Bangladesh: Power System Expansion and Efficiency Improvement Investment Program

Transcription

1 Facility Administration Manual Power System Expansion and Efficiency Improvement Investment Program (RRP BAN 42378) Project Number: Loan Number: LXXXX October 2012 Bangladesh: Power System Expansion and Efficiency Improvement Investment Program

2 Contents I. PROJECT DESCRIPTION 1 A. Impact and Outcome 1 B. Outputs 1 II. IMPLEMENTATION PLANS 2 A. Project Readiness Activities 3 B. Overall Project Implementation Plan 4 III. PROJECT MANAGEMENT ARRANGEMENTS 5 A. Project Stakeholders Roles and Responsibilities 5 B. Key Persons Involved in Implementation 5 C. Project Organization Structure 7 IV. COSTS AND FINANCING 7 A. Detailed Cost Estimates by Expenditure Category of Tranche 1 9 B. Allocation and Withdrawal of Loan Proceeds of Tranche 1 10 C. Detailed Cost Estimates by Financers for Tranche 1 11 D. Detailed Cost Estimates by Component for Tranche 1 12 E. Detailed Cost Estimates by Year for Tranche 1 13 F. Contract Award and Disbursement S-curve for Tranche 1 14 G. Fund Flow for Tranche 1 14 V. FINANCIAL MANAGEMENT 15 A. Financial Management Assessment for Tranche 1 15 B. Disbursement 16 C. Accounting 17 D. Auditing 17 VI. PROCUREMENT AND CONSULTING SERVICES 17 A. Advance Contracting and Retroactive Financing 17 B. Procurement of Goods, Works and Consulting Services 17 C. Procurement Plan 18 D. Outlined Terms of Reference (Appendix 1) 20 VII. SAFEGUARDS 20 VIII. GENDER AND SOCIAL DIMENSIONS 22 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 23 A. Project Design and Monitoring Framework 23 B. Monitoring 25 C. Evaluation 25 D. Reporting 26 E. Stakeholder Communication Strategy 26 X. ANTICORRUPTION POLICY 27 XI. ACCOUNTABILITY MECHANISM 27 XII. RECORD OF PAM CHANGES 27

3 FACILITY ADMINISTRATION MANUAL PURPOSE AND PROCESS The facility administration manual (FAM) describes the essential administrative and management requirements to implement the facility on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the FAM. The executing and implementing agencies are wholly responsible for the implementation of ADB financed facility, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB s policies and procedures. ADB staff is responsible to support implementation including compliance by executing and implementing agencies of their obligations and responsibilities for facility implementation in accordance with ADB s policies and procedures. At Loan Negotiations the borrower and ADB shall agree to the FAM and ensure consistency with the Loan agreement. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the FAM and the Loan Agreement, the provisions of the Loan Agreement shall prevail. After ADB Board approval of the facility's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the FAM or subsequent Project Administrative Manuals (PAMs), if applicable.

4 ABBREVIATIONS ADB = Asian Development Bank ADF = Asian Development Fund AFD = French Agency for Development AFS = audited financial statements BPDB = Bangladesh Power Development Board DESCO = Dhaka Electricity Supply Company Limited DMF = design and monitoring framework DPDC = Dhaka Power Distribution Company Limited DPP = Development Project Proposal EA = executing agency EIA = environmental impact assessment EIB = European Investment Bank EMP = environmental management plan ERD = Economic Relations Division FAM = facility administration manual FMA = financial management assessment FFA = framework financing agreement FIRR = financial internal rate of return GACAP = governance and anticorruption action plan GAP = gender action plan GDP GOB = = gross domestic product Government of Bangladesh IA = implementing agency ICB = international competitive bidding IEE = initial environmental examination IsDB = Islamic Development Bank kv = kilo volt LIBOR = London interbank offer rate MFF = multitranche financing facility MOU = memorandum of understanding MPEMR = Ministry of Power, Energy and Mineral Resources MW = megawatt NWPGCL = North-West Power Generation Company Limited OCR = ordinary capital resources PAI = project administration instructions PAM = project administration manual PCU = Project coordination unit PGCB = Power Grid Company of Bangladesh PMU = project management unit PV = photovoltaic REB = Rural Electrification Board RP = resettlement plan RRP = report and recommendation of the President to the Board SOE = statement of expenditures SPS = Safeguard Policy Statement TOR = terms of reference

5 I. PROJECT DESCRIPTION 1. The Government of Bangladesh has prepared an investment plan worth of $12.15 billion for the period of with the objectives of increasing electrification rate to 68%, eliminating the supply demand gap and resolving reliability and supply quality issues. The Government s investment plan will expand generation and undertake matching investments on transmission and distribution improvements. The proposed multitranche financing facility (MFF) support selected generation expansion, transmission and distribution improvements from the Government s investment program The proposed investment program (MFF) finances carefully selected subprojects from the Government s investment plan. A flexible modality is required to support the government s medium-term investment plan. About 50% of the external finances of the proposed investment program will be mobilized through co-financing. The proposed MFF also facilitate systematic sector capacity building with a longer planning horizon. It will also undertake sector reforms to ensure efficient management of sector entities and their financial sustainability. Power sector investment plan Funding Gap in $ million Year of Generation Transmission Distribution Total commissioning Public Private Public Public Public Private Grand Total , ,125 1,123 2, ,216 1, ,961 1,138 3, ,376 1, ,318 1,357 3, , , ,125 Total 4,286 4,258 1,201 2,402 7,889 4,258 12,147 Source: BPDB, PGCB and ADB estimates A. Impact and Outcome 3. The proposed investments will contribute to low carbon economic growth, productivity, competitiveness and jobs. The outcome will be increased access to clean and reliable supply of electricity in Bangladesh and more effective power sector institutions. B. Outputs 4. The proposed investment program will deliver four outputs: (i) improved efficiency in electricity generation, transmission and distribution; (ii) increased renewable energy use; (iii) enhanced capacity of power sector agencies and farmer organizations; and (iv) project management system. The major physical investment will be undertaken on generation capacity additions through supply side efficiency improvements, transmission expansion and distribution improvement under the first output. Pilot program of solar irrigation will install up to 200 irrigation pumps under the second output. Solar irrigation component will enable up to 4000 poor farm families to cultivate 3 crops instead of one crop per year. The capacity building will provide support for subsequent tranche preparation, supervision consultants for project implementation and training for power sector personnel and members of farmer organizations (for solar irrigation). The training programs will include investment appraisal, operations planning, energy auditing and monitoring, financial performance management and reporting, auditing and governance. 1 The Asian Development Bank provided project preparatory TA, ADB Technical Assistance to Bangladesh for preparing Power System Efficiency Improvement. Manila. 1

6 5. Under the output (i), up to 700 MW generation capacity will be added to the system of which about MW would be added using ADB and government finance. Generation capacity additions in the investment program will be undertaken by converting open cycle gas fired power plants to combined cycle plants. This conversion allows generation of 50% additional power without burning extra gas, hence viewed as an environmentally friendly technology to add generation capacity. Power plant conversion is also a solution for the acute gas shortages in Bangladesh. The output (i) will also build up to 470 km of transmission lines and associated facilities of which about 200 Km will be built using ADB and government funds. The upstream improvements in the 33kV network include up to 500 km of distribution lines and associated facilities and up to 39 new or upgraded 33/11kV substations. Up to 250 km of distribution lines will be added using ADB and government funds. These physical investments will ease overloading of existing transmission and distribution lines, achieve higher reliability and reduce technical losses and provides 450,000 new power connections to households. 6. Efficiency improvement component in tranche 1 will convert four plants: (i) Khulna (150MW), (ii) Baghabari (100 MW), (iii) Sylhet (150 MW), (iv) Shahjibazar (70 MW) 3. Transmission system strengthening in tranche 1 constructs three transmission lines and associated substations, namely (i) 100 km 132 kv double circuit transmission line Mynmensingh-Tangail, (ii) 80 km 132kV double circuit transmission line Chandraghona- Rangamati-Khagrachari, and (iii) 50 km 132kV double transmission line Brahmanbaria- Narsingdi. These lines are aimed at removing constraints in operating the high voltage network in the country, enabling more generation capacity to be dispatched, reducing transmission losses and improving the reliability of the transmission system. II. IMPLEMENTATION PLANS 7. The program will be implemented from December 2012 to October Estimated completion date will be on 31 December Details on the implementation arrangements are shown below. 2 These estimates are tentative because financial plans for tranche 2 and three will be developed during the tranche preparation. 3 Technical details of the power plants are given in supplementary linked document on technical assessment. 2

7 Implementation Arrangements Arrangements Aspects Implementation period December 2012-December 2022 Estimated completion date 31 December 2020 Management (i) Oversight body Steering Committee Secretary, Power Division, MOPEMR - chair Chairman BPDB, Managing Directors of PGCB, NWPGCL, DESCO, DPDC and Chairman REB, Representatives from ERD, Finance Division, Planning Commission, and IMED. (ii) Executing agency (iii) Implementation unit Procurement Consulting services Retroactive financing and/or advance contracting BPDB, PGCB, NWPGCL, DESCO, DPDC, REB Power Division, MOPEMR, REB PMUs in BPDB, PGCB, NWPGCL, DESCO, DPDC, REB, Power Division MOPEMR Four procurement packages are under Tanche 1, with total estimated contract value of $ 338 million. ICB will be used for all procurement packages. Five consulting services packages (firm) are to be engaged under Tranche1, with total estimated contract value of $8.5 million. Consulting firms will be recruited using quality- and cost-based selection. Under each tranche, ADB may, subject to its policies and procedures, allow advance contracting. Retroactive financing will be requested for one contract package in capacity building component for tranche preparation. Disbursement The loan proceeds will be disbursed in accordance with ADB's Loan Disbursement Handbook (2012, as amended from time to time) and detailed arrangements agreed upon between the government and ADB ADB = Asian Development Bank, BPDB = Bangladesh Power Development Board, DESCO = Dhaka Electricity Supply Company Limited, DPDC = Dhaka Power Distribution Company Limited, ERD = Economic Relations Division, MOPEMR = Ministry of Power Energy and Mineral Resources, NWPGCL = North West Power Generation Company Limited; PGCB = Power Grid Company of Bangladesh Limited, PMU = project management unit; REB = Rural Electrification Board; IMED =Implementation, Monitoring and Evaluation Division. Source: Asian Development Bank. A. Project Readiness Activities Month Month Indicative Activities Responsibility Advance contracting actions Retroactive financing actions x x BPDP/NWPGCL/ PGCB/ Power Division BPDP/NWPGCL/ PGCB/Power Division/ADB ADB approval x ADB Loan signing x Power Division/ADB Government legal opinion provided x Power Division Government budget inclusion x Power Division Loan effectiveness x ADB 3

8 B. Overall Project Implementation Plan Figure 1: Overall Project Implementation Plan Activities Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 TRANCHE 1 Component 1: BPDB Projects Bidding Bid evaluation and award Implementation Component 1: NWPGCL Bidding Bid evaluation and award Implementation Component 2: PGCB Preparation of Bidding Documents Bidding and Contract Signing Implementation Component 3: MPEMR Implementation consultants for BPDB and NWPGCL projects Preparation of Tranche 2 Preparation of Tranche 3 Governance and Planning TRANCHE 2 PGCB Preparation of Bidding Documents Bidding and Contract Signing Implementation DESCO Preparation of Bidding Documents Bidding and Contract Signing Implementation DPDC Preparation of Bidding Documents Bidding and Contract Signing Implementation TRANCHE 2 BPDB Preparation of Bidding Documents Bidding and Contract Signing Implementation Dec 2019 PROJECT COMPLETION REPORT Jun

9 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Stakeholders Roles and Responsibilities Project Stakeholders Steering Committee: Executing Agencies: Power Division, Ministry of Power Energy and Mineral Resources (MPEMR) Management Roles and Responsibilities Chaired by Secretary, Power Division, MOPEMR, and consisting of Chairman BPDB, Managing Directors of PGCB, NWPGCL, DESCO, DPDC and Chairman REB, Representatives from ERD, Finance Division, Planning Commission, and IMED. Power Division will implement the capacity building component which include activities for all other executing agencies Bangladesh Power Development Board (BPDB) North-West Power Generation Company Limited (NWPGCL) Power Grid Company of Bangladesh (PGCB) Dhaka Power Distribution Company Limited (DPDC) Dhaka Electricity Supply Company Limited (DESCO) Rural Electrification Board (REB) Project Management Units Asian Development Bank BPDB and NWPGCL will implement energy efficiency improvement component PGCB will implement transmission components DPDC and DESCO will implement distribution components in Tranche 2 REB will implement renewable energy development component in Tranche 2 PMUs will be established within each EA for implementing, monitoring, and reporting on the progress of project implementation to ADB and the government Power Division, MPEMR will form a project coordination unit (PCU) to coordinate all the project activities and report to ADB Will undertake regular project reviews and facilitate in implementation of the projects B. Key Persons Involved in Implementation Executing Agencies BPDB Tamal Chakraborty Member (Generation) Telephone: Fax: mgenpdb@yahoo.com 5

10 Executing Agencies NWPGCL PGCB REB Power Division, MPEMR DPDC DESCO A.M. Khurshedul Alam Managing Director Telephone: Fax: Md. Jamal Ullah Managing Director Telephone: Fax: Brig. Gen. Moinuddin Chairman Telephone: Fax: Md. Nazrul Islam Joint Chief Telephone: Fax: Brig. Gen. (Rtd) Md. Nazrul Hasan Managing Director Telephone: Fax: Md. Shah Alam Director (Engineering) Telephone: Fax: / Asian Development Bank Division Director Yongping Zhai Director, Energy Division Telephone No.: (63-2) address: Mission Leader Herath Gunatilake Lead Energy Economist Telephone No.: (63-2) address: 6

11 C. Project Organization Structure 8. Bangladesh Power Development Board (BPDB), North-West Power Generation Company Limited (NWPGCL) and Power Grid Company of Bangladesh (PGCB) Rural Electrification Board (REB), Power Division, Ministry of Power Energy and Mineral Resources (MPEMR), Dhaka Power Distribution Company Limited (DPDC), and Dhaka Electricity Supply Company Limited (DESCO) will be the executing agencies with overall responsibility for the implementation of respective project components. Power Division, MPEMR will implement the capacity building component which include activities for all other executing agencies. Project implementation consultants will be recruited by Power Division, but they will report to the respective EAs. BPDB and NWPGCL will implement energy efficiency improvement component while PGCB will implement transmission components. DPDC and DESCO will implement distribution components in tranche 2. Project management units (PMU) will be established within each executing agency for implementing, monitoring, and reporting on the progress of project implementation to ADB and the government. The PMUs responsibilities will include (i) overall coordination, macro level project management and monitoring; (ii) annual budget preparation and monitoring utilization of loan proceeds; (iii) progress reporting, including reports on financial management, safeguard compliance and project impact; and (iv) ensuring compliance with loan covenants. The PMUs will also be responsible for administration, and financial and technical supervision of the subprojects, including procurement of goods and services, engagement of consultants, engineering and construction contractors, and monitoring subproject operation performance. Power Division of MPEMR will form a a project coordination unit (PCU) to coordinate all the project activities and report to ADB. IV. COSTS AND FINANCING 9. The Government s investment plan faces a funding gap of about $12,150 million investments during period. A major portion (70%) of the total investment of the Government program will be allocated for generation expansion. The proposed investment program provides up to $1,600 million (13%) of the investment requirements. The government has requested up to $700 million from ADB s ordinary capital resources to finance part of the identified investments in the governments investment plan. The investment program is expected to have three tranches, subject to the government s submission of periodic financing requests; execution of loan and project agreements; and fulfillment of terms, conditions, and undertakings set forth in the framework financing agreement. The first tranche will include generation expansion, transmission expansion and capacity building components. The second tranche includes generation expansion, transmission expansion, distribution improvement and pilot solar irrigation program. The third tranche will undertake generation expansion. 10. The indicative investment plan for the program is shown below. The first tranche of $185 million will have a 25-year term including a grace period of 5 years, and an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR), a commitment charge of 0.15% per year and such other terms and conditions as set forth in the draft loan and project agreements. ADB loan proceeds in each tranche will be provided to the relevant power sector agencies by the government on terms and conditions consistent with Bangladesh legislation and acceptable to ADB. 7

12 Indicative Investment Plan for the Program Amount US$ million Item MFF Tranche 1 Tranche 2 Tranche 3 A Base Costs 1 Energy Efficiency Improvements Transmission Expansion Distribution Improvements Renewable Energy Development Capacity Building Taxes and duty Subtotal A 1, B Contingencies C Financing Charges During Implementation Total (A+B+C) 1, a In mid-2012 prices. b Physical contingencies computed at 5% for civil works; Price contingencies computed at 5% local currency costs. c Includes interest and commitment charges. Interest during construction for ADB loan(s) has been computed at the 5-year forward London interbank offered rate plus a spread of 0.4%. Commitment charges for an ADB loan are 0.15% per year to be charged on the undisbursed loan amount. Source: Project preparatory technical assistance consultants 11. Financing plan for the investment program is given below. ADB will finance $700 million for the investment program, with counterpart funding of $222 million from the government. The rest of the $678 million will be provided by three co-financiers: Islamic Development Bank (IsDB), Agence Francaise de Developpement (AFD), and European Investment Bank (EIB). All three donors visited Bangladesh together with an ADB mission, agreed in principle to finance the investment program, and met the relevant government officials to explain terms and conditions of the co-financing. Government made official request for co financing from AFD and IsDB. ADB and the cofinenciers are in the process of preparation of Memorandom of understanding on cofinancing. Source Financing Plan of the Investment Program Investment Program Funding, $ Million Tranche 1, Year 2012 Tranche 2, Year 2013 Tranche 3, Year 2015 ADB IsDB EIB AFD Government Total ,600.0 ADB = Asian Development Bank, EIB = European Investment Bank, IsDB = Islamic Development Bank, AFD = L Agence Française de Développement (French Agency for Development) Source: Project preparatory technical assistance consultants Total 8

13 A. Detailed Cost Estimates by Expenditure Category of Tranche 1 Component 1 Description NWPGCL BPDB A Base Costs Khulna Baghabari Sylhet Shajibazar Total Material, equipment and civil works Engineering design & incidentals Capacity development - - Taxes and Duty Subtotal A B Contingencies C Financing Charges During Implementation Total Project Cost (A+B+C) Component 2 Description PGCB A Base Costs MT Line CRK Line BN Line Total Material, equipment and civil works Engineering design & incidentals Capacity development - Taxes and Duty Subtotal A B Contingencies C Financing Charges During Implementation Total Project Cost (A+B+C) Component 3 Description MOPEMR A Base Costs Total Material, equipment and civil works Engineering design & incidentals Capacity development 8.50 Taxes and Duty Subtotal A 8.50 B Contingencies - C Financing Charges During Implementation Total Project Cost (A+B+C) 8.50 MOPEMR = Ministry of Power Energy and Mineral Resources, NWPGCL = North-West Power Generation Company Limited, BPDB = Bangladesh Power Development Board, PGCB = Power Grid Company of Bangladesh Limited, MT = Mymensingh-Tangail transmission line, CRK = Chandraghona-Rangamati-Khagrachari transmission line, BN = Brahmanbaria-Narsingdi transmission line 9

14 B. Allocation and Withdrawal of Loan Proceeds of Tranche 1 CATEGORY ADB FINANCING BASIS Amount Allocated for ADB Financing S.N. Item (US$ million) Percentage and Basis for Withdrawal from the Loan Account Category Subcateg. 1 Power Plant 1.1* % of total expenditure claimed** 2 Transmission lines and 100% of total expenditure substations claimed** 3 Tranche 1&2 preparation 100% of total expenditure 1.50 consulting services claimed** 4 Interest and Commitment Charges % of total amount due 5 Unallocated Total * Conversion of Khulna Power Plant **Inclusive of all duties and taxes imposed within the territory of the Borrower. 10

15 C. Detailed Cost Estimates by Financers for Tranche 1 Item Total Cost Amount ADB OCR % of Cost Category ($ million) EIB Loan and Grant Amount % of Cost Category Amount IsDB Fund % of Cost Category Amount GOB Fund % of Cost Category A. Investment Costs a 1 Power Plant 1.1 b % 2 Power Plant % % 3 Power Plant % % 4 Transmission line and substations b % 5 Consulting services for Tranche 2& 3preparations b % 6 Capacity Development c 100.0% 7 Safeguards and administrative costs % Total Base Cost % % % % B. Contingencies d : % % % % C. Financing Charges in Imple Total Project Cost (A+B+C) % % % % a. Cost based on May 2012 Prices; Estimates by EA and PPTA consultants; b. Taxes and duties imposed within Borrower's territory are funded by ADB. C This will be provided as a grant. d. Physical contingences computed at 8%, and price contingencies computed as per ADB s Financial Management and Analysis of Projects,2005. Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant. 11

16 D. Detailed Cost Estimates by Component for Tranche 1 ($ million) Item Total Cost Component 1 Component 2 Component 3 Amount % of Cost Amount % of Cost Amount A. Investment Costs a 1 Power Plant 1.1 b % 2 Power Plant % 3 Power Plant % 4 Transmission line and substations b % 5 Consulting services for Tanche 2& 3 preparations % 6 Capacity Development % 7 Safeguards and administrative costs % % Total Base Cost % % % B. Contingencies c : % % C. Financing Charges in Imple % % - Total Project Cost (A+B+C) % % % a. Cost based on May 2012 Prices; Estimates by EA and PPTA consultants; b. Taxes and duties imposed within Borrower's territory are funded by ADB. c. Physical contingences computed at 8%, and price contingencies computed as per ADB s Financial Management and Analysis of Projects,2005. Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant. % of Cost 12

17 E. Detailed Cost Estimates by Year for Tranche 1 ($ million) Item ADB OCR Year 1 Year 2 Year 3 Year 4 Year 5 A. Investment Costs 1 Power Plant Power Plant Transmission line and substations Consulting services for Tanche 2& 3 preparations Capacity Development 7 Safeguards and administrative costs Total Base Cost B. Contingencies: C. Financing Charges in Imple Total Project Cost (A+B+C) a. Cost based on May 2012 Prices; Estimates by EA and PPTA consultants; b. Taxes and duties imposed within Borrower's territory are funded by ADB. c. Physical contingences computed at 8%, and price contingencies computed as per ADB s Financial Management and Analysis of Projects,2005. Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant. 13

18 F. Contract Award and Disbursement S-curve for Tranche 1 G. Fund Flow for Tranche 1 Figure 1: Fund Flow Diagram Ministry of Finance Economic Relations Division Asian Development Bank Direct Payment Procedure Commitment Procedure Ministry of Power, Energy, and Mineral Resources (Power Division) Reimbursement including SOE Procedure for Part 3 Supplier s Bank Legend: Fund Flow BPDP/PGCB Turnkey Contractors/Suppliers Document Flow Reimbursement including SOE Procedure 14

19 V. FINANCIAL MANAGEMENT A. Financial Management Assessment for Tranche The financial viability assessment of tranche 1 was undertaken considering additional cash flows to the power sector companies due to generated or wheeled extra power. The weighted average cost of capital was calculated following ADB guidelines. The financial internal rates of return (FIRR) were estimated for the power plants and transmission lines separately. Power plant conversion and transmission lines results FIRR values of 4.0% and 4.5%, respectively. These FIRR values exceed the respective values of WACC of 1.9% (power plant conversion) and 2.1% (transmission lines), which demonstrates the financial viability of the project. The financial management assessment shows NWPGCL and PGCB are currently making profits and their financial indicators are satisfactory. The current financial position of the BPDB needs to be improved. BPDB has prepared a loss reduction plan and additional measures were incorporated as undertakings in the FFA to ensure financial sustainability of BPDB. 13. NWPGCL was registered as a Public Limited Company in August 2007 with main line of business of electricity generation for North-western region of Bangladesh. Currently, NWPGCL is still wholly owned enterprise of Government through BPDB. NWPGCL is the EA for Part A1. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. NWPGCL is using the Chart of Accounts of BPDB as its wholly owned subsidiary enterprise. NWPGCL follows the accruals basis of accounting in line with Bangladesh Accounting Standards (BAS) and other applicable Accounting standards of the Institute of Chartered Accountants of Bangladesh. NWPGCL s accounts are audited by a firm of Chartered Accountants as in accordance with the Bangladesh Standards of Auditing (BSA).The auditors of NWPGCL have not reported any major accountability issue in the recent past. The senior personnel of NWPGCL are professionally qualified and are well conversant with foreign donor requirements in terms of procedures and reports. 14. BPDP was established in 1972 as the authority for planning, construction and operation of power generation and transmission facilities throughout the country. BPDB is the EA for Part A2. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. BPDB follows the accruals basis of accounting. It has an accounting system which is adequate for the recording of all relevant financial transactions of the projects being implemented. The Chart of Accounts of BPDP is adequate to properly record and report on project activities and disbursement categories. The accounts of BPDB are prepared in accordance with the requirements of Bangladesh Financial Reporting Standards (BFRS) and audited annually by a firm of Chartered Accountants. The audit is carried out in accordance with Bangladesh Standards of Auditing (BSA). No major issues came up for mention in the Audit Reports of the past three years. All recommendations made by the external Auditors are implemented without any delay. BPDP has years of experience of implementing Projects financed by ADB and other donors. It has adequately trained personnel to look after all aspects of a foreign-funded project. BPDB has a number of qualified professional accountants heading various accounting/finance offices. Personnel are conversant with all aspects of ADB procedures. 15. For NWPGCL and BPDB, while the present Management Information System produces the information required, computerization of the various sub-systems needs to be initiated at the earliest. The training on internal audit is also needed. 15

20 16. PGCB was incorporated in 1996 in accordance with Companies Act 1994 with main business of power transmission. PGCB has over 2000 employees and listed on the Dhaka Stock exchange and the Chittagong Stock Exchange. PGCB is the EA for Part B. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. PGCB follows the accruals basis of accounting. It has an accounting system which is adequate for the recording of all relevant financial transactions of the projects being implemented. The Chart of Accounts of PGCB is adequate to properly record and report on project activities and disbursement categories. The accounts of PGCB are prepared in accordance with the requirements of Bangladesh Financial Reporting Standards (BFRS) and audited annually by a firm of Chartered Accountants. The Financial Statements of PGCB are audited by a firm of Chartered Accountants. The Audit is carried out in accordance with the International Standards of Auditing (ISA), as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB). PGCB has years of experience of implementing Projects financed by ADB and other donors. It has adequately trained personnel to look after all aspects of a foreign-funded project. PGCB has a number of qualified professional accountants heading various accounting/finance offices. Personnel are conversant with all aspects of ADB procedures. 17. PGCB needs to have a Business Plan prepared at the earliest. HRM needs to be computerized and carried out by a separate department, given the large number of 2,000 employees. 18. Based on above, each EA is capable of managing the funds flow, disbursement procedure, accounting and financial reporting under the project. B. Disbursement 19. The Loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2012, as amended from time to time), and detailed arrangements agreed upon between the Government and ADB. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS), ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. ADB's direct payment, commitment, reimbursement including statement of expenditures (SOE) procedures will be followed. Regarding SOE procedure, it will be used for reimbursement for eligible expenditures not exceeding $100,000 per individual payment. 20. Before the submission of the first withdrawal application, the Borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the Borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000, unless otherwise approved by ADB. The Borrower will consolidate claims to meet this limit for reimbursement claims. Each EA will be responsible for (i) preparing disbursement projections for each year, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services for all the packages were produced in or from ADB members, and are eligible for ADB financing. Government counterpart funds will be used to finance the remaining miscellaneous works, services, taxes and duties. 16

21 C. Accounting 21. Each of the EAs will maintain separate project financial statements and records by funding source for all expenditures incurred on each component of the Project. Project financial statements will follow international accounting principles and practices. D. Auditing 22. Each of the EAs will cause the detailed consolidated project financial statements to be audited in accordance with International Standards on Auditing or the Government's audit regulations by an auditor acceptable to ADB. The audited project financial statements will be submitted in the English language to ADB within 6 months of the end of the fiscal year by the EA. The Borrower and the EA have been made aware of ADB s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements. ADB reserves the right to verify the project financial statements to confirm that ADB s share of the financing is used in accordance with ADB s policies and procedures. VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 23. In order to expedite project implementation, the Borrower has requested and ADB has approved advance contracting actions for the procurement and consulting service. All advance contracting will be undertaken in conformity with ADB s Procurement Guidelines (2010, as amended from time to time) (ADB s Procurement Guidelines). The issuance of invitations to bid under advance contracting will be subject to ADB's prior approval. The Borrower and the EAs have been advised that approval of advance contracting does not commit ADB to finance the Project. 24. Except as otherwise agreed with ADB, the expenditures incurred for equipment, civil works, and consulting services will be eligible for retroactive financing, provided that these are incurred before the effectiveness of the related loan agreement, but not earlier than 12 months preceding the signing of the related loan agreement, and as long as they do not exceed an amount of 20% of the individual loan. B. Procurement of Goods, Works and Consulting Services 25. Goods and works to be financed under the project will be procured in accordance with ADB's Procurement Guidelines (2010, as amended from time to time), except the packages for the conversion of Baghabari and Shahjibazar power plants, and conversion of the Sylhet power plant which will be respectively funded by European Investment Bank (EIB) and Islamic Development Bank (IsDB). Those packages will be procured in accordance with the respective co-financier's procurement guidelines. All goods and works will be procured by international competitive bidding. Project Preparation Support consultants for Tranche 2 and Tranche 3 will be engaged in accordance with ADB s Guidelines on the Use of Consultants (2010, as amended from time to time). Project Implementation Management Support consultants for NWPGCL and BPDB, and Capacity Development consultants will be funded by EIB and administered by ADB using its guidelines in consultation with EIB. All consulting services, except implementation consultants will be recruited using quality- and cost-based selection (QCBS), with a quality cost ratio of 80:20. Implementation consultants will be recruited using 90:10 quality cost ratio. Taxes and duties of ADB funded packages will be paid by ADB. 17

22 26. An 18-month procurement plan indicating threshold and review procedures is in Section C. 27. All the consulting services will be recruited in accordance with ADB s Guidelines on the Use of Consultants (2010, as amended from time to time). The outline terms of reference (TOR) for the consulting services are in Section D. C. Procurement Plan Project Name: Country: Executing Agency: Loan Amount: Basic Data Power System Expansion and Efficiency Improvement Investment Program (Tranche1) Bangladesh Power Division, Bangladesh Power Development Board (BPDB), Northwest Power Generation Company Ltd. (NWPGCL), Power Grid Company of Bangladesh Ltd. (PGCB) $185 million Loan (Grant) Number: Date of First Procurement Plan 28 June 2012 Date of this Procurement Plan: 9 August 2012 a. Process Thresholds, Review and 18-Month Procurement Plan 1. Project Procurement Thresholds 28. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works. Method Procurement of Goods and Works Threshold International Competitive Bidding (ICB) for Works $1,000,000 International Competitive Bidding for Goods $500, ADB Prior or Post Review 29. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project. Procurement Method Prior or Post Comments Procurement of Goods and Works ICB Works Prior ICB Goods Prior Recruitment of Consulting Firms Quality- and Cost-Based Selection (QCBS) Prior Recruitment of Individual Consultants 18

23 Procurement Method Prior or Post Comments Individual Consultants Prior 3. Goods and Works Contracts Estimated to Cost More Than $1 Million 30. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description 1.1 Conversion of Khulna power plant Contract Value ($million) Advertisement Date (quarter/year) Procurement Method Prequalification of Bidders (y/n) Comments ICB N 2 nd Quarter 2013 Financed by ADB and GOB 1.2 Conversion of Baghabari and Shahjibazar power plants ICB TBD 4 th Quarter 2012 Financed by EIB and GOB 1.3 Conversion of Sylhet power plant kV Transmission line construction ICB TBD 4 th Quarter 2012 Financed by IsDB and GOB ICB N 4 th Quarter 2012 Financed by ADB and GOB 4. Consulting Services Contracts Estimated to Cost More Than $100, The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description Project Preparation Support for Tranche 2 Contract Value Recruitment Method 1 Advertisement Date (quarter/year) International or National Assignment Comments $750,000 Individual 3 rd Quarter 2012 International Financed by ADB Project Preparation Support for Tranche 3 Project Implementation Management Support for NWPGCL Project Implementation Management Support for BPDB $750,000 QCBS 80:20 $1,500,000 QCBS 90:10 $2,000,000 QCBS 90:10 3 rd Quarter 2013 International Financed by ADB 2 nd Quarter 2013 International Financed by EIB grant 4 th Quarter 2012 International Financed by EIB grant Capacity Development $3,500,000 QCBS 80:20 3 rd Quarter 2013 International Financed by EIB grant 5. Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100, The following table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. 19

24 General Description N.A. Value of Contracts (cumulative) Number of Contracts Procurement / Recruitment Method 1 Comments b. Indicative List of Packages Required Under the Project 33. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the project. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the comments section. Goods and works Estimated Value General Description ($million) Component 1: Power Plant Upgrade 1.1 Conversion of Khulna power plant Estimated Number of Contracts Procurement Method Domestic Preference Applicable Comments ICB N Financed by ADB and GOB 1.2 Conversion of Baghabari power plant and Shahjibazar power plant ICB N Financed by EIB and GOB 1.3 Conversion of Sylhet power plant Component 2: Transmission Line Improvement 132kV Transmission line construction Consulting Services ICB N Financed by IsDB and GOB ICB N Financed by ADB and GOB Estimated Value (cumulativ e) Estimated Number of Contracts Recruitment Method Type of Proposal Comments General Description Project Preparation Support Tranche 2 $750,000 1 International STP Financed by ADB and GOB Trench 3 $750,000 1 International STP Financed by ADB and GOB Project Implementation Management Support NWPGCL $1,500,000 1 International FTP Financed by EIB grant and GOB BPDB $2,000,000 1 International FTP Financed by EIB grant and GOB Capacity Building Capacity Development $3,500,000 1 International FTP Financed by EIB grant and GOB D. Outlined Terms of Reference (Appendix 1) VII. SAFEGUARDS 20

25 34. An environmental assessment and review framework, and a resettlement framework were prepared outlining the environmental and social safeguard principles and requirements. 4 The executing agencies will undertake environmental and social safeguard due diligence on subprojects based on the environmental assessment and review framework and resettlement framework and submit bi-annual reports on implementation of the environmental management plan and resettlement plan for subprojects. Tranche 1 is classified as category B for both involuntary resettlement and the environment. The proposed project has no potential for significant air, water, or noise pollution and it has positive environmental effects of reduction in local air pollution and carbon emissions. It does not fall in the vicinity of any natural ecosystems, reserve forests, protected areas, and cultural sites. It has temporary minor impacts during construction that can be readily mitigated. An initial environmental examination and environmental management plan have been prepared for tranche 1 components based on selected representative subprojects sites. Tranche 2 and 3 are likely to be classified as category B for environment. 35. Tranche 1 components will require only minimum amount of land acquisition. Construction of new transmission lines will have minor temporary impacts on standing crops. Tranche 2 components will have 21 new 33/11 kv substations in the DISCOM-W area for which the sites have already been identified. Most of the substations are proposed to be located on government land. The lines under tranche 2 will have no impact on land acquisition and resettlement except some temporary damage to standing crops that may occur during the construction. 36. Tranche 1 is classified as category C for indigenous peoples. According to social assessments, no indigenous peoples are expected to be significantly affected by the investment program. In the event of impacts on indigenous peoples, the project will apply the mitigation measures provided the resettlement framework, which include specific measures that provide entitlements to vulnerable groups, including indigenous peoples. Project construction activities are expected to be small in scale, with the possible involvement of local people in construction activities, and are not considered to pose a threat to the existing socio-cultural system of indigenous peoples. No tribal lands will be acquired or affected. Tranche 2 may be classified as category A and tranche 3 is likely to be classified as category B for involuntary resettlement. 37. The EAs will ensure the timely and adequate implementation of the environmental management plans (EMP) and the Resettlement Plans (RPs) for each project component (as relevant), and will ensure that all activities comply with the applicable national and local environmental laws and regulations, in addition to ADB s Safeguard Policy Statement In the event a sub project requires modifications to its design or configuration prior or during project construction, the EA will ensure to revise and update the EIA, IEE, EMP and RPs accordingly, and will submit these to ADB for approval and clearance. The EAs will assist in promoting environmentally and socially responsible implementation of the contracts. Contracts shall include provisions that comply with host country employment laws and ADB guidance on labor standards, wages and acceptable working conditions, including measures to avoid and prevent discrimination against women in the workplace, equal pay for equal work, and also public awareness and sensitization of the risks and prevention of the spread of HIV/AIDS. Ensuring these measures are implemented will be the responsibility of the EAs. 4 Environmental Assessment and Review Framework, and Resettlement Framework (accessible from the list of linked documents in Appendix 2). 21

26 38. The mitigation measures will be incorporated into the contractor s contract document. The EA will monitor, audit, and report to ADB on the implementation of the EMP for each subproject semiannually during construction and annually during operation 5. Summary appraisal reports will be submitted to ADB subsequent to the EA s approval. 39. The contractor/subcontractor shall prepare and submit the semi-annual progress reports in conformance with the EMP to the EAs and shall indicate when, how and at what cost the contractors plan to satisfy the requirements as per detailed design. The construction schedules shall detail the resources to be provided or utilized and any related sub contracting proposed. 40. Project implementation is expected to pose minor impacts of a temporary and reversible nature on peoples living in the direct/indirect area of influence of construction sites. The EA/IA and its contractors will be responsible for designing and implementing culturally acceptable and sensitive measures to manage and address significant community, health, safety, and labor issues, in consultation with locally affected peoples, and in accordance with national laws and ADB safeguard requirements. 41. Implementation of Resettlement Plan (RP) activities are the sole responsibility of the EA/IA (as applicable). Implementation of RP activities shall be closely monitored by the responsible party and performance shall be reported back to the ADB on a six monthly basis. RP activities will be carried out in line with applicable ADB policies. During this process, the EA/IA will ensure to improve or at least restore the quality of life of all displaced persons. 42. Where construction works require large numbers of workers, especially migratory (from areas other than the host community), the EA/IA will impart HIV/AIDS awareness campaigns to prevent and control its spread to others during the duration of construction works. Campaigns will include information disclosure of the risks and methods of prevention to women and girls in the local community. The project will not hire child workers for any project related activities and the EA/IAs will ensure that workers are not bonded or forced laborers. VIII. GENDER AND SOCIAL DIMENSIONS 43. Tranche 1 is classified as "No Gender Elements", given the limited opportunities for gender mainstreaming. The loan agreement includes a standard assurance related to compliance with labor standards for contractors, including provisions to ensure equal pay for work of equal value, and the provision of awareness training on sexually transmitted infections (incl. HIV), forced/bonded labor and human trafficking. Dialogue and communication (both written and verbal) with stakeholders will be carried out in a gender-specific and culturally sensitive manner and in local languages, as required. 5 Where all subprojects will result in insignificant environmental impacts, financial intermediaries are not required to adopt an environmental management system or environmental assessment. 22