Afghanistan SDNRP II - P118925
Ministry of Mines and Petroleum, Program Management Unit (PMU) | Published August 6, 2015 - Deadline August 21, 2015
Transaction Advisors For The Mazar Independent Power Plant
Govt. of Islamic & Republic ofAfghanistan
Ministry of Mines andPetroleum
Pashtunistan Watt, Kabul - Afghanistan
Second Sustainable Development of Natural Resources Project(Phase-II)
IDA Grant No.: H 699?AF
Project ID No.: P118925
REQUEST FOR EXPRESSIONS OF INTEREST
Selection of Consulting Servicesfor:
Transaction Advisors for the Mazar Independent Power Plant
Reference: MOMP/PMU/CT-II-34 Date; 06-Aug-2015
A.BACKGROUND AND OBJECTIVES
The Government of the IslamicRepublicof Afghanistan has received a grant from the World Bank toward the cost of the project: Second Sustainable Development ofNatural ResourcesProject in Afghanistan. TheProject is being implemented through a Program Management Unit (PMU) within the Ministry of Mines and Petroleum(MOMP).
The long lasting conflict inAfghanistan had a severe impact on the power sector, both directly (dilapidatedgeneration, transmission and distributioninfrastructure) and indirectly (serious management issues at the State owned power utility). In addition, Afghanistan still largelyrelies on imports from neighboring countries for its power supply, which is not only costly but also raises concerns of thereliability of this supply. With the help of the donor community, significant efforts have been undertaken by the Afghanauthorities to reform and modernize the power sector, by both upgrading and developing infrastructure and by improving overallmanagement ofthe sector.
As part of efforts to increaseavailability of power in the country and self-reliance, the Government of Afghanistan (GoA) has also been exploring options todevelop generation plants.
In this respect, discussionshave beenheld between GoA and various private parties for the possible development of a gas-to-power plant in Mazar-e-Sharif(estimated 50MW) under an Independent Power Plant (IPP), "the Mazar IPP" or "Project". The Mazar IPP would be implemented on acompetitive process. It would also represent the first project of the sort and is, therefore, considered important in terms ofprecedent setting as it could serve as a model for future transactions of the same nature.
Public parties involved in thediscussions on the Mazar IPP have so far included the Ministry of Finance (MoF), the Ministry of Energy and Water (MEW), theMinistry of Petroleum and Mines (MoPM), Da Afghanistan Breshan Sherkat (DABS), the state owned power utility, and Afghan GasEnterprise (AGE), the state owned gas facility. Private parties involved include the International Finance Corporation(IFC) andthe Ghazanfar Group(GG), a private Afghan conglomerate. A Memorandumof Understanding (MoU) was signed between the parties in connection with the MazarIPP Project on May 13, 2015.
Discussions are still on-goingon the exact structuring of the transaction ? including sponsors, financing, and operational arrangements. However, the followingparameters are considered:
theIPP wouldbe established as a corporation in Afghanistan (Project Company) and the plant constructed on land leased fromGoA;
thegas needed for the plant would be supplied by AGE under a long term gas supply agreement;
powerproduced would be purchased by DABS under an off-take agreement (estimated 20years term).
To secure the transaction, theissuance of several guarantees is also being considered, including to secure the purchase of power by DABS and to secure thepurchase of gas from AGE. Such Partial Risk Guarantees (PRG) could be provided by the International Development Association (IDA).In addition, Political Risk Insurance is being considered to cover political risk for the sponsors, which could be provided by theMultilateral Investment Guarantee Agency(MIGA). The structure of the Mazar IPP is not yet finalized and the required guaranteeswill depend upon the structure of the transaction.
It should be noted thatsimilar to thepower sector, the gas sector is currently undergoing a restructuring,involving, among others: a proposedcorporatization and commercialization of AGE (with the objective of making it a market-oriented profitable company), a review ofthe sector legal, regulatory and institutional framework (with the objective of establishing a modern and coherentpolicy framework? including opening the exploration and production stages to private sector operators), a review of price and tariffs issues andthe establishment of a regulator.
Given the number andcomplexity of issues to go ahead with the Mazar IPP, the GoA has requested assistance from the International DevelopmentAssociation (IDA), through the Sustainable Development of Natural Resources Project II (SDNRP II) implemented by MoMP, to hiretransaction advisors (Advisors). The Advisors areexpected to work closely with MoMP as well as other public parties, including AGE,MEW, DABS and MoF, during the structuring and closing ofthe Mazar IPP transaction. It is expected that "on the job training" willbe provided to the different public entities involved in the Mazar IPP to build capacity associated with the implementation ofPPP-typetransactions more broadly.
While the Advisor will behired by MoMP under SDNRP II, the Advisor will need to provide assistance to all Government stakeholders involved in the Mazar IPP(MoMP, AGE, MEW, DABSand MoF). A key task of the Advisor will be to reconcile the different views of the various stakeholders andto safeguard the interests of GoA.
More specifically, theAssistance by the Advisor is expected on three main dimensions.
The structure of the Mazar IPPis still under discussion ? and the GoA will be solicited to take positions on a series of technical (including commercial),financial and legal issues, so as to allow for the Mazar IPP to go ahead. In this respect, the Advisors are expected to providejust-in-time assistance on such issues as the GoA (i.e. MoMP, AGE, MEW, DABS and MoF) will request. The Advisor may also take theinitiative to raise issues that it considersimportant for the GoA to address.
Assistance at the preparationstage may include such issues as:
Technical andcommercial issues: With regard to technical issues, implementing the Mazar IPP will require looking intosuch issues as: (i) assessing whether there is enough gas available for a 20 year project (including therequired quality andpressure) and assessing the capacity of the gas pipeline to supply the gas to the plant, (ii) assessing power evacuation issues:such as, voltage level, frequency, protection, control, grid codes etc. With regard to commercial issues, implementing the MazarIPP will require looking into such issues as: pricing of gas, commercial agreements with AGE, responsibilities of each party andsimilarly on the electricity side (pricing of power, commercial agreements with DABS, responsibilities of each party). Also thestructuring and financing of the deal would need to be analyzed, including tolling vs. IPP purchasing gas and selling electricityetc.
Economic and financial issues: similarly, implementing the IPP will make it necessary for the GoA to assess theeconomic and financial implications of various available options ? and more generally to carry a "value for money" analysis andeconomic analysis of the IPP. The economic analysis will need to look at the different structuring options to assess which providesthe greatest value added for Afghanistan as a whole. Buildingon the economic analysis, a distributional and financial analysis willprovide guidance on how to divide the rent/surplus among the different groups (government, consumers, IPP sponsor, etc.). Thisanalysis needs to take into account the relative riskiness of each approach. Overall issues to look at during the economic andfinancial analysis may include: comparative analysis of design options (cost vs. benefits for Afghanistan ? depending of itsobjective for the gas and power sectors); gas price and tariffs issues (with both systemic and transaction dimensions: gas supplycontract and impact over AGE and the gas sector);electricity price and tariffs issues (with both a systemic/sectoral dimension anda transactional dimension: power purchase agreement and impact over DABS and the power sector); cost of infrastructure, if any,tobe supported by either AGE or DABS to implement the IPP; existing Power Purchase Agreements concluded by DABS and impact of IPPover those, and overall over profitability of DABS; "financial regime" applicable to the IPP, including tax and customs, anybenefits or exemptions granted ? as well as any "concession fees" or other payments due to GoA as the case may be,etc.
Legalissues:the legal framework is in the process of being modernized on a numberof issues in Afghanistan (including the power and gassector ? but also some other issues that may have an impact on the IPP, such as the proposed regulation on PPPs). Going ahead withthe IPP will necessitatelooking into a number of laws and regulations ? and to assess under which conditions the IPP can be put inplace in this context. Laws and regulations to be looked into may cover: power sector (including conditions for an IPP to operate);gas sector; PPPs; corporate issues; guarantees; real estate and lease; foreign investments; tax and customs; dispute resolution;institutional framework (PPPs, gas and power sectors, etc.); procurement (including to check that the proposed approach ?directnegotiations ? is possible, but also as regards the conclusionof the gas supply contract and power purchase agreement); safety,social and environment safeguards, etc. Given the ongoing reforms on various aspects of the legal framework in Afghanistan, it islikely that the IPP will need to address a number of issues that are not ? or not yet ? regulated by a law. The approach couldtherefore consist of relying on contractual arrangements. In so doing, the Advisor would need tokeep in mind the variouslaws/policies currently awaiting approval and more generally the overall, systemic objectives of the sectoral reforms underway. Anygaps in this respect (between specific arrangements proposed under the IPP and proposed sectoral reform) should be identifiedupfront by the Advisor.
Environment and social issues: The transaction would be required to comply with allapplicable and relevant social,environmental, public health and safety national laws and requirements. Also, given the potential participation of IFC and otherWorld Bank entities, the applicable environmental and social Performance Standards (PS) of IFC would apply. Specifically theAdvisor will advise the government (and, in particular, the National Environmental Protection Agency, NEPA) on all aspects ofsocial,environmental, public health and safety compliance requirements, which could involve: (i) reviewing relevant Terms ofReference for the various environmental and social studies and plans that would be requiredto comply with all applicable andrelevant national laws and PS, (ii)reviewing the environmental and social studies and plans to ensure compliance with national lawsand PS, (iii) advising on the Consultations and Disclosure requirements consistent with national law and PS, (iv) reviewing theproposed Grievance Redress Mechanism (GRM), (v) advising on the requisite institutional capacity building needs to ensure effectivesupervision and oversight monitoring during construction and operation and (vi) liaising with the World Bank Group team on allaspects of social, environmental, public health and safety issues.
Implementationstage - negotiation
Once the structure for theMazar IPP has been has been finalized, a number of agreements will need to be prepared and negotiated among the parties (theProject Agreements). Whileit is difficult to precisely list the Projects Agreements until the final Project structure has beenagreed upon, possible agreements include: an Energy Conversion Agreement or Power Purchase Agreement (PPA); a Gas Supply Agreement(GSA), an Implementation Agreement (IA - to include a GoA sovereign guarantee along with other GoA's support), Land Lease Agreement(LLA) and any other direct agreements needed for the Project, i.e. connection agreement (which maybe be inside the PPA),environmental and/or water use agreement (the mode of operation of an IPP in Afghanistan ? as well as any contracts to be concludedwith GoA forthis purpose ? will need to be determined). A key task for the Advisor is to support GoA understand the package ofagreements it must put in place, depending on the deal structure which is decided.
Assistance at theimplementation stageis expected to include:
Headsof Terms review: the Mazar IPP Project Company will develop heads of terms (Heads of Terms) for the Project Agreements. TheAdvisors are expected to review these Heads of Terms and support GoA in reviewing and preparing comments on the Heads of Terms forcirculation to the Project Company. This would include advice on the risks that the GoA would assume given proposed positions, aswell as comments specifically on the appropriateness of contractual obligations of the parties,including:
Risksto be assumed by each party;
Performance standards to be achieved by the private partner;
procedures for monitoring compliance with contractual obligations;
dispute resolution mechanisms;
exitand termination procedures;
Such advice should be providedwhile taking into account: (a) regional and international precedents; (b) local situation and its impact on Project implementationand investment requirements; and (c) the nature of the transaction as the first IPP inAfghanistan, which is also expected to serveas a basis for future transactions.
Negotiation of Heads of Terms: the Advisors would be expected to support the GoA inthe negotiation and agreement onHeads of Terms prior to moving into the review and negotiation of draft agreements. All negotiations are expected to take place inKabul and/or Dubai.
Review of Project Agreements: following agreement on Heads of Terms, the Project Company will prepare draft ProjectAgreements. The Advisor would review draft Project Agreements (both initial drafts and revised versions) and support GoA inreviewing the agreements and in providing written comments on the documentation. This would include:
support in understanding clearly the risks that the GoA would assume upon entering into theagreements;
support GoA in itsreview of proposed commercial terms (basedon the economic and financial analysis undertaken during the preparation phase).
Negotiation of Project Agreements: the Advisors would be expected to support the GoA in the negotiation of the ProjectAgreements. Negotiations are expected to be held in Kabul and/or Dubai.
Implementation support: upon agreement on final Project Agreements, the Advisors would be requested to support the GoAin the following:
identification of all actionsrequiredto be taken by the GoA and other public parties and the timetable andsteps necessary for the successful completion of theseactions; and support to the GoA from a legal perspective in relation to meeting any conditions precedent under the ProjectAgreements and in the development of documentation necessary to evidence that the conditions precedent have beenmet.
On-the job capacity building
The Mazar IPP raises complexissues for the public stakeholders (MoMP, AGE, MEW, DABS and MOF) and assistance is needed for the completion of the Mazar IPPtransaction. The objective is also to set a precedent and encourage the development of otherpower generation projects - but also,more generally, PPPs and private investments. While the Advisor is primarily expected to assist in the finalization of the MazarIPP transaction, the cross-cutting/precedent setting dimension of the assistance should be kept in mind. The Advisors are thusexpected to provide on-the-job training to the staff ofthe ministries and other public entities (such as DABS, AGE) in orderforthem to be able to: (i) conclude the Project; (ii) manage the Project once the contract with the Advisors will have expired; (iii)increase their capacity to conclude similar transactions in the future. The Advisor must ensure a transfer of capacity during theassignment andthe Advisor should highlight how they propose to implement this capacity transfer through a capacity building plan tobe submitted to MoMP and other public stakeholders.
The on-the-job training/capacitybuilding should focus ? to the extent possible ? on Tashkeel staff. Each government stakeholder (MoMP, AGE, MEW, DABS, MoF) shouldappoint one or two technical level Tashkeel staff which will be the main focal point(s) for the Mazar IPP. To ensure sustainablecapacity building, the focal points should remain involve in the Mazar IPP during the life of the Project and therefore commit therequired time.
Because the Project is stillat preparation stage, with discussions on going on its structure, some level offlexibility is needed in the definition of theresponsibilities of the Advisor? as well as for the delivery of services.
As regards preparation phasein particular, the Advisor would be expected, as discussions on the structure advance, to advise the public stakeholders on themain parameters of the proposed transaction, from a technical, financial and legal point ofview.
As regards the implementationphase, the Advisor would be expected to assist the public stakeholders in reviewing the overall legal structure proposed ? and thenreviewing and negotiating the Project agreements, so as to ensure that: (i) contractual structure and contractual terms are incompliance with good businesspractices in the industry; and (ii) the interest of the GoA and relevant public parties involved areproperly assessed, understood and defended.
As regards the capacitybuilding dimension, the Advisor would be expected to address both needs for the Project itself (preparation, implementation andcontract management) - andneeds to ensure some sustainability and replicability of thetrainingprovided.
The Consultant shall be alegally registered entity with core competency as a financial, legal or mining consultant, expertise in related infrastructural,legal and financial matters, and international experience. The team proposed by the Consultant shall have relevant educationcertification, including academic degrees from accredited universities. The team shall have at least ten (10) years' experience inthe mining sector specific to strategic planning, technical assessment, and legal and regulatory development. The Consultant musthave provided strategic planning advisory services related to mining within the last five (5) years and be familiar with currentmining practices and trends, specifically in Asia, international best practi ? The firms shall be financially sound with average annual turnoverof equal or more than (US$ 2,000,000) during the last five years (2010 to 2015);and the generalinternational miningenvironment.
The attentionof interested Consultants is drawn to paragraph 1.9 of the World Bank's Guidelines: Selection and Employment of Consultants under IBRD Loans and IDACredits & Grants by World Bank Borrowers [January 2011, revised July2014.] ("Consultant Guidelines"), setting forth the World Bank's policy on conflict of interest.
The Ministry of Mines and Petroleum hereby invites eligible consultants to indicate their interest in providing the servicesdescribed herein. The expression of interest shall be evaluated based on following criteria: (a) age of the firm and nature of theconsultancy assignment for which the consultant firm is registered (core competency); (b) general experience of the firm in thespecific sector; (c) experience in similar sector and country conditions; and (d) availability of appropriate skills among staffand resources.
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.).
Consultants may associate with other firms in the form of a joint venture or a sub-consultancy to enhancetheir qualifications (consultants are required to clearly mention either of the two terms "Joint Venture" or "Sub-consultancy"where applicable: refer to Para 1.9 ofthe Guidelines: Selection and Employment of Consultants, January 2011, revised July2014.).
The proposed timeline of the contract is for 9 monthstill (30th June 2016) from the signing date of the contract. For key staff, the man-month level of efforts is estimatedat: (35-40 man months over a 9 months period).
A Consultant will be selected in accordance with the Selection Based on Consultant's Qualification (CQS)method set out in the Consultant Guidelines (January 2011 revised July 2014).
Interested firms and agencies may obtain further information atthe address below during regular office hours (Saturday to Wednesday, 08:00 ? 14:00 hrs AFST).Interested firms and agencies may obtain the Terms of Reference by email to below address and also the Terms of Reference attachedseparately.
This notice for Expression of Interest has also been posted onwebsites http://www.mom.gov.af, http://www.acci.org.af, http://www.ards.gov.af (NPA) and https://www.devbusiness.com
Expressions of interest must be delivered to the email address below by no later than 21 August 2015, 14:00 localtime. Expression of Interest with allrelevant information and documents must be submitted and subscribed "Expression of Interest for - "Consultancy Services of Transaction Advisors for Mazar Independent PowerPlant" Reference No. MOMP/PMU/CT-II-34 must bequoted in all correspondence, including the Expression of Interest.
Ministry of Mines and Petroleum, Program Management Unit (PMU)
Attention: Abdul MubeenShahab, Acting Executive and Director
Afghanistan ResourceCorridors Project (ARCP)-World Bank Funded.
Ministry of Mines andPetroleum (MoMP)
Address: Pashtunistan Watt, Kabul - Afghanistan
Afghanistan Geological Survey Building (AGS), 2nd floor, Annex Building,
Closeto Abdul Haq Four-way, 2ndMakrorayan, Kabul, Afghanistan.
Email: firstname.lastname@example.org copy to email@example.com