Timor-Leste: Power Distribution Modernization Project (formerly Electricity System Strengthening and Sustainability Project)

Sovereign (Public) Project | 49177-002

The project will (i) support the modernization of the power distribution system to contribute to the sustainability, resiliency, and reliability of the electricity system; and (ii) provide institutional strengthening and capacity building to the implementing agency, Electricidade De Timor-Leste (EDTL). It is aligned with the following Sustainable Development Goals (SDGs): SDG 7 on access to affordable, reliable, sustainable, and modern energy for all, and SDG 13 on urgent action to combat climate change and its impacts. The project will support EDTL improve the power supply infrastructure in Timor-Leste.

Project Name Power Distribution Modernization Project (formerly Electricity System Strengthening and Sustainability Project)
Project Number 49177-002
Country Timor-Leste
Project Status Proposed
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan: Power Distribution Modernization Project
Ordinary capital resources US$ 35.00 million
TA: Capacity Building of Electricidade de Timor-Leste in Distribution Network Operation and Maintenance
Technical Assistance Special Fund US$ 750,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Energy / Electricity transmission and distribution - Energy sector development and institutional reform

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project will (i) support the modernization of the power distribution system to contribute to the sustainability, resiliency, and reliability of the electricity system; and (ii) provide institutional strengthening and capacity building to the implementing agency, Electricidade De Timor-Leste (EDTL). It is aligned with the following Sustainable Development Goals (SDGs): SDG 7 on access to affordable, reliable, sustainable, and modern energy for all, and SDG 13 on urgent action to combat climate change and its impacts. The project will support EDTL improve the power supply infrastructure in Timor-Leste.
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
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
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 Miller, Daniel
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Council for Administration of the Infrastructure Fund (also Conselho Administrativo do Fundo Infraestrutura)
Palacio do Governo,Ministry of Finance
Edificio 5, 1 Andar Dili, Timor-Leste
Ministry of Public Works
Mercado Lama, Caicoli
Dili, Timor-Leste
Timetable
Concept Clearance 29 Jan 2016
Fact Finding 09 Dec 2020 to 17 Dec 2020
MRM 21 May 2021
Approval -
Last Review Mission -
Last PDS Update 28 Sep 2018

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