[Federal Register Volume 76, Number 72 (Thursday, April 14, 2011)]
[Notices]
[Pages 21044-21072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8983]
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MILLENNIUM CHALLENGE CORPORATION
[MCC FR 11-04]
Notice of Entering Into a Compact With the Republic of Malawi
AGENCY: Millennium Challenge Corporation.
ACTION: Notice.
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SUMMARY: In accordance with Section 610(b)(2) of the Millennium
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium
Challenge Corporation (MCC) is publishing a summary and the complete
text of the Millennium Challenge Compact between the United States of
America, acting through the Millennium Challenge Corporation, and the
Republic of Malawi. Representatives of the United States Government and
the Republic of Malawi executed the Compact documents on April 7, 2011.
Dated: April 8, 2011.
Henry Pitney,
Deputy General Counsel, Millennium Challenge Corporation.
Summary of Millennium Challenge Compact With the Republic of Malawi
The five-year Millennium Challenge Compact with the Republic of
Malawi will provide up to $350.7 million to reduce poverty through
economic growth (the ``Compact''). The Compact focuses on
revitalization of the Malawi power sector, and is intended to: (i)
Increase investment and employment income by raising the profitability
and productivity of enterprises; (ii) expand access to electricity for
the Malawian people and businesses; and (iii) improve delivery of
social services.
1. Project Overview and Activity Descriptions
To advance the Compact goal of reducing poverty through economic
growth, the Compact will fund a Power Sector Revitalization Project
(the ``Project'') that aims to improve the availability, reliability,
and quality of the power supply by: (i) Increasing the throughput
capacity and stability of the national electricity grid; (ii) increase
efficiency of hydropower generation; and (iii) create an enabling
environment for future expansion by strengthening sector institutions
and enhancing regulation and governance of the sector. The Project
consists of two activities (i) the Infrastructure Development Activity
and (ii) the Power Sector Reform Activity (the ``Activities'').
A. Infrastructure Development Activity ($283 Million)
The Infrastructure Development Activity focuses on the
rehabilitation, upgrade and modernization of those generation,
transmission and distribution assets of the Electricity Supply
Corporation of Malawi (``ESCOM'') in most urgent need of repair, in
order to improve the capability of the transmission system and increase
the efficiency and sustainability of hydropower generation. Because
maintaining the current generation assets and expanding generation
capacity are necessary to ensure realization of the full benefits of
the Infrastructure Development Activity, the Government of Malawi
(``GOM'') is committing to maintain current generation assets, and to
invest in new generation by completing the construction of the 64 MW
Kapichira II hydropower plant during the term of the Compact. By the
end of the Compact term, MCC expects that the Infrastructure
Development Activity will result in increases in generation capacity
(from 286 MW to 356 MW), network throughput (from 260 MW to 410 MW) and
distribution capability (from 868 megavolt amperes (MVA) to 1,118 MVA),
as well as a reduction of technical losses of the power system (from
20-25% to 18%).
The Infrastructure Development Activity consists of the following
four sub-activities:
(a) Nkula A Rehabilitation Sub-Activity. This sub-activity will
provide funding to rehabilitate and modernize Malawi's oldest major
hydropower plant Nkula A--at the Nkula Falls Hydroelectric plant. The
objective of this proposed investment is to improve the availability of
power in Malawi by reducing outages caused by the condition of assets,
and maximizing the power output of generators. The rehabilitation is
necessary to assist ESCOM avoid the good probability that at least a
portion, if not all, of the plant could fail by the end of the Compact
without MCC's investment. Such a loss in generation output would have a
significant adverse affect on the Malawi economy, and severely
compromise the potential utilization and returns on MCC's investment in
the transmission and distribution upgrade and rehabilitation.
(b) Transmission Network Upgrade Sub-Activity. This sub-activity
will upgrade the backbone of the transmission network in order to: (i)
Improve the quality and reliability of supply in the northern, central
and southern regions of the country; (ii) increase the capacity to move
power from the south, where 98 percent of Malawi's power is generated,
to the central and northern regions; (iii) reduce technical losses on
transmission lines; and (iv) provide a secure transmission link between
the southern and central regions.
(c) Transmission and Distribution Upgrade, Expansion, and
Rehabilitation Sub-Activity. This sub-activity includes investments in
the southern, central, and northern power systems of the Malawi power
network in order to: (i) Upgrade existing network connections (33-
kilovolt (kV), 11kV); (ii) extend existing substations; (iii) upgrade
transformers in existing substations; (iv) develop new substations; (v)
install and/or repair improved protection systems; (vi) provide new
network extensions and connections; and (vii) install a new system
control and data acquisition system.
(d) Environment and Natural Resource Management (ENRM) Sub-
Activity. The objective of the ENRM sub-activity is to help the GOM and
other relevant stakeholders address the growing problems of aquatic
weed infestation and excessive sedimentation in the Shire River, which
cause costly disruptions to downstream power plant operations. The ENRM
sub-activity intends to address these issues by: (i) Mitigating the
impact of the weeds and sedimentation by providing dredgers and weed-
harvesting equipment for use at existing hydropower plants and the
Liwonde Barrage, and expanding use of upstream biological control
measures; and (ii) developing and implementing an Environmental and
Natural Resource Management Action Plan (ENRMAP) that sets the course
for an improved understanding and action on environmental, social
(including
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gender), and economic factors that cause or contribute to weed
infestation and sedimentation in the Shire River.
B. Power Sector Reform Activity ($25.7 million)
The Power Sector Reform Activity complements the Infrastructure
Development Activity by providing support for the GOM's policy reform
agenda, and aims to build capacity in pivotal sector institutions:
ESCOM, the Malawi Energy Regulatory Authority (MERA), and the Ministry
of Natural Resources Energy and Environment (MNREE). Currently, ESCOM
suffers from significant financial, governance and operational
challenges. In addition, inadequate GOM policies and sector governance
continue to hinder development of the power sector. To address these
challenges, MCC and the GOM have developed two sub-activities under the
Power Sector Reform Activity: the ESCOM Turnaround sub-activity and the
Regulatory Strengthening sub-activity.
(a) ESCOM Turnaround Sub-Activity. The objectives of this sub-
activity are to restore ESCOM's financial health and rebuild ESCOM into
a strong, well-managed company. MCC funding will support three main
areas of the turnaround: finances, corporate governance and operations.
(i) Finances: MCC funding will support the provision of technical
assistance and equipment to ESCOM, including: (1) Development of a
detailed financial plan for 2011-2016; (2) deployment of a ``financial
turnaround team''; (3) development of a loss reduction study; (4)
assistance in rapid billings and collections improvements; (5)
strengthening of internal controls; (6) rebuilding of the customer
database; (7) pursuit of debt collection; (8) development of a new
automated financial management system; and (9) assistance with tariff
applications.
(ii) Operations: MCC funding will support change management
efforts, designing human resources strategies, strengthen ESCOM's
procurement division, and other operational assistance.
(iii) Corporate Governance: MCC funding will seek to improve
corporate governance and support ESCOM's turnaround, including: (1)
Recruitment services; (2) twinning/mentoring arrangements or management
contract support; (3) a performance management system; and (4) board
strategic planning. MCC funding will provide technical assistance on
corporate performance standards, including a study on best practices
and benchmarks for corporate governance of electric utilities with
regional, continental and international benchmarks and recommendations
for ESCOM by the end of the second year of the Compact term.
(b) Regulatory Strengthening Sub-Activity. The objective of this
sub-activity is to provide support for the GOM's policy reform agenda
by building capacity in pivotal sector institutions such as MERA and
MNREE, and to develop a regulatory environment, consistent with best
practices in independent power utility regulation, which will promote
potential private sector investment in generation and grid capacity at
an affordable cost.
(i) Tariff Reform: MCC funding will support a cost of service study
to determine appropriate tariff levels and schedules to achieve full
cost recovery, more efficient utilization of electricity, and
achievement of social objectives. Based on the results of this study,
the GOM commits to a phased implementation of full-cost recovery
tariffs and schedules to be completed by the end of year three of the
Compact.
(ii) MERA Capacity Building: MCC funding will support capacity
building at MERA to improve its regulatory oversight activities and
operations including training and mentoring and development of peer
relationships with other regulatory bodies.
Enabling Environment for Public and Private Sector Investment: MCC
funding will support the GOM's efforts to implement a suitable market
model which will include efforts to: (a) Study and design a single
buyer model to be implemented during the Compact; and (b) develop the
building blocks of a bilateral power trade market.
2. Administration
The Compact also includes program administration costs estimated at
$33 million over a five-year timeframe, including the costs of
administration, management, auditing, and fiscal and procurement
services. In addition, the cost of monitoring and evaluation of the
Compact and integration of MCC's gender policy is budgeted at
approximately $9 million.
3. Economic and Beneficiary Analysis
By reducing power outages and technical losses, enhancing the
sustainability and efficiency of hydropower generation, and increasing
the potential kilowatt hours (``kWh'') of throughput to electricity
consumers, the Program will reduce energy costs to enterprises and
households, improve productivity in agriculture, manufacturing, and
service sectors, and support the preservation and creation of
employment opportunities in the economy. MCC and the GOM expect the
Program to result in the following benefits and distribution thereof:
An estimated 5 million individuals will benefit by year 20
after the Compact term through reduced domestic and enterprise energy
costs, increased employment income, and profits;
An estimated US$2.4 billion of income benefits to Malawi
at the present discounted rate of 10 percent;
An estimated 40 percent of beneficiaries are currently
extremely poor, and 60 percent are poor \1\; and
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\1\ ``Extremely poor'' is defined as living on the equivalent
amount in 2010 of less than US$1.25 per day 2005 PPP adjusted
dollars, and ``poor'' is defined as living on less than US$2.00 per
day 2005 PPP adjusted dollars.
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Extremely poor individuals will gain approximately US$221
of benefits in PPP terms, and poor individuals will gain an average of
US$291 (estimates based on recent employment and electricity connection
patterns, and incorporate effects of a modest rise in tariffs, to
partly finance expanded access).
Millennium Challenge Compact Between the United States of America
Acting Through the Millennium Challenge Corporation and the Republic of
Malawi
Millennium Challenge Compact
Table of Contents
Article 1. Goal and Objectives
Section 1.1 Compact Goal
Section 1.2 Program Objective
Section 1.3 Project Objectives
Article 2. Funding and Resources
Section 2.1 Program Funding
Section 2.2 Compact Implementation Funding
Section 2.3 MCC Funding
Section 2.4 Disbursement
Section 2.5 Interest
Section 2.6 Government Resources; Budget
Section 2.7 Limitations of the Use of MCC Funding
Section 2.8 Taxes
Article 3. Implementation
Section 3.1 Program Implementation Agreement
Section 3.2 Government Responsibilities
Section 3.3 Policy Performance
Section 3.4 Accuracy of Information
Section 3.5 Implementation Letters
Section 3.6 Procurement
Section 3.7 Records; Accounting; Covered Providers; Access
Section 3.8 Audits; Reviews
Article 4. Communications
Section 4.1 Communications
Section 4.2 Representatives
Section 4.3 Signatures
Article 5. Termination; Suspension; Expiration
Section 5.1 Termination; Suspension
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Section 5.2 Consequences of Termination, Suspension or
Expiration
Section 5.3 Refunds; Violation
Section 5.4 Survival
Article 6. Compact Annexes; Amendments; Governing Law
Section 6.1 Annexes
Section 6.2 Amendments
Section 6.3 Inconsistencies
Section 6.4 Governing Law
Section 6.5 Additional Instruments
Section 6.6 References to MCC Web Site
Section 6.7 References to Laws, Regulations, Policies, and
Guidelines
Section 6.8 MCC Status
Article 7. Entry Into Force
Section 7.1 International Agreements
Section 7.2 Conditions Precedent to Entry Into Force
Section 7.3 Date of Entry Into Force
Section 7.4 Compact Term
Section 7.5 Provisional Application
Annex I: Program Description
Annex II: Multi-Year Financial Plan Summary
Annex III: Description of the Monitoring and Evaluation Plan
Annex IV: Conditions to Disbursement of Compact Implementation
Funding
Annex V: Definitions
Millennium Challenge Compact
Preamble
This Millennium Challenge Compact (this ``Compact'') is between the
United States of America, acting through the Millennium Challenge
Corporation, a United States Government corporation (``MCC''), and the
Republic of Malawi (``Malawi''), acting through its government (the
``Government'') (individually a ``Party'' and collectively, the
``Parties''). Capitalized terms used in this Compact will have the
meanings provided in Annex V.
Recognizing that the Parties are committed to the shared goals of
promoting economic growth and the elimination of extreme poverty in
Malawi and that MCC assistance under this Compact supports Malawi's
demonstrated commitment to strengthening good governance, economic
freedom and investments in people;
Recalling that the Government consulted with the private sector and
civil society of Malawi to determine the priorities for the use of
Millennium Challenge Corporation assistance and developed and submitted
to MCC a proposal for such assistance to achieve lasting economic
growth and poverty reduction;
Understanding that MCC wishes to help Malawi implement the program
described herein (as such description may be amended from time to time
in accordance with the terms hereof, the ``Program'') to counter a key
binding constraint to sustained growth and diversification in the
Malawi economy; and
Acknowledging that to implement the Program, MCC wishes to make
available to the Government an amount not to exceed Three Hundred and
Fifty Million Seven Hundred Thousand United States Dollars
(US$350,700,000), subject to the terms and conditions of this Compact;
The Parties hereby agree as follows:
Article 1. Goal and Objectives
Section 1.1 Compact Goal
The goal of this Compact is to reduce poverty through economic
growth in Malawi (the ``Compact Goal'').
Section 1.2 Program Objective
The collective objective of the Program (the ``Program Objective'')
is to (i) increase investment and employment income by raising the
profitability and productivity of enterprises, (ii) expand access to
electricity for the Malawian people and businesses, and (iii) improve
delivery of social services.
Section 1.3 Project Objective
To achieve the Program Objective, the Government will implement the
Power Sector Revitalization Project described in Annex I (the
``Project'') with the assistance of MCC. The objective of the Project
is to improve the availability, reliability, and quality of the power
supply by increasing the throughput capacity and stability of the
national electricity grid, increase efficiency of hydropower
generation, and create an enabling environment for future expansion by
strengthening sector institutions and enhancing regulation and
governance of the sector (the ``Project Objective'').
Article 2. Funding and Resources
Section 2.1 Program Funding
Upon entry into force of this Compact in accordance with Section
7.3, MCC will grant to the Government, under the terms of this Compact,
an amount not to exceed Three Hundred and Forty One Million Five
Hundred and Eighty Thousand United States Dollars (US$341,580,000)
(``Program Funding'') for use by the Government to implement the
Program. The allocation of Program Funding is generally described in
Annex II.
Section 2.2 Compact Implementation Funding
(a) Upon signing of this Compact, MCC will grant to the Government,
under the terms of this Compact and in addition to the Program Funding
described in Section 2.1, an amount not to exceed Nine Million One
Hundred and Twenty Thousand United States Dollars (US$9,120,000)
(``Compact Implementation Funding'') under Section 609(g) of the
Millennium Challenge Act of 2003, as amended (the ``MCA Act''), for use
by the Government to facilitate implementation of the Compact,
including for the following purposes:
(i) financial management and procurement activities;
(ii) administrative activities (including start-up costs such as
staff salaries) and administrative support expenses such as rent,
computers and other information technology or capital equipment;
(iii) monitoring and evaluation activities;
(iv) feasibility and any remaining project preparatory studies; and
(v) other activities to facilitate Compact implementation as
approved by MCC.
The allocation of Compact Implementation Funding is generally
described in Annex II.
(b) Each Disbursement (as defined below) of Compact Implementation
Funding is subject to satisfaction of the conditions precedent to such
Disbursement as set forth in Annex IV.
(c) If MCC determines that the full amount of Compact
Implementation Funding available under Section 2.2(a) exceeds the
amount that reasonably can be utilized for the purposes set forth in
Section 2.2(a), MCC, by written notice to the Government, may withdraw
the excess amount, thereby reducing the amount of the Compact
Implementation Funding available under Section 2.2(a) (such excess, the
``Excess CIF Amount''). In such event, the amount of Compact
Implementation Funding granted to the Government under Section 2.2(a)
will be reduced by the Excess CIF Amount, and MCC will have no further
obligations with respect to such Excess CIF Amount.
(d) Upon the written request of the Government, MCC may grant to
the Government an amount equal to all or a portion of such Excess CIF
Amount as an increase in the Program Funding. Such grant of additional
Program Funding will be in writing and subject to the terms and
conditions of this Compact applicable to Program Funding.
Section 2.3 MCC Funding
Program Funding and Compact Implementation Funding are collectively
referred to in this Compact as ``MCC Funding'', and includes any
refunds or reimbursements of Program Funding or Compact Implementation
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Funding paid by the Government in accordance with this Compact.
Section 2.4 Disbursement
In accordance with this Compact and the Program Implementation
Agreement, MCC will disburse MCC Funding for expenditures incurred in
furtherance of the Program (each instance, a ``Disbursement''). Subject
to the satisfaction of all applicable conditions precedent, the
proceeds of Disbursements will be made available to the Government, at
MCC's sole election, by (a) deposit to one or more bank accounts
established by the Government and acceptable to MCC (each, a
``Permitted Account'') or (b) direct payment to the relevant provider
of goods, works or services for the implementation of the Program. MCC
Funding may be expended only for Program expenditures.
Section 2.5 Interest
Unless MCC agrees otherwise in writing, the Government will pay or
transfer to MCC, in accordance with the Program Implementation
Agreement, any interest or other earnings that accrue on MCC Funding
prior to such funding being used for a Program purpose.
Section 2.6 Government Resources; Budget
(a) The Government will provide all funds and other resources, and
will take all actions, that are necessary to carry out the Government's
responsibilities under this Compact.
(b) The Government will use its best efforts to ensure that all MCC
Funding it receives or is projected to receive in each of its fiscal
years is fully accounted for in its annual budget on a multi-year
basis.
(c) The Government will not reduce the normal and expected
resources that it would otherwise receive or budget from sources other
than MCC for the activities contemplated under this Compact and the
Program.
(d) Unless the Government discloses otherwise to MCC in writing,
MCC Funding will be in addition to the resources that the Government
would otherwise receive or budget for the activities contemplated under
this Compact and the Program.
Section 2.7 Limitations on the Use of MCC Funding
The Government will ensure that MCC Funding is not used for any
purpose that would violate United States law or policy, as specified in
this Compact or as further notified to the Government in writing or by
posting from time to time on the MCC Web site at http://www.mcc.gov
(the ``MCC Web site''), including but not limited to the following
purposes:
(a) For assistance to, or training of, the military, police,
militia, national guard or other quasi-military organization or unit;
(b) For any activity that is likely to cause a substantial loss of
United States jobs or a substantial displacement of United States
production;
(c) To undertake, fund or otherwise support any activity that is
likely to cause a significant environmental, health, or safety hazard,
as further described in MCC's environmental and social assessment
guidelines and any guidance documents issued in connection with the
guidelines posted from time to time on the MCC Web site or otherwise
made available to the Government (collectively, the ``MCC Environmental
Guidelines''); or
(d) To pay for the performance of abortions as a method of family
planning or to motivate or coerce any person to practice abortions, to
pay for the performance of involuntary sterilizations as a method of
family planning or to coerce or provide any financial incentive to any
person to undergo sterilizations or to pay for any biomedical research
which relates, in whole or in part, to methods of, or the performance
of, abortions or involuntary sterilization as a means of family
planning.
Section 2.8 Taxes
(a) Unless the Parties specifically agree otherwise in writing, the
Government will ensure that all MCC Funding is free from the payment or
imposition of any existing or future taxes, duties, levies,
contributions or other similar charges (but not fees or charges for
services that are generally applicable in Malawi, reasonable in amount
and imposed on a non-discriminatory basis) (``Taxes'') of or in Malawi
(including any such Taxes imposed by a national, regional, local or
other governmental or taxing authority of or in Malawi). Specifically,
and without limiting the generality of the foregoing, MCC Funding will
be free from the payment of (i) any tariffs, customs duties, import
taxes, export taxes, and other similar charges on any goods, works or
services introduced into Malawi in connection with the Program, (ii)
sales tax, value added tax, excise tax, property transfer tax or stamp
duty tax, and other similar charges on any transactions involving
goods, works or services in connection with the Program, (iii) taxes
and other similar charges on ownership, possession or use of any
property in connection with the Program, and (iv) taxes and other
similar charges on income, profits or gross receipts attributable to
work performed in connection with the Program and related social
security taxes and other similar charges on all natural or legal
persons performing work in connection with the Program except (1)
natural persons who are citizens or residents of Malawi and (2) legal
persons formed under the laws of Malawi (but excluding MCA-Malawi and
any other entity formed for the purpose of implementing the
Government's obligations hereunder).
(b) The mechanisms that the Government will use to implement the
tax exemption required by Section 2.8(a) will be set forth in the
Program Implementation Agreement (the ``Tax Schedules''). Such
mechanisms may include exemptions from the payment of Taxes that have
been granted in accordance with applicable law, refund or reimbursement
of Taxes by the Government to MCC, MCA-Malawi or to the taxpayer, or
payment by the Government to MCA-Malawi or MCC, for the benefit of the
Program, of an agreed amount representing any collectible Taxes on the
items described in Section 2.8(a).
(c) If a Tax has been paid contrary to the requirements of Section
2.8(a) or the Tax Schedules, the Government will refund promptly to
MCA-Malawi (or to another party as designated by MCC) the amount of
such Tax in Malawi Kwacha and MCA-Malawi will refund that amount in
U.S. Dollars to MCC, unless otherwise provided by MCC, within sixty
(60) days (or such other period as may be agreed in writing by the
Parties) after the Government is notified in writing (whether by MCC or
MCA-Malawi) that such Tax has been paid. If the amount of such Tax is
converted to U.S. Dollars from Malawi Kwacha, the rate of exchange
applicable to such conversion shall be the U.S. Dollar-Malawi Kwacha
rate of exchange as published by the Reserve Bank of Malawi on the date
of transfer.
(d) In the event the Government fails to make a payment, including
any refund, reimbursement, or other payment that falls hereunder in
full when due (including VAT or other refund or reimbursement),
interest shall be paid on such past due amount at a rate of the then
current U.S. Treasury Prompt Pay Interest Rate, calculated on a daily
basis and a 360-day year from the due date of such payment until such
amount is paid.
(e) No MCC Funding, proceeds thereof or Program Assets may be
applied by
[[Page 21048]]
the Government in satisfaction of its obligations under Section 2.8(c).
Article 3. Implementation
Section 3.1 Program Implementation Agreement
The Parties will enter into an agreement providing further detail
on the implementation arrangements, fiscal accountability and
disbursement and use of MCC Funding, among other matters (the ``Program
Implementation Agreement'' or ``PIA''); and the Government will
implement the Program in accordance with this Compact, the PIA, any
other Supplemental Agreement and any Implementation Letter.
Section 3.2 Government Responsibilities
(a) The Government has principal responsibility for overseeing and
managing the implementation of the Program.
(b) The Government will create and designate MCA-Malawi, a public
trust to be created under the laws of Malawi, as the accountable entity
to implement the Program and to exercise and perform the Government's
right and obligation to oversee, manage and implement the Program,
including without limitation, managing the implementation of the
Project and its Activities, allocating resources and managing
procurements. MCA-Malawi will have the authority to bind the Government
with regard to all Program activities. The designation contemplated by
this Section 3.2(b) will not relieve the Government of any obligations
or responsibilities hereunder or under any related agreement, for which
the Government remains fully responsible. MCC hereby acknowledges and
consents to the designation in this Section 3.2(b).
(c) The Government will ensure that any Program Assets or services
funded in whole or in part (directly or indirectly) by MCC Funding are
used solely in furtherance of this Compact and the Program unless MCC
agrees otherwise in writing.
(d) The Government will take all necessary or appropriate steps to
achieve the Program Objective and the Project Objective during the
Compact Term (including, without limiting Section 2.6(a), funding all
costs that exceed MCC Funding and are required to carry out the terms
hereof and achieve such objectives, unless MCC agrees otherwise in
writing).
(e) The Government will fully comply with the Program Guidelines,
as applicable, in its implementation of the Program.
Section 3.3 Policy Performance
In addition to undertaking the specific policy, legal and
regulatory reform commitments identified in Annex I, the Government
will seek to maintain and to improve its level of performance under the
policy criteria identified in Section 607 of the MCA Act, and the
selection criteria and methodology used by MCC.
Section 3.4 Accuracy of Information
The Government assures MCC that, as of the date this Compact is
signed by the Government, the information provided to MCC by or on
behalf of the Government in the course of reaching agreement with MCC
on this Compact is true, correct and complete in all material respects.
Section 3.5 Implementation Letters
From time to time, MCC may provide guidance to the Government in
writing on any matters relating to this Compact, MCC Funding or
implementation of the Program (each, an ``Implementation Letter''). The
Government will apply such guidance in implementing the Program. The
Parties may also issue jointly agreed-upon Implementation Letters to
confirm and record their mutual understanding on aspects related to the
implementation of this Compact, the PIA or other related agreements.
Section 3.6 Procurement
The Government will ensure that the procurement of all goods, works
and services by the Government or any Provider to implement the Program
will be consistent with the ``MCC Program Procurement Guidelines''
posted from time to time on the MCC Web site (the ``MCC Program
Procurement Guidelines''). The MCC Program Procurement Guidelines
include the following requirements, among others:
(a) Open, fair, and competitive procedures must be used in a
transparent manner to solicit, award and administer contracts and to
procure goods, works and services;
(b) Solicitations for goods, works, and services must be based upon
a clear and accurate description of the goods, works and services to be
acquired;
(c) Contracts must be awarded only to qualified contractors that
have the capability and willingness to perform the contracts in
accordance with their terms on a cost effective and timely basis; and
(d) No more than a commercially reasonable price, as determined,
for example, by a comparison of price quotations and market prices,
will be paid to procure goods, works and services.
Section 3.7 Records; Accounting; Covered Providers; Access
(a) Government Books and Records. The Government will maintain, and
will use its best efforts to ensure that all Covered Providers
maintain, accounting books, records, documents and other evidence
relating to the Program adequate to show, to MCC's satisfaction, the
use of all MCC Funding and the implementation and results of the
Program (``Compact Records''). In addition, the Government will furnish
or cause to be furnished to MCC, upon its request, originals or copies
of such Compact Records.
(b) Accounting. The Government will maintain and will use its best
efforts to ensure that all Covered Providers maintain Compact Records
in accordance with generally accepted accounting principles prevailing
in the United States, or at the Government's option and with MCC's
prior written approval, other accounting principles, such as those (i)
prescribed by the International Accounting Standards Board, or (ii)
then prevailing in Malawi. Compact Records must be maintained for at
least five (5) years after the end of the Compact Term or for such
longer period, if any, required to resolve any litigation, claims or
audit findings or any applicable legal requirements.
(c) Providers and Covered Providers. Unless the Parties agree
otherwise in writing, a ``Provider'' is (i) any entity of the
Government that receives or uses MCC Funding or any other Program Asset
in carrying out activities in furtherance of this Compact or (ii) any
third party that receives at least U.S.$50,000 in the aggregate of MCC
Funding (other than as salary or compensation as an employee of an
entity of the Government) during the Compact Term. A ``Covered
Provider'' is (i) a non-United States Provider that receives (other
than pursuant to a direct contract or agreement with MCC) U.S.$300,000
or more of MCC Funding in any Government fiscal year or any other non-
United States person or entity that receives, directly or indirectly,
U.S.$300,000 or more of MCC Funding from any Provider in such fiscal
year, or (ii) any United States Provider that receives (other than
pursuant to a direct contract or agreement with MCC) U.S.$500,000 or
more of MCC Funding in any Government fiscal year or any other United
States person or entity that receives, directly or indirectly,
U.S.$500,000 or more of MCC Funding from any Provider in such fiscal
year.
[[Page 21049]]
(d) Access. Upon MCC's request, the Government, at all reasonable
times, will permit, or cause to be permitted, authorized
representatives of MCC, an authorized Inspector General of MCC
(``Inspector General''), the United States Government Accountability
Office, any auditor responsible for an audit contemplated herein or
otherwise conducted in furtherance of this Compact, and any agents or
representatives engaged by MCC or the Government to conduct any
assessment, review or evaluation of the Program, the opportunity to
audit, review, evaluate or inspect facilities, assets and activities
funded in whole or in part by MCC Funding.
Section 3.8 Audits; Reviews
(a) Government Audits. Except as the Parties may agree otherwise in
writing, the Government will, on at least a semi-annual basis, conduct,
or cause to be conducted, financial audits of all disbursements of MCC
Funding covering the period from signing of this Compact until the
earlier of the following December 31 or June 30 and covering each six-
month period thereafter ending December 31 and June 30, through the end
of the Compact Term. In addition, upon MCC's request, the Government
will ensure that such audits are conducted by an independent auditor
approved by MCC and named on the list of local auditors approved by the
Inspector General or a United States-based certified public accounting
firm selected in accordance with the ``Guidelines for Financial Audits
Contracted by MCA'' (the ``Audit Guidelines'') issued and revised from
time to time by the Inspector General, which are posted on the MCC Web
site. Audits will be performed in accordance with the Audit Guidelines
and be subject to quality assurance oversight by the Inspector General.
Each audit must be completed and the audit report delivered to MCC no
later than 90 days after the first period to be audited and no later
than 90 days after each June 30 and December 31 thereafter, or such
other period as the Parties may otherwise agree in writing.
(b) Audits of Other Entities. The Government will ensure that MCC
financed agreements between the Government or any Provider, on the one
hand, and (i) a United States nonprofit organization, on the other
hand, state that the United States nonprofit organization is subject to
the applicable audit requirements contained in OMB Circular A-133,
``Audits of States, Local Governments, and Non-Profit Organizations,''
issued by the United States Office of Management and Budget; (ii) a
United States for-profit Covered Provider, on the other hand, state
that the United States for-profit organization is subject to audit by
the applicable United States Government agency, unless the Government
and MCC agree otherwise in writing; and (iii) a non-U.S. Covered
Provider, on the other hand, state that the non-U.S. Covered Provider
is subject to audit in accordance with the Audit Guidelines.
(c) Corrective Actions. The Government will use its best efforts to
ensure that each Covered Provider (i) takes, where necessary,
appropriate and timely corrective actions in response to audits, (ii)
considers whether the results of the Covered Provider's audit
necessitates adjustment of the Government's records, and (iii) permits
independent auditors to have access to its records and financial
statements as necessary.
(d) Audit by MCC. MCC will have the right to arrange for audits of
the Government's use of MCC Funding.
(e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used
to fund the costs of any audits, reviews or evaluations required under
this Compact.
Article 4. Communications
Section 4.1 Communications
Any document or communication required or submitted by either Party
to the other under this Compact must be in writing and in English. For
this purpose, the address of each Party is set forth below.
To MCC
Millennium Challenge Corporation, Attention: Vice President,
Compact Operations, (with a copy to the Vice President and General
Counsel), 875 Fifteenth Street, NW., Washington, DC 20005, United
States of America, Facsimile: (202) 521-3700, Telephone: (202) 521-
3600, E-mail: [email protected] (Vice President, Compact
Operations), [email protected] (Vice President and General
Counsel)
To the Government
Ministry of Finance, Attention: Minister of Finance, (with copies
to the (a) Secretary to the Treasury and (b) Chief Secretary to the
Government), Capital Hill, Lilongwe, Malawi, Tel: +265-1788030, Fax:
+265-1788384, E-mail: [email protected].
To MCA-Malaw:
Upon establishment of MCA-Malawi, MCA-Malawi will notify the
Parties of its contact details.
Section 4.2 Representatives
For all purposes of this Compact, the Government will be
represented by the individual holding the position of, or acting as,
Minister of Finance of the Republic of Malawi, and MCC will be
represented by the individual holding the position of, or acting as,
Vice President, Compact Operations (each of the foregoing, a
``Principal Representative''). Each Party, by written notice to the
other Party, may designate one or more additional representatives
(each, an ``Additional Representative''). A Party may change its
Principal Representative to a new representative that holds a position
of equal or higher authority upon written notice to the other Party.
Section 4.3 Signatures
Signatures to this Compact and to any amendment to this Compact
will be original signatures appearing on the same page or in an
exchange of letters or diplomatic notes. With respect to all documents
arising out of this Compact (other than the Program Implementation
Agreement) and amendments thereto, signatures may, as appropriate, be
delivered by facsimile or electronic mail and in counterparts and will
be binding on the Party delivering such signature to the same extent as
an original signature would be.
Article 5. Termination; Suspension; Expiration
Section 5.1 Termination; Suspension
(a) Either Party may terminate this Compact in its entirety by
giving the other Party thirty (30) days' prior written notice.
(b) MCC may, immediately, upon written notice to the Government,
suspend or terminate this Compact or MCC Funding, in whole or in part,
and any obligation related thereto, if MCC determines that any
circumstance identified by MCC, as a basis for suspension or
termination (whether in writing to the Government or by posting on the
MCC Web site) has occurred, which circumstances include but are not
limited to the following:
(i) The Government fails to comply with its obligations under this
Compact or any other agreement or arrangement entered into by the
Government in connection with this Compact or the Program;
(ii) An event or series of events has occurred that makes it
probable that the Program Objective or the Project Objective will not
be achieved during the Compact Term or that the Government will not be
able to perform its obligations under this Compact;
[[Page 21050]]
(iii) A use of MCC Funding or continued implementation of this
Compact or the Program violates applicable law or United States
Government policy, whether now or hereafter in effect;
(iv) The Government or any other person or entity receiving MCC
Funding or using Program Assets is engaged in activities that are
contrary to the national security interests of the United States;
(v) An act has been committed or an omission or an event has
occurred that would render Malawi ineligible to receive United States
economic assistance under Part I of the Foreign Assistance Act of 1961,
as amended (22 U.S.C. 2151 et seq.), by reason of the application of
any provision of such act or any other provision of law;
(vi) The Government has engaged in a pattern of actions
inconsistent with the criteria used to determine the eligibility of
Malawi for assistance under the MCA Act; and
(vii) The Government or another person or entity receiving MCC
Funding or using Program Assets is found to have been convicted of a
narcotics offense or to have been engaged in drug trafficking.
Section 5.2 Consequences of Termination, Suspension or Expiration
(a) Upon the suspension or termination, in whole or in part, of
this Compact or any MCC Funding, or upon the expiration of this
Compact, the provisions of Section 4.2 of the Program Implementation
Agreement will govern the post-suspension, post-termination or post-
expiration treatment of MCC Funding, any related Disbursements and
Program Assets. Any portion of this Compact, MCC Funding, the Program
Implementation Agreement or any other Supplemental Agreement that is
not suspended or terminated will remain in full force and effect.
(b) MCC may reinstate any suspended or terminated MCC Funding under
this Compact if MCC determines that the Government or other relevant
person or entity has committed to correct each condition for which MCC
Funding was suspended or terminated.
Section 5.3 Refunds; Violation
(a) If any MCC Funding, any interest or earnings thereon, or any
Program Asset is used for any purpose in violation of the terms of this
Compact, then MCC may require the Government to repay to MCC in United
States Dollars the value of the misused MCC Funding, interest,
earnings, or asset, plus interest within thirty (30) days after the
Government's receipt of MCC's request for repayment. Interest will
accrue from the date of the violation and will be calculated at the 10-
year U.S. Treasury Note rate prevailing as of the close of business in
Washington, DC as of the date of MCC's request for payment. The
Government will not use MCC Funding, proceeds thereof or Program Assets
to make such payment.
(b) Notwithstanding any other provision in this Compact or any
other existing agreement to the contrary, MCC's right under Section
5.3(a) for a refund will continue during the Compact Term and for a
period of (i) five (5) years thereafter or (ii) one (1) year after MCC
receives actual knowledge of such violation, whichever is later.
Section 5.4 Survival
This Section 5.4 and the Government's responsibilities under
Sections 2.7, 3.7, 3.8, 5.2, 5.3, and 6.4 will survive the expiration,
suspension or termination of this Compact.
Article 6. Compact Annexes; Amendments; Governing Law
Section 6.1 Annexes
Each annex to this Compact constitutes an integral part hereof, and
references to ``Annex'' mean an annex to this Compact unless otherwise
expressly stated.
Section 6.2 Amendments
(a) The Parties may amend this Compact only by a written agreement
signed by the Principal Representatives (or such other government
official designated by the relevant Principal Representative).
(b) Notwithstanding Section 6.2(a), the Parties may agree in
writing, signed by the Principal Representatives (or such other
government official designated by the relevant Principal
Representative) or any Additional Representative, to modify any Annex
to (i) Suspend, terminate or modify any Project or Activity, or to
create a new project, (ii) change the allocations of funds as set forth
in Annex II as of the date hereof (including to allocate funds to a new
project), (iii) modify the Implementation Framework described in Annex
I, or (iv) add, delete or waive any condition precedent described in
Annex IV; provided that, in each case, any such modification (1) is
consistent in all material respects with the Program Objective and
Project Objective, (2) does not cause the amount of Program Funding to
exceed the aggregate amount specified in Section 2.1 (as may be
modified by operation of Section 2.2(d)), (3) does not cause the amount
of Compact Implementation Funding to exceed the aggregate amount
specified in Section 2.2(a), and (4) does not extend the Compact Term.
Section 6.3 Inconsistencies
In the event of any conflict or inconsistency between:
(a) any Annex and any of Articles 1 through 7, such Articles 1
through 7, as applicable, will prevail; or
(b) this Compact and any other agreement between the Parties
regarding the Program, this Compact will prevail.
Section 6.4 Governing Law
This Compact is an international agreement and will be governed by
the principles of international law.
Section 6.5 Additional Instruments
Any reference to activities, obligations or rights undertaken or
existing under or in furtherance of this Compact or similar language
will include activities, obligations and rights undertaken by, or
existing under or in furtherance of any agreement, document or
instrument related to this Compact and the Program.
Section 6.6 References to MCC Web Site
Any reference in this Compact, the PIA or any other agreement
entered into in connection with this Compact, to a document or
information available on, or notified by posting on the MCC Web site
will be deemed a reference to such document or information as updated
or substituted on the MCC Web site from time to time.
Section 6.7 References to Laws, Regulations, Policies and Guidelines
Each reference in this Compact, the PIA or any other agreement
entered into in connection with this Compact, to a law, regulation,
policy, guideline or similar document will be construed as a reference
to such law, regulation, policy, guideline or similar document as it
may, from time to time, be amended, revised, replaced, or extended and
will include any law, regulation, policy, guideline or similar document
issued under or otherwise applicable or related to such law,
regulation, policy, guideline or similar document.
Section 6.8 MCC Status
MCC is a United States government corporation acting on behalf of
the United States Government in the implementation of this Compact. MCC
and the United States Government assume no liability for any claims or
loss arising out of activities or omissions under this Compact. The
Government
[[Page 21051]]
waives any and all claims against MCC or the United States Government
or any current or former officer or employee of MCC or the United
States Government for all loss, damage, injury, or death arising out of
activities or omissions under this Compact, and agrees that it will not
bring any claim or legal proceeding of any kind against any of the
above entities or persons for any such loss, damage, injury, or death.
The Government agrees that MCC and the United States Government or any
current or former officer or employee of MCC or the United States
Government will be immune from the jurisdiction of all courts and
tribunals of Malawi for any claim or loss arising out of activities or
omissions under this Compact.
Article 7. Entry Into Force
Section 7.1 International Agreement
Before this Compact enters into force, the Government will proceed
in a timely manner to complete all of its domestic requirements for
each of the Compact and the Program Implementation Agreement to enter
into force as an international agreement.
Section 7.2 Conditions Precedent to Entry Into Force
Before this Compact enters into force:
(a) The Program Implementation Agreement must have been signed by
the parties thereto;
(b) The Government must have delivered to MCC:
(i) A letter signed and dated by the Principal Representative of
the Government, or such other duly authorized representative of the
Government acceptable to MCC, confirming that the Government has
completed its domestic requirements for this Compact to enter into
force and that the other conditions precedent to entry into force in
this Section 7.2 have been met.
(ii) A signed legal opinion from the Attorney General of Malawi (or
such other legal representative of the Government acceptable to MCC),
in form and substance satisfactory to MCC; and
(iii) Complete, certified copies of all decrees, legislation,
regulations or other governmental documents relating to the
Government's domestic requirements for this Compact to enter into force
and the satisfaction of Section 7.1, if any, which MCC may post on its
Web site or otherwise make publicly available;
(c) MCC shall not have determined that after signature of this
Compact, the Government has engaged in a pattern of actions
inconsistent with the eligibility criteria for MCC Funding;
(d) The Government has delivered to MCC evidence, satisfactory to
MCC, that it has fully funded a turnaround facility for Electricity
Supply Corporation of Malawi (``ESCOM'') to meet ESCOM's working
capital and investment capital needs for the Government's Fiscal Year
2012, as further described in Annex I to this Compact (the ``Turnaround
Facility'');
(e) The Government will ensure that ESCOM has employed a
professionally qualified Chief Executive Officer for ESCOM; and
(f) The Government will have delivered a schedule for the
construction of the Kapichira II hydropower plant that is acceptable to
MCC.
Section 7.3 Date of Entry Into Force
This Compact will enter into force on the date of the letter from
MCC to the Government in an exchange of letters confirming that MCC has
completed its domestic requirements for entry into force of this
Compact and that the conditions precedent to entry into force in
Section 7.2 have been met.
Section 7.4 Compact Term
This Compact will remain in force for five (5) years after its
entry into force, unless terminated earlier under Section 5.1 (the
``Compact Term'').
Section 7.5 Provisional Application
Upon signature of this Compact, and until this Compact has entered
into force in accordance with Section 7.3, the Parties will
provisionally apply the terms of this Compact; provided that, no MCC
Funding, other than Compact Implementation Funding, will be made
available or disbursed before this Compact enters into force.
In Witness Whereof, the undersigned, duly authorized by their
respective governments, have signed this Compact.
Done at Lilongwe, Malawi, this 7th day of April, 2011, in the
English language only.
The United States of America, acting through the Millennium
Challenge Corporation, Name: Patrick Fine, Title: Vice President,
Department of Compact Operations.
The Republic of Malawi, acting through the Ministry of Finance,
Name: Kenny Edward Kandodo, Title: Minister of Finance.
Annex I Program Description
This Annex I describes the Program that MCC Funding will support in
Malawi during the Compact Term.
A. Program Overview
1. Background and Consultative Process
(a) Background
Malawi is a landlocked country in southeast Africa that gained
independence in 1964 and has a population of approximately 13.8 million
people. Although Malawi has seen economic growth average seven percent
over the last six years, an estimated 51 percent of the population
lives on less than US$1.25 a day, and gross national income per capita
stands at approximately US$880 (purchasing power parity (``PPP'')
adjusted). The economy remains heavily dependent on rain-fed
agriculture and primary commodity exports, and sustained economic
growth and development require increasing productivity of industry,
agriculture, and services, as well as diversification of the economy.
Malawi's economy faces numerous challenges, including a power
sector that is one of the most severely constrained in sub-Saharan
Africa. The economic costs of an unreliable and inadequate power
supply, as well as the costs of inappropriate pricing and high
technical and non-technical losses, are estimated at seven to nine
percent of GDP. In order to improve the prospects for sustained growth,
poverty reduction, and improved delivery of health and education
services, the power sector must be stabilized and expanded. Building on
its current efforts to reform the power sector, the Government seeks to
invest in infrastructure, turn around its electricity utility--
Electricity Supply Corporation of Malawi (``ESCOM'')--and develop an
enabling legal and regulatory environment for investment in the sector.
The Program is designed to support these efforts and assist Malawi with
the sector's transformation.
(b) Consultative Process
Malawi was deemed eligible for Compact assistance in 2007. To
coordinate the Compact development process, the Government formed a
core team (the ``MCA-Malawi Core Team'') in March 2008 to work with MCC
to develop the Program. In May 2008, the MCA-Malawi Core Team initiated
an analysis of constraints to economic growth in Malawi, in
collaboration with the World Bank, the U.K. Department for
International Development and the African Development Bank. Pursuant to
this analysis and an extensive consultative process with key
stakeholders, the power sector was identified as a key constraint to
economic growth in Malawi.
[[Page 21052]]
2. Goal and Objectives
The Compact Goal is to reduce poverty through economic growth. The
Program Objective is to increase investment and employment income by
raising the profitability and productivity of enterprises, expand
access to electricity for the Malawian people and businesses, and
improve delivery of social services. The Project Objective is to
improve the availability, reliability, and quality of the power supply
by increasing the throughput capacity and stability of the national
electricity grid, increase efficiency of hydropower generation, and
create an enabling environment for future expansion by strengthening
sector institutions and enhancing regulation and governance of the
sector.
3. Beneficiaries
By reducing power outages and technical losses, enhancing the
sustainability and efficiency of hydropower generation, and increasing
the potential kilowatt hours (``kWh'') of throughput to electricity
consumers, the Program will reduce energy costs to enterprises and
households, improve productivity in agriculture, manufacturing, and
service sectors, and support the preservation and creation of
employment opportunities in the economy. The Parties expect the Program
to result in the following benefits and distribution thereof:
An estimated 5 million individuals will benefit by year 20
after the Compact Term through reduced domestic and enterprise energy
costs, increased employment income, and profits;
An estimated US$2.4 billion of income benefits to Malawi
at the present discounted rate of 10 percent;
An estimated 40 percent of beneficiaries are currently
extremely poor, and 60 percent are poor \2\; and
---------------------------------------------------------------------------
\2\ ``Extremely poor'' is defined as living on the equivalent
amount in 2010 of less than US$1.25 per day 2005 PPP adjusted
dollars, and ``poor'' is defined as living on less than US$2.00 per
day 2005 PPP adjusted dollars.
---------------------------------------------------------------------------
Extremely poor individuals will gain approximately US$221
of benefits in PPP terms, and poor individuals will gain an average of
US$291 (estimates based on recent employment and electricity connection
patterns, and incorporate effects of a modest rise in tariffs, to
partly finance expanded access).
These estimated income benefits do not include the full value of
improvements to the delivery of health and education services of
improved power supply, but these are likely to be important both
economically and socially. All projected results depend upon
complementary investments in generation capacity, as well as the
successful implementation of the infrastructure investments, the
sustained turnaround of ESCOM, and the realization of power sector
reforms.
B. Power Sector Revitalization Project
To advance the Program Objective, the Parties have designed a
project to achieve a better-performing power sector with improved
availability, reliability and quality of the power supply, increased
efficiency of hydropower generation, and strengthened sector capacity
and governance (the ``Power Sector Revitalization Project''). Set forth
below is a description of the Power Sector Revitalization Project that
the Government will implement, or cause to be implemented, with support
from MCC Funding.
The Power Sector Revitalization Project consists of the following
activities (each an ``Activity''):
Investing in infrastructure development, including
investment by the Government in new generation, and MCC Funding for
generation and increased transmission and distribution capacity
(``Infrastructure Development Activity''); and
Rebuilding ESCOM into a financially strong, well-managed
utility and developing a regulatory environment that supports public
and private investment in new generation capacity and expanded access
(``Power Sector Reform Activity'').
1. Infrastructure Development Activity
The Infrastructure Development Activity will rehabilitate, upgrade
and modernize ESCOM's generation, transmission and distribution assets
in most urgent need of repair, in order to preserve existing
generation, improve the capability of the transmission system, and
increase the efficiency and sustainability of hydropower generation. To
facilitate the development and implementation of the Program, MCC is
providing support for the Government's ability to identify and
prioritize investments in the sector by developing an integrated
resource plan. MCC Funding will support significant investments in the
power system infrastructure to preserve generation and stabilize and
modernize the transmission and distribution network.
The Infrastructure Development Activity is only viable, technically
and economically, if the Government and ESCOM maintain current
generation assets and expand the generation capacity of the power
system. Under the Infrastructure Development Activity, the Government
will invest in new generation by completing the construction of the
Kapichira II hydropower plant. Additionally, the Government will
continue to seek to attract sustainable investment from the private
sector and other donors to add significant amounts of new generation to
the system.
The Parties expect that by the end of the Compact Term, the
Infrastructure Development Activity, together with the Government's
commitment to complete construction of Kapichira II, will result in
increases in generation capacity (from 286 MW to approximately 356 MW),
network throughput capacity (from 260 MW to approximately 410 MW) and
distribution capacity (from 868 MVA to approximately 1,078 MVA), and a
reduction of total system losses from 20-25 percent to 18 percent.
(a) Integrated Resource Plan
To facilitate the development and implementation of the Program,
MCC is supporting the development of the Malawi 2020 Integrated
Resource Plan (``IRP'') to enhance the Government's efforts to add
generation. The objective of the IRP is to identify a prioritized list
of generation resources that can help the Government and ESCOM meet the
increasing demands for power in a manner that balances the objective of
least or low cost power to users and diversification of energy sources,
and to increase the impact of the Project. The expected outcome of the
IRP is an executed plan to target and secure increased investments in
the power system.
(b) Nkula A Refurbishment Sub-Activity
MCC Funding will support the refurbishment of the Nkula A
hydropower plant, with the objective to improve the availability of
power in Malawi by reducing outages caused by the condition of the
assets, and maximizing power output from Nkula A. The refurbishment
will improve the reliability of the plant, extend its useful life, and
thereby avoid a partial or total failure of the plant.
(c) Transmission Network Upgrade Sub-Activity
This sub-activity is designed to upgrade the backbone of the
transmission network to: (1) improve the quality and reliability of
supply in the northern, central, and southern regions of the country;
(2) increase the capacity to move power from the south where 98 percent
of Malawi's power is generated to the central and northern regions; (3)
reduce technical losses on
[[Page 21053]]
transmission lines; and (4) provide a secure transmission link between
the southern and central regions.
MCC Funding will support the following investments:
(i) 220kV high voltage power line (the transmission ``backbone'' of
the Malawi power system as currently configured) from the Nkula B
hydropower plant to Lilongwe, which covers the southern and central
regions of Malawi; the section of the backbone from Bawi or Golomoti,
as the case may be, to Lilongwe--subject to completion and results of a
full feasibility study and environmental and social impact assessments;
and
(ii) 132kV line parallel to existing 66kV and 33kV lines from
Chintheche to Luwinga and from Luwinga to Bwengu in the northern
region.
(d) Transmission and Distribution Upgrade, Expansion, and
Rehabilitation Sub-Activity.
This sub-activity includes investments in the southern, central,
and northern power systems of the Malawi power network. MCC Funding
will support the following measures:
(i) Upgrading (up-rating) of existing network connections (33kV,
11kV);
(ii) Extension of existing substations (including 66kV);
(iii) Up-rating of transformers in existing substations;
(iv) Development of new substations;
(v) Installation of improved protection systems;
(vi) Provision of new network extensions and connections; and
(vii) Installation of new controls and communication systems
(SCADA).
(e) Environment and Natural Resource Management (``ENRM'') Sub-Activity
The objective of the ENRM sub-activity is to help the Government
and other relevant stakeholders address the growing problems of aquatic
weed infestation and excessive sedimentation in the Shire River which
cause costly disruptions to downstream power plant operations. MCC
Funding will support the following measures:
(i) Mitigation of the impact of the weeds and sedimentation through
mechanical and biological measures (in accordance with international
best practices), including the purchase and use of dredgers and weed-
harvesting equipment at existing hydropower plants and the Liwonde
Barrage, and expanded use of upstream biological control measures; and
(ii) Development and implementation of an Environmental and Natural
Resource Management Action Plan (``ENRMAP''), acceptable to MCC, that
enables an improved understanding of the environmental, social
(including gender), and economic factors that cause or contribute to
weed infestation and sedimentation in the Shire River, and establishes
a set of prioritized interventions based on economic, institutional,
policy, legal, environmental and social criteria to increase capacity
to address these factors, in collaboration with other donors and
stakeholders.
The Parties expect that the ENRM sub-activity will decrease outages
and increase electricity output at the Nkula, Tedzani, and Kapichira
hydropower plants that are currently affected by invasive weeds and
excessive sedimentation. The ENRM sub-activity is also expected to
improve land use and watershed management practices in the Shire River
basin to help resolve underlying environmental and social issues that
affect hydropower, communities, and other users dependent on ecosystem
services.
(f) Public Sector Power Sector Preservation and New Generation
Investments
An essential part of the Infrastructure Development Activity is the
addition of new generation for the utilization of the new and upgraded
transmission and distribution assets. The economic viability of MCC-
funded investments is contingent on maintaining at least the current
generation capacity of the power system (286 MW) during the Compact
Term and then expanding it by at least 64 MW no later than the end of
the Compact Term. In addition to this new generation, the Government
expects to add significant generation to the system in the coming
years, and MCC Funding will support planning and technical assistance
through the IRP.
To achieve the preservation and new generation required under the
Compact, the Government commits to meet milestones. Under the
preservation milestones, the Government commits to taking all steps
necessary to maintain current generation capacity in accordance with a
plan developed by ESCOM in line with industry best practices, as
acceptable to MCC. If the system's generation capacity falls below 286
MW, unless caused by the temporary shutdown of plants for maintenance
or rehabilitation or force majeure, the Government will use
commercially reasonable efforts to obtain interim replacement output.
Under the new generation milestones, the Government commits to
providing a construction schedule for the 64 MW Kapichira II hydropower
plant (``Kapichira II'') prior to entry into force and completing
construction by the end of the Compact Term. The Government will
provide quarterly updates to MCC on the satisfaction of milestones of
the Kapichira II construction schedule.
2. Power Sector Reform Activity
The Power Sector Reform Activity complements the Infrastructure
Development Activity by providing support for the Government's policy
reform agenda and building capacity in pivotal sector institutions:
ESCOM, the Malawi Energy Regulatory Authority or its successor
(``MERA''), and the Ministry of Natural Resources Energy and
Environment (``MNREE''). The Power Sector Reform Activity consists of
two sub-activities: the ESCOM Turnaround sub-activity and the
Regulatory Strengthening sub-activity.
(a) ESCOM Turnaround Sub-Activity
The objectives of this sub-activity are to restore ESCOM's
financial health and rebuild ESCOM into a financially strong, well-
managed company. MCC Funding will support three main areas of the
turnaround: finances, corporate governance and operations.
(i) Finances
MCC Funding will support the provision of technical assistance and
equipment to ESCOM, including: (1) Development of a detailed financial
plan for 2011-2016; (2) deployment of a financial turnaround team; (3)
development of a non-technical loss reduction study; (4) assistance in
rapid billings and collections improvements; (5) strengthening of
internal controls; (6) rebuilding of the customer database; (7) pursuit
of debt collection; (8) development of a new automated financial
management system; (9) assistance with tariff applications to the
regulator; and (10) assistance with fixed asset mapping.
The Government agrees that a detailed financial plan for ESCOM is
at the core of understanding and resolving the current financial
challenges of the company. With MCC assistance, the Government will
develop a detailed financial plan (the ``Financial Plan'') designed to
restore ESCOM to financial and operational sustainability. The
Financial Plan will project the working and investment capital needs of
ESCOM for the 2011-2016 fiscal years, as agreed to with MCC. The
Financial Plan will be based upon key financial inputs, such as
projected accounts receivables and payables, future maintenance and
capital investment needs, tariff increase projections, planned
operational efficiencies, annual results of operations pursuant to
audited financial statements, and other inputs relevant to
[[Page 21054]]
obtain sound projections of the budget support that the Government will
provide, if required, through the Turnaround Facility. The Financial
Plan will be updated on a quarterly basis with current ESCOM financial
information, and will be approved by ESCOM's Board of Directors and the
Government, as shareholder.
The Government will create and fund the ESCOM Turnaround Facility
to support ESCOM's working capital and investment needs, as identified
in the Financial Plan, during the Compact Term. The Government and MCC
will identify specific milestones in the Malawi budget process and
review progress leading up to the appropriation of funds for the
Turnaround Facility. The Government will transfer to the Turnaround
Facility, by the start of each ESCOM fiscal year (July-June) the
required funding for that fiscal year to cover the maximum projected
shortfall for ESCOM in working and investment capital under the
Financial Plan. The Government will apportion this funding through the
Government budget prior to the start of each fiscal year, beginning
FY2011-2012. The ESCOM Board will control the use of funds disbursed
from the Turnaround Facility. The funding and expenditure, if needed,
of the Turnaround Facility in accordance with the Financial Plan will
be a condition to Disbursement of continued MCC Funding.
The Government has converted a substantial portion of the debt owed
to it by ESCOM into equity. Any remaining debt owed to the Government
by ESCOM will be cleared from ESCOM's balance sheet no later than entry
into force of the Compact. In addition, the Government will ensure that
ESCOM restructures its third-party debt obligations in a manner that
affords ESCOM a reasonable debt-service burden, consistent with the
Financial Plan.
(ii) Corporate Governance
To improve corporate governance and support the turnaround, MCC
Funding will support: (1) Recruitment services for key personnel; (2)
twinning/mentoring arrangements or management contract support; (3) a
performance management system; and (4) strategic planning by the board
of directors of ESCOM (``ESCOM Board''). MCC funding will provide
technical assistance on corporate performance standards, including a
study on best practices and benchmarks for corporate governance of
electric utilities with regional, continental and international
benchmarks and recommendations for ESCOM no later than the end of the
second year of the Compact Term (the ``Corporate Governance
Benchmarking Study'').
The Government will ensure that ESCOM employs a Chief Executive
Officer (CEO) prior to entry into force of this Compact. The individual
selected for CEO will have at least ten years of public utility
management experience, preferably at the CEO level, and a professional
qualification in engineering, business, or finance.
The Government recognizes that good corporate governance of ESCOM
is essential for long-term performance of the company and commits to
improve ESCOM's corporate governance framework and practices. The
Government will ensure that the ESCOM Board adheres to clear benchmarks
for good corporate governance, including: (A) compliance with the
requirements under Malawi's Companies Act, Public Financial Management
Act, Public Audit Act, and the Energy Laws; (B) adherence to Malawi
Code II, including duties of care and loyalty to the corporation and
restrictions on conflicts of interest and related party transactions;
(C) following the Sector Guidelines for Parastatal Organizations (the
most recent of the draft or final form); and (D) staggering of ESCOM
Board terms.
The Government warrants that ESCOM has restructured its existing
ESCOM Board committees to have the following three committees: (i)
Finance and Audit Committee; (ii) Technical Committee; and (iii)
Appointments and Remuneration Committee. The Government will ensure
that future nominations and appointments to the ESCOM Board will be
done in accordance with a framework established pursuant to Malawi's
Parastatals Reform Programme.
The Government will ensure that ESCOM submits and publishes its
annual audited financial statements and annual reports to the relevant
authorities, and will publish reports similar to those applicable to
listed companies under Malawi's Companies Act, all of which will be
posted on ESCOM's Web site. Quarterly reports will be made available to
key stakeholders, including MCA-Malawi and MCC.
MCC Funding will support an annual performance audit of ESCOM
operations. Prior to each audit, MCC and the Government will agree to
the terms of reference based on standards for companies in Malawi,
including Malawi Code II and the Companies Act. The Government will
ensure that ESCOM takes appropriate corrective action to address any
material weaknesses or recommendations identified through the audit.
To improve ESCOM's coordination with the Government, the Government
will designate and coordinate all interaction with ESCOM through its
Department of Statutory Corporations or a replacement or successor
Government ministry or agency (``DSC''). The Government will ensure
that all Government interaction with and shareholder oversight of ESCOM
will be coordinated through DSC.
(iii) Operations
MCC Funding will support change management efforts, including
developing organizational design, conducting performance management
reviews, and designing human resources strategies. MCC Funding will
support the procurement division by strengthening the internal control
environment and developing policies and procedures to implement best
practices in procurement. MCC Funding will support other operational
assistance, including live wire repairs, asset management, occupational
health and safety, safety and diagnostic equipment, and critical spare
parts.
MCC Funding will also support the development of ESCOM's annual
maintenance plan. The Government will ensure that ESCOM budgets and
expends the amount set forth in the maintenance plan (based on a
percentage of undepreciated asset value) for preventive maintenance of
generation, transmission and distribution assets.
The GOM affirms that ESCOM will adhere to the Public Procurement
Act of Malawi and the policies and procedures of the Government's
Office of the Director of Public Procurement (``ODPP''). ESCOM will
also take the following steps: (1) Strengthen the Internal Procurement
Committee as an effective manager and overseer of procurement; (2)
develop procurement benchmarks and milestones; (3) restructure its
procurement and stores management staff to streamline operations; (4)
minimize redundancies and fill skill gaps; (5) conduct public outreach
through an information campaign; (6) design and agree on a new
procurement organization structure merging procurement and supply; (7)
secure guidance from ODPP; (8) develop a formal process to draft annual
procurement plans; and (9) review and restructure the stores function
and conduct regular stock checks.
[[Page 21055]]
(b) Regulatory Strengthening Sub-Activity
The Regulatory Strengthening sub-activity complements the
Infrastructure Development Activity and the ESCOM Turnaround sub-
activity by providing support for the Government's policy reform agenda
and building capacity in pivotal sector institutions, MERA and MNREE.
The objectives of the Regulatory Strengthening Sub-Activity are to
develop a regulatory environment, consistent with best practices in
independent power utility regulation, that support investment in
generation and grid capacity at an affordable cost, with the potential
participation of the private sector.
(i) Tariff Reform
The Government understands that appropriate tariff levels are
critical to ESCOM's financial recovery and the growth of the power
sector. MCC Funding will support a cost of service study to determine
appropriate tariff levels and schedules to achieve full cost recovery,
more efficient utilization of electricity, and achievement of social
objectives. Based on the results of this study, the Government agrees
to a phased implementation of full-cost recovery tariffs and schedules
according to a timeline to be determined by entry into force of the
Compact. Without reducing current tariff levels, the phased
implementation will ensure an incremental increase in the scope of
tariff levels and schedules, that will begin with a tariff that permits
recovery of operating costs, thereafter recovery of operating costs
plus capital replacement charges, and by the end of the Compact Term
recovery of capital replacement costs, capital replacement charges and
capital expansion charges. This full-cost recovery tariff should
include recovery of operating expenses, financing costs actually
incurred by ESCOM, capital replacement charges and capital expansion
charges so that tariffs reflect ESCOM's long-run marginal costs. The
Government will also seek to ensure adequate protection of poor and
vulnerable groups through a lifeline tariff or other mechanism in a
manner which is consistent with average total cost recovery and
efficient utilization of electricity.
The Government will adopt the policy, legal and regulatory changes
necessary to implement tariff reform, including: (1) rationalizing the
five percent inflation fluctuation trigger and the four-year interval
for review of base tariffs and tariff adjustment formula, so that
tariffs may be adjusted on a basis that supports the viability of
licensees; and (2) improving the components and definitions for the
tariff adjustment components (collectively, the ``Tariff Indexation
Framework'').
(ii) MERA Capacity Building
MCC Funding will support capacity building at MERA to improve its
regulatory oversight activities and operations. This work will include
the development and implementation of training and mentoring of MERA
staff, and complementary activities designed to develop MERA. MCC
Funding will also assist MERA to develop peer relationships with other
regulatory bodies or related organizations.
MCC Funding will be used to complete a study to support the
Government's commitment to further develop independent and capable
governance of MERA. This study will be completed by the end of the
second year of the Compact Term. The study will focus on best practices
and benchmarks for corporate governance for electricity regulators,
including regional, continental and international benchmarks and
recommendations for the future governance of MERA (the ``Sector
Benchmarking Study'').
The Government will ensure that MERA develops new technical codes
for transmission, distribution and metering to account for captive,
cogeneration and other forms of generation. MERA will also develop new
``use of system'' charging mechanisms, implement the design for a
bilateral market, and develop codes to implement existing legal
provisions on third-party access to the transmission network. MCC
Funding will support these activities through technical assistance.
The Government will consider changing the composition of the board
of directors of MERA (``MERA Board''), to make the MERA Board and its
governance procedures consistent with best practices for independent
regulatory authorities in the region and internationally. Specifically,
the Government will review the continued membership of ex officio
directors and the appropriateness of cross-representation on power
sector boards and potential conflicts of interest that may arise
between the regulator and regulated entities through board membership,
such as the presence of the Principal Secretary for Energy Affairs and
the Director of Energy Affairs on the MERA Board. To the extent that
Government ex officio members continue on the ESCOM and MERA Boards,
the Government affirms its commitment to ensuring that the ESCOM and
MERA Boards meet standards applicable to Malawi parastatals with
respect to conflicts of interest and independent decision-making, that
the ex officio directors on the MERA Board will continue to be non-
voting members, and that regulatory rulings are transparent.
The Government will ensure that the scope of MERA's power sector
responsibilities is limited to regulation and policy implementation,
and not for policy development or the solicitation of new generation.
In recognition of another key indicator of their progress
developing a model regulatory institution, the Government and MERA
confirm that levies and other charges applicable under the Energy Laws
are, and have been, sufficient to cover MERA's operating expenses. The
Government will ensure that MERA will publish an annual report
including audited financial statements, as required under the Energy
Regulation Act. MCC Funding will be used to support MERA in its
development, including development of an annual report.
(iii) Enabling Environment for Public and Private Sector Investment
MCC Funding will support the Government's efforts to implement a
suitable market model based on the studies performed in connection with
the development of this Compact. MCC Funding will support MNREE's
efforts to study and design (1) a single buyer model for the power
sector (``SBM Plan''); and (2) the building blocks of a bilateral power
trade market. MCC Funding will also assist with stakeholder education
and outreach to support consumer organizations, industrial and
commercial users, and other key players in advocating for improved
service. In addition, MCC will seek to work with Parliament to
strengthen its role in oversight of the power sector.
Based on the SBM Plan, the Government will create a single buyer,
either ring-fenced within ESCOM, or a separate legal entity so that the
single buyer's financial and system operation activities are autonomous
from other ESCOM business units or government entities. Also, the
Government will provide support to improve the credit worthiness of
this single buyer. The Government will not unbundle ESCOM, except as
otherwise provided herein, and shall not make effective the provisions
in Section 4 and Parts IV and V of the Electricity Act that limit
licensees to one license.
The Government will also clarify the Rural Electrification Act (the
``REA'') so that entities that pursue rural electrification activities
without
[[Page 21056]]
receiving funding from the Rural Electrification Fund are not subject
to the REA's internal rate of return and megawatt size restrictions.
The Government will also revise its National Energy Policy to allow
charging of differential tariffs for off-grid electrification.
(c) Power Sector Reform Agenda Semi-Annual Review
The Government and MCC will jointly supervise, through specific
milestones, progress on the implementation of the Government's power
sector reform agenda in the following areas: ESCOM finances; ESCOM
operations; ESCOM corporate governance; tariff reform; MERA governance;
and regulatory enabling environment for public and private sector
participation (collectively, the ``Power Sector Reform Agenda''). The
Government and MCC have specified the milestones below, for which new
capitalized terms are further defined in Annex III. Prior to entry into
force of the Compact, the Parties will identify semi-annual benchmarks
for each milestone. The parties will conduct a semi-annual review of
progress on the Power Sector Reform Agenda. Corrective action,
acceptable to MCC, as needed to ensure satisfactory progress, will be a
condition of continued MCC Funding.
(i) ESCOM Finances
The financial health of ESCOM will be tracked by setting and
maintaining the following financial ratios and covenants:
(1) Cost Recovery Ratio;
(2) Current Ratio supported by cash flow statements;
(3) Bad Debt Ratio;
(4) Average Cost of Electricity Billed; and
(5) ESCOM Billing and Collection Efficiency.
(ii) ESCOM Operations
Improvements in the operations of ESCOM will be measured by the
following areas:
(1) Quantity of Electricity Metered;
(2) Quantity of Electricity Billed;
(3) Reduction in Losses;
(4) Voltage Quality;
(5) Maintenance Expenditures;
(6) Reduced Outages; and
(7) Annual Procurement Audit.
(iii) ESCOM Corporate Governance
ESCOM corporate governance will be measured by ESCOM's performance
on:
(1) Corporate Governance Benchmarking Study;
(2) Annual performance audit reports; and
(3) Public annual report and audited financial statements.
(iv) Tariff Reform
Progress on tariff reform will be phased and measured by:
(1) Cost of service study;
(2) Tariff levels and schedules;
(3) Tariff Indexation Framework; and
(4) Tariff design efficiency, including, a lifeline tariff.
(v) MERA Governance
Improvements in MERA's governance and capacity will be tracked by:
(1) Sector Benchmarking Study;
(2) Peer review; and
(3) Public annual report and audited financial statements.
(vi) Improved Market Structure for Private Investment
Key milestones in the establishment of an enabling environment will
be:
(1) Single-buyer model formed; and
(2) Legal framework for strengthened electricity market.
3. Environmental and Social Safeguards
The Project will be implemented in compliance with the MCC
Environmental Guidelines and the MCC Gender Policy, and any
resettlement will be carried out in accordance with the World Bank's
Operational Policy on Involuntary Resettlement in effect as of July
2007 (``OP 4.12'') in a manner acceptable to MCC. The Government also
will ensure that the Project complies with all national environmental
laws and regulations, licenses and permits, and applicable
international conventions and treaties, except to the extent such
compliance would be inconsistent with this Compact. Specifically, the
Government will: (a) Cooperate with or complete, as the case may be,
any ongoing environmental assessments, or if necessary undertake and
complete any additional environmental assessments, social assessments,
environmental management plans, environmental and social audits,
resettlement policy frameworks, and resettlement action plans required
under the laws of Malawi, the MCC Environmental Guidelines, this
Compact, the Program Implementation Agreement, or any Supplemental
Agreement, or as otherwise required by MCC, each in form and substance
satisfactory to MCC; (b) ensure that Project-specific environmental and
social management plans are developed and all relevant measures
contained in such plans are integrated into project design, the
applicable procurement documents and associated finalized contracts, in
each case, in form and substance satisfactory to MCC; and (c) implement
to MCC's satisfaction appropriate environmental and social mitigation
measures identified in such assessments or plans. Unless MCC agrees
otherwise in writing, the Government will fund all necessary costs of
environmental and social mitigation measures (including, without
limitation, costs of resettlement) not specifically provided for or
that exceed the MCC Funding specifically allocated for such costs in
the Detailed Financial Plan for the Project.
To maximize the positive social impacts of the Project, address
cross-cutting social and gender issues such as human trafficking, child
and forced labor, and HIV/AIDS, and ensure compliance with the MCC
Gender Policy, and to the extent that such does not conflict with MCC's
Gender Policy, the Malawi National Gender Policy as ultimately adopted
by the Government, the Government will: (i) Develop a comprehensive
social and gender integration plan which, at a minimum, performs a
gender, institutional and policy review relevant to the Compact
Project, identifies approaches for regular, meaningful and inclusive
consultations with women and other vulnerable/underrepresented groups,
consolidates the findings and recommendations of Project-specific
social and gender analyses and conducts additional gender analysis as
needed, and sets forth strategies for incorporating findings of the
social and gender analyses into final Project designs and additional
targeted activities as appropriate (``Social and Gender Integration
Plan''); (ii) ensure, through monitoring and coordination during
implementation, that final Activity designs, construction tender
documents and implementation plans are consistent with and incorporate
the outcomes of the social and gender analyses and Social and Gender
Integration Plan; and (iii) on an annual basis, review and update the
Social and Gender Integration Plan as needed to reflect lessons learned
and project-specific analysis.
During the development of the Compact, MCC and the Government
assessed and identified the potential environmental and social impacts
and risks of the Activities. Under the definitions articulated in MCC's
Environmental Guidelines, (1) the Infrastructure Development Activity
is classified as a Category A project; (2) the Power Sector Reform
Activity is a Category C project; and (3) the ENRM sub-activity is
categorized as a Category B project. In addition to environmental
risks, MCC has also identified certain social and gender-related and
resettlement risks from the Activities.
[[Page 21057]]
Several measures have been taken to mitigate the risks associated
with these Activities. Environmental and Social Impact Assessments
(``ESIAs'') have been developed for the Infrastructure Development
Activity, and additional environmental and social (including gender)
analysis and mitigation planning will be carried out for certain
activities of the Infrastructure Development Activity and the ENRM sub-
activity. MCC will require appropriate storage and disposal, possibly
outside of Malawi, of oil-contaminated soils, PCB-contaminated oils,
soils and equipment, and other hazardous waste associated with
implementation of the Infrastructure Development Activity. MCC Funding
will be used to design and implement a hazardous waste management plan
under the Infrastructure Development Activity. MCC will also require,
and MCC Funding will support, measures to ensure appropriate disposal
of weeds and sediment extracted from dredging and weed harvesting
operations at the hydropower plants. The Government has identified
potential sites for the disposal of weeds and sediment associated with
implementation of the ENRM sub-activity and will require appropriate
development and management of such sites.
To address resettlement risks, a Resettlement Policy Framework has
been prepared to specify how resettlement planning and implementation
will proceed in connection with the Compact Activities. This
resettlement framework will attempt to minimize loss of land and
immovable assets, and avoid physical displacement of residential and
other structures. In the event an Activity triggers involuntary
resettlement, MCC Funding will support the development of a
resettlement action plan by MCA-Malawi in consultation with relevant
Government entities, and such resettlement action plan will be
submitted for approval to MCC.
The Compact will fund additional analysis of social and gender-
related implications of the Activities. This analysis will build upon
preliminary work conducted during Compact design to ensure that the
Activities are implemented so as to address and integrate the needs of
vulnerable groups, in adherence with MCC's Gender Policy.
4. Donor Coordination
MCC and the MCA-Malawi Core Team have sought development partners
with complementary expertise on energy issues and whose further
involvement could help ensure sustainability of the Compact. During
Compact development, MCC's review of feasible investments identified
approximately $200 million more in beneficial projects than currently
feasible under the Compact. Given MCC's inability to finance these
otherwise important investments, MCC has discussed with the World Bank
and the African Development Bank--the other key donors supporting the
power sector in Malawi--the possibility of partnering to support a
comprehensive power sector reform program. This reform program could
also include sector institutional strengthening activities such as
capacity building and technical assistance for the MNREE's Department
of Energy.
MCC has also been in discussions with the International Finance
Corporation (IFC) regarding creating an appropriate enabling
environment for private sector and IFC investment. IFC recently funded
a study that identified barriers to private sector investment in energy
efficiency and renewable energy opportunities and scoped potential IFC
investments. IFC's report identifies a critical need for technical
assistance for the Government to establish an enabling environment in
order to facilitate these energy efficiency and renewable energy
opportunities. As of November 2010, MCC is considering incorporating
the IFC's recommendations in the policy, regulatory and legal framework
strengthening activity currently supported under the Compact.
5. USAID
While USAID does not currently play an active role in implementing
this Compact, MCC is seeking USAID involvement to provide technical
assistance for the power sector. MCC is investigating whether USAID's
Africa Infrastructure Program (AIP) could potentially provide technical
assistance to the Government of Malawi to assist them with structuring
agreements with independent power producers and capacity building for
MERA. In addition, MCC will coordinate its outreach initiatives with
the Malawi parliament, media and civil society under the Regulatory
Strengthening sub-activity with USAID's complementary governance and
accountability initiatives under its Malawi Legislative Strengthening
program.
6. Sustainability
The Compact includes several measures to ensure sustainability of
MCC's investment. As designed, both the Power Sector Reform Activity
and the ENRM sub-activity are targeted to ensure sustainability of the
Infrastructure Development Activity. In addition, the Infrastructure
Development Activity includes certain sustainability safeguards such as
requiring a certain percentage of asset value to be set aside for
preventative maintenance.
Substantial progress on the Power Sector Reform Activity is
essential to the magnitude and sustainability of the Compact
investments in physical infrastructure, and to the sustained economic
growth of Malawi. The Power Sector Reform Activity also addresses key
structural issues in the power sector including tariff reform, creating
an environment capable of attracting private sector investment, and
ensuring the creation of a strong and independent energy sector
regulator. These reform activities are structured both as covenants in
the Compact and conditions to entry into force of the Compact, or will
become conditions to disbursement in the Program Implementation
Agreement. Due to the weed and sedimentation problems plaguing Malawi's
almost entirely hydropower-based generation facilities, the ENRM sub-
activity will also provide necessary steps to ensure sustainability of
the Compact.
In addition to the sustainability benefits inherent in the project
design of the Power Sector Reform Activity and the ENRMAP, the
sustainability of the Infrastructure Development Activity will also
heavily depend on a robust maintenance regime for generation,
transmission and distribution assets. As part of the Infrastructure
Development Activity, MCC will require a certain percentage of its
asset value be set aside for preventative maintenance of its MCC funded
as well as other assets.
C. Implementation Framework
1. Overview
The implementation framework and the plan for ensuring adequate
governance, oversight, management, monitoring and evaluation, and
fiscal accountability for the use of MCC Funding are summarized below.
MCC and the Government will enter into the Program Implementation
Agreement, and any other agreements in furtherance of this Compact, all
of which, together with this Compact, set out certain rights,
responsibilities, duties and other terms relating to the implementation
of the Program.
2. MCC
MCC will take all appropriate actions to carry out its
responsibilities in connection with this Compact and the Program
Implementation Agreement, including the exercise of its approval
[[Page 21058]]
rights in connection with the implementation of the Program.
3. MCA-Malawi
In accordance with Section 3.2(b) of this Compact, MCA-Malawi will
act on the Government's behalf to implement the Program and to exercise
and perform the Government's rights and responsibilities with respect
to the oversight, management, monitoring and evaluation, and
implementation of the Program, including, without limitation, managing
the implementation of Projects and their Activities, allocating
resources, and managing procurements. The Government will ensure that
MCA-Malawi takes all appropriate actions to implement the Program,
including the exercise and performance of the rights and
responsibilities designated to it by the Government pursuant to this
Compact and the Program Implementation Agreement. Without limiting the
foregoing, the Government will also ensure that MCA-Malawi has full
decision-making autonomy, including, inter alia, the ability, without
consultation with, or the consent or approval of, any other party, to:
(1) Enter into contracts in its own name; (2) sue and be sued; (3)
establish Permitted Accounts in a financial institution in the name of
MCA-Malawi and hold MCC Funding in such accounts; (4) expend MCC
Funding; (5) engage a fiscal agent who will act on behalf of MCA-Malawi
on terms acceptable to MCC; (6) engage one or more procurement agents
who will act on behalf of MCA-Malawi, on terms acceptable to MCC, to
manage the acquisition of the goods, works, and services required by
MCA-Malawi to implement this Compact; and (7) competitively engage one
or more auditors to conduct audits of its accounts. The Government will
take the necessary actions to establish and maintain MCA-Malawi, in
accordance with the terms hereof including the applicable conditions
precedent to the Disbursement of Compact Implementation Funding set
forth in Annex IV to this Compact. MCA-Malawi will be administered and
managed by a Board of Trustees and a Management Unit. In addition, MCA-
Malawi will have a Stakeholders' Committee to continue the consultative
process during implementation of the Program. MCA-Malawi will be
incorporated through a trust deed under Malawi's Trustees Incorporation
Act, which trust deed will be included in the Program Implementation
Agreement (hereinafter referred to as the ``MCA-Malawi Trust Deed''),
which will, collectively, set forth the responsibilities of the Board
of Trustees, the Stakeholders' Committee and the Management Unit. The
MCA-Malawi Trust Deed will be developed and adopted in accordance with
MCC's Guidelines for Accountable Entities and Implementation
Structures, published on the MCC Web site (the ``Governance
Guidelines''), and will be in form and substance satisfactory to MCC.
MCA-Malawi on behalf of the Government will administer the MCC Funding.
(a) Board of Trustees
(i) Composition. MCA-Malawi will be governed by a board of trustees
(the ``Board of Trustees''), which will consist of voting members
representing the Government, private sector, and civil society groups,
as well as a non-voting representative of MCC as an observer. The
appointment of the trustees will be articulated in the MCA-Malawi Trust
Deed and will adhere to MCC's Governance Guidelines. Subject to further
discussion, members representing the Government will include the
Secretary of the Treasury, the Principal Secretary for Natural
Resources Energy and Environment, and the Principal Secretary for
Development Planning and Cooperation. Non-government members will be
nominated by key private sector and civil society groups rather than by
the Government, and may include but shall not be limited to the Council
for Non-Governmental Organizations in Malawi (CONGOMA), the Economics
Associations of Malawi (ECAMA), and the Malawi Confederated Chambers of
Commerce and Industry (MCCCI). There will be a minimum of seven
trustees, and a maximum of nine trustees. The composition of the Board
of Trustees will comply with the Governance Guidelines, to MCC's
satisfaction.
(ii) Roles and Responsibilities. The Board of Trustees will be
responsible for overseeing the implementation of the Program and will
have final decision-making authority and responsibility over the
implementation of the Program. The Board of Trustees will meet
regularly; the frequency of meetings will be set forth in the MCA-
Malawi Trust Deed and will be in accordance with the Governance
Guidelines. The specific roles of the voting members and non-voting
observers will be set forth in the MCA-Malawi Trust Deed. The
chairperson of the Board of Trustees will be selected by a majority
vote of the Trustees. On at least an annual basis or as otherwise
required by the Government, the Board of Trustees will report to the
Government on the status and progress of the Compact regarding
implementation, financial matters, procurements, and other matters
identified by the Government.
(b) Stakeholders' Committee
(i) Composition. A Stakeholders' Committee will be selected
according to a process in accordance with the MCC's Governance
Guidelines and the MCA-Malawi Trust Deed, as approved by MCC. Without
limiting the foregoing, as required in MCC's Governance Guidelines, the
Stakeholders' Committee will be composed of inter alia, representatives
from non-governmental organizations, civil society, private sector, and
local and regional government Program beneficiaries.
(ii) Roles and Responsibilities. Consistent with the Governance
Guidelines, the Stakeholders' Committee will be responsible for
continuing the consultative process throughout implementation of the
Program. While the Stakeholders' Committee will not have any decision-
making authority, it will be responsible for, inter alia, reviewing, at
the request of the Board of Trustees or the Management Unit, certain
reports, agreements, and documents related to the implementation of the
Program in order to provide advice and input to MCA-Malawi regarding
the implementation of the Program.
(c) Management Unit
(i) Composition. The management unit, which will be led by a
competitively selected Chief Executive Officer, will be composed of
competitively selected staff with expertise in the key components of
the Program, including, without limitation, a Deputy Chief Executive
Officer, Legal Advisor, Human Resources Officer, Power Director,
Communications and Outreach Director, Finance and Administration
Director, ESA Director, Deputy Director for Social and Gender Issues,
Procurement Director, Policy Specialist, M&E and Economics Director,
and MIS Specialist (the ``Management Unit''). The Management Unit will
also include such other personnel as provided for in the MCA-Malawi
Trust Deed. The directors will be supported by appropriate additional
staff to enable the Management Unit to execute its roles and
responsibilities.
(ii) Roles and Responsibilities. The Management Unit will be based
in Lilongwe, Malawi, and will be responsible for day-to-day
implementation of the Compact, with oversight from the Board of
Trustees. The Management Unit will serve as the principal link between
MCC and the Government, and will be accountable
[[Page 21059]]
for the successful implementation of the Program, the Project, and each
Activity. As a recipient of MCC Funding, MCA-Malawi will be subject to
MCC audit requirements.
4. Implementation Arrangements
Subject to the terms and conditions of this Compact and any related
agreements entered into in connection with this Compact, MCC and the
Government have identified certain institutions, including ESCOM, MERA
and MNREE, that may receive technical assistance or other support under
this Compact, and that, together with MCA-Malawi, will have key roles
in the implementation of the Project and the Activities (each, a
``Project Partner''). The Government will ensure that the roles and
responsibilities of each Project Partner will be clearly articulated in
an agreement between MCA-Malawi and the Project Partner, which
agreement must be in form and substance satisfactory to MCC (each a
``Project Cooperation Agreement'').
The Government will ensure that ESCOM, as a Project Partner, will
do the following in support of the Project: (a) Provide access to its
facilities and cooperate with MCA-Malawi, and its consultants
(including the PMC as defined below); (b) dedicate key staff to the
Project, including engineers, environmental, social and gender
specialists, and monitoring and evaluation personnel; (c) bear any
transportation costs and per diems and incidental expenses for any of
its personnel who travel in connection with the Project; and (d)
provide administrative and technical support and use of appropriate
office space and facilities.
MCA-Malawi will contract a project management consultant (``PMC'')
to manage and supervise the implementation of the infrastructure
portions of the Infrastructure Development Activity and will assist
MCA-Malawi with technical evaluations and contract negotiations. The
Project Cooperation Agreement between MCA-Malawi and ESCOM will set
forth the roles and responsibilities of each entity and any
coordinating mechanisms to ensure that the PMC is able to successfully
carry out its mandate. The PMC will also provide technical assistance
to ESCOM with respect to project management.
5. Fiscal Agent
Unless MCC otherwise agrees in writing, the Government, directly or
through MCA-Malawi, will engage one or more fiscal agents (each a
``Fiscal Agent''), who will be responsible for assisting the Government
with fiscal management and ensuring appropriate fiscal accountability
of MCC Funding. Duties of the Fiscal Agent will be set forth in the
Program Implementation Agreement and in such agreement as the
Government, directly or indirectly through MCA-Malawi, enters into with
each Fiscal Agent, which agreement shall be in form and substance
satisfactory to MCC.
6. Procurement Agent
Unless MCC otherwise agrees in writing, the Government, directly or
through MCA-Malawi, will engage one or more procurement agents (each as
``Procurement Agent'') to conduct and certify specified procurement
activities in furtherance of the Compact. The roles and
responsibilities of the Procurement Agent will be clearly articulated
in the Program Implementation Agreement and in such agreement as the
Government, directly or indirectly through MCA-Malawi, enters into with
each Procurement Agent, which agreement shall be in form and substance
satisfactory to MCC. Each Procurement Agent will adhere to the
standards set forth in the MCC Program Procurement Guidelines and
ensure that procurements are consistent with the procurement plan
adopted by MCA-Malawi pursuant to the Program Implementation Agreement,
unless MCC otherwise agrees in writing.
Annex II Multi-Year Financial Plan Summary
This Annex II summarizes the Multi-Year Financial Plan for the
Program.
1. General
A multi-year financial plan summary (``Multi-Year Financial Plan
Summary'') is attached hereto as Exhibit A. By such time as specified
in the PIA, the Government will adopt, subject to MCC approval, a
multi-year financial plan that includes, in addition to the multi-year
summary of estimated MCC Funding and the Government's contribution of
funds and resources, the annual and quarterly funding requirements for
the Program (including administrative costs) and for the Project,
projected both on a commitment and cash requirement basis.
Exhibit A--Multi-Year Financial Plan Summary
--------------------------------------------------------------------------------------------------------------------------------------------------------
Component CIF Year 1 Year 2 Year 3 Year 4 Year 5 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. POWER SECTOR REVITALIZATION PROJECT
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Infrastructure Development Activity................... 2,978,000 12,134,000 80,191,000 80,715,000 64,344,000 42,638,000 283,000,000
(i) Nkula A Refurbishment Sub-Activity.................... ........... ........... 4,436,000 7,762,000 7,762,000 2,218,000 22,178,000
(ii) Transmission Network Upgrade Sub-Activity............ 1,712,000 6,843,000 48,862,000 45,151,000 35,280,000 25,531,000 163,379,000
(iii) T&D Upgrade, Expansion, and Rehabilitation Sub- 740,000 2,590,000 19,090,000 19,675,000 15,377,000 11,086,000 68,558,000
Activity.................................................
(iv) Environment and Natural Resource Management Sub- 526,000 1,588,000 6,133,000 7,910,000 5,925,000 3,803,000 25,885,000
Activity.................................................
(v) Resettlement: Action Plan Development and ........... 1,113,000 1,670,000 217,000 ........... ........... 3,000,000
Implementation...........................................
(b) Power Sector Reform Activity.......................... 3,352,000 4,470,000 4,469,000 4,470,000 4,469,000 4,470,000 25,700,000
---------------------------------------------------------------------------------------------
SUBTOTAL.............................................. 6,330,000 16,604,000 84,660,000 85,185,000 68,813,000 47,108,000 308,700,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
2. CROSS-CUTTING SUPPORT
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Gender Integration.................................... 260,000 348,000 348,000 348,000 348,000 348,000 2,000,000
(b) Monitoring and Evaluation............................. 387,000 2,259,000 1,073,000 1,073,000 858,000 1,350,000 7,000,000
---------------------------------------------------------------------------------------------
SUBTOTAL.............................................. 647,000 2,607,000 1,421,000 1,421,000 1,206,000 1,698,000 9,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 21060]]
3. PROGRAM ADMINISTRATION
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) MCA-Malawi Administration............................. 2,143,000 3,607,000 3,602,000 3,899,000 3,940,000 4,076,000 21,267,000
(b) Financial Management and Procurement Controls......... ........... 2,060,000 2,122,000 2,185,000 2,251,000 2,319,000 10,937,000
(c) Financial Audits...................................... ........... 150,000 155,000 159,000 164,000 168,000 796,000
---------------------------------------------------------------------------------------------
SUBTOTAL.............................................. 2,143,000 5,817,000 5,879,000 6,243,000 6,355,000 6,563,000 33,000,000
---------------------------------------------------------------------------------------------
TOTAL COMPACT BUDGET.............................. 9,120,000 25,028,000 91,960,000 92,849,000 76,374,000 55,369,000 350,700,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annex III Description of Monitoring and Evaluation Plan
This Annex III (this ``M&E Annex'') generally describes the
components of the Monitoring and Evaluation Plan (``M&E Plan'') for the
Program. The actual content and form of the M&E Plan will be agreed to
by MCC and the Government in accordance with MCC's Policy for
Monitoring and Evaluation of Compacts and Threshold Programs as posted
from time to time on the MCC Web site (the ``MCC Policy for Monitoring
and Evaluation of Compacts and Threshold Programs''). The M&E Plan may
be modified as outlined in MCC's Policy for Monitoring and Evaluation
of Compacts and Threshold Programs with MCC approval without requiring
an amendment to this Annex III.
1. Overview
MCC and the Government will formulate and agree to, and the
Government will implement or cause to be implemented, an M&E Plan that
specifies: (a) How progress toward the Compact Goal, Program Objective
and Project Objective will be monitored (``Monitoring Component''); (b)
a process and timeline for the monitoring of planned, ongoing, or
completed Activities to determine their efficiency and effectiveness;
and (c) a methodology for assessment and rigorous evaluation of the
outcomes and impact of the Program (``Evaluation Component'').
Information regarding the Program's performance, including the M&E
Plan, and any amendments or modifications thereto, as well as progress
and other reports, will be made publicly available on the Web site of
MCC, MCA-Malawi and elsewhere.
2. Program Logic
The M&E Plan will be built on a logic model which illustrates how
the Program, Project and Activities contribute to the Compact Goal, the
Program Objective and the Project Objective.
The goal of the Compact is to reduce poverty through economic
growth. The Program Objective is to: (a) Increase investment and
employment income by raising the profitability and productivity of
enterprises; (b) expand access to electricity for the Malawian people
and businesses; and (c) improve delivery of social services. The
outcomes of the Project Activities, otherwise referred to in the
Compact as the Project Objective, are to improve the availability,
reliability, and quality of the power supply by increasing the
throughput capacity and stability of the national electricity grid,
increase efficiency of hydropower generation, and create an enabling
environment for future expansion by strengthening sector institutions
and enhancing regulation and governance of the sector. These results
are expected to contribute to Malawi's own poverty-reduction and
economic growth goals as defined in the Malawi Growth and Development
Strategy (``MGDS'').
3. Monitoring Component
To monitor progress toward the achievement of the impact and
outcomes of the Compact, the Monitoring Component of the M&E Plan will
identify: (1) The Indicators (as defined below), (2) the definitions of
the Indicators, (3) the sources and methods for data collection, (4)
the frequency for data collection, (5) the party or parties responsible
for collecting and analyzing relevant data, and (6) the timeline for
reporting on each Indicator to MCC.
Further, the Monitoring Component will track changes in the
selected Indicators for measuring progress towards the achievement of
the Program Objective and Project Objective during the Compact Term.
MCC also intends to continue monitoring and evaluating the long-term
impacts of the Compact even after Compact expiration. The M&E Plan will
establish baselines which measure the situation prior to a development
intervention, against which progress can be assessed or comparisons
made (each a, ``Baseline''). The Government will collect Baselines on
the selected Indicators or verify already collected Baselines where
applicable and as set forth in the M&E Plan.
(a) Indicators
The M&E Plan will measure the results of the Program using
quantitative, objective and reliable data (``Indicators''). Each
Indicator will have benchmarks that specify the expected value and the
expected time by which that result will be achieved (``Target''). All
Indicators will be disaggregated by gender, income level and age, and
beneficiary types to the extent practicable. Subject to prior written
approval from MCC, the Government or MCA-Malawi may add Indicators or
refine the definitions and Targets of existing Indicators.
(i) Compact Indicators
(1) Goal. The M&E Plan will contain the following Indicators
related to the Compact Goal. The Target of these Indicators is to
contribute to the national goals specified in the MGDS. Although the
Program contributes to these goals, satisfaction of these goals is not
intended to be solely attributable to the Project:
(A) Absolute poverty rate \3\ nationwide: 35-40 percent living on
less than US$1.00 a day in 2010 to 33.3 percent by 2016; and
---------------------------------------------------------------------------
\3\ Poverty rates cited above are based on MCA-Malawi Core Team
projections using poverty line of US$1.00 a day. Annex I defines
poverty line as US$1.25 a day.
---------------------------------------------------------------------------
(B) Absolute rural poverty rate nationwide: 40 percent living on
less than US$1.00 a day in 2010 to 36 percent by 2016.
(2) Other Indicators. The M&E Plan will contain the Indicators
listed in the following tables.
MCA-Malawi will update Baselines for key Indicators after new data
becomes available, including the Malawi Integrated Household Survey
III, after a new billing system is installed at ESCOM, and after a Cost
of Service study and Integrated Resource Plan are
[[Page 21061]]
completed. Indicators on outages and load shedding will be refined
prior to entry into force of the Compact and during the first year of
the Compact. Financial Targets and performance will be reviewed and
updated regularly, as defined in Annex I of the Compact.
Table 1: Compact-Wide Results
The following are Indicators and Targets for the monitoring of the
Program Objective as further described in paragraph 2 of Part A of
Annex I. The Project is expected to contribute to the achievement of
these Indicators and Targets, but is not solely responsible for the
results.
---------------------------------------------------------------------------
\4\ Indicator is sourced from World Bank Enterprise Survey,
2009. Baseline data reflects manufacturing sector data only. MCA-
Malawi will explore developing a tool to capture information for
smaller, informal firms.
\5\ Indicator sourced from Malawi Chamber of Commerce (MCCCI)
survey, 2009.
\6\ Indicator sourced from World Bank Enterprise Survey, 2009.
\7\ ``LV'' is defined as low voltage; ``MV'' is defined as
medium voltage.
\8\ Data and targets will be sourced from Malawi's Electricity
Investment Plan and Integrated Resource Plan.
Table 1--Compact-Wide Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result Indicator Definition Unit Baseline Year 5 Target
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased Profitability and Business sales Average value of %..................... 16.97....................... TBD
Productivity of Doing losses due to sales losses due
Business in Malawi. power to electricity
interruptions outages.
and quality,
disaggregated by
firm size \4\.
Electricity as a Average ranking Rank.................. 9.8......................... 5
major obstacle by firms of
to doing electricity as a
business \5\. major obstacle
to doing
business. 10 is
most severe, 1
is not a
constraint.
Back-up diesel Average annual %..................... 6.55........................ TBD
generation for kWh of diesel
firms \6\. generation
consumed by
registered firms
as a percentage
of total
electricity
consumed.
Energy sales to (Annual %..................... Est. 46..................... 55-65
industrial electricity
customers. sales (MWh) for
industrial
customers (Power
LV & MV))/Total
Electricity
Sales (MWh) \7\.
Improved Electricity Access Percentage of Percentage of %..................... 9........................... 9.5-11
for Households and Key Social population households in
Services. electrified Malawi using
disaggregated by electricity for
national, urban lighting to
and rural. total population
of Malawi.
Percentage of %..................... 3.0......................... 3.2
households in
rural areas
using
electricity for
lighting to
total population.
Percentage of %..................... 11.5........................ TBD
rural households
using
electricity for
lighting to
total rural
population.
Percentage of %..................... 43.6........................ TBD
urban households
using
electricity for
lighting to
total urban
population.
Electric Power (Total kWh billed kWh per capita........ 103......................... 111-115
Consumption per in all regions)/
Capita. Total population.
Social service Percentage of %..................... TBD......................... TBD
electricity total schools
connections, and total health
disaggregated by centers
schools and connected.
health centers.
Expansion of Sector to Better Investment in Total US$ million US$ million........... 0........................... TBD
Meet Demand for Power. energy sector, committed by
disaggregated by financial close,
private and disaggregated by
public sectors, private and
and generation public sectors,
and other assets and generation
\8\. and other.
[[Page 21062]]
MW of investment, MW.................... 0........................... TBD
disaggregated by
private and
public sectors,
and generation
and other.
System Maximum Total demand met MW.................... 260 (2009).................. 320 \9\
Demand Met. by the system.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 2: Infrastructure Development Activity.
The following are Indicators and Targets for the monitoring of the
Infrastructure Development Activity as further described in paragraph 1
of Part B of Annex I.
---------------------------------------------------------------------------
\9\ Target will be calculated using total installed capacity
minus 10 percent reserve margin for largest plant.
\10\ Baseline data are sourced from MCA Compact Development
Indicator Traking Template Pilot Exercise FY2010.
\11\ Baseline data are sourced from MCA Compact Development
Indicator Traking Template Pilot Exercise FY2010, and reflect the
average for the fiscal year.
\12\ Baseline data are derived from MCA Compact Development
Indicator Traking Template Pilot Exercise FY2010, and reflect the
average for the fiscal year.
\13\ Baseline data are derived from MCA Compact Development
Indicator Traking Template Pilot Exercise FY2010, and reflect the
average for the fiscal year.
\14\ Load shedding Indicators and their definitions will be
refined prior to entry into force of the Compact and in the full M&E
Plan.
---------------------------------------------------------------------------
Table 2--Infrastructure Development Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result Indicator Definition Unit Baseline Year 5 Target
--------------------------------------------------------------------------------------------------------------------------------------------------------
Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased Availability of Quantity of Total MWh billed in MWh.................. 1,421,958 \10\....... 1,800,000
Electricity. Electricity Billed. all regions.
Reduction in Losses................ Total System Losses [(Total kWh generated - %.................... 20.13 \11\........... 17.5
(Technical and Non- Total kWh billed)/
Technical). Total kWh generated
during same billing
period].
Transmission System [(Total kWh received %.................... 8.54 \12\............ 6.5
Technical Losses. by transmission from
generation - Total
kWh sent from
transmission to
distribution)/Total
kWh received by
transmission from
generation].
Distribution System [(Total kWh received %.................... 11.58 \13\........... 8
Technical & Non- from transmission to
Technical Losses. Distribution - Total
kWh billed)/Total kWh
received from
transmission to
distribution].
Reduced Outages.................... System Average [No. of customer Customer NA................... TBD
Interruption interruptions > 3 Interruptions/
Frequency Index mins/Total customers]. customer.
(``SAIFI'').
System Average [(No. of customer Duration of Customer NA................... TBD
Interruption Duration interruptions > 3 Interruptions/
Index (``SAIDI''). mins * Duration of customer.
outage)/Total
customers].
Total System Load Shed Average MW load shed MW................... 2.5.................. TBD
\14\. per occurrence in a
year.
Cumulative duration of Hours................ 27,500............... 5,800
load shed in a year.
Maximum MW load shed MW................... Est. 30-40........... TBD
during peak hours.
[[Page 21063]]
Improved quality of power at Voltage Quality, Percentage of time %.................... 83................... 90
primary substations \15\. disaggregated by within (10%
distribution. transmission and
6%
distribution) voltage
range South.
Percentage of time %.................... 83................... 90
within (10%
transmission and
6%
distribution) voltage
range Centre.
Percentage of time %.................... 83................... 90
within (10%
transmission and
6%
distribution) voltage
range North.
Increased Connections \16\......... Number of residential Southern electricity Customer............. 67,316............... 3,139 additional
customers connected supply total domestic
to electricity, connected.
disaggregated by
region.
Central electricity Customer............. 59,375............... 1,540 additional
supply total domestic
connected.
Northern electricity Customer............. 22,612............... 1,255 additional
supply total domestic
connected.
Number of commercial Southern electricity Customer............. 11,751............... 343 additional
customers connected supply general
to electricity, customers connected.
disaggregated by
region.
Central electricity Customer............. 9,189................ 301 additional
supply general
customers connected.
Northern electricity Customer............. 4,158................ 258 additional
supply general
customers connected.
Number of industrial Southern electricity Customer............. 4,204................ 8 additional
customers connected supply [Power LV +
to electricity, Power MV connected].
disaggregated by
region.
Central electricity Customer............. 2,510................ 9 additional
supply [Power LV +
Power MV connected].
Northern electricity Customer............. 812.................. 10 additional
Supply [Power LV +
Power MV connected].
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nkula A Sub-Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nkula A refurbished and operational Total MWh at Nkula A Total energy produced MWh.................. 168,900.............. 207,441
hydroelectric plant. (MWh) annually at
Nkula A.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transmission Network Upgrade Sub-Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transmission Lines Upgraded, New 132-kV lines...... Kms of new 132-kV Kms.................. 0.................... 153
Rehabilitated and Extended. lines built by
Activity.
New 66-kV lines built. Kms of new 66-kV lines Kms.................. 0.................... 79
built by Activity.
New 220-kV lines built Kms of new 220-kV Kms.................. 0.................... 190-205
lines built by
Activity.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 21064]]
T&D Upgrade, Expansion and Rehabilitation Sub-Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total New Transmission Transformer Transmission Sum of transmission MVA.................. 991.5................ 790 additional
Capacity. substation capacity. transformer capacity. through Activity
Increased Network.................. SCADA Coverage Percentage of master %.................... TBD.................. 98-100
Transmission. station availability.
Control and Improved Data SCADA Coverage Percentage of %.................... TBD.................. 90-95
Acquisition. Distribution. communication links
available in
installed sites.
Distribution Network Upgraded, Kms of New Kms of new 33-kV lines Kms.................. 0.................... 113.3
Extended and/or Operational. Distribution lines upgraded or built by
upgraded or built. Activity.
Kms of New Kms of new 11-kV Kms.................. 0.................... 5.44
Distribution Cables. cables built by
Activity.
Distribution Sum of distribution MVA.................. 868.................. 210 additional
substation capacity. transformer capacity. through Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 3: Environment and Natural Resource Management (ENRM) Sub-
Activity
Due to the distinct nature of the data collection and outcomes of
the ENRM sub-activity, it has been broken out into a separate table
below. The following table describes the key Indicators and Targets for
the monitoring the ENRM sub-activity and its relevant components, as
further described in paragraph 1(e) of Part B of Annex I.
---------------------------------------------------------------------------
\15\ Substations will be identified in the full M&E plan.
\16\ Data for Baseline are sourced from June 2010, ESCOM sales
statistics and does not include export customers. The Indicator is
useful for monitoring trends and performance as a function of
overall sector growth, and will be used for impact evaluations.
Targets are based on the Project's technical benefits projections
from ICF-CORE Feasibility Study and which were used in ERR analysis.
Table 3--Environment and Natural Resource Management (ENRM) Sub-Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result Indicator Definition Unit Baseline Year 5 target
--------------------------------------------------------------------------------------------------------------------------------------------------------
Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved availability of Energy not served Sum MWh by HEP MWh................... TBD......................... 57,218 less than Baseline
hydroelectric power plants due to weeds and unavailable due
(HEP) in generation. sedimentation, to weed and
disaggregated by sedimentation
HEP. faults.
Percent Actual energy %..................... 73 (Nkula A)................ 85 (Nkula A)
utilization or generated by HEP 69 (Nkula B)................ 75 (Nkula B)
operating ratio MWh/Theoretical 82 (Tedzani I&II)........... 90 (Tedzani I&II)
of HEP, maximum energy 70 (Tedzani III)............ 75 (Tedzani III)
disaggregated by of installed 77 (Kapichira I)............ 85 (Kapichira I)
HEP \17\. capacity MWh.
Reduced weed infestation and Distribution of Area (Km \2\) of Km \2\................ TBD......................... TBD
siltation in upper Shire invasive aquatic weeds in upper
River basin. species. Shire River
basin as
observed in
geographic
information
system maps and
field
observations.
Water turbidity.. Total suspended TSS................... TBD......................... TBD
solids using
standard
methodology.
--------------------------------------------------------------------------------------------------------------------------------------------------------
ENRMAP component (Indicators and Targets to be defined prior to entry into force of the Compact and MCC approval of activities to be funded under the
ENRMAP component)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Harmonized, gender responsive Harmonized and Legal framework Legal framework ............................ Legal framework adopted.
and effective institutional gender adhering to the adopted.
and policy environment for responsive legal findings and
sustainable environmental and policy recommendations
management and protection. framework of the ENRMAP
enacted. developed \18\.
[[Page 21065]]
Operational Legal framework Legal framework ............................ Legal framework adopted.
payment for enabling adopted.
ecosystem ecosystem
services finance
mechanism developed as per
established. the findings of
the ENRMAP
established.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Weed and Silt Management Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved Control of Aquatic ESCOM expenses on Total MK expended Million MK............ TBD......................... TBD
Weeds. aquatic weed by ESCOM per
management \19\. year on aquatic
weed control,
including staff,
equipment and
fuel.
Yearly amount of Average weight in Million MT............ 13.4........................ 20.04 \20\
weed harvested metric tons
at Liwonde (``MT'') of weed
barrage. harvested at
Liwonde barrage
per year.
Average daily Average peak MT.................... 120......................... 216 \21\
peak weight of weight in metric
weed harvested tons of weed
at Liwonde harvested at
barrage. Liwonde barrage.
Biocontrol Number of Number................ TBD......................... TBD
inoculations, biocontrol
disaggregated by inoculations
key location. conducted,
disaggregated by
key location.
Efficiency of Feeding scars on TBD................... TBD......................... TBD
biological sampled water
control on water hyacinth based
hyacinth. on standardized
methodology \22\.
Improved Control of Silt...... ESCOM expenses on Total MK expended Million MK............ TBD......................... TBD
silt management by ESCOM per
\23\. year on silt
removal,
including staff,
equipment and
fuel.
Percentage of Head pond volume %..................... 30.......................... 75
head pond for Nkula/
available. Original head
pond volume for
Nkula.
Head pond volume %..................... 50.......................... 75
for Tedzani/
Original head
pond volume for
Tedzani.
Head pond volume %..................... 50.......................... 75
for Kapichira/
Original head
pond volume for
Kapichira.
--------------------------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
\18\ Legal framework may include environmental management bill
(including establishment of the National Environmental Management
Authority), water resource management bill, and development of a new
soil conservation bill.
\19\ Indicator is useful for monitoring trends and performance
as a function of overall ecosystem conditions.
\20\ Total harvested material will depend on the performance of
harvesting measures and biological controls.
\21\ Total harvested material will depend on the performance of
harvesting measures and biological controls.
\22\ Indicator will be refined after completion of key
feasibility studies and design work for the ENRMAP.
\23\ Indicator is useful for monitoring trends and performance
as a function of overall ecosystem conditions.
---------------------------------------------------------------------------
[[Page 21066]]
Table 4: Power Sector Reform Activity
The following are Indicators and Targets for the monitoring of the
Power Sector Reform Activity as further described in paragraph 2 of
Part B of Annex I. Key Targets and Baselines for these Indicators will
be defined prior to entry into force of the Compact. Targets on
financial Indicators will be reviewed semi-annually as defined in
paragraph 2(c) of Part B of Annex I, and updated on a yearly basis.
---------------------------------------------------------------------------
\24\ Financial targets will be set after financial modeling is
completed, and will be updated annually. Data will be sourced from
audited financial statements. Baseline for Cost Recovery Ratio is
sourced from World Bank Benchmarking Study. Indicators are useful
for monitoring trends and performance as a function of overall
financial and investment conditions.
\25\ Total revenue based on energy, demand and fixed charges
revenue. Operating expenses include cost of generation, transmission
and distribution operations, corporate expenses, and financing costs
to be incurred.
\26\ Capital replacement costs include depreciation.
\27\ Capital expansion costs include cost of long-term system
expansion projects.
\28\ Targets to reflect results of financial analysis and/or
MERA regulations.
\29\ Indicator to be refined after assessment tool has been
defined prior to EIF.
Table 4--Power Sector Reform Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result Indicator Definition Unit Baseline Year 5 target
--------------------------------------------------------------------------------------------------------------------------------------------------------
Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved Financial Cost Recovery Total Actual %..................... TBD......................... Greater than 100%
Sustainability/Solvency of Ratio. revenue/
ESCOM \24\. Projected
operating
expenses \25\.
Total Actual %..................... TBD......................... Greater than 100%
Revenue/
Projected
operating
expenses plus
capital
replacement
costs \26\.
Total Actual %..................... TBD......................... 100%
Revenue/
Projected
operating
expenses plus
capital
replacement plus
capital
expansion costs
\27\.
Debt Equity Ratio Total Debt/Total Ratio................. TBD......................... TBD\28\
Equity.
Acid or Quick Current Assets/ Ratio................. TBD......................... TBD
Test. Current
Liabilities,
excluding
receivables and
stocks.
Current Ratio.... Current Assets/ Ratio................. TBD......................... TBD
Current
Liabilities.
Improved Internal and External Quality of ESCOM Progress against TBD................... TBD......................... TBD
Governance of ESCOM and the Corporate milestones set
Power Sector. Governance. as a result of
independent
expert
assessment based
on international
and regional
best practices
and Malawi law
as articulated
in Corporate
Governance
Benchmarking
Study..
Regulatory Progress against TBD................... TBD......................... TBD
Independence and milestones set
Effectiveness as a result of
\29\. independent
expert
assessment and/
or benchmarking
study on issues
such as quality
of regulatory
decisions based
upon sound
analysis,
conformity with
Laws of Malawi,
independence,
and transparency
based on
international/
regional best
practices and
governing
principles in
conformance with
Annex I.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 21067]]
ESCOM Turnaround Sub-Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved Financial Management. ESCOM Billing and [Total revenue %..................... TBD......................... 85-90
Collection from post-paid
Efficiency \30\. bills collected
in current month/
total post-paid
billed in
previous month]
x 100 for SES.
[Total revenue %..................... TBD......................... 85-90
from post-paid
bills collected
in current month/
total post-paid
billed in
previous month]
x 100 for CES.
[Total revenue %..................... TBD......................... 85-90
from post-paid
bills collected
in current month/
total post-paid
billed in
previous month]
x 100 for NES.
-------------------------------------------------------------------------------------------------------------------------
Electricity Indicator to be TBD................... TBD......................... TBD
Metered. defined prior to
entry into force
and in the full
M&E plan, in
accordance to
Annex I..
Average 365/(Total post- Days.................. 180......................... 50
Collection paid sales/
Period in days. ((Beginning
accounts
receivables +
ending accounts
receivable)/2)).
Bad Debt......... (Percentage of Days.................. TBD......................... TBD
accounts over
180 days)/(total
accounts
receivable).
Average Creditor 365/(Total credit Days.................. 150......................... 60
Days. purchases/
((Beginning
accounts
payables +
ending accounts
payables)/2)).
Financial Plans ESCOM Financial Update to Plans....... ............................ Update to plans
updated. Plan with agreed
upon financial
ratios and
covenants as
defined in Annex
I under Compact
updated.
Publication of ESCOM audited Publication of 0........................... Annual publication
Audited financial statements.
Financial statements made
Statements. public as
defined in Annex
I under Compact.
Working Capital Yearly Government MWK Millions.......... TBD......................... 0
Gap Financed financial
\31\. contribution
required.
Yearly Government Percentage............ NA.......................... 100% if positive amount
financial required
contribution as
fraction of
amount indicated
by MCC-approved
Financial Plan.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved Quality of Customer Average time to Average time to Days.................. 3.36........................ 2.7
Service. respond to restore power
forced outages. for high voltage
forced outages.
Average time to Days.................. 5.60........................ 3.5
restore power
for MV/LV forced
outages.
[[Page 21068]]
Customer Percent %..................... TBD......................... TBD
satisfaction and improvement in
perceptions of key indicators
ESCOM service, of customers'
disaggregated by satisfaction,
gender. disaggregated by
gender.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved ESCOM Operational Average Cost of [Total expenses US$/kWh............... TBD......................... TBD
Management and Efficiency. Electricity for Gx, Tx and
Billed (kWh). Dx (MK)/total
electricity
generated(kWh)*U
S$].
Maintenance Actual %..................... TBD......................... 100
Expenditures. maintenance
expenditures/
Planned
maintenance
budget as
defined in Annex
I \32\.
Adherence to Plans................. NA.......................... Yearly update to plans
ESCOM
maintenance
plans as defined
in Annex I.
Improved management of Procurement Number of Audit................. ............................ TBD
procurements by ESCOM. Audits. procurement
audits completed
by Auditor
General's Office
receiving
satisfactory
assessments.
Procurement Procurement Million MK............ ............................ Increase over Baseline
threshold. threshold
increased by
ODPP as a result
of improved
ESCOM compliance
to procurement
procedures.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory Strengthening Sub-Activity (Indicators and Targets to be defined prior to entry into force and MCC approval of activities to be funded under
the sub-activity. Additional Indicators will be defined as per the benchmarking study, peer review and/or independent expert assessment)
Output Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Strengthened Regulatory Tariff Average time to Days.................. TBD......................... TBD
Environment. application respond to
processing time. tariff rate
cases.
Tariff Indexation Refinement of Framework............. 0........................... Framework approved and
Framework. legal basis for implemented
tariff
indexation
framework
adopted and
implemented, as
defined in Annex
I.
Audited financial Audited financial Annual Report......... 0........................... Yearly publication of report
statements and statements and
annual report annual report
published by published.
MERA.
MERA Resolutions. Percentage of %..................... ............................ TBD
ESCOM
performance
reports reviewed
on time.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Improved Market Structure for Power Market Creation of Single buyer created.. ............................ Credit worthy buyer created
Private Investment. Structure. credit worthy
single buyer.
Revised Energy Laws passed........... ............................ Amended laws passed
Laws in
conformity with
agreement in
Compact approved
and enacted.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(b) Data Collection and Reporting. The M&E Plan will establish
guidelines for data collection and reporting, and identify the
responsible parties. A performance monitoring task force will be
created at ESCOM, with participation by MERA and MCA-Malawi.
---------------------------------------------------------------------------
\30\ Baselines will be set after a new billing system is
installed.
\31\ Financial targets will be set after financial modeling is
completed, and will be updated annually. Data will be sourced from
audited financial statements and other sources of financial
information.
\32\ Maintenance plan is based on a percentage of un-depreciated
asset value for preventive maintenance of generation, transmission
and distribution assets.
---------------------------------------------------------------------------
Compliance with data collection and reporting timelines will be
conditions
[[Page 21069]]
for Disbursements for the relevant Activities as set forth in the
Program Implementation Agreement. The M&E Plan will specify the data
collection methodologies, procedures, and analysis required for
reporting on results at all levels. The M&E Plan will describe any
interim MCC approvals for data collection, analysis, and reporting
plans.
(c) Data Quality Reviews. As determined in the M&E Plan or as
otherwise requested by MCC, the quality of the data gathered through
the M&E Plan will be reviewed to ensure that data reported are as
valid, reliable, and timely as resources will allow. The objective of
any data quality review will be to verify the quality and the
consistency of performance data across different implementation units
and reporting institutions. Such data quality reviews also will serve
to identify where those levels of quality are not possible, given the
realities of data collection.
(d) Semi-annual Reviews. Semi-annual reviews of the Power Sector
Reform Activity will be conducted as outlined in paragraph 2(c) of Part
B of Annex I.
(e) Management Information System. The M&E Plan will describe the
information system that will be used to collect data, store, process
and deliver information to relevant stakeholders in such a way that the
Program information collected and verified pursuant to the M&E Plan is
at all times accessible and useful to those who wish to use it. The
system development will take into consideration the requirement and
data needs of the components of the Program, and will be aligned with
existing MCC systems, other service providers, and ministries.
(f) Role of MCA-Malawi. The monitoring and evaluation of this
Compact spans one discrete Project and two Activities, and will involve
a variety of governmental, nongovernmental, and private sector
institutions. In accordance with the designation contemplated by
Section 3.2(b) of this Compact, MCA-Malawi is responsible for
implementation of the M&E Plan. MCA-Malawi will oversee all Compact-
related monitoring and evaluation activities conducted for each of the
Activities, ensuring that data from all implementing entities are
consistent, accurately reported and aggregated into regular performance
reports as described in the M&E Plan.
4. Evaluation Component
The Evaluation Component of the M&E Plan will contain three types
of evaluations: (1) Impact evaluations; (2) project performance
evaluations; and (3) special studies. MCC also intends to continue
monitoring and evaluating the long-term impacts of the Compact even
after Compact expiration. The Evaluation Component of the M&E Plan will
describe the purpose of the evaluation, methodology, timeline, required
MCC approvals, and the process for collection and analysis of data for
each evaluation. The results of all evaluations will be made publicly
available in accordance with MCC's Policy for Monitoring and Evaluation
of Compacts and Threshold Programs.
(a) Impact Evaluation. The M&E Plan will include a description of
the methods to be used for impact evaluations and plans for integrating
the evaluation method into Project design. Based on in-country
consultation with stakeholders, the strategies outlined below were
jointly determined as having the strongest potential for rigorous
impact evaluation. The M&E Plan will further outline in detail these
methodologies. Final impact evaluation strategies are to be included in
the M&E Plan. The following is a summary of the potential impact
evaluation methodologies.
(i) Infrastructure Development Activity. The evaluation will
attempt to assess the effectiveness of individual transmission lines
and distribution investments in reducing outages and improving power
quality, particularly in northern Malawi using a combination of
approaches, to include potentially an interrupted time series approach,
exogenous spatial variation due to the project, combined if
sufficiently informative with phased implementation of distribution
projects. The incremental impacts of improved reliability, quality and
access to power will be estimated by comparing key intermediate
outcomes, including changes in business investments and productivity,
between businesses with access to infrastructure improvements, those
without access to improvements, and for those in areas or zones that
experience greater or lesser improvements in electricity due to
differential levels of infrastructure upgrading. Gender disaggregated
information for female-headed businesses will be pursued to the extent
possible.
(ii) Power Sector Reform Activity. The most rigorous evaluation
possible will be conducted, possibly employing an interrupted time
series approach. The evaluation will estimate the causal relationship
between changes in sector governance with: (1) Changes in ESCOM
financial and operational performance; and (2) increases in private
investment, generation capacity and electricity coverage for different
groups such as female-headed households and regions of the country. The
evaluation will also assess: (A) the extent to which improvements in
MERA independence and regulatory capacity result in improved quality of
service and supply by ESCOM; and (B) the extent to which this Activity
improves the efficiency (employees per customer, response time to
outages, etc.) and reduces losses at ESCOM. Differentiated impacts on
customer service and access to men, women, and vulnerable groups will
be explored.
(iii) Environment and Natural Resource Management (ENRM) Sub-
Activity. The evaluation will attempt to isolate the causal factors
linking weed and siltation in the Shire river basin to outages
downstream at generation sites, particularly the extent to which
palliative weed and silt management measures reduce the frequency and
duration of outages and improve plant availability at hydropower plants
downstream of Liwonde barrage. Potentially using a difference-in-
differences and/or matching design, the evaluation will also attempt to
look at how increases in tariff and/or electrification affect consumer
energy choices, such as the use of charcoal and fuel wood, and the
impact of the latter has on the environment. To the extent appropriate,
differentiated impacts on different income groups, males vs. females,
formal and informal firms, and factors such as access or non-access to
capital will be explored. In order to implement the most rigorous
evaluations possible, the Government and ESCOM will cooperate in
assembling the required time series and other data required to
implement the chosen methodology.
(b) Project Performance Evaluation. The M&E Plan will make
provision for evaluations of all relevant Project activities. The M&E
Plan will also make provision for final Project level evaluations
(``Final Evaluations''). With the prior written approval of MCC, the
Government or MCA-Malawi will engage independent evaluators to conduct
the Final Evaluations at the end of the Project. The Final Evaluations
will review progress during Compact implementation and provide a
qualitative context for interpreting monitoring data and impact
evaluation findings. They must at a minimum: (i) Evaluate the
efficiency and effectiveness of the Activities; (ii) determine if and
analyze the reasons why the Compact Goal, Program Objective and Project
Objective, outcome(s) and output(s) were or were not achieved; (iii)
identify positive and negative unintended results of the Program; (iv)
provide
[[Page 21070]]
lessons learned that may be applied to similar projects; and (v) assess
the likelihood that results will be sustained over time.
(c) Special Studies. The M&E Plan will include a description of the
methods to be used for special studies, as necessary, funded through
this Compact or by MCC. Plans for conducting the special studies will
be determined jointly between the Government or MCA-Malawi and MCC
before the approval of the M&E Plan. MCC, the Government and MCA-Malawi
have agreed to conduct the following study as part of the Power Sector
Reform Activity:
(i) Prior to entry into force of the Compact, the Government and
MCC will agree on a method by which to independently evaluate and
assess Malawi's regulatory environment and the governance of ESCOM and
the power sector in Malawi as a whole. MCA-Malawi and the Government
will then conduct both the Corporate Governance Benchmarking Study and
the Sector Benchmarking Study by Year 2 of the Compact.
The M&E Plan will identify and make provision for any other special
studies, ad hoc evaluations, and research that may be needed as part of
the monitoring and evaluating of this Compact. Either MCC, MCA-Malawi
or the Government may request special studies or ad hoc evaluations of
Activities, or the Project as a whole prior to the expiration of the
Compact Term. When the Government engages an evaluator, the engagement
will be subject to the prior written approval of MCC. Contract terms
must ensure non-biased results and the publication of results.
(d) Request for Ad Hoc Evaluation or Special Study. If MCA-Malawi
or the Government require an ad hoc independent evaluation or special
study at the request of the Government for any reason, including for
the purpose of contesting an MCC determination with respect to a
Project or Activity or to seek funding from other donors, no MCC
Funding resources may be applied to such evaluation or special study
without MCC's prior written approval.
5. Other Components of the M&E Plan
In addition to the monitoring and evaluation components, the M&E
Plan will include the following components for the Program, Project and
Activities, including, where appropriate, roles and responsibilities of
the relevant parties and providers:
(a) Costs. A detailed cost estimate for all components of the M&E
Plan; and
(b) Assumptions and Risks. Any assumption or risk external to the
Program that underlies the accomplishment of the Program Objective,
Project Objective and Activity outcomes and outputs.
6. Approval and Implementation of the M&E Plan
The approval and implementation of the M&E Plan, as amended from
time to time, will be in accordance with the Program Implementation
Agreement, any other relevant Supplemental Agreement and the MCC Policy
for Monitoring and Evaluation of Compacts and Threshold Programs.
Annex IV Conditions Precedent to Disbursement of Compact Implementation
Funding
This Annex IV sets forth the conditions precedent applicable to
Disbursements of Compact Implementation Funding (each a ``CIF
Disbursement''). Capitalized terms used in this Annex IV and not
defined in this Compact will have the respective meanings assigned
thereto in the Program Implementation Agreement. Upon execution of the
Program Implementation Agreement, each CIF Disbursement will be subject
to the terms of the Program Implementation Agreement.
1. Conditions Precedent to Initial CIF Disbursement
Each of the following must have occurred or been satisfied prior to
the Initial CIF Disbursement:
(a) The Government (or MCA-Malawi) has delivered to MCC:
(i) An interim fiscal accountability plan acceptable to MCC; and
(ii) A CIF procurement plan acceptable to MCC.
2. Conditions Precedent to Each CIF Disbursement
Each of the following must have occurred or been satisfied prior to
each CIF Disbursement:
(a) The Government (or MCA-Malawi) has delivered to MCC the
following documents, in form and substance satisfactory to MCC:
(i) A completed Disbursement Request, together with the applicable
Periodic Reports, for the applicable Disbursement Period, all in
accordance with the Reporting Guidelines;
(ii) A certificate of the Government (or MCA-Malawi), dated as of
the date of the CIF Disbursement Request, in such form as provided by
MCC; and
(iii) If this Compact has entered into force in accordance with
Article 7, (1) a Fiscal Agent Disbursement Certificate and (2) a
Procurement Agent Disbursement Certificate.
(b) If any proceeds of the CIF Disbursement are to be deposited in
a bank account, MCC has received satisfactory evidence that (i) the
Bank Agreement has been executed and (ii) the Permitted Accounts have
been established;
(c) Appointment of an entity or individual to provide fiscal agent
services, as approved by MCC, until such time as the Government
provides to MCC a true and complete copy of a Fiscal Agent Agreement,
duly executed and in full force and effect, and the fiscal agent
engaged thereby is mobilized;
(d) Appointment of an entity or individual to provide procurement
agent services, as approved by MCC, until such time as the Government
provides to MCC a true and complete copy of the Procurement Agent
Agreement, duly executed and in full force and effect, and the
procurement agent engaged thereby is mobilized; and
(e) MCC is satisfied, in its sole discretion, that:
(i) The activities being funded with such CIF Disbursement are
necessary, advisable or otherwise consistent with the goal of
facilitating the implementation of the Compact and will not violate any
applicable law or regulation;
(ii) No material default or breach of any covenant, obligation or
responsibility by the Government, MCA-Malawi or any Government entity
has occurred and is continuing under this Compact or any Supplemental
Agreement;
(iii) There has been no violation of, and the use of requested
funds for the purposes requested will not violate, the limitations on
use or treatment of MCC Funding set forth in Section 2.7 of this
Compact or in any applicable law or regulation;
(iv) Any Taxes paid with MCC Funding through the date ninety (90)
days prior to the start of the applicable Disbursement Period have been
reimbursed by the Government in full in accordance with Section 2.8(c)
of this Compact; and
(v) The Government has satisfied all of its payment obligations,
including any insurance, indemnification, tax payments or other
obligations, and contributed all resources required from it, under this
Compact and any Supplemental Agreement.
3. For Any CIF Disbursement Occurring After This Compact Has Entered
Into Force in Accordance With Article 7
MCC is satisfied, in its sole discretion, that:
[[Page 21071]]
(a) MCC has received copies of any reports due from any technical
consultants (including environmental auditors engaged by MCA-Malawi)
for any Activity since the previous Disbursement Request, and all such
reports are in form and substance satisfactory to MCC;
(b) The Implementation Plan Documents and Fiscal Accountability
Plan are current and updated and are in form and substance satisfactory
to MCC, and there has been progress satisfactory to MCC on the
components of the Implementation Plan for the Projects or any relevant
Activities related to such CIF Disbursement;
(c) There has been progress satisfactory to MCC on the M&E Plan and
Social and Gender Integration Plan for the Program or Project or
relevant Activity and substantial compliance with the requirements of
the M&E Plan and Social and Gender Integration Plan (including the
targets set forth therein and any applicable reporting requirements set
forth therein for the relevant Disbursement Period);
(d) There has been no material negative finding in any financial
audit report delivered in accordance with this Compact and the Audit
Plan, for the prior two quarters (or such other period as the Audit
Plan may require);
(e) MCC does not have grounds for concluding that any matter
certified to it in the related MCA Disbursement Certificate, the Fiscal
Agent Disbursement Certificate or the Procurement Agent Disbursement
Certificate is not as certified;
(f) If any of the officers or key staff of MCA-Malawi have been
removed or resigned and the position remains vacant, MCA-Malawi is
actively engaged in recruiting a replacement; and
(g) MCC has not determined, in its sole discretion, that an act,
omission, condition, or event has occurred that would be the basis for
MCC to suspend or terminate, in whole or in part, the Compact or MCC
Funding in accordance with Section 5.1 of this Compact.
Annex V Definitions
Activity has the meaning provided in Part B of Annex I.
Additional Representative has the meaning provided in Section 4.2.
Audit Guidelines has the meaning provided in Section 3.8(a).
Baseline has the meaning provided in paragraph 3 of Annex III.
Board of Trustees has the meaning provided in paragraph 3(a)(i) of
Part C of Annex I.
CIF Disbursement has the meaning provided in Annex IV.
Compact has the meaning provided in the Preamble.
Compact Goal has the meaning provided in Section 1.1.
Compact Implementation Funding has the meaning provided in Section
2.2(a).
Compact Records has the meaning provided in Section 3.7(a).
Compact Term has the meaning provided in Section 7.4.
Corporate Governance Benchmarking Study has the meaning provided in
paragraph 2(a)(ii) of Part B of Annex I.
Covered Provider has the meaning provided in Section 3.7(c).
Disbursement has the meaning provided in Section 2.4.
DSC has the meaning provided in paragraph 2(a)(ii) of Part B of
Annex I.
ESCOM has the meaning provided in Section 7.2(d).
ESCOM Board has the meaning provided in paragraph 2(a)(ii) of Part
B of Annex I.
ENRM has the meaning provided in paragraph 1(e) of Part B of Annex
I.
ERNMAP has the meaning provided in paragraph 1(e)(ii) of Part B of
Annex I.
ESIAs has the meaning provided in paragraph 3 of Part B of Annex I.
Evaluation Component has the meaning provided in paragraph 1 of
Annex III.
Excess CIF Amount has the meaning provided in Section 2.2(c).
Final Evaluations has the meaning provided in paragraph 4(b) of
Annex III.
Financial Plan has the meaning provided in paragraph 2(a)(i) of
Part B of Annex I.
Fiscal Agent has the meaning provided in paragraph 5 of Part C of
Annex I.
Governance Guidelines means MCC's Guidelines for Accountable
Entities and Implementation Structures, as such may be posted on MCC's
Web site from time to time.
Government has the meaning provided in the Preamble.
Implementation Letter has the meaning provided in Section 3.5.
Indicators has the meaning provided in paragraph 3(a) of Annex III.
Infrastructure Development Activity has the meaning provided in
Part B of Annex I.
Inspector General has the meaning provided in Section 3.7(d).
Intellectual Property means all registered and unregistered
trademarks, service marks, logos, names, trade names and all other
trademark rights; all registered and unregistered copyrights; all
patents, inventions, shop rights, know how, trade secrets, designs,
drawings, art work, plans, prints, manuals, computer files, computer
software, hard copy files, catalogues, specifications, and other
proprietary technology and similar information; and all registrations
for, and applications for registration of, any of the foregoing, that
are financed, in whole or in part, using MCC Funding.
IRP has the meaning provided in paragraph 1(a) of Part B of Annex
I.
Kapichira II has the meaning provided in paragraph 1(f) of Part B
of Annex I.
kWh has the meaning provided in paragraph 3 of Part A of Annex I.
M&E Annex has the meaning provided in Annex III.
M&E Plan has the meaning provided in Annex III.
Malawi has the meaning provided in the Preamble.
Management Unit has the meaning provided in paragraph 3 (c)(i) of
Part C of Annex I.
MCA Act has the meaning provided in Section 2.2(a).
MCA-Malawi Core Team has the meaning provided in paragraph 1(b) of
Part A of Annex I.
MCA-Malawi Trust Deed has the meaning provided in paragraph 3 of
Part C of Annex I.
MCC has the meaning provided in the Preamble.
MCC Environmental Guidelines has the meaning provided in Section
2.7(c).
MCC Funding has the meaning provided in Section 2.3.
MCC Gender Policy means the MCC ``Gender Policy''(including any
guidance documents issued in connection with the guidelines) posted
from time to time on the MCC Web site or otherwise made available to
the Government.
MCC Policy for Monitoring and Evaluation of Compacts and Threshold
Programs has the meaning provided in Annex III.
MCC Program Procurement Guidelines has the meaning provided in
Section 3.6.
MCC Web site has the meaning provided in Section 2.7.
MGDs has the meaning provided in paragraph 2 of Annex III.
MERA has the meaning provided in paragraph 2 of Part B of Annex I.
MERA Board has the meaning provided in paragraph 2(b)(ii) of Part B
of Annex I.
MNREE has the meaning provided in paragraph 2 of Part B of Annex I.
Monitoring Component has the meaning provided in paragraph 1 of
Annex III.
Multi-Year Financial Plan Summary has the meaning provided in
paragraph 1 of Annex II.
ODPP has the meaning provided in paragraph 2(a)(iii) of Part B of
Annex I.
[[Page 21072]]
OP 4.12 has the meaning provided in paragraph 3 of Part B of Annex
I.
Party and Parties have the meaning provided in the Preamble.
Permitted Account has the meaning provided in Section 2.4.
PMC has the meaning provided in paragraph 4 of Part C of Annex I.
Power Sector Reform Activity has the meaning provided in Part B of
Annex I.
Power Sector Reform Agenda has the meaning provided in paragraph
2(c) of Part B of Annex I.
Power Sector Revitalization Project has the meaning provided in
Part B of Annex I.
PPP has the meaning provided in paragraph 1(a) of Part A of Annex
I.
Principal Representative has the meaning provided in Section 4.2.
Procurement Agent has the meaning provided in paragraph 6 of Part C
of Annex I.
Program has the meaning provided in the Recitals.
Program Assets means any assets, goods or property (real, tangible
or intangible) purchased or financed in whole or in part (directly or
indirectly) by MCC Funding.
Program Funding has the meaning provided in Section 2.1.
Program Guidelines means collectively the Audit Guidelines, the MCC
Environmental Guidelines, the MCC Gender Policy, the Governance
Guidelines, the MCC Program Procurement Guidelines, the Reporting
Guidelines, the MCC Policy for Monitoring and Evaluation of Compacts
and Threshold Programs, the MCC Cost Principles for Government
Affiliates Involved in Compact Implementation (including any successor
to any of the foregoing) and any other guidelines, policies or guidance
papers relating to the administration of MCC-funded compact programs
and as from time to time published on the MCC Web site.
Program Implementation Agreement and PIA have the meaning provided
in Section 3.1.
Program Objective has the meaning provided in Section 1.2.
Project has the meaning provided in Section 1.3.
Project Cooperation Agreement has the meaning provided in paragraph
4 of Part C of Annex I.
Project Objective has the meaning provided in Section 1.3.
Project Partner has the meaning provided in paragraph 4 of Part C
of Annex I.
Provider has the meaning provided in Section 3.7(c).
REA has the meaning provided in paragraph 2(b)(iii) of Part B of
Annex I.
Reporting Guidelines means the MCC ``Guidance on Quarterly MCA
Disbursement Request and Reporting Package'' posted by MCC on the MCC
Web site or otherwise publicly made available.
SBM Plan has the meaning provided in paragraph 2(b)(iii) of Part B
of Annex I.
Sector Benchmarking Study has the meaning provided in paragraph
2(b)(ii) of Part B of Annex I.
Social and Gender Integration Plan has the meaning provided in
paragraph 3 of Part B of Annex I.
Supplemental Agreement means any agreement between (a) the
Government (or any Government affiliate) and MCC (including, but not
limited to, the PIA), or (b) MCC and/or the Government (or any
Government affiliate), on the one hand, and any third party, on the
other hand, including any of the Providers, in each case, setting forth
the details of any funding, implementing or other arrangements in
furtherance of this Compact.
Target has the meaning provided in paragraph 3(a) of Annex III.
Tariff Indexation Framework has the meaning provided in paragraph
2(b)(i) of Part B of Annex I.
Tax Schedules has the meaning provided in Section 2.8(b).
Taxes has the meaning provided in Section 2.8(a).
Turnaround Facility has the meaning provided in Section 7.2(d).
United States Dollars or US$ means the lawful currency of the
United States of America.
USAID is the United States Agency for International Development.
[FR Doc. 2011-8983 Filed 4-13-11; 8:45 am]
BILLING CODE 9211-03-P