Regional Power Transmission Interconnection Project (Afghanistan and Tajikistan)

Transcription

1 Completion Report Project Number: Loan Numbers: 2303-TAJ (SF)/8320-TAJ and 2304-AFG (SF) Grant Number: 0230-AFG June 2014 Regional Power Transmission Interconnection Project (Afghanistan and Tajikistan) This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS Currency unit (Afghanistan) afghani (AF) At Appraisal At Project Completion (6 November 2006) (16 May 2014) AF1.00 = $0.02 $0.017 $1.00 = AF49.44 AF57.35 Currency unit (Tajikistan) somoni (TJS) At Appraisal At Project Completion (6 November 2006) (16 May 2014) TJS1.00 = $0.30 $0.21 $1.00 = TJS3.35 TJS4.84 ABBREVIATIONS ADB Asian Development Bank DABM Da Afghanistan Breshna Moassessa (Afghanistan Power Authority) DABS Da Afghanistan Breshna Sherkat (Afghanistan Power Utility) EIRR economic internal rate of return FIRR financial internal rate of return FY fiscal year IDB Islamic Development Bank O&M operation and maintenance OFID Organization of the Petroleum Exporting Countries Fund for International Development PIU project implementation unit P power purchase agreement PPMS project performance management system QCBS quality- and cost-based selection SCADA supervisory control and data acquisition TA technical assistance TCR technical assistance completion report WEIGHTS AND MEASURES GWh gigawatt-hour km kilometer kv kilovolt kwh kilowatt-hour MW megawatt NOTES (i) The fiscal year (FY) of the Government of Afghanistan and its agencies ends on 20 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2006 ends on 20 March However, in 2012, the ending date of government s fiscal year was changed from 20 March to 21 December to align with international practice. (ii) The fiscal year of the Government of Tajikistan and its agencies ends on 31 December. (iii) In this report, "$" refers to US dollars.

3 Vice-President W. Zhang, Operations 1 Director General K. Gerhaeusser, Central and West Asia Department (CWRD) Director R. Stroem, Energy Division, CWRD Team leader Team member J. Hwang, Senior Portfolio Management Specialist, CWRD L. Dimayuga, Senior Project Officer, CWRD R. Benavidez, Senior Operations Assistant, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 BASIC DATA CONTENTS Page I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 10 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10 III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 13 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15 i APPENDIXES 1. Design and Monitoring Framework Project Costs ADB Annual Disbursements Implementation Schedule Status of Compliance with Loan Covenants Contracts and Disbursements Financed by ADB Financial Assessment of Executing Agencies and Project Economic Analysis Quantitative Assessment of Overall Project Performance Contribution to the ADB Results Framework 67

5 BASIC DATA AFGHANISTAN A. Loan Identification 1. Country 2. Loan Number / Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan / Grant 7. Project Completion Report Number Afghanistan 2304-AFG(SF) / 0230-AFG Regional Power Transmission Interconnection Project Afghanistan Ministry of Energy and Water SDR23,563,000 / $12,000,000 REG 1451 B. Loan Data 1. Fact Finding Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Agreement 5. Date of Effectiveness In Agreement Actual Number of Extensions 6. Closing Date In Agreement Actual b Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 8. Terms of Relending Interest Rate Maturity (number of years) Grace Period (number of years) ADB Loan/Grant 28 August September November November December May August August September June % per annum (1.0% per annum during grace period) ADB Grant Not applicable a 18 October October November January February September December June % per annum (1.0% per annum during grace period) a Project concept paper for supplementary financing approved on 29 September b Actual loan financial closing date was 5 March 2014 and actual grant financial closing date was 29 October 2013.

6 ii Loan: 9. Disbursements a. Dates Initial Disbursement 23 February 2009 Final Disbursement 25 February 2014 Time Interval 60 months Grant : Effective Date 22 August 2007 Initial Disbursement 19 December 2011 Original Closing Date 30 September 2009 Final Disbursement 17 October 2013 Time Interval 25 months Time Interval 22 months Effective Date 12 September 2010 Original Closing Date 31 December 2011 Time Interval 15 months Category b. Loan Amount (SDR 000) Original Allocation Last Revised Allocation Amount Disbursed Amount Cancelled 1 Transmission line 17,302 21,777 21, Demining Incremental administration, training, and PIU support 4 Consulting services Interest during construction 6 Unallocated 471 3, Total SDR 23,563 23,563 22, Total $ equivalent 35,000 36,208 35,154 1,074 PIU = project implementation unit, SDR = special drawing right. Note: 1 SDR = $ Category c. Grant Amount ($ 000) Original Allocation 471 Amount Disbursed 471 Amount Cancelled 1 Transmission line 8,300 4,011 4,289 2 Implementation consultant Unallocated 3, ,000 Total 12,000 4,568 7, Local Costs (Financed, ADB Loan) Not applicable Local Costs (Financed, ADB Grant) Not applicable 0

7 iii C. Project Data Cost 1. Project Cost ($ million) Appraisal Estimate Supplementary Financing Estimate Total Estimate Actual Foreign Exchange Cost Total Financing Plan ($ million) Cost Implementation Costs Appraisal Estimate Supplementary Financing Total Estimate Actual Borrower Financed ADB Loan Financed ADB Grant Financed Afghanistan Reconstruction Trust Fund Islamic Development Bank Total IDC Costs Borrower Financed ADB Financed Other external financing Total ADB = Asian Development Bank, IDC = interest during construction. 3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Supplementary Financing Total Estimate Actual Transmission line Kunduz substation a Baghlan substation Implementation consultant Incremental administration, training and PIU support Demining Taxes and duties Security during construction b Contingencies n/a Land acquisition and resettlement cost Interest during construction Total n/a = not applicable, PIU = project implementation unit. a Substations not yet complete. Contract cost of $17.54 million that covers Kunduz and Baghlan substations. b The government contributed to security during construction by means of local police force. As such, its amount is not recorded

8 iv 4. Project Schedule Item Appraisal Estimate Actual Establishment of project management office 1 November 2005 Date of contract with consultants Loan: Project management consultants Loan and grant: Demining consultants April January April 2011 Civil works contracts Loan and grant: Transmission line October November 2008 Completion of Work March 2009 October 2011 Item Appraisal Estimate Actual Other Milestones Minor implementation arrangements change (separate bidding document for Afghanistan and Tajikistan) Major implementation arrangements change (selection method QCBS 80:20 to 90:10) Request for imprest account establishment Major implementation change (change in IA) Extension of winding up and interest charges as eligible project expenditures 7 October October April December February 2014 Reallocation of Loan Funds First Second Equipment and Supplies First Procurement Completion of Equipment Installation Start of Operations Completion of Tests and Commissioning Beginning of Start-Up 4 November November 2011 November 2007 March 2009 December 2008 October 2008 October October October Project Performance Report Ratings Implementation Period 1 January December January December 2010 Ratings Development Objectives Implementation Progress Satisfactory Satisfactory Satisfactory Partly satisfactory Overall Project Rating a 1 January December 2013 On track a In 2011, e-operations replaced the project performance rating. The indicators used in performance rating are technical, procurement, disbursement, financial management, and safeguards. A single rating applies to the project (Tajikistan loans and Afghanistan loan and grant).

9 v D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person- Days Specialization of Members a Inception Mar a, b, c Review 1 10 May a, c, e Review Nov a, c, g Review 3 26 Jan 2 Feb a, b, c, e, g Review 4 Review 5 Review 6 Contact/Consultation Contact /Review Consultation Mar Jun 3 Jul Aug 2 Sep Feb Oct Aug g, c, h a, c, e, h, i, j a, h, j, k f, d, h a, c, h, j a, c, j Project completion review Nov a, h, j Consultation mission 3 11 Dec a, c, h, j a a = energy specialist/investment officer/mission leader, b = project analyst, c = project officer Afghanistan Resident Mission (AFRM), d = portfolio management specialist, e = energy specialist, f = sector director, g = principal energy specialist, h = energy specialist AFRM, i = social development specialist (resettlement), j = assistant project analyst AFRM, k = investment specialist.

10 vi BASIC DATA TAJIKISTAN A. Loan Identification 1. Country 2. Loan Numbers 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number Republic of Tajikistan 2303-TAJ(SF) / 8230-TAJ a Regional Power Transmission Interconnection Project Republic of Tajikistan Barki Tojik SDR14,475,000 / $8,500,000 REG 1451 B. Loan Data 1. Fact-finding Date Started Date Completed 2. Appraisal Date Started Date Completed 3. Loan Negotiations Date Started Date Completed 4. Date of Board Approval 5. Date of Loan Agreement 6. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions 7. Closing Date In Loan Agreement Actual Number of Extensions ADB Loan 28 August September 2006 Waived Waived 17 November November December February May August December May OFID Loan 10 January September 2007 and 6 November January December June Terms of Loan (ADB) Interest Rate Maturity (number of years) Grace Period (number of years) 1.5% per annum (1.0%) per annum during grace period 32 8 Terms of Loan (OFID) Interest Rate Maturity (number of years) Grace Period (number of years) 1% per annum 20 5 a Cofinancing provided by the Organization of the Petroleum Exporting Countries Fund for International Development (OFID). ADB and OFID signed a letter of administration on 6 November 2007.

11 vii 9. Terms of Relending Interest Rate Maturity (number of years) Grace Period (number of years) LIBOR-based Disbursements ADB Loan: a. Dates Initial Disbursement 18 January 2008 Final Disbursement 16 May 2011 Time Interval 40 months OFID Loan: Effective Date 22 August 2007 Initial Disbursement 8 May 2011 Original Closing Date 31 December 2010 Final Disbursement 31 May 2011 Time Interval 40 months Time Interval 11 months Effective Date 15 January 2008 Original Closing Date 31 December 2010 Time Interval 35 months Category b. Amount (SDR 000) Original Allocation Last Revised Allocation Amount Canceled Amount Disbursed 1 Transmission line 7,204 8, ,537 2 Baipaza hydropower pant 1,279 1, ,324 3 Bulk metering 1,145 1, ,078 4 Optimization of Vakhsh a Resettlement and environmental activities 6 Consulting services 1,346 1, ,261 7 Interest during construction Unallocated 2, Total SDR 14,475 12,313 2,161 2,313 Total $ equivalent 21,500 18,900 3,458 18,900 SDR = special drawing right. a A feasibility study for Vakhsh Optimization was completed by the project implementation consultant, after ADB s approval of the contract variation. Note: 1 SDR = $ Local Costs (Financed) Not applicable C. Project Data 1. Project Cost ($ million) Cost a Appraisal Estimate Actual Foreign Exchange Cost Total a No differentiation was made at appraisal or in actual costs between foreign and local costs.

12 viii 2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed (Barki Tojik) ADB Financed Islamic Development Bank OFID Total IDC Costs Borrower Financed ADB Financed Other external financing Total ADB = Asian Development Bank, IDC = interest during construction, OFID = Organization of the Petroleum Exporting Countries Fund for International Development. 3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual A. Investment Costs 1a. Engineering, Supply and Construction of the Transmission line and 220 kv Line Bay at Sangtuda b. Supply of conductors Baipaza HPP Excitation System Bulk metering Golovnaya HPP Transformer T3 a Golovnaya HPP Unit b 6. Dredging Canals: Centralnaya and Prepadnaya HPPs 7. Implementation Consultant Optimization of Vakhsh River cascade c Land acquisition and compensation Environmental monitoring Subtotal (A) B. Contingencies d 1. Physical Contingencies 2. Financial Contingencies Subtotal (B) C. Interest During Construction Total kv = kilovolt, HPP = hydropower plant. Note: Totals may not add up due to rounding. a Canceled. b Financed Golovnaya Unit 4, in lieu of Unit 3. c Canceled. d Not identified separately in actual cost estimate.

13 ix 4. Project Schedule Item Appraisal Estimate Actual Establishment of project implementation unit July 2006 Date of contract with consultants Mid December 2007 Civil works contracts (i) Lot 1, 220 kv Transmission Line Date of Award Completion of Work April 2007 January December November 2010 (ii) Lot 5, Rehabilitation of Excitation and Temperature System for Generator Units at Baipaza hydropower plant Date of Award Completion of Work March 2008 April December July 2010 (iii) Lot 6, Supply and Installation of Meters and Associated Plant Date of Award Completion of Work August 2008 August March December 2010 Equipment and supplies First procurement June July 2007 Last procurement November August 2010 Completion of equipment installation January October 2010 Start of Operations Completion of Tests and Commissioning Beginning of Start-Up Other Milestones Minor change in implementation arrangements and loan reallocation Minor change in scope and implementation arrangements Minor change in implementation arrangements Reallocation of Loan Proceeds First Second Third Fourth kv = kilovolt. 8 October October June August October June February March 2010 December 2010

14 x 5. Project Performance Report Ratings Implementation Period 1 January December January January February December 2010 Development Objectives Satisfactory Satisfactory Satisfactory Ratings Implementation Progress Satisfactory Partly Satisfactory Satisfactory Overall Project Rating a 1 January December 2013 On track a In 2011, e-operations replaced the project performance rating. The indicators used in performance rating are technical, procurement, disbursement, financial management, and safeguards. A single rating applies to the project (Tajikistan loans and Afghanistan loan and grant). D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person- Days Specialization of Members Inception 29 March 4 April a, b Review 1 19 May a Review October c, d Contact April a, f Review March c, e, f Review June c, f Review 5 Review 6 Review February May November g, b, e c, h, g, i g Project completion review 5 9 November j, k, f a = energy specialist, b = project analyst, c = principal energy specialist, d = infrastructure specialist, e = project implementation officer Tajikistan Resident Mission, f = staff consultant, g = investment specialist, h = director energy division, i = energy specialist, j = project administration unit head/senior energy specialist, k = senior project officer.

15 I. PROJECT DESCRIPTION 1. At the time of project preparation in 2006, Afghanistan s electricity infrastructure had been severely affected by years of conflict, with generation capacity declining to 250 megawatts (MW) in 2005 from 456 MW in the 1990s. Electricity generation was limited and unable to meet demand, leading to widespread load shedding, and the transmission grid was almost nonexistent. This led to the use of small-scale diesel power generators in Kabul and elsewhere, resulting in pollution and high electricity costs. Electricity demand was also forecast to grow at 5.5% per annum to about 1,100 MW by At the same time, Tajikistan had a surplus of power generation capacity in the summer months. Installed electricity generation capacity was 4,405 MW, of which 4,060 MW (92%) was hydropower. Annual hydropower output was about 16,000 gigawatt-hours (GWh) and, on average, there was a summer surplus of 1,500 GWh that was available for export. This surplus increased by 2,700 GWh when the Sangtuda-I hydropower plant was commissioned in April Part of this surplus was exported. Because of a lack of sufficient access to power markets, Tajikistan s hydropower plants were forced to spill water. 3. To address these issues, the Regional Power Transmission Interconnection Project was designed to (i) increase the power export and income-generating capacity of Tajikistan; (ii) restore power supply and lower the cost of electricity in Afghanistan; (iii) improve capacity in the operation of the Afghanistan Power Authority (DABM); and (iv) strengthen the commercial operation of Barki Tojik, the company responsible for electricity generation, transmission, and distribution. 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 4. At appraisal, the project was relevant to each country s development objectives, and to the country strategies and regional cooperation program of the Asian Development Bank (ADB). In 2004, the Government of Afghanistan formulated an electricity sector policy and road map in which the establishment of a regulatory framework and the restructuring and commercialization of the power sector were key features. The aim of the policy was to supply all of Afghanistan with reliable power by To achieve this goal, there were plans to invest in system rehabilitation; increase the power supply, including through imports; and expand generation, transmission, and distribution capacity. The project was designed to support these activities through the development of energy infrastructure to increase imports of electricity from Tajikistan. 5. In 2005, the Government of Tajikistan adopted a two-pronged strategy aimed at (i) rehabilitating the domestic electricity market through policy measures and investment to improve sector operating conditions and enhance financial viability; and (ii) increasing electricity exports, first by using existing potential surpluses, and then by expanding generation capacity. The project was designed to support the expansion of generation and transmission, including exports to Afghanistan. 6. The goal of ADB s Initial Country Strategy and Program for Afghanistan was national reconstruction, with a focus on agriculture and water resources, education, infrastructure, 1 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loans, Technical Assistance Grants, and Administration of Loan by the OPEC Fund for International Development to the Islamic Republic of Afghanistan and Republic of Tajikistan for the Regional Power Transmission Interconnection Project. Manila.

16 2 and the environment. 2 At the government s request in 2003, ADB assistance in the energy sector was directed at generating and distributing electricity, upgrading hydropower, and rehabilitating natural gas and petroleum infrastructure. 7. In Tajikistan, ADB s Country Strategy and Program reflected ADB s overarching objective of poverty reduction. 3 It focused on economic growth with an emphasis on rural development and regional cooperation. Increasing productivity and profitability in rural areas was to be supported through rehabilitation of rural infrastructure to improve agricultural output, market access, and electricity supply. 8. The individual country strategies and programs were to be linked with and complemented by ADB s regional cooperation program. This focused on identifying infrastructure needs and providing the investment environment for promoting cross-border trade, including trade in energy. In the energy sector, ADB s focus was on (i) maximizing the use of national resources and assets, (ii) benefiting neighboring countries by rationalizing and encouraging regional energy trade based on market principles, and (iii) rehabilitating existing infrastructure. 9. The design of the project was sound and addressed the main issues of surplus hydroelectricity in Tajikistan and the lack of transmission capacity in Afghanistan to import electricity from Tajikistan. The design was enhanced with a power purchase agreement (P), arrangements for the institutional strengthening of Barki Tojik and DABM, and measures to encourage the private sector to participate in the energy sector in Afghanistan. The project was formulated in close cooperation with stakeholders. The Government of Tajikistan had pursued opportunities to sell its excess power in spring and summer, while the Government of Afghanistan had identified power imports as the most effective way of meeting its short-term power shortfall. The project was endorsed by the energy and finance ministers and key power sector enterprises of both countries. 10. At completion, the project remains relevant to each country s development objectives, which for Afghanistan includes the development of energy links with neighboring countries and for Tajikistan includes increasing electricity exports. 4 B. Project Outputs 1. Afghanistan Component 11. Part A: Transmission lines. The 220 kilovolt (kv) transmission line was constructed as planned from the border with Tajikistan to Pul-e-Khumri substation in Afghanistan, and was commissioned in October The length of the completed transmission line was increased to 163 kilometers (km) from 157 km to avoid a populated area along the route. To address potential security concerns resulting from possible residual landmines in the line route, a demining contractor was procured under the Afghanistan loan. The contractor cleared a 4.5 km section before construction, as required by the United Nations Mine Action Centre for Afghanistan. 12. Part B: Substations. Work on the substations was delayed. Construction of two switchyards, financed by the Islamic Development Bank (IDB), was carried out by an Iranian contractor, but progress was affected by sanctions imposed on Iran, the contractor, and its 2 ADB Initial Country Strategy and Program: Afghanistan, Manila. 3 ADB Country Strategy and Program: Tajikistan, Manila. 4 ADB Country Partnership Strategy: Afghanistan, Manila; ADB Country Strategy and Program: Tajikistan, Manila.

17 3 banks by the international community, restricting payments to the contractor. As of May 2014, construction was 95% complete, with major equipment already installed. Completion is expected by September Tajikistan Component 13. Part A: Transmission lines. The actual length of the completed transmission line from Sangtuda to the Pyanj River crossing was km, compared to the km expected at appraisal. The transmission line was completed on 30 November 2010, and commissioned and energized for electricity export to Afghanistan on 27 October Part B: Substations. Work at the Sangtuda substation was completed as planned. Two new line bays, numbers 12 and 13, were constructed at the substation. The transmission line was connected to two existing bays, numbers 7 and 8, after installation of new transformers to ensure proper clearance from the existing lines. 15. Part C: Generation. The dredging of the canals at Centralnaya and Prepadnaya hydropower plants was completed in December The dredging at Prepadnaya hydropower plant resulted in a lowering of the water level by about 1 meter. The dredging at Centralnaya hydropower plant was completed as originally planned, but resulted in only marginal improvement as sedimentation was more extensive than expected. A follow-up study recommended the dredging of an additional 12 km along the canal. This dredging was completed in September The upgrading of unit 3 at Golovnaya hydropower plant was not undertaken because unit 4 had failed in the meantime and higher priority was placed on unit 4. Therefore, the loan financed the rehabilitation of unit 4 instead. The operational acceptance certificate was issued on 31 December Rehabilitation of the excitation system at Baipaza hydropower plant was completed in July 2010 with scope expanded to procure 144 additional temperature sensors and associated equipment. 17. The replacement of transformer T3 at the Golovnaya hydropower plant was originally to be financed by Barki Tojik. The first tender, using the limited international bidding procedure, failed to attract interest. The second tender, using international competitive bidding, was successful, but Barki Tojik was unable to fund the required work. This component was therefore not implemented. 5 The optimization of the Vakhsh River cascade was also not implemented as no bid was received during tendering, and its implementation during the project was not feasible given that there was no data acquisition system in place. Instead, the scope of the project implementation consultant was increased to include a feasibility study for (i) the optimization work, and (ii) a supervisory control and data acquisition (SCADA) system. The feasibility study was completed in November The Vakhsh optimization and SCADA are now included under the ADB-financed Regional Power Transmission Project Part D: Metering. The metering component comprised: (i) the replacement of mechanical meters with digital meters, (ii) the replacement of current and voltage transformers, and (iii) improved energy data collection. This component was successfully completed in December 2010 by installing 320 bulk meters, 18 current transformers, and 19 voltage transformers in the western and central grids. During implementation, Barki Tojik 5 Replacement of transformer T3 is included in the scope of the Golovnaya 240 Megawatt Hydropower Plant Rehabilitation Project (Grant 0236-TAJ). 6 ADB Report and Recommendation of the President to the Board of Directors: Proposed Grant to the Republic of Tajikistan for the Regional Power Transmission Project. Manila.

18 4 proposed and ADB approved (i) an increase in the number of staff trained in operation and maintenance (O&M) of the new meters from 40 to 90, and (ii) additional construction works at Kurgan-Tyube and Chapaevo substations to install the current and voltage transformers. 19. Actual project achievements with respect to impact, outcome, and outputs, as specified in the project design and monitoring framework, are in Appendix 1. C. Project Costs 20. The cost of the project was estimated at $109.5 million at appraisal, comprising $55.5 million for the Afghanistan component and $54.0 million for the Tajikistan component. A funding gap arose in the Afghanistan portion of the transmission line because (i) start-up of construction was delayed and security in the Afghanistan project area worsened, further delaying implementation and increasing costs; 7 and (ii) additional towers and line lengths were required to reroute the transmission line to avoid a populated area. ADB approved a supplementary grant of $12.0 million, with the government financing an additional $0.4 million for taxes and duties. 8 The cost increases, including an expected price escalation, amounted to $8.3 million. The balance included an increase in the cost of implementation consulting services ($0.7 million) and an increase in price contingencies ($3.0 million). 9 This increased the estimated cost of the Afghanistan component to $67.9 million and raised the cost for the project as a whole to $121.9 million. Actual project costs amounted to $102.8 million. 10 Details of estimated and actual project costs by component are in Appendix Under the Afghanistan component, ADB actually financed $35.1 million under the Afghanistan loan against $35.0 million estimated at appraisal due to a fall in the SDR dollar exchange rate. Only $4.6 million was disbursed under the Afghanistan grant against $12.0 million approved, equivalent to 38% of the approved amount. At appraisal, the Afghanistan Reconstruction Trust Fund was to finance $16.5 million. Subsequently, this financing was replaced by financing from the IDB, amounting to 12.7 million ($17.5 million equivalent). The government financed $0.7 million against $4.4 million estimated at appraisal At appraisal, ADB was to partly finance the transmission line in Tajikistan, together with the line bay at the Sangtuda hydropower plant, and fully finance the Baipaza excitation and temperature system, bulk metering, the implementation consultant, optimization of the Vakhsh River cascade, land acquisition and compensation, and environmental monitoring. IDB was earmarked for partial financing of the Golovnaya hydropower plant unit 3. The Organization of the Petroleum Exporting Countries Fund for International Development (OFID) was to finance the balance of the cost of the transmission, amounting to $8.5 million. Barki Tojik was to finance conductors related to the transmission line, Golovnaya hydropower plant transformer T3, part of the cost of Golovnaya hydropower plant unit 3, and the dredging of canals at the Centralnaya and Prepadnaya hydropower plants. Under the Tajikistan loan, ADB actually financed $18.9 million against $21.5 million estimated at appraisal. 12 IDB financing was increased from $10 million proposed at appraisal to $ Construction began only in ADB Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Grant to the Islamic Republic of Afghanistan for the Regional Power Transmission Interconnection Project. Manila. 9 Detailed cost escalation estimates are provided in Appendix 2 of the grant report and recommendation of the President, (footnote 6). 10 This Includes financing charges of $0.87 million, $0.15 million under the Afghanistan loan, and $0.72 million under the Tajikistan loan. 11 This includes $0.3 million for taxes and duties, and $407, for compensation for land acquisition and resettlement. 12 Due to a fall in the SDR dollar exchange rate, the SDR value of ADB s disbursement was SDR12,313,617. An amount of SDR2,161,383 ($3,458,905) was cancelled on 16 May 2011.

19 5 million because the awarded contract price exceeded the cost estimate. OFID financed $7.91 million of the proposed $8.50 million and Barki Tojik financed $4.12 million of the proposed $14.00 million. D. Disbursements 23. A breakdown of annual disbursements under loans and grant is in Appendix 3. Total disbursements under the Afghanistan loan were $35,153, compared with $35,000,000 specified in the loan agreement, and $1,074,337 was canceled at closing. Under the Afghanistan grant, the total amount disbursed was $4,567,937 compared with $12,000,000 specified in the grant agreement. Under the Tajikistan loan, total disbursements amounted to $18,900,033, compared with $21,500,000 in the loan agreement. An amount of $3,458,905 from this loan was canceled. 24. For the Afghanistan loan, an imprest account was opened in Da Afghanistan Bank with a limit of $60,000. The average annual turnover ratio of the imprest fund was 1.12, indicating a low annual turnover or utilization. This indicates that the imprest fund was not used efficiently as procedures require that at least twice the amount of the funds advanced to the executing agency should be liquidated every year. The imprest account was closed on 5 March E. Project Schedule 25. Implementation was significantly delayed by the failure to agree the terms of the intergovernmental P, in particular with respect to price. 14 The P was finally signed on 29 August 2008, 12 months after loan effectiveness. An implementation schedule showing the estimated and actual timing of activities under the project is in Appendix At appraisal, the Afghanistan component of the project was to be implemented from December 2006 to March The loan was scheduled to close on 30 September Loan closing was first extended on 1 April 2009 to 31 December 2010 due to the delay in P signing, which was a condition for contract award of civil works. It was subsequently extended to 31 December 2011 and then to 31 December 2012 because of unresolved resettlement issues. The Afghanistan grant was approved on 18 November 2010, and was also scheduled to close on 31 December During 2011, with construction nearing completion, the Ministry of Energy and Water identified an additional 40 families that would be affected by the transmission line near Pul-e-Khumri. 16 The contract of the implementation consultant was extended to prepare land acquisition and resettlement plans. Consequently, the loan and grant closing dates were extended until 30 September 2012 to accommodate the additional work and resolve remaining resettlement issues. The additional land acquisition and resettlement plans were approved by ADB on 18 October Further extensions of the loan and grant closing dates to 31 December 2012 and finally to 30 June 2013 were approved to ensure that all land acquisition and resettlement plan activities would be completed. The Ministry of Energy and Water implemented the compensations as approved in the land acquisition and resettlement plans, and ADB accepted the compliance reports on 1 April The actual physical closing date of the loan and grant accounts was 30 June 2013, while the actual loan financial closing was on 5 March 2014 and grant financial closing was on 29 October Due to a fall in the SDR dollar exchange rate, the SDR value of ADB s disbursement was SDR22,868,715. An amount of SDR694,285 ($1,074,337) was cancelled on 5 March As indicated in the report and recommendation of the President for the Afghanistan grant (para. 5), it was agreed that a P would be signed before any contract award. 15 At the end of 2009, cumulative disbursements amounted to only 7.8%. 16 In total, 138 affected families had been identified along the route of the line.

20 6 27. The Tajikistan component was to be implemented from December 2006 to June The loan agreement was signed on 22 February 2007, and became effective on 22 August 2007, with a delay of 3 months. 17 The loan was scheduled to close on 31 December Loan closing was extended once to 15 March 2011, with financial closing on 16 May The contracts for the transmission line and the Baipaza excitation system 18 were awarded in January The contract for bulk metering was awarded in April Apart from initial delays in start-up and contract bidding and award, a number of delays beyond the control of the contractors, executing agency, and project management unit prevented earlier completion. Work on the transmission line was delayed because the delivery of materials was held up in Uzbekistan and then rerouted through the Kyrgyz Republic. This delayed completion to November 2010, 22 months after the appraisal deadline of January While work on the Baipaza excitation system was completed 1 month ahead of the contractual deadline of August 2010, completion was delayed by a problem with the stator core winding in generator unit 2 that affected the testing and commissioning of the excitation system at full power. 20 The bulk metering works were on schedule for completion in October 2010, but additional site works at two substations delayed completion until December 2010, 17 months after the appraisal deadline on July The original scope of the dredging of canals at the Centralnaya and Prepadnaya hydropower plants was completed in December The additional dredging at the Prepadnaya hydropower plant was completed by December The upgrading and testing of generation unit 4 at the Golovnaya hydropower plant was completed on 26 December F. Implementation Arrangements 29. In Afghanistan, the Ministry of Energy and Water was designated as the executing agency and the Afghanistan Power Authority (DABM) as the implementing agency. The project implementation unit (PIU) was established in the ministry in November 2005 to manage ADB-financed projects and coordinate with Tajikistan counterparts. In September 2009, DABM was restructured as a new power utility, Da Afghanistan Breshna Sherkat (DABS). DABS took over the role of implementing agency for the project, and was bound by the terms and conditions of the project agreement, subsidiary loan agreement, and P. The implementation arrangements were satisfactory. 30. In Tajikistan, Barki Tojik was designated as the executing agency. It was to appoint a project director to take responsibility for day-to-day project operations and coordination with counterparts in Afghanistan. A new, independent PIU was to be set up specifically for the project. However, a PIU had already been set up in Barki Tojik in March 2001 with responsibility for coordination, procurement, disbursement, and reporting on projects implemented by Barki Tojik. In June 2006, this PIU was administratively and physically separated from Barki Tojik, and a project management unit was established under the Office of the President. 21 The project management unit was managed by a director and several deputy directors, and comprised 120 staff. It had significant experience in the implementation of projects financed by international financial institutions, including ADB. The implementation arrangements were satisfactory. 17 Loan effectiveness was delayed by 3 months to submit (i) revised subsidiary loan agreement and (ii) legal opinion. 18 The same contractor was awarded the contract for Golovnaya hydropower plant unit The contract for dredging of canals at the Centralnaya and Prepadnaya hydropower plants was awarded on 1 January In mid-june 2010, Barki Tojik agreed to test the system at reduced power and not to hold the contractor responsible for excitation system failure resulting from the problem in unit The project management unit was named the State Establishment Project Management Unit for Electro- Energy Sector.

21 7 31. Executing agencies, with the assistance of the implementation consultants, were required to establish comprehensive project performance management systems (PPMSs) to monitor and evaluate project performance, as well as delivery of planned facilities and project benefits under the Afghanistan and Tajikistan components. These requirements were complied with, but the focus was primarily on project implementation. The PPMSs did not adequately collect data on project benefits and beneficiaries on which to assess the impact and benefit of the project. The design and implementation of the PPMSs were less than satisfactory. G. Conditions and Covenants 32. Loan and grant covenants were generally complied with and are summarized in Appendix 5. Partial or noncompliance with covenants was mainly related to financial issues as follows: Afghanistan loan and grant (i) DABS operating ratio was below the required level of 90% for fiscal year (FY) 2012 only, but improved in each year since its establishment in (ii) DABS complied with the accounts receivable covenant in FY2010 and However, it was not in compliance in 2012 when accounts receivable rose to 4.3 months, in excess of the 3 months requirement. (iii) (iv) The Ministry of Energy and Water has not submitted the audited project financial statements for FY2012 and FY2013. DABS submission of entity audited financial statement for FY2013 is awaited. The DABS website does not provide project data or financial statements. Tajikistan loan (i) Barki Tojik met the covenanted 6 months accounts receivable in FY2008 and FY2009, but did not comply in FY when accounts receivable were required to be no more than 3 months billing. In FY2012, accounts receivable were almost 3 times the covenanted level at 8.8 months. (ii) Barki Tojik s operating ratio was above the required level of 90% every year since FY2008, except for FY2010 when the covenant was complied with. (iii) From FY2010, Barki Tojik s debt service coverage ratio was below the required level of 1.3. (iv) Tariffs were not adequately adjusted throughout the project implementation period to enable Barki Tojik to comply with financial covenants. (v) The notes to Barki Tojik s financial statements for FY2008 indicated that a part of Barki Tojik s transactions were carried out by mutual set-offs, barter, and other noncash settlements. This contravened the covenant that all barter trade would cease by the end of FY2007. No reports of barter trade were made in the annual reports of 2009 to (vi) Barki Tojik s website does not provide project data or financial statements. H. Related Technical Assistance 33. Technical assistance for Strengthening Corporate Management of Barki Tojik. The technical assistance (TA) was designed to build the capacity of Barki Tojik, focusing on internal management, customer responsiveness, and reliability. The approach proposed by the TA was to engage consultants in a performance-based management contract with an expected impact of improving commercial operations and an outcome of improved institutional capacity of Barki Tojik. Expected outputs were (i) a work plan for restructuring Barki Tojik with detailed steps for the first 3 5 years, (ii) prequalification documents and bidding documents for the management contract, and (iii) an evaluation of the bids.

22 8 34. After several months of debate, the government decided that a management contract was not an appropriate option at the time for Barki Tojik. ADB agreed to revise the TA to emphasize short-term improvements in Barki Tojik operations including implementing governance structures, improving efficiency in key areas (e.g., corporate planning and accounting), and raising operational efficiency to international standards. The change in focus was considered consistent with the original impact and outcomes. The output was revised to an updated sector restructuring plan and a corporate restructuring methodology for Barki Tojik. 35. Overall, the TA completion report (TCR) rated the TA partly successful because it did not achieve the output related to the management contract for Barki Tojik. 22 However, it did initiate the restructuring of Barki Tojik, to which the government and Barki Tojik were committed and which will continue to receive support from ADB. The restructuring of Barki Tojik was adopted under ADB s follow-on Regional Power Transmission Project, to improve the operational and financial performance of the power sector to strengthen Barki Tojik s capacity to service debt while providing high-quality electricity services. 36. Technical assistance for Improving the Capacity of Da Afghanistan Breshna Moassessa. The TA was designed to improve the institutional, technical, and financial capacity of DABM. The expected impact was to improve the capacity of the Ministry of Energy and Water to reduce risks that could undermine the sustainability of the assets financed by the loan. The expected outcomes were (i) strengthened institutional and management capacity, and (ii) improved capacity of technical employees, especially in transmission and distribution. The expected outputs were (i) enhanced staff capability in management and operations, financial management and accounting, human resources management, and customer care management; and (ii) improved technical efficiency of O&M. 37. The TCR stated that the institutional and management capacity building was not achieved and no consultant inputs were provided for this aspect of the TA. 23 It highlighted a lack of commitment on the part of DABM to strengthening its capacity, other than in relation to its technical employees. DABM was at the time in the process of restructuring into DABS and argued that it could not identify potential institutional and management trainees before the establishment of DABS. 38. The TCR concluded that the TA was highly relevant to the needs of the power sector, in particular the need to address the risks to sustainability of the assets financed under the Afghanistan loan. However, the TA was rated less effective because it did not achieve the institutional capacity building output, and less efficient given that no consultant inputs were provided for institutional capacity building. As a result, the TA was rated less likely sustainable and the overall TA rating was partly successful. I. Consultant Recruitment and Procurement 39. Under the Afghanistan loan, the contract for the main project management and implementation consultant was awarded in accordance with ADB Guidelines on the Use of Consultants, at $1.41 million using the quality- and cost-based selection (QCBS) procedure. The same consultant was engaged for both the Afghanistan and Tajikistan loans. The amount disbursed was $1.37 million, equivalent to 94.3% of the contract amount. Following the signing of the Afghanistan grant, a contract variation was approved on 21 November 22 ADB Technical Assistance Completion Report: Strengthening Corporate Management of Barki Tajik intajikistan. Manila (TA 4908-TAJ). 23 ADB Technical Assistance Completion Report: Improving the Capacity of Da Afghanistan Breshna Moassessa in Afghanistan. Manila (TA 4909-AFG).

23 extending the implementation consultant s contract to 31 December An additional amount of $0.634 million was added to the contract from the grant. Of this, $0.56 million (88%) was disbursed. 40. ADB supported the change in the consultant selection method from QCBS 80:20 to QCBS 90:10. The continuing conflict in Afghanistan creates unusual conditions in which consultants must use unconventional approaches to reach project sites, conduct test, supervise works, attract and retain qualified staff, and engage experts with special skills. The difficulty in mobilizing national and international specialists on a timely basis, maintaining close supervision of construction works, and advising the executing agency on urgent issues contributes to cost overruns and implementation delays. 41. Under the Tajikistan component, a single contract for $2.66 million was awarded in accordance with ADB Guidelines on the Use of Consultants using the QCBS procedure. 24 Two contract variations were then approved one to expand the scope of the consulting services to include a feasibility study for Vakhsh River optimization and SCADA, and the other to extend the completion date to the loan closing date of 31 December Actual disbursement was $1.98 million. 42. The procurement of works and goods and services was carried out in accordance with ADB s Procurement Guidelines. The original arrangement was to issue a single bidding document for the complete line, with bidders free to bid for the Afghanistan portion and/or the Tajikistan portion to improve competition. Bidding documents would be issued from Tajikistan. However, ADB supported the Government of Afghanistan s request to prepare separate bidding documents for the Afghanistan and Tajikistan components. A single bidding for two components of work with two employers is administratively complicated particularly for pre-award activities. Also, with ADB s approval, the demining contract was awarded through direct contracting due to the need to urgently proceed with demining works, the small contract amount ($.161,000), and the highly specialized nature of the service. 43. A summary of contracts awarded by ADB under each loan and the grant is in Appendix 6. Under the Afghanistan component, a contract for the transmission line construction was awarded under international competitive bidding for $32.9 million under the Afghanistan loan. 25 A contract variation with a value of $4.73 million was provided to the transmission line contractor under the Afghanistan grant. 44. Under the Tajikistan component, four contracts were awarded with a total value of $24.65 million. The contracts for the work at Sangtuda substation and construction of the transmission line for $20.93 million and the excitation system at Baipaza hydropower plant for $2 million were awarded to international contractors. The contract for the supply and installation of metering equipment for $1.7 million was awarded to a national company. The fourth contract, with a value of $0.02 million, was for resettlement and environmental activities. Actual disbursements were $13.02 million (62.2% of the contract value) for the Sangtuda substation and transmission line, $2.08 million for the excitation system at Baipaza hydropower plant (104% of the contract value), $1.65 million (97% of the contract value) for metering, and $0.02 (100% of the contract value) for resettlement activities. 24 The contract was awarded on 19 December This contract was awarded to the same contractor who was awarded the transmission line contract under the Tajikistan loan.