The Federal Democratic Republic of Ethiopia (FDRE) is planning to implement the proposed Power
Sector Reform, Investment and Modernization in Ethiopia (PRIME-1) (P176731). The Ethiopian Electric
Power (EEP) and Ethiopian Electric Utility (EEU) are responsible for implementing the PRIME-1 Project
activities. The International Development Association (World Bank) has agreed to finance activities (the
“Activities”) that are essential for robust preparation and timely implementation of the Project
activities.
The PRIME is a Multiphase Programmatic Approach (MPA) program that will support a medium-term
transition of the electricity sector towards universal access, reliable supply, utility financial
sustainability, increased private investments, and a climate resilient diversified generation mix. This
transition will be underpinned by structural reforms that will encompass a gradual segregation of the
competitive segments of the sector from the monopolistic segments to enable increased private
participation under a competitive market regime. In parallel, the program will pursue operational
reforms that will enhance utility financial sustainability through timely adjustment of tariffs, greater
energy accountability, efficient investment planning, improved collections, reduced losses, and
modernization of systems. This medium-term reform transition will be achieved through upfront
adoption of a reform mandate by the Government, time-bound reform actions intertwined with
investment support, and institutional capacity building to support the preparation and implementation
of specific reform actions.
The PRIME Program as a Multiphase Programmatic Approach (MPA) is structured in four phases:
PRIME-1, an Investment Project Financing (IPF) operation with Performance-Based Conditions (PBCs)
will prioritize critical infrastructure investments and set the stage for structural and operational
reforms at the energy sector. Implementation of specific reform actions and performance improvement
steps will be supported through a combination of technical assistance and PBCs. Building on Accelerated
Distributed Electricity and Lighting in Ethiopia (ADELE – P171742), investments under PRIME-1 will cover
distribution rehabilitation and transmission strengthening critical to mitigating the risk of a widening
access gap. In addition, the project will help lay the foundation toward exploiting the country’s vast
geothermal potential. Continuing to support reform actions, PRIME-2, a planned Program for Results
Financing (PforR) operation, will help improve operational performance and financial sustainability of
the distribution utility. Building and expanding on Ethiopia Electrification Program (ELEAP – P160395),
PRIME-2 will support activities necessary for reduction in technical and commercial losses, improved
billing efficiency using enhanced energy accountability and collections through deployment of smart
meters and prepaid meters, stronger utility IT systems, evolved utility Supervisory Control and Data
Acquisition (SCADA) systems, improved customer management system, and other relevant measures.
This project will be structured as a PforR with disbursement-linked indicators (DLIs) related to various
performance improvement measures and key reform actions to broaden and deepen the reform
activities under PRIME-1.
PRIME-3, an IPF operation with International Development Association (IDA) Guarantees, will provide
continued credit enhancement for private sector participation in the country’s power sector. Sector
reforms and upstream risk mitigation measures for Independent Power Producer (IPP) projects under
PRIME-1 and improvements in the financial sustainability of the utilities under PRIME-2, and other
planned World Bank engagement are expected to enable the scaling-up of private sector participation
supported by IDA Guarantees, Multilateral Investment Guarantee Agency (MIGA) of the World Bank
Group, or other risk mitigation mechanisms. Along with solar and wind IPP projects supported under
2
Renewable Energy Guarantees Program Project (REGREP-P162607), PRIME-3 would also cover
geothermal IPPs, Independent Power Transmission Companies (IPTCs), and public-private partnerships
(PPPs) in other subsectors. Key pre-requisites for PRIME-3 include improved macro and sector financial
situation.
PRIME-4, a planned IPF operation, will support the rehabilitation of old hydropower capacity as well
as upstream development of renewable energy parks. Rehabilitating dilapidated hydropower plants is
a least cost generation expansion solution. This phase will also support upstream resource
establishment; site development; and transmission infrastructure for solar, wind, and geothermal IPP
projects. It will also support the establishment of a new Geothermal Resource Identification Agency.