nigeria power sector recovery performance based loan...

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NIGERIA

Power Sector Recovery Performance Based Loan (PBL)

Pre-Appraisal Mission

January 21-January 26, 2018

AIDE MEMOIRE

A. INTRODUCTION

1. A World Bank (WB) energy mission1 visited Abuja, Nigeria from January 21-January 26,

2018 for the pre-appraisal of the Performance Based Loan (PBL) in support of the Power Sector

Recovery Program (PSRP). The key objectives of the mission were to: (i) finalize the Results

Framework and the monitoring and evaluation arrangements; (ii) finalize the Disbursement Linked

Indicators and their verification protocols; (iii) finalize the funds flow arrangements for the PBL

credit proceeds; (iv) discuss the draft findings and recommendations of the Bank’s Environmental

and Social Systems Assessment (ESSA) during the consultations held during the mission; (v) agree

on the Program Action Plan to enhance the Program’s systems and performance; (vi) finalize the

scope of the technical assistance and the procurement plan for the TA component on that basis;

(vii) agree on the structure and capacity building needs of the Implementation Monitoring Team;

(viii) review the implementation status of “prior results” supported under the Program; (ix) review

the status of the communication campaign being designed and discuss the next steps for launching

the campaign nationally; (x) review the status of the procurement of the key consultancy services

for the Nigerian Electricity Regulatory Commission (NERC).

2. The mission met with the senior officials and technical staff of the Ministry of Power,

Works, and Housing (MoPWH); the Nigerian Electricity Regulatory Commission (NERC); the

Budget Office of the Federation; the Central Bank of Nigeria (CBN); the Nigerian Bulk Electricity

Trading Company (NBET); the Multi-Agency Financing Team; and the PSRP Implementation

Monitoring Team (IMT). The mission is thankful to the Nigerian counterparts for strong

cooperation. The list of agencies met is included in Annex 1. This Aide Memoire summarizes the

key findings and recommendations of the mission.

B. SUMMARY

3. Implementation of the PSRP has continued to progress since the World Bank’s last mission

in December 2017. Specifically, the Medium-Term Expenditure Framework (MTEF)/Fiscal

Strategy Paper (FSP) for 2018-2020, containing the Financing Plan, was approved by the National

Assembly in December 2017; progress has been made in defining governance arrangements for

institutionalizing the Least Cost Development Plan (LCDP); draft Guidelines have been developed

by NERC for the preparation of Performance Improvement Plans (PIPs) by the distribution

companies (DISCOs); and communication activities have further progressed. Several actions of

1 The mission comprised Ani Balabanyan (Lead Energy Specialist and Task Team Leader); Kyran O’Sullivan (Lead

Energy Specialist and Coordinator of the PSRP for the World Bank); Pedro Antmann (Lead Energy Specialist);

Jaeyoung Jin (Senior Energy Specialist); Muhammad Wakil (Energy Specialist); Yue Man Lee (Senior Economist);

Tu Chi Nguyen (Young Professional); Akinrinmola Akinyele (Senior Financial Management Specialist); Amos Abu

(Senior Environmental Specialist); Edda Mwakaselo Ivan Smith (Senior Social Development Specialist); Carolyn

Warren and Chinazo Ifeanyi-Nwaoha (Energy Consultants); Clara Alvarez (financial consultant); Andres Detomasi

and Mario Pizzaro (regulatory consultants); and Joy Medani and Leonard Wolloh (logistical support).

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the PSRP, that are also prior results of the PBL, have been delayed, as highlighted in the table of

Section C.

4. It is necessary that remaining actions (Section C) are implemented expeditiously so that

the World Bank can complete the appraisal of the PBL and invite the Federal Government of

Nigeria (FGN) to the negotiations. The most critical actions include the official sign-off on the

Financing Plan; the issuance of Guidelines for PIPs to initiate the Reset process; the adjustment of

DISCOs’ invoices payable to NBET for 2018; publication of the generation database, audit reports

of sector companies and key operational and financial data of the sector; provision of the NBET

comprehensive budget reflecting the Financing Plan; formalization of the two multi-agency teams

for updating of the Financing Plan and institutionalizing the LCDP; and publication of the public

PSRP document.

5. The PBL’s processing timeline is as follows:

Appraisal completion: February 20, 2018, subject to implementation of critical actions

Negotiations and Board Approval: April 30, 2018.

C. NEXT STEPS

6. The table below summarizes the actions that are necessary to progress further with the

implementation of the PSRP and to meet the prior results of the PBL (detailed further in Annex

2). Critical actions that need to be carried out by the completion of the PBL appraisal, are

highlighted in bold.

2 Key operational and financial data includes: (a) energy sent-out by each GENCO (in kWh), the resulting invoices to NBET, and

NBET payments against these invoices; (b) the electricity delivered to each DISCO (in kWh), the resulting DISCO bill (invoice

amount), and DISCO payment against these invoices; (c) scheduled electricity supply hours for service areas of by each DISCO;

and (d) amount of funding disbursed to cover the revenue shortfall of the sector.

Decisions and documents Responsible

Agency

Timeline

1. Obtain a letter from the MoPWH formally

designating the multi-agency financing team

responsible for preparing and updating the Financing

Plan, accompanied with a Terms of Reference to

outline responsibilities and timeline for the team

PSRP IMT December

22, 2017

February

6, 2018

2. Obtain a letter from the MoPWH establishing a

multi-agency team to institutionalize the LCDP,

accompanied with a Terms of Reference to outline

responsibilities and timeline for the team

PSRM IMT December

22, 2017

February

6, 2018

3. Publish a database of generation plants and

their contractual arrangements

NERC,

PSRP IMT

January

10, 2017

February

10, 2018

4. Prepare Project Procurement Strategy

Document for the TA component

REA PMU January

15, 2018

February

12, 2018

5. Publish the audited financial statements of

power sector companies (GENCOs and DISCOs) for

years 2015 and 2016, and key operational and financial

data2 for 2017

NERC,

PSRP IMT

January

22, 2017

February

15, 2018

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Actions carried forward from the previous Aide Memoire Previous

Deadline

New

Deadline

6. Publish the PSRP document and ensure that it

contains the full Financing Plan and its fiscal costs

FGN, PSRP

IMT

January 8,

2018

February

15, 2018

7. Provide to the World Bank revised Guidelines

(including its supplements) for preparation of DISCOs’

Performance Improvement Plans

NERC January

30, 2018

February

15, 2018

8. Share the comprehensive NBET 2018 budget

submitted to the Budget Office with the Bank, with the

explanation of the budget line items related to the

Financing Plan

NBET,

PSRP IMT

December

22, 2017

February

18, 2018

9. Issue an order for adjusting NBET invoices to

each of the eleven DISCOs to allow DISCOs retaining

their revenue requirement and paying service

providers their revenue requirement

NERC,

NBET

December

20, 2018

February

20, 2018

10. Appoint the Boards of NBET and TCN FGN January

22, 2018

February

28, 2018

11. Activate the Vesting Contracts of DISCOs to

the adjusted invoice amount

NBET January

15, 2018

February

28, 2018

New actions

12. Review Program Action Plan, DLIs, and Results

Framework (Annexes 2, 3 and 4)

PSRP IMT February 4, 2018

13. Assess 2018 revenue requirement of DISCOs

based on existing MYTO and TCN and share resulting

calculations and underlying model with the World

Bank

NERC February 8, 2018

14. Publish a communique about the launching of

the Reset that will outline the immediate next steps of

the Reset

NERC,

PSRP IMT

February 8, 2018

15. Document detailed invoicing and settlement

procedures for CBN and NBET and provide to the

Bank

PSRP IMT,

CBN, NBET

February 10, 2018

16. NERC to obtain the list of Federal, State, and local

MDAs served by each DISCO (from DISCOs)


17. Obtain from respective branches of Government

(Federal, State, and local) the list of disconnectable and

non-disconnectable MDAs

NERC,

Federal,

State, and

local

Governments

February 15, 2018

18. Receive sign-off on the latest version of the

Financing Plan by the Minister of Finance, Director

General of the Budget Office, and the PSRP

Coordinator

PSRP IMT,

DG Budget,

MOF

February 20, 2018

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D. DESCRIPTION OF KEY ISSUES

Financing Plan

7. As indicated by its designation as a Global Disbursement Linked Indicator (DLI), the

Financing Plan is a critical component of the PBL. The full execution of the Financing Plan is

necessary to ensure that sector companies receive their required revenues until tariffs reach cost

recovery level and that historical deficits are eliminated, so as to enforce key contractual and

regulatory obligations of sector companies.

8. The multi-agency financing team has finalized the Financing Plan, including the base case

Plan and contingency plans for risk scenarios. The finalized Financing Plan includes three sources

of financing: the Payment Assurance Facility financed by the Central Bank of Nigeria (36 percent

of the total financing needs); the proceeds of the PBL (16 percent) and the annual budget

appropriations of the FGN (48 percent). The sales proceeds of the Government-owned NIPP plants

are no longer earmarked for the Financing Plan. Instead, the historical shortfall for 2015-16 will

be settled in three installments in 2018, 2019 and 2020.

New actions

19. Develop funds flow protocol that applies to all

sources of financing in the Financing Plan

PSRP IMT

(WB

support)

February 20, 2018

20. Complete the shortlist for Reset support and issue

Request for Proposal to the shortlisted companies


21. Amend CBN Payment Assurance Facility

agreement with NBET to allow for disbursement of funds

identified in the Financing Plan through a single CBN

collection account

CBN, NBET February 20, 2018

22. Issue the draft Guidelines, after discussing it

with each of DISCOs and with CSOs in separate

meetings, for public consultations and public hearing


23. Finalize the governance arrangements for

institutionalizing the Least Cost Development Plan

MoPWH,

multi-agency

team, PSRP

IMT

February 28, 2018

24. Define a mechanism to clean-up the tariff shortfall

for 2015, 2016 and 2017 from DISCOs’ Balance Sheets

(payables to NBET)


25. Present to the Bank the (i) draft mechanism by

which the non-disconnectable MDAs (Federal, State and

local) will make direct payments to DISCOs from their

respective budgets to cover electricity bills

NERC March 1, 2018

26. Approve the funds flow protocol MOF, CBN,

NBET

March 1, 2018

27. Issue an Order (including the finalized Guidelines)

for preparation of tariff applications by DISCOs and TCN

NERC March 15, 2018

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9. Given the importance of Federal Government budget appropriations to the Financing Plan,

it is important to mitigate the risk associated with temporal fluctuations in their availability. Any

delay in the availability of this funding could result in late payments from NBET to GENCOs and

undermine the implementation of the overall PSRP and PBL. To mitigate this risk, it was agreed

with the Director General (DG) of the Budget Office that NBET can receive the FGN budgetary

contributions through quarterly advances once the FGN budget is approved to reduce the risk of

revenue shortfalls in the budget.

10. For the purposes of the achievement of Global DLI 2 of the PBL, the multi-agency

financing team and the World Bank agreed that the Financing Plan projections and the execution

of the Financing Plan will be determined on an accrual (rather than cash) basis. The deadline for

settling the shortfall of each year will be April 1 of the following year.

11. Consistent with the agreement reached with the DG Budget, the Financing Plan - the use

of funds/expenditures and the sources of funds/financing - should be on-budget. To that end, the

Financing Plan should be fully reflected in NBET’s comprehensive budget for 2018, which has

not yet been submitted to the Budget Office. NBET will submit a first draft of its comprehensive

budget to the Budget Office for review by February 5.

12. The key steps that should be completed by February 20, include: (i) the detailed Financing

Plan signed-off by the Minister of Finance, DG Budget, and PSRP Coordinator; (ii) sharing the

comprehensive NBET budget submitted to the Budget Office with the World Bank, fully reflecting

the inflows and outflows of the Financing Plan for 2018; and (iii) inclusion of the Financing Plan

summary in the public version of the PSRP document.

Critical Actions to Initiate the Reset

13. The implementation of the Reset for the eleven DISCOs and the transmission company

(TCN) is another critical action of the PBL; it is also designated as a Global DLI. To launch the

Reset, NERC should initiate a number of steps, as detailed below.

14. Performance Improvement Plans, which will be prepared by DISCOs on the basis of

detailed Guidelines provided by NERC, are an important component of the Reset. To support

NERC in the finalization of these Guidelines by supplementing some of its components, the World

Bank hired two international consultants with extensive experience in this area. The supplemental

contributions will focus on the following: implementation of Management Information Systems;

implementation of network and customer infrastructure mapping, supported by GIS; massive

phased deployment of consumption meters following the concept of “market or consumer

segmentation”; implementation of arrangements to optimize billing and collection and customer

service using the functionalities of the Commercial Management Systems; identification of high-

priority investments in network rehabilitation and upgrade, as well as other priority investments

needed to improve efficiency in operations in electricity supply. A complete list of measures is

included in Annex 5.

15. The launching and implementation of all the Reset steps should be carried out within a

framework of extensive consultation and full transparency. To that end, NERC should

publish a communique about its intentions of implementing the Reset and outline the immediate

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next steps it will undertake with launching of the Reset. Once the revised Guidelines, incorporating

the supplements are ready, NERC will hold separate meetings with each DISCO and with the civil

society organizations (CSOs) active in the service area of each DISCO, to discuss the draft

Guidelines (during the month of February). Following these meetings, NERC will publish the draft

Guidelines on its website for public consultations and subsequently hold a public hearing to discuss

the Guidelines. NERC will finalize the Guidelines after the public hearing and issue it as part of

the Order for DISCOs and TCN to prepare their tariff applications for the new multi-year tariff

period (mid-March).

16. Another critical step in launching the Reset and partially-activating contracts is the

adjustment of NBET’s invoices to DISCOs, such that DISCOs retain their revenue requirement

and pay to service providers their respective revenue requirements. NERC is finalizing discussions

with Bureau of Public Enterprise, NBET and DISCOs on the issue of invoice adjustment. Vesting

Contracts of DISCOs will be activated (Letters of Credit posted) based on the adjusted invoice

amounts.

17. To facilitate DISCOs’ access to financing from commercial banks and enforce their

Vesting Contracts, the payables related to the historical shortfall (2015-2017), which are fully

budgeted in the Financing Plan, should be cleaned up from their balance sheets. Given the

accounting complexities associated with this process, the World Bank team offered to provide

NERC with technical assistance required for identifying the most appropriate and definitive

solution for addressing this issue.

18. As part of the Program Preparation Advance that the World Bank has recently extended to

the Government, NERC will receive extensive technical assistance in carrying out the Reset. The

Expressions of Interest for the consultancy service to support NERC in the twelve Reset processes

(eleven DISCOs and TCN) have been issued. NERC will begin preparing the Request for

Proposals for the Reset so that the Proposals can be approved by the World Bank by the time the

short list of companies is completed (February 20).

19. The actions that should be completed for the successful launch of the Reset by March 15,

include: (i) NERC issuance of communique about its intention of carrying out the Reset; (ii) NERC

assessment of the 2018 revenue requirement of DISCOs and TCN, and provision of the resulting

calculations and underlying model to the World Bank; (iii) NERC issuance of an instruction

(Order) to NBET for adjustment of DISCOs’ invoices; (iv) NERC revision of the Guidelines for

PIPs by supplementing the existing draft with details; (v) NERC holding of separate discussions

with DISCOs and CSOs on the draft Guidelines; (vi) NBET activation of Vesting Contracts for

the adjusted invoice amount; (vii) NERC publication of the draft Guidelines for public

consultations and conducting of a public hearing; and (viii) NERC issuance of an Order (including

the Guideline) to DISCOs and TCN to prepare their tariff application for the new tariff period.

Funds Flow Arrangement

20. A single Funds Flow Arrangement will be applied to all three sources of financing

identified for the Financing Plan: the CBN PAF, the proceeds of the PBL and the FGN budgetary

contributions. All three funding sources will be accumulated into a single account at the CBN. On

a monthly basis, the CBN will transfer the portion of GENCOs’ invoices that should be settled

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from the Financing Plan to NBET’s account in the CBN. The share of the payment that should be

met by each financing source is currently under discussion. However, cumulative disbursements

from the PBL at any point in time may not exceed sixteen percent (PBL’s pro-rate share in the

Financing Plan). To enable the execution of this arrangement, the PAF Agreement between the

CBN and NBET must be amended. A more detailed description of the draft Funds Flow

Arrangement is in Annex 6.

21. To finalize and approve the Funds Flow Arrangement, the following steps should be

completed by March 1: (i) Implementation Monitoring Team (IMT) documentation of the detailed

invoicing and settlement procedures for CBN and NBET; (ii) with the support of the World Bank,

IMT development of a funds flow protocol that applies to all sources of financing in the Financing

Plan; (iii) NBET amendment of the PAF Agreement with the CBN; (iv) Ministry of Finance,

NBET and CBN approval of the funds flow protocol.

Sustainable Mechanism for Timely MDA Payment

22. NERC will apply a differentiated approach in ensuring timely payments of Ministries,

Departments and Agencies (MDAs). For the majority of the MDAs, whose electricity supply may

be disconnected, NERC will issue a requirement (as part of the Guidelines for PIPs) for the

installation of prepaid meters, starting with MDAs with larger consumption. For MDAs that

require an uninterruptible electricity supply, NERC will work with the different branches of

Government (Federal, State and local) to establish a sustainable mechanism for ensuring timely

payment of electricity bills.

23. The following steps should be completed by March 1: (i) NERC presentation of list of the

MDAs supplied by each DISCO (and whether they are branches of the Federal, State or local

government); (ii) Government identification of the MDAs whose electricity supply cannot be

disconnected; (iii) NERC presentation to the Bank of the draft directive to DISCOs for installation

of prepaid meters at MDAs that can be disconnected; and (iv) NERC development of a draft

mechanism for ensuring electricity bill payment by the respective branch of Government (Federal,

State and local).

ESSA Consultations

24. The consultation for the Environmental and Social Systems Assessment (ESSA) was held

on Thursday, January 25th at 2pm at the NERC Headquarters in Abuja. The consultation was

attended by approximately sixty individuals, representing a wide range of organizations, including

DISCOs, GENCOs, gas companies, development finance institutions, and non-governmental

organizations. The consultation was structured in two parts: (i) discussion of the Government

program (PSRP) and World Bank PBL, and (ii) review of the ESSA.

25. Important aspects of the discussion of the World Bank PBL include:

It was stressed that the PBL requires no infrastructure investment, and that it instead aims

to improve the sector’s financial viability, the enforcement of contracts and regulations,

and transparency and accountability.

In numerous questions and comments, sector companies (gas companies, GENCOs, and

DISCOs) highlighted the current dysfunction in the sector as a result of non-payment and

requested expeditious World Bank support in improving sector conditions.

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Additional questions pertained to gas supply contracts (and enforcement of contracts more

generally); the utilization of the Program-for Results-instrument elsewhere in Africa;

competitive procurement procedures; and off-grid electrification (though investments in

electrification are not supported by the PBL).

26. Noteworthy aspects of the discussion of the Environmental and Social Systems Assessment

included:

The ESSA revealed that, in the areas of both environmental and social protection, Nigerian

regulations and laws are well-developed and consistent with international good standards.

However, enforcement is limited.

The enhance environmental and social performance of the PBL, the Proposed Action Plan

of the ESSA includes: strengthening the mandate of the gender focal point in the Ministry

of Power; building on the current system for stakeholder and citizen engagement;

strengthening the capacity and representatives of consumers and organizations and

developing an “outreach” program/strategy for these groups; formulating guidelines and

manuals for mainstreaming stakeholder engagement and environmental, health and safety

issues into the implementation of the Program; and conducting annual monitoring of

progress on environmental and social issues, particularly regarding the compliance of

Program activities.

Questions pertained to the implications of future tariff adjustment and existing protections

for the poor; capacity building for sector institutions; and protection of the environment. It

was frequently reiterated that the achievement of the Program Development Objective

requires no infrastructure investment; as such, environmental impacts are expected to be

negligible.

27. The Bank team will finalize the ESSA based on the useful feedback received during the

consultation and disclose it by the completion of the PBL appraisal.

Communications

28. The mission had several meetings with the PSRP communication team, as well as a creative

presentation by the communications firm (Noah’s Ark). The PSRP IMT and the World Bank team

agreed that some of the creative materials produced so far did not reflect the messaging strategy

or the findings from the national survey. The remainder of the consulting firm’s contract will be

implemented under the direct supervision of the firm’s CEO and consistent with the campaign

concepts as agreed in November. The firm prepared a 1-page action plan explaining how it intends

to execute the campaign moving forward.

29. A key priority for the PSRP communication team in the next month should be face-to-face

engagement with the key stakeholders of the sector, starting with DISCOs and GENCOs, as the

market Reset is being launched. To that end, the communications team will closely work with

NERC that has a leading role in the Reset, as well as other relevant agencies (e.g. NBET and BPE).

An immediate support will be provided to NERC for the preparation of a communique about its

intentions of implementing the Reset as detailed earlier. The communications team will also give

priority to supporting NERC in organizing discussions with the sector companies, public

consultations and public hearings that will be part of the Reset launching and implementation.

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Disclosure

30. The bank and Ministry of Finance confirm their understanding and agreement that this

aide-memoire will be disclosed in accordance with the World Bank Policy.

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Annex 1: List of Ministries and Agencies Met

Agency Key Attendees

PSRP Implementation

Monitoring Team (IMT)

- Kenny Anuwe

- Simeon Atakulu

- Awele Okigbo

- Abubakar Musa Budget Office - Ben Akabueze

- Alfred Okoh

Nigerian Electricity

Regulatory Commission

(NERC)

- Vice Chairman Sanusi Garba

- Comm. Oseni Musiliu

- Comm. Frank Okafor

- Comm. Moses Arigu

- Comm. Nathan Shatti

Technical representatives from:

- Engineering, Performance and Monitoring Division

- Market Competition and Rates

- Planning, Research and Strategy

- Communications and Public Relations

Federal Ministry of

Finance

- Aliyu Ahmed

- Abdulfatah Abdulsalam

- Stephen Ohaeri

- Tolulope Jaji

PSRP Finance Team Representatives from:

- Central Bank of Nigeria (CBN)

- Nigerian Bulk Electricity Trading Company (NBET)

- Nigerian Electricity Regulatory Commission (NERC)

- Budget Office of the Federation (BOF)

- Debt Management Office (DMO)

- PSRP IMT Nigerian Bulk Electricity

Trading Company

(NBET)

- Ibrahim S. Otoru

- Yesufu Alonge

- Nnaemeka Ewelukwa

- Abba Aliyu

PSRP Communication

Team

- Awele Okigbo

- Funlola Osinupebi

- Noah’s Ark

ESSA Consultation Representatives from:

- Civil Service Organizations (CSOs)

- Generating Companies (Gencos)

- Distribution Companies (Discos)

- Ministry of Power, Works and Housing (MoPWH)

- Ministry of Environment (MoE)

- Nigerian National Petroleum Corporation (NNPC)

- Nigerian Electricity Management Service Agency (NEMSA)

- Ministry of Finance (MoF)

- Ministry of Women Affairs and Social Development (MoWASD)

- Nigerian Bulk Electricity Trading Company (NBET)

- Transmission Company of Nigeria (TCN)

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Annex 2: Disbursement Linked Indicators

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)

Indicative timeline for DLI achievement

2018 (completion of

Reset) 2019 2020 2021

Global DLI 1: TCN and DISCOs

receive their

revenue

requirement based

on MYTO major

review

The

revenue

require-

ments of

TCN and

DISCOs

based on

the existing

MYTO do

not reflect

current

conditions

of the

sector

G1.1 NERC

determines revenue

requirements of

DISCOs and TCN

for 2018 based on

the existing MYTO

G1.2 NERC

approves: (i)

MYTO

methodology for

setting revenue

requirement of

DISCOs and

methodology for

setting revenue

requirement of

TCN, preceded by

public hearings on

each; (ii) new

MYTO order

(following a MYTO

major review) for

each DISCO and for

TCN preceded by a

public consultation

process (including

at least one public

hearing) for each

company, and resets

the revenue

requirement of

DISCOs and TCN

based on pass-

through of

generation costs

(DLI 1); new

performance targets

of DISCOs; and

funding

requirements of

G1.3 Revenue

requirements for

TCN and DISCOs

are set based on the

effective MYTO

order and automatic

adjustments, and the

full pass-through of

the generation costs

consistent with

contracts’ activation

arrangements for

GENCOs (DLI 1)

G1.4 Revenue

requirements for

TCN and DISCOs


new MYTO and

automatic




consistent with


arrangements for

GENCOs (DLI 1)

G1.5 Revenue

requirements for

TCN and DISCOs


new MYTO and

automatic




consistent with


arrangements for

GENCOs (DLI 1)

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Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

DISCOs’

Performance

Improvement Plans

(DLI 3)

The Reset should

be completed for

TCN and all

DISCOs by

December 2019. All

disbursements of

2019-2021

(regardless of

achievement of

other DLIs) will be

cancelled if this

action is not met.

This action is a

regular DLI and

does not affect

other DLIs

This action is a

regular DLI and

does not affect other

DLIs

This action is a

regular DLI and

does not affect

other DLIs

Allocated amount: 180 million 18% 10 million 120 million (10

million for each

DISCO and 10

million for TCN)

20 million 15 million 15 million

Global DLI 2: A

credible and

fiscally

transparent

Financing Plan to

fully cover the

tariff shortfall of

the sector and

settle the

historical shortfall

is prepared and

executed

Revenue

shortfall of

the sector is

not funded

G2.1 (i) FGN

issues a letter

formally

designating the

multi-agency

financing team

responsible for

preparing and

updating the

Financing Plan;

(ii) the multi-

agency financing

team finalizes and

officially shares the

Financing Plan

G2.2 (i) The multi-

agency financing

team updates the

Financing Plan on a

quarterly basis; (ii)

the 2019 FGN

annual budget

submitted to the

NASS includes the

additional FGN

budgetary

contribution in 2019

needed as specified

in the up-to-date

Financing Plan;

G2.3 (i) The multi-

agency financing

team updates the

Financing Plan on a


the 2020 FGN

annual budget

submitted to the

NASS includes the

additional FGN

budgetary


needed as specified

in the up-to-date

Financing Plan;

G2.4 (i) The multi-

agency financing

team updates the

Financing Plan on a


the 2021 FGN

annual budget

submitted to the

NASS includes the

additional FGN

budgetary


needed as specified

in the up-to-date

Financing Plan; (iii)

G2.5 (i) The multi-

agency financing

team updates the

Financing Plan on a


the PSRP document

and the FSP/MTEF

2022-2024 include

the up-to-date

Financing Plan and

its full fiscal costs;

and (iii) 100 percent

of the 2015-2021

tariff shortfall and

CBN debt service

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Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

with associated

assessments; (iii)

the 2018 FGN

annual budget

submitted to the

NASS includes the

additional FGN

budgetary

contribution

needed as specified

in the Financing

Plan; (iv) the PSRP

document, and the

FSP/MTEF 2018-

2020 include the

full Financing Plan

and its fiscal costs;

and (v) at least 80

percent of the 2017

tariff shortfall

indicated in the

Financing Plan is

funded

(iii) the PSRP

document and the

FSP/MTEF 2019-

2021 include the up-

to-date Financing

Plan and its full

fiscal cost; and (iv)

a percentage of the

2018 tariff shortfall

and CBN debt

service costs

indicated in the up-

to-date Financing

Plan is funded by

April 1, 2019

Basic target: 90

percent is funded

Stretch target: 100

percent is funded

Disbursements of

2018 (regardless of

achievement of

other DLIs) will be

put on hold until

the basic target of

this DLI is met

(iii) the PSRP

document and the

FSP/MTEF 2020-

2022 include the up-

to-date Financing

Plan and its full

fiscal costs; and (iv)

a percentage of the

2019 tariff shortfall

and CBN debt

service costs


to-date Financing

Plan is funded by

April 1, 2020

Basic target: 90

percent is funded

Stretch target: 100

percent is funded

Disbursements of

2019 (regardless of

achievement of

other DLIs) will be

put on hold until

the basic target of

this DLI is met

the PSRP document

and the FSP/MTEF

2021-2023 include

the up-to-date

Financing Plan and

its full fiscal costs;

(iv) 50 percent of

the historical

shortfall is funded;

and (v) a percentage

of the 2020 shortfall

and CBN debt

service costs


to-date Financing

Plan is funded by

April 1, 2021

Basic target: 90

percent is funded

Stretch target: 100

percent is funded

Disbursements of

2020 (regardless of

achievement of

other DLIs) will be

put on hold until

the basic target of

this DLI is met

costs indicated in

the up-to-date

Financing Plan are

funded

Disbursements of

2021 (regardless of

achievement of

other DLIs) will be

put on hold until

this DLI is met

Allocated amount: 160 million 16%

40 million 20 million (basic

target)

20 million (basic

target)

20 million (basic

target)

30 million + up to

30 million rollover

from previous years

if only basic target

is met in those years

30 million (stretch

target)

30 million (stretch

target)

30 million (stretch

target)

14

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

DLI 1:

Contractual

arrangements

ensure availability

of generation

capacity needed to

meet demand

There is no

operational

plan, and

contractual

arrange-

ments

(GSAs/PP

As) do not

ensure

availability

of

generation

capacity

1.1 NERC creates a

public database of

generation plants

and their

contractual

arrangements

1.2 (i) System

Operator prepares

an operational plan

of generation;

(ii) NERC issues an

order outlining the

milestones for

increasing

activation of

GSAs/PPAs and

refining contractual

arrangements for

NIPP plants; and

(iii) GENCOs’

invoices to NBET

are adjusted

consistent with the

NERC order

1.3 (i) System

Operator updates

the operational plan;

and (ii) GENCOs’

invoices to NBET

are adjusted

consistent with the

NERC order

1.4 (i) System

Operator updates the

operational plan;

and (ii) GENCOs’

invoices to NBET

are based on full

enforcement of

contractual

arrangements

1.5 (i) System

Operator updates the

operational plan;

and (ii) GENCOs’

invoices to NBET

are based on full

enforcement of

contractual

arrangements

Allocated amount: 50 million 5% 10 million 10 million 10 million 10 million 10 million

DLI 2:

Generation

capacity is

procured

competitively

following an

updated LCDP

Generation

investment

planning

framework

is

incomplete

and

generation

capacity is

procured

based on

unsolicited

proposals

2.1 (i) FGN issues

a letter establishing

a multi-agency

team to prepare the

policy for

institutionalizing

the LCDP; and (ii)

the Ministry of

Power designates a

Ministry/agency

responsible for

preparation of the

LCDP and

establishes

governance

arrangements for

2.2 The Ministry of

Power approves the

LCDP prepared by

the designated

Ministry/agency

2.3 (i) The

designated

Ministry/agency

updates the LCDP;

and (ii) NERC and

NBET ensure that

new generation

capacity is procured

competitively and

consistent with the

LCDP

2.4 (i) The

designated

Ministry/agency

updates the LCDP;

and (ii) NERC and

NBET ensure that

new generation


competitively and

consistent with the

LCDP

2.5 (i) The

designated

Ministry/agency

updates the LCDP;

and (ii) NERC and

NBET ensure that

new generation


competitively and

consistent with the

LCDP

15

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

LCDP

implementation


DLI 3:

Implementation of

Performance

Improvement

Plans (PIPs) for

DISCOs is

enforced

Lack of

regulatory

oversight

over

DISCOs’

performan-

ce and

associated

investments

3.1 NERC issues

detailed guidelines

for preparation and

implementation of

DISCOs’ PIPs

3.2 In consultation

with DISCOs,

NERC approves: (i)

PIPs for DISCOs;

and (ii) performance

standards (baseline

and targets)

3.3 NERC monitors

and enforces

implementation of

PIPs and

performance

standards

3.4 NERC monitors

and enforces

implementation of

PIPs and

performance

standards

3.5 NERC monitors

and enforces

implementation of

PIPs and

performance

standards

Allocated amount: 55 million 5.5% 15 million 10 million 10 million 10 million 10 million

DLI 4:

End-user tariffs

are adjusted to

fully recover

revenue

requirement of the

sector as

determined by the

new MYTO

End-user

tariffs do

not recover

full revenue

require-

ment of the

sector

4.1 End user

electricity tariffs

recover at least 75

percent of the

sector’s revenue

requirement as

determined by the

new MYTO and

MYTO minor

reviews

4.2 End-user

electricity tariffs

recover 90 percent

of the sector’s

revenue requirement

as determined by the

new MYTO and

MYTO minor

reviews

4.3 End-user

electricity tariffs

recover 100 percent

of the sector’s

revenue requirement

as determined by the

new MYTO and

MYTO minor

reviews

Allocated amount: 140 million 14% 50 million 50 million 40 million

DLI 5:

Sustainable

mechanism to

ensure timely

payment of

MDAs’ electricity

bills is in place

and implemented

Lack of a

mechanism

to enforce

payments

of

electricity

bills from

MDAs

5.1 NERC issues a

directive specifying

the mechanism to

ensure timely

payment of

electricity bills by

all MDAs (Federal,

State, and local)

and its

implementation

timetable

5.2 20 percent of

MDAs (with largest

consumption) have

the payment

mechanism

established

5.3 60 percent of

MDAs (with largest

consumption) have

the payment

mechanism

established

5.4 90 percent of

MDAs (with largest

consumption) the

payment mechanism

established

16

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

Allocated amount: 40 million 4% 10 million 10 million 10 million 10 million

DLI 6: GENCOs

receive payments

in a timely

manner

GENCOs

do not

receive

sufficient

payment

for their

invoices,

resulting in

accumulate

d arrears

6.1 MOF approves

a transparent and

rule-based funds

flow mechanism

for the Financing

Plan

6.2 NBET payments

to GENCOs cover a

percentage of

GENCOs’

aggregate invoices

annually

Basic target: 80

percent

Stretch target: 100

percent

6.3 NBET payments

to GENCOs cover a

percentage of

GENCOs’

aggregate invoices

annually

Basic target: 80

percent

Stretch target: 100

percent

6.4 NBET payments

to GENCOs cover a

percentage of

GENCOs’ aggregate

invoices annually

Basic target: 80

percent

Stretch target: 100

percent

6.5 NBET payments

to GENCOs cover a

percentage of

GENCOs’ aggregate

invoices annually

Basic target: 80

percent

Stretch target: 100

percent

Allocated amount: 57 million

(basic target)

5.7% 25 million

8 million (basic

target) and 0.1

million for each

percentage of

invoice amount

settled above 80

percent

8 million (basic

target) and 0.1

million for each

percentage of

invoice amount

settled above 80

percent

8 million (basic

target) and 0.1

million for each

percentage of

invoice amount

settled above 80

percent

8 million (basic

target) and 0.1

million for each

percentage of

invoice amount

settled above 80

percent

65 million

(stretch

target)

6.5% 10 million (stretch

target)

10 million (stretch

target) and a

proportion of 10

million rollover

from previous year

corresponding to the

percentage of

invoice amount

settled (with a

minimum of 80

percent)

10 million (stretch

target) and a

proportion of 20

million rollover

from 2 previous

years corresponding

to the percentage of

invoice amount

settled (with a

minimum of 80

percent each year)

10 million (stretch

target) and a

proportion of 30

million rollover

from 3 previous

years corresponding


invoice amount

settled (with a

minimum of 80

percent each year)

DLI 7: Payment

discipline of

invoices for

energy purchases

Arrears of

US$420

billion

accumulate

d to NBET

in 2016 and

7.1 (i) NERC in

agreement with

NBET and

DISCOs issues an

order on how

NBET invoices to

7.2 NERC instructs

NBET to adjust the

2018 invoices of

DISCOs to reflect

the full revenue

requirement of

7.3 A percentage of

NBET’s annual

invoices to DISCOs

are settled; or

evidence that NBET

has withdrawn on

7.4 A percentage of

NBET’s annual

invoices to DISCOs

are settled; or

evidence that NBET

has withdrawn on

7.5 A percentage of

NBET’s annual

invoices to DISCOs

are settled; or

evidence that NBET

has withdrawn on

17

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

is enforced on

DISCOs

Vesting

Contracts

are not

enforced

DISCOs should be

adjusted (until the

Reset) to allow

DISCOs retain

their revenue

requirement; (ii)

Vesting Contracts

(to the extent of

invoice amount)

are partially

activated and all

LCs are posted

DISCOs based on

the MYTO major

review and to fully

activate the Vesting

Contracts

LCs and NERC, if

required, has

undertaken

disciplinary action

Basic target: 80%

Stretch target:

100%

LCs and NERC, if

required, has

undertaken

disciplinary action

Basic target: 80%

Stretch target:

100%

LCs and NERC, if

required, has

undertaken

disciplinary action

Basic target: 80%

Stretch target:

100%

Allocated amount: 103 million

(basic target)

10% 40 million

15 million 16 million (basic

target) and 0.2

million for each

percentage of

invoice amount

settled above 80

percent

16 million (basic

target) and 0.2

million for each

percentage of

invoice amount

settled above 80

percent

16 million (basic

target) and 0.2

million for each

percentage of

invoice amount

settled above 80

percent

115 million

(stretch

target)

11.5% 20 million (stretch

target)

20 million (stretch

target) and a

proportion of 20

million rolled-over

from previous year

corresponding to the

percentage of

invoice amount

settled (with a

minimum of 80

percent each year)

20 million (stretch

target) and a

proportion of 40

million rolled-over

from 2 previous

years corresponding


invoice amount

settled (with a

minimum of 80

percent each year)

DLI 8: Corporate

governance of

sector agencies

(NBET and TCN)

is strengthened

Board

members of

sector

agencies

are not

appointed

8.1 FGN appoints

the Boards of

NBET and TCN

8.2 The Boards of

NBET and TCN are

functional per

NERC’s Code of

Corporate

Governance

8.3 The Boards of

NBET and TCN are

functional per

NERC’s Code of

Corporate

Governance

8.4 The Boards of

NBET and TCN are

functional per

NERC’s Code of

Corporate

Governance

8.5 The Boards of

NBET and TCN are

functional per

NERC’s Code of

Corporate

Governance

18

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

Guidelines; and

NERC publishes

annual report on its

compliance

monitoring of

NBET’s, TCN’s and

DISCOs’ Boards of

Directors with the

Guidelines

Guidelines; and

NERC publishes


compliance

monitoring of


DISCOs’ Boards of

Directors with the

Guidelines

Guidelines; and

NERC publishes


compliance

monitoring of


DISCOs’ Boards of

Directors with the

Guidelines

Guidelines; and

NERC publishes


compliance

monitoring of


DISCOs’ Boards of

Directors with the

Guidelines


DLI 9: Financial

and operational

transparency of

the sector is

improved

Lack of

transparen-

cy about

financial

situation

and

operational

performan-

ce of power

sector

companies

9.1 NERC

publishes on its

website: (i) 2015

and 2016 audited

financial

statements of the

power sector

companies

(GENCOs and

DISCOs); and (ii)

key operational and

financial data of

2017

9.2 NERC publishes

on its website: (i)

2017 audited

financial statements

of GENCOs and

DISCOs; (ii) 2015-

17 audited financial

statements of NBET

and TCN; and (iii)

key operational and

financial data of

2018 on a quarterly

basis

9.3 NERC publishes

on its website: (i)

2018 audited


of power sector

companies

(GENCOs,

DISCOs, TCN and

NBET); and (ii) key

operational and

financial data of

2019 on a quarterly

basis

9.4 NERC publishes

on its website: (i)

2019 audited


of power sector

companies

(GENCOs, DISCOs,

TCN and NBET)

and (ii) key

operational and

financial data of

2020 on a quarterly

basis

9.5 NERC publishes

on its website: (i)

2020 audited


of power sector

companies

(GENCOs, DISCOs,

TCN and NBET);

and (ii) key

operational and

financial data of

2021 on a quarterly

basis

Allocated amount: 55 million 5.5% 15 million 10 million 10 million 10 million 10 million

DLI 10:

Stakeholder

engagement and

communication

about PSRP are

improved

There is

limited

knowledge

about the

PSRP

10.1 PSRP IMT: (i)

develops a draft

common script

about the PSRP for

key stakeholders to

provide consistent

messaging about

technical issues

and agrees on the

script with the key

10.2 NERC holds

consultations and

outreach activities

as part of the

MYTO major

review, including:

(i) bimonthly

consultations with

DISCOs on the

revenue

10.3 PSRP IMT

carries out: (i)

quarterly public

consultations and

discloses summaries

of feedback on the

mypower.ng

website (some

consultations are

held with only

10.4 PSRP IMT

Team carries out: (i)

quarterly public

consultations and

discloses summaries

of feedback on the

mypower.ng website

(some consultations

are held with only

women); (ii) at least

10.5 PSRP IMT

carries out: (i)

quarterly public

consultations and

discloses summaries

of feedback on the

mypower.ng website

(some consultations

are held with only


19

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

MDAs (NERC,

BPE, NBET); (ii)

engages in a series

of meetings with

key stakeholders

(DISCOs,

GENCOs, National

Assembly,

judiciary, media

and civil society

groups), together

with MDAs, to

convey the

messages agreed in

the common script

and to seek their

feedback; (iii)

ensures that a

nationally

representative

baseline survey is

completed,

awareness-raising

materials are

produced; and (iv)

initiates public

outreach activities

through PSRP

website and the

media

requirement; (ii) at

least one press

conference each

quarter; and (iii) bi-

monthly public

consultations with

specific audience

groups (general

public and private

sector

representatives) to

explain the Reset

process and the

expected outcomes

(including

performance

improvement

requirements)


one workshop with

journalists annually

and subsequent

media monitoring;

and (iii) at least

three consultations

within FGN

annually

one workshop with


and subsequent

media monitoring;

and (iii) at least

three consultations

within FGN

annually

one workshop with


and subsequent

media monitoring;

and (iii) at least

three consultations

within FGN

annually


Total Financing

Allocated:

980 million

(960 million

if only basic

targets are

200 million 240 million (228

million if only basic

targets are met for

190 million (174


targets are met for

185 million (169


targets are met for

165 million (189


targets are met for

Global DLI 2 in

20

Total

Financing

Allocated to

DLI

As % of

Total

Financing

Amount

DLI

Baseline

(as of July

1, 2017)

Prior DLIs (since

July 1, 2017)


2018 (completion of

Reset) 2019 2020 2021

met for DLIs

6-7)

Global DLI 2 and

DLI 6)

DLIs 6-7 and

Global DLI 2)

DLIs 6-7 and Global

DLI 2)

previous years and

basic targets are met

for DLIs 6-7)

21

Annex 3: Results Framework Matrix

3 The extent of end-user electricity tariff recovering the revenue requirement would be clarified only after the Reset when the performance parameters will be

redefined. The baseline indicator is assessed based on the current MYTO of NERC.

Results Areas

Supported by

the PforR

PDO/Outcome Indicators

Intermediate Results (IR) Indicators DLI # Unit of

Measurement

Baseline

(2016)

End

Target

(2021)

Results Area 1:

Improve

reliability of

electricity

supply

PDO Indicator 1: Annual

electricity supplied to the

distribution grid is increased

GWh 23,722 39,420

IR Indicator 1.1: Generation capacity required to meet demand is

available through contractual agreements

1/2 Yes/No No Yes

IR Indicator 1.2: PIP implementation progress of DISCOs to remove

the constraints to supply in their networks

3 Percentage of

implementation

0 50

Results Area 2:

Achieve

financial

sustainability

PDO Indicator 2: Power

sector companies receive

their required revenue

G1 Yes/No No Yes

IR Indicator 2.1: Extent to which end-user electricity tariffs cover

required revenue of the sector

4 Percentage 64.83 100

IR Indicator 2.2: Share of GENCO invoice amount settled by NBET 6 Percentage 26 90

IR Indicator 2.3: Share of NBET invoice amount settled by DISCOs 7 Percentage 27.4 90

IR Indicator 2.4: Share of MDAs adopting a sustainable mechanism

for electricity payment per NERC guidelines

5 Percentage 0 90

IR Indicator 2.5: Historical shortfall accumulated from January 2015

to December 2016 is settled

G2 Naira 420

billion

0

IR Indicator 2.6: Federal MDA arrears to DISCOs accumulated until

December 2016 are settled

G2 Naira 25.9

billion

0

Results Area 3:

Strengthen

governance

and

transparency

PDO Indicator 3: Cash

recovery index improves

Percentage 45.4 67.9

IR Indicator 3.1: Audited financial statements of market participants

(GENCOs, DISCOs, TCN and NBET) are published annually on

NERC website

9 Yes/No No Yes

IR Indicator 3.2: Key operational and financial data for the power

sector are published quarterly on NERC website

9 Yes/No No Yes

IR Indicator 3.3: Public awareness about ongoing reforms in the

power sector

10 Percentage 29 60

22

Annex 4 Program Action Plan

Action Description DLI* Due Date Responsible

Party

Completion

Measurement**

Technical aspects

Conducting MYTO major review

(RESET):

Determination of revenue

requirements of DISCOs and TCN

for 2018 based on the existing

MYTO

Approval of new MYTO

methodology for setting revenue

requirements for DISCOs and

TCN, preceded by at least one

public hearing for each company

Development of new MYTO order

for each DISCO and for TCN,

preceded by at least one public

hearing for each company

Adjustment of end-user tariffs to

fully recover revenue requirement

of the sector as determined by the

new MYTO

June 30,

2018

December

31, 2018

December

31, 2019

Continuous

NERC

NERC

NERC

NERC

NERC directive

A new approved

MYTO

methodology

New MYTO Order

Adjustment of

tariff

DISCOs’ turnaround:

Issuance of a guideline for

preparation of PIPs

Preparation of PIPs

Review and approval of DISCOS’

PIPs

Monitoring and enforcement of

PIPs for DISCOs

Strengthening and monitoring of

business continuity arrangements

for DISCOs

Preparing plan for cleaning up

DISCO’s balance sheet

April 30,

2018

June 30,

2018

September

30, 2018

Continuous

Continuous

December

31, 2018

NERC

NERC/

DISCOs

NERC

NERC

NERC

NERC

A guideline for

PIPs

Completion of PIPs

Records regarding

approval of PIPs

Report on the

adequacy of

NERC’s

monitoring and

enforcement

Directive/Order on

the business

continuity

arrangements

Plan on DISCOs’

balance sheet

clean-up

23


Party

Completion

Measurement**

Monitoring and enforcement of the

plan for cleaning up DISCO’s

balance sheet

Continuous

NERC Report on the

adequacy of

NERC’s

monitoring and

enforcement

Activating contractual arrangements:

Issuance of an Order outlining the

milestones for increasing activation

of GSAs/PPAs and refining

contractual arrangements for NIPP

plants

Issuance of an order by NERC, in

agreement with NBET and

DISCOs, on how (i) NBET

invoices to DISCOs should be

adjusted (until the Reset) to allow

DISCOs retain their revenue

requirement; (ii) Vesting Contracts

(to the extent of invoice amount)

are partially activated and all LCs

are posted

December

31, 2018

December

31, 2018

NERC

NERC

An Order

An Order

Assessment and management of fiscal

risks of the Financing Plan:

Establishment of a multi-agency

team to review and update the

Financing Plan on a quarterly basis

Assessment of the fiscal and debt

sustainability and fiscal risks of the

Financing Plan and formulation of

policy measures to manage fiscal

risks and their impact on

sustainability

May 30,

2018

Continuous

The office of

the Vice

President

Multi-agency

financing

team

A letter formally

designating the

multi-agency

financing team

Updated Financing

Plan

Assessment and management of

contingent liabilities (CLs):

Endowment of the Debt

Management Office (DMO) with

the mandate of monitoring and

managing contingent liabilities

(CLs), and strengthening its

capacity to perform this role

effectively

Assessment of CLs emanating from

the energy-sector through

examination of a universe of

contracts agreed with DISCOs and

Continuous

Continuous

The office of

the Vice

President

Multi-agency

financing

team

A letter formally

designating the

DMO

Updated Financing

Plan

24


Party

Completion

Measurement**

GENCOs; assessment of risks of

CLs (based on their likelihood of

materializing) and formulation of

policy measures to address these

CLs should they materialize

Institutionalization of the Least Cost

Development Plan (LCDP):

Establishment of a multi-agency

team to institutionalize the

governance arrangements (roles and

responsibilities of Ministry of

Power, System Operator, NERC

and NBET) for preparing, updating

and implementing the LCDP

Review of system planning

capacity of System Operator and

identification of gaps

Designation of an agency to prepare

the LCDP

Capacity building of the agency

responsible for system planning

Preparation and approval of LCDP

May 30,

2018

May 30,

2018

June 30,

2018

September

30, 2018

December

30, 2018

FMOPWH

Multi-agency

LCDP team

FMOPWH

Designated

agency

Designated

agency/

FMOPWH

A letter formally

designating the

multi-agency

LCDP team

Report on the

review

A letter designating

the role

Progress report on

the capacity

building

Approval of the

LCDP

Stakeholder and citizen engagement

and communication:

Development of a draft common

script about the PSRP for key

stakeholders to ensure consistent

messaging about technical issues,

and agreement with the key MDAs

(NERC, BPE, NBET) on a final

approved version

Engagement between the IMT and

key MDAs in a series of meetings

with relevant stakeholders

(DISCOs, GENCOs, National

Assembly, judiciary, media and

civil society groups) to convey the

messages agreed in the common

script and to seek their feedback

March 30,

2018

Continuous

Continuous

PSRP IMT

PSRP IMT

PSRP IMT

The draft common

script

A series of

meetings with the

key stakeholders

25


Party

Completion

Measurement**

Establishment of stakeholder

feedback mechanism

Development of clear targets and

monitoring criteria for NERC’s

customer complaints system

Improvement of capacity and

representation of consumer

organizations and development of

outreach program/strategy for these

groups

June 30,

2018

December

30, 2018

PSRP

IMT/NERC

PSRP

IMT/NERC

Stakeholder

feedback

mechanism

Monitoring plan

Specific

engagement plan

for consumer

organizations to

include capacity

building objectives

and minutes/report

of launch workshop

Strengthening the governance of sector

agencies:

Strengthening of corporate

governance of sector agencies

(NBET and TCN)

Monitoring and enforcement of

compliance of sector companies

with NERC’s Code of Corporate

Governance Guidelines

Continuous

Continuous

NERC

NERC

Appointed Board

of Directors

Report on

compliance

Strengthening NBET’s audit function:

Preparation of NBET IFRS audit

for 2015-2021 financial statements

Capacity building in ex-post

systemic and risk-based internal

audits for NBET

Continuous

December

31, 2018

NBET

PSRP IMT

Completion of the

review and

disclosure of the

annual reports

Training of staff

Strengthening PSRP implementation,

monitoring and coordination:

Procurement of experts on DISCO

turnaround and monitoring and

evaluation

Continuous

PSRP IMT

Procurement of

experts

Fiduciary aspects

Procurement arrangement:

Employment of an additional

procurement consultant with

experience in implementing

procurement under World Bank-

funded projects to strengthen the

procurement operations in the REA

PMU

June 30,

2018

PSRP IMT

PSRP IMT

Employment of the

consultant in REA

PMU

26


Party

Completion

Measurement**

Improvement of the management of

procurement files and documents

December

30, 2018

Implementation of

an electronic

procurement filing

and document

management

system or

alternative

measures to

address this issue

Funds flow arrangement:

Establishment of funds flow

arrangements for historical and

recurrent shortfall

June 30,

2018

PSRP IMT

Document on the

funds flow

arrangements

Environmental and Social aspects

Strengthening environmental

regulation and enforcement:

Formulation of Guidelines and

manual for mainstreaming

stakeholder engagement process

and integrating environmental,

health and safety issues into the

implementation of the Program

Annual monitoring of progress on

environmental and social issues,

especially regarding the compliance

of the Program activities with the

environmental standards and

regulations

Gender:

Strengthening of the mandate of the

gender focal point in the FMOPWH

by developing a work plan and

clear lines of responsibility for the

gender desk/focal point

Build on NERC’s current data

collection plans that should be

disaggregated by income level and

gender, commencing by assessing

data gaps and developing terms of

reference for a pilot study

June 30,

2018

Continuous

June 30,

2018

June 30,

2018

NERC,

FMOPWH

NERC,

FMOPWH,

NESREA

PSRP IMT,

FMOPWH

NERC

Completed

guidelines in

booklet form

disseminated to

stakeholders,

training provided,

and guidelines

operationalized

Completed report

with

recommendations

about

environmental and

social issues and

associated follow-

up measures

Work plan with

budget

Terms of Reference

for data gap

assessment and

pilot study

27

Annex 5: Guidelines for DISCOs’ PIPs

28

Annex 6: Draft Funds Flow Arrangement

The following steps should be implemented before the funds flow arrangement is effective:

NERC’s determination of the 2018 revenue requirement for DISCOs and service providers

based on the existing Multi-Year Tariff Order;

Adjustment of NBET’s invoices to DISCOs such that DISCOs retain their revenue

requirement and pay to service providers their respective revenue requirement. (The

invoice amount will be determined as the difference between DISCOs’ tariff revenue and

the sum of their revenue requirement and the revenue requirement payable to the service

providers.) Once this is achieved, NBET will be able to identify each month the amount of

GENCOs’ invoices that will be covered by the DISCOs’ payments, and simultaneously

determine the amount of GENCOs’ invoices (the difference between the aggregate amount

of GENCOs’ invoices and DISCOs’ payments) that will be paid with proceeds from the

Financing Plan (the “tariff shortfall” or “GENCOs’ Invoice Gap”).

Once these initial steps are completed, the basic structure of the FFA will comprise the following

steps:

1. NBET, as the bulk trader of electricity, will issue two invoices for its electricity supply to

each DISCO in each invoicing cycle. One invoice will be the adjusted invoice due and

payable by each DISCO, i.e. the amount due for the volume of electricity effectively

purchased during the respective period. The second invoice will be issued to the Ministry

of Finance (MOF) and will reflect GENCOs’ Invoice Gap.

2. The MOF will send funds from the committed budgetary contribution to the CBN to pay a

portion of the GENCOs’ Invoice Gap (the “MOF Portion”). The CBN will also contribute

funds from the Payment Assurance Facility.

3. Subject to the fulfillment of the applicable Disbursement Linked Indicators, the WB will

disburse funds under the PBL to pay a portion of the GENCOs’ Invoice Gap (the “WB

Portion”). These funds will be disbursed to the CBN per the instruction of the MOF. The

share of the MOF Portion, the WB Portion and the PAF in each payment is currently under

discussion. However, at no point in time, shall the WB cumulative disbursements exceed

the WB’s pro-rata share of financing in the overall Financing Plan (i.e. 16%).

4. The CBN will pay NBET the amount corresponding to 100 percent of the GENCOs’

Invoice Gap for the relevant payment cycle.

5. NBET will pay GENCOs any amounts due to them for the respective payment cycle.

GENCOs shall in turn pay gas companies any amounts due.

29

Table 1: Diagram of Funds Flow Arrangement

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