49177-002: Multitranche Financing Facility - Electricity System Strengthening and Sustainability Program | Asian Development Bank

Timor-Leste: Multitranche Financing Facility - Electricity System Strengthening and Sustainability Program

Sovereign (Public) Project | 49177-002 Status: Proposed

The proposed investment program will finance targeted investments, consistent with the Government of Timor-Leste's priorities and the objectives of the country partnership strategy. The Government of Timor-Leste has indicated its intention to attract a suitably qualified and experienced utility operator to assume management responsibility for EDTL under a public-private partnership (PPP) arrangement ; likely a lease or concession arrangement, but similar in essence to a performance-based management contract. The accompanying parallel technical assistance to be provided and managed by ADB's Office of Public-Private Partnerships (OPPP) will support the government's objective of leveraging private-sector innovation and capacity to improve EDTL's commercial performance and further reduce costs.

Project Details

Project Officer
Trainor, James Michael Pacific Department Request for information
Country
  • Timor-Leste
Modality
  • Loan
Sector
  • Energy
 
Project Name Multitranche Financing Facility - Electricity System Strengthening and Sustainability Program
Project Number 49177-002
Country Timor-Leste
Project Status Proposed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
MFF Facility Concept: Multitranche Financing Facility - Electricity System Strengthening and Sustainability Program
Ordinary capital resources US$ 30.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Energy / Electricity transmission and distribution

Gender Equity and Mainstreaming No gender elements
Description

The proposed investment program will finance targeted investments, consistent with the Government of Timor-Leste's priorities and the objectives of the country partnership strategy. The Government of Timor-Leste has indicated its intention to attract a suitably qualified and experienced utility operator to assume management responsibility for EDTL under a public-private partnership (PPP) arrangement ; likely a lease or concession arrangement, but similar in essence to a performance-based management contract. The accompanying parallel technical assistance to be provided and managed by ADB's Office of Public-Private Partnerships (OPPP) will support the government's objective of leveraging private-sector innovation and capacity to improve EDTL's commercial performance and further reduce costs.

A Multitranche Financing Facility (MFF) is proposed. The use of the MFF modality is considered appropriate, as: (i) the proposed facility will support a sequenced program of investment in distribution assets and systems, and investment in generation assets to reduce Timor-Leste's reliance on diesel fuel; (ii) the project supports Timor-Leste's Strategic Development Plan 2011-2030; and (iii) due to capacity constraints, the investments must be sequenced to focus on priority investments in distribution assets and systems and then on generation investments.

Project Rationale and Linkage to Country/Regional Strategy

The principal weaknesses in the power sector are the high cost of generation, inefficient distribution, low level of revenue generation, ongoing need for substantial fiscal subsidies, and excessive technical and non-technical network losses. These problems are, to some extent, the result of other weaknesses in the institutional, legal and regulatory environment, namely the absence of proper commercial practices within EDTL and poor implementation of the legal and regulatory frameworks for the sector.

Substantial challenges remain beyond the high cost of diesel generation. Roughly 60% of generated electricity is not billed to customers. Network losses are high, and the installation of meters has not kept pace with new connections. Substantial investment needs also remain, especially at the distribution level (20 kV and lower voltages) to extend service to populations that still lack access to modern energy services. The government's Strategic Development Plan 2011-2030 (SDP) target for 100% electrification by 2015 has not been met, which implies the need for additional investment in new distribution assets. Existing legacy networks also need investment in modernization and replacement of ageing assets. This is a particularly acute need in Dili and Baucau, where networks are several decades old and service interruptions are frequent.

To sustain progress in the sector and promote expanded economic opportunity throughout Timor-Leste, EDTL must begin to operate on a more commercial basis: the government currently subsidizes roughly 85% of operating costs in the sector (over $100 million per year). The amount of subsidy required will grow unless technical and non-technical losses decline and generation costs can be reduced. The government also recognizes that the solution may lie in changes to the institutional, legal and regulatory arrangements in the sector. EDTL remains a department within the Ministry of Public Works, Transport, and Communications (MPWTC) and has never operated on a commercial basis. It lacks the human capacity and business systems and processes to operate efficiently and cope with the myriad operational and developmental challenges it faces.

Addressing the sector's identified shortcomings and facilitating its sustained development will require further targeted investments in EDTL's distribution assets to reduce physical and commercial losses, improve service quality, and improve financial performance of EDTL as a commercial enterprise. Investments are also required to provide for: (i) expansion of service coverage to population not currently served by formal network electricity service; (ii) lowering the cost of power generation through public and private investments in fuel-switching and development of Timor-Leste's renewable energy resources; and (iii) the introduction of new management systems and practices, and new commercial and contractual arrangements within EDTL.

Impact Reduced constraints on economic growth
Outcome Improved level of service and fiscal performance of EDTL
Outputs

PR program and CIS and ERP system implementation

Distribution networks modernized and service extended

Meter installation at customer and feeder level completed

Generation investments completed to reduce diesel generation to less than 80% of total generation

Geographical Location Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Trainor, James Michael
Responsible ADB Department Pacific Department
Responsible ADB Division Transport, Energy and Natural Resources Division, PARD
Executing Agencies
Ministry of Public Works, Transport and Communications (formerly Ministry of Public Works)
Mercado Lama, Caicoli
Dili, Timor-Leste
Timetable
Concept Clearance 28 Jan 2016
Fact Finding 18 Feb 2016 to 05 Mar 2016
MRM 24 Aug 2016
Approval -
Last Review Mission -
Last PDS Update 29 Sep 2017

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.