AFRICAN DEVELOPMENT BANK

Public Disclosure Authorized

UGANDA

UGANDA RURAL ELECTRICITY ACCESS PROJECT

Public Disclosure Authorized

ONEC DEPARTMENT

September 2015
 TABLE OF CONTENTS

Page
I. STRATEGIC THRUST AND RATIONALE ............................................................................................................. 1

1.1 PROJECT LINKAGES WITH COUNTRY STRATEGY AND OBJECTIVES .............................. 1

1.2 RATIONALE FOR THE BANK’S INVOLVEMENT .............................................................. 2
1.3 DONORS COORDINATION ............................................................................................. 2
II. PROJECT DESCRIPTION .......................................................................................................................................... 3

2.1 PROJECT COMPONENTS ............................................................................................... 3

2.2 TECHNICAL SOLUTIONS RETAINED AND OTHER ALTERNATIVES EXPLORED ............... 4
2.3 PROJECT TYPE ............................................................................................................. 5
2.4 PROJECT COST AND FINANCING ARRANGEMENTS ....................................................... 5
2.5 PROJECT’S TARGET AREA AND POPULATION .............................................................. 6
2.6 PARTICIPATORY APPROACH ........................................................................................ 7
2.7 BANK GROUP EXPERIENCE AND LESSONS REFLECTED IN PROJECT DESIGN ................ 7
2.8 PROJECT’S PERFORMANCE INDICATORS ...................................................................... 8
III. PROJECT FEASIBILITY............................................................................................................................................. 9

3.1 ECONOMIC AND FINANCIAL PERFORMANCE ................................................................ 9

3.2 ENVIRONMENTAL AND SOCIAL IMPACTS ................................................................... 10
IV. PROJECT IMPLEMENTATION ............................................................................................................................. 13

4.1 IMPLEMENTATION ARRANGEMENTS .......................................................................... 13

4.2 PROJECT MONITORING AND EVALUATION ................................................................. 15
4.3 GOVERNANCE ........................................................................................................... 16
4.4 SUSTAINABILITY ....................................................................................................... 16
4.5 RISK MANAGEMENT .................................................................................................. 17
4.6 KNOWLEDGE BUILDING ............................................................................................ 19
V. LEGAL FRAMEWORK ............................................................................................................................................ 19

5.1 LEGAL INSTRUMENT.................................................................................................. 19

5.2 CONDITIONS ASSOCIATED WITH BANK’S INTERVENTION .......................................... 19
5.3 COMPLIANCE WITH BANK POLICIES .......................................................................... 20
VI. RECOMMENDATION .............................................................................................................................................. 20
APPENDIX I: COUNTRY’S COMPARATIVE SOCIOECONOMIC INDICATORS
APPENDIX II: AFDB’S ONGOING PORTFOLIO IN UGANDA
APPENDIX III: SIMILAR PROJECTS FINANCED BY THE BANK AND OTHER DEVELOPMENT
PARTNERS
APPENDIX IV: MAP OF PROJECT AREA
 CURRENCY EQUIVALENTS

Exchange Rate as of April 2015

UA 1 = USD 1.37949
UA 1 = UGX 4,073.24
USD 1 = UGX 2,952.71

Bank’s Fiscal Year

1 January – 31st December
st

Borrower’s (Uganda) Fiscal Year

1st July – 30th June

Weights and Measures

m meter KOE kilogram of oil equivalent

cm centimetre = 0.01 meter kV kilovolt = 1,000 volts
mm millimetre = 0.001 meter KVA kilovolt ampere (1,000 VA)
km kilometre = 1,000 metres KW kilowatt = 1,000 watts
m² square meter GW gigawatt (1,000,000 kW or 1000 MW)
cm² square centimetre MW megawatt (1,000,000 W or 1 000 kW)
km² square kilometre = 1,000,000 m² KWh kilowatt hour (1,000 Wh)
ha hectare = 10,000 m² MWh megawatt hour (1,000 KWh)
t (t) metric ton (1,000 kg) GWh gigawatt hour (1,000,000 KWh)

Acronyms and Abbreviations

AfDB/ADB African Development Bank MoFPED Ministry of Finance, Planning and

Economic Development
ADF African Development Fund MV Medium Voltage
ARAP Abbreviated Resettlement Plan NDP National Development Plan
CPPR Country Portfolio Performance NELSAP Nile Equatorial Lakes Subsidiary
Review Action Programme
CSR Corporate Social NEMA National Environment Management
Responsibility Authority
CSP Country Strategy Paper NFA National Forestry Authority
CPAF Common Performance NORAD Norway Agency for Development
Assessment Framework Cooperation
DDP District Development Plan NPV Net present value
DPs Development Partners O&M Operation & Maintenance
EA Executing Agency PCR Project Completion Report
EIRR Economic internal rate of PDU Procurement and Disposal Unit
return
EMDPG Energy and Minerals PEFA Public Expenditure and Financial
Development Partner Group Accountability
ENPV Economic net present value PFM Public Financial Management
EIA Environmental Impact PIT Project Implementation Team
Assessments

i
EPC Engineering, Procurement and REA Rural Electrification Agency
Construction
E&S Environmental & Social REB Rural Electrification Board
ERA Electricity Regulatory REF Rural Electrification Fund
Authority
ESAP Environmental and Social ROW Right of Way
Assessment Procedures
ESMF Environmental and Social RESP Rural Electrification Strategy and
Management Framework Plan
ESMP Environmental and Social SE4ALL Sustainable Energy for All
Management Plan
EU-AITF European Union – Africa SP Service Providers
Infrastructure Trust Fund
FIRR Financial internal rate of return SPN Specific Procurement Notice
FM Financial Management ST Service Territory
FNPV Financial net present value STD Sexual Transmitted Diseases
GDP Gross domestic product STI Sexual Transmitted Infections
GNI Gross national income TA Technical Assistance
GoU Government of Uganda UA Units of account
HDI Human Development Index UBOS Uganda Bureau of Statistics
HH Households UEDCL Uganda Electricity Distribution
Company Limited
HIV/AIDS Human Immuno UEGCL Uganda Electricity Generation
Virus/Acquired Immuno Company Limited
Deficiency Syndrome
IMF International Monetary Fund UETCL Uganda Electricity Transmission
Company Limited
IFR Interim Financial Reports UGFO Bank’s Uganda Field Office
IRR Internal rate of return UGX Ugandan Shillings
ISS AfDB’s Integrated Safeguards UMEME The concessionaire distribution
System Policy of 2013 company for the main distribution
systems in Uganda owned by
UEDCL
KIS Kalangala Infrastructure UNRA Uganda National Roads Authority
Services
LDPG Local Development Partners UREAP Uganda Electricity Access Project
Group
LV Low Voltage USD United States Dollar
M&E Monitoring and Evaluation UWA Uganda Wildlife Authority
MEMD Ministry of Energy and VAT Value Added Tax
Minerals Development

ii
 PROJECT INFORMATION SHEET

CLIENT’S INFORMATION
Borrower  Government of Republic of Uganda (GoU)
Executing Agency  Rural Electrification Agency (REA)

FINANCIAL PLAN
Sources Amount (USD million) Instrument
ADB 100.00 Sovereign guaranteed loan
Technical Assistance (TA) grant and
EU-AITF 12.05 (EUR 11.205 m)
Investment Grant (IG)
GoU 9.355 Counterpart Fund/Equity
Total Financing for project cost 121.405

ADB’s KEY FINANCIAL INFORMATION

Loan/grant currency United States Dollar (USD)
Loan type Enhanced Variable Spread Loan (EVSL)
Interest type (Lending Rate) Base Rate + Funding Cost Margin + Lending Spread
Base Rate Floating Base Rate based on 6-month LIBOR with free option to fix Base Rate
The 6-month adjusted average of the difference between: (i) the refinancing rate
of the Bank linked to 6-month LIBOR and allocated to floating interest loans
denominated in USD and (ii) 6-month LIBOR ending on 30 June and on 31
Funding Cost Margin
December. This spread shall apply to 6-month LIBOR which resets on 1
February and on 1 August. The Funding Cost Margin shall be determined twice
per year.
Lending spread 60 basis points (0.6%) per annum
Commitment Fees None
Other fees None
Repayment of Principal Maximum 15 Years following a 5-year grace period
Grace period Maximum 5 Years commencing from the date of signature of the loan agreement

KEY FINANCIAL AND ECONOMIC OUTCOMES

FIRR FNPV @ 10% EIRR ENPV@ 10%
The Proposed Project 11% US$ 7.2 million 22% US$ 111.5 million

TIMEFRAME – MAIN MILESTONES (expected)

Concept Note Approval 16 March 2015
Project Approval 16 September 2015
Loan Effectiveness 28 February 2016
Last disbursement 31 December 2020
Project Completion 28 February 2019
Last repayment 31 December 2035

iii
 PROJECT SUMMARY

The proposed Uganda Rural Electricity Access project covers five service territories (Central,
Eastern, South, North-North West and North Eastern) in sixteen district areas (Nakasongola,
Luweero, Alebtong, Amuria, Soroti, Mbale, Manafwa, Serere, Ngora, Bukedea, Kaliro, Luuka,
Buyende, Iganga, Gulu and Nwoya) and the Bugala Island (Kalangala). The project will: (i) build
about 1,147 km of medium voltage and 808 km of low-voltage distribution networks, (ii) provide
last-mile connections to the grid for 58,206 rural households, 5,320 business centres and 1,474
Project public institutions (schools, health centres and administration offices); and (iii) procure additional
overview connection materials, ready-boards and pre-paid energy metres to intensify the last-mile
connections with 99,077 new customers near to the existing grid in already electrified rural and
urban areas. Construction is expected to be implemented over a period of 21 months after EPC
contract effectiveness and is to be completed by February 2019. The project’s cost is estimated at
USD 121.405 million. The Bank finances USD 100 million from ADB sovereign window and
mobilized EUR 11.205 million from EU-AITF as a grant. Its beneficiaries are mainly rural
Ugandans, who will gain access to reliable and affordable electricity and related improved services.
The overarching goal of the proposed project is to support the long-term and short-term
development strategy and plan of the Government of Uganda (GoU). The expected outcomes are (i)
improved access to electricity for households, commercial centres & business enterprises and
public institutions (health centres, schools and administration offices) in the proposed project areas.
Project The project will support scaling up “inclusive and green” connections through: (i) supply and
outcomes installation of ready-boards, for those who cannot afford housing wiring costs, targeting the most
vulnerable households; and (ii) allowing households to pay the connection charges through
instalments within a period negotiated and agreed with the service providers.
The project will ultimately improve the livelihoods and economic opportunities in rural
communities, and provide better access to social services (such as health and education).
Electricity remains critical for Uganda to attain the growth trajectory and socio-economic
transformation of the country’s fast growing population. The limited access to electricity (14 % at
the national level and about 7 % in rural areas) has affected the delivery of social services,
Needs constrained the development of small-scale industrial and commercial enterprises and adversely
assessment affected larger-scale industrial and commercial investment. To alleviate this situation, the GoU has
formulated and is implementing several measures to achieve its electricity access targets: (i) the
Uganda Vision 2040 - access to 80 % by 2040, (ii) the National Development Plan 2015/16 –
2019/20 access from 14% to 30%; and (iii) the 2013-22 Rural Electrification Strategy and Plan sets
out a target to increase access to electricity in rural areas from 7% to 26%.
The project will be an effective means by which to advance implementation of the government-led,
sector-wide approach and ongoing harmonization process in the energy sector. In addition, the
project will complement and benefit from the synergy with the Bank’s recent interventions in the
sector, specifically the interconnection of regional power grids (NELSAP Interconnection Project),
Bank’s the Mbarara-Nkenda & Tororo-Lira power transmission project, Bujagali hydropower plant project
added value and Buseruka hydropower plant project. The Bank will also benefit from further consolidating its
leadership role in the development of Uganda’s economic infrastructure, and increase its
collaboration with other financing institutions and partners that are supporting the electricity sector.
The provision of an ADB sovereign guaranteed loan for the project will reinforce the Bank’s
cooperation with and support for the GoU’s development programmes and the implementation of
the pillars of the Bank’s Country Strategy Paper and Energy Sector Policy.
The project supports the phase-2 of the 10-year rural electrification programme (RESP-2) of
Uganda. The technical assistance component included in the project will strengthen the institutional
capacity of : (i) the project implementing agency (REA) in the areas of feasibility studies for future
Institutional rural electrification projects, designs, monitoring and evaluation, mainstreaming gender in
development provision of electricity, social and environmental assessments, compensation/resettlement,
and knowledge procurement and contract management; and (ii) the Electricity Regulatory Authority (ERA) to
building conduct studies to determine the “cost of service” (cost structure, cost drivers, and revenue
requirements that need to be reflected in appropriate tariff levels) and affordability of the tariff.
Analytical knowledge building will also be promoted through the preparation of the Project
Completion Report and through the Bank’s participation in joint analytical work with other
development partners supporting the GoU rural electrification programme.

iv
 RESULTS-BASED LOGICAL FRAMEWORK

Country and project name: Uganda Rural Electricity Access Project

Purpose of the project : To provide electricity access and enhance economic growth in rural areas of the country
PERFORMANCE INDICATORS
MEANS OF RISKS/MITIGATION
RESULTS CHAIN Indicator Baseline
Target 2019/20 VERIFICATION MEASURES
(including CSI) 2013/14
Increased economic - % of population below - 19.7% - 14.2% - Uganda Bureau High connection charges
development and the poverty level of statistics and house wiring costs
improved living - % of the population will be mitigated by(i)
standards and - 22.8% - 14.2% - Human Pre-financing and
below the poverty line
wellbeing in rural in Rural areas Development installation of connection
IMPACT

areas through Report materials; (ii) installation

provision of - Increased % of national - 75.4% - 79% of ready boards for
electricity services labour force employed - IMF Country households (HH’s) that
Report cannot afford house
- GDP Per capita - $788 - $1,033 wiring; (iii) payments by
(after instalment with service
GDP providers (SP’s) for
rebasing) connection charges.
Improved access to - Rural areas electricity - 7% - 22% - REA Shortage of financing
electricity for HH’s access resources will be
OUTCOMES

paying attention to - ERA mitigated by strong

gender equality, - National level - 14% - 30% government support
and priority public electricity access - MEMD’s annual towards financing of
report and rural electrification
institutions in the
records programmes to achieve
project areas universal access by 2030
(SE4ALL objective).
A. Construction of - N° households (HH) - N/A - 58,206 - MEMD’s annual Risks associated with
distribution connected report and delay on project start-up
networks records and implementation will
- N° of commercial - N/A - 5,320 be mitigated by the
- Construction of centres & business - REA and SP establishment of a project
MV & LV enterprises connected Annual Reports Implementation Team
distribution - Project progress (PIT) supported by
network in - N° public institutions - N/A - 1,474 and completion additional staff, the
targeted rural connected (health
report supervision consultant,
areas centres, schools and
PIT strengthened through
administration offices)
- Project the provision of TA, the
- Supply of
- N° of additional - 1,953,018 - 99,077 monitoring and use of advanced
connection
customers to be post-evaluation contracting to accelerate
materials
connected in already reports the procurement process
OUTPUTS

- Improved electrified rural & urban and project

employment areas - REA’s project implementation.
opportunities - 88 (30% of which documents
- N° O&M and indirect - N/A
jobs created during women)
- Progress reports
operation from REA and
- N° direct jobs created - 992 (667 semi/low- supervision and
- N/A
during construction skilled), of which 198 management
women (20%) consultant

- Length of 33 kV MV - Bank
- N/A - 1,147 km of MV lines
lines supervision
mission reports
- Length of 0.415 kV LV - N/A - 808 km of LV lines
lines - Disbursement
and financial
reports from
REA

v
Country and project name: Uganda Rural Electricity Access Project
Purpose of the project : To provide electricity access and enhance economic growth in rural areas of the country
PERFORMANCE INDICATORS
MEANS OF RISKS/MITIGATION
RESULTS CHAIN Indicator Baseline
Target 2019/20 VERIFICATION MEASURES
(including CSI) 2013/14
B .Project - N° of project progress - N/A - 4 reports per year - Project - Risks associated to
Administration reports prepared by the completion power supply shortage
& Management supervision report to meet demand due to
consultant including new connections will
- Engineering & E&S compliance be mitigated by the
Construction - N° of timely
environmental audit - N/A - One audit report each sufficient supply of
Supervision year, completed electricity from new
consultant reports submitted
within six months hydro generation
- Project account & - One environmental construction that has
- N° of timely project - N/A
environmental audit report per year already begun;
audit account audit reports
during construction - Risks associated with
- Reinforcement of knowledge transfer
REA’s project - N° of additional key - N/A - 8 staff recruited
staff recruited will be mitigated
implementation through in-house
team technical assistance
C. Technical - N° ERA studies - N/A - 1 study for cost of with clear deliverables
Assistance (TA) completed services & tariff in specific areas of
affordability expertise.
TA for institutional - N° REA feasibility - N/A - 1 feasibility study for - Risk of completion
capacity studies completed future REA projects delay and cost
- N° REA & ERA staff - N/A - 30 staff trained at overruns will be
strengthening of the
trained least 10 women mitigated by the hiring
Electricity - Developed capacity- - 1 National - capacity-building of experienced and
Regulatory building programme for Policy & programme developed reputable contractors
Authority (ERA) & REA and partners to gender and at least 70% of on turnkey, fixed-
REA; enhanced in- strengthen its in-house mainstrea REA technical staff price, and time-certain
house capacity to capacity to mainstream ming having taken part and contracts as well as the
mainstream gender gender in the provision document gender action plan involvement of the
in the provision of of electricity and in REA being implemented by supervision consultant
electricity developed gender action REA/ERA to augment project
plan within REA/ERA - Implemented sex- staff as needed in order
- Sex-disaggregated - N/A disaggregated impact to ensure delivery
impact monitoring monitoring indicators efficiency.
indicators set up and in REA studies - The risk of delays in
incorporated in REA - All REA project resettlement and
studies/reports documents are compensation process
- Gender sensitive project - N/A developed using a which will result in
documents developed gender sensitive delayed handover of
using in-house capacity approach with in- the way leaves will be
house capacity mitigated by: (i)
D. Implementation - ESMP & ARAP fully - N/A - 100% execution of government ring-
of ESMP and executed and quarterly ESMP & ARAP fencing the budget for
ARAP compliance reports - 4 E&S compliance compensation; (ii)
submitted reports submitted p.a. obtaining a waiver to
- N° of trees planted - N/A - 110,000 trees planted make cash
 Execution of the compensations
ESMP and RAP - N° of HIV/AIDS - Monthly sessions held
awareness and - N/A for contractor
prevention and Health workers (100%
 Execution of
& Safety sessions participation) and
sensitization and
conducted affected communities
awareness
- N° of sensitization - 26 campaigns
campaigns
campaigns on - N/A conducted and at least
connectivity, electricity 58,206 HHs sensitized
use and concerns
conducted
COMPONENTS INPUTS
KEY ACTIVITIES

A. Construction of distribution networks A. USD 104.581 million

B. Project administration and management B. USD 3.883 million
C. Technical assistance and capacity building C. USD 3.586 million
D. Implementation ESMF/ESMP and ARAP D. USD 9.355 million
Total Project cost: USD 121.405 mill.

vi
 PROJECT IMPLEMENTATION SCHEDULE

Major Activities 2015 2016 2017 2018 2019

August

August

August
April

April

April
Sept.

Mar.

Sept.

Mar.

Sept.

Mar.

Sept.

Mar.
June

June

June
Nov.

Nov.

Nov.

Nov.
May

May

May
Dec.

Feb.

Dec.

Feb.

Dec.

Feb.

Dec.

Feb.
Oct.

July

Oct.

July

Oct.

July

Oct.
Jan.

Jan.

Jan.

Jan.
Loan approval

Loan signature

Loan effectiveness

Procurement of
supervision consultant
Review and updating
of design and bid
documents
Issue of SPN

Bidding period

Bid evaluation and

contract award

Contracts effectiveness
and Construction
implementation period

vii
 REPORT AND RECOMMENDATION OF THE MANAGEMENT TO THE BOARD
OF DIRECTORS ON PROPOSED FINANCING FOR UGANDA RURAL
ELECTRICITY ACCESS PROJECT

Management submits the following report and recommendations on a proposed loan for
USD 100 million on ADB sovereign guaranteed terms and a grant of EUR 11.205 million
from EU-AITF to finance the Uganda Rural Electricity Access Project.

I. STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives

1.1.1 The Bank’s Country Strategy Paper (CSP) for Uganda (2011–2015) extended to 2016,
seeks to support two strategic pillars: (i) “infrastructure development” through interventions
to address the country’s transport, energy and agricultural infrastructure bottlenecks, and (ii)
“skills and technology development” by supporting the country education systems. The
GoU’s long term development strategy (Vision 2040) sets out a target of increasing access to
electricity to 80 % in the next 30 years and the 5 year medium-term plan “National
Development Plan (NDP-II) 2015/16 – 2019/20” focuses on increasing the percentage of the
population with access to electricity from 14% to 30% as the key means to achieving the
objective of increasing the stock and quality of strategic infrastructure to accelerate the
country’s competitiveness. In addition, the GoU’s 10 year (2013-22) Rural Electrification
Strategy and Plan (RESP-2) sets out a target to increase access to electricity in rural areas
from 7% to 26%.

1.1.2 Uganda has registered some improvement in economic performance. Still, electricity
remains critical for Uganda to attain the growth trajectory and socio-economic transformation
of its fast-growing population. High energy costs, coupled with unreliable supply contributed
to the high cost of doing business, thereby reducing the country’s competitiveness. The
limited access to electricity (14% at the national level and 7% in rural areas) and the high cost
of electricity services has affected delivery of social services in rural areas, constrained the
development of small-scale enterprises and adversely affected larger-scale industrial and
commercial investments in the country. In order to address these challenges, the GoU has
formulated a wide ranging set of policy measures (i) increasing electricity supply through
investing in renewable energy and pursuing improvements in energy efficiency measures, (ii)
building resilience of the energy sector supply system, (iii) implementing tariff adjustments,
(iv) improving monitoring of sector entities, (v) developing the institutional framework and
capacity of the key sector institutions; and (vi) implementing a new RESP-2.

1.1.3 The proposed Uganda Rural Electricity Access Project is a direct response to one of
the four key development objectives called for in the NDP-II “Increase the Stock and Quality
of Strategic Infrastructure to Accelerate the Country’s Competitiveness” though increasing
the percentage of the population with access to electricity (disaggregated by region). The
project is part of the RESP-2 of the GoU. The proposed project is also consistent with the
Bank’s energy sector policy approved in October 2012, which centres on promoting energy
security and increasing access to affordable and reliable energy services. The project is also
aligned with the primary objectives of the Sustainable Energy for All (SE4ALL) initiative that
promotes universal access to modern energy services, which Uganda participates in.

1
1.1.4 The proposed project is in line with the “infrastructure development” pillar of the
extended CSP for Uganda, which had specifically listed support to rural electrification (grid
extension in the North, East, Central and Lira-Gulu areas) under the Bank Group Indicative
Assistance Program 2014-16.The extended CSP is in line with the country’s long-term
development strategy (vision 2040) and its medium-term NDP-II plan, in which energy is a
key strategic development sector.

1.2 Rationale for the Bank’s Involvement

1.2.1 Access to electricity is a necessary precondition for achieving development goals that
extend far beyond the energy sector, such as poverty eradication, access to clean water,
improvement in public health and education, women's empowerment and increasing food
production. The current 7% access rate to electricity in rural Uganda is hampering economic
development, entrenching inequality and impeding the improvement of livelihoods. To
alleviate this situation, the GoU has given priority to investment of infrastructure
development in the energy sector, and particularly in rural electrification. The Bank has
indicated its willingness to support the sector in line with its CSP for Uganda and the GoU’s
policy on division of labour amongst different financing institutions and partners. The
proposed project is in harmony with both the GoU’s long and medium terms development
strategies and the Bank’s operational strategy in Uganda, as per the CSP and the Bank’s
energy sector policy.

1.2.2 The proposed project is in line with one of the operational priorities of the Bank’s ten-
year strategy (2013-2022), being infrastructure development, which aims at promoting the
development of sustainable energy infrastructure to address the key constraints hindering
economic transformation: the energy deficits in the countries, low energy access and high
tariffs. The Bank’s intervention under the proposed project is part of the broader programme
of RESP in Uganda which, among other goals, aims to contribute to an improvement in the
energy sector infrastructure services in rural areas and boost commercial and industrial
activities, increase productivity, generate employment, eradicate rural poverty, improve
access to social services and reduce rural-urban inequality, and catalyse the achievement of
Uganda’s Vision 2040 goal of attaining middle-income status by 2020. The project will
provide an effective means to advance implementation of the government-led, sector-wide
approach and ongoing harmonization process in the electricity sector.

1.2.3 In addition, the project will complement and benefit from the synergy with the Bank’s
recent interventions in the sector, specifically the interconnection of regional power grids
(NELSAP Interconnection Project), the Mbarara - Nkenda & Tororo - Lira power
transmission project, Bujagali hydropower plant project and Buseruka hydropower plant
project. The Bank will also benefit from further consolidating its leadership role in the
development of Uganda’s economic infrastructure, and increase its collaboration with other
financing institutions and partners that are supporting the electricity sector.

1.3 Donors Coordination

1.3.1 Uganda’s foreign aid coordination and harmonization mechanisms are structured
along thematic sector working groups. Development partners (DPs) cover almost all sectors
and their total commitments for each year accounts for about 18.2% of Uganda’s national
budget. The Bank is well-positioned in the effective coordination of DP working groups,
which it does through the overall leadership of the Local DPs Group (LDPG), comprising of
the Heads of Diplomatic Missions and chaired by the World Bank (WB). The Bank is active

2
in the LDPG and chaired the Water and Sanitation DP working group as well as the DP
Economist working group during the CSP implementation period. Implementation of the
RESP-2 is expected to cost about USD 952 million and DPs have pledged contributions
totalling USD 377 million, including the Bank’s contribution for the proposed project.

1.3.2 With respect to the energy sector, DP coordination is done through the Energy and
Minerals Development Partner Group (EMDPG)1 currently chaired by the Government of
Germany. There is a continuous dialogue between the GoU and DPs to ensure that results and
outcomes are achieved in line with the agreed targets. GoU and DPs also undertake monthly
joint Energy and Minerals Sector Working Group meetings and annual Joint Sector Reviews
with participation of public sector stakeholders and DPs to provide a platform to discuss
financing, institutional and implementation issues in the sector. The Bank actively participates
in all the sector coordination activities. The proposed project will provide an effective means
to advance the implementation of the government-led energy sector working group and
ongoing DP harmonization processes in the electricity sector.

II. PROJECT DESCRIPTION

The project’s main development objective is to “provide reliable and affordable electricity to
rural Ugandan households, public infrastructure services (schools, health centres, and
administration offices) and small and medium scale enterprises”. The project will expand
the grid medium voltage (MV) and low voltage (LV) distribution networks spread over five
service territories (ST) in 16 district areas and provide last-mile connections to households,
public infrastructure and small and medium enterprises. In addition, it includes construction
of a 7 km long submarine cable to the Bugala Island from the national grid and procurement
of connection materials, ready-boards and pre-paid energy metres to intensify the last-mile
connections for 99,077 new customers near to the existing grid in already electrified rural and
urban areas that do not require grid extension.

2.1 Project Components

2.1.1 The project has four main components: (A) Grid extension and last-mile connections
through construction of distribution networks, (B) Project Administration and Management,
(C) Technical Assistance and Capacity Building; and (D) Environmental and Social
Management.
Table 2.1: Project components
Component Est. Cost
N° Component Description
Name (USD m)
 Construction of 1,147 km of 33 kV distribution lines, 808 km of low
voltage (0.415 kV) networks and connecting 58,206 households, 1,474
public institutions (schools, health centres and administration offices)
and 5,320 small and medium scale enterprises in rural areas to the grid
Grid Extension
 Construction of a 7 km long of submarine cable to supply the Bugala
A) & last-mile 104.581
Island from the national grid and to supply surplus power from the
connection
island solar-diesel hybrid generators to the national grid
 Supply of connection materials, ready-boards and pre-paid metres to
intensify the last-mile connections for 99,077 new customers near to the
existing grid in already electrified rural and urban areas that don’t

1
The active DPs partners in the EMDPG are the WB, AfDB, French Development Agency (AFD), United Nations
Development Programme (UNDP), KfW/GIZ, Government of Germany, Government of Norway, Japanese International
Cooperation Agency (JICA), European Union (EU), and the United States Agency for International Development (USAID).

3
 Component Est. Cost
N° Component Description
Name (USD m)
require grid extension.
B) Project Administration and Management
 Review and update of designs, specifications and bid documents,
Consultancy assisting in the bidding process, supervision of construction activities,
Services for review and approve contractor’s/supplier’s designs; and supervision of
Project the implementation of Environmental and Social Management
B1 2.410
Supervision Framework (ESMF) and the Environmental and Social Management
and Plan (ESMP)
Management  Electricity danger sensitization programme for newly connected
households
 Annual technical and financial audit services for the project account and
B2 Audit Services 0.158
environmental audit
 The project implementation team will be reinforced through recruitment
Project of additional staff (electrical engineers, accountant, a procurement
B3 1.315
Administration officer, environmentalist, social expert, way-leaves officer, outreach
officers).
 Capacity building to REA to strengthen institutional planning, designs,
monitoring and evaluation, mainstreaming gender in provision of
electricity, social and environmental assessments and
Technical compensation/resettlement, procurement and contract management
Assistance and
C) 3.586  Technical assistance to the Electricity Regulatory Authority (ERA) to
Capacity
strengthen the institution to determine the “cost of service” (cost
Building
structure, cost drivers, and revenue requirements that need to be
reflected in appropriate tariff levels) and affordability of the tariff
 Feasibility studies for future rural electrification projects
Environmental  Implementation of ESMP, ESMF and Abbreviated Resettlement Action
D) and Social 9.355 Plan (ARAP)
Management  Cooperate social responsibility (tree replanting in the project areas)

2.2 Technical Solutions Retained and Other Alternatives Explored

2.2.1 The project aims to expand the grid through construction of MV and LV distribution
networks and to connect households, small and medium scale enterprises, public institutions
(health centres, schools, water supply facilities and trading centres). The best off-grid option
for decentralized electrification (diesel, micro hydro, or solar photovoltaic) was compared
with the national grid expansion option. In the selected project areas, the small-scale
generation (stand-alone mini-grids), to some extent the unavailability of resources (solar
intensity, wind and water resources), and the costs are higher than for grid expansion. The
diesel generator mini-grid option is not in line with one of the Government’s RESP-2
objectives, which is that “the rural electricity access should fundamentally take into account
the aim of offering electricity service to rural consumers at the lowest possible cost” and will
not make electricity more affordable for customers. In addition, the diesel generator mini-grid
option is not in line with one of the three primary objectives of SE4ALL, which is “doubling
the share of renewable energy in the global energy mix”.
Table 2.2: Project alternatives considered and reasons for rejection
Alternative Brief description Reason for rejection
Sizable off-grid  Limited availability of hydro sites and insufficient solar
micro hydro intensity for large scale solar PV and wind in some of the
Off-grid, mini-grid development or diesel project areas. Consequences would include higher
solutions generators to provide investment cost for construction and longer implementation
power to rural time.
villages and towns.  The renewable off-grid solutions costs are higher compared

4
 Alternative Brief description Reason for rejection
to grid connection, severe capacity and electricity storage
Renewable off-grid constraints limits the benefits of electrification, particularly
installations (solar for health centres. In addition, maintenance poses a severe
photo-voltaic challenge, making off-grid a rather temporary solution.
systems, wind, mini  The use of diesel generators would lead to increased
hydro). electricity costs and negative CO2 emissions.

2.3 Project Type

The proposed project is part of the GoU’s ten year rural electrification programme (RESP-2)
to expand access to electricity, and is a standalone project that will be financed through an
ADB sovereign guaranteed loan blended with EU-AITF grants mobilized through the Bank.
The project will extend the national grid for last-mile connections, and is aimed at increasing
access to electricity in rural areas of Uganda. In addition, the project constructs a 7 km long
submarine cable to supply the Bugala Island from the national grid and to supply surplus
power from the island solar-diesel hybrid generation to the national grid.

2.4 Project Cost and Financing Arrangements

2.4.1 The total project cost, including physical and price contingencies and excluding all
taxes, duties, levies, and VAT in Uganda, is estimated to be USD 121.405 million, comprising
foreign exchange costs of USD 86.300 and local costs of USD 35.105 million. Table 2.3
presents the foreign and local currency project cost by component.
`
Table 2.3: Project Cost by Component
USD million
Component
Foreign costs Local costs Total
A) Grid Extension & last-mile connections 80.90 23.681 104.581
B) Project Administration and Management
B1) Project Supervision and Management 2.170 0.240 2.410
B2) Audit Services 0.000 0.158 0.158
B3) Operating Expenses 0.000 1.315 1.315
C) Technical Assistance and Capacity Building 3.230 0.356 3.586
D) ESMP /ESMF/ARAP and tree replanting 0.000 9.355 9.355
Total Project Cost 86.300 35.105 121.405

2.4.2 The Bank finances 82.37% (USD 100 m) of the total financial requirement, the EU-
AITF Technical Assistance and Investment Grants finances 9.92% (USD 12.05 m) and the
GoU will provide 7.71% (USD 9.355 m). The relatively low counterpart fund is due to: (i) the
project’s contribution of the GoU will be above 7.71% since all local taxes for all works,
goods and services will be paid by the GoU (ii) the implementation of RESP-2 requires USD
952 million in total and the secured financing from DPs is around 29% and this will cause
GoU to mobilize budget resources should sufficient financing not be available from DPs, (iii)
ADF allocation has been reduced under the ADF-13 replenishment cycle and the available
ADF resources were insufficient to cover all the pipeline projects in Uganda. Ideally rural
electrification should have concessional financing; (iv) GoU has committed to achieve a 26%
electricity access in 2022 from the current 7%, and (v) GoU’s overall budget for Fiscal Year
2015/16 is USD 8.0 billion; of which 15% is devoted to energy sector, which is only exceeded
by transport (18%) and this shows the priority assigned to the energy sector. The debt level

5
has increased to a Nominal Debt to GDP Ratio of 29.9% on account of large infrastructure
projects; but Uganda’s Debt Service to Revenue at 9.1%, remains sound. To reduce the GoU’s
financial burden in this project, the Bank’s contribution has been increased. See Technical
Annex B.2.1.

2.4.3 The sources of financing of the project are illustrated in Table 2.4. The Bank’s
financing will be used to cover 86.04% of the total foreign cost and 73.35% of local costs of
the project excluding all taxes, duties, levies, and VAT in Uganda. The EU-AITF grant will
be used to cover 13.96% of the total foreign costs.
Table 2.4: Sources of Financing for Foreign and Local costs
USD million
Sources % of total
Foreign costs Local costs Total
ADB sovereign guaranteed loan 74.250 25.750 100.00 82.37%
EU-AITF Grant 12.05 0.000 12.05 9.92%
Government of Uganda 0.000 9.355 9.355 7.71%
Total project cost 86.300 35.105 121.405 100%

Table 2.5: Project Cost by Category of Expenditure

USD million % foreign
Category of expenditure
F/C L/C Total costs
Works
Grid Extension & last-mile connection 57.800 23.681 81.481 70.94%
Goods
Supply of connection materials, ready boards & energy metres 23.100 0.000 23.100 100%
Services
Project Supervision and Management 2.170 0.240 2.410 90.04%
Technical Assistance and Capacity Building 3.230 0.356 3.586 90.07%
Audit Service 0.000 0.158 0.158 0%
Operating costs
Project Administration and Operating Expenses 0.000 1.315 1.315 0%
Others
ESMP / ESMF/ ARAP and tree replanting 0.000 9.355 9.355 0%
Total project cost 86.300 35.105 121.405 71.08%

2.4.4 The Bank’s financing expenditure schedule by component is provided in Table 2.6.

Table 2.6: Expenditure Schedule by Component (ADB and EU-AITF)

Expenditure per year (USD million)
Component
2015 2016 2017 2018 2019 Total
Grid Extension & last-mile connection 0.000 5.229 52.836 30.218 16.296 104.579
Project Administration and Management 0.800 0.971 1.701 0.412 3.884
Technical Assistance and Capacity Building 0.000 1.076 1.076 1.076 0.359 3.587
Total 0.000 7.105 54.883 32.995 17.067 112.050
Cumulative 0.000 7.105 61.988 94.983 112.050

2.5 Project’s Target Area and Population

2.5.1 The key project beneficiaries will be an estimated 58,206 rural households living
within five STs (central, Eastern, South, North-North West and North Eastern) in 16 district
areas (Nakasongola, Luweero, Alebtong, Amuria, Soroti, Mbale, Manafwa, Serere, Ngora,
Bukedea, Kaliro, Luuka, Buyende, Iganga, Gulu, Nwoya and Bugala Island) representing

6
around 279,389 people2. The households and businesses in Bugala Island (Kalangala) will
benefit by getting reliable power supply from the grid. The public institutions and businesses
in these district areas will be significantly improved, as the project will provide access to
modern, reliable energy to 5,320 business centres and 1,474 public institutions (schools,
health centres and administration offices). Finally, markets, business centres, and other major
consumers will be given priority in the routing as per the programme design. It is therefore
expected that the project will improve livelihoods, economic opportunities in rural
communities, better the access to social services (health, education) including maternity
facilities, relieve women and children from in-house pollution coming from to use of fuel
wood and charcoal, reduce inequalities between urban and rural areas and benefit small-scale
businesses and the few large commercial and industrial clients in the areas. The project will
also supply connection materials, ready-boards and pre-paid meters for 99,077 new customers
near to the existing grid in already electrified rural and urban areas that don’t require grid
extension.
2.6 Participatory Approach

2.6.1 There was intensive consultation amongst DPs during the preparation of the GoU’s ten
year RESP and on the investment prospectus. The GoU and DPs had discussions in July 2013
and support for the rural electricity programme was reaffirmed.
2.6.2 In the framework of specific activities related to this project, consultations were
conducted with communities, potentially affected people, civil society, and key sector and
local administrative officials during the preparation of the ESMF and ESMP. The
stakeholders and beneficiaries of the project were identified after undertaking literature
reviews and preliminary consultations. The stakeholders consulted included District Local
Government Officials (District Environment Officers, District Production Officers, District
Engineers, Chief Administrative Officers, District Planners and District Engineers) officials
from MEMD, National Environment Management Authority (NEMA), Uganda National
Roads Authority (UNRA), National Forestry Authority (NFA), and Uganda Wildlife
Authority (UWA) and local communities among others. The stakeholders raised some
concerns which are reflected in the ESMF but overall there was broad-based community
support for the project. REA will undertake additional stakeholder consultations throughout
the design and implementation stages of the project. Overall, stakeholder consultations are a
continuous activity throughout the life of the project. REA will also put in place a Stakeholder
Engagement Plan (SEP) in order to guide their engagement activities and facilitate reporting.
2.7 Bank Group Experience and Lessons Reflected in Project Design

2.7.1 As at the end of May 2015, the Bank’s portfolio comprised 17 operations (see
Appendix II). These included 15 sovereign loans and 4 grant operations, amounting to a
commitment of UA 689.16 million. The Bank’s portfolio distribution by sector shows that
infrastructure (energy, transport, water and sanitation) accounts for 55.28 % of the total
commitment, followed by agriculture, 17.85% and human development (social), 28.87%. The
Country Portfolio Performance Review (CPPR of 2013) clearly demonstrated that the
portfolio performance has improved since 2011, with an improvement in the overall rating of
2.5 in 2012 to 2.66 in 2013. There has also been remarkable improvement in the disbursement
rate, from 44.29% in 2012 to 46% in 2013. There were no problematic or potentially
problematic projects as at the end of May 2015. The active sovereign portfolio has an average
age of 4.85 years with no aging projects.

2
Estimated 4.8 people per household in rural area as per Uganda Bureau of Statistics (UBOS) 2014.

7
2.7.2 The AfDB’s preparation and appraisal of the proposed project has incorporated
lessons learned from the Bank’s ongoing operations and past interventions in Uganda, as well
as other DPs’ interventions in the rural electrification programme, particularly in the first
phase of RESP. The lessons learned from the Bank’s ongoing operations and past
interventions, as well as other DPs’ interventions are detailed in Annex B1. The lessons
learned from the Bank’s ongoing operations and past interventions in Uganda and from other
DPs’ interventions in the first phase of RESP for the period of 2001 to 2012 relate to: (i)
acquisition of way-leaves prior to project implementation to avoid delay in handing over of
sites to contractors, (ii) project start-up and implementation delays due to ineffective
institutional arrangements, insufficient staffing and delays in fulfilling the conditions
precedent to loan effectiveness and to the first disbursement, (iii) delays in procurement
processes and poor design of project supervision service contracts due to a lack of expertise
and insufficient staffing of the executing agencies, (iv) high level of contract variations
arising from incomplete needs assessments and designs; and (v) poor contractors and
supervision consultant performances.
2.7.3 The design of the proposed project takes these lessons into account by: (i) taking
appropriate actions in the compensation of project affected people to avoid delays in
implementing the project due to compensation and resettlement issues, (ii) assigning a
specific project implementation team (PIT) by staffing through the project resources, (iii)
strengthening the procurement capacity of REA through training on Bank procurement
guidelines and procedures, (iv) project supervision and management consultant involvement
to ensure the preparation and submission of good quality bid documents and evaluation
reports; (v) providing technical assistance and capacity building training in the relevant areas,
(vi) the Bank will do a thorough review on the Terms of Reference and Request for Proposals
for recruitment of a supervision consultant and qualification criteria for evaluation of
contractors/bidders proposals, (vii) The bidding documents should clearly define the needs,
and designs and realistic completion time, and establishing a system for contract management
and monitoring jointly between the procurement unit and the PIT; and (viii) carrying out
regular Bank supervision missions.
2.7.4 The proposed project incorporates good international practices and experience in
several essential ways: (i) the RESP-2 is formulated on a concept of “area coverage for the
entire country ensures access for all” to cover the entire country; 13 service territories were
established so that no one is left out. This approach is in line with experience in other
countries; and (ii) accountability for increasing on-grid access established, which enforces
accountability for each service provider in their respective service territories to increase
access for on-grid connections.
2.8 Project’s Performance Indicators
2.8.1 The key deliverables and outcome indicators of the project are:

Access: 58,206 households, 5,320 business centres (commercial centres & industries) and
1,474 public institutions (schools, health centres and administration offices) connected to the
national electricity grid by constructing: (i) 1,147 km of MV distribution lines and (ii) 808 km
of LV networks. Additional 99,077 new connections within 3-years after project completion.

Quality: Sustained reliability of electricity supply for existing and new consumers in Bugala
Island (Kalangala) by constructing 7 km of submarine cable to supply from the national grid.
Consumers are suffering from power interruption from the solar-diesel hybrid plant due to the
low power factor in the island.

8
In-house capacity: (i) increased number of staff trained and improved rural electrification
project planning and design preparation, as well as an improved financial management
system, procurement handling, environmental and social safeguards implementation and
improved capacity to mainstream gender in the provision of electricity in the executing
agency; and (ii) established institutional capacity within ERA to carry out the “cost of
service” and affordability of tariff studies in the future.

2.8.2 REA will have the primary responsibility for tracking the project’s key performance
indicators, using data from the contractors, the supervision consultant, the service providers
and other project stakeholders. Statistics reports produced by ERA and MEMD will verify the
performance indicators. The progress during implementation will be measured by the timely
commencement of the work, regular disbursements, consultations with the Project
Management Teams, timely submission of quarterly progress reports and implementation of
the ESMP/ESMF/ARAP, and annual audit reports. After completion of the project, its
effectiveness will be assessed via monitoring of productive use of electricity in the targeted
project areas, which will be done in close cooperation with the concerned government
organizations. MoFPED will play its role of monitoring the developing impact and evaluation.
After project closing, the connections to be carried out by Service Providers (SPs) within the
first 3 years after commissioning of the project, will be monitored and ensured by REA, as
REA has entered into Lease Agreements with all SPs that clearly articulate performance
targets of individual SPs and rights and obligations of the parties involved.

2.8.3 The technical assistance component will provide capacity development and know-how
to strengthen in-house capacity for preparation of project planning and design documents,
feasibility study, proper financial management and procurement handling for REA. For ERA
it will provide for the preparation of “cost of services” and “affordability of tariff” studies and
for building the in-house capacity for future revision of these studies in order to accurately
determine the generation, transmission, distribution and end user tariffs. The source of data to
confirm these indicators will be time-to-time assessments of the effectiveness of the technical
assistance. This effectiveness will be monitored, after completion of the project, through the
quality of future rural electrification projects and documents prepared by REA and revised
cost of services studies prepared by ERA.

III. PROJECT FEASIBILITY

3.1 Economic and Financial Performance

3.1.1 The Bank and REA jointly developed the project’s financial model, basing it primarily
on data from the project technical feasibility studies conducted by the consultants for each
district. In order to determine the impact of the proposed investment, the model adopts an
incremental analysis, which entails comparing the “with the project” scenario to the “without
the project” scenario.

3.1.2 The results of the analysis show that the project is financially sustainable and
economically viable. Its financial internal rate of return (FIRR) is estimated at 11% (real)
while the financial net present value (FNPV) discounted at a real rate of 10% is USD 7.2
million. These figures were obtained on the basis of electricity tariffs on the ERA website of
UGX 531.5 per KWh charged to domestic consumers (UGX 150 for the first 15 units),
UGX 484.6 charged to commercial consumers and UGX 461.6 charged to small industries,
respectively.

9
3.1.3 The economic benefits of the project are computed by considering the willingness-to-
pay of the targeted end users. According to the data available from the technical feasibility
studies, the total amount spent by non-electrified households on energy-related expenses is
UGX 32,000 (around USD 12) per month. The studies provide an average consumption of
60 kWh per month for non-electrified households, given an energy cost of UGX 532/kWh
(around USD 0.19/kWh). The project will yield an economic internal rate of return (EIRR) of
22% (real) and an economic net present value (ENPV) discounted at the opportunity cost of
capital of 10% (real), estimated at USD 111.5 million.

3.1.4 The main financial and economic results are summarized in Table 3.1 below. The
detailed calculations and assumptions are presented in Annex B7.

Table 3.1: Key Financial and Economic Results

Base case
FIRR (%, real) 11%
FNPV (@10% real, million USD) 7.2 million
EIRR (%, real) 22%
ENPV (@12% real, million USD) 111.5

3.1.5 A sensitivity analysis was also performed against the key risk variables of the project
to test the robustness of its financial and economic cash flows. The key risks tested include an
increase in investment costs, an increase in operating costs, and a reduction in revenues. The
results of the sensitivity analysis show that the economic results are robust under adverse
conditions. Details of the financial and economic analysis, as well as the sensitivity analysis,
are provided in Annex B7.
3.2 Environmental and Social Impacts
3.2.1 Environment

3.2.2.1 The project has been classified as Category-2 type in accordance with the AfDB’s
Integrated Safeguards System (ISS) Policy and the Environmental and Social Assessment
Procedures (ESAP) of 2014 because no major adverse environmental and social impacts are
expected to arise but during implementation there would be potential small scale, localized and
short-term environmental and social impacts that will be mitigated. Most of the expected impacts
will be minimal as the project will intervene in distribution and supply line networks and will not
pass through any sensitive areas nor will it result in physical displacement of people. To a large
extent, the project facilities will run along existing community access and feeder road reserves
hence; no resettlement is anticipated. Though the preliminary designs and line routing have been
completed, the detailed designs and final routing shall be determined during project
implementation. The tools deemed most suitable for the environmental and social assessment
and management of the project are the Environmental and Social Management Framework
(ESMF) and the Environmental and Social Management Plan (ESMP). The ESMF and ESMP
summaries were posted on the Bank’s website since 29 June 2015 for a period of 30 days prior to
the presentation of the project to the Board.
3.2.2 Mitigation Measures
3.2.2.2 Though the project has large positive impacts, it is anticipated that the project will trigger
some limited potential negative impacts which will include; soil erosion arising from excavations
for pole foundations and this will be mitigated by compaction of loose soil surfaces. Possible
disruption of traffic flow along the roads during project implementation will be mitigated by

10
working with traffic police who will guide traffic. There will also be some spot losses of sections
of roadside vegetation which can be reduced through adopting designs that avoid thick
vegetation areas and where necessary, limited compensation for some affected roadside trees.
Other concerns will include management of construction waste such as conductor wire off-cuts
which the contractor will collect and dispose in designated areas outside the project areas. The
project will provide Personal Protective Equipment (PPE) for the health and safety of the
workers. On HIV/AIDS and Sexually Transmitted Infections (STI)/Sexual Transmitted Diseases
(STDs) concerns for the workers and the nearby communities, this is to be addressed through
sensitization of workers on HIV/AIDS and provision of condoms and voluntary counselling
and testing (VCT) which is to be done by nearby health units in the project areas under project
arrangements. Potential oil spills from transformers will be mitigated by ensuring that the
transformers are prepared and set, ready for installation, before transportation to the site.
Acquisition of temporary camp sites will be secured directly by the contractors from the land
owners under agreed terms and the sites are to be fully restored at the close of the project.
Overall, the project will have minimal environmental and social impacts which will be
mitigated through implementation of measures outlined in the ESMP.

3.2.3 Climate Change

3.2.3.1 One of the positive impacts of the project relates to its potential provision of alternate
source of energy for cooking and lighting especially at domestic and institution levels in
schools and health facilities (e.g. energy for sterilization of medical equipment and laboratory
based operations) which to a small scale, will reduce reliance on fire wood and charcoal in the
rural areas. However, other anticipated climate change aspects of the project relate to potential
flooding of the wetland areas and intense storms and hotter temperatures during the dry
seasons which will affect stability of the poles and power distribution lines. To mitigate these,
REA ensures electricity distribution wires are strung in such a way that allows for their
contraction and expansion due to heat and temperature changes without breaking. On the
other hand, the stability of power distribution poles in areas prone to flooding, especially
wetlands, is to be guaranteed and compacting gravel around the poles for purposes of
stabilizing them. In some sections of wetland areas, electricity distribution poles are placed in
plastic drums which form part of their foundations and later filled with gravel and compacted.
To avoid damage from seasonal fires, the Right of Ways (RoWs) are routinely maintained
through periodic and systematic vegetation cutting and tree trimming. On the other hand,
through REA’s CSR programme, it is expected that some 110,000 trees planted will planted
under then project.

3.2.4 Gender

3.2.4.1 Uganda has a GII3 value of 0.529, ranking it 115 out of 149 countries in the 2013
index. The longer term objective of the project will be to contribute to addressing the
identified challenges through increasing energy access to public institutions such as health
centres, schools and market places and ensuring that the project adopts a gender sensitive lens
to its design. For instance, energy is a critical enabler for vital primary health care services,
especially during maternal and childbirth emergencies. Electricity is needed for basic lighting,

3
The Gender Inequality Index (GII) reflects gender-based inequalities in three dimensions – reproductive health,
empowerment, and economic activity. Reproductive health is measured by maternal mortality and adolescent birth rates;
empowerment is measured by the share of parliamentary seats held by women and attainment in secondary and higher
education by each gender; and economic activity is measured by the labor market participation rate for women and men. The
GII can be interpreted as the loss in human development due to inequality between female and male achievements in the
three GII dimensions.

11
vaccine storage, access to clean water, equipment sterilization, and to power other essential
equipment. Energy access to schools will allow students the option of attending class in the
evening potentially increasing school enrolment and it will also allow schools to put in place
Information Technology (IT) labs for the students, this is expected to encourage and prepare
students for secondary and potentially higher education.

3.2.4.2 REA has considerable commitment and informal capacity on gender in place. REA
has partnered with NORAD and ENERGIA, the International Network on Gender &
Sustainable Energy, to prepare a gender mainstreaming strategy for rural electrification
projects. REA has put in place a Gender Focal Team and has an employment ratio of 55%
women and 45% men, of these, 29% of women are at management level while 71% are men.
To date, REA has achieved the commitment of senior decision-makers to gender
mainstreaming; integration of gender in six rural electrification projects; established a Gender
Task Team for further gender mainstreaming support; increased awareness of gender issues
through workshops with REA staff, contractors and civil society partners; and shared
experience with other energy agencies in Uganda and with international networks. REA
attempts to increase access by specifically targeting women and men with different
promotional messages for connections, according to their energy needs, media access, and
household decision making, considers subsidies, pre-payment cards, and ready-boards as a
means of increasing access for women and has committed to providing connections to social
infrastructure such as health clinics and water pumping stations for free.

3.2.4.3 In order to ensure that gender dimensions are considered already during the design
stages of REA projects, REA typically engages gender focal points in the stakeholder
engagement process, these focal points are placed in the various regions and form a part of the
gender network established by the Ministry of Gender, Labour and Social Development.
Furthermore, the project intends to set aside a budget specifically for gender-targeted
activities and will support REA in achieving some of its key milestones set out in its gender
mainstreaming strategy. The following activities have been identified and will subsequently
shape the social and gender components of the project, namely, under the capacity building
component a provision has been made for gender training for board, management and staff by
supporting the development of a capacity-building programme for REA, to strengthen the
capacity within REA to mainstream gender in the provision of electricity. The project also
intends to support REA in setting up sex-disaggregated impact monitoring indicators within a
comprehensive monitoring system. Further details are provided in Technical Annex B.8.5.

3.2.5 Social
3.2.5.1 Uganda’s Gini coefficient is 44.3 (where 0 expresses perfect equality and 1 expresses
maximal inequality) and Human Development Indicator (HDI) value for 2013 is 0.484, which
is in the low human development category, positioning the country at 164 out of 187 countries
and territories. Between 1980 and 2013, Uganda’s HDI value increased from 0.293 to 0.484,
an increase of 65% or an average annual increase of about 1.53%. Uganda’s 2013 HDI of
0.484 is below the average of 0.493 for countries in the low human development group and
below the average of 0.502 for countries in Sub-Saharan Africa. HIV prevalence among ages
15-49 is 7.2% and infant mortality rate (per 1000 live births) is 45.4 The top 4 causes of death
in Uganda in 2010 were HIV 17%, Malaria 12%, Lower Respiratory infections 7% and
Tuberculosis 5%.5

4
URL: http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/UGA.pdf
5
URL: http://www.cdc.gov/globalhealth/countries/uganda/

12
3.2.5.2 The project is expected to directly influence the quality of life in the rural areas
through improvements in health service delivery, quality of education, safety of drinking
water, sanitation and general improvement of livelihoods. Furthermore, the project is
expected to enhance HIV/AIDS awareness of the rural population and also the construction
workers through HIV/AIDS awareness campaigns that will be held on a regular basis. Since
the majority of the rural people are engaged in subsistence agriculture, rural electrification
will be critical in value addition for agricultural produce. Type of settlements may also change
over time from being scattered to linear as people will shift to staying near power supply
sources. The type of structures which are largely temporary and semi-permanent may
transform to permanent as a result of rural electrification.

3.2.5.3 REA has also established a pro-poor scheme that allows vulnerable households to
access power connection for payment on instalment terms within an agreed timeframe based
on vulnerability criteria and ready-boards are provided as an option for more affordable
connections. Feasibility studies indicated that there is an overall willingness to pay for
electricity in the rural areas of intervention. Details are provided in Technical Annex B.8.4.

3.2.6 Involuntary Resettlement

3.2.6.1 The project is not envisaged to trigger relocation of people, however, it is expected
that a number of people will be affected in terms of loss of crops and fruit trees along the
RoW which is estimated to be 10 metres wide. The estimated number of people to be affected,
if at all, shall be determined when the final line route has been established by the contractor.
The nature of distribution lines is such that social impacts are much less compared to
transmission lines, and that in most cases the line routes will be within the road reserves of
existing community and district feeder roads. In addition, much of the impacts that may befall
the populations are linked to crops and trees which could easily be mitigated. Thus, in the
event that people are affected by the project, the applicable resettlement action plans in
accordance with the Bank’s ISS will be developed prior to commencement of distribution
lines/networks construction works in such section(s).

IV. PROJECT IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 Institutional Arrangements: The borrower of the proposed ADB sovereign

guaranteed loan will be the GoU through its MoFPED. For the purpose of implementing the
national rural electrification programme, the GoU has established REA as a semi-autonomous
Agency under the MEMD through Statutory Instruction No.75 to facilitate projects’
implementation regardless of the source of funding. Accordingly, the executing agency for the
proposed project will be REA, which reports to MEMD. MEMD provides policy guidance
and oversight for the Rural Electrification Programme. REA will be primarily responsible for
facilitating, monitoring, evaluating, and reporting on project activities and progress.

In assessing the capacity of REA, it is noted that REA has gained technical and managerial
experience through implementation the RESP-1 projects. However, as per the current
organizational setup of REA, some of the required key project staff is not within one work
unit, which means it requires cross-work unit coordination and this affects the timely
availability of staff. REA’s Project Development & Management Department is managing all
projects regardless of the source of funding and faces a huge challenge to control, monitor,
and supervise the projects as required and as RESP-2 involves several projects; further

13
strengthening of the existing staff for the proposed project implementation is needed. For the
proposed project, the PIT will be established within the Department, comprising sufficient
staff to run the project. REA will submit the Curriculum Vitae of one environmentalist, one
procurement specialist, one social expert, two electrical engineers, one way-leave officer, five
outreach officers, and one accountant to be assigned to the project for the Bank’s approval.
The profiles of the staff members are given in Annex B.3. The project team will be assisted by
Engineering and Construction Supervision Consultant procured under this project that will
review and update the designs, technical specifications and bid documents, assist during the
bid evaluation, review and approve the contractor’s detailed engineering design, and supervise
and monitor the project implementation, including the ESMP/ESMF and ARAP. REA will be
responsible for compiling and transmitting quarterly progress reports including the
implementation of ARAP and annual financial and audit reports to the Bank. REA’s
organizational chart and the project implementation arrangements are detailed in Annex B.3.

4.1.2 Procurement Arrangements: All procurement of goods and works through

International Competitive Bidding (ICB) and acquisition of consulting services financed by
the Bank will be in accordance with the Bank's Procurement Rules and Procedures: “Rules
and Procedures for Procurement of Goods and Works”, and “Rules and Procedures for the
Use of consultants” both dated May 2008 and revised July 2012, using the relevant Bank
Standard Bidding Documents and Request for Proposals. Procurement of Goods and
acquisition of consulting Services financed by EU-AITF grant will be in accordance with the
resolution adopted in July 2010 (ADB/BD/WP/2010/113/Approved) by Board of Directors of
the Bank extending the procurement eligibility for operations financed with the resources of
the Trust Fund. Procurement of goods and works through National Competitive Bidding
(NCB) will be in accordance with national procurement procedures using the national
Standard Bidding Documents, and the provisions stipulated in the Financing Agreement
signed between the Bank and the Government of Uganda. The Executing Agency has
prepared the project Procurement Plan for the Bank’s approval. The Government has
requested the use of Advance Contracting procedures for design review and construction
supervision as well as for the EPC contracts, as a way of limiting project start delays.

REA will be responsible for the procurement of works, goods and services financed by the
project through the Project Implementing Team of the Project Development & Management
Department. The resources, capacity, expertise and experience of the REA have been assessed
and found to be adequate to carry out the procurement activities required for the project.
Meanwhile, given that the REA manages all projects, regardless of the source of funding, and
faces a huge workload challenge, technical assistance will be provided in order to strengthen
its capacity. Toward the same, the Bank will organize regular training on Bank’s Procurement
Rules and Procedures.

4.1.3 Financial Management: In line with Paris Declaration on Aid Effectiveness and
Accra Agenda for Action, the Project will to a large extent make use of the country’s financial
management systems. The day to day financial management of the Project will be as per the
rules and procedures stipulated in REA’s Financial Policies and Procedures Manual. REA’s
Manager for Project Development and Management assisted by the Manager Finance and
Administration will be responsible for the overall Financial Management function of the
Project. REA has experience in managing donor funded projects having worked with other
Development Partners like the World Bank, JICA, SIDA and NORAD. However, it was noted
that REA has as of now not yet implemented any AfDB-funded project. There will, therefore,
be a need to second/recruit a Project Accountant by REA with relevant qualifications and
experience to facilitate the financial transactions of the Project. The Project will prepare and

14
submit quarterly reports (financial and physical) to the Bank and the Ministry of Finance
within 45 days after the end of each quarter. REA’s internal audit department will include the
Project financial transactions in their annual work programme. Detailed financial management
arrangements and assessments are included in the Technical Annex B.4.

4.1.4 Disbursement: The project shall mainly apply two (2) of the four (4) disbursement
methods of the Bank as set out in the Disbursement Manual. These will be the Special
Account (SA) and Direct payment methods. The project will operate one foreign special
account (USD) into which the proceeds of the loan will be deposited and further to a local
currency special account. Both accounts will be opened at the Bank of Uganda. An initial
disbursement will be deposited in the project SA in foreign currency based on a six month
cash flow forecast for the project and based on the agreed work plan approved by the Bank
through the initial Withdrawal Application to the Bank after the effectiveness of the loan.
Actual expenditures will be replenished through submission of Withdrawal Applications
supported by Statements of Expenditures (SOE) while the direct payment method will be used
for equipment, supplies and services payments (including audit and consultancy). All
disbursements from the EU-AITF financing will be made in EURO. The Bank’s
Disbursement Letter will be issued stipulating key disbursement procedures and practices. A
detailed analysis of disbursement is provided in Annex B.4.

4.1.5 Audit: The project’s annual financial statements will be audited annually by the Office
of the Auditor General or an independent external auditor acceptable to the Bank. The audit
report, complete with a Management Letter, will be submitted to the Bank not later than six
months after the end of the financial year. The cost of the audit will be borne by the project. A
detailed analysis of audit is provided in Annex B.6.

4.2 Project Monitoring and Evaluation

4.2.1 The monitoring and evaluation arrangements of the proposed project activities will be
undertaken by REA as mandated in RESP-2. REA will provide regular reporting and liaison
with the Bank for all financial, procurement, fiduciary, safeguard and project implementation
matters. REA will have the responsibility to supply current data on the set of agreed
performance indicators at least: (i) on an annual basis for project outcome indicators, (ii) on a
quarterly basis for performance targets based on the output of each component of the project
and propose corrective actions; and (iii) on an annual basis for audit reports. These reports
shall cover all aspects of project implementation, including the status of progress against
agreed implementation and disbursement schedules for all components; implementation of
environmental and social mitigation measures; and the status of fulfilment of the loan
conditions. The audit report will be prepared by the Office of the Auditor General and once it
is cleared by REA management, REA submits to the Bank. Through the Bank’s supervision
missions - at least twice a year - and reviews of annual audit reports, the Bank will closely
monitor project implementation. In addition, gender analysis will be an integral part of
implementation, monitoring and evaluation of all project activities.

4.2.2 The Bank will undertake a mid-term review of the project approximately 24 months
after the effectiveness of the loan. The execution of the ESMP/ESMF and ARAP will also be
monitored during all stages of the project by REA and through the Bank’s supervision
missions. The supervision consultant shall also prepare and submit to REA and the Bank final
commissioning reports at the completion of its assignment. Within six months of the
completion of the project, the Bank, together with REA, will prepare a Project Completion
Report (PCR).

15
4.3 Governance
4.3.1 As REA will be the implementing agency for the project, the Executive Director of
REA shall be the Accounting Officer in relation to the accountability of resources entrusted
for the project’s operations. He shall designate the managers for Project Development and
Management and Finance and Administration to undertake the day-to-day management of
the project. The Bank, MoFPED and MEMD will provide oversight during the life of the
project. All the Anti-Corruption measures that pertain to REA and the Government will apply
to this project.
4.4 Sustainability
4.4.1 The project is technically, economically, and financially sustainable as described in
the following key factors:
4.4.2 Government commitment to the project and programme. The GoU’s commitment to
RESP-2 and to its objective is strong, and is anchored by targets of the NDP-2 to increase the
national access to electricity from 14% to 30% and the Uganda Vision 2040 to increase the
national access to electricity to 80%. The proposed project, which is part of the GoU rural
electrification ten year programme, will provide and improve access to modern, reliable and
cost effective electricity services to households, businesses and priority public institutions as
per the GoU’s commitment.
4.4.3 Development partners’ commitment to the programme. The commitment of DPs is
positive and was found strong in the implementation of the first phase of the programme for
the period of 2001 to 2012. For the RESP-2 the DPs have expressed their intent to provide
additional financing, and up to USD 277 million is already pledged, excluding the Bank’s
financing for the proposed project.

4.4.4 Affordability of tariff, connection charges and the financial viability of the Service
Providers (SPs). The Rural Electrification Board (REB) has entered into lease agreements
with 5 SPs for 7 STs out of 13 STs, with clear roles and responsibilities. The 5 STs are run by
the Uganda Electricity Distribution Company Limited (UEDCL) under management
contracts. UMEME and WENRECO are SPs with concessional agreements with GoU. To
ensure the financial viability of SPs, and at the end of the rural electrification programme, the
tariff needs to be set at a level that recovers operating costs along with connection charges and
needs to be affordable for the rural population. The GoU through RESP-2 has mandated ERA
to determine and approve electricity pricing taking into consideration the operating costs of
each SP including systems operations and administrative expenses, approved capital
expenditure recovery through depreciation allowance, financing costs and/or established rate
of capital return corresponding to investments made by the SPs. Under guidance from REA,
SPs are preparing new tariff proposals for review and approval by ERA. One of the
subcomponents of the technical assistance component under the proposed project is design to
strengthen the in-house capacity of ERA to carry out the “cost of service” studies to determine
the electricity pricing and this will help in the long-term to continuously revise the tariff. The
current tariff is affordable for most of rural unconnected households in Uganda. The major
barrier to electricity access in rural areas is the upfront cost of connection charges and the
house wiring, rather than the tariff affordability. The connection charge is mitigated by
relieving the poor households from upfront payment giving provision to them to pay the
connection charges through instalments within a period negotiated (via an easy instalment
plan payable on the monthly electricity bill). The project uses the ready boards for those poor
households that cannot afford internal house wiring costs. (See Technical Annex A.3).

16
4.4.5 Project technical design. All the technologies applied in the project have been widely
used in other countries with similar conditions and in the region. The proposed project will use
existing distribution standards and technical requirements in Uganda, which are based on
international standards and best practice; adapted for conditions prevailing in Uganda. The
distribution networks are also based on standard off-the-shelf equipment and proven
technologies, making the project significantly immune to technological risks.

4.5 Risk Management

The RESP-2 and the proposed project involve some degree of risk at the implementation level
and during the life of the facilities (after project completion). The major risks and mitigation
measures are discussed in Table 4.1 below. The overall risk to achieving the development
objectives is assessed as ‘low to moderate’ and supervision missions will monitor progress in
implementing the mitigation measures. (The ratings are: L: Low, M: Moderate, H: High.)
Table 4.1: Risk and Mitigation Measures
Risk Risk description Rating Mitigation
Risks at implementation level of RESP-2 and the proposed project
Political risk a) Borrower relations: M a) (i) REA has established Rural Electrification Master
and Political interference in the Plan which provides a prioritized guideline for
stakeholders prioritization and selection extending access.
of areas for grid extension (ii) REA in its RESP-2 has established out 13 service
leading to non-viable territories to cover all the country and ensure no
investments & GoU’s one will be left out from the programme.
target of 26% for rural
(iii) RESP-2 is complementing with selected off-grid
electrification by 2022
electrification wherever it is more cost-effective
unlikely to be met.
than grid connection.
b) Partner relations:
There may be a lack of b) (i) Strengthen the Energy Sector Working group and
harmonization between the REA to take leadership in streamlining DP support
various DPs involved in to the rural electrification programme.
the sector. (ii) Sector oversight will be enhanced through the
c) Inter-agency strengthening of the Sector Working Group
cooperation: A lack of c) (i) Continue with the current implementation
clarity of roles and arrangements, where the REA is responsible for
responsibilities of various implementation with guidance from MEMD.
government agencies may
impede on harmonized (ii) Strengthening the capacity of SPs in terms of
finance and technical support
implementation.
Completion Risk of completion delay L  Meticulous preparation of design and technical
delay and cost and/or that the cost of the specifications, as well as evaluation and qualification
overrun project might escalate requirements, should ensure minimum variance in
during implementation. costs.
 Selection of experienced and reputable contractors and
equipment suppliers through international competitive
bidding process with fixed price and time bounded
contracts will minimize delays in completion.
 Selection and employment of experienced project
supervision consultant to augment project staff will
ensure project’s delivery efficiency.

17
 Risk Risk description Rating
Delay on a) The risk associated with
procurement delay on starting and the
and contract long procurement process
implementation time due to limited human
resources in REA will
delay project
implementation
b) Inadequate contract
management will result in
delayed project
implementation &
potential loss of value.
Unaffordability There is a risk that poor
for connection households cannot afford
charges and connection charges and
house wiring house wiring expenses
expenses which results in not
achieving the targets of
connections.
Environmental The project is classified as
and social environmental Category II.
There are risks of weak
and slow implementation
of the ARAPs prior to
construction works due to
insufficient resources and
staffing available for
safeguards
implementation.
There is a risk of delays in
resettlement and
compensation process
which will result in
delayed handover of the
way leaves.
Delay on There is a risk for late
Financial and submission of project
Audit reports financial and audit reports,
due to lack of follow up as
the audit is normally done
by Office of Auditor
General.
Risks after completion of the project
Inadequate There is a risk associated
power supply with rapid increase of
to meet demand from the
demand households and other when
stemming accelerating the expansion
from new of on-grid electricity
connections services and delay of
ongoing power generation
projects.
Mitigation
M  Implementation of the advance
contracting/procurement option.
 Selection of an experienced project management and
supervision consultant to review and update the
designs, specifications and biding documents.
 Hiring additional technical staff for the project to
support procurement and contract management and
complementing these with design and supervision
consultants.
L  The proposed project envisages the supply and
installation of ready board units for the poor
households.
 REA is giving provision to the households to pay the
connection charges through instalments within a period
negotiated and agreed with the service providers.
M  The project unit capacity and staffing constraints will
be enhanced with two additional safeguard staff (one
social specialist and one environmental specialist) and
1 way leave officer and 1 outreach officer who will be
largely involved in compensation and community
engagement with Bank funding, to ensure that there is
sufficient capacity for close implementation
monitoring and reporting of all environmental and
social issues including safeguards (ESMF/ESMP and
ARAP).
 During project launching and throughout project
implementation, the Bank’s team will provide
sufficient training and support on Bank’s safeguard
policies and requirements.
 As a mitigation measure, the government will
prioritize the budget for compensation and obtains a
waiver to make cash compensations.
 Advance procurement of way-leave consultant
M  Bank’s supervision missions will monitor progress in
implementing mitigation measures.
 As this problem is recorded on the ongoing Bank’s
operation in Uganda, the Bank will continuously
dialogue with the Borrower (MoFPED).
L  In regard to overloading of networks, currently the
government is conducting integrated network
development plan study based on the 15 year load
forecast to identify possible bottleneck areas. The
study will recommend upgrading and extension of
networks.
 The increased demand will be mitigated by the timely
completion of the new hydropower generation projects
(Karuma and Isimba) that began its construction.
18
 Risk Risk description Rating Mitigation
SPs capacity a) Weak implementation L  Appropriate capacity building programmes for SPs are
and technical capacity of SPs will underway financed by World Bank and REA. This
risks result in slow includes in Inventory Management, purchase of
implementation that will machinery and tools for operation and maintenance.
constrain the scale-up of
 Continuous human resource development on
connections.
operational and maintenance activities supported by
b) Lack of long-term
development partners through RESP-2.
maintenance will result
in poor sustainability of  The grid extension investments will be operated and
investments, reversing maintained by several SPs under agreed performance
gains made by the targets included in the O&M contracts. Operator
electrification performance will be monitored and supervised by the
programme. Regulator (ERA) under their license obligations.

4.6 Knowledge Building

4.6.1 The knowledge transfer mechanism, especially on project management and

supervision, is important to build the in-house capacity of REA, as it will manage several
similar future projects to meet the government’s access targets. During implementation of the
project, the captured knowledge will be monitored during Bank supervision missions, in
quality and time assessments of the procurement process, and in audit reports.

4.6.2 The project’s activities will support REA’s management of feasibility studies for
future rural electrification projects and training. Capacity building will support REA’s project
planning, preparation of feasibility studies, and design and technical specifications. This in-
house knowledge building will enable REA to prepare projects on time and ensure quality at
entry to DPs for future projects. In addition, the TA activity will support ERA for the conduct
of cost of service studies. These components will, in the short to medium term, reduce the
technical and capacity risks.

V. LEGAL FRAMEWORK

5.1 Legal Instrument

The legal instrument to be used for financing of the project is an ADB loan to the Republic of
Uganda.

5.2 Conditions Associated with Bank’s Intervention

5.2.1 Conditions Precedent to Entry into Force

The entry into force of the Loan Agreement shall be subject to the fulfilment by the Borrower
of the provisions of Section 12.01 of the General Conditions Applicable to Loans and
Guarantee Agreements of the ADB.

5.2.2 Conditions precedent to first disbursement

The first disbursement of the loan shall be subject to Borrower having submitted to the Bank,

(i) A Subsidiary Financing Agreement for on-granting the proceeds of the loan to REA;

19
(ii) Opening of a foreign currency denominated Special Account and a designated Special
Account for local currency in the Bank of Uganda for receipt of part of the proceeds of the
Loan (Paragraph 4.1.4 here above);

5.2.3 Other Conditions

(i) Submission of Specific ESMPs for each section of the Project prior to the
commencement of distribution lines/networks construction of works in such section;

(ii) Actual compensation of PAPs (if any) as well as any persons whose assets such as
trees and crops may be damaged during Project implementation, in accordance with the
Bank’s Policy on Involuntary Resettlement, the RAP or ARAP for the Project (if applicable)
and the Specific ESMPs for any given section(s) of the Project, prior to commencement of
distribution lines/networks construction works in such section(s);

5.2.4 Undertakings

(i) Recruitment of key personnel for the REA Project Implementation Team (1
Procurement Officer, 1 Environmentalist, 2 Electrical Engineers, 1 Accountant, 1 Social
Specialist, 1 Way-leave Officer and 5 Outreach Officers) within 6 months following the first
disbursement of the Loan; and

(ii) Conclusion, not later than 3 months prior to commissioning of the sub-marine cable
connecting Bugala Island to the national grid, of an agreement or other satisfactory
arrangement between relevant Government Agencies and Kalangala Infrastructure Services
Limited (KISL) concerning KISL’s role following the connection of the island to the national
grid.

5.3 Compliance with Bank Policies

This project complies with all applicable Bank policies. In particular, it is consistent with the
Bank’s Energy Sector Policy, approved in October 2012 and “Diversifying the Bank’s
Products to provide Eligible ADF-Only Countries Access to the ADB Sovereign Window”
approved in May 2014.

The Board approved Uganda’s request for ADB public sector financing in 2014 in connection
with the Uganda Markets and Agricultural Trade Improvement Programme (MATIP-2)
Project in accordance with the Bank’s Credit Policy, as at 2014, following a Credit Risk
Committee (CRC) decision that Uganda was sufficiently creditworthy, had a Low Risk of
Debt Distress classification and was within its non-concessional borrowing limit. There has
subsequently been no major change in Uganda’s macroeconomic and debt outlook that would
invalidate the original assessment provided in the Information Note to the Board in 2014.

VI. RECOMMENDATION

Management recommends that the Board of Directors approve the proposed loan to the
Republic of Uganda for an amount not exceeding USD 100 million on ADB sovereign
guaranteed loan terms and the EU-AITF Technical Assistance and Investment grants for an
amount not exceeding EUR 11.205 million subject to the conditions stipulated in this report,
the Loan and Grant Agreements.

20
 Appendix I: Country’s Comparative Socioeconomic Indicators
Developing Developed
Indicator Year Uganda Africa
Countries Countries
Basic Indicators
Area ('000 Km²) 241.6 30,046.4 80,976.0 54,658.4 GNI per Capita (US $)
Total Population (millions) 2014 38.8 1,136.5 5,628.5 1,068.7 3000
Urban Population (% of Total) 2014 16.8 40.6 44.8 77.7
2000
Population Density (per Km²) 2014 160.6 35.4 66.6 23.1
GNI per Capita (US $) 2013 550.0 1,969.6 2,780.3 39,688.1 1000
Labor Force Participation - Total (%) 2009 32.0 32.7 0.0 0.0 0

2010

2011

2012

2013
Labor Force Participation - Female (%) 2014 49.0 42.6 39.8 43.3
Gender -Related Development Index Value 2007 0.5 0.5 .. 0.9
Human Develop. Index (Rank among 169 countries) 2012 161.0 .. .. .. Uganda Africa
Popul. Living Below $ 1 a Day (% of Population) 2009 38.0 .. 25.0 ..

Demographic Indicators
Population Growth Rate - Total (%) 2014 3.3 2.5 1.4 0.7
Population Growth
Population Growth Rate - Urban (%) 2014 5.9 3.4 2.4 1.0
Rate - Total (%)
Population < 15 years (%) 2014 48.2 40.8 29.2 17.7 4
Population >= 65 years (%) 2014 2.4 3.5 6.0 15.3
3,5
Dependency Ratio (%) 2014 101.6 77.3 52.8 ..
3
Sex Ratio (per 100 female) 2014 100.5 100.0 934.9 948.3
Female Population 15-49 years (% of total 2,5
2014 22.1 24.0 53.3 47.2
population) 2
Life Expectancy at Birth - Total (years) 2014 59.7 59.6 65.7 79.8
1,5
Life Expectancy at Birth - Female (years) 2014 63.5 60.7 68.9 82.7
Crude Birth Rate (per 1,000) 2014 42.6 35.0 21.5 12.0 1
Crude Death Rate (per 1,000) 2014 9.0 10.2 8.2 8.3 0,5
Infant Mortality Rate (per 1,000) 2014 54.7 60.4 53.1 5.8 0

2010

2011

2012

2013

2014
Child Mortality Rate (per 1,000) 2009 96.7 108.9 51.4 6.3
Total Fertility Rate (per woman) 2014 5.8 4.6 2.7 1.8
Maternal Mortality Rate (per 100,000) 2010 310.0 415.3 440.0 10.0 Uganda Africa
Women Using Contraception (%) 2014 39.7 32.5 61.0 75.0

Health & Nutrition Indicators

Physicians (per 100,000 people) 2010 11.7 52.6 77.0 287.0
Nurses (per 100,000 people)* 2005 130.6 .. 98.0 782.0 Access to Safe Water
(% of Population)
Births attended by Trained Health Personnel (%) 2011 57.4 .. 39.0 99.3 100
Access to Safe Water (% of Population) 2009 71.5 66.9 84.0 99.6
Access to Health Services (% of Population) 2000 49.0 65.2 80.0 100.0
Access to Sanitation (% of Population) 2012 33.9 39.4 54.6 99.8 50
Percent. of Adults (aged 15-49) Living with
2009 6.5 4.4 161.9 14.1
HIV/AIDS
Incidence of Tuberculosis (per 100,000) 2012 179.0 223.6 .. ..
Child Immunization Against Tuberculosis (%) 2009 90.0 85.5 89.0 99.0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Child Immunization Against Measles (%) 2009 63.0 75.2 76.0 92.6
Underweight Children (% of children under 5 years) 2011 14.1 .. 27.0 0.1
Uganda Africa
Daily Calorie Supply per Capita 2009 2,137.0 2,564.7 2,675.2 3,284.7
Public Expenditure on Health (as % of GDP) 2011 2.5 5.9 4.0 6.9

Education Indicators
Gross Enrolment Ratio (%) .. .. .. ..
Primary School - Total 2009 124.0 100.9 106.0 101.5 Secondary School -
Primary School - Female 2009 124.5 97.0 104.6 101.2 160 Total
Secondary School - Total 2009 28.4 47.5 62.3 100.3 140
Secondary School - Female 2009 25.6 44.4 60.7 100.0 120
Primary School Female Teaching Staff (% of Total) 2009 40.5 44.6 .. .. 100
Adult Literacy Rate - Total (%) 2006 71.4 .. 19.0 .. 80
Adult Literacy Rate - Male (%) 2006 62.1 .. .. .. 60
Adult Literacy Rate - Female (%) 2006 81.4 .. .. ..
40
Percentage of GDP Spent on Education 2012 3.3 5.3 .. 5.4
20
Environmental Indicators 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Land Use (Arable Land as % of Total Land Area) 2011 33.8 8.4 9.9 11.6
Annual Rate of Deforestation (%) 2000 2.0 0.6 0.4 -0.2
Annual Rate of Reforestation (%) .. .. .. .. Uganda Africa
Per Capita CO2 Emissions (metric tons) 2011 0.1 1.1 .. ..
Sources : ADB Statistics Department Databases; World Bank: World Development Indicators Last update: April 2015
UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available.

I
 Appendix II: AfDB’s Ongoing Portfolio in Uganda

% disb.
Type of Total amount Approval
No. Sector and project name as of
Instrument (Million UA) date
May 2015
A. AGRICULTURE
Community Agricultural Infrastructure ADF
1 45.00 0.71.5% 17/09/2008
Improvement Programme- Project II Loan
Markets and Agricultural Trade ADF
2 38.00 95.1% 25/03/2009
Improvement (MATIIP) Loan
Community Agricultural Infrastructure ADF
3 40.00 32.1% 03/05/2011
Improvement Programme III Loan
Total Approvals 123.00 66.0%
B. TRANSPORT
Road Sector Support Project 2 (Fort portal ADF Loan
4 58.00 91.6% 17/12/2007
Bundibugyo Rd) (103KM) and Grant
Road Sector Support Project 3( Nyakahaita
5 ADF Loan 80.00 88.4% 25/09/2009
Ibanda Rd)(143KM)
Road Sector Project 4 ( Kigumbba Masindi
6 ADF Loan 72.94 0.0% 13/03/2013
Rd) 135 KM
Total Approvals 210.94 58.7%
C. WATER & SANITATION
7 Kampala Sanitation Project ADF Loan 35.00 38.4% 16/12/2008
Kawempe Urban Poor and Sanitation
8 ADF Grant 0.99 75.8% 04/01/2013
Improvement Project
ADF Loan
9 Water Supply and sanitation programme 43.59 50.2% 05/10/2011
and Grant
Total Approvals 79.58 45.3%
D. SOCIAL
10 Rehabilitation of Mulago and KCC Clinics ADF Loan 56.00 28.1% 06/07/2011
Support to Post Primary Education and
11 ADF Loan 52.00 86.0% 25/11/2008
Training Project (Education IV)
12 Education V Project (HEST) ADF Loan 67.00 1.50% 21/11/2012
Rural Income and Employment
13 ADF Loan 10.20 94.5% 17/11/2009
Enhancement Project
Total Approvals 185.20 38.4%
E. ENERGY
Bujagali Transmission Interconnection
14 ADF Loan 19.21 89.4% 28/06/2007
Project
Mbarara-Nkenda/Tororo-Lira
15 ADF Loan 52.50 64.0% 16/12/2008
Transmission Lines Project
Total Approvals 71.72 70.8%
F. MULTI NATIONAL PROJECT
ADF Loan
16 NELSAP 7.59 36.1% 27/11/2008
and Grant
Lake Victoria Water Supply and Sanitation
17 ADF Grant 11.13 62.9% 17/12/2010
programme phase II
Total Approvals 18.72 52.0%
GRAND TOTAL 689.16 54.08%

II
Appendix III: Similar Projects Financed by the Bank and Other Development Partners

Expected
Development
Country/Agency Sector Project Completion
Partners finance
Date
Government of Rural Implementation of two rural
46.9 million NOKs 2015
Norway Electrification electrification projects
Government of Rural Implementation of six rural
196 million NOKs 2016
Norway Electrification electrification projects
Rural Rural Electrification Projects
BADEA/SFD 21 million US$ 2015
Electrification in Eight Areas
Rural
WB ERT II Additional Funding 12.5 million US$ 2016
Electrification
Rural Rural Electrification Project Under Defects
JICA 10 million US$
Electrification in Uganda Phase III Liability
OPEC Fund for
International Rural Energy Development &
10 million US$ 2017
Development Electrification Access Expansion Project
(OFID)
Distribution Lines associated
Islamic Rural with (i) Opuyo – Moroto
Development 15 million US$ 2019
Electrification 132 kV Transmission Lines;
Bank (IDB)
(ii) Kabale – Mirama
Islamic Rural Grid Rural Electrification
Development 70 million UD$ 2019
Electrification Project;
Bank (IDB)
AFD-Funded Grid
Extensions in North
Loan 42.9 million
French Rural Western, Rwenzori,
Euro
Development Western, Mid-Western, 2017
Electrification Grant 8.0 million
Agency South & South Western
Euro
Distribution Service
Territories
GPOBA, KfW, Rural Output Based Aid for last-
16 million USD 2017
EU & GoU Electrification mile connections
Abu Dhabi Fund Rural Rural Electrification Project
12.5 million USD 2018
for Development Electrification (Kalungu Component)
Rural ERT Phase III (Rural Energy
WB (IDA & GEF) 85.7 million USD 2019
Electrification Infrastructure)

III
Appendix IV: Map of Project Area

IV