The World BankSustainable Energy Financing Program (P098423)

REPORT NO.: RES31591

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

SUSTAINABLE ENERGY FINANCE PROGRAM GLOBAL ENVIRONMENT FACILITY (GEF) GRANT

TO THE

REPUBLIC OF FIJI, AUSTRALIA NEW ZEALAND BANKING GROUP LTD

May 2018

ENERGY & EXTRACTIVES

EAST ASIA AND PACIFIC

Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf

Senior Global Practice Director: Riccardo PulitiPractice Manager/Manager: Jie Tang

Task Team Leader: Kamleshwar Prasad Khelawan

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

The World BankSustainable Energy Financing Program (P098423)

ABBREVIATIONS AND ACRONYMS

ANZCNODOE

Australia New Zealand Banking Group LimitedCoconut oilDepartment of Energy

EAEE

Executing AgencyEnergy Efficiency

ESSF Environmental and Social Safeguards FrameworkFJD Fijian DollarGEFGEOGoF

Global Environmental FacilityGlobal Environmental ObjectiveGovernment of Fiji

IFC International Finance CorporationKWhMSE

Kilowatt HourMicro and Small Enterprise

MTR Mid Term ReviewPADPDOPFI

Project Appraisal DocumentProject Development ObjectiveParticipating Financial Institution

PNG Papua New GuineaPVRBF

PhotovoltaicReserve Bank of Fiji

RE Renewable EnergyRMI Republic of Marshall IslandsRSF Risk Sharing FundSEFP Sustainable Energy Finance ProjectSI Solomon IslandsSME Small and Medium EnterpriseTA Technical AssistanceUSD United States DollarsWB World Bank

The World BankSustainable Energy Financing Program (P098423)

BASIC DATA

Product Information

Project ID Financing Instrument

P098423 Investment Project Financing

Original EA Category Current EA Category

Not Required (C) Not Required (C)

Approval Date Current Closing Date

12-Jun-2007 30-Jun-2018

Organizations

Borrower Responsible Agency

Republic of Fiji,ANZ Department of Energy

Project Development Objective (PDO)

Original PDOThe project aims to significantly increase the adoption and use of renewable energy technologies in participating Pacific Island states through a package of incentives to encourage local financial institutions to participate in sustainable energy finance in support of equipment purchase.

Current PDOThe project aims to (i) significantly increase the adoption and use of renewable energy technologies and the more efficient use ofenergy through a package of incentives to encourage local financial institutions to participate in sustainable energy finance in the Recipient's Territory (Fiji) and (ii) support knowledge sharing and capacity building on renewable energy and energy efficiencytechnologies in the Participating Island States.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing

Ln/Cr/Tf Approval Signing Effectiveness ClosingNet

Commitment Disbursed Undisbursed

TF-58282 17-Aug-2007 17-Aug-2007 29-Oct-2007 30-Jun-2018 5.20 5.20 0

TF-58284 09-Jul-2007 09-Jul-2007 09-Jul-2007 30-Jun-2018 1.99 .28 1.71

The World BankSustainable Energy Financing Program (P098423)

TF-90429 09-Jul-2007 09-Jul-2007 09-Jul-2007 30-Jun-2018 .56 .51 .05

TF-90430 05-Jul-2007 05-Jul-2007 28-Sep-2007 23-Jul-2014 .19 .19 0

TF-90431 21-Jun-2007 21-Jun-2007 02-Nov-2007 07-Jul-2014 .51 .51 0

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?No

The World BankSustainable Energy Finance Project (P098423)

I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

1. This restructuring seeks to extend the closing date of the Sustainable Energy Financing Project (SEFP) by three (3) months (cumulative nine (9) months from the original closing date) to finalize approvals for an extension to the SEFP and its relaunch as a regional risk facility.

2. The SEFP commenced in August 2007 as a joint operation by the World Bank and the International Finance Corporation (IFC), supported by a USD 9.48 million Global Environmental Facility (GEF) grant. Its objective was to facilitate the uptake of renewable energy technologies and energy efficiency in Fiji, Papua New Guinea (PNG), Solomon Islands (SI), Republic of Marshall Islands (RMI) and Vanuatu. The World Bank commenced implementation of the project in Fiji, PNG and SI. The IFC was to implement the program in RMI and Vanuatu but chose not to proceed, based on its conclusion that there were insufficient opportunities and potential partner banks willing to commit to the program in these regions at that time.

3. The core component of the SEFP is a Risk Sharing Fund (RSF), which is managed by the Australia and New Zealand Banking Group Limited (ANZ) (acting as the Fund Manager) under agreement with the International Bank for Reconstruction and Development (IBRD). The RSF incentivizes local Participating Financial Institutions (PFIs) to lend to businesses and households to support installation of renewable energy equipment and energy efficiency measures. The incentive is provided through a 50 percent partial guarantee for loans provided by the PFIs to individuals and small businesses for renewable energy and energy efficiency equipment. The RSF involves a USD 5.2 million grant to support loan guarantees. The other component of the SEFP is USD 2.552 million for funding technical assistance, provision of market incentives, communications and management and evaluation of the results of the program.

4. The first mid-term review (MTR) of project progress in 2011 recommended that the project be modified to: (i) close the project in PNG and SI and limit support under the project to knowledge-sharing and capacity building in the Pacific Island Countries (PICs); and (ii) utilize the proceeds under the project to accelerate the successful implementation of the project in Fiji and to share lessons learned from Fiji with the originally participating PICs and other PICs as agreed with the World Bank, where conditions appeared conducive for successful implementation of similar programs in future. A level 1 restructuring of the project was undertaken in 2014 to close implementation in PNG and SI and consolidate the operations in Fiji.

5. A second MTR of the project in 2016 found the project in Fiji had been successful with all targets for the project met or exceeded. Progress towards achievement of the Project Development Objective (PDO) as satisfactory. The PFIs have lent approximately USD 22 million to individuals and small businesses to support investments in renewable energy and energy efficiency of over USD 40 million benefiting over 40,000 households. The low non-performing loan ratio (approximately 1%) means that most of the initial USD 5.2 allocated to the RSF is largely available for further use, demonstrating the success of the program. The MTR identified an emerging need and an increased level of readiness of other PICs for such a product. The review recommended that the project be expanded and be relaunched as a regional risk facility to support electrification in countries like Vanuatu (access 30%), SI (access 20%) and PNG (access 12%) and others, building on the lessons learned from the implementation of the project in Fiji.

6. At present 79% of the project funds have been disbursed (100% of the RSF which has been released for redeployment and 31% of technical assistance funds, which ensures sufficient funds for an ongoing operation). There are no outstanding compliance (legal, fiduciary, or safeguards) issues in relation to the project. This restructuring does not involve any substantive changes such as revisions to the Project Development Objective,

The World BankSustainable Energy Finance Project (P098423)

additional financing or changes to implementation arrangements. The upcoming longer-term extension will be accompanied by relevant project adjustments needed to relaunch the project as regional operation.

7. The project is being restructured in two stages. A Level 2 restructuring was undertaken prior to the original closing date of 31 December 2017 to extend the project by six months to 30 June 2018 to allow for a longer-term extension (to December 31, 2022) and relaunch of the project as a regional risk facility. However, the process and dialog with the clients has taken longer than anticipated. It is unlikely that the approvals will be secured and the legal agreements signed by the current project closing date of June 30, 2018. The closing date for the project is being extended by a by further three (3) months (cumulative nine (9) months from the original closing date) to allow sufficient time.

The World BankSustainable Energy Finance Project (P098423)

III. SUMMARY OF CHANGES

Changed Not Changed

Change in Loan Closing Date(s) ✔

Change in Implementing Agency ✔

Change in DDO Status ✔

Change in Project's Development Objectives ✔

Change in Results Framework ✔

Change in Components and Cost ✔

Cancellations Proposed ✔

Reallocation between Disbursement Categories ✔

Change in Disbursements Arrangements ✔

II. DESCRIPTION OF PROPOSED CHANGES

Grant Agreement between the International Bank for Reconstruction and Development and the Australia and New Zealand Banking Group Limited.

Amend the Agreement so as extend the closing date of the GEF grant from June 30, 2018 to September 30, 2018 Amend the Agreement to extend the deadline for which the Fund Manager is required to return the uncommitted GEF

funds to the Bank from June 30, 2018 to September 30, 2018.

Grant Agreement between the International Bank for Reconstruction and Development and the Republic of Fiji.

Amend the Agreement so as extend the closing date of the GEF grant from June 30, 2018 to September 30, 2018.

The World BankSustainable Energy Finance Project (P098423)

Change in Disbursement Estimates ✔

Change in Overall Risk Rating ✔

Change in Safeguard Policies Triggered ✔

Change of EA category ✔

Change in Legal Covenants ✔

Change in Institutional Arrangements ✔

Change in Financial Management ✔

Change in Procurement ✔

Change in Implementation Schedule ✔

Other Change(s) ✔

Change in Economic and Financial Analysis ✔

Change in Technical Analysis ✔

Change in Social Analysis ✔

Change in Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_LOANCLOSING_TABLE

LOAN CLOSING DATE(S)

Ln/Cr/Tf StatusOriginal Closing

Revised Closing(s)

Proposed Closing

Proposed Deadline for Withdrawal

Applications

TF-58282 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019

TF-58284 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019

TF-90429 Effective 31-Dec-2017 30-Jun-2018 30-Sep-2018 30-Jan-2019

TF-90430 Closed 31-Dec-2017 28-Aug-2014, 23-Jul-2014

TF-90431 Closed 31-Dec-2017 02-Feb-2015, 07-Jul-2014

Note to Task Teams: End of system generated content, document is editable from here.

The World BankSustainable Energy Finance Project (P098423)