Project Details
ID: P-AO-FA0-002 Name: POWER SECTOR REFORM SUPPORT PROGRAM Status: Completed Country: Angola
Sector: Power Approval date: 13-May-2014 Task Manager: RICHARD Humphrey Ndwiga, RDGS4
Total cost: 648120000
Currency: UAC
Source(s) of financing
AfDB: 648121743.2


Project Objective: The project aims to support Government efforts to implement reform in the energy sector, power infrastructure rehabilitation and modernization, improvement of public financial management and institutional capacity building. The development objective is therefore to promote a resilient and inclusive economic growth through energy sector reforms and improved governance.Project Implementation Design The loan will be designed as a multi-year programmatic operation to enhance predictability and flexibility. The first tranche will be disbursed against achievement of prior actions before board presentation of the program. The program will have a set of indicative triggers for the subsequent years which will be reviewed and discussed with the government prior to disbursement.Project Scope The proposed project will support key reform measures in three areas: (a) implementation of power sector reform and improvement of regulatory environment; (b) fostering private sector investment in the energy sector; and (c) enhancing the quality of public investment and public finance management. The three components include the following activities: Component 1: Implementation of power sector reform and improvement of regulatory framework "Legal and regulatory measures to consolidate the restructuring of the energy sector to improve business and operational efficiency;"Unbundling and operationalizing the new three utility companies for generation, transmission, and distribution, and strengthen the institutional competencies;"Strengthen and capacitate the regulatory agency (IRSE) to manage sector operations and promote environmental protection and price competition in production and distribution of electricity;"Develop policies and regulations to operationalize the new power market model;"Feasibility study for a national dispatch center;"Provide Advisory technical support.Component 2: Fostering private sector investment in the energy sector "Development of regulations and operational manuals for PPPs ;"Strengthening of the capacity of the PPP Unit at the Ministry of Economy;"Develop an operational framework to define the contractual and commercial relationships between IPPs;"Development of an incentive framework for renewable energy and rural electrification;"Promotion of the contracting service providers for the management of system equipment and transfer of know-how.Component 3: Enhancing public finance management and the quality of public investment "Timely submission of financial reports by electricity utilities to ISEP in 2014 and 2015;"Strengthening the Public Investment Program (PIP);"Publication of "Citizens' Budget" for 2014 budget proposal;"2013 Public Enterprise Framework Law (strengthening financial reporting by SOEs);"Approval of draft National Inspectorate of Finance Regulation;"Revision of the procurement law and adoption of procurement regulation and standard bidding documents;"Introduce a procurement complaints and appeal mechanism;"Develop measures to verify and clear domestic arrears " Develop measures to strengthen medium term fiscal framework to align public investment with the national development plan "Adoption of a PFM Reform Action plan in 2014/2015 based on the recommendations of the Public Expenditure Management and Fiduciary Systems Review (PEMFSR) to be launched in Q2 of 2014.


Project Benefits: The project will deliver substantial benefits to (i) the people of Angola by improving the business, operational and productive performance of the electricity sector, (ii) the government by gradually reducing the need to provide electricity subsidies and improved financial management of public utilities and finance, (iii) the private sector by opening the electricity sector for PPP and IPPs. Overall, the project is set to trigger rapid socioeconomic development in Angola.


Project Rationale: The proposed operation responds to the country's broad development priorities - infrastructure development with emphasis to energy sector, and modernization of public administration and public finance. It will also foster private sector investment in the energy sector.The Energy sector reform program that will be supported by the operation comprises three key stages, namely stage 1 up to December 2012: Diagnostic & Mobilization stage involving definition of baseline situation, design of the market model, identification of critical issues and launch of change management; stage 2 up to September 2013: Restructuring of the Electricity Sector involving dissolution of existing state enterprises and strengthening of the IRSE, development of capacity within the electricity sector, improvement of sector operations; Stage 3 up to September 2015: Improvement of functional operations of the sector and management of the reform process. Massive sector rehabilitation and modernization, including intensive capacity building is necessary at Stage 2 and 3 to guarantee sustainability of the new power market model. Government's effort to modernize its financial management system and transparency in use of public resources is a vital component of the project. The reform program includes a gradual rationalization of subsidies towards a cost reflective tariff by 2021.