TRANSMISSION, DISTRIBUTION AND DISASTER RECONSTRUCTION PROJECT SYSTEM EFFICIENCY IMPROVEMENT, EQUITIZATION AND RENEWABLES PROJECT CONTENTS

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized I PROPOSED AMENDMENTS TO THE DEVELOPMENT CREDIT AGREEMENTS AND GEF TRUST FUND GRANT AGREEMENT TRANSMISSION, DISTRIBUTION AND DISASTER RECONSTRUCTION PROJECT SYSTEM EFFICIENCY IMPROVEMENT, EQUITIZATION AND RENEWABLES PROJECT CONTENTS Summary and Introduction... 1 Country and Sector Context... 1 Project and Borrower Performance... 3 IV. Proposed Restructuring... 4 V. Justification... 5 Annex A: Transmission, Distribution and Disaster Reconstruction Project: Details of Project Implementation Status and Proposed Restructuring. 7 Annex B: System Efficiency Improvement, Equitization and Renewables Project Details of Project Implementation Status and Proposed Restructuring i

2 CURRENCY EQUIVALENTS (Exchange Rate Effective March 3 1,2005) Currency unit = Vietnamese Dong 1,000 Dong = US$0.063 US$l = 15,824Dong 1 Special Drawing Right = US$ FISCAL YEAR January 1 - December 31 CAS CPPMB DSM EA ERR EMDP EVN FIRR GEF GIS GOV GWh IDA IPP IRR km kv LV MOI MV MVA MVAR MW NPV PC PC 1 ABBREVIATIONS AND ACRONYMS Country Assistance Strategy Central Power Project Management Board Demand-side management Environmental assessment Economic internal rate of return Ethnic minorities development plan Electricity of Vietnam Financial internal rate of return Global Environment Facility Gas-insulated switchgear Government of Vietnam Giga Watt hour International Development Association Independent power producer Internal rate of return Kilometer Kilo Volt Low voltage Ministry of Industry Medium voltage Mega Volt Ampere Mega Volt Ampere reactive Megawatt Net present value Power company Power Company No. 1 PC2 Power Company No. 2 PC3 Power Company No. 3 PCHCMC Ho Chi Minh City Power PDO PIP PMB PPC PPMB RAP RARE SDP SDR SEER SFR SPPMB ss TD1 TD2 TL TWh VND Company Project development objective Project implementation plan Project Management Board Provincial People s Committee Power Project Management Board Resettlement action plan Remote area rural electrification Standard disbursement percentage Special drawing rights System Efficiency Improvement, Equitization and Renewables Project (Cr 3680 VN, TF ) Self-financing ratio Southern Power Project Management Board Sub-station Transmission, Distribution and Disaster Reconstruction Project (Cr 3034 VN) Second Transmission and Distribution Project (under preparation) Transmission line Tera Watt hour Vietnamese Dong 11

3 I. SUMMARY AND INTRODUCTION 1. This memorandum seeks the approval of the Executive Directors to amend the Development Credit Agreements and the Project Agreements for the Transmission, Distribution and Disaster Reconstruction Project (Credit 3034 VN, TD 1) and the System Efficiency Improvement, Equitization and Renewables Project (Credit 3680 VN, SEER) and the Global Environment Facility (GEF) Trust Fund Agreement for SEER. The proposed amendments are in response to requests from the Socialist Republic of Vietnam (the Borrower) for amendment to TD1, dated July 14, 2004, and for amendments to SEER dated July 2 1,2004 and April 1 1, It is proposed to restructure both TD1 and SEER to accommodate the fast-changing requirements of the transmission and distribution subsector, to allow accelerated project implementation and to permit financing of additional urgently needed investments in the transmission and distribution systems, using project cost savings. The restructuring would consist of the following: (0 In TD1: addition to the transmission system components of further investments at the 500 kilo Volt (kv) and 220 kv levels, including the Vietnamese portion of the Vietnam-Cambodia interconnector and further subprojects to be identified; addition to the distribution networks component of rehabilitation and expansion of the 110 kv system totaling about 300 km of transmission lines and about 600 Megavolt Amperes (MVA) of substation capacity and further sub-projects to be identified; and rehabilitation of the medium and low voltage distribution networks of Hai Duong and Ha Tinh cities in the provinces of the same name. (ii) In SEER: addition to the system efficiency improvement component of further investments at the 220 kv level including about 423 km of single and double circuits and 13 substations with capacity totaling 2,125 MVA and further sub-projects to be identified; addition of a subcomponent to the system efficiency improvement component on commercia1 metering at the transmission system interfaces with generation and distribution; addition to the rural access component of further investments at the 110 kv level including about 122 km of single and double circuit lines and 18 substations totaling about 560 MVA capacity and further sub-projects to be identified; and changes to the disbursement categories and procurement methods for the GEF grant. 3. The original objectives of the projects and the loan and grant amounts would be unchanged. The restructured projects would continue to be economically viable. The Development Credit Agreements and Project Agreements for both projects and the GEF Trust Fund Grant Agreement for SEIER would be amended to reflect the proposed restructuring. In addition, the closing date of TD1, originally June 30, 2002, would be extended to December 3 1, 2006, to allow the project fully to achieve its objectives. 11. COUNTRY AND SECTOR CONTEXT 4. Demand for electricity in Vietnam has grown in the percent per year range during the last several years, and i s expected to remain in this bracket while annual 1

4 economic growth continues at 7-8 percent, as it is projected to do for several years to come. The dominant electricity provider, Electricity of Vietnam (EVN) met a fourfold increase in demand for electricity from 8.7 Tera Watt hours (TWh) in 1990 to 34.9 TWh in It has an installed capacity of 9,400 Megawatts (MW) currently, which is expected to increase to more than 20,600 MW in 2010 to match demand. EVN receives through its tariffs about $O.OS/kWh, sufficient to make a profit and maintain a selffinancing ratio (SFR) of percent. 5. Aside from the need to meet demand growth, other major sector issues include: mobilizing between $1.5 billion and $2 billion per year for electricity sector investments; making further progress on sector reform in the move to meet the financing challenge and to improve further the commercial and market orientation of the sector; improving levels of access to power and quality of service; and strengthening the transmission and distribution system. 6. The transmission and medium-voltage distribution system, which is owned and operated by EVN, has undergone substantial improvement in the past decade. Highlights include the construction in 1997 of a 500 kv north-south link, which is now being strengthened by a second circuit and additional substations. The 220 kv system has been expanded, particularly in major load centers, including Ho Chi Minh City and Hanoi. These improvements, combined with rehabilitation of urban distribution networks, have reduced losses from 24 percent in 1993 to 12.2 percent in The improvements have also increased stability and permitted better control of the system. The 110 kv system, the highest voltage level at which power distribution takes place, has been expanded to meet growth in local power demand, particularly in urban areas. 7. The passage of the Electricity Law in November 2004 and its entry into force, expected on July 1, 2005, puts in place the framework for the development of the power sector over the medium term. It separates generation, transmission and distribution; creates a regulator; and moves the sector toward a more market oriented footing in the medium term. In doing so, it adds further to the demands for network capacity and improved technical and commercial management. Country Assistance Strategy Objectives 8. The International Development Association s (IDA S) work in the transmission subsector contributes to the Country Assistance Strategy (CAS) objective of narrowing the development gap of disadvantaged and lagging areas. It is also increasingly contributing to the capacity of Vietnam to maintain high growth and to improve the investment climate. IDA s Strategy in the Power Sector 9. Since the start of its engagement in the power sector in Vietnam, IDA has undertaken individual investment operations within the context of a development strategy for the power sector as a whole. IDA has adopted a twin-track strategy: high-level policy dialogue aimed at promoting incremental reform and operational involvement through an investment program. The transmission and distribution subsector has fitted in well with that arrangement, and IDA has maintained a portfolio of two to three operations in the transmission and distribution subsector for the past several years. This approach means 2

5 that complex and interlinked issues can be broken down and addressed piecemeal through individual operations, allowing for simpler and more easily managed operations. 10. Within this approach, TD1 builds on two earlier projects, which have now closed, putting the transmission and distribution subsector onto a modern footing technically, by building out the system articularly to evacuate electricity from the power stations and to P the centers of demand. It also furthers the sector restructuring process by separating transmission from generation. Following five years later, SEER is aimed at making the transmission system more efficient through technical improvements and also by starting the equitization process.2 A proposed operation now being appraised, Second Transmission and Distribution Project (TD2), would further develop the portfolio by focusing efforts on malung the transmission system more commercially oriented through both investment and further sectoral reforms. III.PROJECT AND BORROWER PERFORMANCE 11. The transmission and distribution subsector portfolio has generally performed well during the past 10 years. Closed projects have met their objectives and TDl and SEER have both been rated satisfactory with respect to their development objectives throughout their lifetime. Implementation progress for both projects i s satisfactory and has mostly been so during their lifetimes. Individual project performance is discussed in greater detail in Annexes A (for TD1) and B (for SEER). 12. The good project implementation record reflects the increasing capacity of the Borrower. Implementing agencies now manage subprojects throughout the investment cycle, from identification through appraisal, procurement, implementation, and commissioning. International consultant support and turnkey approaches are confined to deployment of newer technologies, and they have become the exception rather than the rule. 13. Transmission and distribution must keep up with rapid growth and change in patterns of electricity demand. The client has responded to this by periodically reviewing and reassigning the priorities for individual sub-projects. The client s improved capacity and greater responsiveness make this possible, but it must be complemented by financing that will enable it to meet system needs on a just in time basis rather than the planned, just in case basis upon which the design of TD1 and SEER is based. Some subprojects have been overtaken by events that make them of lower priority, while other investments not included for financing by IDA have become more pressing. Consequently, implementation progress has suffered in the latter stages of TD1 and is beginning to be to suffer in SEER. Moreover, as subprojects slip down the list of priorities, their potential to make a contribution to the project s development objectives is lessened. TD1 has now partially achieved its development objectives through the completion of the original subprojects, but there is potential for further progress. Power Sector Rehabilitation and Expansion Project (CR 2724 VN, closed June 30,2000) and Power 1 Development Project (CR 2820-VN, closed December 3 1, 1999). * Equitization i s defined as selling 65 percent of shares to non state shareholders and having no dominant or special state shares.

6 14. Financial performance. EVN s current financial situation and status of compliance with financial covenants are satisfactory based on its consolidated 2003 accounts, the latest available. EVN recorded its highest ever growth rate of power production and sales. Total electricity generated and purchased from independent power producers grew by 14 percent in 2003 from the previous year, and power sales grew by 17 percent. Average revenue per unit of energy sold increased by 15 percent in 2003, as sales in higher-tariff categories outpaced sales in lower-tariff categories. Unit revenue growth was sufficiently robust to keep pace with inflation and the depreciation in the exchange rate between the Vietnamese Dong to the U.S. Dollar. During 2003, EVN realized a higher sales margin and increased liquidity, and implemented a $1.1 billion investment program. The SFR for 2003 was 75 percent, and the debt service coverage ratio was 6.6x, exceeding the covenanted requirements of 30 percent and 1.5x, respectively. Audited financial statements for 2003 show that the subsidiary distribution companies, Power Company No. 1, Power Company No. 2, and Ho Chi Minh City Power Company (PC1, PC2 and PCHCMC respectively) complied with the financial covenants of both the credits. 15. Proiect cost savings. Experience with projects in the power sector now under implementation in Vietnam indicates that actual subproject costs are normally around 30 percent less than estimated in the feasibility studies. Vietnam, and EVN in particular, are now fully convinced of the benefits of a competitive procurement process. With increasing experience, combined with historically low prices following the Asian financial crisis, EVN has been able to maintain continued downward pressure on equipment prices. Inflexible rules set by the government that require costs to be based on standard price lists and a desire to avoid having to resubmit feasibility studies have also created strong institutional incentives for implementing entities to overestimate costs. As a result of these twin tendencies, projects show substantial cost savings with TD1 accumulating savings of about $87.5 million out of an original loan amount of $199 million, and savings under SEIER are estimated to be about $24 million on subprojects so far implemented. Incentives for more accurate cost estimation are gradually being introduced, as is the case with the recent introduction of a commitment fee for IDA funds. IV. PROPOSED RESTRUCTURING 16. For further progress toward each project s objectives and thus the overall aim within the transmission and distribution subsector, a mechanism is required to enable TD1 and SEIER to adapt to the rapid growth and changing patterns of demand that lead to adjustment in the investment program of EVN. The proposed restructuring aims to permit other subprojects to become eligible for IDA financing by adopting a more flexible approach to subproject identification, appraisal, and financing. The proposed restructurings are a proactive measure intended to reinvigorate project implementation in TD1 and to anticipate a slowdown expected in SEER and thus ensure each project can fully achieve its objectives. 17. It is proposed to restructure TD1 and SEIER by introducing a framework approach into the design. Except for several of the more urgent investments that have already been appraised, additional investments would not be predetermined. Rather, they would be selected from a list of subprojects to be updated from time to time by the Borrower. The 4

7 subprojects listed would be part of EVN s long-term plan as set out in Master Plan for Power Development No. 5, covering , or Master Plan for Power Development No. 6, covering To be eligible for financing, each sub-project must contribute to its respective project s objective, meet defined technical, operational, and economic criteria, as well as comply with the safeguards frameworks which that have already been adopted by the Government af Vietnam (GOV) and EVN. Detailed criteria are set out in Attachments 1 to Annexes A and B. 18. Each sub-project brought forward will be appraised by IDA when the feasibility study, environmental impact assessment, and resettlement action plan (RAP) have been prepared. Financing for each sub-project will be made available when appraisal has been completed satisfactorily, on a first-come, first-appraised basis. During appraisal, special attention will be paid to make sure that the specific sub-project contributes to the objectives of the project under which it is being put forward. 19. This proposed restructuring is a pragmatic response to the evolving situation in the transmission and distribution subsector in Vietnam. Where appropriate, a similar design approach is planned for use in other projects now under preparation in the power sector. The restructuring is seen as a first step toward greater reliance on country systems and sectorwide approaches by increasing reliance on EVN and its subsidiaries own investment planning and prioritization approaches. Details of the restructuring are contained in Annex A for TD1 and Annex B for SEER. 20. In addition to the major restructuring discussed above, other changes are proposed: Raising to 100 percent the standard disbursement percentages (SDPs) for both TD1 and SEER in all disbursement categories to overcome obstacles to smooth project implementation; Revision of the financial covenants for both TD1 and SEER to remove the requirement to meet explicit tariff levels by certain dates and replace them with financial performance ratios for EVN; Introduction of a commercial metering subcomponent under the system efficiency improvement component of SEER, to permit accounting for power flows between the transmission system and generation and distribution systems; Changes to GEF-financed components of SEER, including: widening the eligibility criteria to participate in the off-grid subcomponent; introducing disbursement categories for the purchase of goods, for incremental operating expenses and for training; introducing national competitive bidding and shopping for goods; and raising to 100 percent the SDPs for all disbursement categories. V. JUSTIFICATION 21. IDA has pursued a policy of proactive portfolio management in the power sector, seeking to identify ways in which projects under implementation can better meet the needs of the client and obtain their objectives. The proposed restructurings will not only deal with current constraints to implementation, but will also make the projects more compatible with the portfolio approach to management in the power sector and contribute to wider objectives of the IDA program in Vietnam. 5

8 22. The restructuring of the investment components of TD1 and SEER to allow the inclusion of as yet not completely appraised sub-projects will enable reallocation of financing to the highest-priority sub-projects and the use of sizable cost savings to meet the country s need for investment in transmission and distribution to support economic growth. It would enable more rapid response to the most pressing investment requirements, which if unaddressed result in poor service, including unscheduled outages, power shortages, frequency and voltage fluctuations and power losses, all of which have subs tanti a1 opportunity cost. 23. Restructuring would enable a stronger focus on implementation by freeing up the capacity of the implementing agencies, EVN, GOV, and IDA staff who would otherwise be used on extensive and repetitive efforts to amend the legal agreements to add or remove sub-projects. Better management of the project cycle and thus more rapid implementation, more efficient and better quality procurement, and greater attention to safeguards and their monitoring would be possible. Over the longer term, the restructuring will reduce, though not entirely eliminate, the retail aspects of IDA financing in the sector, and thus reduce the routine supervision and management burden. 24. At the sub-sector level, the restructuring will allow further decentralization of decisionmaking, project management and implementation to the subsidiaries of EVN, which house the implementing agencies. It will also bring more coherence to the subsector portfolio while maintaining the focus of each individual project on its own objectives. Such a move toward greater decentralization will help lay the groundwork for sector wide approaches, because they will be able to propose and implement sub-projects based on their operational priorities rather than availability of financing. It will also open up the opportunity for further commercialization of the sector, as well as providing valuable lessons for the implementation of TD2 and opportunities for increasing reliance on country systems in subsequent projects. 25. The proposed introduction of the commercial metering subcomponent is justified on the grounds that metering meets an urgent need following the passage of the Electricity Law. With separation of the transmission function envisaged under the law, and the need to establish more commercial relationships between it and electricity generators and distributors, metering has become a high-priority task. The proposed changes to the SDPs are in line with the country financing parameters and the changes recognize the significant level of cost-sharing in the power sector, as shown by the proportion of local financing in TD1 and SEER, as well as from non-ida-financed projects. The proposed changes to the procurement arrangements for the GEF-financed activities are justified because they will improve the efficiency of implementation. 26. Extension of TD1 i s justified on the grounds that the investments it will finance under the proposed restructuring are urgently needed. Implementation progress will be accelerated through the restructuring, thus enabling the rapid achievement of its objectives. 27. The restructured projects would remain consistent with the CAS objectives of supporting the transition to the market economy and supporting inclusive and sustainable development. Restructuring of the projects will help them to support these objectives more efficiently through accelerated and smoother implementation. 6

9 Annex A: TRANSMISSION, DISTRIBUTION AND DISASTERECONSTRUCTION PROJECT: DETAILS OF PROJECT IMPLEMENTATION STATUS AND PROPOSED RESTRUCTURING Al. The objectives of the Transmission, Distribution and Disaster Reconstruction Project (TD1) are to: (i) strengthen the high voltage transmission network to facilitate evacuation of power from generating stations; (ii) rehabilitate distribution systems to reduce losses and improve reliability; (iii) support sector reform and restructuring through unbundling of transmission and generation and implementation of regulatory reforms; (iv) support institutional strengthening and commercialization; and (v) reduce peak demand and electricity consumption through demand-side management (DSM) activities. An additional objective, to help normalize economic activity in the area affected by Typhoon Linda, was added at a late stage of preparation: the typhoon struck on November 3, 1997 and the project was approved by the Board on January 20, A2. The project mainly consists of the Transmission and Distribution Components, with total financing of $319 million, of which IDA is financing SDR million, or $189 million equivalent at the time of approval. This is divided into six subcomponents, of which the important ones are: (i) construction of the Pleiku-Phu Lam 500 kv transmission line and associated substations; (ii) construction of the Ha Tinh 500 kv substation; (iii) construction of a 220 kv circuit and substation in Ho Chi Minh City; and (iv) rehabilitation of distribution networks in the cities of Halong, Vinh, and Vung Tau. The first two components are implemented by EVN, the third by Ho Chi Minh City Power Company (PCHCMC), and the fourth by Power Companies No. 1 and 2 (PC1 and PC2). Other components provided technical assistance to support aspects of sector reform. An associated TA component, which was financed by a Japanese grant, and the Disaster Reconstruction Component of which IDA-financed SDR million ($10 million equivalent), are largely complete and are not discussed further. A3. Progress toward obiectives. The project development objectives of supporting sector reform and institutional strengthening and reducing peak demand and consumption though DSM activities have largely been achieved, and further work is taking place under separate projects. The objectives relating to the high-voltage network have yet to be completed. As might be expected in a system experiencing rapid demand growth, strengthening of the transmission and distribution system continues to be needed to improve reliability and reduce bottlenecks. The project restructuring is targeted at the full achievement of these latter objectives. A4. Project ratings. Throughout the implementation period, the project s implementation progress has been rated satisfactory with both physical and institutional activities being implemented well. The rating for the project s likely achievement of its development objectives has been downgraded on three occasions, each relating to a tariff covenant. After approval, there was a delay of more than a year in the signing of the credit agreement, occasioned by the Government s difficulty in implementing the negotiated covenant to raise tariffs by stages. The rating was upgraded following the signature of the credit agreement its effectiveness. The two other downgradings, in December 2000 and December 2001, were in response to concerns over EVN s finances and the Government s commitment to ensuring that EVN achieve its financial objectives. 7

10 A program of phased tariff increases and other financial reforms was agreed, and the project was upgraded to satisfactory in June 2002, which status it has retained ever since. A5. Phvsical progress. As of March 2005, the project s physical completion rate is estimated at 95 percent or greater for all components, except for the 220 kv circuit and substation in Ho Chi Minh City. The delay to this component is largely a result of the need to coordinate the construction of the 220 kv line and substation with road and bridging projects. The project s original closing date has been extended to June 30,2005, to allow time to complete the Ho Chi Minh City sub-project and to permit restructuring of the project. A6. Disbursement. At the end of March 2005, total disbursements stood at SDR million (about $108 million equivalent at today s exchange rate) or approximately 54 percent. About SDR 2.1 million ($3.2 million equivalent) in further disbursements was outstanding in final payments for contracts. A7. Proiect cost savings. Cost savings are about $87.5 million equivalent. In addition, the recent fall in the value of the dollar-in which most equipment is priced-has resulted in a windfall gain of about $8.5 million. In all, it is expected that $96 million is available for use in the restructuring (at March 2005 exchange rates). A8. Additional sub-proiects. The proposed amendment is intended to increase flexibility during the remainder of the project s lifetime by allowing sub-projects to be brought forward for financing when they have been appraised to meet the criteria for financing set out in Attachment 1 to this Annex. Nonetheless, an initial list of projects (given in Attachment 2) that has been provided by the Borrower includes the following: Construction of a 500 kv substation at Doc Soi, including financing one transformer; Construction of 220 kv lines, totaling about 230 km of single and double circuits, and construction of two substations. Also at the 220 kv level is the construction of the Vietnam side of the Vietnam-Cambodia interconnector involving 97 km of single circuit line and a 125 MVA substation. The Cambodian part is also being financed by IDA under the Rural Electrification and Transmission Project (Cr 3840-KH); Construction and rehabilitation of the 110 kv system totaling about 300 km of single and double-circuit lines and 12 substations totaling about 590 MVA of capacity ; Rehabilitation of the 22 kv medium voltage (MV) and low voltage (LV) distribution networks in the cities of Ha Tinh and Hai Duong. A9. Costs and financing plan. The costs and financing plan are given in Table A.l. Sub-projects will continue to be financed up to the point at which all remaining funds in the Credit have been used. The current list of sub-projects has been used as the basis for calculating the costs and financing plan. Because there are several different possible combinations of sub-projects to be financed, the balance between local and IDA financing may vary. What is presented in Table A.l is the best estimate made on the basis of discussions with EVN and the PCs. 8

11 Table A.1: Expected Costs and Financing Plan, Additional Sub-projects (million US$) Subcomponent Total IDA 1 I I Borrower I Identified 500 kv transmission 1 I I I Identified 220 kv transmission Identified 110 kv distribution Identified medium and low voltage distribution Unidentified projects2 Total AlO. Procurement. The procurement arrangements originally established for the Project will continue to be used. All contracts financed by IDA for the supply of equipment and materials for substations, and for transmission and distribution lines will be subject to international competitive bidding. A1 1. Proiected disbursement. Following restructuring, the disbursement schedule for the remaining term of the project will be as presented in Table A.2. Table A.2: Expected Disbursement Schedule: TD1 (million US$) /Disbursement 1 I 6.0 I 7.1 I 7.8 I 17.4 I I 9.6 I ICumulative I 108 I I I I I I I I A12. Standard disbursement percentages. Raising the SDPs for both disbursement categories (Consultants Services and Goods) to 100 percent is proposed, in line with the country financing parameters. This is primarily aimed at overcoming obstacles that result from payments under each contract that must be met from two sources and thus undergoing two separate approvals processes: one for the portion financed by IDA and one for the portion financed from local sources. Cost-sharing through non-ida-financed contracts within the same sub-project (for example, for civil works and some goods) normally accounts for percent of total sub-project costs. Besides, at the transmission and distribution subsector level, a significant proportion of the required 9

12 investment i s undertaken by EVN and its subsidiaries entirely from local sources. Hence, raising of SDPs to 100 percent will not materially affect the principle or practice of costsharing. A13. Economic and financial analysis. Economic analysis for the identified subprojects carried out on the same basis as at appraisal, using a 10 percent discount rate, yields an estimated economic internal rate of return (EIRR) of 32.6 percent with an economic net present value (NPV) of $341.9 million. The financial internal rate of return (FIRR) of the new sub-projects is estimated to be 20.5 percent with a financial NPV of $241.0 million. This compares with an estimated EIRR of the original sub-projects of 27.2 percent with an economic NPV of $286.1 million and FIRR of 13.3 percent with a financial NPV of $187.2 million. Calculations of the combined project NPV and internal rates of return (IRRs) are not presented because it is not yet possible to revise the cost stream for the original sub-projects based on actual costs. Sub-projects not yet identified will be required to meet minimum levels of economic ERR of 12 percent and FIRR of 10 percent as set out in Attachment 1 to this annex. A14. Environment safeguards. For those sub-projects that are marked in Attachment 2 as having been appraised, environmental assessments (EAs) and resettlement action plans (RAPs) have been prepared and provided to IDA for review, and have been found satisfactory. For each individual sub-project yet to be appraised, EVN, PC1, or PC2 will carry out an environmental assessment and prepare an environmental management plan in a manner satisfactory to IDA. EVN has adopted procedures for preparation of EAs which have been reviewed and are acceptable to the Bank. A15. Resettlement and compensation. For resettlement and compensation, and in respect of ethnic minorities who may be affected by the Project, the Ministry of Industry (MOI), EVN and the PCs have adopted policy frameworks for the preparation and implementation of RAPs and ethnic minorities development plans (EMDPs). These policy frameworks have been evaluated and are considered acceptable to IDA. As further sub-projects are appraised by IDA, EVN and the PCs will prepare RAPs and EMDPs in accordance with these frameworks and guidelines and provide them to IDA for review. A16. Proiect implementation plan. EVN and the PCs have prepared a revised project implementation plan (PIP) which includes procurement plans and timetables for construction for each of the new sub-projects listed. It has been reviewed and found acceptable by IDA. The PIP demonstrates that the project will be completed within the two-year extension period. Further sub-projects that are brought forward will also be required to provide an implementation plan demonstrating that the sub-project can be completed within the remaining time for the project. A17. Results framework and risk assessment. A results framework for the revised project has been prepared and is presented in Attachment 3, together with a reevaluation of the risks identified at appraisal and further risks identified during restructuring. A18. Revised project description. To give effect to the proposed restructuring, the Project description has been revised as shown in Attachment 4. 10

13 Attachment 1 to Annex A: Sub-project Eligibility Criteria For Transmission Distribution and Disaster Reconstruction project, the following criteria will be used to determine sub-project eligibility for financing: 1. The sub-project will contribute to the objectives of the project, namely either to strengthen the high-voltage transmission network to facilitate evacuation of power from generating stations or to rehabilitate and expand distribution systems to meet demand, reduce losses and improve reliability; 2. The sub-project will meet international technical standards and best practice; 3. The sub-project is included in EVN s Master Plan for Power Development No. 5 for 2001 to 2005, or Master Plan for Power Development No. 6 for 2006 to 2010 as it may be updated and approved by the GOV; 4. The sub-project is estimated to have an economic rate of return of at least 12 percent and a financial rate of return of at least 10 percent, calculated using a methodology acceptable to IDA; 5. Sub-project EAs, RAPS and EMDPs, satisfactory to IDA, have been prepared and disclosed in accordance with the frameworks and guidelines adopted by the GOV, EVN and the PCs. 6. All necessary clearances and approvals for implementing the sub-project, including the feasibility study and environmental certificates, have been given by the relevant agencies or authorities; 7. Financing, procurement and implementation plans, satisfactory to IDA, have been prepared. 11

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16 Attachment 3 to Annex A: Revised Results Framework and Risk Analysis Results Framework ect e S se of 0 ma To: 0 Strengthen the high-voltage transmission network to facilitate evacuation of power from generating stations 0 Rehabilitate and expand distribution systems to meet demand, reduce losses and improve reliability 0 Support sector reform by the separation of transmission and generation functions Sub-component One: Zapacity of transmission system :xpanded to meet current needs md power demand patterns Sub-component Two: Transmission reliability: faults/km/year at different voltage levels, transmission losses, power flows between Central and Southern regions Distribution systems: number of supply interruptions per year; average duration; distribution losses Operation of transmission as a separate cost center, passage of Electricity Law Results Indicators for Each Comoonent Sub-component One: Construction of 500 kv substation at Doc Soi; Construction of about 230 km of single- and double-circuit 220 kv line and two substations; 0 Electrical interconnection between Vietnam and Cambodia at 220 kv Sub-component Two: Evaluation of project impact, focusing of sub-projects on priority investments Focus of sub-projects and distribution rehabilitation on priority areas [For information only, because this objective has been largely achieved1 Sub-component One: Performance and progress of physical investments, contribution toward related PDO Sub-component Two: lemand for power in Ha Tinh md Hai Duong and other demand :enters met with high-quality,,eliable supply Construction and rehabilitation of 110 kv system totaling about 300 km of lines and substations of 590 MVA capacity; Rehabilitation of 22 kv MV and LV systems in Ha Tinh and Hai Duong Performance and progress of physical investments, contribution toward related PDO Limited to sub-components subject to restructuring, because other components have been completed. 14

17 Arrangements for Results Monitoring 0 Faults/100 Myear at 500 kv 0 Transmission losses (%) 0 Power flows between Central and Southern Regions (MVA) Annual performance reports reports Distribution systems in PCl and PC2 areas: 0 Number of supply interruptions per year 0 Average duration of supply interruptions (hrs) Distribution losses (9%) PCI: 7.78 PC2: PC1: 6.78 PC2: 7.93 Annual performance reports EVNPClPC2 operations reports EVNPC 1PC2 Results Indicators for Each Sub-component Sub-component One: 500 kv substation at Doc Soi in service Not in service In service Quarterly supervision reporting Management information, supervision missions EVN Central Power Project Management Board (CPPMB) About 230 km of single and double circuit 220 kv line and two substations in service Not in service In service Quarterly supervision reporting Management information, supervision missions EVN CPPMB and Southern Power Project Management Board (SPPMB) Electrical interconnection between Vietnam and CIambodia at 220 kv in service Sub-component Two: 4dditional 110 kv system.otaling about 300 km of ines and substations of 590 VIVA capacity in service Not in service Not in service In service In service Quarterly supervision reporting Quarterly supervision reporting Management information, supervision missions, liaison with Cambodia task team Management information, supervision missions EVN SPPMB PC1 and PC2!2 kv MV and LV systems n Ha Tinh and Hai Duong in iervice Not in service In service Quarterly supervision reporting Management information, supervision missions PC 1

18 Reevaluation of Risks From outputs to objectives Non-availability of counterpart funds which that could lead to implementation delays M Agreement with GOV to provide local cost financing in case the concerned entities are unable to do so Experience has shown that counterpart funds have been made available in a timely fashion N Waning of EVN, HCMCPC, PC 1, PC2 management commitment to deploy adequate resources for project completion N Close monitoring at early stages of the project to ensure adequate deployment of teams to work on the project Initially was an issue, but increased capacity, especially of EVN s CPPMB and SPPMB, have demonstrated original assessment was warranted N Waning of government commitment to pursue reforms and of EVN commitment to institutional strengthening programs M No mitigation offered No longer relevant to the project as these subcomponents have been completed nja Lack of EVN commitment or ability to implement effective DSM programs and policy framework M Close monitoring of DSM progress and supervision reports as well as technical assistance activities provided by international consultants No longer relevant to the project as these activities have been completed n/a From components to outputs Lack of resources for land acquisition M Advance action in land procurement Issue has not been a lack of resources, but see below M Inadequate procurement resources, slow procurement decisions S Proactive monitoring of procurement by task team. Appointment of Procurement Monitoring Group to ensure procurement decisions are made in a timely manner Capacity and experience at PPMBs and in PCs has increased during project implementation; some fiduciary risk remains N Delays in appointment of :onsultants, inadequate :onsultant inputs or poor :onsultant performance for the :ethnical assistance components M Selective consultant appointment process and intensive supervision of consultant s work by EVN, the government and IDA The activities at risk have been completed; consultant quality on work related to physical investment components remains mixed (for example, for RAP and EA monitoring); continued close supervision required M 3verall project risk rating M See below

19 in a timely fashion Resettlement is proving a slow process that is subject to delay Insufficient attention to social and environment safeguards Overall restructured project risk rating M M M regular follow up on pipeline Partially mitigated through RAP framework approach, but longer-term solution is improved resettlement procedures and transparency, so issue is likely to remain during lifetime of project Close monitoring of application of frameworks and safeguards implementation I Risk Rating: H (high), S (substantial), M (modest), N (negligible or low), d a (not applicable).

20 Attachment 4 to Annex A: Revised Project Description (Bold type indicates new or amended language.) The objectives of the Project are to assist the Borrower to : (a) facilitate evacuation of power generating from stations by strengthening Borrower s high voltage transmission networks; (b) reduce losses and improve reliability of electricity supply through rehabilitation and expansion of the distribution systems in the cities of Ha Long, Vinh, Vung Tau, and other selected cities and towns; (c) strengthen the Borrower s power sector regulatory framework by separating EVN s transmission and generation function, introducing tariff reform and implementing regulatory reforms; (d) improve the distribution function of the Power Companies through increased commercialization and the introduction of demand side management capabilities; and (e) normalize economic activities in the typhoon- affected areas of the Borrower through the reconstruction of the electricity distribution network in such areas. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: 500 kv Transmission System 1. Construction of: (a) a 500 lulovolt (kv) transmission line of approximately 550 kilometers (km) between Pleiku and Phu Lam, together with expansion of existing 500 kv substation at Pleiku and Phu Lam with additional switching bays and associated equipment, and control and dispatch equipment; and (b) selected additional 500kV transmission lines, together with construction and expansion of associated substations. 2. Resettlement and rehabilitation of Affected Persons under Part A.l of the Project. Part B: Ha Tinh Substation Expansion of the substation at Ha Tinh with a 450 megavolt ampere (MVA) 500/220/35 kv transformer, a 63 MVA, 220/110/22 kv transformer and associated 220 kv, 110 kv, 35 kv, and 22 kv switching bays. Part C: 220 kv Transmission System 1 Construction of two 220 kv transmission lines (approximately 2x 10 km) connecting Nha Be and Tao Dan substations, together with construction of a gas insulated switchgear (GIS) substation at Tao Dan with two 250 MVA, 220/110/23 kv transformers, two 63 MVA, 115/23/15.7 kv transformers, and six 220 kv and ten 110 kv switching bays. 2. Resettlement and rehabilitation of Affected Persons under Part C( 1) above. 18

21 3. Construction of selected additional 220 kv transmission lines, together with construction and expansion of associated substations. 4. Resettlement and rehabilitation of Affected Persons under Part C(3) above. Part D: Distribution Networks 1. Ha Long Distribution Network (a) Rehabilitation and upgrading of the distribution network in the city of Ha Long through: (i) installation of a 40 MVA, 110/35/22 kv transformer at the 110 kv substation Gieng Day; (ii) installation of a 25 MVA, 110/22 kv transformer at 110 kv substation at Giap Khau; (iii) installation of a 25 MVA, 110/35/22 kv transformer at 110 kv substation at Ha Tu; (iv) strengthening the distribution network by : (A) upgrading voltage at about 150 substations; (B) changing voltage at about 10 substations; (C) installing about 187 new substations in overloaded areas of the city; (D) installation of about 8 km of underground cable and 25 km of double-circuit and 80 km of single circuit above- ground transmission lines; and (E) upgrading of about 480 km of distribution lines and installation of about 15,000 customer meters; and (v) provision of training facilities. above. (b) Resettlement and rehabilitation of Affected Persons under Part D( l)(a) 2. Vinh Distribution network (a) Rehabilitation and upgrading of the distribution network in the city of Vinh through: (i) construction of about 18.6 km of 35 kv distribution lines and about 112 km of 22 kv transmission lines; (ii) installation or replacement of about 205 distribution transformers in 22/0.4 kv and 10-22/0.4 kv substations; (iii) addition of about 172 km of 0.4 kv distribution lines and installation of about 39,000 customer meters; and (iv) provision of training facilities above. (b) Resettlement and rehabilitation of Affected Persons under Part D(2)(a) 3. Vung Tau Distribution network (a) Rehabilitation and upgrading of the distribution network. in the city of Vung Tau through: (i) upgrading voltage level of 15 kv overhead lines to 22 kv; (ii) adding about 93 km of copper under ground cable and replacing about 20 km of overhead lines; (iii) installation of about 40 sets of remote controlled reclosers and about 80 sets of remote controlled load breaker switches and replacement of about 300 sets of fuses; (iv) construction of about 195 new 22/0.4 kv substations; (v) construction of about 484 km of aluminum conductor lines; (vi) installation of a supervisory control and data acquisition (SCADA) system; (viii) installation of energized cable sensors, lines fault locators, voltage indicators and related devices; and (viii) provision of training facilities.

22 (b) above. Resettlement and rehabilitation of Affected Persons under Part D(3)(a) 4. Northern Distribution Network (a) Rehabilitation and upgrading of selected portions of the distribution network in the Northern region, including upgrading and construction of llokv distribution lines, construction of underground cables and installation or upgrading of associated substations. (b) Resettlement and rehabilitation of Affected Persons under Part D(4)(a) above. 5. Southern Distribution Network (a) Rehabilitation and upgrading of selected portions of the distribution network in the Southern region, including upgrading and construction of 1 lokv distribution lines, construction of underground cables and installation or upgrading of associated substations. (b) Resettlement and rehabilitation of Affected Persons under Part D(5)(a) above. Part E: Institution Building and Reform Strengthening the Borrower s power sector regulatory capacity through preparation of detailed working procedures and analytic tools needed to regulate the power sector effectively, and the provision of consultants services and training of selected staff of regulatory institutions in the use of said procedures and tools. Part F: Demand Side Management Development of demand side management (DSM) capability within EVN and relevant agencies of the Borrower, through: (1) creation of a DSM cell to: (a) design a national DSM policy framework; (b) develop a regulatory mechanism to encourage DSM activities; (c) prepare and implement initial DSM programs; (d) coordinate DSM program implementation; and (e) monitor and evaluate DSM programs; (2) carrying out of load research and implementation of a pilot load management program; (3) design and implementation of a pilot municipal lighting program; and (4) design and implementation of efficiency standards for: (i) lighting equipment, industrial motors, and the testing of equipment at existing testing facilities in nearby countries; and (ii) commercial buildings;

23 all through the provision of consultants services and testing equipment. Part G: Disaster Reconstruction Reconstruction of typhoon-affected electricity distribution networks through: (i) construction of about 180 km of low voltage distribution lines; (ii) construction of about 160 km of medium voltage distribution lines; (iii) installation of about 320 transformers of a capacity aggregating to 25 MVA; and (iv) installation of electrical switching and control equipment for distribution substations, in the Borrower s provinces of (1) Ca Mau, Kien Giang, Bac Lieu, SOC Trang, Tra Vinh, Ben Tre, Tien Giang, Ba Ria-Vung Tau and Binh Thuan, and (2) Can Gio.

24 Annex 3: SYSTEM EFFICIENCY IMPROVEMENT, EQUITIZATION AND RENEWABLES PROJECT DETAILS OF PROJECT IMPLEMENTATION STATUS AND PROPOSED RESTRUCTURING B1. The objectives of SEER are to (i) improve overall system efficiency and reduce investment needs; (ii) enhance energy access for the poor; and (iii) sustain reform of the power sector. In addition, it has a global objective to contribute to reduced greenhouse gas emissions by promoting the use of electricity production using renewable resources. B2. The project consists of three components: (i) system efficiency improvement, focusing particularly on the upgrading of the 500 kv and 220 kv transmission systems and a demand-side management activity, with an indicative cost of $183.6 million of which $115 million is financed by IDA; (ii) improving rural access, which includes upgrading of the 110 kv subtransmission systems, rehabilitation of small hydro and development of off-grid or mini-grid supply using renewable energy with an indicative cost of $151.2 million of which $82.7 million is financed by IDA and $1.5 million by GEF; and (iii) institution building, including training, equitization and improvement of EVN s management information system, with an indicative cost of $3 1.4 million, of which $27.3 million is financed by IDA and $3 million by GEF. B3. Progress toward obiectives. The project has made reasonable progress toward its objectives since it became effective in February Based on evidence to date, it can be expected to meet its reform objective, but the system efficiency improvement and the access goals may be more difficult to achieve within the project lifetime because of constraints imposed by the implementation mechanism. B4. Proiect ratings. The project ratings for achievement of the development objectives and implementation progress have remained satisfactory since project approval in June Progress in implementing the subcomponent to modernize the financial management system has been unsatisfactory during the last 12 months and it has been critically reviewed by the task team. EVN i s required to take action to restore it to satisfactory status before the next supervision mission scheduled for May 2005 or face the subcomponent s cancellation. B5. Physical progress. Sub-projects related to transmission and distribution fall into two categories. Where EVN and the PCs have been able to proceed with the project under IDA financing, physical progress is much as might be expected for this stage in the project. As of December 2004, the procurement of goods was complete for all but three contracts, and approximately 50 percent of the goods had been delivered on site. Physical completion is estimated at 5-10 percent. In the second category are projects that EVN and the PCs no longer wish to be financed under the IDA credit because of changing priorities. Some sub-projects, including the 500 kv transmission line and substations, became so urgent that it became necessary for EVN to go ahead with them before the credit became effective; and in consequence they will not be financed under SEER. Other sub-projects have become less pressing and EVN and the PCs are reluctant to use scarce resources, both financial and human, for projects that are of low priority. B6. Disbursement. Total disbursements and commitments stand at SDR 55 million (about $57.7 million at March 2005 exchange rate) or approximately 22 percent in SDR terms. 22

25 B7. Project cost savings. Although at an earlier stage of project implementation, the evidence suggests that, as with TD1, project cost savings are resulting from overestimation at the feasibility study stage. These are expected to be around 30 percent of original project cost estimates. Combined with the windfall gain because of the change in the SDR and US Dollar exchange rate, an additional $43 million is available compared with the time of approval. B8. Additional sub-proiects. The proposed restructuring is intended to increase flexibility by allowing sub-projects to be brought forward for financing when they are needed and when they meet the criteria for financing set out in Attachment 1 and have been appraised. An initial list of projects has been provided by the borrower and is at Attachment 2, comprising: 0 Construction and rehabilitation of the 220 kv system totaling about 423 km of single and double circuits and 13 substations with capacity of 2,125 MVA; Construction and rehabilitation of the 110 kv system totaling about 122 km of singleand double-circuit lines and 18 substations totaling about 560 MVA of capacity. B9. Commercial metering subcomponent. A commercial metering subcomponent is proposed to be introduced under the system efficiency improvement component to permit the financing of meters at the interfaces between the transmission system and generation and distribution systems. Metering will create incentives to efficient operation of the transmission system through the development of a market-based system of transactions between generators, distributors and the transmission system. The metering subcomponent has been introduced in response to the requirements set out in the recently passed Electricity Law, which enters force on July 1, B10. Changes to RARE subcomponent. It is proposed to restructure the GEF-financed remote area rural electrification (RARE) subcomponent to permit rehabilitation of existing small hydro plant in remote areas. The definition of eligible plants would also be expanded to cover those at village and province level (in addition to commune level), as well as privately owned projects. B11. Costs and financing plan. The costs and financing plan are given in Table B.l, which revises the estimates originally made at appraisal for the whole project. The revised plan accounts for sub-projects that have been dropped as well as new ones. New sub-projects will continue to be financed up to the point at which all remaining funds in the Credit have been used. The current list of sub-projects has been used as the basis for calculating the costs and financing plan, and any remaining sub-projects listed will be financed by EVN and the PCs from other sources. Because there are several different possible combinations of sub-projects to be financed, the balance between local and foreign costs may vary and what i s presented below is the best estimate made on the basis of discussions with EVN and the PCs.

26 Table B.l: Expected Revised Costs and Financing Plan (million US$) Strengthening regulation, planning, and Total I I I 4.5 I Note: Estimate based on existing balance. B 12. Disbursement percentages. Raising the SDPs for all disbursement categories to 100 percent is proposed in both IDA- and GEF-financed parts of the project, in line with the country financing parameters. This is primarily aimed at overcoming obstacles that result from payments under each contract having to be met from two sources and thus undergoing two separate approvals processes: one for the portion financed by IDA or GEF and one for the portion financed from local sources. As with TD1, cost-sharing through non-ida-financed contracts within the same sub-project (for example for civil works and some goods) normally accounts for percent of total subproject costs and a significant proportion of required investments in transmission and distribution is undertaken by EVN and its subsidiaries entirely from local sources. Under the GEF, raising SDPs to 100 percent will avoid procurement and other implementation delays. B 13. Disbursement categories. It is proposed to introduce additional disbursement categories under the GEF-financed parts of the project as follows:

27 0 Establishment of two disbursement categories for Goods to permit under one, purchasing of small hydro training materials and office equipment and under the other, wind resource measurement equipment; 0 0 Establishment of a disbursement category for Training of $200,000 to allow the project to strengthen the capacity of the new regulatory authority for small power project regulation; Establishment of a disbursement category for Incremental Operating Expenses of $65,000 to allow the smooth operation of the Project Management Board in the MOL B 14. Procurement methods. The procurement arrangements established originally for the transmission and distribution components will continue to be used. All contracts financed by IDA for the supply of equipment and materials for substations, transmission and distribution lines will be subject to international competitive bidding. Procurement and disbursement under the GEF-financed components and subcomponents will be modified as follows: Introduce national competitive bidding for procurement of contracts for goods below $100,000 and national shopping for contracts below $50,000; Allow single source selection of consultants with the Association s agreement and in line with the provisions in the Consultant Selection Guidelines, to reduce transaction times and costs and to ensure continuity of consultant support. B 15. Disbursement schedule. Following restructuring, the disbursement schedule for the remaining term of the project will be as presented in Table B.2 below. Table B.2: Expected Disbursement Schedule: SEIER (million US$) B 16. Economic and financial analysis. Economic analysis for the identified subprojects carried out on the same basis as at appraisal, using a 10 percent discount rate, yields an estimated EIRR of 38.5 percent with an economic NPV of $354.6 million. FIRR of the new subprojects is estimated to be 19.3 percent with a financial NPV at 6.5 percent of $206.4 million. This compares with an estimated EIRR of the original project of 31 percent with an NPV of $460 million and FIRR (by component) of percent with a financial NPV at 6.5 percent of $276.0 million. NPVs of those components not being restructured have not been recalculated or included in the figures above, thus accounting for the lower NPVs. Sub-projects not yet identified will be required to meet minimum levels of EIRR of 12 percent. For those sub-projects at 220 kv or higher, which are considered to be commercial investments, FIRR must be at least 10 percent. For those at 110 kv which are considered to be supporting rural electrification and are

28 therefore noncommercial FIRR must be 6.5 percent or more. Attachment 1 to this annex provides these and other criteria for new sub-projects to be eligible for financing. B 17. Environment and resettlement. During project preparation, MOI adopted policy frameworks for the preparation and implementation of RAPs and EMDPs. It has now required EVN and the PCs to apply the frameworks to new sub-projects to be financed under SEER. In addition, EVN has adopted procedures for the preparation of EAs. These policy frameworks and procedures have been evaluated and are considered to be acceptable to IDA Those sub-projects that are marked at Attachment 2 as having been appraised have had EAs and RAPs and, where required, EMDPs have been prepared and provided to IDA for review. These EAs, RAPs and EMDPs have been found satisfactory. As further sub-projects are appraised by IDA, EAs, RAPs and EMDPs prepared under these frameworks and procedures will be reviewed. B18. Proiect implementation plan. The PIP for the transmission and access components has been revised and reviewed by IDA. It demonstrates that the project will be completed before the project i s due to close on December 31,2007. B19. Revised proiect description. To give effect to the proposed restructuring, the Project description has been revised as shown in Attachment 4.

29 Attachment 1 to Annex B: Criteria for Sub-project Eligibility For the System Efficiency Improvement, Equitization and Renewables Project, the following criteria will be used to determine sub-project eligibility for financing: 1. The sub-project will contribute to the objectives of the project, namely to improve overall system efficiency and reduce investment needs or to improve energy access for the poor in remote areas; 2. The sub-project will meet international technical standards and best practice; 3. The sub-project i s included in Master Plan for Power Development No. 5 for 2001 to 2005, or Master Plan for Power Development No. 6 for 2006 to 2010 or as it may be updated and approved by the GOV; 4. The sub-project has an economic rate of retum of at least 12 percent, and a financial rate of retum of at least 10 percent for sub-projects at 220 kv or higher and 6.5 percent for sub-projects at 110 kv, calculated using a methodology acceptable to IDA; 5. Sub-project EAs, RAPS and EMDPs, satisfactory to IDA, have been prepared and disclosed in accordance with the frameworks and guidelines adopted by the GOV, EVN and the PCs. 6. All necessary clearances and approvals for implementing the sub-project, including the feasibility study, and environmental certificates, have been given by the relevant agencies or authorities; 7. Financing, procurement and implementation plans satisfactory to the Bank have been prepared.

30 28 T

31 3 c! 3 m c? 3 N 3. ri In PJ X 3 3 B 3 E B X a, v) v) M c s b c E 5 3- m 3 29

32 E m 2 x i m c? 0 x 3 m N 3 m c.l 3 X m 3 30

33 Attachment 3 to Annex B: Revised Results Frameworks and Risks Analysis Results Framework To: 0 Improve overall system efficiency through optimization of transmission system and rehabilitation of distribution network 0 Enhance rural access Transmission and distribution system: system losses; for transmission lines, faultslkmlyear and duration at different voltage levels; for substations faults/mva/year and duration for 500 kvl220 kv and 220 kv1110 kv systems, proportion of 500 kvl220 kv and 220 kv1110 kv transformers overloaded Number of households using mains power, number of off-grid community minisystems installed, number of households electrified using renewables Evaluation of project impact, focusing of sub-projects on priority investments Identification of further requirements for on- and off-grid electrification, focus of subprojects on key investments 0 Sustain power sector reform and improve corporate governance Component One: Transmission system efficiency increased, bottlenecks and overloading reduced Component Two: Rural access enhanced Component Three: Financial soundness of joint stock companies, number of successful equitizations, application of modern management information system throughout EVN, sustainable mechanisms in place for off-grid and small power Droducers L Results Indicators for Each Component Component One: 0 Transmission line lengths installed, transformer and substation capacity installed, capacity and energy saved (MWIGW h) Component Two: 0 Length of 110 kv lines and capacity of substations ( kv and kv) installed or rehabilitated 0 Numbers of additional households connected to grid and minigrid sources Component Three: Gauge effectiveness of reform, basis of further policy dialogue and reform Use of Results Monitoring Component One: Performance and progress of physical investments, contribution toward related PDO, gauge performance against best practice to determine future requirements Component Two: Performance and progress of physical investments, contribution toward related PDO, gauge requirement for further work Component Three: 31