015Revised Closing 31 December 2016

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Date: (if any)C. Ratings Summary

Outcomes: MSImplementation: MURisk to Sustainability: M

D. Results Indicators

Indicator Baseline Value Original Target Values

Formally Revised Target Values

Actual Value Achieved at Completion

Indicator 1 Petroleum risk management framework completed Value (quantitative or qualitative)

No – No risk framework currently in place.

Yes – Risk management framework adopted.

Yes – Risk management framework adopted.

Date 25-Jun-12 31-Dec-2016 31-Dec-2016Comments/Explanation

The target has been achieved. To assess Tonga’s high vulnerability to oil price shocks and interruptions in the delivery of fuel, the Government of Tonga (GoT) undertook extensive financial and legal analysis through a Petroleum Supply Chain assessment and options analysis examining petroleum supply and storage options as well as potential Public Private Partnership (PPP) ownership arrangements. Together, these constitute the risk management framework. At this stage, GoT is holding discussions with the private sector and it is not yet clear whether the preferred options will be implemented. In parallel to the completion of the Petroleum Supply Chain assessment and options analysis, the GoT requested that the technical assistance be expanded to include the development of an Energy Framework Bill.

Indicator 2 Environmental and Social Management Framework Completed Value (quantitative or qualitative)

No – Significant gaps in existing environment and social management framework.

Yes – Framework submitted to Cabinet for approval.

No – Environmental and Social Management Framework was completed and with government for dissemination.

Date 25-Jun-12 31-Dec-2016 31-Dec-2016Comments/ The target has substantially been achieved. The final ‘Guidelines for land

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Explanation acquisition approvals, environmental permits, building permits, development partner environmental and social impact requirements for Renewable Electricity Generation and Electricity Infrastructure’ and the ‘Codes of Environmental Practice: Managing Environmental and Social Impacts for Renewable Electricity Generation and Electricity Infrastructure’ were completed and delivered to Government in September 2016. The Guidelines and Codes of Environmental Practice are with Government for dissemination and implementation. However, the Guidelines and Codes of Environmental Practice have not yet been submitted to Cabinet for approval.

Indicator 3 Improvements in network reliability indexes Value (quantitative or qualitative)

155.0 minutes – System Average Interruption Duration Index (SAIDI), measured as minutes/yr./customer. Twelve-month rolling average for Tongatapu, excluding extreme events.

86.05 minutes 88.0 minutes

Date 25-Nov-12 31-Dec-2016 31-Dec-2016Comments/Explanation

The target has substantially been achieved. In July 2016, 88 minutes were recorded, which represents a 98 percent achievement of the end target, and there were no unplanned outages (0 minutes) up to the time of project closing, which suggests an overall improvement in network reliability. However, a reading of 159 minutes was recorded at project closing. The increase in minutes recorded was due to planned outages for Tonga Power Limited (TPL) to carry out High Voltage upgrades. While the project has funded technical assistance to support improved planning and modelling, and some network reliability investments during the last few months, it is difficult to directly attribute improvements in network reliability indexes to the project. Moreover, the overall objective of Component 2 of the project was to prepare TPL for increased renewable energy generation on the grid network and not to replace the existing network infrastructure.

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Indicator 4 Ability of TPL to model and predict the effects of new generation on the power systems

Value (quantitative or qualitative)

No – No overall system modeling software utilized.

Yes – Outputs from park of asset management planning process.

Yes – System modeling software in use and system plans developed.


Target has been achieved. Modelling software was installed and commissioned and is currently in operation and being utilized by TPL staff that have been trained in its use. TPL has invested in further ongoing training for the development and utilization of the installed software.

E. Intermediate Outcome Indicators

Indicator Baseline Value Original Target Values

Formally Revised Target Values

Actual Value Achieved at Completion

Indicator 1 Adequate Staffing of TERM-IU Value (quantitative or qualitative)

No – TERM-IU Director Only.

Yes – TERM-IU CEO and admin staff in place; sectoral specialists hired.

Yes – TERM-IU CEO and admin staff in place; ministry sector specialists available for collaboration.


Target has been achieved. In 2014, the Tonga Energy Road Map Implementation Unit (TERM-IU) office had 5 staff; two professional staff, the TERM Director and Statistician, and three support positions, Administration Officer, Executive Officer and a General Duties position. All staff were funded by a United Arab Emirates Trust Fund. At this time, the TERM-IU was integrated into the Ministry of Energy, Environment, Climate Change, Disaster Management, Meteorology, and Information and Communications (MEIDECC), which was created by cabinet approval on May 12, 2014 and became effective on July 1, 2014. To date, TERM-IU has been a separate unit within MEIDECC but an Energy Department was established under MEIDECC, which can also support TERM-IU. While the number of staff within the TERM-IU has decreased overtime (at the time of project closing there were two staff directly working for TERM-IU, the Director and an administrative staff member), based on the

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current role and function of the TERM-IU, the current staffing arrangements are considered adequate.2

Indicator 2 Control and protection equipment installation to enable the network for intermittent renewable energy generation


No – Control and protection systems currently inadequate for high penetration renewable energy generation

Yes – Equipment and/or network upgrades installed and operational

Yes – Equipment has been installed.


This target has been achieved. Through technical assistance funded under the project, TPL identified the equipment needed to upgrade the network control systems in order to improve overall network reliability and the ability of the network to accept high levels of intermittent renewable energy generation, including power system control and communication upgrades, such as enhanced SCADA capacity, and additional protection settings. The reconfiguration of the radial network into a ring topology network will enable intermittent renewable energy to be generated in multiple directions from the source, e.g. if a fault occurs from one end, the energy can be directed in the opposite direction without a total islanding effect.

Indicator 3 Feasibility studies relating to fuel substitution, coconut biomass/biofuel, wind generation, solar PV generation, energy storage and demand side management


No – Technical and commercial viability of large scale implementation of renewable generation is not well determined

Yes – Feasibility studies and technical options reports completed

NA

Date 25-Jun-12 31-Dec-2016Comments/Explanation

Indicator was deleted during 2015 Restructuring. The proposed activity was completed by TPL with assistance from another development partner for the wind generation, however, energy storage and demand side management was completed under the project.

2 It is noted that the project did not fund any consultant positions within TERM-IU, except for the TERM-IU Advisor and a short term communications consultant at the commencement of the project and a short term Procurement Advisor in 2015.

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Indicator 4 Development Plan for the grid completedValue (quantitative or qualitative)

No – Out-dated studies with insufficient detail to support good planning

Yes – Plans incorporated into the asset management plan and disclosed to TERM – C

Yes – Renewable Energy Master Plan was developed.


Indicator was deleted from the PDO Indicators and moved to intermediate indicators during 2015 Restructuring.

This target has been achieved. Through technical assistance funded by the project, TPL prepared the ‘Tonga Renewable Energy Master Plan’. The Master Plan guides how to develop the next three solar Photovoltaic (PV) installations to achieve the least cost implementation of a high renewable energy penetration power system. The Master Plan also considers the Government’s desire to move towards 100 percent renewable energy electricity generation and aligns the recommendations to ensure that the generation developments are consistent with these longer terms goals.

Indicator 5 Summary report of processes and documents required for investment in generation systems


No – No current processes defined.

Yes – Processes used as the basis for the implementation of multiple projects.

Yes – processes and documents are in place.



This target has been achieved. TPL prepared a ‘Business Plan 2017-2020’ and an ‘Asset Management Plan (Generation & Distribution)’ based around the various projects identified under the Renewable Energy Master Plan.

Indicator 6 A well-developed power system planning document for the years 2012-2017Value (quantitative or qualitative)

No – Power system planning documentation, asset management plan, and strategic plan exist; but need to be strengthened.

Yes – Power system plan revised by TPL to reflect implementation status, and disclosed to TERM-

Yes – system planning document is in place.

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C. Date 25-Jun-12 31-Dec-2016 31-Dec-2016Comments/Explanation


This target has been achieved. Notwithstanding long delays in procurement and optimistic timeframes to achieve the outcomes, TPL has a set of well-developed power system planning documents in place.

Indicator 7 Kilometers constructed of new feeder linesValue (quantitative or qualitative)

0 km 7.5 km 2.06 km


Intermediate indicator added during 2015 Restructuring.

The target has strictly not been achieved. Due to initial bids for the supply and construction of the new feeder line being too expensive, the scope of work was split between the supply of materials and the construction of the new lines. The project supported the supply of materials to construct 7.5km of feeder lines and TPL would undertake construction of the lines. All materials required for the lines were supplied to TPL by project closing. TPL has completed the construction of 2.06km of feeder lines. The second phase of installation of feeder lines has been delayed due to a financial shortfall in the 2016 financial year. The second phase will commence in the new financial year (July 2017) and is expected to be completed by December 2017. In order to allow for the fourth feeder to be successfully installed, TPL will increase the total distance to 9.56km from 7.5km. The remaining 7.5km will be installed by December 2017.

A. Restructuring (if any)

Restructuring date(s)

Board Approved PDO Change

ISR Ratings at Restructuring

Amount Disbursed at Restructuring (USD millions)

Reason for Restructuring & Key Changes Made

DO IP

12/18/2014 MU MU 1.01 Twelve-month closing date extension of the ASTAE trust fund to allow adequate time for the TERM-IU to finalize the consulting contract for a petroleum assessment under

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Component 1 of the project. The disbursement estimates were aligned with the proposed closing date of the grant (December 31, 2015). The closing date of the ASTAE grant was aligned to the Project closing date (December 31, 2015). The project closing date was not extended and there were no changes to the results framework.

12/21/2015 N MS MS 1.28 Twelve-month closing date extension to allow adequate time for the TERM-IU to finalize the petroleum assessment, the energy policy work and the environmental and social guidelines under Component 1 of the project, and for TPL to finance networks upgrades under Component 2 to improve the penetration of renewable generation in Tongatapu. Other changes included (i) revised PDO and indicators to reflect the change in scope; (ii) changed environmental category from C to B; and (iii) updated disbursement projects. The new closing date was December 31, 2016.3

3 The change to the PDO was not approved by the Board because the original project was approved by the Country Director and the Level 1 restructuring was approved by the Regional Vice President, in accordance with the small Recipient Executed Trust Fund guidelines.

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I. Project Context, Project Development Objectives and Design

1. Government Strategy in the Energy Sector: The Tonga Energy Road Map 2010-2020

Prior to the commencement of the project, in 2009, the GoT, with support from the World Bank and other development partners, undertook a sector-wide review of the energy sector and developed an approach to improving sectoral performance and mitigating risks. The resulting document entitled the ‘Tonga Energy Road Map 2010 – 2020: Ten Year Road Map to Reduce Tonga’s Vulnerability to Oil Price shocks and Achieve an Increase in Quality Access to Modern Energy Services in an Environmentally Sustainable Manner’ or ‘Tonga Energy Road Map’ (TERM). TERM addresses improvements in petroleum supply chain and consideration of price hedging instruments, increased efficiency both in electricity supply and use, development of grid-connected domestic renewable energy resources, improved access to quality electricity services in remote areas, reduced environmental impacts both locally and globally, enhanced energy security, and improved overall sector financial viability. TERM was approved under Cabinet Decision 739 of August 20, 2010.

The TERM was developed as a process to organize the sector which resulted in a high level directions documents with an established dialogue decision making process. The TERM sets out priority actions in the areas of policy, legal, regulatory and institutional arrangements, and sets out an investment program based on a least cost approach for reducing reliance on diesel for power generation, with explicit consideration given to managing risk through development for a portfolio of options to meet the demand for electricity. The TERM also recommends a detailed program of actions with indicative funding sources and costs for each element. The TERM serves as the guiding document for actions by the GoT and TPL and for development partner support and coordination.

The TERM Agency (TERM-A) was established through Cabinet Decision No. 330 of April 20, 2012 as a Government Agency responsible for achieving the objectives of TERM on behalf of the Government. 4 All energy related projects detailed under TERM are the responsibility of the TERM-A. Within the TERM-A there is the TERM Committee (TERM-C), a governing entity within TERM-A that has a Governance structure allowing it to operate with its own legal personality and with full delegation from Cabinet. TERM-C is made up of CEO’s of key Government portfolios, Ministers, Directors and Secretaries of key government ministries. TERM-IU is the operating entity under TERM-C directly implementing TERM. It was intended that TERM-IU would eventually become a Department of Energy located in a Government ministry or a fully-fledged Ministry of Energy. Figure 1 represents the structure of TERM’s governance arrangements.5

The process of developing and implementing the TERM is widely seen in the region as a concrete example of a new paradigm for Government leadership and development partner coordination to develop a vision, and then undertake sensible planning needed for coordinated implementation. The

4According to its mandate, TERM-A acts on behalf of cabinet and is accountable directly to it5 A Cabinet paper, approved on August 17, 2012, clarified the role of the TERM-Committee (TERM-C), TERM-IU and TPL and endorsed the establishment of a Technical Sub-Committee comprising of staff from TERM-IU, TPL and other relevant Government bodies, to discuss project proposals prior to going to TERM-C for approval.

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project provided assistance to strengthen the core institutions and regulatory framework relating to TERM and was a key precursor for the ongoing and planned operations in the sector.

Figure 1: TERM Governance Structure

2. Original Project

Development Objectives (PDO) and key indicators

The original project development objective (PDO) reflected in the Project Appraisal Document (PAD) was to support the strengthening of the institutional and regulatory framework for the TERM.

The original key performance indicators selected for measuring and monitoring progress toward achieving the PDO were:

I. Petroleum risk management framework completed II. Environmental and Social Management framework completed

III. Development Plan for the grid completed IV. Improvements in network reliability indexes V. Ability of TPL to model and predict the effects of new generation on the power

systems VI. Summary report of processes and documents required for investment in generation

systems VII. A well-developed power system planning document for the years 2012-2017

3. Revised Project Development Objectives (PDO) and key indicators

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The PDO was revised and the Results Framework was rationalized and simplified, as described in the Restructuring Paper dated December 21, 2015. The revised PDO and Results Framework reflected the change in scope of the original activities under Component 2, described in Section 6.

The revised PDO reflected in the Restructuring Paper was to support the strengthening of the institutional and regulatory framework of the TERM and facilitate the implementation of future renewable energy projects.

As a result of restructuring the key performance and intermediate outcome indicators were refined taking into account the revised scope of the components:

- PDO indicators: ‘Petroleum risk management framework completed’, ‘Environmental and Social Management framework completed’, ‘Improvements in network reliability indexes’, and ‘Ability of TPL to model and predict the effects of new generation on the power systems’, were retained with no changes.

- PDO indicators: ‘Development Plan for the grid completed’, ‘Summary report of processes and documents required for investment in generation systems’ and ‘A well-developed power system planning document for the years 2012-2017’, were moved to intermediate indicators as a result of policy advice from Operations Policy and Country Services (OPCS) that only three to four project objective level indicators should be used.

- The intermediate indicator: ‘Feasibility studies relating to fuel substitution, coconut biomass/biofuel, wind generation, solar PV generation, energy storage and demand side management’, was dropped as the work had been completed by another development partner; and

- a new intermediate indicator: ‘Kilometers constructed of new feeder lines’, was added to measure the new activities under Component 2.

After restructuring the key PDO indicators were: I. Petroleum risk management framework completed

II. Environmental and Social Management framework completed III. Improvements in network reliability indexes IV. Ability of TPL to model and predict the effects of new generation on the power

systems

4. Main Beneficiaries

The PAD states the direct beneficiaries of the project are TERM-IU and TPL, and indirectly energy consumers (household and businesses). Key project outputs, such as the Petroleum Supply Chain assessment and options analysis, the Draft Energy Framework Bill, the Environmental Guidelines and Codes of Practice, the Renewable Energy Master Plan and the use of modelling software and installation of equipment to support network reliability upgrades and increased generation from renewable energy, have directly benefitted the TERM-IU and TPL. Through implementation of these various outputs, energy consumers are expected to benefit from more stable electricity tariffs,

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improved quality of electricity service and improved access to affordable electricity, as the various planned investments are implemented.

5. Original Components

The project had two components as outlined below.

Component 1: Strengthening the Energy Sector Framework and Structure (AusAID/Pacific Region Infrastructure Facility (PRIF) US$0.70 million; Asia Sustainable and Alternative Energy Program (ASTAE) US$0.4 million; GoT US$ 1.00 million – Implemented by TERM-IU). This component was designed to support the GoT to strengthen the function of the TERM-IU including through technical assistance in the areas of: (i) energy sector policy; (ii) environmental and social safeguard frameworks; (iii) petroleum price risk management strategy; (iv) feasibility studies for power generation from renewable sources; (v) detailed surveys for electricity use; and (vi) development of a communication plan (including awareness and dissemination material in local language) for the Energy Roadmap in order to rally key stakeholders around long-term goals and activities being implemented, thus mitigating risks of misinformation.

Component 2: Preparing TPL for Renewable Energy Supply (AusAID/PRIF US$1.8 million; TPL US$0.10 million – Implemented by TPL). This component was designed to support TPL to strengthen its capacity to: (i) carry out power system modeling to determine the most cost effective way to diversify energy generation, with a focus on achieving a high long-term renewable and distributed energy penetration; (ii) design and specify upgrades to monitor, control, and protect systems to ensure a reliable and secure supply of energy through the electricity system with high levels of renewable energy generation; (iii) develop standards and procedures for connection to the power system by independent power producers; and (iv) develop (in conjunction with TERM-IU and to be approved by TERM-C) a power system plan for a period of five years focusing on specific renewable energy technology projects such as solar, wind, biomass and biofuels, but also covering energy storage options and demand side management.

6. Revised Components

A Level 1 restructuring, approved on December 21, 2015 introduced changes to Component 2. The restructuring revised Component 2 to include the procurement and building of three new section of 11-kV distribution lines for the Tongatapu network. The project involved training delivered by consultants to TPL staff to develop software models of Tongatapu’s and three other main islands’ electricity supply systems. The software models were used to determine the necessary changes to the generation and distribution systems so as to enable further penetration of renewable energy without creating reliability issues that may occur due to the intermittent nature of renewable energy generation sources. To enable the installation of future renewable generation in Tongatapu, various network upgrades are required, as well as some automation to control the way in which generation sources and battery-stored energy are dispatched. Component 1 and all other elements of Component 2 remain unchanged. 6

6 See Data Sheet

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II. Key Factors Affecting Implementation

7. Project Cost

The table sets out the project cost as estimated at approval and actual project cost at the time of project closing. Parallel financing leveraged was provided as counterpart financing. The counterpart financing was provided ‘in-kind’ as salaries and staff time of TERM-IU and TPL staff.

Components/ActivitiesApproval Estimate

(USD)

Actual (USD)

Actual as a Percentage of

Approval Amount(%)

Parallel financing/other

sources/leveraged funds (USD)

1. Strengthening the Energy Sector Framework and Structure

0.40 0.39 99.64% 1.0

2. Preparing TPL for Renewable Energy Supply 2.50 2.23 89.3% 0.1

Total Project Cost 2.90 2.62 90% 1.1

A total of US$268,912.01 remained undisbursed at the end disbursement date (April 30, 2017). The funds remaining are a result of a favorable move in exchange rates in respect to TPL’s contract with AECOM and a subsequent reduction in the contract cost overall.7 It was not possible to reallocate the remaining funds and utilize them by the project closing date.

8. Summary of Implementation

Overall Rating: Moderately Unsatisfactory (MU)

The project was significantly affected by low implementation capacity and implementation delays, especially before the midterm review in mid-2014. Following the mid-term review, there were a number of attempts to strengthen capacity, including seeking fiduciary support from the Technical and Fiduciary Services Unit (TFSU), reducing the number of contracts, and providing an Implementation Support Specialist to provide dedicated fiduciary training and support. These started to bear fruit from 2015, when project implementation accelerated. By the end of the project the main project outcomes were generally achieved, but necessitated a two-year cumulative extension of the grant and project closing dates: implementation for Component 1 took twice the planned implementation time and was extended by two years and Component 2 was extended by one year. Support by the Task Team and the Implementation Support Specialist went above and beyond what is normally required from the Bank in recipient executed activities. This support had a negative impact on World Bank supervision budget, but positive results on the ground.

7 The contract was signed in multiple currencies and was at the time of signing equivalent to US$828,629, but due to significant depreciation in the New Zealand dollar and Australian dollar against the dollar (US$), the total amount disbursed against the contract was equivalent to US$584,471.

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The project became effective on September 25, 2012. Initial progress was slower than expected at appraisal as the implementing agencies were still building up some of the fundamental implementation and management capabilities, which may have been underestimated. A number of activities were behind schedule and sustainable fiduciary support within TERM-IU was not yet in place. A constraining factor was that TERM-IU had not yet been properly institutionalized as a Department of Energy within the Government structure. TERM-IU had no Government budget allocation, whereas the off-grid group under the Ministry of Environment did. A significant step forward was the creation of Ministry of Energy, Environment, Climate Change, Disaster Management, Meteorology, and Information and Communications (MEIDECC) in mid-2014, the creation of a separate Energy Department and the integration of TERM-IU into the Ministry. To date, the Energy Department and TERM-IU have remained separate units under the MEIDECC, and TERM-IU continued as the implementing agency for Component 1 of this project.

In 2013, in an effort to address the limited implementation capacity to execute fiduciary functions under the project, which presented a high risk to the project, it was agreed that TERM-IU required an accountant to help TERM-IU fulfil its financial management objectives. However, an accountant was never appointed to TERM-IU. The TERM-IU also entered into an agreement with the TFSU, which supports the World Bank supported Tonga Aviation project, for the TFSU to provide needed procurement support to TERM-IU. In practice, the support arrangements between the TFSU and the TERM-IU did not work well due to an internal lack of coordination and this arrangement was suspended.

Up to and throughout 2014 there was limited progress in project implementation. Only US$0.802 million (27 percent) disbursed by June 30, 2014. There were protracted procurement delays on the side of the World Bank and the implementing agencies. A delay of at least 12 months to finalize a key technical assistance procurement due to disagreements between the World Bank and GoT teams concerning the recommendations of the evaluation report impacted project implementation, the rate of disbursement and the completion of key outputs. In order to resolve the protracted delays with this procurement, the TTL established an independent evaluation committee to verify the client’s recommendations in the evaluation report, which were ultimately confirmed, and which resulted in the client being able to move forward with contract signing and an eventual improvement in the progress of project implementation. During the Mid-Term Review (MTR), carried out from July 22 – 24, 2014, issues raised included:

Problems with Project Execution Instrument. This included challenges of utilizing a recipient-executed trust fund instrument in a small Pacific Island Country when the implementing agency worked in parallel with other development partners that used the equivalent of bank-executed models. Specifically, the TERM-IU was used to working with other development partners that handled administrative responsibilities such as financial management and procurement. The Bank’s requirement that the recipient execute these functions caused confusion to an implementation unit with very limited capacity and no previous experience with World Bank projects. While the modality of execution did not change after the mid-term, the Bank did step up supervision and support to the client to assist in implementation as further described below.

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Problems with project and fiduciary management. Project management arrangements, and in particular fiduciary functions, required strengthening to satisfactorily manage the various activities conducted under the project. The lack of a substantial financial management system, and qualified staff members within TERM-IU with the requisite experience and skills, constrained TERM-IU’s capacity to provide the timely and reliable information required to manage and monitor the implementation of the project. Prior review of contracts, mainly for consulting services, highlighted that procurement processing was slow and negatively impacted implementation.

Following the MTR, the project was restructured in December 2014 to process a 12-month closing date extension of the ASTAE trust fund to allow adequate time for the TERM-IU as implementation unit to finalize the consulting contract for a petroleum assessment under Component 1 of the project. This restructuring did not extend the closing date of the project or amended the results framework.

From 2015, significant improvements were made on behalf of the World Bank and the implementing agencies. Intensive technical and fiduciary support from the Task Team resulted in strengthened institutional capacity and led to the acceleration in the implementation of activities, a significant increase in the disbursement rate and increased client ownership and commitment to the outcomes of the project. By December 2015, the project had disbursed US$1.46 million (50 percent), and the project was restructured to process a 12-month closing date extension to allow adequate time for the TERM-IU to finalize the petroleum assessment, the energy policy work and the environmental and social guidelines under Component 1 of the project, and for TPL to finance networks upgrades under Component 2 to improve the penetration of renewable generation in Tongatapu. The restructuring and extension of the project closing date by twelve months in December 2015 enabled the project to achieve majority of its core objectives by the revised project closing date (December 31, 2016). A number of key factors contributed to the accelerated project implementation:

Enhanced supervision and implementation support was provided by the Task Team. The Bank provided sustained and intensive support to assist TERM-IU with implementation activities, including (i) to emphasize the importance of carrying out an economic and legal due diligence in order to analyze the potential benefits of restructuring the wholesale market for the supply of petroleum; and (ii) guidance on the initial review of energy policies and the legal and regulatory enabling environment. In addition, the Task Team provide dedicated fiduciary support to the implementing agencies to address ongoing financial management and procurement delays.

Appointment of Implementation Support Specialist. In mid-2015, and since the support arrangements between the TFSU and the implementing units had not materialized, the Bank recruited an Implementation Support Specialist as a member of the Task Team with accounting qualifications and experience. The specialist provided intensive support to the implementation units, especially TERM-IU, to develop client capacity and increase familiarity with recipient executed activities. As a result, improvements in financial management and procurement were evident and activities were completed in a timely manner.

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Inclusive stakeholder consultations on technical assistance activities. Consultations on the draft Energy Framework Bill were held with key stakeholders in a timely and open manner. Key stakeholder input and feedback were taken into consideration and resulted in a client orientated draft Bill. The use of a local consultant helped to get stakeholder buy in. Similar consultations and engagement were conducted by the consultants responsible for the Energy Sector Environmental and Social Guidelines. These activities were also well aligned with the work to implement other activities and projects under TERM being undertaken by other development partners, including the Government of Australia.

9. Safeguard and Fiduciary Compliance

9.1 Safeguard Compliance

Environmental Assessment: As the original scope of works was on technical assistance and regulatory reforms, and as such no safeguards policies were triggered. Following the 2015 restructuring to include physical works under Component 2, the safeguards category was revised from C to B and Operational Policy 4.01- Environmental Assessment was triggered.

An Environmental Management Plan (EMP) was prepared by TPL for the proposed network upgrade works. TPL had some previous experience with preparing EMP for network upgrades (funded by New Zealand Ministry of Foreign Affairs and Trade and the Asian Development Bank), and with the support of the World Bank safeguards specialists, they were able to prepare an EMP that met the World Bank policy requirements. This was consulted and disclosed during the project restructuring process. The EMP provided a comprehensive review of potential impacts and provided a robust set of mitigation measures. It was consistent with Tonga Environmental Impact Access Act 2003 and Regulations 2010, for network upgrades and formed the basis of the permit application under the Act.

There was generally satisfactory compliance with environmental safeguards, although reporting was not always timely and detailed. It is noted that much of the physical work under the EMP will be carried out by TPL in 2017, beyond the end of the Project. TPL will continue to implement the EMP going forward.

9.2 Fiduciary Compliance

Procurement: Procurement activities were generally carried out in accordance with agreed procedures. Despite the delays early on in Project implementation on the side of the World Bank and the implementing agencies, TERM-IU and TPL complied with the Bank’s procurement policies and regulations. Recognizing the ongoing weaknesses within the TERM-IU to manage the procurement processes, the number of contracts was reduced and, from mid-2015, intensive procurement guidance and implementation support was provided by the Task Team. A short term Procurement Specialist was engaged in late 2015 but was only used in a very limited capacity as the majority of work had already been undertaken and was of limited benefit to TERM-IU.

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The TPL contracts were monitored by TPL staff. Contract management in TPL was initially weak but improved over the course of the Project.

Financial Management: arrangements in TERM-IU, including accounting, reporting, budgeting and funds flow, internal controls, and financial management staffing were generally inadequate. The need for TERM-IU to have an experienced accountant/finance officer was identified at appraisal, however, this was not put into place. There was no qualified accountant and the accounts were managed using a cash book and Interim Financial Reports (IFRs). There were issues with the accuracy of the IFRs, delays in preparing annual financial statements, difficultly in maintain accurate records and documentation, and there was a lack of support from TERM management to address the financial management issues. In 2015, enhanced implementation support was provided to address the shortfalls in the financial management arrangements. The final financial management implementation review report recorded the IFRs were up to date and the major issues identified in the previous reviews had been rectified.

Annual project accounts were audited each financial year. The 2013 audit was completed by a private audit firm and the 2014 thru 2016 audits were completed by the Tongan Audit Office. The annual audited project financial statements were submitted with significant delays to the Bank each year from 2012 to 2015. Only the 2016 audit was submitted on time. Apart from some issues with an ineligible expenditure, the annual audit reports did not have any major qualifications. After significant delays, the ineligible expenditures were repaid to the Bank in October 2016.

Arrangements in TPL, including accounting, reporting, budgeting and funds flow, internal controls, and staffing were generally adequate. The TPL audited financial statements included a note to the accountants disclosing funds received by the World Bank. The TPL audited financial statements were received by the Bank each year.

III. Assessment of Outcomes

10. Achievement of Project Development Objectives

Overall Rating: Moderately Satisfactory (MS)

While implementation over the whole period was slow, with a significant acceleration of implementation support and the project extensions, the project was able to achieve moderately satisfactory on outcomes. The project has generally achieved the main objective of strengthening the institutional and regulatory framework of the TERM and facilitating the implementation of future renewable energy projects set out in the PDO. A number of key outputs were achieved by the revised project closing date, as a result of project interventions, but there is still some work remaining to operationalize some of the outputs:

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The GoT undertook a Petroleum Supply Chain assessment and options analysis that found that Tonga already enjoys ‘Medium Range (MR) prices’ without having to invest in the facilities required to enable MR supply, and that these low prices have been achieved as a result of regulatory decisions and without Government risking any capital investment. The assessment also recommended GoT to implement the Energy Framework Bill and the new regulatory regime.

The Government prepared a draft Energy Framework Bill to develop a coherent institutional, regulatory and policy framework for the Tonga energy sector that will support its objectives of energy resilience, affordability, security and safety, access and reliability, and sustainability. A key focus of the Bill is ensuring responsibilities and decision-making between the Ministry, Department and respective governance bodies. Overall, the Bill will increase energy security and resilience, promote fair cost based prices for consumers, and provide greater certainty to existing and new investors in the energy sector in Tonga. The Draft Energy Framework Bill was completed in December 2016, but has not yet been introduced into Parliament, as government want to present it together with other associated texts still to be prepared. The preparation of the Draft Energy Framework Bill was not envisaged as part of the original deliverables or indicator but was undertaken in response to the changing key technical assistance needs within the sector.

‘Guidelines for land acquisition approvals, environmental permits, building permits, development partner environmental and social impact requirements for Renewable Electricity Generation and Electricity Infrastructure’ and the ‘Codes of Environmental Practice: Managing Environmental and Social Impacts for Renewable Electricity Generation and Electricity Infrastructure’ were developed to help manage investment in the electricity sector and build capacity within the in-country safeguards systems. This provides a long term legacy for the sector to improve safeguards outcomes. However, the Guidelines and Codes of Environmental Practice have not yet been submitted to Cabinet for approval.

TPL prepared the ‘Tonga Renewable Energy Master Plan’. The Master Plan guides how to develop the next three solar Photovoltaic (PV) installation to achieve the least cost implementation of a high renewable energy penetration power system.

TPL identified and installed equipment needed to upgrade the network control systems in order to improve overall reliability and the ability of the network to accept high levels of renewable energy generation.

Achievements under the post-restructuring PDO indicators are highlighted below:

(a) Petroleum Risk Management Framework Completed

To assess Tonga’s high vulnerability to oil price shocks and interruptions in the delivery of fuel, the GoT undertook extensive financial and legal analysis through a Petroleum Supply Chain assessment and Options Analysis examining petroleum supply and storage options as well as potential PPP ownership arrangements. Together, these constitute the risk management framework. The

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Government investigated the potential to bring down the cost of fuel and to improve national energy security by introducing MR tankers to supply fuel in Tongatapu. The assessment was completed in December 2016.

Storage facilities in Tonga are currently owned and operated by the two incumbents, Pacific Petroleum and Total. After Pacific Petroleum approached GoT in April 2015 with proposed changes to the existing storage arrangements, GoT decided to explore what possible options could be available. The GoT undertook extensive analysis and engagement with the private sector on the various options for moving to MR supply and expanding petroleum storage. The final analysis noted (i) the already low prices enjoyed by Tongan consumers; (ii) the costs involved in encouraging the private sector to adopt new supply arrangements; (iii) the uncertainties attached to the overall capital investment required from the GoT; (iv) potential losses in efficiency and sustainability due to the complexities involved with the alternative models; (v) whether competitive MR supply is viable over the longer term; (vi) potential negative impacts for downstream domestic competition which may be affected by complexities associated with open access rules for shared facilities; and (vii) the small potential upside for consumers given that prices are already low and the need to recover any additional capital investment will put upward pressure on prices. At this stage, GoT is holding discussions with the private sector and it is not yet clear whether the preferred options will be implemented.

In parallel to completing the petroleum assessment, the GoT requested the World Bank through the project to support the development of an Energy Framework Bill as an extension of the petroleum supply chain technical assistance to take into account some of its findings. The Energy Framework Bill builds on the work completed under the TERM 2010 – 2020 and the Overview Assessment on the Tonga Energy Framework which analyzed current institutional, legal and regulatory arrangements in the Tongan energy sector. In May 2015, Cabinet approved the Government’s vision and objectives for the energy sector and next steps to strengthen the institutional and policy framework. In June 2015, the Deputy Prime Minister and Minister responsible for Energy approved a scope and work plan that would culminate in the introduction of a draft Energy Framework Bill. The Cabinet Paper on the Energy Sector law reform was approved by Cabinet in October 2016 and drafting instructions for the new draft Energy Sector law have been provided to the local lawyer.

The draft Bill was developed with due consideration for the GoT’s vision for Tonga’s energy sector, which is to develop “a resilient, reliable and flexible energy system that provides high quality, sustainable and affordable energy to support and stimulate economic growth and the prosperity of the people in Tonga”.8 The primary purpose of the draft Bill is to establish a legal framework which provides a coherent institutional, regulatory and policy framework for the Tonga energy sector. 9 Public consultations were carried out on the Outer Islands of Vava’u and Eua between 15 December and 20 December, 2016. Two public consultation processes also took place on Tongatapu during the same period. These engagements with stakeholders and communities has helped to improve awareness and support for the reforms, while also improving its responsiveness and appropriateness for Tonga.

8 Kingdom of Tonga, Intended Nationally Determined Contribution, 4 December 2015.9 Kingdom of Tonga, Submission to Cabinet, Energy Framework Bill 2017, 13 January 2017.

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The draft Energy Framework Bill seeks to address the key issues and gaps identified under TERM and provide a robust framework for managing the energy sector in the coming years. The issues addressed include: (i) the absence of policy oversight and a coherent strategic direction in Tonga’s energy sector; (ii) a lack of clarity regarding the role and responsibilities of the Energy Department; (iii) gaps in the regulation of petroleum, including safety and technical standards, and potential regulatory changes required to support a new petroleum storage entity; (iv) a desire to ensure efficiency and effectiveness in electricity regulation; (v) a need for greater coordination between Government, TPL and donors, particularly in facilitating private sector investment in Tonga’s electricity sector; and (vi) a need to rationalize the regulation of on-grid and off-grid electricity.

The Bill would formally establish the Ministry responsible for energy, the Energy Department and specify their statutory responsibilities. An Energy Advisory Committee would be established to provide advice to the Ministry on issues related to the energy sector. The current regime divides the regulation of the market between the Electricity Commission and the Competent Authority, which creates readily identifiable gaps in the regulation of the energy sector and the petroleum sector. The reforms will see the establishment of a new single Energy Commission responsible for regulating the electricity, petroleum, gas and renewable energy sectors. The Energy Commission is also expected to have regulatory authority over the price and non-price elements of service delivery, including importation and storage of petroleum and related energy security issues, thereby reducing the risks of energy supply interruptions. A key focus of the draft Bill is to ensure that there is clarity in the functions of the Ministry, Department and respective governance bodies.

The draft Bill also includes regulation of petroleum supply to a more transparent cost based framework and moving toward the regulation of petroleum storage by a concession contract framework. However, on the basis that reforms to the sector were being sought through the Bill, the final Petroleum Supply Chain assessment report recommended retaining the current petroleum supply model until the proposed model in the Bill can be implemented. Once the new regulatory regime is in place, it was recommended the Government again engage with the private sector on the TERM for the sector over the medium term.

The final petroleum supply chain assessment and options analysis recommended GoT to implement the Energy Framework Bill and the new regulatory regime. The report noted, if implemented well, the new regulatory regime will give investors (private or public) greater confidence that new investments will early a fair and stable return. The assessment also recommended, once the new regulatory regime is in place, the GoT could engage with the private private sector on a road map for the sector over the medium term. This can take into account how prices in Tonga are benchmarking against other Pacific countries, future investment requirements, security of supply considerations, and how any common use facility could be made to operate in Tonga (if required).

The Draft Energy Framework Bill was completed in December 2016, but has not yet been introduced into Parliament, as government want to present it together with other associated texts still to be prepared. A failure to pass the bill would stall the ongoing reforms in the electricity and petroleum sectors. Without the new legislative framework, the Petroleum Sector Reform would be extremely difficult to implement.

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(b) Environmental and Social Management Framework Completed

The government, with support from Environmental and Social Safeguards advisors, prepared ‘Guidelines for land acquisition approvals, environmental permits, building permits, development partner environmental and social impact requirements for Renewable Electricity Generation and Electricity Infrastructure’ and the ‘Codes of Environmental Practice: Managing Environmental and Social Impacts for Renewable Electricity Generation and Electricity Infrastructure’. The Guidelines and Codes of Environmental Practice were completed and delivered to Government in September 2016. The purpose of the Guidelines was to establish a common approach to environmental and social impact, and tools that provide clear, practical processes for site selection, consultation, risk management, land acquisition and compensation, environmental assessment and social impact assessment and mitigation. They were also developed to help manage investment in the electricity sector and strengthening of in-country safeguards systems.

The sector, government agencies and development partners welcomed the opportunity to develop practical guidance and standardized approaches to energy sector developments in Tonga. It was seen as an opportunity to improve the transparency and efficacy of approval processes, and to reduce some of the barriers to good project design and implementation. It was also seen as a trial that may have lessons or benefits for other sectors (roads, maritime, quarrying, etc.). The Guidelines and Codes of Environmental Practice are with Government for distribution and implementation. The next step is to ensure they are tested, updated, operationalized (or regulated) and become ‘business as usual’. The TERM-IU has advised the Guidelines and Codes of Environmental Practice will be distributed and implemented. However, this will occur beyond the end of the project and it will be difficult to monitor implementation.

A shortcoming of the technical assistance was the lack of time and resource allocated to supporting the Government agencies (Department of Lands, Department of Environment), TPL and other stakeholders to embed the guidelines into their operations.

(c) Improvements in network reliability indexes

This indicator measures the System Average Interruption Duration Index (SAIDI), which is measured as minutes per year per customer. In context of the project, the indicator measured the twelve-month rolling average for Tongatapu, excluding extreme events. In July 2016, 88 minutes were recorded, which represents a 98 percent achievement of the end target, and there were no unplanned outages (0 minutes) up to the time of project closing, which suggests an overall improvement in network reliability. However, a reading of 159 minutes was recorded at project closing. The increase in minutes recorded was due to planned outages for Tonga Power Limited (TPL) to carry out High Voltage upgrades.

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While the project has funded technical assistance to support improved planning and modelling, and some network reliability investments during the last few months, it is difficult to directly attribute improvements in network reliability indexes to the project.

(d) Ability of TPL to model and predict the effects of new generation on the power systems

TPL has installed and commissioned modelling software. The software is in operation and being utilized by TPL staff that have been trained in its use. In addition, TPL identified equipment needed to upgrade the network control systems in order to improve overall reliability and the ability of the network to accept high levels of intermittent renewable energy generation. Separately, TPL undertook network upgrades to create greater stability in the grid by creating a “ring” to allow energy to flow in either direction around the grid to assist TPL in reaching 20 percent renewable energy generation penetration. Construction of the ring network is still ongoing. Without the ring formation as part of the grid’s foundation, the penetration of renewable energy generation will remain low.

11. Other/Unintended Outcomes and Impacts

With technical assistance through the project, TPL prepared the ‘Tonga Renewable Energy Master Plan’. The Master Plan guides how to achieve the least cost implementation for a high renewable energy penetration power system in Tonga. TPL has drawn extensively on this Master Plan to prepare a technical submission for funding from the Green Climate Fund to support the installation of large scale battery storage to the existing grid network, estimated at US$55 million.

The draft Energy Framework Bill is drawing interest from other countries within the region. The GoT has been approached by representatives from the energy sectors in other Pacific Island nations with requested to share the draft Energy Framework Bill. The draft Bill is being viewed as a good example of a legal framework which can provide a coherent institutional, regulatory and policy framework for the energy sector.

IV. Risk to Sustainability

Overall Rating: Moderate (M)

Several key outputs of the technical assistance have been developed and are being used by the TERM-IU and TPL. Such is the case for the Petroleum Supply Chain and options assessment, and the Renewable Energy Master Plan, that are being used by these institutions for practical decision making, preparing funding applications to development partners, and guiding specific network investments. Some, such as the draft Energy Framework Bill (which goes above and beyond what the project was initially set to achieve) and the Guidelines and Codes of Environmental Practice have been completed, but there is still a small amount of work to do to operationalize these, such as approval of the Energy Framework Bill by Parliament and operationalizing the Guidelines and Codes of Environmental Practice. In addition, the development outcome is potentially affected by factors

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external to the project or by internal factors within key institutions (TERM-IU and TPL). The following factors are identified as potential risks to the project’s development outcome and the implementation of key outputs:

(i) Departure of the World Bank as coordinator in the energy sector. The World Bank currently has no follow-up activity planned in the Tonga energy sector. Key sector stakeholders are concerned with continuity of the support provided up to now, as they believe that could be an ongoing role for the Bank in coordinating the work under TERM to support the GoT to realize its goal for the sector. The TERM-IU has requested funding support from the World Bank to conclude the work to implement the Energy Framework Bill. However, recognizing the need for selectivity in the Bank’s engagement in the country, and for complementarity with other donors, the Bank and GoT have been discussing the priority areas for involvement going forward, and the Bank is being asked to focus on alternative sectors.10

(ii) Risk the Draft Energy Framework Bill not being passed by Parliament. While there is a strong level of support from the GoT to finalize the legislative reforms, a lack of financing and technical assistance to complete the final activities may impact the government’s ability and commitment to operationalize the necessary reforms. Financing from the World Bank to complete activities to enable to draft Energy Framework Bill to be approved by parliament is not available beyond project closure. While requests for funding to complete the Bill and associated texts have been sent to other donors, there is a risk that funding required to complete the activities may not materialize or donors may not have the necessary technical skills to support law reform and implementation activities in a timely way (government’s timeline is to complete the Bill by September 2017 and to be ready for the Legislative Assembly in October 2017). The World Bank has reached out to other partners but no funding has been forthcoming for this activity.

(iii) Lack of financing to fund necessary grid upgrade investments to support GoT to meet its Nationally Determined Contributions (NDCs). Through the ‘Renewable Energy Master Plan’, TPL has identified three key areas of investments required to support the additional renewable energy generation on Tonga’s electricity grids. TPL requires a significant amount of grant or highly concessional financing to undertake the necessary grid upgrades. Without these investments, TPL will be unable to install the required amount of renewable energy generation to support GoT meet their NDCs. While a number of funding sources are being pursued by TPL and GoT, these have not yet materialized.11

V. Lessons Learned

(i) ‘Whole of Sector’ approach encourages ownership of programs and reforms. Despite the delays in implementation, the TERM has strong government ownership and commitment and provides a mechanism for development partner coordination.

10 The Asian Development Bank is planning significant investments in the sector.11 TPL is preparing a technical submission for funding from the Green Climate Fund to support the installation of large scale battery storage to the existing grid network, estimated at US$55 million.

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Coordinated management of international aid flows can provide vital support in mitigating the impacts of external shocks in the electricity and petroleum sectors. Close coordination and engagement with other development partners in the identification of policy priorities is useful in sectors where the Bank has limited previously knowledge and engagement.

(ii) Presence of a lead coordinator in the energy sector. The World Bank played a major role in the development of TERM. The Bank led information sharing and coordination with other development partners from an early stage, as well as the proper identification of stakeholder groups and their representatives. The continued and consistent presence of a lead coordinator in the sector can provide vital support to the GoT to coordinate multiple donor and key stakeholders in the sector and ensure the ongoing implementation of TERM.

(iii) Institutional strengthening through sector-based environmental and social guidelines. Key stakeholders welcomed the opportunity for guidelines, codes of practice and other tools to be developed to help improve the safeguards outcomes of a sector. Multiple stakeholders came together to discuss the environmental and social issues and impacts in the energy sector, and to agree on a set of guidelines that would satisfy the industry and the Government regulators. This approach can have a legacy effect on the way that safeguards are managed within a sector. Allowing time and resources in the project to assist with testing and operationalizing the guidelines and codes of practice could have additional benefits.

(iv) Build local capacity and develop ownership of institutional reforms. The preparation of the draft Energy Sector Bill by an international expert law firm, which included a local lawyer as part of the consultancy team, helped to ensure that the approach and legal drafting was appropriate for the local context. The presence of a local lawyer improved the quality of consultation with local stakeholders and communities, and resulted in a greater local ownership of the final draft Bill. There is a sense of pride and ownership of the Bill and a commitment to seeing the Bill introduced to parliament.

(v) Ensuring readiness for Implementation: The project experienced substantial delays despite the appraisal concluding that the criteria for readiness had been met, in particular implementing agencies were still building up some of the fundamental implementation and management capabilities, and budget support and sustainable fiduciary support within TERM-IU was not yet in place. Throughout project implementation, the most effective way to prevent delays is for the Bank to ensure readiness for implementation. It is also necessary to advance procurement readiness by having the Terms of Reference and the Technical Specifications for activities in place as early as possible. In addition, supervision demands on Task Teams should be acknowledged and managed at project design, noting that small engagements, especially those focused on the provision of technical assistance, may impose similar or heavier implementation burdens than large-scale investment operations.

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(vi) Strengthen institutional capacity for project implementation, financial management and procurement. Early proactive action on behalf of the Bank to support the implementing agencies with project management, financial management and procurement was required. In countries of low capacity, the Bank may need to employ unconventional approaches above and beyond routine supervision to support successful and timely project implementation. Intensive technical and fiduciary support from the Task Team, especially from 2015, resulted in strengthened institutional capacity and led to acceleration in the implementation of activities and a significant increase in the disbursement rate. Another alternative could be to establish a centralized Project Management Unit or Fiduciary Unit within Government which supports all donor funded projects and supplements individual ministerial and departmental fiduciary capacity.

(vii) Aligning project outcomes and indicators with changing needs within the sector. Due to delays during the initial implementation period, the key technical assistance needs within the sector moved beyond what the project had originally set out to address, for example it was identified that beyond a petroleum risk management framework broader unifying legislative reform was required. In 2015, the GoT requested expand the ongoing technical assistance to include the preparation of the Energy Framework Bill. The team showed flexibility and responsiveness to the government by adapting the support provided through the project to fit the changing needs. At the same time, the project restructuring in December 2015 could have reviewed the relevance of the PDO indicator ‘Petroleum risk management framework completed’ as designed and conducted an assessment whether the indicator should be updated to better measure the progress of the project to support the achievement of the PDO. For example, a revised indicator could have expressly measured the preparation, completion and introduction into parliament of the Energy Framework Bill. This was a missed opportunity to better align the outcomes of the project with the current needs within Tonga’s energy sector.

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Annex

Team Composition at Project Approval

Name Role Title Unit LocationRoberto G. Aiello Task Team Lead Senior Energy Specialist EASNS Sydney,

AustraliaTendai Gregan co-Task Team Lead Energy Specialist EASNS Sydney,

AustraliaWendy Hughes Economist Lead Energy Economist SEGES Washington,

D.C.Natsuko Toba Economist Senior Economist EASIN Washington,

D.C.Ashok Sarkar Team Member Senior Energy Specialist SEGEN Washington,

D.C.Isabella Micali Drossos

Counsel Senior Counsel LEGES Sydney, Australia

Aleta Moriarty Communications Communications Officer EACNF Sydney, Australia

Stephen Paul Hartung

Financial Management

Financial Management Specialist

EAPFM Sydney, Australia

Haiyan Wang Finance Officer Finance Officer CTRLN Manila, Philippines

Cristiano Costa e Silva Nunes

Procurement Senior Procurement Specialist

EAPPR Sydney, Australia

Nicole Forrester Program Assistant Program Assistant EACNF Sydney, Australia

Paul Fulton Consultant Energy Consultant EASNS AustraliaMartin Swales Consultant Energy Consultant EASNS AustraliaPenelope Ruth Ferguson

Environmental Safeguards

Environmental Consultant

EASIS New Zealand

Ann McLean Social Safeguards Social Consultant EASNS New Zealand Nicolas Drossos Financial

ManagementConsultant EASNS Sydney,

AustraliaSiosaia Tupou Faletau

ADB/WB Liaison Officer

ADB/ WB Liaison Officer EACNF Nuku’alofa, Tonga

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Team Composition at Project Closing

Name Role Title Unit LocationJames Neumann Task Team Lead Senior Counsel GTI11 Washington,

D.C.Sharon Louise Riley

Implementation Support Specialist

Consultant GEE09 Sydney, Australia

Stephen Paul Hartung

Financial Management

Financial Management Specialist

EAPFM Sydney, Australia

Cristiano Costa e Silva Nunes

Procurement Senior Procurement Specialist

EAPPR Sydney, Australia

Kim Dagmar Baverstock

Program Assistant Program Assistant EACNF Sydney, Australia

Penelope Ruth Ferguson

Environmental Safeguards

Environmental Consultant

EASIS New Zealand

Recipient Organization(s) at Project Approval

Organization Name

Role Contact Title Phone Email

TERM-IU Implementing Agency

Mr. ‘Akau’ola

Director, TERM-IU

+676 24794 [email protected]

Tong Power Limited

Implementing Agency

Mr. John von Brink

Chief Executive

+676 27390 [email protected]

Recipient Organization(s) at Project Closing

Organization Name

Role Contact Title Phone Email

TERM-IU Implementing Agency

Mr. ‘Inoke Vala

Director, TERM-IU

+676 7863633

[email protected]

Tong Power Limited

Implementing Agency

Mr. Robert Matthews

Chief Executive

+676 7863202

[email protected]

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