Viet Nam: Mong Duong 1 Thermal Power Project

Transcription

1 Completion Report Project Number: Loan Numbers: 2353 and 2610 July 2018 Viet Nam: Mong Duong 1 Thermal Power Project This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS Currency unit dong (D) At Appraisal At Project Completion (24 July 2007) (31 December 2016) D1.00 = $ $ $1.00 = D16,135 D22,769 ABBREVIATIONS ADB Asian Development Bank BOT build-operate-transfer CFB circulating fluidized bed DER debt equity ratio DMF design and monitoring framework DSCR debt-service coverage ratio EIA environmental impact assessment EIRR economic internal rate of return EMP environment management plan EPC engineering, procurement, and construction EVN Vietnam Electricity FFA framework financing agreement FIRR financial rate of return FWSS freshwater supply system GDP gross domestic product ICB International competitive bidding IDC Interest during construction LIBOR London Interbank Offered Rate MD1TPP Mong Duong 1 Thermal Power Plant MD2TPP Mong Duong 1 Thermal Power Plant MFF multitranche financing facility MMMP mangrove management and monitoring plan NCB national competitive bidding OAI Office of Anticorruption and Integrity OCR ordinary capital resources PMU project management unit QCBS quality- and cost-based selection SFR self-financing ratio SOE state-owned enterprise TOR terms of reference TPMB1 Thermal Power Management Board No. 1 TPPMU1 Thermal Power Project Management Unit 1 WACC weighted average cost of capital

3 WEIGHTS AND MEASURES GWh gigawatt-hour (1,000 kwh) ha hectare (unit of area) km kilometer (1,000 meters) kv kilovolt (1,000 volts) kw kilowatt (1,000 watts) kwh kilowatt-hour (1,000 watt-hours) MW megawatt (1,000 watts) TWh terawatt-hour (1,000 gigawatt-hour) NOTES (i) (ii) The fiscal year (FY) of the Government of Viet Nam ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2014 ends on 31 December In this report, "$" refers to United States dollars. Vice-President Stephen Groff, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Director Andrew Jeffries, Energy Division, SERD Team leader Team members Aruna Wanniachchi, Senior Energy Specialist, SERD Renalyn Padilla, Senior Operations Assistant, SERD Aloha Samoza, Senior Project Officer, SERD Indah Setyawati, Senior Safeguards Specialist (Resettlement), SERD Au Minh Tuan, Senior Project Officer (Energy), SERD Kyoko Uematsu, Safeguards Specialist, SERD 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. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 2 B. Project Outputs 3 C. Project Costs and Financing 4 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 7 G. Technical Assistance 7 H. Consultant Recruitment and Procurement 8 I. Safeguards 9 J. Monitoring and Reporting 10 III. EVALUATION OF PERFORMANCE 12 A. Relevance 12 B. Effectiveness 12 C. Efficiency 13 D. Sustainability 13 E. Development Impact 14 F. Performance of the Borrower and the Executing Agency 16 G. Performance of Cofinanciers 16 H. Performance of the Asian Development Bank 16 I. Overall Assessment 16 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 17 A. Issues and Lessons 17 B. Recommendations 17 APPENDIXES 1. Design and Monitoring Framework Project Cost at Appraisal and Actual Project Cost by Financier Disbursement of ADB Loan Proceeds Project Implementation Schedule (At Appraisal vs. Actual) Chronology of Main Events Contract Awards of ADB Loan Proceeds Summary of Contracts Funded by the Asian Development Bank Implementation of Environmental Safeguards Implementation of Resettlement & Ethnic Minority Development Plan Status of Compliance with Loan Covenants Economic Analysis Financial Evaluation Summary Financial Statements Generation Company 3 68 i

5 BASIC DATA A. Loan Identification 1. Country Viet Nam 2. Loan number and financing source 2353, 2610, Ordinary Capital Resources 3. Project title Mong Duong 1 Thermal Power Project 4. Borrower Socialist Republic of Viet Nam 5. Executing agency Viet Nam Electricity 6. Amount of loan 2353 $27,860,000, 2610 $902,850, Project completion report number Financing modality Multitranche financing facility B. Loan Data 1. Appraisal Date started Date completed 2. Loan negotiations L2353 Date started Date completed Loan negotiations L2610 Date started Date completed 3. Date of Board approval MFF L2353 L Date of loan agreement Loan 2353 Loan Date of loan effectiveness L2353 In loan agreement Actual Number of extensions Date of loan effectiveness L2610 In loan agreement Actual Number of extensions 6. Project completion date L2353 Appraisal Actual Project completion date L2610 Appraisal Actual 7. Loan closing date L2353 In loan agreement Actual Number of extensions Loan closing date L2610 In loan agreement Actual Number of extensions 23 August September May May November November September October December October November January March February May April April June December June June December December

6 ii 8. Financial closing date L2353 L Terms of loan Interest rate Maturity (number of years) 18 February June 2017 LIBOR % per annum 25 years 6 years Grace period (number of years) 10. Terms of relending (if any) Interest rate LIBOR % + 20% on-lending fee Maturity (number of years) 25 years Grace period (number of years) Second-step borrower 6 years Vietnam Electricity 11. Disbursements a. Dates L2353 Initial Disbursement 22 January 2009 Effective Date 27 March 2008 L2610 Initial Disbursement 5 December 2011 Effective Date 12 May 2011 Final Disbursement 1 July 2013 Actual Closing Date 30 June 2013 Final Disbursement 15 May 2017 Actual Closing Date 31 December 2016 Time Interval 53.3 months Time Interval 63.2 months Time Interval 65 months Time Interval 67.7 months L2353 b. Amount ($ million) Increased during Implementation Canceled during Implementation Last Revised Allocation Category Original Allocation (1) (2) (3) (4=1+2 3) Amount Disbursed (5) Undisbursed Balance (6 = 4 5) Civil works Consulting services IDC and commitment charges Unallocated Total L2610 Original Allocation (1) Increased during Implementation (2) Canceled during Implementation (3) Last Revised Allocation (4=1+2 3) Amount Disbursed (5) Undisbursed Balance (6 = 4 5) Category EPC package Civil works Consulting services IDC and commitment charges Unallocated Total EPC = engineering, procurement, and construction; IDC = interest during construction.

7 iii C. Project Data 1. Project cost ($ million) L2353 Cost Appraisal Estimate Actual Foreign exchange cost Local currency cost Total L2610 Cost Appraisal Estimate Actual Foreign exchange cost , Local currency cost Total 1, , Financing Plan ($ million) L2353 Cost Appraisal Estimate Actual Implementation cost Borrower financed ADB financed Total implementation cost Interest during construction costs Borrower financed ADB financed (includes commitment charges) Total interest during construction cost L2610 Cost Appraisal Estimate Actual Implementation cost Borrower financed ADB financed Other external financing (The Export Import Bank of Korea) Total implementation cost 1, , Interest during construction costs Borrower financed ADB financed (includes commitment charges) Other external financing Total interest during construction ADB = Asian Development Bank. 3. Cost breakdown by project component ($ million) L2353 Component Appraisal Estimate Actual Civil works Field surveys and bidding documents Land acquisition and resettlement Project implementation consultant Social and environmental monitoring Project management Taxes and duties Subtotal Physical contingencies Price contingencies IDC and commitment charges Total

8 iv L2610 Component Appraisal Estimate Actual Engineering, procurement, and construction contract , Civil works Compensation and resettlement costs Project management cost Consulting services Taxes and duties Subtotal , Physical contingencies Price contingencies IDC and commitment charges Total 1, , IDC = interest during construction. 4. Project schedule L2353 Item Appraisal Estimate Actual Consultant recruitment (stage 1) Aug 2006 Jun 2007 Aug 2006 Dec 2008 Design, bid preparation, and tendering Apr 2007 Dec 2008 Apr 2007 Sep 2010 Resettlement plan and EMP implementation Oct 2007 Dec 2009 Jan 2009 Apr 2012 Consulting services implementation (stage 1) Jun 2007 Sep 2008 Dec 2008 Jul 2012 Civil works Dec 2008 Dec 2009 Nov 2008 Apr 2012 Site leveling and construction of diversion channel Nov 2008 Apr kv power system for construction Feb 2009 Apr 2012 Construction of site offices for PMU and consultants Apr 2009 Oct 2010 Construction of access road to highway No. 18 Sep 2010 Oct 2011 EMP = environmental management plan, kv = kilovolt, PMU = project management unit. L2610 Item Appraisal Estimate Actual Engineering, procurement, and construction package Jul 2009 Dec 2014 Nov 2009 Dec 2015 Consulting services (stage 2) Oct 2009 Dec 2014 Mar 2010 Dec 2016 Civil works Freshwater supply system Apr 2010 Apr 2013 Jul 2011 Nov 2014 Cooling water discharge canal Apr 2010 Mar 2013 Oct 2011 Jul 2014 Ash pond No. 1 Sep 2010 May 2013 Oct 2012 Dec 2014 Fence between two plants Nov 2012 Dec 2013 Jul 2014 Aug 2015 L Project performance report ratings Implementation Period Development Objectives Ratings Implementation Progress From 31 October 2007 to 31 May 2008 Satisfactory Satisfactory From 30 June 2008 to 31 December 2010 Satisfactory Highly Satisfactory Single Project Rating From 31 January 2011 to 30 June 2013 On Track

9 v L2610 Implementation Period Development Objectives Ratings Implementation Progress From 31 December 2009 to 31 May 2010 Satisfactory Satisfactory From 30 June 2010 to 31 December 2010 Satisfactory Unsatisfactory Single Project Rating From 31 January 2011 to 30 June 2011 On Track From 31 July 2011 to 30 September 2011 Potential Problem From 31 October 2011 to 31 December 2012 On Track From 31 January 2013 to 31 March 2013 Potential Problem From 30 April 2013 to 30 June 2017 On Track D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person- Days Specialization of Members Fact-finding mission 21 Jun 3 Jul a, b, i, j Appraisal mission 22 Aug 1 Sep a, b, f, g, h Inception mission Nov a, h, i Loan review mission Jul a, b, f Loan review mission Mar a, c, i, k, l Loan review mission May a, c, f, h Special project administration mission Jun c Loan review mission Jun a, h Loan review mission Oct a, b, d, h Special project administration mission Nov a, b, d Special project administration mission May a, d, h, l Loan review mission Jun a, d, h, l Special project administration mission Jul c, k, l Special project administration mission Nov c, k, l Loan review mission May a, c, h, k Midterm project review mission Nov a, c, h Project completion review mission (L2353) Apr a, c, d, h and loan review mission 8 Loan review mission Nov a, c, d, h, l Loan review mission Mar 1 Apr a, d, h, l Loan review mission Oct a, d, h, l Loan review mission 12 7 Apr a Project completion review mission (L2610) Sep a, c, d, h, l Environmental review mission Dec d, k Environmental review mission Mar d, k a = mission leader/energy specialist, b = energy economist, c = resettlement/social specialist, d = environment specialist, f = financial specialist, g = counsel, h = project analyst or project officer, i = resettlement consultant, j = power systems specialist/energy consultant, k = environment consultant, l = VRM national staff.

10 I. PROJECT DESCRIPTION 1. On 21 September 2007, the Asian Development Bank (ADB) approved a multitranche financing facility (MFF) comprising two loans in an aggregate principal amount of $ million. 1 The project supported Vietnam Electricity (EVN) in the construction of the 1,000 megawatt (MW) Mong Duong 1 Thermal Power Plant (MD1TPP), the first phase of a power complex of two coalfired power plants with total installed capacity between 2,000 and 2,200 MW. The intended impacts of the project were an adequate and reliable supply of power to meet national electricity demand in an environmentally sustainable manner, and a diversified fuel mix in power generation. The project outcome was that households and industries in northern Viet Nam have access to reliable and stable electricity supply. The main project outputs were (i) a 1,000 MW coal-fired thermal power generating station that uses circulating fluidized bed (CFB) boiler technology a cleaner coal technology, and (ii) common facilities for both the MD1TPP and the ,200 MW Mong Duong 2 thermal power plant (MD2TPP), the second plant in the complex, developed under a build-operate-transfer arrangement by a private investor. The project scope also included institutional and technical capacity building, particularly in CFB boiler technology and power plant operation. 2. At the time of project formulation in 2006, Viet Nam s gross domestic product (GDP) had grown at an average of 7.5% per annum over and achieved 8.2% growth in The government was determined to maintain high economic growth of 8.0% 8.5% in the 5-year socioeconomic development plan ( ) so as to reduce poverty to 11% 15% by To sustain this economic growth, a reliable power supply is essential; thus, the updated sixth Power Development Plan (PDP VI), with an outlook until 2025, forecast 16% annual growth in demand from 2006 to 2011 and 11% growth from 2011 to The high growth rate in electricity demand coupled with the country s disproportionate dependency on hydropower at the time left Viet Nam with dangerously low reserves during the annual dry seasons, when hydropower outputs fall to about 40 50% of installed capacity. The reliability of supply was thus poor during the dry season. Without significant increases in thermal plant generation capacity, the continuing demand for electricity was expected to reduce the reserve capacity to zero by To address system imbalances and seasonal power generation shortages, EVN therefore planned to develop thermal power plants rapidly. 3. The project was included in the PDP VI prepared on the basis of least-cost power generation planning. The government had identified the Mong Duong power complex as a priority power generation project for meeting the country s rapidly growing demand. Thus, the project was formulated to support the government by directly financing one power plant and to facilitate private sector investment for the second power plant in the same complex. II. DESIGN AND IMPLEMENTATION 4. The project achieved the originally envisaged output targets following the sound project design described in the Report and Recommendation of the President to the Board of Directors (footnote 1). 2 Due diligence was properly implemented. The design was relevant at the appraisal and remained so at completion. The design and monitoring framework (DMF) was not changed, Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to the Socialist Republic of Viet Nam for Mong Duong 1 Thermal Power Project. Manila. 2 Since the multitranche financing facility (MFF) was used to finance a single time-sliced project, the terms MFF, and the project were used interchangeably. Discussions on each of the two tranches under this MFF are specifically referred to as tranche 1 and tranche 2.

11 2 and there were no major changes in the project scope during project implementation. Appendix 1 compares the DMF prepared at appraisal in 2006 with project achievements at the completion of the power plant in December A. Project Design and Formulation 5. Relevance of the project. ADB s Viet Nam country strategy and program for recognized the remarkable poverty reduction that the government had achieved by 2006 and focused on improving the efficiency of Viet Nam s investments to sustain economic growth and further reduce poverty. To this end, ADB s strategy was to help the government respond to the rapidly growing demand for new infrastructure and to promote private sector investment. 6. Annual GDP growth during was robust at 6.3%, albeit lower than the 7.5% annual growth in the decade prior to Similarly, annual growth in electricity demand during , although lower than the projected 16%, was very strong at 12.8%. From 2011 to 2015 it remained at about 11%. The forecast growth in both GDP and demand for power for were affected by the 2007 Asian financial crisis. Even though the economic slowdown resulted in lower electricity demand as businesses shut down and manufacturing slowed, growth in demand was still in double digits, unlike in the rest of the Southeast Asian countries. The project contributed to meeting increased demand to provide adequate power supply, a key requirement for socioeconomic growth. Therefore, the project remains relevant to attaining the objectives of the government s socioeconomic development plan and ADB s country strategy and program. 7. Also notable is that the privately funded MD2TPP added 1,240 MW to the grid (the first unit was commissioned in June 2014, the second in May 2015). The MD2TPP was one of the first few thermal power plants successfully developed by foreign investors in Viet Nam under a buildoperate-transfer arrangement. Therefore, the project is also assessed as relevant for facilitating foreign investment in the power generation subsector. 8. Project preparation. The project was formulated by EVN and supported by a consultancy firm engaged by ADB to conduct feasibility studies and a firm engaged under the loan to update the power plant design and finalize the engineering, procurement, and construction (EPC) contract. The project also used clean, proven CFB technology which efficiently uses poor-quality and waste coal from mines near the project site. Stakeholder participation and consultation was satisfactorily undertaken during project preparation. Due diligence and environmental and social assessments, and preparation of impact mitigation plans were satisfactory. 9. Coal-based generation. Under the PDP VI, coal-fired power plants are to provide essential base-load power generation to ensure the security of the electricity supply. The government had made a policy decision to use domestic and imported coal. Coal s share in the country s generation mix was expected to more than double, from 16% in 2006 to 34% in 2020, while hydropower s share would fall gradually, from 37% in 2006 to 27% in 2020, while remaining the second largest component in the generation mix in terms of capacity. The project is in Quang Ninh Province of northern Viet Nam, where coal is abundant accounting for 90% of the country s reserves. Viet Nam is a signatory to the Kyoto Protocol, though it was not required to reduce carbon emissions under the agreement, which lasted until The 2005 United Nations Framework Convention on Climate Change shows that Viet Nam emits 0.3 tons of carbon dioxide (CO 2) per capita, compared with 6.3 tons per capita by Japan, 8.8 tons per capita by the United Kingdom, and 20.6 tons per capita by the United States. As Viet Nam s economy was rapidly developing, its consumption of energy was also expected to increase

12 3 to sustain economic growth and reduce poverty to 15% (footnote 1). The government was aware that the country s CO 2 emissions would increase and therefore chose the use of cleaner technologies such as CFB to minimize those emissions. 11. Financing modality. An MFF with two loans was the preferred financing modality for the project for three reasons: (i) during the first 2 years of project implementation only about $27.86 million of the estimated $1 billion project cost was required for preliminary works (the estimated duration of site clearing and leveling and river diversion works was 20 months); (ii) sufficient time was needed to design, bid, negotiate, and award the main EPC contract to construct the power plant under international competitive bidding (ICB) following ADB s Procurement Guidelines (2007, as amended from time to time); and (iii) to attract interest from reputable contractors, financing for the EPC contract had to be firmly in place prior to bidding. Given the uncertain timing in the procurement and negotiation of such large contracts, the government prudently opted to defer the second, larger loan to avoid paying commitment fees over a long period. Hence, the second loan was scheduled for when the EPC contract was substantially ready for award. 12. EVN is the executing agency, and Thermal Power Management Board 1 (TPMB1) under EVN originally named Thermal Power Project Management Unit 1 is the implementing agency. EVN and TPMB1 have shown strong ownership of the very large and complex project and consistency in progressing with project implementation. B. Project Outputs 13. The project outputs are a 1,000 MW CFB technology coal-fired power plant and common facilities for shared use by the MD2TPP. The outputs were successfully achieved. The peak generation capacity of the MD1TPP is 1,080 MW, owing to the use of more efficient boilers by the EPC contractor. All the common facilities (the freshwater supply system [FWSS], the coolingwater discharge canal, and the access roads) and ash pond were constructed satisfactorily and are performing satisfactorily. EVN constructed a 500 kv transmission line in parallel to the project for evacuation of power from both power plants. Between its commissioning in 2015 and December 2017, the plant generated 9,500 GWh of electricity. 14. The institutional and technical capacity building was provided efficiently. It was included in the scope of the stage 1 and stage 2 consultancy services and in the EPC contract. Throughout the project implementation, capacity building for TPMB1 staff was carried out by providing training sessions and hands-on training, starting from the preparation of the basic technical design and specifications with the stage 1 consultant, and the technical design review and approval with the stage 2 consultant, and continuing with plant operation during the commissioning stage with the EPC contractor. TPMB1 technical staff were qualified technically prior to the start of commercial operations and took over operations, with continued technical support from the EPC contractor, during the 2-year warranty period. 15. Tranche 1. Outputs were (i) preconstruction works and (ii) consulting services, referred to as stage 1 consultants. The scope of the preconstruction works included (i) site clearing and leveling for the power complex; (ii) the Mong Duong river diversion channel; (iii) access roads, including a road connecting the power complex to Highway 18; (iv) provision of power supply through a 35 kv transmission line to the construction site; (v) provision of water supply; and (vi) a site office and quarters for the project management unit (PMU) and consultants. Stage 1 consulting services included (i) updating the technical designs and drawings, (ii) assisting EVN in procuring the EPC package, (iii) supervising the tranche 1 civil works contracts, and (iv) updating

13 4 the environmental management plan (EMP) and resettlement plan, and supervising their implementation. The outputs were achieved satisfactorily and there were no scope changes. 16. Tranche 2. Outputs were (i) the 1,000 MW CFB technology coal-fired thermal power plant (output 1); and (ii) common facilities for the two power plants (output 2). The scope of output 1 included the EPC package and stage 2 consulting services. Stage 2 consulting services included overall project management, supervision of the EPC and other civil contracts for the common facilities and monitoring of implementation of EMP and the resettlement plan. The scope of output 2 included (i) the FWSS, (ii) the cooling-water discharge canal, (iii) the ash pond, 3 and (iv) the perimeter fence between the two plants. There were no major changes in the scope of tranche 2, although the implementation schedule slipped by 2 years as a result of the procurement delays in the EPC package. C. Project Costs and Financing 1. Project costs 17. The actual project cost is $1, million, which is $ million higher than the $1, million estimated at project appraisal. The cost overruns occurred mainly in tranche 2, due to high price escalations in the EPC contract. EVN sourced financing for the gap from the Export-Import Bank of Korea, which offered a $510 million loan. 18. Tranche 1. The actual project cost of tranche 1 is $39.98 million, which is $4.03 million less than the $44.01 million estimated at appraisal. This difference arises mainly from the decrease in the interest during construction (IDC) owing to the lower than projected London Interbank Offered Rate (LIBOR) during project implementation. The actual project implementation cost, excluding IDC and commitment charges was $39.26 million, $2.41 million higher than the $36.85 million estimated at appraisal. This increase is due to (i) the larger quantity of work in the site leveling and river diversion contract, particularly additional slope protection works and more rock excavations required at the project site; and (ii) greater land acquisition and resettlement costs ($7.95 million versus the $2.50 million at project appraisal). 19. Tranche 2. The estimated cost of tranche 2 was $1, million at MFF approval and $1, million at appraisal. The actual cost was $1, million, which is $ million higher than the estimate at appraisal. The estimated cost of the EPC contract at appraisal was $ million; the actual cost was $1, million a $ million difference. The cost overruns were caused by high price escalations during the 3 years of the EPC procurement process, risk premiums included in the price owing to the complexity of the package and the 2- year warranty requirement, and the quality of equipment offered by the reputed companies selected based on pre-qualification and ICB two-stage, two-envelope method. There was about $44.10 million in cost overruns for other civil works components, most of it caused by variations in work quantities and scope, changes that were anticipated for this kind of project at appraisal. 4 Appendix 2 compares the detailed project costs by component at project appraisal and completion. 3 Initial plan was to construct a common ash pond for both plants in the power complex on cost sharing basis, however EVN later opted to separate the ash ponds due to the different compositions of the ash discharged by the two power plants. Land acquisition and site leveling for Mong Duong 2 thermal power plant was implemented under the project but constructed separately. The two ash ponds are built in the same location separated by an embankment in the middle. 4 Cost overrun of ash pond was due to the variation in work quantities and change in scope to build an embankment to split the pond between the two power plants.

14 5 2. Project financing 20. The financing plan for the original estimate of $1, million for the MFF consisted of (i) a $ million (85%) ADB loan and (ii) $ million (15%) counterpart financing. The actual financing of $1, million consisted of $ million (57%) from ADB, $ million (31%) from the Export-Import Bank of Korea, and $ million (12%) counterpart financing. The original financing plan and actual allocation by financier at completion is in Appendix Tranche 1. The original estimated cost of $44.01 million for tranche 1 consisted of (i) a $27.86 million (63.3%) first loan from ADB for site preparation works and consulting services, contingencies, IDC and commitment charges; and (ii) counterpart financing in local currency equivalent to $16.15 million (36.7%) for project management, preparation of technical design and bid documents, payment of taxes and duties, implementation of the resettlement and environmental plans, and conduct of hydrological surveys. The actual financing plan did not deviate from the original, but loan proceeds were reallocated from unallocated and IDC and commitment charges cost categories to civil works and consulting services, to cover adjustments in costs related to contract variations. The actual ADB financing was $22.02 million, against the approved $27.86 million loan, and counterpart financing was $17.96 million. Unutilized loan proceeds of $3 million were partially canceled on 16 May 2013, and the remaining $2.84 million was canceled at the financial closure of the loan account on 18 February There was no material change in the financing between appraisal and completion. 22. Tranche 2. The original estimated cost of tranche 2 was $1, million at MFF approval in It consisted of (i) $ million (85.5%) from ADB for the EPC package, stage 2 consulting services, the common facilities, contingencies, and IDC and commitment charges; and (ii) EVN counterpart funding in local currency equivalent of $ million (14.5%) for resettlement and compensation, project management costs, taxes and duties, and a significant portion of the physical and price contingencies. The total cost of tranche 2 was updated to $1, million in January 2008 to reflect price escalations and exchange rate fluctuations between January 2008 and October The financing plan was revised to (i) $ million in an ADB loan (79.0%) and (ii) EVN counterpart funding equivalent to $ million (21%). It was updated again in December 2011, taking into consideration (i) the increased EPC contract price of $1, million (net of taxes and duties), (ii) $510 million parallel financing from the Export-Import Bank of Korea for the EPC package, (iii) financing charges borne by EVN for the Export-Import Bank of Korea loan, and (iv) reallocation of loan proceeds between cost categories. The total cost was re-estimated at $1, million. The revised financing plan was $ million (52.1%) in an ADB loan, the Export-Import Bank of Korea loan of $510 million (29.4%), and EVN counterpart funding of $ million (18.5%). 23. The actual financing for tranche 2 was $ million (57.4%) from ADB, $ million (31.9%) from the Export-Import Bank of Korea, and counterpart financing of $ million (10.7%). The Export-Import Bank of Korea closed the loan on 15 February The remaining undisbursed ADB loan proceeds of $22.72 million were canceled at the financial closing of the loan account on 9 June The savings were largely due to the decrease in IDC caused by lower LIBOR rates during project implementation. Counterpart funds were provided in a timely manner, ensuring smooth project implementation. D. Disbursements 24. The loans were disbursed in accordance with ADB s Loan Disbursement Handbook (2007 as amended from time to time). Actual disbursements under tranche 1 during the first 3 years

15 6 were slightly lower than projected at appraisal because of initial delays in project implementation. Disbursements were generally consistent with projections but lower in amounts because of the decrease in IDC and the partial cancellation of the loan proceeds. Disbursements under tranche 2 were generally consistent with the projections but took longer than anticipated because of the 2-year extension of the loan and the delays in resolving the commercial issues under the EPC package. Disbursements were completed for tranche 1 in July 2013 and for tranche 2 in May Appendix 4 shows the projected versus actual disbursements. E. Project Schedule 25. The planned implementation period at MFF appraisal was 6 years, and was scheduled to be completed by June At the time of MFF approval in September 2007, the project had been appraised fully, and the advance actions for consultant recruitment and procurement of civil work packages for tranche 1 was underway and it was to be implemented within 2 years, from June 2007 to June 2009, to accord with the anticipated contract award for the EPC package in July However, it took almost 4 years to complete for two reasons: (i) the stage 1 consulting services were engaged 11 months after the loan effectiveness date, and (ii) implementation of the civil works for site preparation took 42 months as a result of additional works, design changes, and difficulty in excavation under the site leveling and river diversion contract caused by larger than expected rock quantities not uncommon in this kind of projects. At MFF approval, tranche 2 was expected to be implemented from July 2009 to June At tranche 2 approval in December 2009 this was revised, with a utilization period of 5 years to loan closing at 31 December During implementation, the tranche 2 loan closing date was extended by 2 years until 31 December 2016, owing to (i) the delayed award of the EPC contract on 15 September A comparison of the projected and actual implementation schedules appears in Appendix All the expected outputs under tranche 1 were satisfactorily completed in April 2012, in time for the handover of the site to the contractors for both power plants. The 2-year delay in the completion of the civil works under tranche 1 did not cause a significant impact in the implementation of tranche 2 as the procurement of the EPC contract was delayed by 3 years. Tranche 1 was financially closed on 18 February 2014, about 8 months after the loan closing date. The financial closing was delayed by late confirmation of loan closure from the borrower and EVN. 27. The packages for the FWSS and cooling water discharge canal under tranche 2 were initially tendered in July 2011 and October The FWSS package was rebid in February 2012, after ADB rejected the bidding results due to conflict of interest between the two recommended bidders and contract was awarded in July The cooling water discharge cannel package was rebid in April 2012 after TPMB1 rejected all received bids for not meeting the technical and bid security requirements and contract was awarded in October All tranche 2 components were substantially completed in December 2015 before the extended loan closing date of 31 December Thus, the actual delay of the project is 2.5 years. There were no changes under either tranche other than this delay. 28. The EPC package had a 2-year warranty period, until December The MD1TPP has two units. The provisional acceptance certificates were issued on 10 October 2015 for unit 1 and on 3 December 2015 for unit 2. All eligible costs were financed out of the ADB loan proceeds as 5 Loan effectiveness was delayed by 5.4 months for tranche 1 and 6 months for tranche 2 because of the delay in the execution of the subsidiary loan agreement between Vietnam Electricity and the government. This did not have any impact on project implementation since the project was mostly ready by loan approval. Readiness include completion of original environmental impact assessment and resettlement plan as early as 2006, and consultants recruitment and procurement commenced in 2006.

16 7 designed and the loan account was closed on 9 June 2017, almost 6 months after the loan closing date. The major events in project processing and implementation are presented chronologically in Appendix 6. F. Implementation Arrangements 29. There were no changes in the project s implementation arrangements. The executing agency (EVN) and the implementing agency (TPMB1) delivered the outputs required and achieved the outcomes specified under the MFF. As the project is one of the largest undertaken by TPMB1, it had established and staffed the PMU based in Ha Noi as early as May TPMB1 senior and technical staff and the consultants moved to the project site after the completion of the site offices in October 2010 to closely supervise project implementation and commissioning works, and most of the PMU staff moved to the project site offices at the commencement of works under the EPC package. 30. TPMB1 encountered difficulties in the initial stages of the project because of the delay in the recruitment of the consultant for the stage 1 consulting services. It also took some time for TPMB1 to become familiar with ADB s procurement procedures and reporting requirements. ADB engaged an international procurement specialist to assist TPMB1 in procurement-related matters until stage 1 consultants were engaged. TPMB1 was also assisted by the stage 2 consultant during the implementation of tranche 2. With these measures, the project was managed satisfactorily. 31. TPMB1 started to operate under EVN s Generation Company 3 (GENCO3) in 2013, when three generation companies (GENCO1, GENCO2, and GENCO3) were established. EVN and TPMB1 remained the project executing and implementation agencies, and there were no material changes to the original implementation arrangements. During the project completion review mission in September 2017, EVN indicated that it had a plan for a gradual equitization and divestment of its three generation companies starting in In March 2018 GENCO3 was equitized. It is an autonomous legal entity, responsible for its financial sustainability. Its revenues, expenses, assets, liabilities, and equity are accounted separately from those of EVN, and it produces audited financial statements. The government plans to divest its stake in GENCO3. The details of the sale and required debt restructuring have not been decided. According to the loan agreement, EVN will need ADB s approval to divest its stake. G. Technical Assistance 32. ADB provided small-scale advisory technical assistance (TA) for $150,000 on 17 October 2005 to assist EVN in preparing the project. 7 Following TA approval, the government requested to support the common facilities for the MD2TPP. A major change in scope and an additional $400,000 was approved on 1 December The TA was implemented by a team of individual consultants from November 2005 to May The TA delivered the following: (i) confirmation that the project was part of EVN s least-cost generation development plan; (ii) determination of the general approach to developing the project with public and private sector components; (iii) confirmation that CFB technology was the most appropriate coal-burning technology for the 6 Equitization in Viet Nam means turning a state-owned enterprise ownership into a joint stock company and selling some shares (up to 49%) to either local or foreign private investors. The majority share ownership by the state does not necessarily change. 7 ADB Small-scale Technical Assistance to the Socialist Republic of Viet Nam for the Mong Duong Thermal Power Generation Project. Manila (TA 4670).

17 8 project; (iv) recommendation of an MFF as the lending modality; and (v) preparation of the terms of reference (TOR) for consultants to support EVN in the detailed design, procurement, and supervision of construction of the project and in capacity building, particularly in CFB boiler technology and power plant operation. The TA also supported preparation of ADB loan processing documents. 33. The TA contributed directly to the successful achievement of the MFF performance targets by identifying and confirming the appropriateness of the project design, implementation arrangements, and financing scheme during project preparation, and providing interim technical support during the transition prior to project commencement. H. Consultant Recruitment and Procurement 34. With the approval in August 2006 of advance action for the recruitment of the stage 1 consultants, TPMB1 began to recruit. However, recruitment was delayed by two failed bidding attempts. The main issues were inadequate TOR and a low cost estimate for the consultancy package. With the support of a consultant engaged by ADB, the TOR were enhanced, and the budget was increased to attract proposals from the shortlisted firms. The consulting services contract was awarded after the third bidding in December There were no issues in the recruitment of the stage 2 consultancy services. 35. The procurement of the EPC contract was challenging because of the size and complexity of this package. It took about 3 years from prequalification in august 2008 to contract award mainly because it used the two-stage, two-envelope procurement method, which took additional time. The EPC contract was awarded to Hyundai Engineering & Construction Company of Korea, which has good global experience. Commercial issues that arose between EVN and the EPC contractor included (i) payments by EVN to the contractor due to price escalations; (ii) payment by the contractor to EVN of the increase in the cost of commissioning fuels (under the contract, commissioning fuel was to be provided by the contractor); and (iii) liquidated damages paid by the contractor to EVN because of the delayed implementation of the contract. After lengthy negotiations between EVN and TPMB1 and the contractor, the issues were resolved amicably. The works were delivered in accordance with the approved design. However, during the final acceptance tests for the EPC package conducted within the 2-year warranty period, corrosions in some parts in the unit 2 turbine were identified. This needs replacement of hot isostatic pressing bladed rotor and high pressure lower diaphragm of the unit 2 turbine. This has no immediate impact and unit 2 is in operation, however unit 2 turbine will not be able to operate guaranteed life time. Therefore, EVN has signed an agreement with the contractor to replace above spare parts by July 2019 for which contractor has placed the order from the original manufacturer. The final acceptance certificate for unit 1 has been issued. Due to the pending repairs for unit 2, a bank guarantee is being processed for issuing the final acceptance certificate by July TPMB1 adhered to ADB s Procurement Guidelines (2007, as amended from time to time). There were no deviations from the procurement methods except for the FWSS and cooling water discharge cannel contract packages resulted in rebidding (paragraph 27). Initial procurement plan was to procure the two contacts under ICB using single stage, two-envelope bidding procedure, however, both packages were retendered using single stage, one envelope bidding procedure to catch up with the project schedule to ensure that these facilities will be completed for commissioning of the two power plants. 37. Actual contract awards under tranche 1 were higher than the projected contract awards at appraisal due to contract variations based on actual works quantities, yet were generally

18 9 consistent with the projections. Actual contract awards under tranche 2 are significantly higher than the projections, which was primarily due to the high contract amount for the EPC Package and increases in other civil work contracts due to contract variations based on actual works quantities and price escalations. 38. The performance of the consultants and contractors was generally satisfactory. Appendix 7 compares projected and actual contract awards. A summary of the contracts funded by ADB is in Appendix 8. There were no integrity issues other than that the ADB Viet Nam Resident Mission received an anonymous complaint concerning the bidding for the EPC contract. It is alleged that the contractor won the EPC contract by paying bribes to government officials. This was referred to the ADB Office of Anticorruption and Integrity (OAI). The OAI examined the case and advised that there was insufficient basis to support the complainant's claim. Moreover, the procurement process surrounding the decision to award the contract to the winning bidder was sound. Therefore, the OAI decided to close the case. I. Safeguards 39. Environment Safeguards. As the project is category A for environment under ADB s Environmental Assessment Guidelines (2003), a comprehensive environmental impact assessment (EIA) was prepared, covering both the MD1TPP and the MD2TPP, as they would share common facilities. TPMB1 implemented the EMP through contractors during the construction phase and conducted monitoring with the support of loan consultants. Before any commencement of works, TPMB1 obtained all required environmental and forest approvals at national, provincial, and commune levels, including an unexploded ordinance clearance certificate from the military. Impacts on surface water and groundwater quality, fisheries, and air pollution were discussed in regular monitoring reports. Mitigation measures were implemented for dust reduction, noise abatement, sewage treatment, and waste management during construction. Mitigation measures also included planting 52 ha of mangrove to offset identified biodiversity losses caused by the project; this plantation was successfully implemented, with sustainable mechanisms in place for its conservation. 40. Starting in 2009, regular environmental monitoring reports were submitted until the end of 2017, about 2 years after the MD1TPP began commercial operation. The reports before the loan closing were prepared with the support of the stage 1 and stage 2 consultants; during the operational phase, TPMB1 prepared monitoring reports without the consultant s support. The monitoring of air, soil and water quality did not take place until 2012, because the engagement of a third-party monitoring agency was delayed. Since 2012, a monitoring agency engaged by TPMB1 conducted monitoring of air, soil and water quality. No complaints were received regarding environmental impacts from the activities carried out under the project. There was no change to the EMP that was prepared in Overall, the EMP implementation was satisfactory. The analysis of the implementation of the EMP is in Appendix Social Safeguards. The categorization of the involuntary resettlement impacts is B for tranche 1 and A for tranche 2. A total of 349 households (1316 people) were affected; 56 households had to be relocated and 156 were severely affected. The categorization of impacts on indigenous people is B for impacts due to power plant, ash pond and cooling water discharge cannel and A for impacts FWSS. The project activities for the FWSS affected households from two ethnic minority groups (the Dao and the Tay). A resettlement plan for the power plant, ash pond and cooling water discharge cannel was prepared in September 2006 on the basis of the preliminary design and updated in December 2008 and in July A resettlement and ethnic minority development plan (REMDP) for the FWSS were prepared and disclosed in October 2012.

19 10 REMDP was necessary due to all the affected people due to FWSS were ethnic minority. Both the resettlement plan and REMDP were prepared and updated in accordance with ADB s Involuntary Resettlement Policy (1995) and Safeguard Policy Statement (2009) and government regulations in close consultation with the affected households. 42. The resettlement plan and REMDP were implemented and monitored satisfactorily; there are no pending issues. Compensation payments and support allowances following the provisions of the updated resettlement plan for main plant area, ash pond and water discharge cannel was started in 2008 and substantially completed by end of 2009 except some support allowances under income restoration program which were completed in Compensation due to FWSS was completed in TPMB1 coordinated closely with the district compensation committee and resettlement board of Cam Pha city in the preparation and implementation of resettlement. Compensation rates were adjusted in the updated resettlement plan to reflect current rates. Affected people were not displaced before receiving compensation and support, and construction activities started after land was handed over by affected people. Grievances were received and resolved through the grievance redress mechanism established for the project. Most grievances involve discrepancies in measurements, disputes between claimants, and absence of records. These were typically resolved in a few weeks, except for one case involving an unused structure on the access road to the project staff housing complex, which was resolved later. 43. Arrangements were made to provide training courses to help affected people improve the productivity of their remaining land, find new jobs, start other income generating activities, and diversify their income sources. Internal and external resettlement monitoring conducted throughout the project implementation followed up on the conditions of the affected households. Issues that emerged during construction were addressed. Regular safeguards supervision missions were also conducted. Social safeguard monitoring reports were submitted regularly and disclosed. The external monitoring agency submitted its final monitoring and evaluation report and disclosed it on the ADB website in December The detailed analysis of the implementation of the resettlement plan and REMDP is in Appendix 10. J. Monitoring and Reporting 44. Appendix 11 shows the status of compliance with the loan covenants. EVN has complied with the loan covenants, except for the financial ratios and reporting covenant in the loan agreements of tranche 1 and tranche 2, with which it has partially complied. Part of the covenant that EVN could not maintain is the three financial ratios and internal audit function. For the financial ratios it was required that EVN maintains (i) a self-financing ratio (SFR) of 25% or above, (ii) debt service coverage ratio (DSCR) of 1.5 or above, and (iii) a long-term debt equity ratio (DER) of 70:30 or less. EVN complied at the time of project approval. During implementation, EVN complied with the SFR only in 2012, was in breach of the DSCR throughout , and complied with the DER from 2012 to 2015 and was in breach in 2010 and 2011 (Table 1). 8 Government of Viet Nam, Vietnam Electricity Mong Duong 1 Thermal Power Plant Project: Fourth Independent Monitoring Report. Ha Noi. 9 Government of Viet Nam, Vietnam Electricity Mong Duong 1 Thermal Power Project - Tranche 2: Quarterly Resettlement Monitoring Report (January-March 2015). Ha Noi.

20 11 Table 1. Financial Ratios of Viet Nam Electricity, Ratio Covenant DER < 70:30 (2.33) DSCR > 1.5% SFR > 25% (24.53) (4.85) ( ) = negative, DER = debt equity ratio, DSCR = debt service coverage ratio, SFR = self-financing ratio. Source: EVN s audited financial reports. 45. National and sectoral issues were the reasons why EVN could not maintain the financial ratios. Viet Nam has relied predominantly on a public sector model for financing power infrastructure expansion. This model has come under strain as demand for power supply and investment needs have continued to grow rapidly. The maintenance of retail electricity prices below cost recovery levels over many years has affected cash flows in the sector, leaving EVN with no option but to increase debt to meet capital expenditure needs. EVN s financial performance has also been adversely affected by other factors, including hydrology, fuel price hikes, and currency risks. The devaluation of the dong from 2009 to 2016 was almost 40%. This affected EVN's financial performance significantly by increasing its debts in dong terms, as most were denominated in foreign currencies such as the US dollar and yen. 46. The government initiated work on a reform road map to develop a competitive electricity market and a detailed tariff reform, both of which are ongoing. ADB has been instrumental in this reform process through the provision of nine TA projects, which led to the promulgation of the Electricity Law in 2005, the road map for the development of a competitive electricity market in 2006, the launching of a competitive generation market in 2012, and ongoing development of the wholesale electricity market and transmission pricing regulation. The progress is deemed satisfactory and the government is closely monitoring the implementation. Furthermore, the World Bank is assisting EVN in addressing financial challenges, including obtaining a corporate credit rating and issuing a long-term bond in the international capital markets. 47. EVN and TPMB1 submitted quarterly progress reports regularly during project implementation. Safeguards monitoring reports were also submitted regularly during project implementation. The finalization and disclosure of annual environmental monitoring reports during the operation stage were delayed. TPMB1 has adequate and qualified staff who are familiar with the operation of the plant, including financial management. However, the environmental staff lacked the capacity for environmental monitoring and its reporting during operation. After ADB s continuous follow-up and support including several awareness-raising sessions, environmental monitoring reports from the commissioning up to December 2017 were finalized and disclosed on the ADB website in April EVN submitted acceptable audited project financial statements and audited entity financial statements, together with management letters, on time from the date of effectiveness until the financial closing for tranche 1 and until 2016 for tranche 2. The 2017 audit reports for tranche 2 are due by 30 June The annual audits raised the issue of EVN s noncompliance with the financial ratios. The lack of internal audit within EVN also was raised in an annual audit because it was a loan covenant. This noncompliance did not affect project performance. As EVN has been submitting audited financial statements and audited project accounts prepared using international financial reporting standards, with the audit carried out by reputed international auditors following international auditing standards, in the projects approved by ADB after 2011 the covenant on internal auditing was not used. However, in 2016 EVN established an internal audit and financial supervision department directly reporting to EVN board of directors.

21 12 III. EVALUATION OF PERFORMANCE A. Relevance 49. The project was highly relevant at appraisal and remained so at completion. To support the least-cost generation expansion plan in the PDP VI, the project added 1,080 MW of installed capacity to the power grid. The project was also an integral part of a highly effective power sector investment program that enabled power supply growth to keep pace with the 11% annual growth in demand in the period The design and formulation of the project is also assessed as highly relevant, given that the timing of the implementation of the outputs of tranche 1, as preparation for the bigger and more complex components financed under tranche 2, and the MFF arrangement were very suitable and appropriate. The MFF modality provided the advantage of not requiring commitment fees on the project until tranche 2 (96% of the $930 million ADB loan) was approved. 51. The two tranches were designed to mitigate the risks identified in the review of ADB s previous energy programs 10 by (i) ensuring a high degree of readiness, with detailed technical designs, government approvals, and advanced procurement in place before a tranche is approved; (ii) implementing procurement plans with an appropriate number of procurement contracts; and (iii) building the capacity of implementing agency staff to prepare and implement safeguard plans, and to operate and maintain a power plant using CFB boiler technology. 52. The use of CFB technology is very appropriate, given the high sulfur content in the coal being used in the MD1TPP. CFB is one of the innovative technologies for reducing the sulfur content in emissions. It is widely used for mine-mouth coal projects and in places where highgrade coal either is not available or is used mainly for metallurgical industries (e.g. steel production). The project added 1,080 MW of power at low operation cost, with good control over future fuel costs as it uses domestic coal. 53. The cost overrun in the EPC package of $433 million was explained in paragraph 19. The risk of project cost increases, especially the cost of the EPC package, was known, and EVN managed to source financing to cover the gap. The capital expenditure for the MD1TPP is $1.5 billion. The average construction cost of a 1,000 1,200 MW comparable coal-fired power plants in Viet Nam is in the range of $ billion (Table A12.2, Appendix 12). The range is wide because different technologies have different costs. B. Effectiveness 54. The project is rated highly effective. The project outcome of households and industries having access to reliable, stable electricity supply is consistent with Viet Nam s development priorities and ADB s country and sector strategies to meet high growth in electricity demand both at appraisal and at completion. To meet the huge investment needs identified in the PDP VI, the government sought development partners support and ADB responded effectively through the MFF. 10 ADB s country assistance program evaluation for Viet Nam, , identified efficiency issues related to implementation delays in energy sector programs, in particular (i) lengthy government administrative and approval procedures involving several ministries; (ii) many layers of approval for procurement, construction, land acquisition, and safeguards; (iii) delays in finalizing detailed technical designs; (iv) small procurement packages, to attract local bidders; and (v) limited trained human resources to implement safeguard measures in an effective and timely way.

22 The project has helped foster sustainable national economic growth and generate employment. It improved the reliability of power supply. Thermal power generation during the dry season prevents load shedding to industrial, commercial, residential, and rural consumers. The project addressed the imbalance between hydropower and thermal generation capacity in the power system by increasing base-load thermal generation. Furthermore, by financing the required common facilities for the MD2TPP, the project helped EVN to award that project on a stand-alone basis to the private sector. 56. In parallel, EVN expanded transmission and distribution networks, power system losses dropped to 7.7% in 2016 from 10.2% in 2010, and retail tariffs and transmission tariffs increased several times, as stipulated in the loan covenants. 57. Project management and implementation units were set up on schedule. Advance recruitment of consultants was undertaken, although there were delays due to failed bidding attempts. Capacity building of TPMB1 in CFB technology and project management was implemented. The resettlement plan, REMDP and EMP were implemented satisfactorily. 58. Tranche 1 effectively funded the required preparatory activities towards. The 2-year delay did not affect the overall project delay. The required outputs from tranche 1 were completed in time for the start of tranche 2 and the MD2TPP. Tranche 2 of the project is also highly effective. Although tranche 2 was delayed by 2 years, it did not have any impact on the outcome as the other power projects in the PDP VI were implemented in parallel, including several hydropower plants, and the first unit of the MD2TPP was commissioned in June EVN thus managed to maintain a reserve margin above 20% from 2013 to 2015 (the delay period) and in consistent with the actual demand growth of 12.8% from 2006 to 2011, which was lower than the forecast demand growth of 16% mainly because of the global recession during the period. The project outcomes and outputs were fully achieved. C. Efficiency 59. The project is rated highly efficient. The economic internal rate of return (EIRR) was calculated and confirmed the economic viability of the project. Both the before and after economic internal rate of return (EIRR) exceed the minimum economic hurdle rate of 12%. The reevaluation resulted in an annualized EIRR of 17.54%, which is lower than the EIRR of 23.9% estimated at appraisal but still confirms that the project is economically beneficial. This lower result was due to the cost overruns of the EPC contract and the increase in fuel costs since appraisal The economic costs considered in the evaluation of EIRR are the investment and the operating costs of the project, and environmental management costs. The economic benefits are: (i) the non-incremental benefits accrued by not having to run thermal power plants at suboptimum levels, thereby producing savings; and (ii) the benefits both incremental and non-incremental accrued to the consumers by having a sufficient supply of electricity. D. Sustainability 61. The project is rated likely sustainable. Its financial internal rate of return (FIRR) is calculated as 7.83%. This is above EVN s weighted average cost of capital of 3.64% and comparable to the FIRR of 6.49% anticipated during appraisal. The financial analysis is based on 11 The coal costs considered for the calculation are $0.015 per kwh at appraisal and $0.019 per kwh at evaluation.

23 14 the incremental revenues arising from the project. It considers only the project cash flows arising from the capital investments. The financial evaluation is provided in Appendix Strengthening power generation capacity to meet increasing demand remains one of the government s priorities in the energy sector. The project contributed 1,080 MW to the country s installed power generation capacity, through cleaner and proven CFB technology which efficiently utilizes poor-quality and waste coal from coal mines near the project site. The power plant is a revenue-generating asset. The project assets are being operated and maintained by TPMB1 under GENCO3, and both have the in-house capacity to operate and maintain coal-fired power plants as well as the institutional resources to maintain the outputs and expected outcome. There are regular annual training programs for operation and maintenance staff on the operation and special maintenance for sustainable operation of these assets. Therefore, the likelihood that project outcomes and outputs will be maintained over the economic life of the project is high. 63. GENCO3 has been equitized and is an autonomous legal entity. It will start to operate as a joint stock company from July As such, GENCO3 is responsible for its own financial sustainability. The future sustainability of the project will depend on the financial performance of GENCO3. Its revenues increased by 27.6% in 2016, the year in which the MD1TPP started its operations. In 2016, it generated a cash flow of $267 million from its operating activities before paying an interest cost of $99 million. The annual electricity demand growth of 12.1% over and the projected annual electricity demand growth of 10.5% reconfirms that this revenue stream is sustainable. Forward looking financial statements for GENCO3 are provided in Appendix 14. One of the important concerns in the financial performance of GENCO3 is its vulnerability to foreign exchange risk. The dong saw an average annual depreciation of 3.47% between 2008 and Tariffs paid to GENCO3 are executed in dong, so if the depreciation continues, GENCO3 s revenues may not cover its dollar-dominated debt-service payments after a period of time. GENCO3 can sustain its debt-repayment capacity if the tariff policy is reformed to index the electricity tariffs to mitigate the currency depreciation risk. The risk is assessed as low because market-based tariff reforms were initiated in 2009 and tariff levels have improved towards full cost recovery. The latest tariff regulation incorporated a lower threshold of 3 5% for tariff adjustment and allows EVN to adjust retail tariffs within this threshold without seeking government approval. 12 To operate Viet Nam s wholesale electricity market effectively, starting in 2019, the government plans to develop a new retail tariff structure to reduce the level of crosssubsidies and better target low-income households, which will improve the efficiency of the tariff pricing mechanism. 64. EVN is planning to divest its stake in GENCO3 by bringing in some strategic investors. This would result in a change in the ownership and control of the organization. A detailed analysis of different mechanisms by which EVN could restructure its debt, the risks associated with each mechanism, and the different assessments needs to be carried out. Owing to the absence of information from EVN about the potential future investors, a comprehensive financial management assessment is not possible. E. Development Impact 65. The project impacts are (i) adequate and reliable power supply to meet Viet Nam s electricity demand in an environmentally sustainable manner, and (ii) a diversified-generation fuel mix. Both impact targets were achieved. The achievement of impact is rated as highly satisfactory. 12 Government of Viet Nam Decision 24/ 2017/QĐ-TTg, mechanism for adjustment of average retail electricity price. Ha Noi.

24 Economic impact. Adequate and reliable power supply is an essential prerequisite to drive Viet Nam s socioeconomic development. The high concentration of industrial plants and economic development requires reliable and good-quality power supply, especially in the centers of dynamic development in the Southeast, Central Highlands, and Red River Delta. Without expanding power generation and transmission networks, the main load centers in these regions would suffer a worsening electricity supply deficit, which then would affect production capacity for both domestic consumption and for export and reduce economic growth potential. The country s sustained economic growth (more than 6% per year during ) would not have been possible without expansion of the power system. Savings for the economy can also be realized as the existing power plants need not be operated outside their optimal regimes to cater to increased demand, thereby increasing efficiency. Coal-fired generation also diversifies the energy mix and helps in alleviating seasonal variations in generation capacity brought about by the large amount of hydropower capacity in the generation mix. 67. Environmental impact. An EIA, which includes an EMP with mitigation measures and a monitoring program, was developed during the project preparation stage. A series of public consultations were carried out during EIA preparation; these continued into the implementation phase. Mangrove replantation has been effectively implemented and handed over to the local commune which is managing a government program for conservation of the plantation in the area. TPMB1, supported by ADB, complied with all the requirements of ADB s Safeguards Policy Statement (2009) and government environmental safeguards requirements during the preparation, implementation, and operation of subprojects. There are no outstanding environmental issues to resolve. 68. Social impact. All relocating households opted to self-relocate and built better houses in the places where they resettled. Many affected people successfully shifted to other businesses, with support of the livelihood enhancement program and support from their social networks. Postresettlement reviews conducted in July 2009 for resettlement plan implementation, and independent post-resettlement evaluations in December 2014 confirmed the compensation payments were sufficient to help them to acquire new plots, build better houses, and start new income-generating activities. Independent post-resettlement evaluations in January 2017 confirmed that many affected people were able to improve or at least restore their living conditions and livelihood compared with their pre-project conditions. 69. Poverty alleviation and social aspects. Viet Nam has made remarkable progress in expanding access to electricity, as the percentage of households without electricity fell from 22% in 1999 to 2% in Affordability and public welfare must be strongly considered at all stages of Viet Nam s development. Gradual tariff increases to cover greater costs associated with power system increases basic living costs, reducing the amount of disposable income and/or access to services. The poorest households in Viet Nam spend less than 2.5% of household income on paying electricity bills. For all households, the first 50 kwh is priced at 92% of the national average price and the second block ( kwh) at 95% of that price. Usage over 100 kwh is priced above the average tariff. Poor households and those eligible for social welfare who use less than 50 kwh of electricity per month receive monthly cash subsidies to cover the first 30 kwh. This arrangement ensures that the poorest households can afford to use electricity. The project ensures sufficient capacity for providing access to people in grid-connected areas. The project also created approximately 6,000 jobs during construction and 200 jobs during operation.

25 16 F. Performance of the Borrower and the Executing Agency 70. The performance of the borrower, EVN, and the executing agency, TPMB1, is rated as highly satisfactory. EVN and TPMB1 managed to address the initial difficulty in consultant selection and the bidding process for the EPC package. TPMB1 submitted progress reports, safeguards reports, and other requested documents and information on time. Throughout the project, EVN and TPMB1 were responsive to the requests of ADB. As specified in the loan agreement, EVN provided counterpart funds in time. EVN complied with the loan covenants, except for the financial ratio covenants. Project financial reports and financial audits were submitted on time and were of good quality. Furthermore, EVN took actions to establish internal audit function which eventually was established in TPMB1 ensured that procurement plans were implemented properly, and there were no delays in submission of procurement documents for ADB approval. The resettlement plan, REMDP, and EMP were carried out satisfactorily. ADB noted the delays in submission of environmental monitoring reports during operation, which were resolved through discussions and awareness raising by the ADB safeguards specialist. G. Performance of Cofinanciers 71. Parallel financing from the Export-Import Bank of Korea was arranged by EVN after the EPC contract was awarded in September 2011 exclusively for that contract because the winning bidder was a Korean company. ADB and the Export-Import Bank of Korea maintained adequate communications and consultations related to the implementation of the contract. The Export- Import Bank of Korea signed the loan agreement on 13 March Its representatives joined a loan review mission in May The cofinancier s performance was rated as satisfactory. H. Performance of the Asian Development Bank 72. ADB s performance is rated as highly satisfactory. Regular project review missions, including several special-purpose missions and a project completion review mission, were fielded on time and assistance was provided to resolve project issues. ADB maintained close communications with EVN and TPMB1. ADB provided small-scale advisory technical assistance and additional financing to assist EVN in the preparation of the project, an international consultant to assist in consultant selection, consultants to support the initial stage of procurement of the EPC package, and train TPMB1 staff. ADB also provided supervision consultants for environmental monitoring and reporting, which helped TPMB1 s performance in EMP implementation monitoring and reporting during the construction phase. ADB was very prompt and responsive to the requests of the borrower, EVN, and TPMB1. During discussion of contractual issues between EVN and the EPC contractor, ADB closely followed up and provided guidance on finding amicable solutions. During the project completion review mission, EVN, GENCO3, and TPMB1 confirmed ADB s support, supervision, and administration of the loan was highly satisfactory. In particular, EVN and TPMB1 appreciated ADB s guidance and close follow-up on safeguards planning, implementation, and monitoring, which helped TPMB1 properly implement project safeguards. I. Overall Assessment 73. The project is considered highly successful overall because it was implemented as conceived and designed, and met its intended outcome and output targets (Table 2).

26 17 Table 2. Overall Ratings Rating Criteria MFF Relevance Highly Relevant Effectiveness Highly Effective Efficiency Efficient Sustainability Likely Sustainable Overall Assessment Development impact Highly Satisfactory Borrower and executing agency Highly Satisfactory Performance of ADB Highly Satisfactory ADB = Asian Development Bank, MFF = multitranche financing facility. Source: Asian Development Bank. IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 74. Factors that contributed to successful implementation of the EMP, resettlement plan and REMDP include the early assignment of a dedicated onsite team from TPMB1 to assess the impacts and prepare the plan in 2006; effective consultation and communication with the affected people; coordination with the affected communes, wards, and district authorities that have good experience in resettlement; and effective mobilization of experienced institutions for monitoring. 75. Because of the delay of engagement of the environmental monitoring agency at start-up phase, surface water and groundwater quality, fisheries, and air pollution were not monitored until The post monitoring environmental reports initially did not include all the measurements stipulated in the EIA. ADB observed lack of capacity of the operation staff and guided the relevant staff on proper environmental monitoring and its reporting. 76. The cost overrun of the EPC package was $ million a 49% increase from the appraisal estimate of $ million, resulting in the actual cost of $1, million. While the project cost is comparable with the costs of other coal-fired power plants and cost overruns are common due to the complexity of the project and use of better technologies, a proper market sounding at the beginning would have provided a more realistic cost estimate. B. Recommendations 1. Project Related 77. Future monitoring. All project outcomes and outputs have been achieved. The project has adequately met environmental and social safeguards policies and the requirements of ADB and the government. As the project is environment category A and monitoring during operation is important, ADB should maintain close contact with EVN through future loans to ensure it continues to have adequate in-house capabilities for environmental monitoring during operation in accordance with the monitoring plan proposed in the EIA. 78. Covenants. All the covenants were complied with, except for the financial ratios covenant which is partially complied. These financial covenants should be continued in future projects to ensure government commitment to improving sector sustainability. The noncompliance was mainly caused by the retail electricity prices that were below the cost recovery level. A road map to develop a competitive electricity market and a detailed tariff reform are ongoing. Progress on those two objectives should be continuously monitored.

27 Further action or follow-up. The sustainability of the project depends on the financial performance of GENCO3 until divestment. EVN plans to divest its stake in GENCO3 by bringing in some strategic investors. As this would result in a change in the ownership and control of the organization, EVN should demonstrate to ADB before divestment that the project will remain sustainable. 80. Timing of the project performance evaluation report. The power plant was fully commissioned in October It may be prudent to conduct a project performance evaluation after 3 years of operation. Hence, it is recommended that a project performance evaluation be scheduled in General 81. Building on the successful implementation of REMDP, the following recommendations are made to include in similar projects: (i) assessment of impacts and land acquisition requirements, and meaningful consultations with all stakeholders early on; (ii) a carefully designed livelihood restoration program, with specific activities targeting the specific beneficiaries and ensuring access to job opportunities; and (iii) inclusion of wealth management coaching and assistance as part of the income restoration activities to ensure that the affected households manage their compensation income appropriately to secure the continuation of their livelihood income. Since stabilization of livelihoods for affected people takes several years, it is prudent to conduct a survey after 4-5 years after resettlement to supplement the survey done in Procurement of the EPC contract took nearly 3 years because EVN was unfamiliar with the two-stage two-envelope bidding procedures. The ADB country partnership strategy ( ) final review also notes that greater emphasis is needed on investing enough time and resources in the preparation of projects. 13 This includes greater upstream work on preparing technical designs and cost estimates, ensuring procurement packages and bidding documents are correct, and ensuring that executing agencies have sufficient capacity to reduce implementation delays. 83. It also took considerable time for TPMB1 to prepare annual environmental monitoring reports during operation. This situation could have been avoided by having trained staff. Therefore, it is recommended that an environmental consultant is mobilized for at least one year during the operation stage to ensure operation staff prepare regular environmental monitoring reports in accordance with EIA provisions. 13 ADB Country Partnership Strategy Final Review: Viet Nam, Manila.

28 Appendix 1 19 DESIGN AND MONITORING FRAMEWORK 1.1 DMF for the multitranche financing facility Impact Design Summary Adequate and reliable supply of power to meet Viet Nam s electricity demand in an environmentally sustainable manner. Performance Indicators and Targets 5 years after project completion About 30 GW of additional generation capacity by Project Achievements Total generation capacity was 11 GW in 2006, and 38.5 GW in 2015, an increase of 27.5 GW. This lacks 2.5 MW to meet the target. The gap is due to the growth during was lower than predicted. In 2015 there was sufficient reserve margin (20%) to supply a reliable power supply. This is a good achievement. The target was revised during tranche 2 approval. Diversified generation fuel mix. Outcome Households and industries in northern Viet Nam have access to reliable, stable electricity supply. Outputs Project completed: 1,000 MW CFB technology coal-fired power plant Ratio of hydro to thermal plant capacity reduced from 37% in 2006 to 27% by Economic growth in Quang Ninh Province and northern Viet Nam to achieve Government framework growth targets. Improved environmental compliance and performance of the sector. After project completion About 14 GW of additional generation capacity by Reliability of power supply to consumers. Project environmental management in operation. During project implementation ADB-financed construction of the Project, comprising: EPC contract comprising: Civil works, CFB boilers and auxiliaries, turbine generators and auxiliaries, coal handling plant, electrical equipment, RRP indicated 37% in 2006, 27% in 2020 which is more realistic. In 2015, the generation mix comprised 38% hydro, 33.5% coal, 2.3% oil, 20.7% gas, 0.4% renewable, 5.1% diesel and small hydropower which is a good diversified generation mix and by 2020 the generation mix will have a good balance with increased gas and renewable generation. Project contributed to achieve the target. This is a better fuel mix. This shall be assessed after 5 years, i.e Baseline not provided This shall be assessed after 5 years, i.e Baseline not provided Total generation capacity in 2010 was 19 GW, an increase of 8 GW compared to 11 GW in The project could not contribute to this increase. The outcome target was revised during tranche 2 approval. However the addition of 8 GW was sufficient as the demand did not grew at high forecast (16%) due to global recession In 2006, power outages during the dry season was 8 hours/day. At project completion, outages did not occur during the dry season because the reserve margin was sufficient (20% in 2015). Project environmental management is in place. Achieved

29 20 Appendix 1 Design Summary Performance Indicators and Targets control and instrumentation, Balance of plant, Implementation consulting services and civil works. Provision of common services to the project and BOT project comprising: main access road to site, water supply, construction power and water, Cooling water discharge channel and ash pond. Project Achievements Achieved. Initial plan was to construct a common ash pond for both plants in the power complex on cost sharing basis, however EVN later opted to separate the ash ponds due to the different compositions of the ash discharged by the two power plants. Two ash ponds are built in the same location separated by an embankment in the middle. Implement environmental management plan: mitigation measures during preconstruction, construction and operational phases; environmental monitoring (water quality, air quality, noise levels, aquaculture activity, and mangrove planting). Achieved Environmental monitoring during operation phase was not consistent with the environmental monitoring plan and reporting was delayed. ADB safeguards specialist trained the relevant operation staff and environmental reports were updated to include the results of measurements, submitted to ADB and uploaded in ADB website. Implement resettlement plan: Implementation of resettlement Achieved plans, compensation payments, and restoration of livelihood; monitoring of implementation of the plans. ADB = Asian Development Bank; BOT = build-operate-transfer; CFB = circulating fluidized bed; EIA = environmental impact assessment; EMP = environmental management plan; EPC = engineering, procurement and construction; EVN = Viet Nam Electricity; GW = gigawatts; MW=megawatt; RRP = Report and Recommendation of the President to the Board of Directors 1.2. DMF For tranche 2 Design Summary Performance Indicators and Targets Project Achievements System reserve margin of 25% for the period Impact More reliable, uninterruptible supply of electricity to industries, businesses and households to enable socio-economic development and industrialization in northern Viet Nam. Outcome Adequate system generating capacity to meet growing electricity demand in northern Viet Nam. Economic growth in northern Viet Nam to achieve Government socio-economic development plan's targets for the period After project completion 1,000 MW generating capacity added to the system by About 30 GW of additional generation capacity by To be assessed in the reserve margins were 20% in 2015, 25% in To be assessed in ,080 MW added in October 2015 (unit 1 with 540 MW) a 10- months delay, unit 2 with 540 MW in December This delay did not have any impact on the reliability or the quality of electricity supply because the reserve margin in 2014 was 35%. Already achieved in In 2016 total capacity was 42 GW an increase of 31 GW compared to 11 GW in 2006 base year.

30 Appendix 1 21 Outputs Design Summary Performance Indicators and Targets Project Achievements Ratio of hydro to thermal plant capacity reduced from 37% in 2006 to 27% by RRP indicated 37% in 2006 and 27% in 2020 which is more realistic. In 2015, the generation mix comprised 38% hydro, 33.5% coal, 2.3% oil, 20.7% gas, 0.4% renewable, 5.1% diesel and small hydropower which is a better diversified fuel mix and by 2020 the fuel mix will have a good balance with increased gas and 1. A 1,000 MW CFB technology coal-fired power plant. 1,000 MW power plant constructed, tested and commissioned by May Full and satisfactory completion of resettlement plans. Environmental protection and mitigation satisfactorily implemented. renewable generation. Unit 1 with 540 MW was tested and commissioned in October 2015 and Unit 2 with 540 MW was tested and commissioned on 10 December Achieved Achieved ADB-financed construction of the Project completed by May 2014, comprising: EPC contract comprising: civil works, CFB boilers and auxiliaries, turbine generators and auxiliaries, coal handling plant. Electrical equipment, control and instrumentation, balance of plant, implementation consulting services and civil works. Achieved 2. Common facilities for MD2. Provision of common services comprising: main access road to site, freshwater supply, power and water for construction, cooling water discharge channel and ash pond. Implement environmental management plan: mitigation measures during preconstruction, construction and operational phases. Environmental monitoring (water quality, air quality, noise levels, aquaculture activity, and mangrove planting). Achieved Achieved Environmental monitoring during operation phase was not consistent with the environmental monitoring plan. ADB safeguards specialist trained the relevant operation staff and environmental reports were updated to include the results of measurements. Implement resettlement plan: Achieved Implementation of resettlement plans, compensation payments, and restoration of livelihood; and Monitoring of implementation of the plans. ADB = Asian Development Bank; BOT = build operate and transfer; CFB = circulating fluidized bed; EMP = environmental management plan; EPC = engineering, procurement and construction; EVN = Viet Nam Electricity; GW = gigawatt; HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency syndrome; IEE = Initial Environmental Examination; MD2 = Mong Duong 2 power project; MW = megawatt; RRP = Report and Recommendation of the President to the Board of Directors

31 22 Appendix 2 L2353 PROJECT COST AT APPRAISAL AND ACTUAL ($ million) Item Appraisal Estimate Actual Foreign Local Total Foreign Local Total Civil Works Field Surveys and Bidding Documents Land Acquisition and Resettlement Project Implementation Consultant Social and Environmental Monitoring Project Management Taxes and Duties Sub Total (1) Physical Contingencies Price Contingencies IDC and Commitment Charges Sub Total (2) Total L2610 Item Appraisal Estimate Actual Foreign Local Total Foreign Local Total Engineering, procurement and construction , , Civil Works Dredging of cooling water discharge Ash pond Cooling water discharge canal Fresh water system Residential area for staff Fence between the two power plants Compensation and Resettlement Costs Project Management Cost Consulting Services Taxes and Duties Sub Total (1) , , Physical Contingencies Price Contingencies Sub Total (2) IDC and Commitment Charges Sub Total (3) Total , , , IDC = interest during construction Sources: Viet Nam Electricity, Thermal Power Project Management Unit 1 and Asian Development Bank.

32 Appendix 3 23 PROJECT COST BY FINANCIER Table A3.1a: Project Cost at Appraisal by Financier- L2353 ($ million) EVN ADB Total Cost a % of Cost Category % of Cost Category Taxes and Duties Item Amount Amount Amount A. Baseline Costs 1. Civil Works % % a. De-mining % % 1.23 b. Site Leveling and Diversion Channel % % c. PMU Office and Staff Quarters % % 0.83 d. Access Road to Highway % % 0.57 e. Installation of Power Supply % % 1.90 f. Installation of Water Supply % % Field Surveys and Bid Documents % % Land Acquisition and Resettlement % % Project Implementation Consultants % % Social and Environmental Monitoring % % Project management % % Taxes and Duties % % Subtotal (A) % % B. Financial Charges During Implementation % % Interest During Construction % % Commitment Charges % % 0.18 Total Project Cost (A+B) % % % Total Project Cost 36.7% 63.3% 4.7% ADB: Asian Development Bank, and EVN: Viet Nam Electricity Source: Report and Recommendation to the President (RRP) for MFF, August 2007.

33 24 Appendix 3 Table A3.1b: Project Cost at Appraisal by Financier- L2610 ($ million) EVN ADB Total Cost a % of Cost % of Cost Category Amount Category Amount Taxes and Duties Item Amount A. Investment Costs 1. Engineering, procurement and construction % % Civil works % % a. Dredging of cooling water discharge % % 0.89 b. Ash Pond % % 2.31 a. Cooling water discharge canal % % 6.92 b. Fresh water system % % 9.22 a. Residential area for staff % % 3.23 b. Fence between the Two Power Plants % % Compensation and Resettlement Costs % % 7.15 Subtotal (A) % % B. Recurrent Costs 1. Project Management Cost % % Consulting Services % % Taxes and Duties % % Subtotal (B) % % Total Base Cost (A+B) % % C. Contingencies 1. Physical Contingency % % Price Contingency % % Subtotal (C) % % D. Financial Charges During Implementation % % Total Project Cost (A+B+C+D) % % 1, % Total Project Cost 21.0% 79.0% 2.7% ADB = Asian Development Bank; EVN = Viet Nam Electricity. Source: Periodic Financing Request Report for tranche 2, December 2009.

34 Appendix 3 25 Table A3.2a: Project Cost at Completion by Financier L2353 ($ million) EVN ADB Total Cost a % of Cost Category % of Cost Category Taxes and Duties Item Amount Amount Amount A. Baseline Costs 1. Civil Works % % a. De-mining % % 0.40 b. Site Leveling and Diversion Channel % % c. PMU Office and Staff Quarters % % d. Access Road to Highway % % e. Installation of Power Supply % % f. Installation of Water Supply % % Field Surveys and Bid Documents % % Land Acquisition and Resettlement % % Project Implementation Consultants % % Social and Environmental Monitoring % % Project management % % 5.98 Subtotal (A) % % B. Financial Charges During Implementation % % 0.72 Total Project Cost (A+B) % % % Total Project Cost 44.9% 55.1% 4.7% ADB = Asian Development Bank, EVN = Viet Nam Electricity. Sources: Viet Nam Electricity, Thermal Power Project Management Board No. 1 and Asian Development Bank.

35 26 Appendix 3 Table A3.2b: Project Cost at Completion by Financier L2160 ($ million) EVN ADB The Export-Import % of Cost Category % of Cost Category Bank of Korea % of Cost Category Total Cost a Taxes and Duties Item Amount Amount Amount Amount A. Investment Costs 1. Engineering, procurement and construction % % % 1, Civil works % % % a. Dredging of cooling water discharge % % % b. Ash Pond % % % a. Cooling water discharge canal % % % b. Fresh water system % % % a. Residential area for staff % % % b. Fence between the Two Power Plants % % % Compensation and Resettlement Costs % % % Subtotal (A) % % % 1, B. Recurrent Costs 1. Project Management Cost % % % Consulting Services % % % Subtotal (B) % % % Total Base Cost (A+B) % % % 1, C. Financial Charges During Implementation % % % Total Project Cost (A+B+C) % % % 1, % Total Project Cost 10.7% 57.4% 31.9% 10.3% ADB = Asian Development Bank, EVN = Viet Nam Electricity. Sources: Viet Nam Electricity, Thermal Power Project Management Board No. 1 and Asian Development Bank.

36 Appendix 4 27 DISBURSEMENT OF ADB LOAN PROCEEDS Table A4.1a: Annual and Cumulative Disbursements of ADB loan proceeds L2353 ($ million) Annual Disbursement Cumulative Disbursement Amount Amount Year ($ million) % of Total ($ million) % of Total % % % % % % % % % % % % Total % % Table A4.1b: Annual and Cumulative Disbursement of ADB Loan Proceeds - L2160 ($ million) Annual Disbursement Cumulative Disbursement Amount Amount Year ($ million) % of Total ($ million) % of Total % % % % % % % % % % % % % % Total % % ADB = Asian Development Bank. Source: Asian Development Bank.

37 AMOUNT (in million) 28 Appendix 4 Figure 4.1a: Projection and Cumulative Disbursement of ADB Loan Proceeds L2353 ($ million) Year Projected Actual Total Source: Asian Development Bank. 25 Projected and Actual Disbursements YEAR Projected Actual

38 Appendix 4 29 Figure 4.1 b: Projection and Cumulative Disbursement of ADB Loan Proceeds- L2610 ($ million) Year Projected Actual Total Source: Asian Development Bank.

39 30 Appendix 5 PROJECT IMPLEMENTATION SCHEDULE (AT APPRAISAL VS. ACTUAL)

40 Appendix 5 31 L2610-PFR2 Project Implementation Schedule (At Appraisal vs. Actual) ID A Processing Task Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Loan processing 2 Management approval of PFR1 3 Loan signing 4 Loan effectiveness B Implementation 1 Consultant recruitment (Stage 2) 2 Design, bid preparation and tendering 3 EPC Package 4 Consulting services implementation (Stage 2) 5 Civil works a Fresh waster supply system b Cooling water discharge canal c Ash Pond No. 1 d C Fence between Two Plants Loan closing ADB = Asian Development Bank, EMP = environmental management plan, MFF = multitranche financing facility, PFR = periodic financing request, PMU = project management unit, Q1 = first quarter, Q2 = second quarter, Q3 = third quarter, Q4 = fourth quarter. Source: Asian Development Bank estimates. Appraisal Actual Warranty period (appraisal) Actual warranty period (EPC) / limited services during warranty period (consulting services stage 2) / contract extensions (ash pond 1)

41 32 Appendix 6 Date A. Project Processing CHRONOLOGY OF MAIN EVENTS Event 17 October 2005 Approval of project preparatory assistance (TA 4670-VIE) Tranche 1 (L2353) 21 June 3 July 2006 Fact-finding mission 15 August 2006 Management review meeting 22 August 1 September 2006 Appraisal mission 27 September 2006 Staff review committee meeting May 2007 Loan negotiations 21 September 2007 Board approval of the MFF 2 October 2007 Management approval of tranche 1 9 October 2007 Loan and project agreements signing 27 March 2008 Loan effectiveness Tranche 2 (L2610) 22 September 2009 Management review meeting 16 October 2009 Staff review committee meeting November 2009 Loan negotiations 21 December 2009 Management approval of tranche 2 9 November 2010 Loan and project agreements signing 12 May 2011 Loan effectiveness B. Implementation November 2007 Inception mission 7 11 July 2008 Loan review mission 1 4 November 2008 Contract for site leveling and river diversion works signed (PCSS 0001) (L2353) 9 December 2008 Contract for consulting services engineering stage 1 signed (PCSS 0002) (L2353) 2 February 2009 Contract for supply of equipment/materials and construction of 35 kv power system signed (PCSS 0003) (L2353) 2 6 March 2009 Loan review mission 2 14 April 2009 Contract for construction of site offices for PMU and consultants signed (PCSS 0004) (L2353) May 2009 Loan review mission June 2009 Special project administration mission June 2010 Loan review mission 4 8 September 2010 Contract for construction of road connecting Mong Duong 1 to Highway No. 18 signed (PCSS 0005) (L2353) October 2011 Loan review mission November 2011 Special project administration (handover) mission 2 5 December 2011 Minor change approved to revise percentage of ADB financing for the EPC Package from 87% to 100% and to reallocate loan proceeds (L2610) 2 8 May 2012 Special project administration mission 3 4 February 2013 Reallocation of loan proceeds approved (L2353) 16 May 2013 First partial cancellation of $3,000,000 (L2353) 3 7 June 2013 Loan review mission 6 17 June 2013 Extension of L2610 loan closing date from 31 December 2014 to 31 December June 2013 Original loan closing date (L2353) July 2013 Special project administration mission November 2013 Special project administration mission 5

42 Appendix 6 33 Date Event 18 February 2014 Final cancellation of $2,839, unutilized loan proceeds (L2353) 18 February 2014 Actual loan closing date (L2353) 25 February 2014 Minor change approved to revise disbursement plan for the EPC Package in relation to adjustments needed to satisfy the Export-Import Bank of Korea disbursement plan (L2610) May 2014 Loan review mission 7 31 December 2014 Original loan closing date (L2610) April 2015 Project completion review mission (L2353) and loan review mission November 2015 Loan Review Mission 9 29 March-1 April 2016 Loan Review Mission April 2016 Minor change approved to revise disbursement plan for the EPC Package and reallocate loan proceeds (L2610) 4-7 October 2016 Loan Review Mission December 2016 Revised loan closing date (L2610) 7 April 2017 Loan Review Mission 12 9 June 2017 Final cancellation of unutilized loan proceeds (L2610) 9 June 2017 Actual loan closing date (L2610) September December Mar 2018 Project Completion Review Mission (L2610) Special environmental safeguards review mission Special environmental safeguards review mission

43 34 Appendix 7 CONTRACT AWARDS OF ADB LOAN PROCEEDS Table A7.1a: Annual and Cumulative Contract Awards of ADB Loan Proceeds- L2353 ($ million) Annual Contract Awards Cumulative Contract Awards Amount Amount Year ($ million) % of Total ($ million) % of Total % % % % % % Total % % ADB = Asian Development Bank. Source: Asian Development Bank. Table A7.1b: Annual and Cumulative Contract Awards of ADB Loan Proceeds- L2610 ($ million) Annual Contract Awards Cumulative Contract Awards Amount Amount Year ($ million) % of Total ($ million) % of Total % % % % % % % 861, % Total % % ADB = Asian Development Bank. Source: Asian Development Bank. Figure A7.1: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million) L2353 Year Projected Actual Total Source: Asian Development Bank.

44 L2610 Year Projected Actual Total Source: Asian Development Bank. Appendix 7 35

45 36 Appendix 8 SUMMARY OF CONTRACTS FUNDED BY THE ASIAN DEVELOPMENT BANK L2353 PCSS No. Contractor/Supplier Description A. Category 01A: Civil works 0001 Licogi Corporation Limited Site Leveling and Construction of Mong Duong River Diversion Canal 0003 Entec/My-Dinh 1 Power Construction Co. Ltd Bach Dang Joint Stock Company No Bach Dang TMC Construction Investment JSC Supply of Equipment/Materials and Construction of 35kV Power System for Construction Construction of Site Offices for PMU and Consultants Construction of Road Connecting Mong Duong 1 to Highway No. 18 Contract Amount (VND)* $ Equivalent 309,143,197,983 16,800,869 18,874,337, ,875 12,998,847, ,827 1,490,070,687 73,815 Subtotal (A) 342,506,453,793 18,655,386 B. Category 01B: Consulting Services 0002 WorleyParsons Pte Ltd Consulting Services for Engineering Stage 1 $1,172,181 S$2,018,018 2,640,388 Subtotal (B) $2,640,388 2,640,388 L2610 PCSS No. Contractor/Supplier Description A. Category 01A: Works EPC Package 0001 Hyundai Engineering & Construction Co., Ltd. Total $21,295,774 21,295,774 Contract Amount (VND)* $ Equivalent Engineering Construction $827,903, ,903,004 Procurement (EPC) Subtotal (A) $827,903, ,903,004 B. Category 01B: Civil Works 0003 Song Da 11 Joint Stock Company Construction of Freshwater Supply 164,753,297,460 7,850,454 System 0004 Hoa Hiep-HCJC1 Joint Venture Construction of Cooling Water Canal 204,270,753,990 9,782, Phu Xuan Construction and Construction of Ash Pond Phase 1 87,475,011,954 4,125,473 Consultants JSC 0006 Lilama 69-1 Pha Lai Joint Stock Construction of Fence Separating 5,424,547, ,536 Company Two Plants Subtotal (B) 461,923,610,783 22,007,654 C. Category 02: Consulting Services 0002 Poyry Switzerland Ltd. Engineering Consulting Services Stage 2 $11,542,951 11,542,951 Subtotal (C) $11,542,951 11,542,951 Total $861,453, ,453,609 PCSS No. = procurement contract summary sheet number Source: Asian Development Bank *except where currency is indicated

46 Appendix 9 37 IMPLEMENTATION OF ENVIRONMENTAL SAFEGUARDS A. Environmental Safeguards Categorization and Due Diligence 1. The project was classified as category A in accordance with ADB s Operations Manual (OM) and Bank Policies (BP) FI/BP: Environmental Considerations in ADB Operations. An environmental impact assessment (EIA) was prepared to meet the requirements of ADB s Environmental Assessment Guidelines (2003) and the Environment Policy (2002). The EIA was based on a separate national environmental impact assessment prepared by Viet Nam Electricity (EVN) and approved by Ministry of Natural Resources and Environment (MONRE) and Ministry of Agriculture and Rural Development (MARD). An environmental and social assessment working group, comprising of ADB consultants, EVN s environmental specialists, Thermal Power Management Board 1 (TPMB1) staff, staff of MONRE and MARD, and environmental experts of a national consultancy firm (Power Engineering Consulting Company 1), was established in 2006 to ensure consistency between the impact assessment reports prepared by EVN and the EIA. 1 A summary environmental impact assessment (SEIA) was provided to the government, circulated to ADB s Board of Directors, and disclosed in the ADB website in August A core part of the EIA is an environmental management plan (EMP) which documents the environmental mitigation and monitoring activities to be implemented throughout preconstruction, construction, and operation of the project. Supported by detailed cost estimates, the EMP contained the roles and responsibilities of institutions and contractors along with the capacity building activities to ensure adequate resources to fulfill their obligations under the plan. A survey and public consultation on the project were held to share the potential environmental and social benefits and impacts as well as to solicit the views of the project affected peoples. B. Institutional setup and environmental management 3. Construction phase. The project implementation unit was established and staffed in May An environmental management system was defined in the EMP and was established during project inception under the guidance of Worley Parson, the stage 1 project implementation consulting company (PIC) engaged in PIC had one international environmental expert (12 months) and several qualified national environmental experts (7 person-months). PIC assisted TPMB1 s safety department to supervise and monitor the construction contractor s EMP implementation and to prepare semi-annual environmental monitoring reports since Operation phase. TPMB1 s power plant safety department which has five staff: (i) supervised the compliance of environmental and safety issues of the power plant operation; (ii) conducted periodic environmental monitoring; and (iii) prepared annual environmental monitoring report for Quang Ninh Department of Natural Resources and Environment (DONRE), while TPMB1 s technical department which has 19 staff prepared environmental monitoring reports for submission to ADB, based on the information shared by safety department. 5. Capacity building. During the construction phase, ADB provided training to TPMB1 staff, PIC and contractors on environmental monitoring and reporting which helped efficient EMP implementation, monitoring and reporting. During the operation phase, TPMB1 s safety 1 BTOR of Consultation Mission, January BTOR of Loan Fact-Finding Mission, 21 June 3 July 2006

47 38 Appendix 9 department provides regular safety training to its operation staff. TPMB1 s staff also participate in several trainings on environment organized by Quang Ning DONRE. C. Implementation 6. Public consultation and grievance redress. Several public stakeholder consultations were held during the project preparation. A survey on the project and its potential environmental and social benefits and impacts as well as the views expressed by the project affected people was incorporated in the EIA. During the operation phase, people in the project area were invited to tour MD1TPP several times, and they expressed satisfaction at the environmental friendly facilities. Overall, it is concluded that public consultation and participation was commensurate with the identified risks. Complaints were not received during project implementation. 7. Prior to commencement of works, all required environmental and forest approvals at national, provincial and commune levels were obtained including unexploded ordnance clearance certificate from the military. Important issues that was considered in the EIA include the project effects on ambient air, and the quality of surface water and groundwater. A range of technical mitigation and pollution control measures, monitoring activities, as well as capacity building, was conducted during preconstruction, construction, and operation phases to mitigate the impacts. The impact of the project on mangrove ecosystems was also considered, and a program of mangrove replanting to offset identified biodiversity losses was implemented. 8. Mangrove plantation. Mangrove offset program is the major environmental mitigating measure identified since 31.3 hectares (ha) of mangroves and 20 ha of forests were removed during power complex site clearing. Planting of mangrove seedlings was completed in 52 ha offset area in Binh Dan commune, Van Don district, Quang Ninh province in However, it was later found that according to the latest approved master plan, the location was within the planned economic zone of Van Don district. Therefore, TPMB1 obtained permit from the Quang Ninh People Committee to relocate the offset area in Dong Rui commune, Tien Yen district and replanting was completed in June A contractor was engaged to plant and maintain the 52 ha of mangroves. In addition, at the early stage several guards were engaged onsite to make sure that the local people do not encroach to catch fish since that might trample young plants. This ensured healthy growth of the mangroves. ADB strictly adhered to field semiannual safeguards missions supported by national environmental consultants and provided timely guidance on corrective actions such as to combat barnacle infestation at early stage. ADB review found that satisfactory local procedures were followed to conserve the forest and the government has assigned Dong Rui commune to conserve the forest. 4 TPMB1 staff conducted the latest site visit of the mangrove plantation area on 9 February 2018 and confirmed that mangrove trees were developing well, two photographs during low tide is provided in Figure A Dong Rui commune s office manages the mangrove plantation mainly through voluntarily community-based forest management groups established at commune and village levels. The ADB project completion review mission met with the chairman of Dong Rui commune who explained that several awareness programs about mangrove forest benefits and protection were implemented for local people who are allowed to harvest seafood products in the mangrove forest. Quang Ninh DONRE is working with University of Natural Sciences, Vietnam National University, Hanoi to develop the 2,000 ha mangrove forest in Dong Rui in the same area which includes the Project s 52 ha of Mangrove plantation to make the area follow requirements of Ramsar Convention on Wetlands as the long-term development and protection of mangrove forest.

48 Appendix 9 39 Figure A9.1 - Photos of Mangrove Plantation Area Source: Thermal Power Management Board 1 under Viet Nam electricity dated 9 February Air quality measurements. During the operation phase, ambient air quality of the project area was measured four times each year in 2016 and Total suspended particles did not meet Vietnamese standards three times in TPMB1 informed that the exceedance is due to external factors (national highway No.18 development activity and coal mining activities taking place about 5 km from the complex) and emissions from MD1TPP are generally compliant with Vietnamese standards. Based on the government porocedures,tpmb1 needs to send the results to Quang Ninh Provincial People s Committee, Cam Pha District People s Committee, Mong Duong Commune People s Committee, Quang Ninh DONRE and Quang Ning Department of Public Security. The measurements were taken when the boilers were re-started. TPPMB1 is planning to change the starting-up fuel from fuel oil (FO) to diesel oil (DO) by October 2018 to reduce damage to the emission gas treatment system and to improve the emissions. 10. Ash disposal. The capacity of the exiting ash pond is 2,250,000 m 3. Bottom ash is being sold for cement manufacturing, however, according to TPMB1, fly ash from MD1TPP is not suitable for cement manufacturing. As of 26 February 2018, the ash pond s remaining capacity is estimated to be 588,819 m 3, which will serve for only 9 more months. This means that the ash pond will be full by January TPMB1 plans to construct a second ash pond, but its construction is expected to be completed by December During appraisal need of ash pond 2 in 2015 (after 5 years of operation) and ash pond 3 in 2030 (after 20 years of operation) was considered. For proper operation of MD1TPP and sustainable ash disposal in the upcoming years, TPMB1 is planning to use fly ash for the ground levelling of an area about 30 km away from power complex and waiting for the approval of Technical Guidance for use of ash from coal thermal power plant for construction material by the Prime Minister which is expected to be approved in Q A detailed plan for the ash use has been prepared by TPMB1 which is under review by GENCO3. D. Monitoring 11. External and internal monitoring. Environmental Monitoring and Analysis Center of Quang Ninh Province was the third-party external monitor retained by TPMB1 during construction since 2012 and operation phase, except for the period from 1 April 2016 to 31 December 2016 when Environmental Monitoring Center of Viet Nam Environment Administration was contracted. They monitored noise and vibration levels, and the quality of air, groundwater and surface water. Internal monitoring was conducted by TPMB1 s safety department. PIC assisted TPMB1 in 5 The plant discharges annual average of 1 million Ton of bottom and fly ash. TPMB1 has managed to find a land backfilling company for using 3 million tons of fly ash which can consume both bottom and fly ash from the power plant in the next 3 years.