Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA SIDA SIDA-50554) ON A CREDIT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA SIDA SIDA-50554) ON A CREDIT IN THE AMOUNT OF SDR MILLION (US$ 199 MILLION EQUIVALENT) TO THE Socialist Republic of Vietnam FOR A Transmission, Distribution and Disaster Reconstruction Project Sustainable Development Department Vietnam East Asia and Pacific Region December 28, 2007

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2007) Currency Unit = Dong 1,000 Dong = US$ US$ 1.00 = 16,125 Dong US$ 1.00 = Special Drawing Rights FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy kwh Kilowatt hour CPS Country Partnership Strategy LRMC Long-Run Marginal Cost DSCR Debt Service Cover Ratio LV Low Voltage DSM Demand Side Management M&E Monitoring and Evaluation EIRR Economic Internal Rate of Return MoC Ministry of Construction EA/EMP Environment Assessment and Environmental Management Plan MoI Ministry of Industry (now Ministry of Industry and Trade EMDP Ethnic Minority Development Plan MoST Ministry of Science and Technology ERAV Electricity Regulatory Authority of Vietnam MV Medium Voltage EVN Electricity of Vietnam (now MW Megawatt Vietnam Electricity) FMR Financial Management Report MVA Megavolt Ampere (1,000 KVA) FIRR Financial Internal Rate of Return PAH Project Affected Household GDP Gross Domestic Product PC Power Company GEF Global Environment Facility PC1 Power Company No. 1 (northern region) GNI Gross National Income PC2 Power Company No. 2 (southern region) GIS Gas Insulated Switchgear PDO Project Development Objective GoV Government of Vietnam PMB Project Management Board HCMC PC Ho Chi Minh City Power QAG Quality Assurance Group Company IBRD International Bank for RP Resettlement Plan Reconstruction and Development ICM International Creditors' Model SFR Self Financing Ratio ICR Implementation Completion and Results Report SIDA Swedish International Development Agency IDA International Development SS Substation Association IDC Interest During Construction TA Technical Assistance ISR Implementation Status Report TL Transmission Line kv Kilovolt VDB Vietnam Development Bank kva Kilovolt Ampere VND Vietnam Dong

3 Vice President: James W. Adams Country Director: Ajay Chhibber Sector Manager: Hoonae Kim Project Team Leader: Richard Spencer ICR Team Leader: Richard Spencer

4 VIETNAM Transmission, Distribution and Disaster Reconstruction Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP

5 A. Basic Information Country: Vietnam Project Name: Transmission, Distribution and Disaster Project ID: P L/C/TF Number(s): IDA-30340,SIDA ,SIDA ICR Date: 12/28/2007 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Environmental Category: B SOCIALIST REPUBLIC OF VIETNAM XDR 144.4M Disbursed Amount: XDR 106.0M Implementing Agencies: Electricity of Vietnam (EVN) Ho Chi Minh City Power Company Power Company No. 1 Power Company No. 2 Cofinanciers and Other External Partners: JAPAN Swedish International Development Agency (SIDA) B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 08/22/1996 Effectiveness: 02/12/ /12/1999 Appraisal: 10/06/1997 Restructuring(s): 05/26/2005 Approval: 01/20/1998 Mid-term Review: 12/31/2000 Closing: 06/30/ /30/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Satisfactory Moderate Moderately Unsatisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory i

6 Quality of Supervision: Unsatisfactory Overall Bank Performance: Moderately Unsatisfactory Implementing Agency/Agencies: Overall Borrower Performance: Satisfactory Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: Yes Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): Satisfactory Satisfactory Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Power Theme Code (Primary/Secondary) Infrastructure services for private sector development Primary Primary Natural disaster management Secondary Primary Other financial and private sector development Primary Primary Other urban development Primary Not Applicable Regulation and competition policy Primary Primary E. Bank Staff Positions At ICR At Approval Vice President: James W. Adams Jean-Michel Severino Country Director: Ajay Chhibber Andrew D. Steer Sector Manager: Hoonae Kim Mohammad M. Farhandi Project Team Leader: Richard Jeremy Spencer Darayes Bahadur Mehta ICR Team Leader: ICR Primary Author: Richard Jeremy Spencer Richard Jeremy Spencer Kurt F. Schenk ii

7 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) (a) Strengthen the high voltage transmission network to facilitate evacuation of power from generating stations to the load centers; (b) Rehabilitate and expand distribution systems to meet demand, reduce losses and improve reliability; (c) Support sector reform and restructuring through: (i) unbundling "transmission" and "generation" functions; (ii) the implementation of regulatory reforms; (iii) the introduction of tariff reforms; and (iv) exploring financing of distribution from diversified sources. (d) Support institutional strengthening and commercialization through: (i) securing greater autonomy for the distribution companies; and (ii) introducing planning capabilities for Demand Side Management. Revised Project Development Objectives (as approved by original approving authority) Project Development Objectives unchanged on restructuring. (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Strengthen HV transmission network to facilitate evacuation of power from generating stations: Faults/100km/year at 500kV Transmission losses (%) Power flows between Center and South (MW) Faults/km/year:.02 Transmission losses: 19.8% Central-South power flows: MW 66, GWh 260 Nha Be-Tao Dan Power Flow: MW 0, GWh 0 Faults/km/year: Transmission losses: 16.0% Central-South power flows, MW: 856, GWh 3,420 Nha Be - Tao Dan Power Flow MW: 500, GWh 2250 Faults/100km/ year at 500kV revised to Transmission losses revised to 3.75% Central-South power flows revised to 1,400 MW, 3,420 GWh Faults/100km/year at 500kV: Transmission losses 2.4% Central-South power flows: 1,300-1,400 MW(maximum), 3,650 GWh Nha Be - Tao Dan Power Flow MW: 160, GWh Date achieved 12/05/ /30/ /26/ /30/2007 Comments (incl. % achievement) 90%. Fault level in 500kV system lower than revised target. Central - South flows in line with revised target (range, not single number is reported). Losses considerably below target. Flows to Tao Dan lower. Indicator 2 : Rehabilitate and expand distribution systems to meet demand, reduce losses and iii

8 Value quantitative or Qualitative) improve reliability: Interruptions: Number Duration (hours) Distribution losses (%) No. interruptions Halong 17 Vinh 32 Vung Tau 100 Ho Chi Minh City 20 Duration interrruptions (hrs/yr): Halong 3 Vinh 3.5 Vung Tau 29 Ho Chi Minh City 14.5 Dist. losses, %: Halong 18 Vinh 15 Vung Tau 12.5 Ho Chi Minh City 14.5 No. interruptions Halong 8 Vinh 10 Vung Tau 5 Ho Chi Minh City 8 Duration interrruptions (hrs/yr): Halong 1 Vinh 1.1 Vung Tau 3 Ho Chi Minh City 10 Dist. losses, %: Halong 10 Vinh 10 Vung Tau 8 Ho Chi Minh City 10 Added: Interruptions PC1 and PC2 area: 3.32 Average duration supply interruptions: hours Losses PC1: 6.78, PC2: 7.93 Interruptions, no.: Halong 0.33 Vinh 0.24 Vung Tau 2.16 HCMC 5.39 PC1 and PC2: 2.34 Interruptions, mins: Halong 5 Vinh 264 Vung Tau 58 HCMC 41 PC1 and PC Losses Halong 6.3 Vinh 5.1 Vung Tau 7.4 HCMC 6.7 PC PC Date achieved 12/05/ /30/ /26/ /30/2007 Comments (incl. % achievement) 90%. Significant improvements in overall distribution system reliability, well over targeted values. Improvement in losses in original areas exceeded, but minor shortcomings in PC1 and PC2 areas. Support sector reform through (a) unbundling of transmission and generation Indicator 3 : functions; (b) implementation of regulatory reforms; (c) introduction of tariff reforms; and (d) exploring financing of distribution from diversified sources. Value quantitative or Qualitative) Transmission bundled with generation. No electricity law or secondary legislation. No separate regulator or procedures. Tariff 6.1 cents/kwh Transmission separate cost center 1998, profit center Electricity law presented to National assembly Not revised 1998 promulgated in 12 months. Separate regulator and functions mid 1999 Regulatory Four transmission companies operate as cost centers. Electricity Law passed December 2004 Regulator created October Tariffs remain 5.2 cents/kwh iv

9 procedures end Tariff 7 cents/kwh by Date achieved 12/31/ /31/ /26/ /30/2007 Comments (incl. % achievement) Indicator 4 : Value quantitative or Qualitative) 75%. Moderate shortcomings: progress son reform slow but 100% achieved by end of project. Tariff increased in VND terms by about 25%. It may have been unrealistic / undesirable to expect more rapid progress on reform or such significant tariff increase. Support institutional strengthening and commercialization through: (i) securing greater autonomy for the distribution companies; and (ii) improving its Financial Management Systems. Charters for each distribution company increasing No charters for each operational and distribution company. management No distribution function autonomy. at Deputy Director Distribution General level. function Deputy Unimproved accounting Director General and budgeting systems by created by April January Improved accounting and budgeting systems by January 1999 Not revised Greater autonomy given by delegation rather than amendment of charters. Distribution DDG appointed April Financial management system improved Date achieved 12/31/ /31/ /26/ /30/2007 Comments (incl. % 90%. Qualitative improvements in PCs' autonomy and commercial management. achievement) Indicator 5 : Help normalize economic activity in typhoon-affected areas Inferred: reconstruct 180km LV lines, 160km No baseline provided. MV lines and 182km MV line, Value Inferred baseline is install km LV line, quantitative or Not revised absence of electricity distribution 389 transformer Qualitative) service in nine provinces transformer substations installed substations with 25MVA aggregate capacity Date achieved 12/05/ /30/ /29/ /31/2000 Comments (incl. % achievement) These objectives are inferred from the PAD text as no PDO indicator was established. 100% achieved but delayed in completion. v

10 (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years 500kV Pleiku to Phu Lam transmission system and 500kV substations added (from PAD) Actual length of transmission line added under subproject 550km Transmission line: Transmission line: and 450MVA 2,660km 1,480km Not revised transformer Capacity: 4,400 Capacity: 2,700 MVA capacity added. MVA End of project values for whole system 1,530 km and 1,800 MVA Date achieved 12/31/ /30/ /26/ /30/2007 Comments (incl. % achievement) 100% of original components added. Original baseline and target values seem too high for Vietnam 500kV system but too low for Vietnam kV system. Indicator 2 : 220kV Nha Be to Tao Dan system installed (from PAD) Value (quantitative or Qualitative) Transmission line: 0km Capacity: 0 MVA Transmission line: 10km Capacity: 626 MVA Not revised 12km of transmission line added and 376 mva of transformer capacity added Date achieved 12/31/ /30/ /26/ /30/2007 Comments (incl. % achievement) Transmission line and substation operational. 60% of transformer capacity added, because only one 220/110kV transformer added rather than two originally planned. Indicator 3 : Distribution systems of Halong, Vinh and Vung Tau rehabilitated Value (quantitative or Qualitative) MV line length: 370km Transformer capacity: 220MVA LV line length: 307km MV line length: 650km Transformer capacity: 3700MVA LV line length: 1,400km Not revised MV line length: Transformer capacity: LV line length Date achieved 12/31/ /30/ /26/ /30/2007 Comments (incl. % [awaiting final data but expected to be 100%] achievement) Indicator 4 : Capacity of transmission system expanded to meet current needs and power demand patterns (from restructuring memo) Value No 500kV substation at 500kV substation Not revised. Doc Soi substation vi

11 (quantitative or Qualitative) Doc Soi No incremental 220kV line and substations No electrical interconnection between Vietnam and Cambodia at Doc Soi Project About 230km of extended by single and doublecircuit 220kV line June 30, 2007 six months to and two substations Electrical interconnection completed dropped and transferred to another Credit. 324km of 220kV single and doublecircuit line and 125MVA (one substation) added. Connection to Cambodia ready but not connected(awaiting line on Cambodia side) Date achieved 05/26/ /31/ /21/ /30/2007 Comments (incl. % 141% of transmission line, but 50% of substations (by number). achievement) Indicator 5 : Demand in Hai Duong and Ha Tinh and other demand centers met with highquality reliable supply About 300km of Incremental 302km 110kV line and of 110kV line and No incremental 110kV 590MVA Not revised. 315MVA line or substations substations in Value Project substations in MV and LV systems in service (quantitative extended by service. 341 km Ha Tinh and Hai Duong 22kV MV and LV or Qualitative) six months to MV lines in Ha unrehabilitated systems in Ha June 30, 2007 Tinh and Hai Tinh and Hai Duong and [65] Duong MVA installed rehabilitated Date achieved 05/26/ /31/ /21/ /30/2007 Comments (incl. % [100% achieved in all indicators] achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 05/28/1998 Satisfactory Satisfactory /17/1998 Unsatisfactory Satisfactory /13/1999 Satisfactory Satisfactory /20/1999 Satisfactory Satisfactory /27/1999 Satisfactory Satisfactory /22/2000 Satisfactory Satisfactory /28/2000 Unsatisfactory Satisfactory /26/2001 Satisfactory Satisfactory vii

12 9 12/27/2001 Unsatisfactory Satisfactory /27/2002 Satisfactory Satisfactory /25/2002 Satisfactory Satisfactory /30/2003 Satisfactory Satisfactory /29/2003 Satisfactory Satisfactory /29/2004 Satisfactory Satisfactory /28/2004 Satisfactory Satisfactory /06/2005 Satisfactory Satisfactory /29/2006 Satisfactory Moderately Satisfactory /23/2007 Satisfactory Satisfactory H. Restructuring (if any) Restructuring Date(s) ISR Ratings at Restructuring Board Approved PDO Change DO IP Amount Disbursed at Restructuring in USD millions 05/26/2005 S MS Reason for Restructuring & Key Changes Made I. Disbursement Profile viii

13 1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) Ten years after the watershed doi moi restructuring of the economy, Vietnam's progress was tangible: in 1997 GDP stood at $24 billion and had grown at 8.2 percent per year for the past five years; annual per capita GNI was around $300. Poverty had been reduced from 58 percent to 37 percent. In , investment had run at about 24 percent of GDP, of which foreign direct investment made up ten percent. Though the Asian financial crisis was to break later in 1998, the project was prepared against a backdrop of solid macroeconomic growth. The energy sector mirrored the macroeconomic picture. On average each person used quite small amounts of energy but rising demand for energy was forecast on the back of strong industrial sector growth, which had consistently outpaced GDP, and reached 13 percent in Demand for electricity was forecast to grow about 70 percent faster than GDP from 1997 to The main issues facing the electricity sector were: (a) Need for investment. Large sector investments, estimated to cost around $6 billion, were predicted for the period The Government of Vietnam (GoV) planned a twin-track approach of increasing electricity tariffs and attracting foreign investment including the private sector. (b) Inadequate and inefficient electricity infrastructure. Seasonal and locational differences in generation and demand indicated the need to strengthen the north-south extra high voltage transmission system while distribution losses in the range of percent pointed to the need for extensive rehabilitation, to reduce the need for additional investment in generation. (c) Impediments to commercial operation. Although the power sector was consolidated under Electricity of Vietnam (EVN) in 1995, commercialized operation was hindered by the need to unbundle the generation, transmission and distribution functions and encourage diversified participation. (d) Inadequate regulatory regime. Government functioned as policy maker and regulator while also being involved in operational decisions that would have been better devolved to EVN. (e) Need to improve demand side efficiency. Although there was some awareness of the potential there was limited capacity, information and incentive for initiatives in demand side management (DSM). On November 3, 1997, after appraisal, Typhoon Linda struck southern Vietnam. Nine provinces were affected, 432 people were killed and 3,800 missing, 76,537 houses 2,250 school rooms and 358,000 hectares of paddy land were ruined. Damage to the electrical 1

14 distribution network was estimated at $13 million and included 180km of low voltage (LV), 160km of medium voltage (MV) lines and 320 distribution substations destroyed. Supply to about 100,000 consumers was disrupted. The investment and reform objectives of the project were covered in the Country Assistance Strategy (CAS) dated October 25, 1995 (report 15053). Support for the transition to a market economy including investments in the power sector was identified as a priority for IDA, in recognition that neither other donors nor the private sector would be able meet all the financing needs of the sector. The CAS was consistent with the GoV's plans to invest in basic infrastructure and the Bank's strategy in the power sector to focus on needs in transmission and distribution, including high-return rehabilitation, while addressing reform to attract the private sector. The Bank supported the project for three reasons. First, by providing $189 million of IDA funding, it would help meet Vietnam's needs for investment, focusing on reinforcing the transmission and distribution grids to improve their efficiency; it would also introduce DSM to the sector. Second it would broaden and deepen the Bank's policy dialogue on badly needed sector-wide reform and commercialization of EVN. Third, it would provide urgently-needed assistance to reconstruct distribution systems following Typhoon Linda. 1.2 Original Project Development Objectives (PDOs) and Key Indicators (as approved) The PDOs were to: 2

15 (a) Strengthen the high voltage transmission network in Vietnam to facilitate evacuation of power from generating stations to the load centers. (b) Rehabilitate distribution systems to meet demand, reduce losses and improve reliability. (c) Support power sector reform and restructuring through: (i) the separation of "transmission" and "generation" functions; (ii) the implementation of regulatory reforms; (iii) the introduction of tariff reforms; and (iv) exploring financing of distribution from diversified sources. (d) Support institutional strengthening and commercialization through: (i) securing greater autonomy for the distribution companies; and (ii) introducing planning capabilities for demand side management. (e) Help normalize economic activity in the Typhoon Linda affected areas through the reconstruction of the electricity distribution network. The key performance indicators were improvements in transmission system reliability, losses and usage; improvements in distribution system reliability and losses; qualitative measures of the progress of reform including the operation of transmission as a cost center, presentation of an electricity law to the national assembly, and creation of a regulatory office and regulatory procedures; and qualitative measures of the autonomy of the distribution companies, improvements to EVN's financial management systems and the measurements in the reduction in peak demand and electricity consumption. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDOs were unchanged on restructuring in May Main Beneficiaries, The main beneficiaries were the Ministry of Industry, on behalf of the Government, EVN and its subsidiary Power Companies (PCs), No. 1 (PC1), responsible for electricity distribution in the northern part of the country, No. 2 (PC2) responsible for electricity distribution in the southern part of the country and Ho Chi Minh City PC (HCMC PC) responsible for the metropolitan area of Ho Chi Minh City. EVN directly benefited from the investments in the transmission system, by improving stable and reliable operation of the power system, by increasing the capacity to transport power between north to south in line with seasonal demand and generation availability, by enabling connection of additional generation capacity and by reduction in transmission losses. PCs 1 and 2 and HCMC PC benefited through investments designed to improve the capacity and efficiency of their systems, thus enabling them better to meet demand and to improve service to consumers. The Ministry of Industry (MoI), EVN and the PCs benefited from support, during preparation, of the development of a medium term power sector policy. During the project, technical assistance (TA) supported the first steps in implementing the policy to separate generation from transmission, to improve transparency and autonomy in the 3

16 commercial management of power transmission and distribution operations and to establish a legal and regulatory framework. The introduction of a DSM action plan and program further improved the efficiency of EVN and the PCs in meeting consumer demand. Secondary beneficiaries were electricity consumers, primarily in the north and south of the country served by PCs 1 and 2 and in particular in the cities of Ha Long, Ha Tinh, Hai Duong and Vinh in the north and Ho Chi Minh City and Vung Tau in the south. Indirectly, electricity consumers throughout the country were beneficiaries. The gains to consumers in improved quality of power service as a result of the investments can be inferred from fewer interruptions in supply and greater quantities of power flowing in the system. The main and secondary beneficiaries were not changed by the project restructuring, however the larger number of investments possible through cost savings increased the number of secondary beneficiaries and the benefits they gained. 1.5 Original Components The Transmission and Distribution Component was divided into six subcomponents: (i) construction of the second circuit of the Pleiku-Phu Lam 500 kv transmission line (TL) and associated substations (SS); (ii) construction of the Ha Tinh 500/220/110kV SS; (iii) construction of the 220 kv Nha Be to Tao Dan circuit and 220/110kV gas insulated switchgear (GIS) Tao Dan substation in Ho Chi Minh City; (iv) rehabilitation of distribution networks in the cities of Halong, Vinh, and Vung Tau; (v) consultant services for the Pleiku Phu Lam 500kV line and the 220kV Nha Be to Tao Dan circuit and substation; and (vi) technical assistance for improving the regulatory framework and for the demand side management (DSM) program. This component supported the first four of the project development objectives, by strengthening the high voltage transmission network, rehabilitating distribution systems, supporting sector reform, and restructuring and supporting commercialization and institutional development. An associated TA component, financed by Japan, initiated the work on sector reform and restructuring. The component financed studies to improve the transmission and distribution functions. The Disaster Reconstruction Component consisted of the reconstruction of 180km of LV and 160km of MV distribution lines and 320 distribution substations with an aggregate capacity of 25MVA. The component supported the fifth project development objective of normalizing activity in the Typhoon Linda affected area. 1.6 Revised Components Formal Restructuring Without Changes to PDO In May 2005, a restructuring of the project was approved by the Board. The PDOs were not changed. The reasons for the restructuring was to permit additional important and 4

17 badly-needed investments to be included for financing under the project, which would contribute further to the PDOs while also using substantial project cost savings that had built up. The restructuring introduced a more flexible approach which allowed EVN and the PCs to include (and drop) subprojects in response to their investment priorities. A more generic project description was adopted, and appraisal criteria agreed for the subprojects, including their contribution to the PDO, technical, economic and financial efficiency, and compliance with the World Bank's safeguards policies. Three subcomponents under the Transmission and Distribution Component were modified and a further 28 subprojects were proposed for financing with a total cost of $160.6 million, of which $88.3 million was proposed to be financed by IDA. In the event 20 subprojects were financed, with a total cost of $96.30 million, of which $48.70 million was from IDA. The subcomponents modified are detailed in Table 1. Table 1: Original and Revised Scope of Subcomponents Original Scope/ Subcomponent Revised Scope (a) Pleiku Phu Lam 500kV Permitted additional 500kV TL and SS, none implemented. transmission line and associated substations (b) 220kV Nha Be Tao Dan Permitted additional 220kV TL and SS. circuit and Tao Dan substation Implemented: Thot Not Chau Doc 220kV TL and Chau Doc 220/110kV SS $20.1 million of which $11.0 million IDA Quy Nhon Tuy Hoa 220kV TL $11.0 million of which $4.4 million IDA Tuy Hoa Nha Trang 220kV TL $21.7 million of which $8.7 (d) Rehabilitation of distribution networks in Halong, Vinh and Vung Tau million IDA Permitted rehabilitation and upgrading of additional distribution networks in the northern region and southern region of the country. Implemented: In northern region: Lang Son Cao Bang 110kV TL $7.2 million of which $2.9 million IDA Troi 110/35/22 kv SS and associated TL $3.2 million of which $1.9 million IDA Thanh Chuong 110/35/22 kvss $1.6 million of which IDA $1.0 million Rehabilitation of Hai Duong and Ha Tinh cities' distribution networks $11.9 million of which IDA $5.1 million In southern region: Vinh Long Cho Lach 110kV TL $1.6 million of which IDA $0.6 million Soc Trang My Tu TL $1.2 million of which IDA $0.7 million Di Linh Phu Hoi Duc Trong 110kV TL $2.6 million of which IDA $1.0 million Can Tho Chau Thanh 110kV TL $1.2 million of which IDA $0.5 million Phan Thiet Mui Ne 110kV TL $1.3 million of which IDA $0.5 million Mo Cay Cho Lach 110kV TL $2.0 million of which IDA 5

18 $0.8 million Chau Thanh 110/35/22 kv SS $2.0 million of which IDA $1.2 million Da Lat 2 110/35/22 kv SS and associated TL $1.2 million of which $0.7 million IDA My Tu 110/35/22 kv SS $1.2 million of which IDA $0.7 million Mui Ne 110/35/22 kv SS $2.0 million of which IDA $1.2 million Cai Be 110/35/22 kv SS $2.0 million of which IDA $1.2 million Cho Lach 110/35/22 kv SS $1.2 million of which IDA $0.7 million To reflect the changes in the project, the results framework was also modified in May 2005, and aligned with monitoring indicators collected by EVN. 1.7 Other significant changes Changes in Timing The project was originally scheduled to become effective in March 1998 and close in June The project was extended a total of five times as follows: June 2002 To December 31, May 2003 To December 31, December 2004 To June 30, June 2005 To December 31, December 2006 Partial, to June 30, Extensions to the closing date of the Credit agreed in June 2002 and in May 2003 were primarily targeted at allowing the completion of the Pleiku to Phu Lam TL and Nha Be to Tao Dan TL and Tao Dan SS subcomponents following a slow start and slow implementation. The third was to allow completion of project restructuring. The fourth extension was given at the time of restructuring in May 2005 to give time to implement the subprojects that were introduced into the project. The fifth was to permit completion of those contracts which had been delayed or rebid as a result of materials price increases that occurred during the second half of Covenants At negotiations, the project covenanted a schedule of increases to bring the average retail tariff to 7 US cents/kwh by March 1, This had become contentious even before the start of implementation and was to be the subject of discussion on several occasions during the lifetime of the project, without reaching substantive agreement between IDA and GoV. In consequence, the tariff covenant was replaced by a covenants for EVN to maintain three key ratios: self financing ratio (SFR), of 25 percent or better; debt service coverage ratio (DSCR), of 1.5 times or more; and debt: equity ratio of no more than 6

19 70:30. The same covenants were applied to all projects in the IDA portfolio providing finance to EVN. Cancellation After the restructuring, EVN and the PCs were unable to bring forward sufficient subprojects to allow the full balance of the credit amount to be committed and disbursed before the revised closing date of December 31, Thus on June 30, 2006, IDA cancelled Special Drawing Rights (SDR) 27 million, (equivalent to about $40 million) from the credit. As of December 13, 2007, the actual amount disbursed from the credit was SDR106 million. SDR 11.4 million, or about $17 million was thus left unused, mainly accounted for by savings on the estimated costs of subprojects implemented following the May 2005 restructuring but also by the significant depreciation in the dollar against the SDR in the latter stages of the project. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Project design was straightforward, with one subcomponent per investment subproject. Swedish International Development Agency (SIDA) was the co-financier for two subcomponents, the 500kV Ha Tinh substation extension and the DSM component but this did not present a substantial complication in the project. The project was underpinned by a major piece of analytical work which was being undertaken simultaneously 1. The analysis identified the potential for transmission and distribution system investments to contribute to electricity system growth and efficiency, and the importance of effective policy and regulation. Other studies supported project design. A significant piece of sector work to support the preparation of an electricity law was also started during preparation. Comprehensive feasibility studies were carried out by international consultants for the major investments at 500 and 220kV. There were multiple dimensions to the PDOs. Taken together these dimensions supported the CAS objective of providing investment support to the power sector and hence the GoV's objective of investment in basic infrastructure as well as helping to increase private sector participation. The parts relating to reform were broad and ambitious and had some linkages to activities outside the project, such as the preparation of the electricity law. Nonetheless the PDOs are considered appropriate and were achievable. 1 Later published as 'Fueling Vietnam's Development New Challenges for the Energy Sector, Report No VN' in December

20 Appraisal appears to have relied on cost estimates based on previous procurement of 500kV and 220kV equipment in Vietnam. These had taken place some years before, and had been based on negotiated prices and thus were higher than could be expected from competitive bidding. In addition, high levels of contingencies were included, because of strong institutional and personal incentives to avoid project costs over-running estimates. At appraisal risks to the development objective namely: timely availability of counterparts funds, implementing agencies management commitment, Government commitment to sector reform were identified and assessed as moderate. Risks to implementation progress: lack of resources for land acquisition; slow procurement; and delays in appointing consultants, were well identified but their impact in terms of the length of delays possible was, with hindsight, somewhat optimistic. Appraisal was based on load forecasts known at the time, but with local demand growth rates sometimes exceeding the national average by a substantial margin, the risk of underestimating or overestimating demand growth was not assessed. The re-evaluation of risks at project restructuring downgraded several, but identified new ones, including subprojects not being identified or appraised in a timely fashion and insufficient attention to safeguards and again may have been over optimistic. A weakness in the project design was how it dealt with raising retail tariffs. Staged rises in the average retail were covenanted on EVN, yet it was unable to influence tariff rises directly, since any increase was subject to government approval. Its value as a means of ensuring adequate financial performance by EVN was also questionable. The Government's commitment to raising tariffs was not explicitly identified as a risk to the PDO or to implementation progress, unless inferred as part of 'waning of Government commitment to push with reforms and of EVN commitment to institutional strengthening programs' which was rated moderate. There was a Quality Assessment Group (QAG) review at entry but there are no records of its findings on the project files. 2.2 Implementation Design for initial implementation was straightforward, with each subcomponent to be carried out by identified implementing agencies. The technically more complex subcomponents were planned to be supported by international consultants to prepare feasibility studies, support procurement and supervise implementation. Ministry of Industry and EVN were the main agencies involved in the technical assistance activities. They and HCMC PC had some experience of Bank procedures, including procurement and disbursement, gained through previous projects. MoI had been engaged with the Bank on policy dialogue for a number of years. No fiduciary or safeguards issues were new to the project. Tariffs The level and the timing of tariff increases were discussed extensively during project preparation and were supported by a study carried out by international consultants. 8

21 Shortly after the project was approved by the World Bank's Board of Directors in January 1998, GoV seems to have had misgivings about committing itself to the level of 7 cents/kwh by December 31, 1999 and thus the signing of the project documents was delayed. A further round of negotiations resulting in agreement of staged increases such that the tariff would reach 7 cents/kwh by March 1, This schedule was reflected in the Development Credit Agreement signed in November During project implementation there were at least two slippages in the schedule: in May 1999, the tariff of 7 cents/kwh was expected to be reached by 2002; and in June 2001 only by July 1, Reflecting tariff concerns, the DO progress indicator was downgraded to unsatisfactory on three occasions. In VND terms, average tariffs did rise over the project period from VND 680/kWh in 1998 to VND 842/kWh from January 1, In dollar terms it stood still: at the exchange rate prevailing in mid 1998 the tariff was 5.24 cents and at the exchange rate in mid 2007, it was 5.22 cents/kwh. Although EVN is in some respects financially more exposed today than it was in 1997, in 2005, the last year for which a full analysis has been completed, it maintained its three key performance indicators of SFR, DSCR and debt:equity ratio at covenanted levels. Slow Implementation Progress Implementation of the original subcomponents started slowly, delayed by late signing and effectiveness, since final approvals to subproject technical designs were not given until then. There was also a delay because of uncertainties within government about the timing of the second circuit for the Pleiku Phu Lam 500kV line. When under way, progress was slow but without major difficulties. There were delays in hiring the consultants to support EVN and HCMC PC on the Pleiku to Phu Lam TL and the Nha Be to Tao Dan TL and Tao Dan SS. There were significant delays in procurement. Cost Savings The original subcomponents were achieved at substantially lower cost than identified at appraisal, not wholly as a result of the East Asian financial crisis. As early as August 2001, GoV requested IDA to use the cost savings, implicitly about $20 million. Estimates of saving rose by stages from then until, by December 2004, they were estimated at $87.5 million, or about 44 percent of the original credit amount. A workshop in early 2004 was held to review progress and to identify subprojects that could be included in a restructured project. This workshop identified a substantial number of subprojects, including those requested by SBV in 2001 that were at a sufficiently advanced state of preparation to be included in the project. The amendment took a further year to finalize. Other Issues in Implementation 9

22 The May 2005 restructuring made the EVN/IDA process easier to manage with the minimum of formalities, but EVN and the PCs remained exposed to the complex and extended GoV approvals process for each subproject. To prepare the restructuring on the Vietnamese side required approval of the Prime Minister, and subprojects still required a process of feasibility study, detailed design and preparation of procurement documents which required separate, sequential approvals. The approval of the restructuring by GoV delegated approvals for EVN subprojects to MoI and for PCs' subprojects to EVN while all procurement could be approved by EVN. This was a significant improvement compared with project preparation when approval by the Prime Minister was required at several stages. Towards the end of project implementation, a sharp increase in the prices of several commodities including aluminum, copper, nickel, steel and zinc further slowed procurement. All are key constituents of electrical systems equipment and as a result a number of procurement packages had to be rebid. It was the result of this rebidding that the final extension from December 31, 2006 to June 30, 2006 was granted. Price adjustment formulae were not adopted in the project, because it was considered incompatible with the procurement law in Vietnam which only permits deviations from it if a donor's procurement guidelines require it; price adjustment formulae are not mandated in the Bank's procurement guidelines. There appears to have been a QAG assessment of supervision but there are no records of its findings on the project files. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design The indicators for measuring the PDOs were of reasonable quality. Those related to the investment components were specific, measurable and relied on EVN's and the PCs' own performance monitoring system. Those linked to the sector reform and institutional development of EVN could have been more rigorous. The emergency recovery component was not included in the project logical framework and no indicators for its objective appear to have been developed. The restructuring of the project in May 2005 introduced some additional indicators and revisited the original ones. M&E for the physical investment was aligned with the data collected by EVN for its own internal monitoring purposes and is considered reliable and sustainable. Indicators introduced during the restructuring are less easily attributed to the project. There was also some lack of clarity on which of the original indicators were retained at the restructuring. The financial performance of EVN and the PCs was designed to be monitored on a consistent basis for each project in the portfolio. An International Creditors' Model (ICM) was developed under a separate project initially to verify appropriate tariff levels and subsequently used to ensure the key financial indicators were consistently calculated. 10

23 Implementing agencies were also required to hire independent monitoring consultants, on terms of reference satisfactory to the Bank for monitoring of implementation of environment assessments and environment management plans (EA/EMPs) and resettlement plans (RPs). The independent consultants' reports were sent to the Bank for review. M&E Implementation Implementation progress data were captured quarterly. Data on outcomes were collected as the subprojects were completed. Data for all indicators were collected as part of the implementation completion reporting process. Financial indicators were monitored as an annual exercise for all projects in the portfolio. Data quality for the investment subcomponents has generally been acceptable. Methods for data collection have generally been appropriate, using a 'bottom up' reporting process which is linked to the management hierarchy in EVN and the PCs. Independent monitoring of EMPs has provided data of mixed quality with the main difficulty being insufficient field-based monitoring using appropriate techniques. M&E Utilization Implementation data were used to review progress of the project against agreed timetables and to revise the timetables as necessary. Use of the outcome-level indicators has proved problematic, because the indicators chosen are at system level and it is hard to distinguish impact of the project from other non-project related factors. It has become increasingly difficult as the system has grown, and consequently the impact of any single subproject is less significant. Financial monitoring data have been the basis for dialogue with EVN and the Government on a variety of issues including tariff levels, forecast future investment needs, and the impacts of equitization Safeguard and Fiduciary Compliance Environment An EA/EMP was carried out for the second circuit of the Pleiku to Phu Lam 500kV transmission line. It is not clear what level of environment assessment was carried out for the remaining subprojects. Subprojects that were appraised following the restructuring in May 2005 followed agreed guidelines for the preparation of environment assessments. In general the impacts of transmission and distribution lines and substations on the environment were of a mainly temporary nature associated with construction and 2 Equitization is the process of creation of a joint stock company and sale of a proportion of shares to the public and employees. 11

24 included noise, dust, disruption to traffic, excavation operations and the need to accommodate workers. Permanent effects were mainly confined to the right of way of the line, which must be kept clear of high-growing plants and trees. Alignments of lines and siting of substations were chosen to minimize the combined environment and social impacts. Supervision of the implementation of environment management plans (EMPs) by independent monitoring consultants and Bank staff revealed no major issues. Indigenous Peoples The project appraisal document noted that a few ethnic minority households would be affected by the Pleiku to Phu Lam TL but "because of the relatively minor nature of the impact, no separate Indigenous People's Development Plan is considered necessary." The EIA also included sections that constituted a full ethnic minorities development plan (EMDP). EMDPs do not appear to have been prepared for the other original subprojects. Following the restructuring in May 2005, EMDPs were required based on a framework that was agreed with the GoV and adopted by EVN. EMDPs were prepared for 3 subprojects, affecting a total of 1445 ethnic minorities households, mainly on a single 110kV TL from Lang Son to Cao Bang in the north of the country. All EMDPs have been satisfactorily implemented. Resettlement Just over 2,000 households were identified at appraisal as being affected by the various subprojects, of which about 530 needed to be relocated, based on a resettlement Plan (RP) that was an integral part of the EIA. Most of the affected households and nearly all the relocations were linked to the Pleiku to Phu Lam TL. In the event, nearly 9,000 households were affected by the line, the large discrepancy being the result of underestimation at appraisal. Following the restructuring in May 2005, a framework for resettlement planning was agreed with the Government of Vietnam and adopted by EVN and applied to all additional subprojects. Subsequent subprojects affected around 8,700 households, the majority in a minor way. In most cases appraisal estimates of numbers of households affected, land acquisition and compensation were close to the actual values on implementation. Resettlement was on the whole well implemented by the responsible agencies. Most households that were relocated were allowed to remain in their old houses until the new ones were ready, and all were moved as short a distance as possible, resulting in minimal disruption to livelihoods. No grievances or complaints were brought to the attention of Bank staff during implementation which included independent site visits. Independent monitoring of the RPs revealed no major issues. 12

25 Procurement Procurement was effectively organized; at the start of the project a procurement management group involving the Ministry of Industry and EVN was used to support EVN's executing agencies and the PCs in the early stages when they were not familiar with some of the in the more complex procurement processes. Procurement progressed slowly, especially with the large packages at the start of the project, which required multiple levels of approval up to the Prime Minister. There were four complaints during procurement of which two were dropped by the complainant, one was invalidated and one resulted in rebidding. There were no instances of procurement irregularities. Financial Management Financial management was generally satisfactory though there were two recurrent issues during the project. One was late submission of financial management reports (FMRs) and audit reports. Towards the end of the project reporting improved but there were still instances of late submission by the PCs and by EVN itself. Audits were satisfactory throughout the project and continuing entity financial statements were generally unqualified. The second recurrent issue was slow processing of disbursement requests within the Vietnamese system and delays in payments. Under Ministry of Finance rules, all ODA projects must have a controller which, amongst other things, checks disbursement requests made by implementing agencies. For this project, the controller was the Vietnam Development Bank (VDB, formerly the Development Assistance Fund). Some VDB branches' checking was excessive, requiring for example all contracts (including standard parts) to be translated into Vietnamese and notarized. The effect was for the implementing agencies, which for the most part had to pay their suppliers before the checking was complete, to have to wait long periods for reimbursement by IDA; in late 2006 it was estimated that implementing agencies were waiting for VDB to release $25 million in payments for goods financed under the project. In some cases this had a noticeable effect on financial performance of the PCs since they had built up significant levels of receivables. 2.5 Post-completion Operation/Next Phase Each investment subcomponent or subproject was implemented by a Project Management Board (PMB), which is a special purpose, permanent entity within the overall management structure of EVN or the participating Power Companies. On completion of commissioning the subproject was handed over to the operations department of the implementing agency. Each of the subprojects formed part of the investment plan of the implementing agency, which is also the project's ultimate owner. Each transmission project has been handed over from the PMB to one of four transmission companies which together operate all the transmission assets in the EVN. They are now cost centers of EVN and thus staffing, operations and maintenance are the responsibility of EVN, the asset owners. EVN recovers its costs from electricity 13