Afghanistan: Multitranche Financing Facility for Energy Sector Development Investment Program

Transcription

1 Multitranche Financing Facility Administration Memorandum MFF Number: 0026 Project Numbers: Grant 0134, JFPR 9128 (Tranche 1), Grant 0184 (Tranche 2) June 2010 Afghanistan: Multitranche Financing Facility for Energy Sector Development Investment Program

2 CONTENTS Page MAIN TEXT A. Introduction... 1 B. Purpose of the Facility Administration Memorandum (FAM)... 1 C. Key Persons Involved in the MFF... 2 D. Processing History...2 ANNEX 1: MFF DESCRIPTION 4 A. Impact and Outcomes... 4 B. Outputs... 4 ANNEX 2: MFF PROGRAM AND PROJECT MANAGEMENT 6 A. Sponsors, Stakeholders and External Agencies... 6 B. Project Organization Structure... 6 C. Roles and Responsibilities... 9 ANNEX 3: PROCUREMENT PLAN 11 A. Advance Contracting and Retroactive Financing B. Procurement Plans C. National Competitive Bidding (NCB) D. Procurement and Recruitment Activities and Timeframe ANNEX 4: SAFEGUARD PLAN 21 A. Safeguards for MFF B. Tranche-Specific Requirements ANNEX 5: FINANCING PLAN 26 A. MFF Financing Plan B. Tranche 1 Financing Plan C. Tranche 2 Financing Plan ANNEX 6: INVESTMENT (COST) PLAN 31 A. Tranche B. Tranche ANNEX 7: EXECUTION PLAN 35 A. Activities by Responsibility B. Gantt Chart MFF C. Gantt Chart Tranche D. Gantt Chart Tranche E. Implementation Schedule ANNEX 8: PERFORMANCE MONITORING AND EVALUATION 45 A. Tranche 1 Grant B. Tranche 1 JFPR C. Tranche 2 Grant D. Progress Reports ANNEX 9: MAJOR COVENANTS 54 A. MFF B. Tranche C. Tranche ANNEX 10: REFERENCES AND FORMATS 60 A. References B. Format of Annual Report on the Investment Program C. Format of Project Safeguard Compliance Report D. Format of Project Quarterly Progress Report E. Suggested Format of Project Completion Report F. Format of Implementation Completion Memorandum for Tranche 1 JFPR ANNEX 11: CHANGES IN SCOPE AND IMPLEMENTATION ARRANGEMENTS 71 A. Tranche B. Tranche

3 MAIN TEXT A. Introduction 1. The Government of the Islamic Republic of Afghanistan (the Government) has entered into a Framework Financing Agreement (FFA) with the Asian Development Bank (ADB) for up to $570 million to finance the Energy Sector Development Investment Program on 22 October ADB's Board of Directors approved a multitranche financing facility (MFF 0026-AFG) on 28 November 2008 to finance the Investment Program Tranche 1 comprises grants for $164 million from the ADB's Special Funds for MFF 0026 Project 1 (Grant 0134) and $12 million from the Japan Fund for Poverty Reduction (JFPR) for developing mini hydropower plants in Badakhshan and Bamyan provinces (JFPR 9128). 2 The projects will improve power transmission and distribution infrastructure by rehabilitating, augmenting and expanding primary high- and low-voltage transmission networks, and promote rural electrification and renewable energy development. 3. Tranche 2 is a grant for $81.5 million from the ADB's Special Funds for MFF 0026 Project 2 (Grant 0184). The project will rehabilitate and expand the distribution network of southwest Kabul, and develop a transmission line and substation in Kabul Municipality. B. Purpose of the Facility Administration Memorandum (FAM) 4. Following the FFA between the Government and ADB, this Multitranche Financing Facility Administration Memorandum (FAM) was developed to help the executing and implementing agencies and ADB monitor MFF implementation, including the individual tranches, 3 and evaluate its performance. 5. Procurement, safeguards, and financing plans are summarized in the Annexes. References to the relevant ADB policies and procedures and FFA and tranche covenants are in Annex 10 Appendix A. The FAM is an active document, progressively updated and revised as necessary, particularly following any changes in project or program costs, scope, or implementation arrangements. This document may not reflect the latest project or program changes. 1 ADB Report and Recommendation of the President to the Board of Directors for a Proposed Multitranche Financing Facility and Administration of Grant Energy Sector Development Investment Program. Manila. An additional $12 million in grant funds from the Japan Fund for Poverty Reduction cofinances Tranche 1. 2 Summary in Appendix 8 of MFF 0026 RRP (footnote 1). See also: ADB Grant Assistance Report on Proposed Grant Assistance to the Islamic Republic of Afghanistan: Development of Mini Hydropower Plants in Badakhshan and Bamyan Provinces (Financed by the Japan Fund for Poverty Reduction). Manila. 3 A Grant Implementation Manual is typically prepared for JFPR projects. However, as it is part of MFF 0026, JFPR 9128 is covered in this FAM under the sections on Tranche 1.

4 2 C. Key Persons Involved in the MFF ADB MFF Tranche 1 JFPR and Tranche 2 Asad Aleem, Energy Specialist, Keiju Mitsuhashi, Energy AFRM Specialist, CWEN Juan Miranda, Director General, Central and West Asia Department Pil-Bae Song, Director, Energy and Natural Resources Division, Central and West Asia Department (CWEN) Craig Steffensen, Country Director, Afghanistan Resident Mission (AFRM) Binsar Tambunan, Head, Project Administration Unit, CWEN Abdul Hameed Quraishi, Project Implementation Officer, AFRM Sulaiman Edrissy, Assistant Project Analyst, AFRM Mary Rose Favis, Assistant Project Analyst, CWEN Executing Agencies MFF Tranche 1 and JFPR Tranche 2 Omar Zakhilwal, Minister, Ministry of Finance (MOF) Jalil P. Shams, Chief Executive Officer, DABS Jalil P. Shams, Chief Executive Officer, DABS Jalil P. Shams, Da Afghanistan Breshna Sherkat (DABS) Wahidullah Shahrani, Minister, Ministry of Mines D. Processing History MFF 0026-AFG, Tranche 1 (Grant 0134-AFG) and JFPR 9128-AFG Milestone Date Project/program preparatory technical assistance approval 9 Jun 2008 Fact-finding 22 May 5 Jun 2008 Management review meeting 23 Jul 2008 Appraisal mission 5 13 August 2008 Staff review committee meeting 26 Sep 2008 Grant negotiations/ffa signing 22 Oct 2008 Board circulation 7 Nov 2008 Board consideration and approval of MFF and JFPR administration 28 Nov 2008 Management approval of Tranche 1 1 Dec 2008 Signing of grant agreements 1 Feb 2009 Signing of Subsidiary Loan Agreement between MOF and DABS 16 May 2009 Grant effectiveness 1 Feb 2009 (JFPR 9128), 26 May 2009 (Grant 0134)

5 3 Tranche 2 (Grant 0184-AFG) Milestone Tranche 2 Project/program preparatory technical assistance approval 27 May 2009 Fact-finding Sep 2009 Grant negotiations 12 November 2009 Board circulation 23 November 2009 Board consideration and approval 3 December 2009 Signing of grant agreements 21 January 2010 Grant effectiveness 22 February 2010 Signing of Subsidiary Loan Agreement between MOF and DABS

6 4 ANNEX 1: MFF DESCRIPTION A. Impact and Outcomes 1. Impact of MFF 6. The expected impact of the Investment Program will be a larger and more cost-effective power supply to all consumers, resulting in sustainable economic development. 2. Outcome of MFF 7. The expected outcome of the Investment Program is the (i) improved power supply in northern and eastern Afghanistan, Kabul, and areas south of Kabul, and (ii) greater institutional capacity within DABS, i.e., management information system (MIS), metering, billing, collection, operation and maintenance (O&M) capabilities, and project management. B. Outputs 1. Tranche 1 including JFPR Tranche 1 Project 1. NEPS 220 kv Transmission Line: Kunduz Taloqan 2. NEPS Distribution Network: Kunduz, Baghlan Description The project entails the construction of a double-circuit (single circuit stringing), 220 kv transmission line, about 67 kilometers in length, linking the cities of Kunduz and Taloqan. The construction of the grid substation at Taloqan is included in an ongoing project funded by ADB (Loan 2165-AFG). Kunduz: The project comprises the development and reconstruction of the 20 kv network and rehabilitation of low-voltage networks. Beneficiaries include 37,000 households, 2,000 small businesses and commercial enterprises, and about 135 government or public institutions, such as offices, mosques, schools, and dispensaries. In addition, several large- or medium-scale industries are operating in Kunduz. Baghlan: The project comprises development and reconstruction of the 20 kv network and rehabilitation of low-voltage networks. Beneficiaries include 22,000 households and about 1,500 small businesses. The construction of grid substations for both cities is cofinanced by the Islamic Development Bank for an ongoing ADB project (Loan 2304-AFG). 3. NEPS 220 kv System Operation and Maintenance The project is a consulting service to assist with the maintenance of the newly constructed 220 kv NEPS as Afghanistan Electricity Corporation does not have the technical capacity to maintain such a system. The contract period will be 3 years, during which DABS will undergo intensive training to enhance its capacity to independently operate the system by the end of the contract period. The contract will include an option for a 2-year extension in case the required capacity is not obtained in the initial contract period. The consulting service also includes identification and procurement of the required tools and spare parts for the maintenance of the 220 kv NEPS, including emergency restoration systems.

7 5 Tranche 1 Project 4. Baharak Small Hydropower Plant and Mini- Grid 5. Sheberghan Gas Fields Rehabilitation Description The project entails the development of a run-of-river small hydropower plant of 2.1 MW on the Warduj River near the city of Baharak in Badakhshan Province. The project includes the development of a mini-grid to serve about 7,500 customers in Baharak and Jurm districts who are not expected to be supplied by the NEPS in the foreseeable future. The project was prepared through ADB technical assistance TA 4662-AFG). The project will rehabilitate the dilapidated gas wells to enable extraction of domestic gas to power future gas-fired power generation that will connect to the NEPS system at Sheberghan. Ministry of Mines (MOM) is the executing agency. 6. Program Management Recognizing the weak project management capacity of executing agencies, consultants will be recruited to support a program management office (PMO). A management information system will be established in the PMO to improve efficiency, accuracy, and transparency 7. Preparation of Tranches 3 and 4 JFPR Project 1. Mini Hydropower Stations in Bamyan and Badakhshan Provinces The PMO will have a special due diligence team supported by consultants to prepare due diligence work in support of projects evaluated for subsequent tranches. Description The project entails the development of up to four mini hydropower plants through cofinancing by Japan Fund for Poverty Reduction (JFPR). The project will serve remote district centers in Badakhshan and Bamyan provinces, which are not expected to be supplied by the NEPS in the foreseeable future. The aggregate installed capacity will be about 2 MW. 2. Tranche 2 Tranche 2 Project 1. Kabul distribution and transmission system rehabilitation and expansion Description The project comprises: (i) 30 km of double circuit 220 kv transmission line from existing Chimtala substation to the new Kabul Southwest Substation; (ii) development of Kabul Southwest Substation (220/110/20 kv); (iii) rehabilitation and expansion of the distribution system of southwest Kabul including 65 km of medium voltage (20 kv) lines and 500 km of low voltage (0.4 kv) lines; and (vi) supply of 100 distribution transformers for the Kabul distribution network. 2. Program Management The component will supplement the needs of the Program Management Office through additional consultants' inputs for Tranche 2 implementation. 3. DABS Management assistance 4. Assistance for distribution planning 5. Assistance for the establishment of a revolving fund Consultants will be recruited to assist DABS to facilitate its operationalization following the transfer of staff and assets from the Afghanistan Electricity Authority (Da Afghanistan Breshna Moassassa; DABM). Consultants will be recruited to build DABS' capacity on distribution planning using a planning software to be procured under this component. Consultants will be recruited to assist DABS and MEW to devise a mechanism for the Government to efficiently use the repayment from DABS. The revolving fund is expected to finance needs of the energy sector such as system expansion, rural electrification, and targeted tariff subsidies for the poor and vulnerable.

8 6 ANNEX 2: MFF PROGRAM AND PROJECT MANAGEMENT A. Sponsors, Stakeholders and External Agencies Institution Name Ministry of Finance (MOF; the Recipient) Da Afghanistan Breshna Sherkat (DABS) Sponsor X Stakeholder Primary Secondary X Remarks Responsible for overall implementation of MFF except for project where MOM is the executing agency. Ministry of Mines (MOM) X Responsible for Sheberghan Gas Field Rehabilitation project in Tranche 1. Ministry of Energy and Water (MEW) Asian Development Bank (ADB) X X Responsible for energy sector issues and support to JFPR project. B. Project Organization Structure 1. Project Organization Structure Asian Development Bank (ADB) Ministry of Finance (MOF) Ministry of Energy and Water (MEW) Advice on sector issues Da Afghanistan Breshna Sherkat (DABS) (Executing Agency for all Tranches including JFPR) Ministry of Mines (MOM) (Executing Agency for Sheberghan Gas Field Rehabilitation Project in Tranche 1) Advice on JFPR implementation Program Management Office (PMO) Coordinate <Legend> Sponsor Stakeholder Primary Stakeholder Secondary

9 2. Program Management Office (PMO) Organization Chart DABS ADB (HQ/AFRM) Afghanistan MOF Afghanistan MOM PMO(D) External Auditor DABS CEO PMO(M) Coordination PMO(D) Management of DABS Due Diligence Technical Legal Finance & Administration Safeguard and Gender Communications Evaluation/ Monitoring/ Reporting/MIS Capacity Building/ Training Design Supervision Audit Controller Safeguard Gender Procurement Contracts Environment Social Results Measurement External Monitor External Monitor/Local ADB = Asian Development Bank, AFRM = ADB Afghanistan Resident Mission, CEO = chief executive officer; DABS = Afghanistan Electricity Corporation, HQ = ADB Headquarters, MIS = management information system, MOF = Ministry of Finance, MOM = Ministry of Mines, PMO = Project Management Office; PMO(D) = DABS component of PMO; PMO(M) = MOM component of PMO.

10 8 MOM ADB (HQ/AFRM) Afghanistan MOF DABS External Auditor Afghanistan MOM Minister of Mines PMO(D) PMO(M) Coordination PMO(M) DIRECTOR/ Design Technical Engineer Legal MIS Safeguard Finance & Administration / Accountant Results Measurement External Monitor/Local External Monitor ADB = Asian Development Bank, AFRM = ADB Afghanistan Resident Mission, CEO = chief executive officer; DABS = Afghanistan Electricity Corporation, HQ = ADB Headquarters, MIS = management information system, MOF = Ministry of Finance, MOM = Ministry of Mines, PMO = Project Management Office; PMO(D) = DABS component of PMO; PMO(M) = MOM component of PMO.

11 9 C. Roles and Responsibilities 1. Strategic and Overall Management 8. The MFF sponsors (see Annex 2.A) provide strategic direction and resources, as agreed, and review progress. They also ensure that the MFF complies with the statutory requirements, and ADB's policies and procedures, including on anticorruption. 2. Operational Level Program Management Office (PMO) 9. DABS is responsible for overall MFF implementation, including the projects under the individual tranches and JFPR (except for the Sheberghan Gas Field Rehabilitation Project under Tranche 1 which has the Ministry of Mines as EA), and monitors progress based on the Design and Monitoring Frameworks (Chapter II.B). 10. The program management office (PMO) in DABS manages day-to-day implementation of all projects, including due diligence for new transactions under the MFF. The PMO is supported by a team of consultants. The team leader of the consultants will assume the position of PMO Deputy Director. 11. The Ministry of Mines will second staff to the PMO for the implementation of the Sheberghan Gas Field Rehabilitation Project under Tranche The institutional structure of the PMO is provided in the previous page. The responsibilities of each team within the PMO are outlined below. Each team will be supported by one or more international and national consultants. Unit PMO Director Technical team Legal team Finance and Administration Team Responsibility The PMO Director is a senior management staff of DABS who is responsible for the overall performance of the PMO. S/he is engaged for at least 5 years without interference from the Government. The Director will supervise the day-to-day implementation of the projects and report directly to the Chief Executive Officer (CEO) of DABS. S/he will also be the point of contact with MOF and ADB. The technical team handles all operational and technical matters during implementation including design, procurement, supervision, commissioning. The team will be supported by the engineers of the consultants. The technical team will also be responsible for the technical due diligence of projects to be included in the subsequent tranches. The legal team provides fiduciary oversight to ensure project implementation adheres to the laws and regulations of Afghanistan, as well as with the policies and guidelines of ADB. The legal team will also monitor compliance with FFA undertakings and grant covenants. The legal team will also assist with the legal aspects of procurement. The finance and administration team handles administration, including withdrawal applications, bank accounts, and payment instructions.

12 10 Unit Safeguards and Gender Mainstreaming Team Due Diligence Team Evaluation/ Monitoring/ Reporting/MIS Team Communications Team Capacity Building Team Responsibility The team will work with the Evaluation/ Monitoring/ Reporting/MIS Team to prepare and update the MIS in financial management and administration. The team is also responsible for the financial and economic due diligence of projects to be included in the subsequent tranches. The team will prepare/review environmental and social safeguard documents and ensure that project implementation adheres to the safeguard policies of the Government and ADB. The team will be responsible for hiring an external monitoring agency which will monitor the contractor's compliance with the environmental monitoring and management plans (EMMPs) and land acquisition and resettlement plans (LARPs), and issue no-objection certificates for civil works to be commence. The team is also responsible for the safeguard due diligence of the projects to be included in the subsequent tranches. The team will ensure that there are no gender segregation in terms of supply of services and job opportunities. The team prepares new projects to be included in subsequent tranches. The team consists of staff from technical, legal, finance and administration, and safeguards teams. The team is responsible to establish a Project Performance Monitoring System (PPMS) for the MFF/tranche, collect baseline data, and update periodically. The team measures the results of ADB projects using a methodology consistent with the Design and Monitoring Framework of the MFF/tranche. The team will also be responsible for establishing the MIS, as well as preparing reports as required by the Government and ADB. The team establishes a strategy and action plan, and communicates regularly with the public on actions and successes. The capacity building team coordinates staff training on (i) planning and project management, (ii) financial management, (iii) policy refinements, and (iv) business operations (including commercial and operational assistance).

13 11 ANNEX 3: PROCUREMENT PLAN 13. Procurement of works and goods to be financed under the MFF will be implemented following ADB s Procurement Guidelines (2007, as amended from time to time). Consultants will be selected and engaged following ADB's Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers (2007, as amended from time to time). A. Advance Contracting and Retroactive Financing 14. ADB has approved advance contracting and retroactive financing as requested by the Government. For expenses incurred before tranche effectiveness to be eligible for retroactive financing, procurement and recruitment procedures must be fully compliant with ADB's guidelines. At effectiveness, up to 20% of such tranche proceeds may be used to retroactively finance eligible expenditures incurred during the period not exceeding 12 months prior to signing of the financing agreement. Alternatively, the Government may also opt for advance contracting without retroactive financing, in which case, the procurement procedures completed under advance contracting do not conclude with the contract award until after the tranche becomes effective. Approval of advance contracting and retroactive financing does not commit ADB to finance any of the proposed projects. B. Procurement Plans 15. Each project approved under the individual tranches has its own procurement plan. Project procurement plans are on ADB's website, The plans are updated at least annually covering the next 18 months (see Annex 8). The procurement plans of Tranche 1 and Tranche 2 as of date are attached as Appendixes A3-A and A3-B, respectively. 16. Procurement plan for the JFPR is included in that for Tranche 1. C. National Competitive Bidding (NCB) 17. National competitive bidding (NCB) is the competitive bidding procedure normally used for public procurement in the country of the borrower, and may be the most appropriate way of procuring goods or works which, by their nature or scope, are unlikely to attract foreign competition. To be acceptable for use in ADB-financed procurement, these procedures shall be reviewed and modified as necessary to assure economy, efficiency, transparency, and broad consistency with the provisions included in ADB's Procurement Guidelines. Details of modification required for NCB in Afghanistan are presented in Appendix A3-C. D. Procurement and Recruitment Activities and Timeframe 18. Tables below outline the steps involved in procurement of goods and works, and recruitment of consultants, and the number of days typically required.

14 12 1. International Competitive Bidding (ICB) Single Stage One Envelope 2. Consultant Recruitment Quality and Cost Based Selection

15 13 Appendix A3-A: Tranche 1 Procurement Plan MFF0026-AFG: Energy Sector Development Investment Program Project 1 Amount: $164 million Date of first Procurement Plan for MFF 0026: 17 October 2008 Grant Number: (Grant 0134-AFG) Executing Agency: Afghanistan Electricity Corporation (DABS) and Ministry of Mines (MOM) Date of this Procurement Plan: 6 April 2009 Section 1. Process Thresholds, Review, and 18-Month Procurement Plan A. Project Procurement Threshold 1. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works. Procurement of Goods and Works Method Threshold International Competitive Bidding for Works Greater than $2,000,000 International Competitive Bidding for Goods Greater than $500,000 National Competitive Bidding for Works Beneath that stated for ICB, Works National Competitive Bidding for Goods Beneath that stated for ICB, Goods Shopping for Works Less than or equal to $100,000 Shopping for Goods Less than or equal to $100,000 B. ADB Prior or Post Review 2. 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 International Competitive Bidding for Works, Goods Prior Limited International Bidding for Works, Goods Prior National Competitive Bidding for Works, Goods First use, Prior Shopping for Works, Goods Post Direct Contracting Prior Recruitment of Consulting Firms Quality- and Cost-Based Selection Prior Quality-Based Selection Prior Other selection methods: Consultants Qualifications, Least-Cost Prior Selection, Fixed Budget, and Single Source Recruitment of Individual Consultants Procurement for recruitment of individual consultants Prior C. Goods and Works Contracts Estimated to Cost More Than $1 Million 3. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description 220 kv Transmission Line between Kunduz and Taloqan Contract Value ($ million) Procurement Method Prequalification of Bidders Advertisement Date (quarter/ year) 20.0 ICB Yes Q Comments

16 14 General Description Contract Value ($ million) Procurement Method Prequalification of Bidders Advertisement Date (quarter/ year) Distribution Network Baghlan and Kunduz 22.2 ICB Yes Q Baharak Civil Works 2.0 NCB No Q Hydropower Plant and Mini-Grid Electromechanical Equipment 3.0 ICB No Q Development Mini Grid 9.0 NCB No Q NEPS 200 kv Transmission System Purchase of Equipment and Spare Parts 19.0 ICB No Q Comments Gas Production Rehabilitation 21.8 LIB No Q $ = United States Dollar, AFG = Afghanistan, ICB = international competitive bidding, kv = kilovolt, LIB = limited international bidding, NCB = national competitive bidding, NEPS = North East Power System, Q = quarter, USAID = United States Agency for International Development. Note: Domestic preference is not applicable for any of the contract packages. 4. Consulting Services Contracts Estimated to Cost More Than $100, The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description Contract Value ($ million) Recruitment Method Advertisement Date (quarter/ year) Individual 0.5 EA may recruit in Consultants (cumulative) accordance with ADB procedures or Government procedures acceptable to ADB. ADB = Asian Development Bank, EA = executing agency. International or National Assignment International Comments 5. Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100, The following table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description Value of Contracts ($, cumulative ) Number of Contracts Procurement and/or Recruitment Method Comments External Monitoring Agency 80,000 4 LCS (BTP) Indicative External Auditor 50,000 5 LCS (BTP) Indicative BTP = biodata technical proposal, LCS = least-cost selection. Section 2: Indicative List of Packages Required Under the Project 5. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of Project 1. Contracts financed by the Recipient and others should also be indicated, with an appropriate notation in the Comments section.

17 15 Project kv Transmission Line between Kunduz and Taloqan 2 Distribution Network Baghlan 3 Distribution Network Kunduz 4 Baharak Hydropower Plant and Mini Grid Development Contract Type Procurement/ Recruitment Mode Estimated Value ($ million) Turnkey ICB with PQ 20.0 Turnkey ICB with PQ 22.2 Civil Works Works NCB 2.0 Electromechanical Equipment Plant ICB 3.0 Mini-Grid Plant NCB 9.0 Remarks Contracts 1, 2 and 3 maybe prepared as one package to reduce contract value. 5 NEPS 220 kv Transmission System O&M MTA Contract 6 Gas Production Rehabilitation Purchase of Equipment and Spare Parts O&M MTA Gas Field Rehabilitation Implementation Consultants Goods ICB 19.0 Consulting Services QBS (FTP) 9.0 Turnkey LIB 21.8 Consulting Services SSS (STP) 1.2 As O&M MTA of 220 kv is a highly specialized expertise, QBS is adopted, as limited offers of such service are available. Specialized scope of works with little interest in AFG by competitive bidders as shown by failed bids under Loan 1997-AFG and significant delays experienced by USAID. 7 Program Management and Implementation of Tranche 1 Projects (project nos. 1-4) 8 Project Preparation of Tranche 2 Projects Consulting Services Consulting Services QBS (FTP) 12.5 QBS (FTP) External Monitoring Agency Consulting Services LCS (BTP) External Auditor Consulting Services LCS (BTP) Individual Consultants Consulting Services EA may recruit in accordance with ADB procedures or Government procedures acceptable to ADB. 0.5 (cumulative) ADB = Asian Development Bank, AFG = Afghanistan, BTP = biodata technical proposal, EA = executing agency, ICB = international competitive bidding, kv = kilovolt, LCS = least-cost selection, LIB = limited international bidding, MTA = management and technical assistance, NCB = national competitive bidding, NEPS = North East Power System, O&M = operation and maintenance, PQ = prequalification, QBS = quality-based selection, SSS = singlesource selection, USAID = United Sates Agency for International Development. Note 1: Domestic preference is not applicable for any of the contract packages. Note 2: International and national assignments for all consulting services packages.

18 16 Appendix A3-B: Tranche 2 Procurement Plan MFF 0026-AFG: Energy Sector Development Program, Project 2 Amount: MFF $582 million (including JFPR) Project 2: $81.5 million Date of first Procurement Plan: November 2009 Grant Number: G0184 Executing Agency: Da Afghanistan Breshna Sherkat (DABS) Date of this Procurement Plan: Section 1. Process Thresholds, Review, and 18 Month Procurement Plan A. Project Procurement Thresholds 1. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works. Procurement of Goods and Works Method Threshold International Competitive Bidding for Works > US$ 2,000,000 International Competitive Bidding for Goods > US$ 500,000 National Competitive Bidding for Works Beneath that stated for ICB National Competitive Bidding for Goods Beneath that stated for ICB Shopping for Works </= US$ 100,000 Shopping for Goods </= US$ 100,000 B. ADB Prior or Post Review 2. 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 of Goods and Works Procurement Method Prior or Post Comments ICB Works Prior ICB Goods Prior NCB Works First use, Prior NCB Goods First use, Prior Shopping for Works Post Shopping for Goods Post Direct Contracting Prior Recruitment of Consulting Firms Quality and Cost Based Selection (QCBS) Quality Based Selection (QBS) Other selection methods: Consultants Qualifications (CQS), Least Cost Selection (LCS), Fixed Budget (FBS), and Single Source (SSS) Prior Prior Prior Recruitment of Individual Consultants Individual Consultants Prior CQS = consultants qualification selection; FBS = fixed budget selection; ICB = international competitive bidding; LCS = least-cost selection; NCB = national competitive bidding; QBS = quality-based selection; QCBS = qualityand cost-based selection; SSS = single source selection. C. Goods and Works Contracts Estimated to Cost More Than US$ 1 Million 3. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

19 17 General Description 220 kv Transmission Line (Chimtala S/S to South West S/S) 220 kv Kabul South West S/S Distribution Network Rehabilitation and Expansion Supply of 15/20 kv Dual Voltage Transformers, Oil Treatment Plant and Thermal Monitoring Contract Value ($ million) Procurement Method Prequalification Of Bidders (y/n) Advertisement Date (quarter/year) Comments 13.8 ICB No Q4/2010 Turnkey 16.5 ICB No Q4/2010 Turnkey 15.0 ICB No Q4/2010 Turnkey 2.5 ICB No Q2/2010 Device Note 1: Domestic preference is not applicable for any of the contract packages. Note 2: Contract values excluding contingencies. ICB = international competitive bidding; kv = kilovolts; Q = quarter; S/S = substation. D. Consulting Services Contracts Estimated to Cost More Than US$ 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 Program Management and Tranche 2 Implementation Supervision Consultants DABS Management Assistance Establishing of the Revolving Fund Distribution Contract Value ($ million) Recruitment Method 2.3 SSS (BTP) 4.5 QBS (FTP) Advertisement Date (quarter/ year) International or National Assignment Q4/2009 International and National Q4/2009 International Comments A firm has been recruited as the Program Management and Project Implementation Consultant under Tranche 1. SSS of the firm is proposed because: (i) Tranche 2 is a natural continuation Tranche 1, (ii) the firm is already mobilized and has experience, (iii) the firm's performance is satisfactory, and (iv) it is judged to be the most qualified and economical. 0.2 QBS (BTP) Q2/2010 International and National 0.7 QBS Q1/2010 International Planning (STP) and National Note: Contract values excluding contingencies. BTP = biodata technical proposal; Q = quarter; QBS = quality-based selection; SSS = single source selection; STP = simplified technical proposal E. Goods and Works Contracts Estimated to Cost Less than US$ 1 Million and Consulting Services Contracts Less than US$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.

20 18 General Value of Contracts Number of Procurement / Comments Description (cumulative ) Contracts Recruitment Method External Monitoring 50,000 1 LCS (BTP) Indicative Agency External Auditor 50,000 1 LCS (BTP) Indicative Individual Consultant 100,000 5 QBS (BTP) or in accordance to government procedures acceptable to ADB Indicative ADB = Asian Development Bank; BTP = biodata technical proposal; LCS = least cost selection; QBS = quality-based selection. Section 2: Indicative List of Packages Required Under the Project 6. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of Tranche 2. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the Comments section. 1 Subproject 220 kv Transmission Line (Chimtala S/S to South West S/S) Indicative Procurement Packages Contract Procurement Type Mode Turnkey ICB kv Kabul South West S/S Turnkey ICB Distribution Network Rehabilitation and Expansion Turnkey ICB 15.0 Estimated Value ($ million) Remarks Packages 1-3 may be combined into one or two package if judged to be more economical and efficient. 4 Supply of 15/20 kv Dual Voltage Transformers, Oil Treatment Plant and Thermal Monitoring Device Goods ICB Program Management and Tranche 2 Implementation Supervision Consultants Consulting Services SSS (BTP) 2.5 Reasons for SSS as above. 6 DABS Management Assistance 7 Establishment of Revolving Fund 8 Distribution Planning Consulting Services Consulting Services Consulting Services QBS (FTP) 5.0 QBS (BTP) 0.2 QBS (STP) External Monitoring Agency Consulting Services LCS (BTP) 0.05 Indicative 10 External Auditor Consulting Services LCS (BTP) 0.05 Indicative 11 Individual Consultant Consulting Services QBS (BTP) or in accordance to government procedures acceptable to ADB 0.1 Indicative ADB = Asian Development Bank; BTP = biodata technical proposal; ICB = international competitive bidding; LCS = least-cost selection; PQ=pre-qualification; QBS = quality-based selection; S/S = substation; SSS = single source selection; STP = simplified technical proposal. Note 1: Domestic preference is not applicable for any of the contract packages. Note 2: International and national assignments for all consulting services packages except 4. Note 3: Contract values excluding contingencies.

21 19 Appendix A3-C: National Competitive Bidding 1. General. National competitive bidding for the procurement of goods and related services shall conform to the provisions for Open Tender without prequalification as prescribed in the Procurement Law of October 2005 and elaborated in the Rules of Procedure for Public Procurement issued by the Ministry of Finance in April 2007, with the clarifications and modifications described in the following paragraphs required for compliance with the provisions of the ADB Procurement Guidelines. 2. Registration and other pre-bid requirements. Bidding shall not be restricted to Shortlists or Standing Lists. 3. No bid shall be declared as ineligible of the grounds of debarment without ADB s prior concurrence. 4. No bid shall be declared ineligible on the grounds of government regulations that restrict sources without ADB s prior concurrence. 5. Foreign suppliers and contractors from ADB member countries shall be allowed to bid, without registration, licensing, and other government authorizations. However, in case these foreign suppliers and contractors are declared winning bidders, the requirements may be completed after award and before signing of contract, without unreasonable costs or additional requirements. 6. Prequalification. Post qualification shall be used unless prequalification is explicitly provided for in the loan agreement/procurement plan. Irrespective of the procedure applied (whether prequalification or post qualification), no domestic or foreign contractor shall be precluded from participation. 7. If prequalification is undertaken, the prequalification criteria should include "Eligibility Requirements", "Financial Situation", "Pending Litigation", and "Experience". Technical Capacity (personnel and equipment) should not be part of the prequalification criteria. 8. Interested bidders shall be given a minimum period of 28 days for the preparation and submission of prequalification applications. 9. Advertising. Bidding of NCB contracts estimated at $500,000 or more for goods and related services and NCB contracts estimated at $1,000,000 or more for works shall be advertised on ADB s website via the posting of the Procurement Plan. 10. Bidding documents. Procuring entities shall use standard bidding documents acceptable to ADB, based ideally on the standard bidding documents issued by ADB. 11. Bidding period. Procuring entities shall allow for a minimum of four weeks for submission of bids. 12. Bid security. Where required, bid security shall be in the form of a bank guarantee or check from a reputable bank and should not be more than two percent of the estimated value of contract to be procured.

22 Preferences. No preference of any kind shall be given shall be given to domestic bidders or for domestically manufactured goods. 14. Evaluation. No bid shall be rejected on the grounds of price, or for any other reason(s) not related to the evaluation and qualification criteria, without ADB s prior concurrence. 15. Prompt payment discounts offered by bidders shall not be considered in bid evaluation. 16. Price Negotiations. Price negotiation shall be allowed only after receiving ADB s prior concurrence. 17. Advance payments. No advance payment shall be made without an advance payment security in the form of a bank guarantee or check from a reputable bank. 18. Government-owned enterprises. Government-owned enterprises in Afghanistan shall be eligible to participate only if they can establish that they are legally and financially autonomous, operate under commercial law, and are not a dependent agency of the procuring entity, or the Project Executing Agency, or the Implementing Agency. 19. Right to inspect/audit. A provision shall be included in all NCB works and goods contracts financed by the Bank (ADB) requiring suppliers and contractors to permit ADB to inspect their accounts and records and other documents relating to the bid submission and the performance of the contract, and to have them audited by auditors appointed by ADB. 20. Anti-corruption policy. The Borrower shall reject a proposal for award if it determines that the bidder recommended for award has, directly or through an agent, engaged in corrupt, fraudulent, collusive, or coercive practices in competing for the contract in question. 21. ADB will declare a firm or individual ineligible, either indefinitely or for a stated period, to be awarded a contract financed by ADB, if it at any time determines that the firm or individual has, directly or through an agent, engaged in corrupt, fraudulent, collusive, or coercive practices in competing for, or in executing, ADB-financed contract, as indicated in paragraph 1.14 (a) of ADB's Procurement Guidelines. 22. Disclosure of decision on contract awards. At the same time that notification of award of Contract is given to the successful bidder, the results of bid evaluation shall be published in a local newspaper, or well-known freely accessible website identifying the bid and lot numbers and providing information on (i) name of each bidder who submitted a Bid, (ii) bid prices as read out at bid opening, (iii) name of bidders whose bids were rejected and the reasons for their rejection, and (iv) name of the winning bidder, and the price it offered, as well as duration and summary scope of the contract awarded. The executing agency/implementing agency/contracting authority shall respond in writing to unsuccessful bidders who seek explanations on the grounds on which their bids are not selected. 23. Member Country Restriction. Bidders must be nationals of member countries of ADB, and offered goods, works and related services must be produced in and supplied from member countries of ADB.

23 21 ANNEX 4: SAFEGUARD PLAN A. Safeguards for MFF 19. All tranches and projects under the MFF are implemented in accordance with ADB's safeguard policies and guidelines and the laws and regulations of Afghanistan. 20. They must also adhere to the Environmental Assessment and Review Framework (EARF) and the Land Acquisition and Resettlement Framework (LARF) prepared for the MFF. 21. Details of the safeguard requirements common to all tranches and projects under the MFF are described below. MFF Safeguard Document Environmental Assessment and Review Framework (EARF: Supplementary Appendix D of RRP) 1. Environmental Safeguards Categorization The majority of projects under the MFF are expected to be classified as category B. However, some projects could be classified differently over the MFF period. Tranche 1 and 2 projects have been subjected to detailed due diligence, and all involving physical investments were classified as Category B and IEEs have been prepared. Projects under subsequent tranches require further due diligence. Requirements for Subsequent Projects During Preparation During Implementation Each project has individual Contractors update IEEs for safeguard documents. projects with turnkey Environmental impacts contracts during detailed under all subsequent design stage. They are tranche projects are unable to start construction categorized through the until the IEE is approved by environmental ADB. For projects adopting categorization form and design-bid-build modality, the supported by rapid PMO updates IEEs during the environmental preconstruction phase. Civil assessments. Following works contractors are not ADB's environment policy, mobilized until the IEE is environmental impact approved by ADB. The examination reports are implementation consultants prepared for Category A monitor and implement the and B (sensitive) projects, EMMP attached to the IEEs, and IEE reports for and report to the PMO. An Category B projects. These external monitor performs reports are attached to the environmental audits twice a PFR. year and prepares safeguard compliance reports. EMMP = environmental monitoring and management plan, IEE = initial environmental examination, PFR = periodic financing request (para 26), PMO = project management office, RRP = Report and Recommendation of the President (footnote 1). 2. Involuntary Resettlement MFF Safeguard Document Land Acquisition and Resettlement Categorization Tranche 1 and 2 projects have been categorized as Requirements for Subsequent Projects During Preparation During Implementation LAR plans for the projects The PMO and contractors under subsequent tranches update LAR plans for projects are finalized once additional with turnkey contracts during

24 22 MFF Safeguard Document Framework (Supplementary Appendix E of RRP) Categorization Category B. Available information suggests similar LAR requirements for projects under subsequent tranches. Requirements for Subsequent Projects During Preparation During Implementation due diligence, and in relevant cases design work, is completed. Subsequent tranche projects are categorized through the involuntary resettlement categorization form. Following ADB's involuntary resettlement policy, Operations Manual, and involuntary resettlement handbook, LAR plans are prepared for Category A and B projects, and attached to the PFR. the detailed design stage. The contractors are unable to start construction until the LAR plan is fully implemented. For projects adopting the conventional design-bid-build modality, implementation consultants update the LAR plans during the preconstruction phase. Civil works contractors are not be mobilized until the LAR plan is fully implemented. The PMO monitors the LAR plans and reports to ADB. An external monitor issues a no-objection certificate for the start of civil works, and prepares safeguard compliance reports twice a year. LAR = land acquisition and resettlement, PFR = periodic financing request (para 26), PMO = project management office, RRP = Report and Recommendation of the President (footnote 1). MFF Safeguard Document Not applicable 3. Indigenous Peoples Categorization Tranche 1 and 2 projects have been classified as Category C. Most future tranche projects are expected to be classified the same. The project areas are inhabited by different ethnic groups. Their socioeconomic features and level of vulnerability do not fit ADB s definition of indigenous peoples. PFR = periodic financing request (para 26). 4. Gender Requirements for Subsequent Projects During Preparation During Implementation Subsequent tranche projects As required. are categorized through the indigenous peoples impact categorization form. Following ADB's indigenous peoples policy, indigenous peoples development plans and frameworks are prepared for Category A projects, and specific actions favorable to indigenous peoples for Category B projects. These plans are attached to the PFR. 22. EAs follow the principles of the ADB s gender and development policy during MFF implementation, including taking all necessary actions to encourage women living in the project areas to participate in planning and implementing project activities. They monitor each project's effects on women through, where relevant, gender-disaggregated data collected pursuant to the

25 23 monitoring and evaluation system referred to in the project performance monitoring system (see Chapter IX). 5. Sexually transmitted diseases and HIV/AIDS 23. Through coordination with relevant local authorities, EAs cause contractors to distribute information on the risks of sexually transmitted diseases to those employed during MFF implementation. 6. Women and child labor 24. EAs ensure that (i) there is no differential payment between men and women for work of equal value, and (ii) civil works contractors do not employ child labor in construction and maintenance activities following applicable laws, regulations and international conventions. B. Tranche-Specific Requirements 25. In addition to the common safeguard requirements, the following requirements must be adhered to for the implementation of individual tranches and projects. 1. Environmental Safeguards Tranche 1 Grant 0134 (Category B) Safeguard Due Diligence Required Action by PMO Subjected to detailed due diligence. IEEs /EMMPs to be translated and submitted to NEPA for IEE reports with EMMPs prepared for issuance of licenses/permits. Civil works shall not start until NEPS 220 kv Transmission Line appropriate licenses/permits have been obtained and (Kunduz-Taloqan) endorsed by ADB. NEPS Distribution Network (Kunduz EMA to be recruited to confirm to monitor implementation of and Baghlan) EMMPs and report to ADB and NEPA. Baharak Small Hydropower and PMO to monitor environmental impact following EMMPs. Mini-Grid Sheberghan Gas Fields Rehabilitation (Supp. Appendixes I- L of RRP) EMA = external monitoring agency; IEE = initial environmental examination, EMMP = environmental monitoring and management plan, NEPA = National Environmental Protection Agency; PMO = project management office, RRP = Report and Recommendation of the President (see footnote 1). Tranche 1 JFPR 9128 (Category B) Safeguard Due Diligence Subjected to detailed due diligence. IEE with EMMP for whole project prepared (Supplementary Appendix A of GAR). Required Action by PMO IEEs /EMMPs for each subproject to be prepared once sites are identified and designs are completed. IEEs/EMMPs to be prepared in accordance with EARF for ADB endorsement. IEEs /EMMPs to be translated and submitted to NEPA for issuance of licenses/permits. Civil works shall not start until

26 24 Safeguard Due Diligence Required Action by PMO appropriate licenses/permits have been obtained and endorsed by ADB. PMO to monitor environmental impact following EMMPs. EMA to be recruited to monitor implementation of EMMPs and report to ADB and NEPA. Reporting for JFPR to be made separately in accordance with JFPR Guidelines and GAR. EMA = external monitoring agency; IEE = initial environmental examination, EMMP = environmental monitoring and management plan, GAR = Grant Assistance Report (see footnote 2), NEPA = National Environmental Protection Agency; PMO = project management office, RRP = Report and Recommendation of the President (see footnote 1). Tranche 2 Grant 0184 (Category B) Safeguard Due Diligence Subjected to detailed due diligence. IEE reports with EMMPs prepared for Kabul Distribution and Transmission Rehabilitation and Expansion (Supp. Appendixes X of RRP) Required Action by PMO IEEs /EMMPs to be translated and submitted to NEPA for issuance of licenses/permits. Civil works shall not start until appropriate licenses/permits have been obtained and endorsed by ADB. PMO to monitor environmental impact following EMMPs. EMA to be recruited to monitor implementation of EMMPs and report to ADB and NEPA. EMA = external monitoring agency; IEE = initial environmental examination, EMMP = environmental monitoring and management plan, NEPA = National Environmental Protection Agency; PMO = project management office, RRP = Report and Recommendation of the President (see footnote 1). 2. Involuntary Resettlement Tranche 1 Grant 0134 (Category B) Safeguard Due Diligence Short LARPs prepared for NEPS 220 kv Transmission Line (Kunduz-Taloqan) NEPS Distribution Network (Kunduz and Baghlan) (Supp. Appendixes F and G of RRP) Other projects do not involve LAR. Required Action by PMO Short LARPs to be updated based on detailed design. Updating by contractor for turnkey contracts and by PMO for conventional design-bid-build contracts. Submission of LARPs for endorsement by ADB. EMA to be recruited to ensure that resettlement plan is fully implemented. External monitoring agency will issue NOCs. Civil works shall not start until NOCs are forwarded for endorsed by ADB. PMO to monitor social impact during project implementation. EMA to report social impact and report to ADB. EMA = external monitoring agency; LARP = land acquisition and resettlement; LARP = land acquisition and resettlement plan, NOC = no-objection certificate; PMO = project management office, RP = resettlement plan; RRP = Report and Recommendation of the President (see footnote 1). Tranche 1 JFPR 9128 (Category B) Safeguard Due Diligence LAR Framework included in MFF RRP. LARPs not prepared since specific sites have not been identified in the GAR. Required Action by PMO LARPs for each subproject to be prepared once sites are identified and designs are completed. Submission of LARPs for endorsement by ADB. EMA to be recruited to ensure that resettlement plan is fully implemented. External monitoring agency will issue NOCs. Civil works shall not start until NOCs are forwarded for endorsed by ADB.

27 25 Safeguard Due Diligence Required Action by PMO PMO to monitor social impact during project implementation. EMA to report social impact and report to ADB. Reporting for JFPR to be made separately in accordance with JFPR Guidelines and GAR. EMA = external monitoring agency; GAR = Grant Assistance Report; LARP = land acquisition and resettlement; LARP = land acquisition and resettlement plan, NOC = no-objection certificate; PMO = project management office, RP = resettlement plan; RRP = Report and Recommendation of the President (see footnote 1). Tranche 2 Grant 0184 (Category B) Safeguard Due Diligence Short LARP prepared for Kabul Distribution and Transmission Rehabilitation nad Expansion (Supp. Appendixes X of RRP) Required Action by PMO Short LARPs to be updated based on detailed design. Updating by contractor for turnkey contracts and by PMO for conventional design-bid-build contracts. Submission of LARPs for endorsement by ADB. EMA to be recruited to ensure that resettlement plan is fully implemented. External monitoring agency will issue NOCs. Civil works shall not start until NOCs are forwarded for endorsed by ADB. PMO to monitor social impact during project implementation. EMA to report social impact and report to ADB. EMA = external monitoring agency; LARP = land acquisition and resettlement; LARP = land acquisition and resettlement plan, NOC = no-objection certificate; PMO = project management office, RP = resettlement plan; RRP = Report and Recommendation of the President (see footnote 1).

28 26 ANNEX 5: FINANCING PLAN 26. General conditions applicable to the MFF are described in Section A, where as specific conditions relevant to each tranche are provided in Section B. A. MFF Financing Plan 1. Priority Investment Financing Plan ($ million) Source Priority Investments Share (%) ADB (including JFPR) Other Financiers 1, Total 2, Source: Afghanistan Electricity Corporation and Asian Development Bank estimates. 2. Financing Terms 27. The maximum financing amount available under the Facility is $570 million, provided in separate tranches in the form of grants and/or loans from ADB s Special Funds resources. 4 Tranches are provided in sequence or simultaneously. 28. Japan Fund for Poverty Reduction (JFPR) co-finances Tranche 1 with a $12 million grant. 29. The Government submits a periodic financing request (PFR) for each tranche to ADB for at least $50 million or its equivalent. ADB reviews the PFR(s) and, if found satisfactory, prepares the related legal agreements. The projects for which financing is requested under the PFR are subject to the selection criteria in the FFA, satisfactory due diligence, and relevant safeguards and fiduciary frameworks and other documents. Until notice is otherwise given by Afghanistan, MOF is the authorized representative for executing PFRs. 30. Each tranche may be financed under terms different from the financing terms of previous or subsequent tranches. The choice of financing terms depends on the project and ADB s financing policies prevailing at the time the tranche is documented in a legal agreement, and adherence to undertakings made in the FFA and individual tranche financing agreement covenants. Following ADB s policy on grant financing, 5 Tranches 1 and 2 are provided entirely as grants. Subsequent tranches are subject to general availability of ADB Special Funds, and Afghanistan s access to such resources following ADB s Graduation Policy and the ADF donors' requirement. 31. Advance contracting and retroactive finance are applicable to the MFF. 4 Tranche 1 also includes a grant of $12 million from the Japan Fund for Poverty Reduction (see footnote 1). 5 ADB Revising the Framework for Asian Development Fund (ADF) Grants. Manila.

29 27 3. Disbursement Arrangements 32. Disbursements follow ADB s Loan Disbursement Handbook. Direct payment procedures are generally used for large civil works, turnkey and consulting services contracts. Commitment procedures may be used for large turnkey, and supply and delivery contracts. Imprest fund procedure is used for other expenditures. Initial advance to be imprest account should not exceed the estimated eligible project expenditures for the next 6 months or $100,000 whichever is lower. Statement of Expenditures procedure will be used to reimburse eligible expenditures or to liquidate and replenish the imprest account for any individual payment less than $50,000. Commitment charges or guarantee fees are not payable on the MFF. 33. The last date for any disbursements under any tranche is 30 June The Government is expected to submit the last PFR no later than 31 December Fund Flow ADB (Financier) Direct Payment Procedure and Commitment Procedure Loan Agreement Afghanistan MOF (Recipient) Grant Agreement Grant Agreement Direct Payment Procedure and Commitment Procedure Repayment DABS (Borrower) MOM (Recipient) Contract Contract Contract Contract Contract Imprest Fund Procedure (Statement of Expenditure) Imprest Fund Procedure (Statement of Expenditure) DABS Imprest Account MOM Imprest Account Grant/Loan Agreement Fund Flow (major) Repayment Fund Flow (minor) ADB = Asian Development Bank; DABS = Da Afghanistan Breshna Sherkat (Afghanistan Electricity Corporation); MOF = Ministry of Finance; MOM = Ministry of Mines. Note: MOM involved only for Tranche 1.

30 28 5. Financial Accounting and Audit 34. The EAs will independently (i) maintain separate accounts for each of their projects under the MFF, (ii) have such accounts audited annually, in accordance with appropriate auditing standards applied by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB following its guidelines on Financial Management and Analysis of Projects (2007, as amended from time to time), and (iii) furnish certified copies of such audited project accounts, audited financial statements and the auditors opinion (including the separate opinions on the proper use of the grant proceeds, the imprest account and the statement of expenditure procedure, and compliance with the financial covenants of the grant agreement, and such other information concerning the audit requested to ADB) within 6 months from the end of each related fiscal year. The independent auditors will be engaged and financed by the Government or EAs. B. Tranche 1 Financing Plan 1. Financing Terms 35. Grant Following the Grant Agreement signed by ADB and MOF, $164 million is being provided entirely as a grant from ADB's Special Funds (para 2) for MFF 0026 Project 1. MOF is lending $138.6 million to DABS under a Subsidiary Loan Agreement, with a term of 32 years, 8-year grace period, interest rate of 1% per annum during the grace period and 1.5% per annum thereafter, and foreign exchange risk borne by DABS. The remaining $25.4 million will be used by MOM to implement the Sheberghan Gas Fields Rehabilitation Project. Other terms are in the Grant Agreement. 36. JFPR Following the Letter of Agreement signed by ADB, DABS and MOF, $12 million is being provided entirely as a grant from the JFPR to develop mini hydropower plants in Badakshan and Bamyan provinces (para 2). The Government is providing up to $1 million more for land acquisition, licensing, and other in-kind contributions. Communities are contributing about $500,000 for connection fees, house wiring, etc. 2. Disbursement Arrangements 37. Grant No disbursements will be requested or made after 30 June Funds for works could only be withdrawn after an updated land acquisition and resettlement plan for the subproject is approved by ADB and implemented in a manner satisfactory to ADB. As the EAs, DABS and MOM each have their own imprest account. 38. JFPR The last day for any disbursements by ADB is the expected project completion closing date [or four years from the date of the Letter of Agreement (1 February 2009)] plus six months 6, whichever is earlier, or such other date agreed upon by ADB. DABS has a separate imprest account for JFPR The six months represent the grace period during which time disbursements may be made for goods that have been delivered and services that have been completed before the closing date.

31 29 3. Allocation of Proceeds Grant 0134 Category Item Amount Allocated ($) 1 Turnkey 61,900,000 2 Civil Works 2,200,000 3 Goods 33,100,000 4 PMO Support 3,000,000 5 Consulting Services 25,200,000 6 Unallocated 38,600,000 Total 164,000,000 JFPR 9128 Category Item Amount Allocated ($) 1 Civil Works 3,948,000 2 Equipment and Supplies 2,686,000 3 Training, Workshops, Seminars and Public Campaigns 124,000 4 Consulting Services 3,512,000 5 Grant Management 530,000 6 Unallocated 1,200,000 Total 12,000,000 Percentage of Bank Financing 100% of expenditures claimed excluding local taxes and duties Percentage of Bank Financing 100% of expenditures claimed excluding local taxes and duties C. Tranche 2 Financing Plan 1. Financing Terms 39. Following the Grant Agreement signed by ADB and MOF, $81.5 million is being provided entirely as a grant from ADB's Special Funds (Grant 0184, para 3) for MFF 0026 Project 2. MOF is lending the entire amount to DABS under a Subsidiary Loan Agreement, with a term of 32 years, 8-year grace period, interest rate of 1% per annum during the grace period and 1.5% per annum thereafter, and foreign exchange risk borne by DABS. 2. Disbursement Arrangements 40. The last date for any disbursements by ADB is 30 June Funds for works could only be withdrawn after an updated land acquisition and resettlement plan for the subproject is approved by ADB and implemented in a manner satisfactory to ADB. DABS has a separate imprest account for Tranche 2.

32 30 3. Allocation of Proceeds Category Item Amount Allocated ($) 1 Equipment 35,595,000 2 Civil Works 21,754,000 3 Consulting Services 7,700,000 4 Land Acquisition and Compensation 600,000 5 Unallocated 15,851,000 Total 81,500,000 Percentage of Bank Financing 100% of expenditures claimed excluding local taxes and duties

33 31 ANNEX 6: INVESTMENT (COST) PLAN A. Tranche 1 1. Detailed Cost Estimate Projects and Components A. Base Costs ($ million) 1. Equipment and Materials 59.9 a NEPS Transmission Line Kunduz Taloqan 8.2 b NEPS Distribution Network: Kunduz 5.7 c NEPS Distribution Network: Baghlan 3.6 d Baharak Small Hydropower Plant and Mini-Grid 11.8 e NEPS 220 kv System Operation and Maintenance 21.3 f Sheberghan Gas Field Rehabilitation 6.6 g Development of Small Hydropower Plants in Badakhshan and Bamyan Provinces (JFPR) Civil Works and Erection 43.8 a NEPS Transmission Line Kunduz Taloqan 10.8 b NEPS Distribution Network: Kunduz 7.6 c NEPS Distribution Network: Baghlan 4.7 d Baharak Small Hydropower Plant and Mini-Grid 2.2 e NEPS 220 kv System Operation and Maintenance 0.0 f Sheberghan Gas Field Rehabilitation 14.6 g Development of Small Hydropower Plants in Badakhshan and Bamyan Provinces (JFPR) Consulting Services 28.9 a NEPS Transmission Line Kunduz Taloqan 2.3 b NEPS Distribution Network: Kunduz 1.2 c NEPS Distribution Network: Baghlan 0.8 d Baharak Small Hydropower Plant and Mini-Grid 3.3 e NEPS 220 kv System Operation and Maintenance 6.4 f Sheberghan Gas Field Rehabilitation 1.2 g Development of Small Hydropower Plants in Badakhshan and Bamyan Provinces (JFPR) 4.2 h Project Management 7.0 i Preparation of Subsequent Tranches 2.5 Total Total Base Costs (A) B. Contingencies 1. Price Contingencies Physical Contingencies 7.7 Total Contingencies (B) 21.6 C. Program Management Office Support 3.0 D. Tranche 1 Contingencies 18.7 Total Tranche 1 Cost Estimate kv = kilovolt, JFPR = Japan Fund for Poverty Reduction; NEPS = North East Power System. Note: 1. Base costs split is for information only since most contracts are to be turnkey contracts. 2. Excluding taxes and duties. Source: Asian Development Bank estimates.

34 32 2. Forecast of Cost to Complete Base Cost ($ million) Tranche 1 Projects Total I II I II I II I II I II I II Transmission Line Distribution Networks Small Hydropower Mini Hydropower Gas Field Rehabilitation Operation and Maintenance Consulting Services Total Note: Excluding recurrent costs, contingencies, interest during construction, taxes, and duties.

35 33 B. Tranche 2 1. Detailed Cost Estimate A. Base Cost ($ '000) ADB Amount 1 Equipment/materials 35, a. Transmission Line 9, b. Kabul Southwest Substation 11, c. Kabul Distribution Network 10, d. Distribution Components 2, Civil Works/Installation 21, a. Transmission Line 6, b. Kabul Southwest Substation 7, c. Kabul Distribution Network 7, d. Distribution Components Non-physical Component (Consulting Services) a. b. c. d. 7, Supervision Consultancy 2, DABS management assistance 4, Consultancy for revolved funds Distribution planning system Land Acquisition and Compensation a. Land acquisition & compensation TOTAL BASE COSTS 65, B. Physical Contingencies (10%) 6, TOTAL BASE COST INCLUDING PHYSICAL CONTINGENCIES 72, C. Price Contingencies 9, D. TOTAL (round-up) 81, DABS = Afghanistan Electricity Corporation, kv = kilovolt, OH = over head, VAT = value added tax Note: Project costs are by turnkey basis and split between Equipment/Materials and Civil Works/Installation is for information only. Excluding taxes and duties. Source: Asian Development Bank estimates.

36 34 2. Forecast of Cost to Complete Base Cost ($ million) Tranche 2 Projects I II I II I II I II Total Consulting Services T2 Implementation DABS Management Distribution Planning Revolving Fund Procurement Transmission Line Substation Distribution Network /20 kv Transformers Total Note: Excluding recurrent costs, contingencies, interest during construction, taxes, and duties.

37 35 ANNEX 7: EXECUTION PLAN A. Activities by Responsibility 1. Implementation Stage Major Activity Implementation MOF EA PMO Consultant Contractor External Agency 1 Finance, Administration and Reporting 1.1 Establishment of Program Management Office (PMO) X 1.2 Appointment of PMO Director X 1.3 Opening of imprest account X X X 1.4 Preparation of withdrawal applications X X 1.5 Submission of withdrawal applications X X 1.6 Onlending ADB grant proceeds to DABS X 1.7 Program/project accounting X X 1.8 Preparation of audit reports X X X X 1.9 Financial reporting to MOF and ADB X X X 1.10 Establish Project Performance Management System, baseline X X survey and reporting 1.11 Establish management information system (MIS) for MFF X X 1.12 Covenant compliance monitoring and reporting X X X 1.13 Preparation of progress reports X X 2 Consultant Recruitment 2.1 Preparation of Request for Proposals X 2.2 Technical and financial evaluations X 2.3 Contract negotiations X 2.4 Contract award X X 2.5 Supervision of consultants X X 3 Design, Procurement and Supervision 3.1 Establish MIS for each project X X 3.2 Outline design for turnkey contracts X X 3.3 Detailed design for design-bid-build (BDD) X X 3.4 Detailed design for turnkey contracts X 3.5 Preparation of bidding documents (BD) X X 3.6 Issuance of BDs and evaluation of bids X X 3.7 Contract negotiations 3.8 Contract award 3.9 Execution of works, delivery of supplies, etc X 3.10 Project supervision X X 4 Safeguards 4.1 Update initial environmental examinations (IEE) for BDD X X contracts 4.2 Update land acquisition and resettlement plans (LARP) for BDD contracts X X 4.3 Update initial environmental examinations (IEE) for turnkey X contracts 4.4 Update land acquisition and resettlement plans (LARP) for X turnkey contracts 4.5 Issue updated IEEs for licensing by National Environmental X Protection Agency 4.6 Implement LARP X X 4.7 Monitor implementation of LARP X 4.8 Issuance of no-objection certificate (NOC) on LARP implementation X 4.9 Environmental Monitoring and Management during X X implementation 4.10 Monitor social impacts and gender issues during implementation X X 4.11 Preparation of safeguard compliance reports X

38 36 2. Due Diligence Stage for Subsequent Tranches Major Activity Due Diligence of Subsequent Tranches MOF EA PMO Consultant Contractor External Agency 1 Preliminary Investigation 1.1 Screening of potential projects X X 1.2 Consultation with Ministry of Energy and Water X X 1.3 Donor coordination X X 2 Consultant Recruitment 2.1 Preparation of Request for Proposals X 2.2 Technical and financial evaluations X 2.3 Contract negotiations X 2.4 Contract award X X 2.5 Supervision of consultants X X 3 Tranche Preparation Periodic Financing Request 3.1 Preparation of feasibility study X X 3.2 Preparation of safeguard documents X X 3.3 Preparation of periodic financing request (PFR) X X 3.4 Grant/loan negotiations with ADB X X X 3.5 Signing of grant/loan and project agreements with ADB X X 3.6 Preparation and signing of subsidiary loan agreement X X 3.7 Submission of legal opinion (prepared by Ministry of Justice) X 4 Advance Action and Retroactive Financing 4.1 Preparation of bidding documents (BD) for advance action X X 4.2 Issuance of BDs and evaluation of bids X X 4.3 Contract negotiations X X 4.4 Contract award for retroactive financing X X B. Gantt Chart MFF

39 37 C. Gantt Chart Tranche 1 1. North East Power System (NEPS) 220 kv Transmission Line: Kunduz Taloqan

40 38 2. NEPS Distribution Networks Rehabilitation: Kunduz and Baghlan

41 3. Baharak Small Hydropower Plant and Mini-Grid 39

42 40 4. NEPS 220 kv Operation and Maintenance

43 5. Sheberghan Gas Field Rehabilitation Project 41

44 6. Development of Mini Hydropower Plants in Badakhshan and Bamyan Provinces (JFPR) 42

45 43 D. Gantt Chart Tranche 2