Notice of Entering Into a Compact With the Republic of Liberia, 61846-61849 [2015-26064]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 80, Number 198 (Wednesday, October 14, 2015)]
[Notices]
[Pages 61846-61849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26064]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 15-04]


Notice of Entering Into a Compact With the Republic of Liberia

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 (22 U.S.C. 7701-7718) as amended (the Act), and 
the heading ``Millennium Challenge Corporation'' of the Department of 
State, Foreign Operations, and Related Programs Appropriations Act, 
2015, the Millennium Challenge Corporation (MCC) is publishing a 
summary of the Millennium Challenge Compact between the United States 
of America, acting through the Millennium Challenge Corporation, and 
the Republic of Liberia. Representatives of the United States 
Government and Liberia executed the Compact documents on October 2, 
2015. The complete text of the Compact has been posted at https://assets.mcc.gov/documents/compact-liberia.pdf.

    Dated: October 7, 2015.
Maame Ewusi-Mensah Frimpong,
Vice President and General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Republic of Liberia

Overview

    MCC has signed a five-year, nearly $257 million Compact with the 
Republic of Liberia aimed at reducing poverty and accelerating economic 
growth. The Compact seeks to address two binding constraints to 
economic growth in Liberia: Lack of access to reliable and affordable 
electricity, and inadequate road infrastructure.

Program Overview and Budget

    Liberia first became compact eligible in fiscal year (``FY'') 2013, 
but failed the scorecard in FY 2014, largely due to a change (by the 
indicator provider, not the government of Liberia) in the methodology 
for collecting and reporting on data associated with the Natural 
Resource Protection Indicator. As a result, MCC's Board of Directors 
authorized MCC to continue development of a compact, but with the 
expectation that Liberia again pass the scorecard prior to the compact 
coming forward for approval. In FY 2015, Liberia passed its scorecard: 
It met ten of the twenty indicators, including the Control of 
Corruption and Democratic Rights ``hard hurdles.'' An analysis 
completed in September 2013 found lack of access to reliable and 
affordable electricity and inadequate road infrastructure to be binding 
constraints to growth in Liberia.
    The high cost and unreliability of publicly provided electricity 
(at $0.52 per kilowatt-hour, one of the world's highest electricity 
tariffs), coupled with limited electricity grid infrastructure 
(currently the electric utility, Liberia Electric Corporation 
(``LEC''), has an installed generating capacity of only 22 megawatts 
(``MW'') mean that less than two percent of Liberia's approximately 
four million citizens have access to the network, imposing a 
significant barrier to Liberia's long-term economic development. 
Similarly, inadequate capacity to plan for, finance and execute 
maintenance on the predominately unpaved road network, coupled with 
sustained rainfall for nearly half the year (which renders many of 
these roads impassable), undermines national and regional trade 
opportunities, threatens sustained political stability and severely 
constrains economic growth and social diversification. The Compact will 
address these issues through the following investments in wide-ranging 
policy reforms, institutional strengthening, and infrastructure:
     Increasing Liberia's domestic generation capacity by up to 
88 MW through investment in rehabilitation of the Mount Coffee 
Hydropower Project (with the European Investment Bank, and the 
governments of Norway and Germany);
     Supporting sustainability in the power sector by, among 
other things, providing training for LEC employees and support to 
establish an independent regulator; and
     Supporting sustainability in the roads sector, including 
re-establishing regional maintenance centers and standing up a 
dedicated fund.
    The budget for the Compact is approximately $257 million, allocated 
as follows (figures are approximate due to rounding):

                         Compact Budget Summary
------------------------------------------------------------------------
                                                           Budget (in US
                    Project/activity                            $)
------------------------------------------------------------------------
Energy Project:
  Mt. Coffee Rehabilitation Activity....................    $146,800,000
  Mt. Coffee Support Activity...........................     $18,100,000
  LEC Training Center Activity..........................      $5,500,000
  Energy Sector Reform Activity.........................     $31,190,000
                                                         ---------------
      Energy Project Subtotal...........................    $201,590,000
Roads Project:
  National Road Maintenance Activity....................     $15,000,000
  Roads Sector Reform Activity..........................      $6,070,000
                                                         ---------------
      Roads Project Subtotal............................     $21,070,000
Monitoring and Evaluation Project:

[[Page 61847]]

 
  Monitoring and Evaluation Activity....................      $5,500,000
                                                         ---------------
      Monitoring and Evaluation Project Subtotal........      $5,500,000
Compact Administration:
  MCA-Liberia Administration............................     $17,066,000
  Financial Management and Procurement Controls.........      $9,500,000
  Financial Audits......................................      $2,000,000
                                                         ---------------
      Compact Administration Subtotal...................     $28,566,000
                                                         ---------------
          Compact Grand Total...........................    $256,726,000
------------------------------------------------------------------------

    The Energy Project aims to improve various aspects of the energy 
sector in Liberia. The Mt. Coffee Rehabilitation Activity aims to 
increase the amount of electricity generated in Liberia, facilitate a 
decrease in the overall electricity tariff, and contribute to increased 
reliability and adequacy of electricity. This activity addresses the 
overarching problem in the energy sector, i.e., lack of access to 
affordable and reliable electricity, by targeting the insufficient 
supply of electricity in Liberia. Complementary activities in the 
Energy Project should support the results of the Mt. Coffee 
Rehabilitation Activity, address other root cause problems in the 
sector and/or mitigate negative impacts and risks of the investment, 
such as the risk of increased saltwater intrusion in the municipal 
water supply.
    The Roads Project aims to improve the quality of Liberia's road 
network by supporting the piloting of a new road maintenance regime and 
building capacity within the sector. Improved management of the road 
sector is expected to decrease vehicle operating costs and provide time 
savings for road users.

Energy Project ($201.6 Million)

    The Energy Project is comprised of the following four interlinked 
activities aimed at enhancing power generation, strengthening the 
capacity of key sector institutions, and supporting the development of 
foundational policies as the sector modernizes and becomes more 
commercially viable.
    1. Mt. Coffee Rehabilitation Activity ($146.8 million). MCC funding 
along with funding from other donors will cover: (i) The expected cost 
of the Mt. Coffee Hydropower Plant's fourth turbine, allowing the 
rehabilitated plant to generate up to 88 MW of power once operational; 
(ii) unfunded gaps between existing and available other stakeholder 
commitments and a total cost to complete the project at $357 million 
(which includes contingencies to provide a 98 percent confidence level 
that the costs will not exceed that amount); (iii) the cost of a second 
66 kilovolt transmission line from the Mt. Coffee Hydropower Plant to a 
substation at Paynesville; and (iv) the cost of rehabilitating a raw 
water intake located inside the reservoir. MCC's investment in the 
rehabilitation of the Mt. Coffee Hydropower Plant will take advantage 
of an existing project and financial management structure (the project 
implementation unit (``PIU'') being used by the other international 
donors. Like an accountable entity, the PIU is a single-purpose 
government of Liberia entity with the responsibility for managing and 
overseeing the rehabilitation of the Mt. Coffee Hydropower Plant. The 
PIU is composed of Liberian and international experts and will remain 
subject to applicable MCC-mandated audits. MCC will be part of the 
PIU's donor oversight committee, and MCC funds will be isolated in a 
new, separate project bank account, to be established.
    2. Mt. Coffee Support Activity ($18.1 million). In its assessment 
of the rehabilitation of the hydropower facility, MCC concluded that 
additional areas of support would be required to better mitigate 
environmental and social risks and ensure long-term sustainability that 
could not be procured under the contract structures already in place. 
These include (i) the provision of small-scale community infrastructure 
(foot bridges, water points, pit latrines, etc.) for project affected 
persons, (ii) additional human resources support to the activity's 
project implementation unit to ensure timely and professional 
management, oversight and reporting, (iii) a watershed management plan 
(including climate change and fisheries studies), and (iv) 
rehabilitation of the raw water transmission line from the Mt. Coffee 
reservoir to the White Plains Water Treatment Works.
    3. LEC Training Center Activity ($5.5 million). MCC funding will 
support the construction of a training center for LEC and the provision 
of equipment and training materials. The LEC training center will form 
the core base for training of technicians in the electricity sector. 
The training center will provide training in the following core areas: 
(i) Transmission and distribution, (ii) electrical, (iii) mechanical, 
(iv) hydro-electric, and (v) other specialized training. The proposed 
training center will also provide training for the director, 
instructors, and support staff of the LEC training center, who will be 
hired as employees of LEC.
    4. Energy Sector Reform Activity ($31.2 million). The Energy Sector 
Reform Activity aims to provide support to the key institutions 
responsible for policy making, investment planning, asset management, 
and environmental and social oversight--namely the Ministry of Lands, 
Mines and Energy, LEC and the Liberian Environmental Protection Agency. 
With considerable donor financing secured for new transmission, 
distribution and generation infrastructure as well as residential and 
commercial connections, the proposed activity and its components have 
been developed to complement support programmed by other sector 
stakeholders. The central components of this activity are:
    i. The provision of support for the development of an independent 
regulator which is seen by all sector stakeholders as necessary within 
the next three to five years, given the levels of investment in the 
sector and the proposed expansion plans. MCC assistance will help 
establish the regulator within the Department of Energy until such time 
as it can function independently. Work to establish the regulator will 
be done in cooperation with the European Union, which is separately 
assisting the Department of Energy as a whole. Compact funding will 
also provide for a situation assessment of the energy sector, 
development of a financial model for the sector, analyses of demand, 
willingness to pay, connections, and cost of service, and the design of 
a regulatory information system;
    ii. Support to the enhancement of the capacity of the Liberian 
Environmental Protection Agency to better manage its core functions, 
including environmental licensing and permitting, review and approval 
of environmental and social impact assessments and management plans, 
review and approval of resettlement action plans, and monitoring and 
oversight of the implementation of these plans to mitigate 
environmental and social risks. This support will include the provision 
of technical assistance and capacity building for staff of the Liberian 
Environmental Protection Agency and the provision of material support 
such as IT upgrades and laboratory equipment; and
    iii. Support to the implementation of a management arrangement for 
LEC. As part of Compact development, MCC has worked with the government 
of Liberia

[[Page 61848]]

to study the options for medium to long-term management of LEC, and the 
disbursement of Compact funding after February 2016, is conditioned on 
the government of Liberia's decision to pursue a long-term management 
solution likely to lead to a financially stable utility based on the 
results of that study. The form of MCC support will depend on the 
management arrangement selected, but could, for example, include 
technical assistance to LEC management and staff in the case that a 
public management option is selected, or funding and technical 
assistance to execute a transaction for a private sector management 
option.

Roads Project ($21.1 Million)

    Inadequate road infrastructure is a binding constraint to economic 
growth in Liberia. Rather than a large capital investment directly in 
road construction or maintenance, however, the Roads Project will focus 
on institutional strengthening via two activities:
    1. National Road Maintenance Activity ($15 million). This activity 
will pilot up to five Regional Maintenance Centers (``RMC''), including 
the construction of at least two RMCs, and match government of Liberia 
contributions (up to $8 million dollars) into a Road Maintenance Fund 
(which will be managed by an agency known as the ``Road Fund 
Administration''), which is considered critical for the sustainability 
of road maintenance.
    i. RMCs existed prior to the Liberian civil war and were 
responsible for providing routine and periodic maintenance under the 
auspices of the Ministry of Public Works (``MPW''), which owned the 
maintenance equipment and directly executed road works. In the post-
conflict setting, MPW has moved away from direct implementation of 
works to contracting maintenance work to the private sector, due to 
ongoing institutional reforms within the sector. The activity will 
include the construction of at least two regional RMCs located in the 
western region of Liberia, in Tubmanburg, Bomi County and the other in 
the southeastern region, in River Gee County, each covering two 
additional counties. An RMC will include residential quarters for staff 
and resident engineers, technicians and operators. RMCs will not be 
fitted with equipment owned by the MPW; rather they will rely on 
private contractors to provide the equipment and implement works. MCC 
may fund the remaining three RMCs, depending on successful completion 
of the first two and an assessment of their viability.
    ii. The Road Fund Administration will be created by the government 
of Liberia during the first year of the Compact and will exist as a 
stand-alone entity under the Ministry of Transport, with the primary 
responsibility of collecting, managing, and disbursing money in a Road 
Fund dedicated to periodic road maintenance. The fund will be supported 
by revenues from a fuel levy, vehicle licensing and registration fees. 
MCC will match the government of Liberia's contributions to the Road 
Fund on a one-to-one basis up to $8 million during the Compact term, 
subject to measurable indicators of performance on maintenance 
planning, capacity, and implementation.
    2. Roads Sector Reform Activity ($6.1 million). This activity will 
provide for capacity building and technical assistance at the national 
and regional level, including training support for RMCs, the Ministry 
of Public Works, the Ministry of Transport, and Road Fund 
Administration staff in transportation planning, policy, maintenance, 
and institutional systems from the local to international level.
    i. Data on Liberia's road network is sparse; even the most 
comprehensive traffic counts collected for the Transport Master Plan of 
2010 have significant gaps in the primary road network and little to no 
data for the secondary network. Therefore, data collection on roadway 
conditions and traffic counts will be carried out under the Compact, 
including on primary, secondary and feeder roads. This data will then 
be used to inform sector planning, including a network analysis to 
support efforts to prioritize road rehabilitation and maintenance.
    ii. Compact activities to increase the capacity of the many actors 
in the roads sector will be coordinated with and complement the 
activities of other donors, building on current efforts of the donor 
working group. Compact funding will support an axle load control law, 
strengthening the operational framework of the Road Fund and its 
administration, training in transportation planning methods, 
development of a five-year transportation asset management plan for 
Liberia, urban transportation planning in Monrovia, and a review of 
existing policies on road safety to develop recommendations for updates 
and their implementation. These activities will be undertaken in 
partnership with the U.S. Department of Transportation.

Economic Analysis

    Currently, the supply and distribution of electricity in Liberia 
are extremely limited, both in terms of the number of connections and 
the total demand of those connections. Current customers pay a high 
tariff, due to the expensive fuel price for the high-speed diesel 
generators that are currently used for LEC's entire supply of 
electricity. After the completion of the Mt. Coffee Rehabilitation 
Activity, existing customers on the grid will receive a one-time 
benefit of the drop in tariff, and after that will receive benefits 
based on their consumption of grid-delivered electricity, as measured 
by the amount they pay for electricity.
    Demand for electricity and the provision of new connections to the 
grid drive MCC's economic model for the Energy Project. Using a ``base 
case'' scenario developed as part of Liberia's Electricity Sector Least 
Cost Development Plan (which assumes 90,000 new household connections 
and 1,450 new industrial connections by 2020), the project yields an 
economic rate of return (``ERR'') of 11 percent with the possibility of 
variation, based on the number of additional connections made by LEC 
during the lifetime of the Compact.
    This figure is inclusive of all capacity building activities that 
support the Mt. Coffee Rehabilitation Activity (both operations and 
maintenance) and connecting new customers to the grid (e.g., the LEC 
Training Center Activity).
    Economic analysis for the Roads Project is pending, but will be 
complete once designs and feasibility studies are complete. Road 
maintenance programs of this nature typically have strong ERRs and 
these projects will be subject to MCC's normal investment criteria.

Update on Liberia Threshold Program

    Liberia was selected as eligible to receive MCC threshold program 
funding in 2010 and the $15.1 million program was then implemented by 
USAID from July 2010 to December 2013. It included three components:
    1. Strengthen Land Rights and Access. This project was designed to 
improve the policy and legal frameworks for land management and thereby 
increase security of tenure, investment in land, and land market 
activity. A great success of this project, though an unintended one, 
was the creation of a stand-alone land agency. Twenty-five communities 
successfully prepared land rights inventories.
    2. Improve Girls' Access to Primary Education. This project aimed 
to improve girls' primary education enrollment and retention. It was 
designed as a research-based project to increase educational 
opportunities for primary school girls in selected

[[Page 61849]]

communities in three counties, and tested three different intervention 
models. Girls' attendance rates at all 40 school programs increased 
beyond project targets, and baseline enrollment of girls increased by 
23 percent, in comparison to a decrease of over 19 percent in control 
schools.
    3. Improve Trade Freedom. This project intended to improve 
Liberia's trade freedom and to enable Liberia to participate more 
effectively in the Economic Community of West African States by 
improving performance on key policy measures. As a result of the 
project, the government of Liberia eased requirements for processing 
import and export declaration permits. The project also provided 
support to government of Liberia efforts to revise policies in a way 
that would lead to accession to the World Trade Organization; Liberia's 
accession is expected to be concluded by December of this year.

[FR Doc. 2015-26064 Filed 10-13-15; 8:45 am]
BILLING CODE 9211-03-P