CONSULTANT SERVICES

Country:

Solomon Islands

Publication Date:

Nov 4, 2004

Deadline:

Nov 18, 2004

Funding Agency:

World Bank

Buyer:

Solomon Islands PPP Options for power (and water) utilities in the Solomon Islands
The World Bank

Original Language:

English

Address:

Mr. Barry Trembath
Lead Power Engineer & TTL.
World Bank
1818 H Street Room
East Asia and Pacific Energy Division.
Washington , DC 20433
United States

Telephone:

(1-202) 458-2891

Fax:

(1-202) 522-1648.

Email:

Click here

This notice appears in UN Development Business Online only and not in the printed version. Although this notice is assigned to a specific print issue, the official publication date of this notice is considered the date that it is posted online (see below).

I. Objectives

The Solomon Islands Government (SIG) intends receiving grant financing from the World Bank for supporting reform in its power sector. Specifically, SIG is seeking the services of a Consultant specializing in infrastructure market restructuring and utilities regulation to provide advice over the course of the next 4 months. The principal tasks are to formulate various public-private partnership (PPP) options for restructuring the power sector; identify a recommended option; and develop an implementation plan for pursuing the recommended PPP option. This task should be carried out in close coordination with a separate task related to the financial restructuring of the Solomon Islands Electricity Authority (SIEA), the owner and operator of the major power transmission and distribution infrastructure in the country.

Assignment: The Consultant will undertake tasks in the following areas: (i) Conduct a diagnostic power sector review (ii) Formulate various public-private partnership (PPP) options for restructuring SIEA’s operations in Honiara and provincial centers; (iii) identify a recommended PPP option and clearly define in detail next steps in pursuing the recommended option. The detailed scope of work is attached electronically at the end of the message. All deliverables listed should draw on and cite the experience and situation in the Pacific Islands and small island economies, as well as on related international best practices.

The World Bank, on behalf of SIG, now invites eligible consultants to indicate their interest in providing the services for both the assignments. Interested consultants must provide information indicating that they are qualified to perform the services (brochures, description of similar assignments, experience in similar conditions, availability of appropriate skills among staff, etc.).

II. Desirable Qualifications

The Consultant should be a firm (or joint venture of firms), and should be recognized internationally, with demonstrated expertise and on-the-ground results in power and water sector reform. Since one of the possible options might be a bundled PPP option with the Solomon Islands Water Authority (SIWA), experience with water-sector reform issues, along with working on infrastructure-related issues in the Pacific Islands (such as the multi-utility power and water concession in Vanuatu) is highly desirable. Previous work in post-conflict and in smaller countries will also be a plus.

III. Implementation period

The implementation period for the project will be approximately 4 months from the start date. The Consultant is expected to be mobilized prior to an expected World Bank mission to the Solomon Islands in early February 2004.

IV. Selection Procedures

The Consultant, who will report to the World Bank Task Manager (TM), will be selected in accordance with the procedures set out in the World Bank’s Guidelines: Selection and Employment of Consultants by World Bank Borrowers. The CQS procedures will be applied.

V. Contact Information

Interested institutions would need to submit an Expression of Interest (EOI) no more than 20 pages. The EOI should include at least the following information:

- Detailed CV for each team member;
- Brief summary of any relevant project carried out by the team members;
- Preliminary work-plan with an indication of the man-month inputs for each of the workstreams.

EOIs should be delivered (three hard copies) and e-mailed to the address(es) below by November 18, 2004.

Attn: Mr. Barry Trembath.
Lead Power Engineer & TTL.
The World Bank.
East Asia and Pacific Energy Division.
1818 H Street, NW.
Washington DC, 20433, USA.
Tel: (1-202) 458-2891
Fax: (1-202) 522-1648.

E-mail (for soft copies):
btrembath@worldbank.org
asanghi@worldbank.org

DRAFT TERMS OF REFERENCE

PPP Options for infrastructure utilities in the Solomon Islands

The Solomon Islands Government is seeking the services of a Consultant specializing in power and water utilities restructuring, management and regulation, to provide advice over the course of the next 4 months. The principal tasks are to formulate various public-private partnership (PPP) options for restructuring the power sector; identify a recommended option; and develop an implementation plan for pursuing the recommended PPP option.

[Note: This exercise will be carried in parallel to another one related to the preparation and implementation of a financial plan for SIEA. Together, the financial plan and the PPP options study constitute a broader strategy for improving the performance of infrastructure utilities in the country].

1. Background

(i) General
With a population of approximately 440,000 dispersed over 300 islands, and per capita GDP of USD 530, the Solomon Islands is the third-largest island nation, and one of the poorest, in the South Pacific Ocean. About 80 - 85% of the population lives in rural areas, with most relying on subsistence agriculture and fishing as a primary source of income, and kerosene as a source of home lighting.

The country is now slowly recovering from unrest that erupted into open conflict in June 2000. Since mid-2003, security has improved significantly with the arrival of the Regional Assistance Mission to Solomon Islands (RAMSI).

(ii) Government Objectives
Restoration of law and order to pre- conflict levels; the need to improve economic management; and meeting the basic needs of its citizens remain the most critical challenges for the Government. Moreover, through stabilizing its own political and economic situation, the Government is also keen on contributing to, and promoting, stability in a region that is expected to experience only modest growth, and has witnessed significant political instability in the past.

(iii) Electrification Data
There are few reliable data on how much of the population lacks suitable access to electricity. Aside from the capital city of Honiara, which receives its electricity from a diesel-powered grid, very few of the towns have access to electricity. It was estimated that in 1996, 15% of the total population, and only an insignificant 5% of the rural population, had access to power.

According to the ADB, total energy production amounted to 32 GWh in 1998. Consumption per head of electricity stood at 75 kWh in 1998, down from 94 kWh in 1990. The recent turmoil in the country affected all services, including power supply. In May 2003 the failure of the government to pay its electricity bill led to the disconnection of supply to all Government offices and a complete blackout in Honiara.

Data on power generation, transmission and distribution are as follows:

(a) Power Generation
Maintaining sufficient generation capacity in Honiara is a major problem. Due to the inability to meet daily demand, all available plant is forced to run on a continuous basis at the expense of regular maintenance thereby leading to even more breakdowns. Total estimated installed capacity is 9.6 MW. A recent study by AusAID (September 2003) identifies the condition of installed plant and estimates repair and rehabilitation needs at about AUD2.4m. Of this, AUD 0.5m has been identified for critical requirements (which would increase total plant capacity to 14.8 MW). However, only part of the work identified (scheduled maintenance and minor repairs) has been carried out so far.

There are 8 local systems in the provincial capitals ranging from a capacity of 40 kW to 1,800 kW. At present the available plant capacities can meet the system loads subject to the available plant being operational (i.e. without considering standby capacity). Majority of the plants is also considerably newer. However, even these plants require a well-planned maintenance program.

Apart from the economic and financial losses caused by system outage, considerable additional cost is incurred by the utility when regular maintenance is not carried out. There is an urgent need to rehabilitate generation plant both in Honiara and the provinces. An assistance program (funded by AusAID and JICA) is underway to largely address these needs.

(b) Power Transmission and Distribution
The Solomon Islands Electricity Authority (SIEA) owns and operates the major power transmission and distribution infrastructure.

The power transmission and distribution in Honiara is affected by two interconnecting lines at 33 kV (one overhead and the other by UG cable-currently out of service) between the two power stations, Lungga and HPS together with 12 distribution feeders at 11 kV.

While the system, overall, is a functioning one, and there is no emergency per se to rehabilitate it, there is a need nonetheless to carry out substantial improvements in order to reduce losses and improve reliability. In particular, considering the age of the distribution assets, building the distribution system in an efficient manner is important for continued development of the system.

(iv) Government Strategy
The Government recognizes the role that cost-effective, reliable, and safe power plays in promoting growth and reducing poverty. This is particularly relevant in the context of the Government’s stated desire to promote economic-growth centers, which will require planning for relatively larger amounts of power provision. Consequently, the Government is keen on reforming SIEA, and attracting private sector participation in the sector (a parallel exercise on the financial restructuring of SIEA is also being undertaken). This initiative builds upon a request made directly by the Government to the World Bank to explore PPP options in the sector, and other related initiatives recently undertaken in the region by the World Bank and the Public-Private Infrastructure Advisory Facility (PPIAF), namely: (i) Regulatory Framework and Transaction Models for Private Participation in Infrastructure in Pacific Islands Countries: Report Diagnostic Review, October 2001; (ii) Report on Selected Multi-Sector Regulatory Agencies, April 2002; and (iii) Pacific Island Utilities Reform Mission, May 2003.

2. Scope of Work
The Consultant will undertake tasks in the following areas: (i) Conduct a diagnostic sector review (ii) Formulate various public-private partnership (PPP) models for restructuring SIEA’s operations in Honiara and provincial centers, discussing the relative strengths and weaknesses of each model; (iii) identify a recommended PPP option, clearly justifying the preferred model in terms of its relative merits compared with the alternatives, and clearly define in detail next steps in pursuing the recommended option. All deliverables listed below should draw on and cite the experience and situation in the Pacific Islands and small Island Economies as well as on related international best practices.

2.1 Review of Existing Sector Structure
The Consultant will conduct a diagnostic review of the power sector. This will include:
• Providing reliable data on how much of the population lacks needed access to affordable electricity.
• Based on population density, census data, and other related information, earmarking geographical areas that can be served by grid vs. off-grid electricity.
• Benchmarking the performance (cost, efficiency) of SIEA in power generation, transmission, and distribution relative to utilities in other neighboring countries (Vanuatu and Fiji in particular).
• Providing a clear understanding of the institutional and operational framework, in particular, policy-formulation and tariff-setting/implementation, procedures for establishing and monitoring quality standards currently in place in the country; and extent and nature of subsidization of the sector. This will also include providing a clear understanding of how generation fuel is procured.

2.2 Formulate various PPP options
Based on the diagnostic review, the Consultant will formulate various PPP options for the main (grid) system in Honiara and provincial centers. Models include, but are not limited to:
• A vertically integrated regulated monopoly in public hands (the current status quo), but improved SIEA efficiency through strengthening financial and technical capacity; twinning arrangements etc.
• A vertically integrated regulated monopoly in private hands through a management/service contracts; lease; concession; or outright divestiture.
• PSP in generation component: Transmission and distribution would remain owned and operated by SIEA while generation could be unbundled (to enhance competition) and privatized.
• PSP in generation and distribution components: Transmission would remain owned and operated by SIEA while generation, distribution and supply (billing, collection and customer service) for both grid-connected and off-grid systems could be through public, private or community participants with operations supervised by a regulator.
• A multi-utility PSP option: It is possible to overcome possible lack of scale economies by seeking PSP for the combined operations of the power and water utilities (SIEA and SIWA). Vanuatu is one country in the region where the water and power sector have been concessioned jointly to a private provider. Based on Vanuatu’s experience so far, and experiences elsewhere, the Consultant shall assess the pros- and cons- of a multi-utility option approach in the Solomon Islands context .

For each option, the Consultant will define essential policy-making and regulatory roles and responsibilities for each of the relevant parties, in the context of sector-wide policy issues; responsibilities in introducing PSP; responsibilities in formulation and implementation of tariff schemes; establishing and monitoring appropriate performance criteria; indicating responsibilities in terms of maintenance of assets, social and environmental impact study obligations; Community Service Obligations (CSO) etc.

The future role of SIEA (and SIWA) participation, whether as public participant or public partner, will also be considered as part of the study. Based on the existing legal structure, for each option, the Consultant will outline legal steps required for implementation of the option.

2.3 Identify the recommended PPP option and define next steps in pursuing the recommended option
The consultant will provide a cost-benefit analysis of each option, and based on the option that maximizes the economic policy rationale , identify a recommended option. The recommendation shall be consistent with international best practices and be reflective of the needs and characteristics of Solomon Island’s economy (e.g. limited financial and human resources).

The Consultant should prepare and deliver a detailed implementation plan for pursuing the recommended option, including any necessary legal steps.

3. Deliverables, Timeframe, Payment Schedule and Working Arrangements
The table below illustrates the deliverables and the payment schedule for this assignment:
Timing Deliverable Contract Payment
Contract signing 10%
+0.5 month Draft report on existing sector structure and diagnostics 15%
+1.5 months Draft report on various PPP options and identification of recommended option 25%
+2 months Detailed implementation plan for pursuing recommended option 25%
+3 months Final report 25%

The Consultant will liaise with relevant stakeholders and report to the task manager (TM) in coordination with the Government. The World Bank will supervise the Consultant. The Consultant will provide three hard copies and an electronic copy of each deliverable. Final versions of the papers, reports, plans, draft law and regulations (including any amendments) will be submitted as five hard copies and one electronic copy. All deliverables should be in English. It is estimated that this project will spread out over a 4-month period from the contract signing date to complete.

4. Qualifications
The consultant will be selected on the basis of the legal and regulatory qualifications and experience in the area of infrastructure (power and water in particular) and regulatory reform. Knowledge of Solomon Islands and the Pacific Island economies will be a plus

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