AFRICAN DEVELOPMENT BANK

PROJECT: ENERGY SECTOR EFFICIENCY AND EXPANSION

PROGRAMME (ESEEP) PHASE I

COUNTRY: ANGOLA
P-AO-FA0-003

PROJECT APPRAISAL REPORT

Date: August 2019

Task Manager S. Mandago - Principal Power Engineer PESD1 3527
Co-Task Manager L. Harmse - Chief Utility Management Specialist PESD2 8469
Y. Hatira - Environmental Officer RDGS4 3146
D. Morra – Social Development Officer RDGS4 8452
P. Baptista – Country Program Officer COAO 6904
F. Mateus – Senior Country Economist COAO 6909
J. Nolasco – Energy Economist Consultant RDGS1 8692
A Kabungo Mwila - Financial Analyst PERS2 1815
Project Team M. Diallo – Principal Procurement Specialist RDGS 8275
Project Team Members J. Nyamukapa - Regional FM Coordinator RDGS4 6177
A. Valko Celestino – Senior Gender Specialist RDGS4 3881
N. Alhassan Alolo –Chief Strategy Officer SNSP 3972
B. Wamambe – Principal Legal Counsel RDGS 3335
P. Conradie - Energy Consultant RDGS 8686
M. Layte - Climate Change consultant RDGS 8677
M. Dray – Environmental Consultant PESD
Country Manager J. Ribeiro COAO 6901
Sector Manager A. Nalikka PESD1 2272
Regional Manager F. Kanonda RDGS 8411
Sector Director B. Baldeh PESD 4036
Acting Regional RDGS
J. Ngure 8501
Director

G. Kaijage – Principal Financial Management Specialist COTZ 6456

Osric Forton - Principal Environmental and Social Safeguards Officer SNSC 5078
Peer I Naceur – Portfolio Data Analyst PESA 1866
Reviewers A.C Pederson- Chief Regional Power Systems Officer RDGS 8480
E. Chigozire – Chief Power Engineer PESD2 7791
S. Alissoutin Principal Quality Assurance Officer SNOQ 3811
 AFRICAN DEVELOPMENT BANK
Public Disclosure Authorized

ANGOLA

ENERGY SECTOR EFFICIENCY AND EXPANSION PROGRAMME

(ESEEP) PHASE I

RDGS/PESD/COAO DEPARTMENTS

November 2019
Public Disclosure Authorized
 TABLE OF CONTENTS

PROJECT: ENERGY SECTOR EFFICIENCY AND EXPANSION

PROGRAMME (ESEEP)

COUNTRY: ANGOLA

1. STRATEGIC THRUST & RATIONALE 1

1.1 Project linkages with country strategy and objectives 1
1.2 Rationale for the Bank’s involvement 1
1.3 Donors coordination 2

2. PROJECT DESCRIPTION 3
2.1 Project components 3
2.2 Technical solution 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 7
2.6 Participatory process for project identification, design and implementation 8
2.7 Bank Group experience and lessons reflected in project design 8
2.8 Key performance indicators 9

3. PROJECT FEASIBILITY 10
3.1 Economic and Financial Performance 10
3.2 Environmental and Social Impacts 12
3.3 Climate Change 13
3.4 Gender 14

4. IMPLEMENTATION 15
4.1 Institutional arrangements 15
4.2 Procurement 15
4.3 Financial Management Arrangements 16
4.4 Monitoring and Evaluation 17
4.5 Governance 17
4.6 Sustainability 17
4.7 Risk management 18
4.8 Knowledge building 18

5. LEGAL INSTRUMENTS AND AUTHORITY 19

5.1 Legal instruments. 19
5.2 Conditions associated with the Bank’s intervention 19
5.3 Compliance with Bank Group policies 20

6. CONCLUSION AND RECOMMENDATION 20

APPENDIXES
Appendix I. Justification of level of Counterpart contribution
Appendix II: Table of AfDB’s portfolio in Angola – on-going projects (July 2019)
Appendix III: Project specific challenges and performance targets
Appendix IV: Similar projects financed by the Bank and Development Partners
Appendix V: Map of Project Area
Appendix VI: Governance and Implementation Arrangements
Appendix VII: Detailed PIU, Deloitte &Touche composition
Appendix VII: Efforts to Improve Governance
 Currency equivalents
As of August 2019

UA 1 = USD 1.37
UA 1 = AOA 469.17
USD 1 = UA 0.73
USD 1 = AOA 341.11

Fiscal year
01 January – 31 December

Weights and measures

1 metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres

Acronyms and abbreviations

AfDB African Development Bank Group MDB Multilateral Development Banks
AGTF Africa Growing Together Fund MINEA Ministry of Energy and Water
ANNA Angola-Namibia Interconnector MTR Mid-Term Review
CAPEX Capital Expenditure OE Owner’s Engineer
CSP Country Strategy Paper OPGW Optical Power Ground Wire
CSS Climate Safeguards System PAP Project Affected People
D&T Deloitte & Touche PAR Project Appraisal Report
DFI Development Finance Institution PCN Project Concept Note
DP Development Partners PCR Project Completion Report
ENDE Empresa Nacional de Distribuição de PDT Project Development Team
Electricidade PIU Project Implementation Unit
E&S Environment and Social Impact PRODEL Empresa Pública de Produção de
ESIA Environment & Social Impact Electricidade
Assessment PSRSP Power Sector Reform Support
ESMP Environment & Social Management Programme
Plan SDG Sustainable Development Goals
ESMS Environmental & Social Management QPR Quarterly Progress Report
System RAP Resettlement Action Plan
FC Foreign Currency RFP Resettlement Policy Framework
FY Financial Year RNT Empresa Rede Nacional de Transporte
GDP Gross Domestic Product de Electricidade
GHG Greenhouse Gases ROW Right of Way
GoA Government of Angola SAPP Southern Africa Power Pool
IPP Independent Power Producers SMEs Small and Medium Enterprises
ISS Integrated Safeguards System TYS Ten Year Strategy
IRSEA Instituto Regulador dos Serviços de UA Units of Account
Electricidade e de Água. USD United States Dollar
kWh per kilowatt hour USAID United States Development Agency
LC Local Currency WB World Bank

i
LOAN INFORMATION

CLIENT’S INFORMATION
Country Angola
Borrower/Recipient The Republic of Angola
Executing Agency Ministry of Energy and Water (MINEA)
Implementing Agency RNT and ENDE

FINANCING PLAN
Sources Amount in USD Amount in UA Instrument
M M
African Development Bank (ADB) 480.00 348.98 Loan
Africa Growing Together Fund (AGTF) 50.00 36.35 Loan
USAID/Power Africa 2.00 1.4 Grant
Government of Angola 11.50 8.36 Counterpart
Total Financing 543.50 395.15

ADB AND AGTF FINANCING INFORMATION

Loan currency United States Dollars (USD)
Type of Loan Fully Flexible Loan
Tenor Up to 25 years inclusive of Grace Period
Grace Period Up to 8 years
Average Loan
TBD (function of the amortization profile)
Maturity
Repayments Consecutive semi-annual payments after grace period
Interest Rate Base Rate + Funding Cost Margin + Lending Spread + Maturity Premium
Base Rate Floating rate based on 6-month LIBOR with free option to fix the base rate
The Bank funding cost margin as determined each 1st January and 1st July and
Funding Cost Margin
applied to the Base Rate each 1st February, AND 1st August.
Lending rate 80 basis points (0.80%)
To be determined based on the Average Loan Maturity
• 0% if Average Loan Maturity <= 12.75 years;
Maturity Premium
• 10 bps (0.10%) if 12.75< Average Loan Maturity <=15;
• 20 bps (0.20%) if Average Loan Maturity >15 years
0.25% of the loan amount payable no later than 60 days from the date of entry into
Front-end fees
force or at first disbursement, whichever is earlier
0.25% of the undisbursed amount. Commitment fees start accruing 60 days after
Commitment fees
signature of the loan agreement and are payable on payment dates
Option to convert the In addition to the free option to fix the floating Base Rate, the borrower may
Base Rate** reconvert the fixed rate to floating or re-fix it in part or for the fully disbursed
amount. Transaction fees are payable
Option to cap or The borrower may cap or set both the cap and floor on the Base Rate to be applied in
collar the Base part or to the fully disbursed amount. Transaction fees are payable.
Rate**
Option to convert The borrower may convert the loan currency for both undisbursed and disbursed
loan currency (Only amounts in full or in part to another approved lending currency of the Bank.
for ADB loan) Transaction fees are payable.

ii
 KEY FINANCIAL AND ECONOMIC OUTCOMES
ENPV@
FIRR FNPV @ 5% EIRR
12%
Component 1: Transmission line 19 884 39.1 863
Component 2: Revenue improvement 26 465 16.3 60
Total program 21.2 1346 30.9 924

TIME FRAME – KEY MILESTONES

Project Concept Note(PCN) approval by CT May 2019
Expected date of Board consideration December 2019
Disclosure of ESIA/ESMP/RAP summaries August 2019
OpsCom PAR clearance October 2019
Forecasted date of effectiveness May 2020
Forecasted date of project completion report December 2023
Forecasted date of last disbursement December 2024

PROJECT SUMMARY
The Energy Sector Efficiency and Expansion Programme Phase 1 (ESEEP I), which aims
at strengthening Angola’s power transmission and distribution system, is structured
around three components: (i) Construction of a 343 km long 400kV Central-South
transmission line; (ii) Revenue improvement through installation of prepaid meters; and
(iii) Program management for project design and implementation. The program will
reinforce the operational capacity of the Angolan power distribution utility (ENDE) while
increasing the wheeling capacity of the transmission system countrywide. The
beneficiaries are the households, industries, businesses, small and medium sized
Project enterprises in Angola, who will gain access to cheaper, more reliable and sustainable
overview electricity from more than 1,000 MW excess power from the Northern part of the country.
The Southern provinces, the most affected by the war, are run as isolated systems,
supplied through costly diesel generated power while low-cost hydro excess capacity is
available from the Northern power system. ESEEP I intends to address this anomaly. In
addition, the country would benefit from the opportunity to replace existing expensive
thermal plants, thereby lowering their cost of power generation. Furthermore, the
distribution utility ENDE would improve its financial sustainability by reducing non-
technical losses and reducing its dependence on state-subsidies on fuel costing $11million
monthly. 1
Currently, the power utility companies in Angola are heavily dependent on Government
subsidies to sustain operations. This situation severely impacts the cost and availability
of energy in the Southern region but also presents a risk for the region’s future economic
Needs growth. In what refers to the distribution sub-sector, it is approximated that 860,000 out
assessment of 1.08 million residential customers (>79%) are not metered; which contributes
significantly to the financial losses that affect the levels of subsidies and utility
performance. Angola needs to address structural bottlenecks on economic infrastructure.
Investments towards the enhanced efficiency and sustainability of the energy sector is

1
In May 2019 the GoA completed USD 4.5 billion, 2GW Hydro power project and transmission line from North to central Angola, from its
own resources. In addition, in 2018; construction of USD 4.5billion another large hydro of 2.1GW started, which also funded by GoA own
resources. Government has prioritized infrastructure development and despite the oil crisis, it has spread thin and spending almost USD 10
Billion of its own resources investing in the sector

iii
 critical to reduce the current high production costs, reduce/eliminate government
subsidies and unlock the full economic potential of the country. This operation is aligned
with the current IMF program that recommends Angola only to borrow cheaper funding
in order to allow sustainable economic growth. This intervention will be the first phase
of a medium-to-long term support to the development of Angola’s power sector, with the
aim of increasing its financial and economic sustainability, whilst contributing to
unleashing the potential benefits associated with the regional interconnection of the
country’s power system.
The program will increase electricity supply capacity to address the power deficit in
southern Angola and allow the country to improve electricity access. Moreover, the
expected increase in revenue, by metering additional customers and displacement of
Program diesel plants, will increase the financial sustainability of the sector. The integration of the
outcomes power systems from North-Central-South will address power shortages throughout the
region and improve reliability; and most importantly contribute to the social and
economic development as well as poverty reduction efforts, which are aligned to the needs
of the countries within the region
The AfDB has been instrumental in facilitating the government’s achievement of its
development objectives, specifically via its previous USD 1 billion Power Sector Reform
Support Program (PSRSP). This support has resulted in important policy reforms within
the energy sector and positioned the Bank as a strategic partner of choice to become the
first Multilateral Development Bank (MDB) to support the country’s power sector
infrastructure. ESEEP-I complements and benefits from the synergy with the Bank
supported PSRSP. Furthermore, the Bank received a request from GoA to finance the
Bank’s added Angola section of the Angola-Namibia regional transmission project (ANNA) and
value Baynes Hydro Power Project. The AfDB contribution for the proposed program will
therefore reinforce the Bank’s cooperation with and support for, the development
programs of Angola and the implementation of the pillars of the Bank’s CSP, Ten-year
Strategy and the Strategy for the New Deal of Energy in Africa (NDEA) highlighting the
Sustainable Utility Transformation (SUT). Through the assisted implementation approach
designed for the project, the capacities of relevant government agencies will be developed
to facilitate improved project execution for the other operations planned over the next
years.
The project focuses on the power transmission & distribution sub-sectors which are areas
where the Bank has a stronghold and immerse experience on the continent, albeit the Bank
Knowledge
has not concentrated in this area in Angola. The institutional support component will
building
provide capacity-building to facilitate transfer of knowledge for efficient management of
the sector utilising Bank’s prior experience in the region and on the continent.

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ANGOLA ENERGY SECTOR EFFICIENCY AND EXPANSION PROGRAMME PHASE I - Results Based Logical Framework
Country and project name: Angola – ENERGY SECTOR EFFICIENCY AND EXPANSION PROGRAMME PHASE I (ESEEP I)
Purpose of the project: Improve financial sustainability and technical performance of the energy sector, and expand the transmission network infrastructure for increased access to electricity, in
strategic provinces and rural areas of Angola.
PERFORMANCE INDICATORS
MEANS OF
RESULTS CHAIN RISKS/MITIGATION MEASURES
Indicator Baseline Target VERIFICATION
(including Core Sector Indicator) 2018 2023
Improve financial Reduction in Government subsidy - ENDE & RNT Risk: The Angolan economy remains highly dependent on oil exports which makes the
sustainability of towards the sector: Financial statements country very vulnerable to exogenous risks. Given the country’s income gap, majority
IMPACT

the energy sector. - Audit reports of the population remains unable to meet basic needs, thus impacting their ability to pay
- ENDE subsidy per kWh sold 15 AOA 0 AOA - Annual reports for energy services, thus the sustainability of the sector remains at risk.
- Supervision mission Mitigation: The relevant Bank departments to continue engagement with GoA through
- Generation subsidy per month 11m$ < 2.2m$ AM policy dialogue to encourage implementation of ongoing economic and sector reforms,
(Average diesel spend) as well as promote diversification of the economy.
Improved financial -Increase in revenue 390 650 - ENDE & RNT Risk: Low revenue recovery rates due to lack of customer acceptance of new tariff being
performance of (annual value million USD ) Financial statements implemented as well as requirement to pay for actual consumption versus flat rate.
ENDE & RNT -Increase in revenue recovery 0 60% - Audit reports Mitigation: The regulator and ENDE have worked on a communication strategy to
(% recovered) - Annual reports engage consumers on the impact and reasoning behind the revised tariff. Active
-Reduction in total Distribution system 28.7 22 - Supervision mission stakeholder engagement/consultation is planned to facilitate acceptance of the new
losses (%) AM payment approach.
Improved technical -Average duration of customer 1804 min 9022 min - ENDE & RNT Risk: Project delays due to unavailability of counterpart funding.
Mitigation: Counterpart funding has been minimized to reduce the risk of project
OUTCOMES

performance of the interruptions for ENDE (SAIDI) annual performance

sector -Average frequency of customer outages 22 per year 11 per year reports implementation delays and to minimize pressure on government budget expenditure
for ENDE (SAIFI) program. Further, representatives from the Ministry of Finance actively participated in
-RNT system availability (%) 95 97 project design; not only are they fully aware of the project, they have collectively
-Average interruption time (min/year) 120 95 ensured that ESEEP-I has been included in the budget planning for 2020 and beyond.
This provides the required guarantees vis-à-vis the availability of counterpart funding
Improved GX -Increase in energy transfer to southern 0 MW 1000MW - PRODEL annual from Government.
system utilisation region via the new Transmission line performance reports Risk: Risk of poor monitoring and reporting according to MDB methodology due to
for PRODEL -Increased country transmission capacity 0 2250 MVA insufficient institutional capacity
Reduce carbon Reduction of Carbon emissions 206 125Mtonnes of - Decommissioned Mitigation: Relevant Bank division will review bi-annual reporting and support project
footprint of (MtCO₂) CO2 units report Prodel team and GoA with capacity building intervention on GHG accounting, if required
Angola power Reduction of diesel consumption 46.8 Billion - Min Fin report on
system 0 litres/year fuel subsidy
Component A: - 400kV TX line constructed between 0 343 km - Supervision mission Risk: Risk of delay in implementation and completion of the project due to limited
Transmission Huambo to Lubango (km) AM experience of the implementing agencies (PIUs) in working with development banks.
OUTPUTS

network expansion - New 400kV line bay at Belem do 0 1 - ESMP Mitigation: Advance procurement activities have been pursued to reduce time to
Dango substation in Huambo implementation complete key contracts. Specialized Financial Management and procurement training to
- Construction of new 400/220/60kV 0 1 reports be provided to the PIUs during the project launch. PIU capacity to be strengthened by
substation at Lubango and line bay - RAP completion Deloitte & Touche funded by Power Africa/USAID. Specialized owners, supervision
- Creation of a regional distribution 0 1 report and management consultants will provide additional support, coupled with close
control centre in Lubango -SCADA - Studies prepared supervision by the Bank.

v
 - RAP fully implemented 0 100% (prior to - Quarterly and audit
commencement reports Risk: Risk of project cost overruns due to historical high project implementation costs
of works) and risk pricing applied by contractors to mitigate slow and non-payment by
government.
- Installation of inter-statistical meters Mitigation: Competitive international bidding to be utilised for all contracts with direct
o Generation to Transmission 0 183 payments by Bank. The project costing provides contingency funds of 7.5% to mitigate
o Transmission to Distribution 0 20 this risk.
- No of jobs created during Risk: Due to limited fluency of Bank in Portuguese language, review of sector
construction documents and communication between stakeholders have been strained and going
o Males 0 400 forward may impact the effective and timely project implementation.
o Females 0 15 Mitigation: During project implementation, the Bank’s country office will acquire the
Component B: - Installation of pre-paid meters for 0 860,000 services of a technical expert that will support translation and project management on
Revenue unmetered customers the entire portfolio in order to ensure effective implementation. Energy consultant is
Improvement - New meter customers connection 0 400,000 expected to join the country office in October and Power Africa will finance additional
Programme - Development and implementation of 0 1 bilingual experts to support different aspects of project management at the PIU level.
GIS based customer data The procurement expert is already on-board and few members from Deloitte & Touche
management system are on board through Power Africa support
- Extension of vending system and 0 1
infrastructure to including online
and mobile payment options.
- Number of enhanced public 0 3
procurement packages
(including gender-sensitive)
- Number of jobs created during
implementation:
Males 0 50
Females 0 30
Component C: Feasibility study for Gove Transmission 0 1 - ESIA & RAP
Program line, studies
Management ESIA & RAP 0 2 - ESMS RNT
Project owner’s engineer, management 0 2 - ESMS ENDE
and supervision (incl. E&S and gender - Feasibility
plans) 0 2 report
Upgrading Enterprise Management
- Upgraded EMS
System (EMS) 0 4
Project audit services
PIUs capacity building program (incl. 0 100%
E&S)
VI
TI

TI
K

Y
A
C
E

COMPONENTS INPUTS
S

1. Transmission network expansion Component 1: USD 204.50 m (UA 148.68 m) Funding sources
2. Revenue Improvement programme Component 2: USD 289.00 m (UA 210.11 m) ADB loan : USD 480.00 m (UA 349.00)
3. Program Management Component 3: USD 38.50 m (UA 28.00 m) AGTF loan : USD 50.00 m (UA 36.35)
4. RAP (Government contribution) Component 4: USD 11.50 m (UA 8.36 m) USAID/PA : USD 2.00 m (UA 1.45 m)
Total cost : USD 543.50 m (UA 395.15 m) GoA : USD 11.50 m (UA 8.35 m)

vi
PROJECT TIMEFRAME
YEAR 2019 2020 2021 2022 2023
Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
1 Project Approval
2 Effectiveness
3 Project Implementation – Component 1
3.1 Appointment of Technical Consultant (OE)
3.2 EPC Bidding Process for RNT
3.3 EPC Contract Award
3.4 Implementation timeline
4 Project Implementation – Component 2
4.1 Appointment of Technical Consultant (OE)
4.2 EPC Bidding Process for ENDE
4.3 EPC Contract Award
4.4 Implementation timeline
5 Project Implementation – Component 3
5.1 Appointment of Supervision Consultant
5.2 Project Supervision
5.3 Appointment of Consultant for T-line Feasibility Study
5.4 Feasibility Study
6 Last Disbursement
7 Closing Date
8 Preparation of PCR

vii
REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE AFRICAN
DEVELOPMENT BANK GROUP TO THE BOARD OF DIRECTORS ON A
PROPOSED LOAN TO THE GOVERNMENT OF ANGOLA (GoA) FOR THE
ENERGY SECTOR EFFICIENCY AND EXPANSION PROGRAMME (ESEEP)
PHASE I
Management submits the following report and recommendation on a proposed ADB Sovereign
Guaranteed Loan of USD 480 million (Four Hundred and Eighty million USD) and AGTF loan
of USD 50 million (Fifty million USD) to finance the Energy Sector Efficiency and Expansion
Programme Phase I (ESEEP -I) in Angola.
1. STRATEGIC THRUST & RATIONALE
1.1. Project linkages with country strategy and objectives
1.1.1. The proposed ESEEP-I will support Angola towards greater competitiveness and more
inclusive growth as envisaged under the two mutually reinforcing pillars of the Bank’s Country
Strategy Paper (CSP) for Angola (2017-2021), specifically: (i) Support to sustainable
infrastructure development and (ii) Inclusive growth through agricultural transformation. The
project will develop the requisite infrastructure to stimulate growth through, inter-alia, and
industrialization as per Angola’s Vision 2025 goals. A well-performing energy sector and
expanded electricity infrastructure are explicitly recognized as fundamental enablers for higher
competitiveness and productivity of economic sectors, which will consequently lead to
economic diversification as envisaged under the Country Strategy Pare (CSP). Through these,
the reliability of the system and access to electricity are expected to improve, thus facilitating
connections of new customers to expand revenue collection, improve the quality of life of the
population and ultimately contribute to the overall development of Angola. To this effect,
ESEEP-I is well aligned and poised to deliver on the expansion plans of the power sector
towards economic diversification. Furthermore, ESEEP-I will lay the required foundations for
future preparation of the Baynes hydropower project and Angola-Namibia (ANNA)
interconnector project. The envisaged transmission line will become the backbone for the
interconnector and evacuation of power to the southern provinces of Angola, Namibia and
Southern Africa Power Pool (SAPP) that will enable power trading between these countries.
1.1.2. ESEEP-I is consistent with GoA’s development goals as articulated under its National
Development Plan (NDP) 2025. The energy sector is explicitly prioritized under Pillar-III of
the NDP, from which GoA has developed its long-term energy vision (Angola Energia 2025).
The sector goal, on which ESEEP-I is firmly anchored, is to increase priority investments in
generation, transmission, distribution and network expansion.
1.2. Rationale for the Bank’s involvement
1.2.1. Angola’s national development is guided by its overarching NDP (2025) which, inter-
alia, defines policy frameworks for promotion of economic diversification, growth and
employment creation. In the energy sector, it is complemented by the Angola Energia (2018-
2025) Strategy that seeks to chart a path on the best way to maximize focus and effectiveness
through priority investments in generation, transmission, regional interconnection, as well as
the distribution and network expansion. This Strategy aims to move from the current electricity
access rate of 36% to 50% by 2022 and 60% by 2025 (with a projected demand growth of
12%). It also aims to reach 9.9 GW of installed generation capacity that will rely primarily on
hydropower and gas, as well as solar, wind, biomass and mini-hydro. Government of Angola
(GoA) also aspires to interconnect the four transmission systems through a north-central-south
backbone and expand the grid to interconnect the national power grid with that of the Southern
and Central African Power Pools, while integrating the major new generation plants in an
effective. It will be in line with the long-term master plan for the national transmission system

1
prepared by the Japan International Cooperation Agency (JICA). This will ensure a least cost,
optimization of national generation resources, more stable power system, improved security
and quality of supply countrywide, as well as reduce reliance on fossil fuel power generation.
For instance, the average monthly diesel subsidy of at least USD 11 million (or USD 132
million annually) is expected to be phased out once ESEEP-I is operational, as it will allow the
evacuation of power from North to South, which will ultimately lead to the decommissioning
of all diesel-powered generation facilities in the Southern region. These savings will allow the
GoA to invest in other critical priority areas that will spur socio-economic growth.
1.2.2. Through the USD 1 billion PSRSP supported by the Bank in 2015, the GoA
implemented key reforms in the energy sector that included unbundling the utility into three
distinct entities, namely: national production company (PRODEL - Empresa Pública de
Produção de Electricidade), the national transmission company (RNT-Empresa Rede Nacional
de Transporte de Electricidade) and the national distribution company (ENDE - Empresa
Nacional de Distribuição de Electricidade) as well as the establishment of a national energy
regulator, IRSEA - Instituto Regulador dos Serviços de Electricidade e de Água was
successfully realised. In addition, codification of the electricity law and tariff reforms through
which, residential tariffs increased by 60% ($0.071/kWh) and 190% ($0.059/kWh) for
commercial and industries in 2016 were implemented. GoA aims to continue such tariff
reforms up to 2025. This has propelled the World Bank (WB) to join such efforts through its
support to a “cost of service study” that will be used to inform further sustainable tariff
applications. On August 2019, new electricity tariff increases of 77% were approved, and will
further increase revenue collections (Details appendix I (3.7)). ESEEP-I builds on the
momentum of the Bank’s PSRSP and the GoA on-going reforms to consolidate these gains
towards further improvements in the sector.
1.2.3. In alignment with the GoA’s energy targets, ESEEP-I will focus on implementing the
Central – South 400kV transmission line and revenue improvement which are expected to have
significant impact on the financials of the utilities, while simultaneously having a positive
impact on GoA’s huge fiscal burden; accrued largely from unsustainable subsidies to the sector.
Given the current low levels of tariffs and distorted customer billing formula, the electricity
value chain has continuously experienced revenue short falls and has relied on a cash subsidy
program from the central government towards meeting its liquidity needs for operating and
investment costs. The current capped tariff subsidy is 15.00 AOA /kWh, while the tariff is as
low as 5.2 AOA/kWh. The tariffs increase of 77%-176% in 2019 will represent a critical step
towards sector sustainability and meeting the NDP goals. The GoA clearly recognizes the
unsustainability of the subsidies for the value chain. Therefore, efforts to improve the viability
of the sector, through inter alia revenues collection, loss reduction improvement in the supply
of electricity and the transition to cost reflective tariffs by 2025, are all in the right direction.
1.2.4. The project will accelerate transformation of rural areas, especially in the Southern parts
of Angola which was profoundly affected by the war. In so doing, ESEEP-I will help reduce
regional inequalities and promote women’s economic empowerment, stimulate economic
growth which are consistent with the aspirations of the Bank’s Gender Strategy and Ten-Year
strategy (2013-2022). The project aims to strengthen the country’s power transmission and
distribution system while accelerating energy access and contributing to the sustainability of
the power sector. As such, ESEEP-I will accelerate the achievement of aspirations under the
Bank’s Strategy for the New Deal on Energy and the High5s agenda, particularly the “Light
Up and Power Africa”.
1.3. Donors coordination
1.3.1. Given the increased interest of Development Partner’s (DP’s) in the energy sector in
Angola, an informal working group has been created to facilitate coordination and synergies.

2
The group, involving AfDB, WB, JICA, EU, EIB, UNDP, AFD and USAID, meets quarterly.
Once approved, ESEEP-I will unlock multiple other projects to be complemented by different
DPs. In collaboration and support of ESEEP-I, Power Africa through USAID has recruited
Deloitte & Touche to support implementation of the program. A Project Management Office
(PMO) with a team of experts from D & T will be embedded within the executing agencies
PIUs in order to support management of the project and ensure knowledge transfer.
1.3.2. Other DPs are considering investing in the Angolan power sector. For instance, the WB
is planning a USD 250 million project, focusing on electricity access and installation of post-
paid meters to non-residential (large industrial customers), scheduled for approval early 2020.
The European Investment Bank (EIB) is considering a EUR 100 million in the transmission
sub-sector. JICA is planning to extend the Bank-financed transmission line from Lubango to
the port of Namibe. The Development Bank of Southern Africa (DBSA) has funded the
Angola-Namibia (ANNA) interconnection preparation studies. DPs have agreed to coordinate
their projects to ensure complementarities and maximum impact on the sector; the total
investment required exceeds USD 2.7 billion for the next 5 years (see table 1.1).
Table 1. 1 Energy Sector Working Group - Projects under development
Partner Timeline Amount ($ m) Primary Focus
AfDB 2019 480 ESEEP-I
AGTF 2019 50 Supporting AfDB SEEP-1 interventions and components
USAID/Power
2019 2 Technical assistance component of ESEEP I
Africa
Rehabilitation and expansion of distribution infrastructure.
World Bank 2020 250
Possible coordinated approach under ESEEP-II
AfDB 2020 150 Potential support to ANNA interconnector under ESEEP-II
EIB 2020 113 Exploring financing with AfDB and World Bank ESEEP-II
AfDB /others 2022 1,500 Baynes Hydro Power Angola and Namibia
JICA 2020 190 Extend AfDB financed line from Lubango to Namibe
Total: 2,735
Source: Discussions with DPs during appraisal mission.

2. PROJECT DESCRIPTION
2.1. Project components
2.1.1. The ESEEP-I comprises three complementary components: (i) Transmission network
expansion to improve operational performance, interconnect North, Central and Southern
systems and ensure a more reliable electricity service; (ii) Revenue improvement though, inter-
alia, installation of pre-paid meters to existing un-metered customers, installation and
connection of pre-paid meters to new customers, to enhance revenue generation and collection;
and (iii) Program management aimed at building both technical and implementation capacities
and capabilities at the utility level and to prepare future projects, including an envisaged
ESEEP-II successor project. Table 2.1 below summarises the ESEEP project components, its
costs and associated key activities.

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Table 2. 1: Project costs Components
Component Name Estimated Estimated
Component Description
cost MUA Cost MUSD
Component 1: 89.79 123.50 • Construction of a 343km long 400kV
Transmission transmission line
network expansion -
RNT 58.89 81.00 • Construction of 400kV Substation
• Construction of line-bay at Huambo substation
• Installation of SCADA system
• Install inter-network statistical meters
Component 2: 189.03 260.00 • Installation 860,000 of Pre-paid meters and
Revenue normalisation services to existing customers
Improvement • Installation of 400,000 new customers with pre-
Program -ENDE paid metered
21.08 29.00 • Provision of GIS customer database system,
• Capturing of customer, system and meter data
into design of utility management and fraud
prevention database functionalities and tools to
support customer mobile payment system
Component 3: 21.45 29.50 • Feasibility study for Gove Transmission line
Program • ESIA and RAP for Gove T-line
Management • Project owner’s engineer, management and
supervision
• Upgrading Enterprise Management System
(EMS) for RNT financial management
• Project audit & translation services
6.55 9.00 • Administrative, (PMO) strengthening,
supervision tools
• ESMP and RAP implementation support
• Capacity building, including development of
E&S capacity and ESMS, Gender mitigation
framework, and M & E reinforcement
RAP 8.36 11.50 • Compensation of Project Affected Persons
implementation (PAPs)
Total project cost 395.15 543.50
2.2. Technical solution retained and other alternatives explored
2.2.1. Various alternatives have been considered in structuring ESEEP-I. Several routes and
circuits were considered for the transmission backbone based on the Masterplan conducted by
JICA. The chosen route is the optimal solution because it minimizes physical and economic
displacement within the 60m servitude. Moreover, the long term least cost generation scenario
recommends that base load generation should come from the North, while the intermittent
power sources like wind and solar resources should come from the South (via IPP schemes).
2.2.2. The revenue improvement program is critical as it will ensure the viability of the power
sector in Angola and help achieve a cost reflective tariff regime. The metering technology is in
line with the best practises in Sub-Saharan Africa with the development of an e-vending
mechanism for the pre-paid customers that will improve customer experience and transparency,
thereby increase their willingness to pay. The program also includes the roll-out of management
tools for energy balancing and fraud prevention.
2.2.3. During the program design stage, it was considered to add a component to be funded
by the World Bank (WB) that will install post-paid meters to at least 5,000 large customers and
scale-up electricity access in 3 provinces. However, due to differences in project processing
schedules, the WB decided to postpone its intervention to 2020 under a larger program. It was
also considered to co-finance the transmission line with EIB, but variances in fiduciary
processes of the two institutions did not permit such co-financing arrangements.

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2.3. Project type
This programme is an investment lending that seeks to optimize the power transmission and
distribution capacity and increase electricity access.
2.4. Project cost and financing arrangements
2.4.1. The total project cost, including a physical and price contingency of 7.5% but excluding
customs taxes and duties, is estimated at UA 395.15 million (equivalent to USD 543.50
million). Project cost estimates by component, financing sources, cost estimates by category of
expenditure, and expenditure by year are shown in tables 2.2, 2.3, 2.4, 2.5 and 2.6
Table 2. 2: Program costs by component
In USD (millions) In UA (millions)
No. Components
FC LC Total FC LC Total
1 Transmission network expansion
1.1 Construction of a 343km 400kV T-line 98.00 25.50 123.50 71.25 18.54 89.79
1.2 Construction of 400kv Substation, & 68.85 12.15 81.00 50.06 8.83 58.89
construction of line bay, SCADA &
Inter-statistical meters installation
Sub-total 166.85 37.65 204.50 121.31 27.37 148.68
2 Revenue Improvement Program
2.1 Pre-paid meters installation, & new 247.00 13.00 260.00 179.58 9.45 189.03
customers and normalisation services
2.2 GIS data system, capturing of customer, 27.55 1.45 29.00 20.03 1.05 21.08
system and meter data into design of
utility management, fraud prevention
database functionalities and tools.
Extension of the e- vending platforms
Sub-total 274.55 14.45 289.00 199.61 10.50 210.11
3 Program Management
3.1 Services: F/studies, ESIA and RAP for 28.50 1.00 29.50 20.72 0.73 21.45
Gove 20kV line, Owner’s, management
and supervision engineer, Upgrading
Enterprise Management System (EMS)
Project audit & Translation services

3.2 Operating expenses: administrative, 8.00 1.00 9.00 5.82 0.73 6.55
capacity building, PMO, Gender
mitigation framework, supervising tools.
E&S support include ESMP & RAP
implementation support for PIUs, ESMS
development, & capacity building
Sub-total 36.50 2.00 38.50 26.54 1.46 28.00
4 RAP implementation
4.1 Compensation of PAPs 0.00 11.50 11.50 0.00 8.36 8.36
Subtotal 0.00 11.50 11.50 0.00 8.36 8.36
Total 477.90 65.60 543.5 347.46 47.69 395.15

2.5. Government contribution

The GoA’s contribution to ESEEP-I will be USD 11.5 million which will go towards
compensation and resettlement of the project affected persons (PAPs) under the project as well
as support enforcement and strengthening of the Project Implementation Unit (PIU). The
Bank’s policy on counterpart financing requires Angola, as an ADB country, to finance 50%
of the program expenditures unless there are valid justifications for a lower proportion.
However, a waiver on this policy requirement is sought to enable the implementation of a
critical project for Angola as explained in appendix i. In the past few years the Angolan

5
economy has experienced successive fiscal deficits, which has resulted in increased public
indebtedness, limiting the government’s ability to increase its contribution to this strategic
project. This will grant GoA the much-needed fiscal space to invest in other critical social
expenditures (e.g. education, health and social protection) where which tends to be severely
affected during budget crisis.
Table 2. 3: Sources of Finance (USD million)
Source of Funds FC LC Total % of FC
ADB loan 430.90 49.10 480 89.80
AGTF loan 45.00 5.00 50 90.00
USAID/Power Africa (grant) 2.00 0.00 2 100.00
GoA counterpart 0.00 11.50 11.50 0%
TOTAL FUNDING 477.90 65.60 543.50

Table 2. 4: Project Cost by Category of Expenditure (USD million)

CATEGORY OF EXPENDITURE FC LC Total % of FC
a Works
Construction of a 343km long 400kV line;
98.00 25.50 123.50 80
Substation, line bay, SCADA, Inter-
68.85 12.15 81.00 85
statistical meter
Sub-total 166.85 37.65 204.50
b Goods
Pre-paid meters installation and
247.00 13.00 260.00 95
normalisation services, new meters
GIS data system, capturing of customer,
system and meter data into design of utility
management and fraud prevention 27.55 1.45 29.00 95
database functionalities and tools.
Extension of the e- vending platforms
Upgrade Enterprise Management System-
1.00 0.00 1.00
RNT
Sub-total 275.55 14.45 290
c Services (RNT)
Feasibility studies for Gove T-line
(including ESIA and RAP) 2.00 0.00 2.00 100

Project owner’s, management and

supervision engineer 13.50 0.00 13.50 100

Project audit & Translation services,

0.00 0.50 0.50 0.00
Services (ENDE)
Project owner’s, management and
supervision engineer 13.00 0.00 13.00 100

Project audit & Translation services,

0.00 0.50 0.50 0.00
28.50 1.0 29.50
Operating Costs _RNT
Program Management Office 0.0 0.40 0.40 100
Development of E&S capacity and ESMS,
M &E, Coordination of implementation of 2.20 0.10 2.30 90
ESMP and RAP
Implementation of Gender mitigation
0.90 0.00 0.90 100
framework

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 CATEGORY OF EXPENDITURE FC LC Total % of FC
Administrative expenses (capacity
building, supervision tools and vehicles 3.10 0.50 3.60 95.34

Operating costs - ENDE

Program Management Office 0.00 0.70 0.70 100
E&S and ESMS development–,
supervision tools and vehicles 2.60 0.10 2.70

Implementation of Gender Mitigation

1.0 0.00 1.0 100
Framework
7.00 1.00 8.00
RAP Implementation
Resettlement Action Plan (RAP)
0.00 11.50 11.50
implementation–GoA/RNT

TOTAL COST 477.90 65.60 543.50

Table 2. 5: AfDB/AGTF financing Expenditure Schedule (USD million)

EXPENDITURE SCHEDULE 2020 2021 2022 2023 Total
AfDB 20% 35% 35% 10% 100%

Table 2.6 Cost per category per financing (USD millions)

Source of Funds Works Goods Services Operating Costs RAP TOTAL
ADB loan 184.50 260.00 27.50 8.00 0.00 480.00
AGTF loan 20.00 30.00 0.00 0.00 0.00 50.00
USAID/Power Africa 0.00 0.00 2.00 0.00 0.00 2.00
(grant)
GoA counterpart 0.00 0.00 0.00 0.00 11.50 11.50
TOTAL FUNDING 204.50 290 29.50 8.00 11.50 543.50

2.6. Project’s target area and population

2.6.1. The physical location of the transmission infrastructure will be in the South provinces
whereas the revenue improvement (pre-paid meters) program will cover the North, South, East
and Central provinces of the country. Project beneficiaries will include households, small and
medium sized enterprises, artisanal and mining operations, local schools, health centres, and
administrations. The project will help (i) reduce reliance on fossil fuel and lower the power
generation costs; and (ii) improve the reliability of the national power systems and better meet
peak loads. The existing 1.374 million customers will benefit from improved service reliability
and efficiency. Over 400,000 new metered connections are envisaged, approximately 100,000
households and 500 SMEs, and private sector are expected to receive new or improved access
to electricity services as a result of ESEEP-I. The proposed transmission project will facilitate
the connection of the transmission backbone to the southern system whereas surplus generation
capacity from the north will be available to the south. Existing customers in the Lubango (3rd
most populous city) and Namibe will be able to consume more reliable power. ENDE has
plans/programs designed to extend the distribution network and connect many new customers
most likely to be funded by the successor project ESEEP-II and beyond. There is also a number
of other transmission projects in the pipeline that will extend the transmission network on both
220kV and 400kV to many other cities in the southern provinces, using the new 400/220/60kV
substation at Lubango as a hub or source. The programme will create an enabling environment
for further rural electrification, private sector investments, as improved access to power is
expected to revitalize defunct industries and spur economic development that will, in turn,
facilitate job creation. Women from various beneficiary groups will receive increased
opportunities through a range of integrated activities including collection of sex-disaggregated

7
data, gender-targeted marketing, community outreach, and training programs that will be
delivered at various levels to encourage and facilitate their participation in the project.

2.7. Participatory process for project identification, design and implementation

2.7.1. During the design of ESEEP-I, the Bank team consulted with key stakeholders at both
national and provincial levels, including DPs. Key stakeholders consulted included MINEA,
RNT, ENDE, PRODEL, GAMEK, Ministry of Environment, Provincial Governors (Huambo
and Lubango), and beneficiary communities in Huambo, Lubango and DP’s in para 1.3.1.
2.7.2. Stakeholder consultations were conducted during the preparation of the revised
Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan (RAP) for
the project in line with Angolan regulations and the Bank’s Integrated Safeguards System (ISS)
requirements. The Resettlement Action Plan (RAP) was prepared in consultation with local
communities and will continuously be updated to ensure adequate compensation for
resettlement as well as provide support to enhance the benefits and development of SMEs in
the targeted provincial areas. Discussions were conducted with Project Affected People
(PAPs), communities, potential consumers of electricity, government officials and agencies
and their views and concerns included in the document. The engagement process will continue
throughout the life of the project to ensure ownership from the relevant stakeholders through
the stakeholder engagement plan. A Grievance Redress Mechanism (GRM) has been
established by the project to ensure that any potential complain(s) that may arise during project
implementation will be resolved as soon as possible, using the project GRM in the first
instance.
2.8. Bank Group experience and lessons reflected in project design
2.8.1. ESEEP-I builds on the Bank’s PSRSP completed in 2016 which led to the unbundling
of the sector, strategic studies on system non-technical and technical losses, enactment of
procurement law 2016 and some tariff reforms. Preliminary findings of these studies were used
to inform the scope of ESEEP. The Project Completion Report (PCR) of the PSRSP revealed
key lessons which the Bank has synthesized into ESEEP-1, as shown in table 2.7.
Table 2. 7: Key lessons extrapolated from PBO PCR and implications for ESEEP-I
Lessons from PBO PCR Implication for ESEEP-I
1. For tangible impacts beyond policy actions, a For this reason, ESEEP-I has been designed as an
Sector Budget Support program should be designed to investment project to build the requisite infrastructure
promote some investment projects. This would ensure that will sustain and consolidate the reform efforts.
that follow-up infrastructure projects needed to
sustain reform can be launched to ensure a more
harmonized and integrated implementation of the
overall reform process.
2. Analytical work during design requires greater Preparation of the ESIA for the ESEEP involved
involvement with direct beneficiaries in order to direct consultations with beneficiary communities.
diagnose in advance the relevant needs of vocational Beyond this, the project has identified key
training or technical assistance, thus speeding up stakeholders to be involved in implementation at the
project implementation and guaranteeing governorate levels in order to facilitate smooth
sustainability. implementation on ground.
3. Due to the short period of PBOs compared to the ESEEP-I is a four-year operation with indicators to
maturity of reform processes, there is need to improve financial performance and sustainability of
prioritize indicators that ensure success of the reforms the sector, as well as technical performance of the
and those that attract downstream investment to the sector, as shown in the log-frame. ESEEP-I will
sector. therefore provide the springboard for other key
investments to follow, including Phase two of ESEEP
to be financed with other DPs as a successor project.
4. The effectiveness and efficiency of the Bank's ESEEP-I is designed in an integrated manner with
complementary support to the GoA requires closer other DPs to maximize sector results and development
links between other development partners and donors impact. While some partners (AGTF and USAID) are

8
 in order to complement and harmonize the support co-financing with the Bank on ESSEP-I, others are
provided by others to ensure sustainability of overall parallel financing components that aim, collectively,
sector strategy. to achieve the broader sector objectives.
2.8.2. The Bank’s active portfolio in Angola amounts to UA 581.9 million (as of September
2019). It includes eight (8) operations, of which seven (7) public and one (1) non- sovereign
operations. In 2018, the Bank approved a SEFA Grant of USD 1 million to implement the
Renewable Energy Program in Angola aimed at developing a regulatory and institutional
framework for enhanced private sector engagement in the renewable energy sub-sector. The
approval of ESEEP I will position the energy sector at 60% of the total portfolio.
2.8.3. The Bank’s Angola portfolio has been at the bottom in the sub Regional Portfolio
Flashlight, with the proportion of red-flagged operations ranging from 50% to 87% between
2017 and 2019 and the overall performance rated unsatisfactory (2.5) due to slow procurement
and disbursement. However, since the beginning of 2019, considerable progress has been
recorded in the commitment rate of most operations. As of September 2019, the average age
of the portfolio is 4 years, with only three operations more than 5 years. The cumulative
disbursement rate is 19%, which stems primarily from the 75% weight - of two undisbursed
operations since becoming effective in 2016.
2.8.4. Key lessons learnt from the portfolio of ongoing operations and recently completed
projects which have informed the design of ESEEP-I are summarized in table 2.7 below.
Table 2. 6: Lessons learnt from Bank Group Operations
Key lessons learnt Actions incorporated into the design of ESEEP
Need to decentralize implementation. The Bank is currently recruiting an energy and
procurement experts to be based in the country office.
Need to ensure high state of readiness for project Advance procurement for major activities has been
start up and implementation. approved to commence in September 2019.
Key team of experts from Deloitte and Touche are
already on-board to work with ENDE & PIU for
advance procurement activities.
Additional provision made for ENDE & RNT to
recruit external experts to be part of their PIUs if
needed.
Need for project management to be strengthened Deloitte & Touche experts and some members of the
with multidisciplinary experts to respond to project implementation support team are already recruited to
complexity. ensure, inter-alia, transfer of knowledge. (Annex B3).
Need to align project with national budget Agreements held with GoA to include project in
planning/implementation requirements. budget planning/implementation requirements as per
signed Aide Memoir at Appraisal of ESEEP-I.
Availability and retention of qualified staff is key to A Youth-focused Apprenticeship will be implemented
improve sector performance and institutional under ESEEP-I, with technical assistance providing
capacity. transfer of knowledge.
The need to properly measure and report An M&E expert will be recruited at MINEA for
development outcomes. overall oversight, including the ESMP and RAP
implementation. This will be complemented by the
local committees at the provincial levels.
2.9. Key performance indicators
2.9.1. The main performance indicators of ESEEP-I relate to improving electricity access and
increasing reliability and efficiency of the utility which will consequently improve power
supply reliability and increase on grid access, thereby improving the quality of lives of people.
Furthermore, the program will enhance institutional capacity for effective implementation of
the government’s electrification program. Although the program results chain is summarized
in the logical framework, key outcomes include average system losses, number of new
customers metered, and current unmetered customers provided pre-paid meters, average

9
amount of revenue collected annually, length of the 400kV constructed, the number of
substations constructed, and inter-statistical meters installed.
2.9.2. The key outcome indicators include: (i) significant increase in electricity supply to
South with an overall capacity of 1000 MW, (ii) reduced cost of power generation by the RNT
by at least USD 11 million/per month, and attract private sector investments (iii) annual
reduction of ~ 125 Gigatonnes of CO2 emissions and saving of 46.8 billion litres of diesel due
to the replacement of thermal plant, and (iv) increased revenue collection by both utilities.
2.9.3. Project targets will be monitored through baseline data to be collected by the
supervision and management firm, Implementing Agencies (IA) and contractors throughout
the project cycle. Other indicators to be collected, as part of supervision processes, will include
gender disaggregated results on employment of local communities, income and livelihood
restoration programs, HIV/AIDS and implementation of the RAP.
3. PROJECT FEASIBILITY
3.1. Economic and Financial Performance
3.1.1. Country Economic Context. The country has been experiencing lower economic
growth since the start of the oil price crisis in 2014. GDP growth rate shifted from 4.8% in
2014 to -1.7% in 2018. The low economic growth has been attributed to lower revenues from
the oil sector, which has not given sufficient fiscal room to the Government to continue
investing in economic infrastructure to spur growth. The Angolan economy is predominantly
dominated by the public sector. The decline in public investment, therefore, resulted in an
overall contraction of economic activities.
3.1.2. Fiscal Policy. Since the oil price decline, the GoA continued its tight fiscal policy due
to declining overall revenue. Oil prices decreased to a low of 28.82 USD/bbl in February 2016
and fiscal balance as a percentage of GDP also declined from 6.7% in 2012 to -3.2% in 2018.
Total revenue contracted from 30.7% in 2014 to 20.5% of GDP in 2018, which had direct effect
on government expenditure. As a result, total expenditure also contracted from 36.5% of GDP
in 2014 to 20.1% of GDP in 2018. This was further aggravated by the inability of the
government to raise non-oil tax revenue, which represented only 7.9% of GDP in 2014 and 5%
in 2018.
3.1.3. Debt Sustainability Analysis. With reduction on fiscal revenues, the GoA was forced
to increase its borrowing from bilateral and multilateral partners in order to meet critical
expenditures. Public debt moved from 39.8% in 2014 to 87.8% of GDP in 2018, raising
concerns over debt sustainability. During that period, both domestic and foreign debt rose by
53.1% and 55.5% respectively. In 2018, the IMF estimated Angola’s total public debt at USD
77.2 billion and its financing gap for the next two years at USD 3.8 billion. This has driven the
Government to institute measures to ring-fence its finance through reduction in public
expenditure by 16% of GDP since the start of the oil prices crisis in 2014. The GoA has also
given priority to financing from multilateral development partners as parts of efforts to contain
its debt levels. Most of the country’s debts have long tenure terms, which gives enough
breathing space to contract essential debt for development. The presidential decree in August
2019 for privatization law included list of state-owned companies for privatization and
introduction of14% VAT effective from 01st October 2019. The IMF projects under the current
scenario, public debt would peak at about 91 percent of GDP in 2019, and gradually converge
to 65% by 2024 which is below the high-risk IMF’s benchmark. Although, the country’s
debt is high, there is still room to source development financing to spur growth through critical
investments in power infrastructure.
3.1.4. Political Development and Governance: Angola’s political landscape has
experienced a pacific power transition in October 2017. The new president created the

10
conditions for the country to strengthen its implementation of policies towards the
improvement of transparency and governance. The WB 2017 World Governance Indicators
(WGI) showed a slight improvement in 5 areas out of 6 with political stability ranked the
highest indicator. Moreover, the 2018 Mo Ibrahim Index of Africa Governance ranked Angola
45th out of 54 countries, with improvement of 0.7. The Bank’s 2018 Country Policy and
Institutional Assessment (CPIA) overall score stands at 3.44 (out of 6), representing also a
slight improvement of 0.11 points from 2016. However, the GoA still needs to make further
progress towards transparency, governance, and accountability. As part of GoA commitment
to addressing governance challenges, in January 2019, a new penal code with anticorruption
and anti-money laundering provisions was approved as elaborated in appendix IX.
3.1.5. Power Sector Analysis. A public investment programme has been defined under the
framework of the 2018-2022 Action Plan for the energy sector, aiming at addressing some of
the sector’s key challenges, specifically enhancing technical and financial sustainability.
Indeed, as highlighted in section B.6 of the technical annexes, the sector operates at loss with
receipts obtained from customers representing roughly 15% of the total sector costs in 2016
and with system losses hovering above the 30% figure. This unsustainable situation strikingly
compares with Angola’s possibility to convert its hydropower potential into low-cost electricity
for the national and regional benefit. Aligned with the efforts to enhance the sector’s
sustainability, important sector reforms including unbundling of the sector to facilitate private
sector participation and a significant tariff increase are ongoing.
3.1.6. Overall Project viability. Aligned with the effort to enhance the sector’s sustainability,
the programme’s economic and financial viability derives from the economic and financial
rationale underlying each of the programme’s components. On one hand, the economic
rationale for the central-south transmission line relates to the expected overall reduction in the
generation costs, specifically fuel costs, associated with the southern system. On the other hand,
in what refers to the revenue improvement programme, the key economic benefit will relate to
the expected reduction of non-technical losses and increase in the revenue collection. The
paragraphs below provide a short summary on the expected economic benefits from each of
the components, whilst section B.6 of the technical annexes provides in-depth analysis of the
economic and financial analysis of the project.
3.1.7. Component 1 (Transmission network expansion). The construction of a 400kV
single circuit line with a transfer capacity of 2,250MVA which is uniform with the North to
South will allow the evacuation of about 1,000 MW of hydro power from northern to the
southern regions of the country that are currently not interconnected. The transmission line will
also have fibre wire to facilitate mobile communication as an ancillary benefit.
3.1.8. Component 2 (Revenue Improvement Program). The support to the GoA’s ongoing
effort of expanding pre-payment via the installation of prepaid meters will enhance the
financial sustainability of the electricity sector. The split-meter pre-paid technology inhibits
fraudulent features; therefore, the increased pre-paid meter customer base will improve revenue
collection and minimise theft and fraud. With the roll-out and installation of pre-paid meters,
the level of non-technical losses will reduce, thereby increasing collection rates and enhancing
the financial sustainability of the sector value chain. ENDE collects the entire revenues for the
sector, and then distribute them across the electricity value chain using a pass over mechanism
established by the government. The tariff increases from 2 AOA/kwh to 15 AOA/kwh by end
of 2019 along with the new pre-paid meter installations and envisaged 250 kWh per
consumption per month among the 860,000 customers will all contribute to guaranteeing
ENDE about 60% increase in revenues.
3.1.9. Financial and Economic Indicators. Based on the information shared with the Bank
by Angola’s authorities and utilities, specifically the detail on the expected investment cost and

11
programme revenues, financial calculations were conducted in order to assess the financial and
economic viability of the operation. The resulting key financial and economic indicators are
highlighted in table 3.1 below.
Table 3. 1: Key Financial and Economic Indicators
PARAMETERS VALUES
Component: Transmission Line
FIRR 19%
FNPV (@5% 884 million USD
Component: Revenue improvement
FIRR 26%
FNPV (@5% 465 million USD
Total project
FIRR 21.2%
FNPV (@5% 1,349 million USD
EIRR 23%
ENPV (@12%) 600 million USD

3.1.10. The above deterministic results were reviewed vis-à-vis potential risks to the project. A
sensitivity tests was conducted to assess the impact of these variables on the results obtained
above. Key risk variables included: tariffs, energy flow in the system, reduced consumption of
energy by metered customers, increase in capital expenditure dues to delay in project
implementation. The results show that reduced consumption, increased investment costs and
reduced energy flow are likely to negatively impact the deterministic results in Table 3.1.
3.1.11. A comprehensive review of the financial statements of the utilities, RNT and ENDE
was undertaken. The financial results, based on audited statements of the last 2 years from
2017, remain unsustainable primarily because of poor revenue collections. Therefore,
implementation of the ESEEP-I is likely to significantly to the sustainability of the sector.
Detailed analysis and results are presented in annex.B.6.
3.2. Environmental and Social Impacts
3.2.1. The proposed project is confirmed as Category 1 according to the Bank’s ISS,
specifically on account of the environmental and social (E&S) risk profile of the construction
of a 343km 400kV transmission line from Huambo to Lubango and the construction of a new
400/220/60kV substation at Lubango. Negative impacts potentially engendered by the
transmission line component include direct loss, degradation and fragmentation of habitats and
vegetation (mostly woodland habitats) caused by vegetation clearance in the Right of Way
(RoW), as well as direct loss of structures, farmlands, crops and fruit trees caused by the
establishment of the RoW. The component on improving revenue collection does not directly
impact the environment adversely and is unlikely to induce adverse social impacts. However,
enhancement measures and plans will be developed by ENDE as part of the capacity building
programme in order to anticipate and manage eventual unintended impacts.
3.2.2. Based on the above, a revision of the initial Environmental and Social Impact
Assessment (ESIA) –originally developed in 2015– was carried out to update information on
the legal and institutional framework, prevailing E&S conditions and account for changes in
project scope, as well as ensure compliance with the Bank’s Integrated Safeguard System
(ISS). A Resettlement Action Plan (RAP) was prepared by the Borrower, with numbers to be
confirmed once topographic survey undertake and siting of the towers and alignment of the
transmission line are finalized. The RAP currently estimates the number of physically displaced
households at 150 (750 people approximately) and economically affected people is estimated
at 15,505. It is anticipated that the project will result in temporary land restriction of 2,100 ha
(approximately 21 km2) for the line corridor during the construction phase, decreasing to 1,581
ha (approximately 15.81 km2) of permanent land take during the operational phase.

12
3.2.3. These key documents prepared by a national environmental consultancy company
registered with the Ministry of Environment (MINAMB), as per national requirements. AfDB
will ensure that all E&S studies are conducted and obtain the required approval and
authorizations in accordance with national requirements.
3.2.4. The ESIA and RAP documents were reviewed, cleared and disclosed on the AfDB
website on 05th August 2019, in accordance with ISS policy requirements.
3.2.5. Public consultations were undertaken by the Borrower in the context of the ESIA
revision and the development of the RAP. These engagements will continue as part of a wider
stakeholder engagement plan. .
3.2.6. An Environmental and Social Management Plan (ESMP) was developed to ensure the
project’s E&S performance during the construction and operational phases. Mitigation
measures include avoidance of Miombo woodland areas during the optimization of the
transmission line alignment, campsites and other ancillary areas to be installed outside
woodland areas; minimize cut down of trees for new access roads; avoid clearing of
unnecessary areas; restoration of degraded areas after construction and tree planting in areas
defined in consultation with RNT and the Provincial Cabinet of Environment. The ESMP also
includes social development activities to benefit the local communities, including improvement
of access to electricity.
3.2.7. The estimated ESMP implementing budget under RNT purview is USD 804,000,
comprising the construction phase and the first three years of operations. The costs of
implementation of mitigation measures under the responsibility of the EPC are integrated into
their overall engineering and construction costs. During the operation phase RNT will be
responsible for the implementation of all mitigation measures. The resources for the
implementation of the RAP and compensation are mobilized as part of the counterpart funding
and will be borne by the Government counterpart. The RAP budget is estimated at USD
11,500,000. This budget is subject to final validation of the number of affected people. In the
event costs associated to the RAP are higher than estimated, the GoA will avail the necessary
funds accordingly. The contractors and sub-contractors will not commence implementation of
any works on any section of a given lot under the project, unless PAPs in such lots have been
compensated and/or resettled in accordance with the RAP and/or the agreed works and
compensation schedule.
3.2.8. On institutional capacity, RNT and ENDE have not had experience implementing
projects in line with the E&S requirements and standards of DFIs, including those of the AfDB.
The E&S safeguards functions within both institutions are at their infancy. RNT and ENDE
have both set-up Environment, Health, Safety and Security Departments within their structures
but these are yet to be adequately staffed and/or capacitated. RNT and ENDE have
demonstrated commitment to address staffing and skills gaps. The ESEEP-I project will assist
in developing their respective Environmental and Social Management Systems (ESMS). In
order to enhance the capacity for E&S implementation and monitoring, the PIUs will include
at least one environmental and social specialist, each, who will benefit from the overall
institutional capacity developed and implemented in collaboration with the consultancy firm
recruited by USAID/Power Africa
3.3. Climate Change
3.3.1. Based on project’s risk to climate vulnerability, the project is Category 2 project
according to the Bank’s CSS tool. This means the project impact is vulnerable to climate risk
factors, including erratic rainfall patterns, increasing temperatures and high potential of soil
erosion in proximity of planned infrastructure construction of the new 400kV transmission line.

13
3.3.2. Improving clean energy efficiency and access to electricity will improve sustainable
livelihoods and economic activity through the expansion of the distribution network is a clear
climate adaptation benefit in a long run. The efficiency measures integrated in the project
design of the construction phase is projected to replace current high emitting energy sources
of power, primarily due to fugitive emissions from oil & gas and thus significantly reduce 2011
(206 MtCO₂e) baseline energy sector GHG emissions and the second highest in the SADC
region (after South Africa), a key commitment of the Angolan government (to reduce its GHG
emissions by 35% from baseline estimates by 2030 (National Climate Change Strategy (2018-
2030). To achieve this target, the energy sector is key in transitioning the country’s economic
growth path to a less carbon reliant economy and thus climate mitigation. In addition to the
ESMP conditions, an important consideration is government’s institutional capacity to monitor
the climate change impact of the project, especially ~ 125 Gigatonnes of GHG emission
reduced and clear indicators of economic growth has improved due improved energy access
3.4. Gender
3.4.1. Improved reliability of the transmission and distribution system will contribute to the
improvement of living conditions for households, both urban and rural through the different
components of the ESEEP Project. Due to much lower access to energy in rural areas, ~5% in
rural versus 60% in urban for a national average of ~35% (2013), the statistical levels in health,
education, access to clean water also rate lower in the rural areas, with an impact on higher
nativity rates, neo-mortality rates and lower health care, compared to those in urban areas.
Furthermore, increased access to electricity will greatly benefit women, supporting their
empowerment to get involved in income-generating activities. Gender gaps related to rural
access to energy were identified in four main areas: (i) knowledge and skills development on
renewable energy (off-grid) solutions, especially solar energy; (ii) management through
cooperatives of energy resources and off-grid solutions; (iii) access to information (via
internet/use of computers); and (iv) access to energy in general, considered the basic service to
empower any further development. Sex-disaggregated data collection and availability of
baseline indicators remains a key challenge. As an illustration, the breakdown of clients
connected to the on-grid network provides the overall number of clients (1 516 842), and the
connections from the post-paid low voltage residential and (1 087 253), without sex-
desegregated indication. One residential connection considers one household, and to get the
number of people benefitting from access to electricity, one would multiply the number of
households connected by five (the national family average according to National Statistics).
3.4.2. In alignment with the Bank’s Angola CSP gender targets and with national priorities
and strategies, notably the 2013 National Policy on Gender Equality and Equity and
Government’s priority of access to energy for rural development, it is envisaged that alongside
the transmission line and revenue collection component, the program includes enabling
environment, skills development and business opportunities supporting women’s
empowerment. With these elements embedded in the ESEEP, the Project falls under Category
III of the Bank’s Gender Marker System, the supporting gender analysis and gender action plan
are presented in annex. To address the identified gaps and beyond, the sex-disaggregated job
creation targets during construction and equipment installation, emphasis for gender
mainstreaming is put on awareness and institutional capacity building of the various
stakeholders involved in the Project to empower them to take gender into consideration. These
include support to developing a Gender Policy for their institution, gender indicators in the
public procurement packages for sub-contracting in the energy supply chain, provisioning for
on-job training and internships with ENDE/RNT and sub-contractors for women and youth to
promote their participation in the energy labour force. These activities will be complemented
by mobilization campaigns to sensitize women and girls to enter the non-traditional STEM
sectors and take on installation and meter controlling jobs, so as to grow the female engineers’

14
 pool. Furthermore, the update of the registration and collection system is recommended to
address the missing desegregation, which in turn will allow the establishment of a baseline in
terms of women/men access to electricity.
4. IMPLEMENTATION
4.1. Institutional arrangements
Executing
Figure 1: Institutional arrangements
Agency Ministry of Energy

PIU 1: RNT - Component 1 Implementing Implementing

Agency 1: RNT Agency 2: ENDE PIU 2: ENDE – Component 2

4.1.1. Implementing details: The Ministry of Finance (MinFin) will provide oversight and
ensure interface with the Bank. The Executing Agency will be the Ministry of Energy
(MINEA), which will provide overall oversight and strategic guidance to the Implementing
Agencies (IA), which are (ENDE and RNT). Implementation of the program component 1, will
be executed by RNT, whilst that of component 2 by ENDE. In assessing the capacity and
capability of IA’s it was noted that they do not have adequate experience executing projects
financed by the AfDB and/or DP’s. It is therefore envisaged that these entities will face
challenges in the implementation of the proposed program as required. Hence, new PIUs will
be created under each IA and their capacity will be strengthened to use the Bank’s fiduciary
systems, under this program. Each IA, at minimum, will comprise of a project
manager/coordinator, engineer, procurement specialist, environmental expert,
social/community liaison expert, and accountant for effective project management (see
Appendix VI). Additionally, the PMO from Deloitte & Touche that already been recruited (para
1.3.1) to support implementation of ESEEP, will work with the PIU’s to support program
implementation & management as per Bank’s standards, and transfer of knowledge. Detailed
implementation arrangements provided in appendix VII, & Annex B.3.
4.1.2. An owner’s management and supervising engineer consulting firm will be recruited to
on behalf of the client. This firm will work on implementation up to the completion and handle
over to the client. Main functions are; project management service to assist the client to control
the construction process to the completion of construction. Whereas the quality of construction
works is controlled in close cooperation with the client.
4.1.3. These activities will be undertaken using the Bank’s fiduciary systems, utilising the
advance contracting that has been approved by the Bank.
4.2. Procurement
4.2.1. The Government of Angola has made progress in developing a legal and regulatory
framework for public procurement starting in 2010. The latest procurement law (“Lei nº 9/16
dos Contratos Públicos”, dated 16 June 2016) brought significant improvements: (i) adopting
a modern legislation to regulate public procurement and to comply with principles of fairness,
transparency, competitiveness and cost effectiveness; (ii) establishing the Procurement
Authority SNCP (“Serviço Nacional da Contratação Pública”) to discharge the mandate of
public procurement oversight; and (iii) introducing a mandatory requirement to publish bidding
opportunities to achieve greater economy and transparency. The legal framework is generally
consistent with internationally accepted practices promoting open competition, allowing free
access to public procurement market and enabling aggrieved bidders to appeal through a
complaint mechanism. Despite the progress achieved, there are still significant gaps in the
public procurement framework that may affect the quality, efficiency, effectiveness and equity

15
of procurement outcomes. Consequently, procurement of goods, works and consulting
Services, under the Project, will be carried out in accordance with the Bank’s Procurement
Framework for Bank Group-Funded Operations, dated October 2015, using Bank’s
Procurement Methods and Procedures (PMP).
4.2.2. A Procurement Risk and Capacity Assessment (PRCA) was undertaken to: (i) evaluate
the risks associated with the borrower procurement system, the sector capacity which includes
the capacity of the local industry, the project complexity and design, and the procurement
capacity of the Executing Agency; (ii) set up risk mitigation to be exercised by the Bank and
the Borrower; and (iii) form a judgment on the adequacy of procurement methods and
procedures, as well as controls being used by the Borrower in the use of funds and contract
management. The detailed PRCA is outlined in the Technical Annexes.
4.2.3. In order to accelerate implementation of the project, the Borrower has submitted to the
Bank a request for advance contracting for the procurement of: (i) RNT Owners Engineer -
Project design and procurement; (ii) ENDE Owners Engineer - Project design and
procurement; (iii) Prequalification for the Line Construction Huambo to Lubango 400 kV 343
Km (single tender T-lines); (iv) Substation and Lubango 400 / 220/60 kV Substation; and (v)
Consultant for the implementation of the resettlement plan (RAP). The request has been
approved by the Bank on 12 September 2019. The Borrower will undertake such advance
contracting at its own risk, and any concurrence by the Bank with the procedures,
documentation, or proposal for award(s) does not commit the Bank to provide Financing of the
project. The Procurement Plan (included in the Technical Annexes of the PAR) shows that the
early commencement of procurement processing by the Borrower (before approval of the
Financing by the Board of Directors) will enable a time saving of five (5) months on Project
implementation. It has to be recalled that Deloitte and Touche has already mobilized a qualified
Procurement Specialist who is ready to carry out the activities.
4.3. Financial Management Arrangements
4.3.1. Project Financial Management (for each of the ENDE and RNT components) will be
the responsibility of the respective Finance and Accounting departments for each of the entities.
An appropriately qualified and experienced accountant from each of ENDE and RNT will be
designated as the project accountant, to be included in each entity’s project implementing unit
(PIU). Due to a lack of prior experience of working with multilateral financiers, the separate
PIUs domiciled in each of ENDE and RNT will be supported technically by the aforementioned
PMO from D & T (para 1.3.1) which will include a financial management expert with some
knowledge of accounting for donor financing. This financial management expert will act as the
technical resource person supporting the designated project accountants. Both ENDE and RNT
will make use of their existing accounting systems, software’s, and procedures, with only minor
modifications to incorporate processes for:
• Accessing funds from the Bank,
• Managing funds from the Bank, and
• Reporting on usage of the funds from the Bank.
4.3.2. The PIUs will both benefit from coverage by existing entity internal audit units, which
will include the proposed project activities in their regular work programs. Reporting will
consist of PIU specific quarterly interim unaudited financial reports (to be submitted no later
than 45 days after the end of the quarter reported on), culminating in annual audited financial
reports detailing the financial performance of each PIU. The audit will be conducted by
independent external audit firms, hired on terms of reference approved by the Bank. The
audited financial statements, accompanied by the applicable audit management letters, will be
submitted to the Bank no later than six months after the close of the financial year audited.

16
4.4. Disbursements
4.4.1. Both ENDE and RNT would make use of the Bank’s various disbursement methods for
accessing funds for the proposed project, including (i) Direct Payment, (ii) Special Account
(SA), (iii) Reimbursement methods, and (iv) Reimbursement Guarantee in accordance with
Bank rules and procedures as laid out in the Disbursement Handbook. Direct payment will be
used for payments on contracts; while a project specific USD Special Account together with a
related local currency (Kwanza) account will be opened in a commercial bank by each of
ENDE and RNT to facilitate all other project related payments. The other disbursement
methods would be called upon if required.
4.5. Monitoring and Evaluation

4.5.1. Foundation for the overall project monitoring. The Results-Based Logical Framework
(RBLF) will form the basis for the development of an overall monitoring and evaluation (M&E)
system to properly measure progress in the implementation, the achievement of results and the
impact. During implementation, the Bank will carry out periodic reviews, through among
others, supervision, quarterly reports and mid-term reviews. The program will be monitored
through the integrated technical assistance in order to build the M&E capacity.
4.5.2. Mechanisms and Tools. Each PIU, in ENDE and RNT, will be responsible for the
daily management and implementation of the activities under their respective components. An
overall M&E system, including information collection methods and calendar, and a Project
Operational Manual (POM) will be prepared by each PIU shortly after the loan approval. This
will be done with support the M&E Officer within the PMO.
4.5.3. Reporting. Each PIU, supported by the M&E Specialist, will prepare: (i) annual work
program and budgets, including quarterly targets for commitment and disbursement; (ii)
Quarterly Progress Reports; (iii) annual progress reports; (iv) status reports for supervision
missions; (vi) Mid-term Review Report; and (vii) Project Completion Report.
4.6. Governance
4.6.1. The implementation of ESEEP requires the establishment of a governance structure
with clear roles and responsibilities, from national to provincial levels, in order to enhance
responsiveness, transparency, accountability and efficiency in the use of resources and the
project sustainability. The organogram for Project implementation is presented in Appendix
VI. Detailed functions will be detailed out in the project operations manual. The Bank, through
COAO and RDGS, shall closely monitor/supervise project implementation.
4.7. Sustainability
4.7.1. This program will pave the way for future public and private sector investments in the
power sector. This transmission line will serve as the main backbone between South and North
but most importantly, the link and only enabler for the Angola Namibia (ANNA) transmission
line project that is expected to start in 2021, this will enable Angola to enter the SAPP and
trade power within the region given that is the only country not connected to the power pool.
The upcoming Baynes Hydro power project between Namibia and Angola will also rely on the
Lubango-Huambo Line for its evacuation. In addition, the southern part of Angola which is
semi-desert has proven abundant of renewable such as solar and wind which cannot be
developed given that there is no grid in the south, therefore once this line is completed will
open up renewable energy and IPP on implementation of these renewable energies.
4.7.2. The Deloitte & Touche PMO team has been recruited by the USAID/power Africa as
part of their co-financing to this ESEEP program Improvement on the financials of the utilities
and positively affect the government of Angola fiscal burden due to the unsustainable subsidies

17
 provided to the sector. This team will provide transfer of knowledge for future projects
including operation and maintenance issues.
4.8. Risk management
4.8.1. The risks of the programme and mitigation measures are presented in table 4.1 below.
Table 4. 1: Programme Risks and Mitigation Actions
Risk
The Angolan economy remains highly dependent on oil
exports which makes the country very vulnerable to
exogenous risks such as exposure to variations in prices on
international markets. Furthermore, given the country’s
income gap, the majority of the population remains unable to
meet their basic needs, thus impacting their ability to pay to
energy services, thus the sustainability of the sector remains
at risk.
Risk of delay in the implementation and completion of the
project due to limited experience of the government
implementing agencies in working with development banks.
Risk of project cost overruns due to historical high project
implementation costs and risk pricing applied by contractors
to mitigate slow and non-payment by government.
Low revenue recovery rates due to lack of customer
acceptance of new tariff being implemented as well as
requirement to pay for actual consumption vs flat rate.
Risk of project delay due to unavailability of counterpart
funding
Mitigation Measures
The relevant Bank departments will continue engagement with
GoA through policy dialogue to encourage implementation of
ongoing economic reforms and promote diversification.
Advance procurement activities have been pursued to fast track
key activities.
Fiduciary training to be provided to the PIUs during the project
launch.
The PIU’s to be strengthened by PMO, and owner’s, supervision
and management consultants’ firm through close supervision by
the Bank.
Competitive international bidding to be utilized for all contracts
with direct bank payments. Contingency of 7.5% been included in
major works
The regulator and ENDE has worked on a communication strategy
to engage consumers on the impact and reasoning behind the
revised tariff. Active stakeholder engagement is planned to
facilitate acceptance of the new payment approach.
Ministry of Finance has been actively participating as project
members improving awareness of the program and the project
has been included in the budget planning for 2020 and beyond.
‘the MinFin has committed to providing the funds for
compensation in a timely manner, so that there will be no delays
to the start of civil works

Due to limited Bank staff fluent in Portuguese, review of The country office in the process to acquire the services of a
sector documents and communication between stakeholders technical translator and necessary technical skills to support the
have been strained and going forward may impact the various projects.
effective and timeous project implementation Part of the responsibility of the owners, management and
supervision engineer will also include producing key documents
in required languages
4.9. Knowledge building
4.9.1. The knowledge transfer mechanism, especially regarding project management and
supervision through the supervision consultant, is important in building the in-house capacity
of the power utilities, as they will manage other similar projects to meet the government targets
for increasing the power supply. Deloitte & Touche PMO team will also provide in-house
transfer of knowledge to ENDE and RNT at all stages, including E&S support and system
development. Moreover; besides the Power Africa/USAID support, the EPC contractor,
owners, supervision and management firm will be liable for transfer of critical knowledge to
both ENDE & RNT.
4.9.2. Similar project implementation arrangements and technologies are likely to be used for
other projects in the near future, such as for the ANNA project which will involve Namibia &
Angola

18
5. LEGAL INSTRUMENTS AND AUTHORITY
5.1. Legal instruments
5.1.1. The project will be financed using two instruments:
(i) A Loan Agreement between the Republic of Angola (the “Borrower”) and the
Bank; and
(ii) A Loan Agreement between the Borrower and the Bank (on behalf of the Africa
Growing Together Fund (AGTF)).
5.2. Conditions associated with the Bank’s intervention
Conditions precedent to Entry into force:
5.2.1. The entry into force of the Loan Agreements shall be subject to the fulfilment by the
Borrower of the provisions of Section 12.01 of the General Conditions Applicable to African
Development Bank Loan Agreements and Guarantee Agreements (Sovereign Entities) dated
February 2009.
5.2.2. Conditions precedent to First Disbursement: The obligation of the Bank to make the
first disbursement of the Loans shall be conditional upon the entry into force of the Loan
Agreements, and the submission by the Borrower, of evidence in form and substance
satisfactory to the Bank, confirming the fulfilment of the following conditions:
(i) Updated Resettlement Action Plan (RAP) together with a schedule (the “Works
and Compensation Schedule”) detailing inter alia; (i) the sections into which
each lot of the civil works will be divided, and (ii) a timeframe for
compensation of Project Affected Persons (PAPs) with respect to each affected
section; and
(ii) Establishment of a PIU in each implementing agency whose composition,
qualifications and experience are acceptable to the Bank.
5.2.3. Conditions Precedent to Disbursements for Works Involving Resettlement. In addition
to the fulfilment of the Conditions Precedent to First Disbursement, the obligation of the Bank
to disburse the Loans for works that involve resettlement shall be subject to the satisfaction by
the Borrower, of the following additional conditions:
(a) Submission of satisfactory evidence that all PAPs in the affected section of the affected
lot have been compensated and/or resettled in accordance with the Environmental and
Social Management Plan (“ESMP”), the Resettlement Action Plan (“RAP”) and /or the
agreed works and compensation schedule and the Bank’s Safeguards Policies, prior to
the commencement of works in the affected section of such lots and in any case before the
PAPs’ actual move and/or taking of their land and related assets; or
(b) In lieu of paragraph (a) above, submission of satisfactory evidence indicating that the
resources allocated for the compensation and/or resettlement of PAPs have been deposited
in a dedicated account in a bank acceptable to the Bank or remitted to a trusted third party
acceptable to the Bank, where the Borrower can prove, to the satisfaction of the Bank that,
compensation and /or resettlement of PAPs in accordance with paragraph (a) above could
not be undertaken fully or partially, because of the following reasons:
(i) the identification of PAPs by the Borrower is not feasible or possible;
(ii) ongoing litigation involving PAPs and/ or affecting the compensation and/or
resettlement exercise; or
(iii) any other reason beyond the control of the Borrower, as discussed and agreed with
the Bank.
19
(c) Submission of evidence confirming that the Borrower has acquired all land and/or
rights with respect thereto, required for carrying out the works.
5.2.4. Undertakings. The Borrower undertakes, in form and substance satisfactory to the
Bank, to:
(i) Make timely provision of the resources required as counterpart contribution to
the financing of the Project to facilitate timely implementation of the Project;
(ii) Fully implement the Environmental and Social Management Plan (ESMP)
prepared in accordance with the Bank’s Integrated Safeguards System (ISS);
and
(iii) Implement the Project and have it implemented by its Executing Agency,
Implementing Agencies, their contractors, agents and employees in accordance
with the applicable policies and procedures of the Bank, national laws, and
recommendations, requirements and mitigation measures and procedures
contained in the ESMP.
5.3. Compliance with Bank Group policies
This project complies with applicable Bank Group policies.

6. CONCLUSION AND RECOMMENDATION

Management recommends that the Board of Directors approves an ADB loan not exceeding
Four Hundred Eighty Million USD (USD 480,000,000) and an AGTF loan not exceeding Fifty
Million USD (USD 50,000,000) to the Republic of Angola, for the purposes and subject to the
terms and conditions stipulated in this report.

20
APPENDIXES
APPENDIX I: JUSTIFICATION OF LEVEL OF COUNTERPART CONTRIBUTION

1. Introduction

1.1 Based on the Bank’s policy on Expenditure Eligible for the Bank Group, this operation is proposing a
waiver to the government financial contribution of less than 50%. The government’s direct contribution to
ESEEP-I will be at least 27%, based on the following: 2.4% equivalent to USD 11.5 million (UA 8.36 million)
directly towards the compensation and resettlement of project affected people (PAP’s); 10.9% equivalent to
the project’s import taxes exemption; and 14% from Value Added Tax (VAT) exemption.

1.2 In spite of its oil and mineral wealth, Angola faces critical development challenges, especially with regards
to shared prosperity. With about 25.8 million inhabitants and a GDP per capita of over USD 3,450, Angola is
the seventh most populous country, the third-largest economy and the second largest oil producer in Africa.
Notwithstanding its middle‐income status and natural wealth, the pattern of resource use has excluded large
portions of the population, especially the poor, and inequality across the country is remarkable. More than
60% of the poor live in rural areas, where large parts of population lack access to basic services. The Southern
and South-Eastern regions – where ESEEP-I will focus its benefits – are particularly excluded from growth,
due to isolation, low connectivity and absence of major urban centers and markets. As most of the population
seeks to escape poverty by living in urban areas, Angola is experiencing relatively fast urbanization, which
poses challenges, some of which ESEEP seeks to address, such as bridging the worsening divide between
urban and rural areas.

1.3 Implementation of Angola’s Development Program, towards which ESEEP-I will contribute, requires
USD 3.5 billion in total and the secured financing from DPs is around USD $2 billion between 2019-2022
without considering the Bank’s proposed ESEEP-I project. This will cause GoA to mobilize budget resources
should sufficient financing not be available from DPs. It is important to mention that GoA is committed to a
transformational energy sector program, targeting energy transition, major scale up of electricity supply and
access, and regional connectivity

2. Country Commitment to Implement its Overall Development Program

2.1 The Angolan economic structure characterized by overreliance on oil and heavy presence of the State in
key economic sectors revealed its limitations when international oil prices began to collapse in 2014. Angola
fell into a deep macroeconomic crisis, and the effects are still being felt on the economy. GoA is currently
faced with a number of macroeconomic challenges including inflation; fiscal and external imbalances; foreign
exchange pressures; sharp cuts in public expenditures and investment; weak and undercapitalized financial
sector; worrying debt dynamics; chronic unemployment; distorted fuel subsidies and negative growth. The oil
sector still accounts for about one‐third of GDP, over 95 percent of export earnings, and 75 percent of
government revenues.

2.2 The Angolan economy remains severely impacted by the decline in international oil prices that occurred
in mid-2014. Angola’s economy remains highly dependent on oil, which in 2018 accounted for some 30% of
real GDP, nearly 95% of exports and over 72% of government fiscal revenue. Angola’s real GDP growth rates
have turned negative since 2014, averaging negative 0.9% during 2015-2018. Growth in the non-oil sector
declined from 8.9% in 2014 to an average of negative 1.5% during 2015-2018, constrained by the agricultural
sector’s slow recovery from a drought during 2012-2014 and general reduction of credit in the economy due
to rising interest rates. After reaching single digits during 2013-2015, average inflation surged in 2016
reaching an average of 27.1% during 2016-2018. Gross international reserves averaged 8.1 months of imports
in 2016-2018. Gross public debt is estimated to have reached 80, 16% of GDP in 2018, an increase of 18.80
percentage points over 2017.
I
2.3 It is imperative for the country to transition to a new growth model, grounded on macroeconomic stability,
economic diversification and private sector participation. In this regard, under the guidance of the IMF, GoA
is gradually shifting towards a more sustainable growth model anchored on stable macroeconomic
fundamentals; i.e. fiscal consolidation and public debt sustainability.

2.4 Angola’s development framework and long-term development goals are laid out in the country’s Long-
Term Strategy (Angola 2025), which has the objective of taking Angola to the group of countries with High
Human Index above 0,70 by 2025. This strategy has a specific document for the energy sector, which includes
targets on growth in electricity generation, expansion of transmission lines, and promotion of private sector
investment in the energy sector that will contribute to economic diversification. The Government’s Medium
Term Development Plan (2018-2022 NDP) implements the strategic development options outlined by the
Long Term Strategy and focuses on 6 strategic areas (1) human development and wellbeing (2) Sustainable
and inclusive economic development; (3) infrastructure needed for development ; (4) peace consolidation,
strengthening of the Democratic State and law, and decentralization; (5) territorial development; and (6)
territorial integrity and strengthening of the regional role in the region and internationally. The NDP aims at
an average GDP growth of 3% between 2018 and 2022 and investments in the energy sector is key to the
process of economic diversification, expansion of non-oil sector and increase in private investment to 20,7%
of GDP. Average inflation is projected to decrease to single digits, while the non-oil primary fiscal deficit is
projected to improve. The debt-to-GDP ratio is also projected to be on a declining trend, converging close to
the sustainable level of 65% by 2024. In this context, Government will pursue the following priorities:
a) Fiscal consolidation and strengthening public financial management and tax administration;
b) Accelerate implementation of the economic diversification program; and
c) Improve governance in natural resource management and state-owned enterprises.
2.5 The Government has put economic diversification at the center of its strategy to promote sustainable and
inclusive growth, especially as regards the business enabling environment and investment climate reforms,
export promotion and economic diversification initiatives, improving the quality of the public investment
program and public finance management as well as improving domestic revenue and tax administration
capacity. The Government is committed to implement reform measures critical for the delivery of the
economic diversification program and improve the quality of public investment through promoting private
sector participation in key sectors of the economy.
3. Financing Allocated by the Country to Sectors Targeted by Bank Assistance
3.1 Support economic infrastructure is one of the pillars of the Country Strategy Paper (CSP) of the Bank for
the period 2017-2021. The country elaborated multi-year master-plans and programs to develop the
infrastructure sector, however, funding remains a challenge.

3.2 Faced with a projected demand growth of 12% per year, the GoA has embraced its ambitious strategy for
the sector (Angola Energia 2025). It aspires to increase installed energy generation and electricity connection
as the average energy consumption per inhabitant is expected to grow from 375 kWh per capita in 2013 to
1230 kWh, overall system load to reach 7.2 GW, which about four times the level in 2013 that requires
installed energy generation to grow to 9.9 GW; Electricity connections are expected to grow from an estimated
30% currently to 60% of the population, interconnect the transmission systems effectively, expand the grid
from 3,354 km to 16,350 km and expand the total installed generation capacity to 10 GW from major hydro
plants by 2025

3.3 Government continues to prioritize energy and infrastructure sectors, as reflected in annual development
expenditure 2017/2018 budget year, 2.35% allocated to Energy, Infrastructure and ICT; in addition, 2.07%
allocated to state department for energy. According to the Angola Energia 2025 total planned investments in
energy generation, transmission and distribution requires at least USD 23.3 billion new investment in the
period 2018-2025. However, financing remains a major challenge, and for fiscal year 2019, budget allocations
for the energy and combustible sector is about 2.3% and shares of oil and gas is 0.23%.
II
3.4 In May 2019, the GoA completed a 360km 400kV line from the Lauca Hydro to Huambo, connecting the
northern to central to the grid. Supplementing the expansion of the main transmission grid that will
interconnect the northern, central and southern grids, there are ongoing projects as well as planned projects in
the distribution system that will increase the current customer base of 1,478,000 to more than 2,700,000. These
projects are mainly in the larger urban areas and provincial capitals and will also be supported by the
installation of pre-paid meters to all unmetered customers (860,000) and new the customers

3.5 The total generation potential of Angola for 2040 is estimated at 18.2GW with 8.26GW for hydro plants
on the Kwanza river basin only. The total foreseen capacity of 10GW in 2025 will be base load generation
which will enable Angola to export power to neighboring countries such as Namibia, and other Southern
Africa countries through the Power pool. Angola has an enormous gas potential, with proven 270,000 million
m3 of gas reserves equivalent to30,000 tons monthly supply that could be used for additional gas to power
projects. Gas infrastructure, tariff, and domestic gas market are still being developed whereas a large on-shore
gas field was discovered in the Kwanza basin in 2017.

3.6 The GoA recently approved the National Strategy for New Renewable Energy establishing concrete
targets for the various renewable energy sources taking into account the potential of each resource and setting
priorities for solar, wind, biomass and small hydro. Generation expansion under the strategy relies mostly on
hydropower and gas, in addition to solar, wind, biomass and mini-hydro. The diversification of the energy
mix through non-conventional renewable sources will help strengthen reliability of electricity supply in the
phase of adverse climate change events especially drought in Southern Angola. According to the UNDP
report, by April 2019, the GoA had spent USD 750 million for emergency relief and responses due to drought.
In the last 5 years, including the completed and on-going energy infrastructure, the GoA spent at least USD
10 billion investing its own resources in energy sector for projects such as the Large-scale Soyo combined
cycle natural gas plant (750 MW), and the Lauca hydroelectric project (2.1 GW) projects.

3.7 In its pursuit to improve governance in state-owned enterprises, the GoA continue to build on momentum
of the Bank’s PSRSP with newly approved tariff of 77% as of August 2019. The impact of the increase of the
tariff is here presented from the perspective of the utility with the focus on the realized incremental revenues
from the implementation of the new tariff regime. The social economic impacts are not here quantified, but
the Angola has taken into consideration such impacts in the design of the new tariff regime and will implement
the tariff which mitigates and ensure affordability concerns are fully addressed. In addition, an attempt has
been made to disaggregate the impact by the customer category whereas the impact assessment takes into
consideration the change in the tariff structure that has been effected in Angola. It should be noted that the
effected electricity tariff changes have included relatively higher increases in the fixed component (KVA) for
lower voltages users, from 0 to 100 AOA/KVA. For such user, the variable component has also increased
from 3 to 12.82 AOA/Kwh.

3.7.1 To demonstrate the impact of such an analysis, we limit the analysis to the variable component due to
limited data on voltage parameters of the different customer category. An assumption of consumption average
of 350Kwh/month per customer. This consumption should be expected to increase over time, but we have
limited our analysis to a single period using the existing number of ENDE customers database. The Table
below summarizes the results, showing the revenues arising from such a change in tariff increases as per
consumer category in one year from USD 52 to 187 million.

III
Table .1 Revenues projections from tariff increase
Low Single Low Low
Low Low
Low Voltage Phase Social Three-
Social Voltage
Voltage Commerce Domestic Domestic Phase TOTAL
Domestic Street
Industry and Low Voltage Domestic
Voltage I Lighting
Services Voltage II Voltage
Revenues (million
USD), new tariff 1.28 0.12 6.40 0.40 0.63 0.04 178.94 187.81
Revenues (million
USD), old tariff - 0.04 1.82 0.11 - 0.01 50.99 52.97
Revenues (million
USD), incremental 1.28 0.08 4.58 0.29 0.63 0.03 127.95 134.83

This impact analysis focuses only residential customers. However, the commercial and services categories in
the above table include a huge informal business base in Angola. It is therefore safe to assume that by the time
the program ends, the utility will collect enough revenue to off-load Government of subsidy and hence, can
future justify the minimum contribution as per Bank’s policy.

4. Country Debt Level and Budget Situation

4.1 In May 2019, the Government unveiled a AOA 10.4 trillion (approx. USD 28.9 billion) budget for FY
2019. The overall budget expenditure is about 19.4%, substantially lower than the 36.5% of GDP expenditure
observed for FY 2014, which is year that the government started to increase efforts to curb expenditure after
the dip-in oil prices. Domestic revenue is projected not to increase and is equivalent to about 19.3% of GDP
in FY 2019, significantly lower than what was observed in the FY 2014 where revenue was 30.7% of GDP.
The budget situation is summarized in Table 2, which highlights the challenges the Government faced in
securing external financing for the FY2019 budget to support the development agenda.

4.2 The share of public debt as percentage of GDP is projected to reach 90.6% by the end of 2019. Fiscal
balance is expected to be around 1.3% of GDP in line with IMF’s program to bring debt level to a sustainable
path. The IMF’s most recent debt sustainability analyses (DSA) in mid-2019 indicates that Angola is
benchmarked as high-risk but is projected to improve this classification by the end of the program in 2021 as
a result of current fiscal efforts.

TABLE 2: BUDGET SITUATION

2017 Budgeta 2018 Budgetb 2019 Budgetc
Total Expenditure as % of GDP 23.8% 19.4% 19.4%
Domestic Revenues as % of GDP 17.5% 21.5.3% 19.3%
Public Debt as % of GDP 68.5% 87.8% 90.6%
Share of External Debt as % of GDP 37.1% 55.5% 57.5%
Source: IMF. a) EFF from December 2018; b) preliminary from EFF 1st Review June 2019; c) projection from EFF 1st Review June
2019

5. Conclusion

It is worth highlighting that GoA is in the process of implementing a proper policy response to its weakened
outlook through a conservative supplementary budget for 2019, alternative sources of cheaper financing
(which includes ESEEP-I financing), and progress toward a more flexible exchange rate regime, among others.
Providing up to 27% of financing under ESEEP-I will therefore grant GoA the much-needed fiscal space to
invest in other critical social expenditures (e.g. education, health and social protection) which tend to be
severely affected during budget crisis. Increasing its counterpart funding to 50% will imply borrowing from
the previous unstainable sources of financing, which will increase the country’s debt vulnerabilities the IMF
had warned against.

IV
Therefore, with these reforms, spending and debt levels, and rising social expenditures, the GoA is
unable to contribute significant amount in counterpart financing to the project, and is therefore
requesting a waiver to contribute less than 50% of the total project cost, as required by Bank policy.

V
 APPENDIX II: TABLE OF AFDB’S PORTFOLIO IN ANGOLA – ON-GOING PROJECTS (JULY 2019)

Jan Sep Jan Sep20

Age (since approval)

2019 2019 2019 19

Signature Date
Approval date
Flashlight

Source First
Effectiven Completio Amount
Operations of Sector Disbursem IP DO
ess Date n date (USD) Commitment Disbursement
Funding ent date
rate rate

National Transport Sector Master Plan

and Pre-feasibility study for the
1 ADF Transport 9/17/2013 6 12/2/2013 6/1/2015 2/14/2018 12/30/2019 4,089,000 3 3 93% 96% 37% 94%
railway connection between Angola
and Zambia
2 Fisheries Sector Support Project ADF Fisheries 5/15/2013 6.3 7/16/2009 10/29/2014 8/26/2015 12/31/2020 28,200,000 3 2 60% 80% 37% 41%
Cabinda Province Agriculture Value
3 ADB Agriculture 12/15/2017 1.7 1/16/2018 8/14/2018 11/16/2018 3/31/2022 101,070,000 2.5 2.5 2% 3% 2% 2%
Chains Development Project
Science and Technology Development
4 ADB Social 10/21/2015 4 3/15/2016 6/16/2016 5/9/2017 03/31/2021 90,000,000 2 2 1% 2% 1.6% 3%
Support Project
Institutional Capacity Building for Multi-
5 ADB 9/17/2014 5 12/18/2014 4/14/2015 5/11/2016 12/31/2021 24,852,000 2 2.5 5% 20% 3.6% 6%
Private Sector Development Sectoral
Institutional and Sustainability Support Water and
6 ADB 4/1/2015 5 6/24/2015 3/18/2016 7/27/2016 12/31/2021 123,770,000 3 3 17% 49.3% 6.18% 11%
to urban water supply Sanitation
7 Line of Credit to Banco BPC ADB Finance 10/21/2015 4 12/13/2016 11/10/2017 11/28/2017 12/13/2019 325,000,000 -- -- -- -- 37% 37%
Trade Finance Line of Credit to Banco
8 ADB Finance 2/28/2018 2 tbd tbd tbd 7/18/2021 100,000,000 -- -- -- -- 0% 0%
BAI
TOTAL 4 --- --- --- --- 796,981,000 2.6 2.5 -- -- 18% 19%
Renewable
9 Renewable Energy Program SEFA 7/11/2018 1.1 7/11/2018 7/11/2018 tbd 6/30/2020 1,000,000 USD -- -- 0% 20% 0% 0%
Energy

Delivery Dashboard – Project Performance: September 2019

2. Effective since 5-3 years and disbursement less than 50%
3. Less than 40% signed in Contracts after 1 year of effectiveness
4. Less than 50% signed in Contracts after 2 years of effectiveness
5. Less than 50% signed in Contracts after 2 years of effectiveness
6. Less than 50% signed in Contracts after 2 years of effectiveness
7. Disbursement closing date in 13-15 months and disbursement is less than 60%.
8. Approved but not signed for more than 365 days
9. Signed but not disbursed for more than 180 days

VI
 APPENDIX III: PROJECT SPECIFIC CHALLENGES AND PERFORMANCE TARGETS (AS OF SEPTEMBER 2019)

Completion Actions being or to be Performance target -

FLR Sep 2019 Ongoing Operations Reasons for flagship
date undertaken by the Bank turnaround

National Transport
12/30/2019 --- Close follow up n/a
Sector Master Plan
A substantial change in
• Lack to follow up/ monitoring by the EA;
Disbursement closing the amount disbursed is
• PIU weak procurement capacity; Project extension approved.
date in 13-15 months Fisheries Sector expected by Q1 2020
12/31/2020 • Lengthy procurement and disbursement processes in 2017/2018 with impact on the
and disbursement is Support Project related to the start-up of
speed of implementation; Implementation support
less than 60%. the road construction
works
Cabinda Province
Less than 40% signed • Specific designs are required for the construction works; A substantial change in
Agriculture Value
in Contracts after 1 3/31/2022 • Start up delays & contract with the firm/PIU not aligned with the execution needs Implementation support the amount committed is
Chains Development
year of effectiveness and involvement required to speed up implementation expected by Q2 2020
Project
Science and
Less than 50% signed • Start-up delays and challenges in putting in place a Project Coordinator and team. A A substantial change in
Technology
in Contracts after 2 03/31/2021 new coordinator was recruited in April 2018 and considerable progress was made in Project extension the amount committed is
Development Support
years of effectiveness the technical planning and specification of activities. expected by Q2 2020
Project
• The project is an institutional and capacity building with high value on goods and A substantial increase,
Less than 50% signed Institutional and
works coming at the tail end of the project; above 50%, in the amount
in Contracts after 2 Sustainability Support 12/31/2021 Project extension
• Lengthy disbursement process in 2017/2018 with impact on the speed of committed is expected by
years of effectiveness to urban water supply
implementation; Q1 2020,
• Start up delays due to changes in the management of one of the EA and
establishment of a PIU team;
Less than 50% signed Institutional Capacity A substantial change in
• Merging of two main Executive Agencies (IFE and INAPEM) to form one
in Contracts after 2 Building for Private 12/31/2021 Project extension approved the amount committed is
institution as a result of the merging of the Economy and Planning to form one
years of effectiveness Sector Development expected Q4 2019.
Ministry - need of restructuring of the project components to ensure alignment with
the Government Strategy
• Challenges in the disbursement of the second instalment, due to difficulties in Dialogue with the Government,
Disbursement closing securing a pipeline of bankable projects; as per legal advice:
in less than 12 • The Borrower is current with its payments to the Bank (interest, commitment fees (a) Key CPs for 2nd
months and Line of Credit to BPC 12/13/2019 etc.) and not in default in respect of any of its particular obligations under the LOC. If disbursement are not likely to --
disbursement is less the foregoing is confirmed, the Bank is obliged to keep the undisbursed amounts be satisfied by the closing date;
than 60% available in return of the payment of the relevant commitment fees until the Closing (b) Given the time lapsed, the
Date. Any unilateral cancellation on the part of the Bank may ultimately result not to magnitude of the loan amount

VII
 Completion Actions being or to be Performance target -
FLR Sep 2019 Ongoing Operations Reasons for flagship
date undertaken by the Bank turnaround

be founded and give rise to possible dispute, liability and reputational risk for the and the current implementation
Bank. status, the Bank will neither be
• Letter from the Government requesting cancellation is requested, as per legal in a position to waive the
department advice. aforementioned key CPs nor to
extend the closing date;
• Conditions renegotiated following a substantial change in the economic context/
Approved and
Line of Credit to environment. The variation in the commercial terms was submitted to the approval of
unsigned for over 365 7/18/2021 Signature & launching Q4 2019
Banco BAI the various committees. An addendum to that effect has been distributed for Board
days
approval on the 5th of December 2018 on LOTB.
Signed but not
Renewable Energy • Delays in the signature of the Agreement (both form the Bank and Government Implementation support / Flashlight turnaround in
disbursed for more 6/30/2020
Program side) and lack of experience of the EA to manage procurement processes. close follow up Q4-2019
than 180 days

VIII
 APPENDIX IV: SIMILAR PROJECTS FINANCED BY THE BANK AND DEVELOPMENT PARTNERS
Start End
Entity Sub-sector Intervention Brief Description Allocation Status
Date Date
Energy Sector
Namely including: electricity access scale up; transmission network
Transmission Efficiency and Under
expansion; revenue improvement program; technical assistance. tbd 2020 tbd
Distribution Expansion Program – preparation
Phase I (ESEEP I)
Renewable Angola Renewable Support the enabling environment for IPP/PPP projects towards the
AfDB USD 1 Mn Ongoing 2018 2020
Energy Energy Program improvement of bankability of the pipeline of RE projects.
Main results achieved include: (i) completion of unbundling of power
Power Sector Budget
utility companies through creation of new companies for generation,
Power Support Reform USD 1 Bn Completed 2014 2016
transmission and distribution; (ii) improved operational efficiency; and
Program (PSBSRP)
(iii) strengthened governance and value for money in the power sector.
Generation, Electricity Sector Comprises: Electricity access expansion and improvement of revenue
Under
World Bank Transmission Improvement Project collection; Electricity service improvement; Capacity Building for USD 250 M 2020 tbd
preparation
Distribution planning, operation and maintenance and for project management
Nationwide Power Development Master Plan (2018-2040) focused on
Generation, Power Sector Master transmission and generation development and including capacity
USD 2.5 Mn Completed 2017 2018
Transmission Plan building to MINEA, RNT, PRODEL and ENDE in the formulation and
update of the Master Plan.
JICA Power Sector Budget
Provided a Japanese ODA loan for the Power Sector Reform Support
Power Support Reform USD 200 Mn Completed 2014 2016
Program co-financed with AfDB.
Program (PSBSRP)
Renewable Solar panel and LED USD 0.033
Donation of 394 units to support UNDP and UNFPA interventions. Ongoing 2018 2019
Energy kit for Off-Grid Mn
Power transmission stability analysis, and optimal and alternative routes
for the 400 kV central-south transmission line and outstanding studies
USAID Power Sector Power Africa Completed 2018
(comprehensive economic and financial feasibility assessment and
ESIA).
Establishment of PIU units within RNT and ENDE Under
Power Sector Power Africa 2020
preparation
Financing portfolio for the Angolan private sector to invest in the areas
IFC Power Sector USD 34 Mn
of energy and agribusiness
Renewable Promoting sustainable Develop a private sector-led technology value chain for making off-grid USD 3.5 Mn
energy energy access for rural renewable energy technologies available to base-of-pyramid rural (GEF) Under
2019 2024
communities in South- households in isolated areas which will not be reached by the grid in the / USD 18 Mn preparation
Eastern Angola medium term. Focus on solar lanterns and solar home systems. (total)
UNDP Renewable Derisking Renewable Three studies analyzing the barriers to private sector investment in
energy Energy Investment renewable energy and recommending the most cost-effective political
and financial measures to be put in place to overcome or mitigate the Internal funds Ongoing 2018 2019
latter, (i) for utility-scale investments, (ii) for mini-grids, (iii) for off-
grid solar home systems solutions.

IX
 Start End
Entity Sub-sector Intervention Brief Description Allocation Status
Date Date
Conducting studies for the Restoration of the Biopio dam (15 MW) to
AFD Generation Biopio dam renovation EUR 0.5 Mn 2018
assess rehabilitation or rebuilding the dam.
Elaboration of regulations in the distribution, transmission and
commercialization of national energy. Drafts are currently under review
NORAD/NVE Power Sector Clean Energy 2018
and are expected to be submitted for the legislative process by the end
of the first semester of 2019.
PPA Model to Mitigate Technical Assistance in the Elaboration of Power Purchase Agreement
SE4ALL
Risks, Improve (PPA) for the for the development of Renewable Energy projects in
Africa Renewable
Business Environment Angola. 2018
(European Energy
for Private RE
Union)
Developers

X
 APPENDIX V: MAP OF PROJECT AREA
Map of the Country
Angola is located on the South Atlantic
Coast of West Africa between Namibia
and the Republic of Congo. It also is
bordered by the Democratic Republic of
the Congo and Zambia to the east.

Angola is divided into eighteen provinces:

Bengo; Benguela; Bié; Cabinda; Cuando
Cubango (Kuando-Kubango); Cuanza
Norte (Kwanza-Norte); Cuanza Sul
(Kwanza-Sul); Cunene; Huambo; Huíla;
Luanda; Lunda Norte; Lunda Sul; Malanje
(Malange); Moxico; Namibe; Uíge; Zaire.

Component 1: Transmission Expansion Programme

Detail:

Red lines are existing 400kV in the north

system indicating the existing 400kV
connection from Lauca to Huambo
(Belem do Dango) substation.

The green line is the proposed Central –

South 400kV interconnector, highlighting
the indicative route of 343km.

XI
: Component 2: Revenue Improvement Programme

Detail:

The second component of the programme

will support the roll-out and installation
of pre-paid meters in the country as a
whole, including its 18 provinces.

XII
 APPENDIX VI: GOVERNANCE AND IMPLEMENTATION ARRANGEMENTS

TRANSMISSION DISTRIBUTION

NATIONAL OVERSIGHT STEERING COMMITTEE

STRATEGIC
GUIDANCE

Chair: Minister of Energy

Co-Chair: CEO RNT, CEO ENDE,
Members: GEPE/MINEA, IRSEA, PRODEL, Ministry of
Environment, Ministry of Finance

MINEA MINFIN
SECTOR OVERSIGHT

GEPE

TECHNICAL
ASSISTANCE:
PROJECT
MANAGEGMENT
OFFICE

ENDE
PIU:
RNT Project Coordinator
Fiduciary, M & E,
PIU: E&S
Project Coordinator
Fiduciary, M & E,
E&S

MULTISECTOR
TECHNICAL ASSISTANCE
IMPLEMENTATION

TO PROJECT
MULTISECTOR MANAGEMENT FROM
TECHNICAL ASSISTANCE Deloitte & Touche
TO PROJECT Project Manager
MANAGEMENT FROM Fiduciairy, social, Gender,
Deloitte & Touche Meter engineer
Project Manager
Fiduciary, E &S, M &E
Power Engineer, Gender,
substation and transmission
engineers

XIII
APPENDIX VII: PMO STAFF COMPOSITION

XIV
 PIU STAFF COMPOSITION
PIU 1: RNT
REQUIRED PIU STAFF ALREADY YET TO BE COMMENT (to be recruited by?)
IN PLACE RECRUITED
1. Project Manager/Coordinator ✓
2. Procurement specialist X November 2019
3. Accountant X
4. Transmission engineer X
5. Substations engineers
6. Civil engineers
7. Environmental experts X 1 in Luanda, 1 in Huambo and 2 in
Lubango (refer to ESMP under
institutional arrangements)
8. Social/community liaison officer X 1 in Luanda, 1 in Huambo and 2 in
Lubango (refer to RAP under
institutional arrangements)
9. Technical assistance team from Deloitte & ✓ September 23rd 2019
Touche
PIU 2: ENDE
REQUIRED PIU STAFF ALREADY YET TO BE COMMENT (to be recruited by?)
IN PLACE RECRUITED
1) Project Manager/Coordinator ✓
2) Procurement specialist X
3) Accountant
4) Distribution metering engineer
5) Social/community liaison officer X
6) Environmental expert X
7) Social/community liaison officer
8) Technical assistance team from Deloitte & September 23rd 2019
Touche

XV
 APPENDIX VIII: EFFORTS TO IMPROVE GOVERNANCE

1 Introduction
For the first time in 133 years, Angola has a new penal code. On January 23, 2019, the National
Congress of Angola approved the new code which will replace the one put in place by the
Portuguese.
The new code proposes a structural change of the Angolan penal system and, particularly
regarding the fight against corruption, it promotes more transparency consistent with the global
trend to increase anticorruption enforcement. The main changes promoted by the new penal
code related to corruption and economic crimes and the implications for companies operating
in Angola.

2 New Provisions Related to Corruption and Economic Crimes

Since he took office in September 2017, President Lourenço has taken concrete actions to
promote economic stabilization, fight corruption, and attract foreign direct investment. In
March 2018, the new administration created a specialized anti-corruption (“SCI”) unit within
the executive branch tasked with preventing corruption-related crimes. Since then, there has
been a significant increase in the number of investigations related to economic crimes,
including cases involving ministers and public managers. As a result, some actions have been
taken towards the prosecution and charges of some prominent party and Government officials.
This has helped to improve the country’s governance and transparency perception by the
international community and increased the president’s popularity rating within the country.

3 Anti-Corruption Provisions of the New Code

Chapter IV of the code criminalizes “whoever offers, promises or gives” to public officials
(article 360) or to judges or arbitrators (article 362) an undue benefit, either patrimonial or not;
and the crimes of passive corruption, which penalizes the public officials (article 361) or judges
and arbitrators (article 363) who “ask for, request, or accept, for himself or for third parties”
any undue benefit or promise of benefit. Chapter IV also criminalizes other economic crimes,
such as “influence traffic” (article 368) and the embezzlement of public assets (article 364)

4 Anti-Money Laundering Provisions of the New Code

In an effort to protect the financial system and strengthen anti-money laundering measures, the
code creates new limits on economic conduct and punishes crimes against consumers. One of
the most significant changes is that article 470 limits cash transactions to prevent the circulation
of large amounts of money outside the formal financial system. The limitation is three million
kwanzas (8,522 euros) for citizens and five million kwanzas (14,285 euros) for companies.
Such limits were not covered by the previous penal code, nor by the Anti-Money Laundering
and Countering Financing of Terrorism Law (Law 34/11). The new provisions will allow
disciplining and punishing some practices that harm the financial market. These changes also
provide “greater security for the national currency” and assures more “fluidity to the national
financial system.” These changes may create a more secured environment for investors in
Angola, particularly in the banking sector.

5 Anti-corruption strategy

In addition, the Government has approved an anti-corruption strategy led by the General
Attorney Office and is preparing a new legislation on anti-money laundering. The strategy
includes strengthening the legal framework to fight corruption by producing new laws on assets
recovery, protection of victims, witnesses and collaborating defendants, and video surveillance.

XVI
The anticorruption and anti-money laundering provisions of the new penal code reinforce the
government’s commitment to far-reaching reforms. The approval of the new code is
undoubtedly a sign that the Angolan government will take a more aggressive approach to
combatting corruption and money laundering in the country. If fully implemented, the new
code will increase the legitimacy of public institutions and help level the playing field for the
private sector. The Government is also committed to provide more resources and strengthening
the entire judicial system. It is also committed to approve by the end of the year a new law on
anti-money laundering and combating and fighting terrorism. This law is expected to address
issues related to the politically exposed people (PEPs) and strengthening the financial sector
monitoring system in terms of origins and application of resources

XVII