Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20640 IMPLEMENTATION COMPLETION REPORT (IDA-28200) ON A CREDIT IN THE AMOUNT OF SDR 121 MILLION TO THE THE SOCIALIST REPUBLIC OF VIETNAM FOR A POWER DEVELOPMENT PROJECT June 22, 2000 Energy and Mining Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective As of February 2000) Currency Unit = Dong (D) 14,000 = US$ I US$ = 0.0000714 FISCAL YEAR January I to December 31 ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank ASTAE - World Bank Asia Alternative Energy Program BOT - Build, Operate, Transfer CC - Combined Cycle CPPMB - Central Vietnam Power Projects Management Board DSM - Demand Side Management EIA - Environmental Impact Assessment El - Energy Institute of Vietnam EIRR - Economic Internal Rate of Return ESMAP - Energy Strategy Management Assistance Program FIAS - Foreign Investment Advisory Services EVN - Electricity of Vietnam GSA - Gas Supply Agreement GT - Gas Turbine HV - High Voltage IFC - International Finance Corporation JGF - Japanese Grant Fund LRMC - Long run Marginal Cost MOE - Ministry of Energy MOF - Ministry of Finance MOI - Ministry of Industry MSTE - Ministry of Science, Technology and Environment NPPMB - Northern Vietnam Power Projects Management Board NOx - Nitrogen Oxide OECF - The Overseas Economic Cooperation Fund of Japan PAP - Project Affected People PC 1,-2,-3 Power Companies (as subsidiaries of EVN) PHMY-1 - Phu My Thermal Power Project, Phase -1 PHMY-2 - Phu My Thermal Power Project, Phase -2 PHMY2- I - Phu My Thermal Power Project 2, Phase -I PHMY2-2 - Phu My Thernal Power Project 2, Phase -2 PPMB - Power Projects Management Board PSREP - Power Sector Rehabilitation & Expansion Project (Cr. No. 2724 - VN) PMBRMB- Phu My Ba Ria Management Board RAP - Resettlement Action Plan SAR - Staff Appraisal Report SPPMB - Southern Vietnam Power Projects Management Board Vice President: Jamil-ud-din Kassum, EAP Country Manager/Director: Andrew Steer, EACVF Sector Manager/Director: Yoshihiko Sumi, EASEG Task Team Leader/Task Manager: Anil Malhotra, EACVF FOR OFFICIAL USE ONLY CONTENTS Page No. 1. Project Data I 2. Principal Performance Ratings l 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 10 8. Lessons Learned 12 '3. Partner Comments 12 10. Additional Information 13 Annex 1. Key Performance Indicators/Log Frame Matrix 14 Annex 2. Project Costs and Financing 17 Annex 3. Economic Costs and Benefits 20 Annex 4. Bank Inputs 23 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 25 Annex 6. Ratings of Bank and Borrower Performance 26 Annex 7. List of Supporting Documents 27 Annex 8. ICR Mission Aide-Memoire 28 Annex 9. Borrower's Completion Report 3 7 Map: IBRD No. 27314 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Project ID: P042236 Project Name: POWER DEVELOPMENT Team Leader: Anil Kumar Malhotra TL Unit: EACVF ICR Type: C'ore ICR Report Date: June 29, 2000 1. Project Data Name: POWER DEVELOPMENT L/C/TF Number: IDA-28200 Count r/Department: VIETNAM Region: East Asia and Pacific Region Sector/subsector: PP - Electric Power & Other Energy Adjustment KEY DATE,S Original Revised/Actual PC'D: 07/05/95 Effective: 05/20/96 05/20/96 Appraisal: 09/21/95 MTR: Approval: 02/20/96 Closing: 12/31/99 12/31/99 Borrower/lImplementing Agency: GOVERMENT OF VIETNAM/ELECTRICITY OF VIETNAM Other Partners: ADB, Danish Government Consultant Trust Fund, Danish Government Environmental Fund, Japanese Grant Fund, ESMAP, Bank's Asia Alternative Energy Program (ASTAE), and OECF STAFF Current At Appraisal' Vice President: Jemal -ud-din Kassum Country Manager: Andrew D. Steer Callisto E. Maldavo Sector Manager: Yoshihiko Sumi Jayasankar Shivakumar Team Leatder at ICR. Kurt Schenk Darayes Mehta ICR Primary Author: Kurt F. Schenk; Hung Tien Van; Rebecca C. Sekse; Anil Kumar Malhotra 2. Principal Performance Rafings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: HS Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3. 1 Original Objective: The main objectives of the Project as stated in the Staff Appraisal Report (SAR) dated January 2, 1996 are to: (a) help meet the rapid growth in electricity demand in the south of Vietnam through the addition of new gas-fired generating capacity; (b) strengthen the high voltage (HV) transformation capacity in Vietnam; (c) assist the Govemment in introducing private power in the country; (d) strengthen the institutional capability of EVN through technical assistance (TA) and training; and (e) assist in the formulation of a national strategy and master plan for rural electrification The objectives were realistic in scope, relevant, important, and consistent with the Bank's Country Assistance Strategy (Report 18375) which sees IDA's role for the power sector as filling an important niche not covered by other players in the sector. This includes financing of transmission and distribution, and thermal power to the extent that the Bank Group could be instrumental in introducing private power while simultaneously working with the Govemment in improving the legal and regulatory framework. The project design is directly relevant toward achieving the above objectives. A major achievement of the Project was in spearheading the introduction of private power in Vietnam by the development of Phu My 2-2 through a joint venture/Build Own Transfer (BOT)-type of arrangement (the bidding process is completed but negotiations with the successful bidder are still underway). In addition, the Project supported two crucial investments in the power sector in Vietnam - Phu My 2-1 (2x15OMW gas turbines (GTs)) and HV transformer additions. The GTs assisted in relieving the power shortages in Vietnam and the HV transformer additions reduced recurrent transformer overloading, thus, improving quality of service. The Govemment and IDA developed a staged program for sector reform under the Project and the Ministry of Industry issued a policy statement for power sector reform dated August 12, 1997, which was an update of the first policy statement issued on December 1, 1995. The staged reform program was intended to gradually strengthen the financial health of the power sector to meet the huge investrnent and rural access challenges being faced. It was recognized that the major economic, institutional and political challenges occurring in Vietnam required the reforms in the power sector to be evolutionary rather than rapid and immediate. In essence, it was recognized that while these reforms were not to be easy, they were considered fundamental to embarking on a stable reforn process. Although much work has been done to support reform implementation, in many areas, key decisions and government approvals have been inordinately delayed. Institutional barriers to reform remain, but IDA and the Government are working towards reforming the external environment and internal constraints facing the country. 3.2 Revised Objective: The original objectives remained unchanged. 3.3 Original Components: The Project financed: (a) the installation of 2xl 50 MW gas turbines for the first 450 MW Phu My 2, Phase-1 PIHMY2-1 Combined Cycle (CC) power block; (b) addition of about 900 MVA of high voltage transformation capacity at existing substations in the South of Vietnam and about 1,350 MVA of such capacity in other parts of the country; (c) resettlement and compensation of persons affected by the Phu My plant; and (d) consulting services for: (i) project design and supervision for Phu My; (ii) development of BOT type of arrangement for the second CC power block of Phu My on the basis of competitive bidding; (iii) technical assistance (TA) and training for EVN managerial staff; (iv) master plan for rural electrification; and (v) technical studies for the Dai Ninh hydropower project. In addition, ESMAP group -2 - of the World Bank provided continuing technical assistance for development of a legal and regulatory framework for the power sector. The original Project components were: Component Total Project Cost (US$ million) 2x1501 MW PHMY 2-1 gas turbine generators 109.0 Transformer additions including switching/Control equipment and testing Equipment 72.0 Resettlement and compensation 1.0 Consulting services 6.5 Technical assistance 2.5 Miscellaneous (overheads, taxes and duties and local civil and erection works) 39.0 Total 230 The above components were well designed and took into account the administrative and financial management capability of EVN, the implementing agency. EVN had prior experience with Bank procurement guidelines and procedures through the first Credit (Power Sector Rehabilitation and Expansion Project, CR 2724-VN) and with power projects in the country at the time of project initiation. 3.4 Revised Components: The original description of the components was not revised. 3.5 Quality at Entry: Overall, quality at entry is rated as satisfactory. There is no QAG rating at entry available for the Project. At appraisal, preparation of the technical and economic components of the Project had been advanced to a satisfactory degree, and the level of readiness of all the project components was satisfactorily uniform in terms of level of preparation. At the outset, several initiatives approved under the first Credit, have been provided to assist the Government and EVN in restructuring the power sector and institutional strengthening: (a) the Power Sector Reform and Restructuring Study supported by ESMAP, was intended to assist the Government in developing a framework and sequence for reforming the sector; (b) TA to improve the financial and accounting systems of EVN and the Power Companies (PCs) funded by ADB; and (c) TA with JGF funding to support the commercialization and corporatization of EVN and the PCs. These initiatives were the starting point for further TA planned under the Project and were aimed at ensuring that the recommendations from these studies would be fully considered for implementation. * Consistency of Obiectives. The Project was consistent with the major objectives of the Government Power Sector Policy, namely, to encourage and introduce private sector capital and direct participation in the sector, to introduce an appropriate legal and regulatory framework for the sector, to prepare and implement a plan to bring electricity to rural areas, and to improve the technical and operational efficiency of the sector through strengthening the sector institutions and moving them toward commercialization and corporatization. * Risk Assessment. The Project clearly identified the risks associated with the Phu My component. Risk mitigation measures for minimizing potential implementation delays for Phu My were exemplary: The Phu My GT power plant was finalized in record time under controlled project management arrangements. However, the Project underestimated the political requirements for securing a long-term arrangement for gas supply for Phu My which was expected by end-of 1996 and was only realized in December 1999. Several risks associated with the transformer additions component were not identified at appraisal and, therefore, not mitigated: (a) the risk of forecasting errors in the evaluation of the expected loading levels of transfonners which resulted in early overloading of some - 3 - additional transformers; and (b) the risk of a devaluation in the exchange parity of the SDR to the US Dollar which resulted in inadequate fund allocation to cover committed and anticipated disbursements under the component. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The outcome of the Project is satisfactory; the Project achieved to a satisfactory degree all relevant institutional and physical objectives. It is noteworthy that the development objective (DO) rating of the Project was downgraded from "satisfactory" to "unsatisfactory" in June 1998. This was due to the uncertainty in reaching agreement with the Government on sufficient tariff adjustments that would enable EVN to meet its main development objectives. However, this issue was resolved, when the Government sent an official letter to IDA in August 1998, reaffirtning its commitment to the financial sustainability of EVN and the PCs. The letter indicated Government's agreement to: (a) increase average retail tariff and (b) maintain the self financing ratio of at least 30% during the period. Consequently, the DO rating was upgraded to "satisfactory" in late 1998 and remained "satisfactory" until Credit closing on December 31, 1999. Underlying the implementation of the Project, there were 20 legal covenants which were designed to: (a) promote sector reforn and restructuring; (b) ensure the sustainability of EVN and the sector by requiring compliance with financial ratios; (c) promote rural electrification, (d) promote private sector participation by developing a joint venture/BOT type of arrangements; and (e) foster environmental sustainability. The Government and EVN have complied with all but one of the covenants (i.e. self financing ratio less than 30%) under the Credit and Project Agreements. Sectoral/Institutional Objectives Assist the Government in the Introduction of Private Power. The introduction of private power in Vietnam is a major accomplishment of this Project. The achievement of this objective is highly satisfactory. IDA's successful strategy to predicate financing on a clear up-front policy decision by the Government to introduce private power for the second block of Phu My bore fruit. The Government acceded to IDA's request and competitive bidding for Phu My 2-2 CC, the first plant targeted for private power participation, was satisfactorily concluded and resulted in competitive and favorable low price of power obtained from Phu My bidders. The ICB process has been successful in introducing the concept and procedures for ICB in BOT projects. While the ICB process provided one of the lowest prices for electricity, the Government, MOI, and EVN have yet to conclude the negotiations and sign the contracts. In addition to Phu My 2-2 CC, there are two other independent power producers now in commercial operation (i.e. the 3x125 MW Hiep Phuoc, and the 7 MW Amata), one in which commercial operation is expected in 2000 (i.e. 50 MW Nomura), and seven others for which PPAs have either been agreed or are under negotiation. Establishment of a Legal and Regulatory Framework. The achievement of the sectoral objective is currently underway. Under the Project, a follow-up TA was provided to assist the Government in identifying issues and options in creating a legal and regulatory framework for the power sector that would be conducive to private sector participation. At negotiations, EVN agreed that it would review the recommendations of the consultant study engaged by this TA and take necessary measures to implement the regulatory framework and Electricity Law. As required, a Draft Overview of the Electricity Law was prepared and forwarded to Ministry of Industry (MOI) in September 1996 and a first draft of the Law was discussed with the Government in early 1997. The final Draft of the Law was completed by the Electricity -4- Law Working Group and is currently under review with the National Assembly; approval expected by early 2001. The passage of the Electricity Law was delayed by the backlog of other laws in queue at the National Assembly and ongoing political debate in the structure and role of the regulatory agency. Nevertheless, the process of drafting the legislative package and consultations on the content of the draft legislation are progressing well. The landmark Law has resulted in the preparation of a primary Law and secondary regulations on electricity pricing, licensing, formation of the regulatory authority, supervision and penalties, and inspection of facilities. The framework is essential to successful private power development, however, the massive legal, political, and organizational underpinnings, required to enact the Law was particularly challenging. It is to be noted that in drafting the electricity law and its attendant decrees, there was coordination with the ADB who financed part of the TA necessary for the detailed drafting of the decrees while the Bank worked on the draft of the Electricity Law. Financial Obiectives and Compliance with Covenants. The financial objectives of the Project, as reflected in the covenanted financial ratios, were substantially achieved. EVN's financial performance since its creation in February 1995 has been satisfactory. Its profitability and strong perfornance are reflected in the financial ratios: from FY96-98, operating margin (earnings before interest and taxes) averaged 17%; return on average invested capital, 4%; and self-financing ratio, 36%. EVN's financial projections during project appraisal were largely met. At appraisal, EVN projected financial results to be satisfactory on the strength of robust sales, reduced system losses, efficient implementation of the power development program and upward adjustment in tariffs. With this scenario, it was assumed that EVN would be able to finance about 34% of its future investments from internal sources. ]n spite of the regional financial crisis in mid-1997 and export stagnation which affected energy consumption in all economic sectors, EVN continued to record satisfactory financial performance and achieve strong earnings in FY98. Because of the continued growing demand for power, albeit at a slower rate than pre-1997 pace, and increased revenues from electricity sales, sufficient revenues were generated by EVN to cover all operating and maintenance expenses (including depreciation) and interest expenses. Except for FY98, EVN was in compliance with all the financial covenants during the project period. Despite positive operating results, however, audited figures showed that EVN fell a little short of its obligation to contribute at least 30% of internally generated funds to investment, posting a self financing ratio of 27% in FY98, The shortfall was caused primarily by an increase in working capital requirements due to significant trade prepayments at the end of the year, which tied up necessary funds. The financial strength of EVN and the power sector as a whole is a key development objective of IDA in its involvement in Vietnam's power sector. Hence, the sector reform program required an increase in the average rate of tariffs to reflect the true cost of electricity supply to consumers. The long-run marginal cost of electricity was estimated in 1993 to be in the range of 7 USą/kWh and the Government, at the time of project appraisal, expressed its commitment to increasing tariffs to this level by 1999. Electricity tariffs were raised periodically during the project period: in June 1995, April 1996, and May 1997. In January 1998, IDA approved the third Vietnam Credit for the Transmission, Distribution and Disaster Reconstruction Project, which was conditioned on the Government's actual approval to raise electricity tariffs to 7 USą/kWh by 1999. However, while the Government agreed to the tariff conditionality during negotiations, they were not prepared at Credit signing to be bound by a tariff increase within a year's time. Furthermore, the impact of the regional financial crisis and continuing devaluation of the Dong against the dollar, raised major concerns in the govemment. This led to an 18-month impasse, a delay in Credit signing and a downgrading of the Project rating to unsatisfactory. After detailed discussions with the Government, the issue was finally resolved and agreement was reached to raise average retail electricity - 5 - tariffs according to a progressive schedule: (a) 5.2 USO/kWh by July 1999; (b) 6.2 USO/kWh by July 2000; and (c) 7 US /kWh by March 1, 2001. In March 1999, EVN proposed a restructuring of tariffs within categories and an increase in the average retail tariff to 5.2 USO/kWh and the Government approved the proposal effective October 1, 1999. Physical Objectives The physical objectives were fully achieved. Phu My 2-1, completed in record time, assisted in meeting the rapid growth in demand in the southern areas of Vietnam. The Project also added 2,447 MVA (SAR: 2,250 MVA) of transformer capacity which is now in operation, assisting in reducing the recurring brown outs and improving the voltage profile in the system. 4.2 Outputs by components: Physical Components Construction of Phu My 2-1, 2x150 MW Gas Turbines and Status. This component was satisfactorily carried out. Phu My 2-1 was executed by a turnkey contract through International Competitive Bidding, the first such contract undertaken by EVN. Project management was satisfactorily carried out by the Phu My Ba Ria Management Board (PMBRMB). Completion time for the Project was a record 419 days, in keeping with its "fast-track" schedule. Unit 1 was synchronized on February 2,1997 and Unit 2 on March 3, 1997. The GTs are currently operating on gas from the White Tiger field. The long-term supply contract, according to the credit covenant, which was supposed to have been signed by December 1996, was finally signed in December 1999, for a period of 17 years starting from the year 2000. Phu My 2-1 was developed initially as an open cycle gas turbine plant, with later conversion to combined cycle, giving a final capacity of approximately 900 MW. Annual unplanned interruption for maintenance was 2% in 1998 and 3.1% in 1999. A major overhaul of both units was undertaken in 1999, and hence unit availabilities were down to 79% and 38% for units 1 and 2, respectively. For 1997 and 1998, plant availability exceeded the target of 85%. The units are well maintained and operating staff is adequate and well trained to cope with any contingency in the plant. Maintenance budget for the period 1997-1999 was about 28% of the operating budget. Addition of transformer capacity and status. By Credit closing, 44 of the 46 substations were energized and the assembly and installation works of the remaining two substations have been completed. Procurement of goods was undertaken satisfactorily through ICB while local construction companies performed the installation-works. Despite delays in finalizing the contract awards for the substations and the regional financial crisis which affected delivery of some equipment this component has been, in the main, satisfactorily carried out by the Northern, Central and Southern Power Projects Management Boards of EVN As all transformers and associated switchgear were installed in existing substations operating for many years, land acquisition was not necessary. In addition, all transformer substations built followed Vietnamese environmental and safety regulations and were approved by the local fire-Protection Authority. The installation of transformers posed no significant environmental risk and no PCBs were used. * Northern Vietnam, five 220 kV and twelve 110 kV existing substations were extended, adding a total transformer capacity of 1,410 MVA. A total of 15 substations were energized by December 1999 and the Dong Anh 110 kV substation, which was transferred to Hanoi Power Company in May 1999, was energized in June 1999. Only the Viet Tri 110 kV substation remained to be energized by Credit closing date, with completion expected in March/April 2000. Financing for the balance of this work will be undertaken by EVN. -6 - * Central Vietnam, one 220 kV and five 110 kV existing substations were extended, adding 207 MVA of transformer capacity to the system. There was a 1 /2-year delay, for the I 0 kV substations, because of the impact of the regional financial crisis on the suppliers who could not deliver the control and protection panels. * South Vietnam, three 220 kV and twenty 110 kV existing substations were extended, adding 830 MVA to the system and improving the recurrent overloading and undervoltage situation in the network. All substations except one were energized by Credit closing date. The My Tho substation was energized in March/April 2000 with financing provided by EVN. Environment and Land Acquisition Phu My 2-1 is in compliance with social and environmental requirements. Social impacts have been kept to a minimum, and the Project has improved the local infrastructure, as well as welfare of the project affected people (PAPs): annual per capita income of the affected people rose five fold in the 4-year period from 1995-1999: from D 890,000, at project appraisal to D 5,460,000 at project completion. About 80% of the inhabitants in Phu My Township live on agricultural activities (i.e. fruit crops, cashew nuts, rice cultivation, animal husbandry), fishing and salt production. Appraisal estimates for resettlement and land acquisition factors (Tables 1 and 2 in Section 10) were close to the actual values, reflecting a thorough analysis of the issues. According to the Township Development Plan, Phu My will become an urban area which would include the Phu My Industrial Development area, comprising heavy industry, fertilizers, and metallurgy, provide opportunities for employment, and further increase the standard of living of the PAPs . In retrospect, the Resettlement Action Plan (RAP) constituted a good basis for resettlement planning. No major grievance was recorded. As required in the Project Agreement, an environmental unit was set up by June 30, 1996. The following environmental mitigation measures which were satisfactorily implemented: * GTs are burning natural gas which is considered environmentally benign. * GTs are equipped with low NOx burners and NOx levels have been kept below 25 ppm which compares favorably with the appraisal figures of 50 ppm. * At night, noise levels range from 47-53 decibels (dBA) against the appraisal figures of 55 dBA. * Since oil spillage into the sensitive mangrove ecosystem is a potentially serious matter, oil deliveries are inspected regularly by the local fire department. * Operating and maintenance procedures have been established for the delivery and inspection of oil and an emergency response plan is also in place. * As required in the EIA, an environmental coordination and training program, and environmental monitoring during construction and operation, were fully implemented. More information on environmental data is available in Table 3, Section 10. Technical Assistance TA for the Development of BOT type of Arrangement for Phu My 2-2. The outcome of this TA is satisfactory. Closing negotiations on the final arrangements for Phu My 2-2 are expected in July 2000 and commercial operations by 2003. TA for Rural Electrification Master Plan. The outcome of this TA is satisfactory. The TA was financed by the Danish Government Consultant Trust Fund, the Danish Government Environmental Fund, and the Bank's Asia Alternative Energy Program (ASTAE). It was aimed at providing assistance to the Government in developing a national rural electrification strategy and implementation plan to extend - 7 - electric service to more than 65% of the population by the year 2010. The TA was completed in June 1999 and its findings and recommendations were used by EVN and IDA for the preparation of the Rural Energy Project which was approved by the IDA's Board on May 30, 2000. TA for Technical Studies for Dai Ninh. This TA was successfully carried out. With financing from the Japanese Grant Fund, the objective of the TA was to assist the Government in making a decision on the most feasible hydropower scheme under its Master Plan for hydropower development; and the development of models for the optimization of the Dai Ninh Hydropower Project. The outcome of this TA would have supported IDA's preparation work on a Dai Ninh Hydropower Project, but financing for the project was taken over by OECF. The feasibility study, including detailed design and bidding document were finalized and approved in December 1997. IP Rating: Throughout the implementation of the Project, the Implementation Progress rating of the project was "satisfactory". The implementation of the Project was accomplished in record time, there were no procurement delays and disbursement perfornance was exemplary; reflecting the high coordination and successful management of the Project. 4.3 Net Present Value/Economic rate of return: Phu My Power Plant At appraisal, the Project was a priority project in the least cost power development of the power system of Vietnam for the period 1995-2000. The economic rate of return (EIRR) was based on the incremental economic cost and benefits associated with the entire investment, including development of the transmission and distribution system in order to consume the power generated by the Project. The EIRR at appraisal was estimated as 16.9%. Using the same methodology as in the SAR, but with some adjustments in the assumption as deemed appropriate, the EIRR was recalculated as 19%. In the SAR's base case, the gas price was assumed at US$2.5 1/1,000 cu.ft., and the LRMC at the consumer end was 6.1 USą/kWh. For this ICR, the recalculation was based on the latest gas price of US$3.0/1,000 cu.ft. and LMRC of 7.0 USO/kWh. The EIRR of the project is slightly higher than SAR estimates due to the following factors: (a) the SAR assumed that the power plant would run on distillate oil for about 6 months after commissioning, but in fact gas became available on the first day of the operation of the plant, (b) the LRMC of power at the consumer end was higher than estimated, and (c) the actual output of the plant is slightly higher than estimated. Transformer Additions. At appraisal, the economic analysis for the transformer additions was based on two scenarios: (a) " with the project", and (b) "without project". The EIRR was estimated at appraisal as 42.6% for the southern region and 40.1% for the rest of Vietnam. Using the same methodology and the same assumptions as the SAR, with appropriate adjustments, and with the actual costs of the project, EIRR for these two components have been re-estimated as 34% and 22% for the southern region and for the rest of Vietnam, respectively. The actual EIRR is lower than estimated because: (a) the actual benefits streams occurred two year later than estimated in the SAR, and (b) actual costs were higher than estimated. 4.4 Financial rate of return. There was no financial rate of return calculation for this Project. 4.5 Institutional development impact: The Project was instrumental in: * maintaining Government's commitment to improving the commercial operation of the sector and for the need to increase tariffs to reflect cost-based principles. The Government demonstrated its commitment -8 - by raising tariffs in October 1999; further tariff increases have also been agreed to; * maintaining Government's commitment to power sector reform and restructuring which was started under an ESMAP-funded TA under the Project. Government commitment to sector reform and structuring remains strong; the primary electricity law and secondary regulations are being finalized and are expected to be approved in early 2001; * fostering private sector participation through the development of a joint venture/ BOT type of arrangement for the next block at Phu My following a competitive process, * improving customer service, including: prompt response and fair handling of customer complaints and questions, in installing and managing the metering system; and * promoting good environmental practices by inter alia minimizing the environmental impact during construction and operation of the gas turbine, properly disposing of PCBs in old transformers, and not using PCB in new transformers. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: GDP growth in 1999 was the lowest growth rate in a decade. The slowdown in economic growth limited the expansion in electricity demand to about 8% in 1998 and 1999, half the growth rate in the mid-1990s, and led l,VN to lower its load forecast in the next 5 years. 5.2 Factors generally subject to government control: * Strengthening EVN managenent systems. The Government needs to undertake actions to improve EVN's organizational and management system and increase independence. The Government recognizes the problem and is slowly beginning to decentralize some decision-making. It is also focusing on staff training to upgrade EVN's skill base; _ Financial Sustainability of EVN. EVN financial sustainability is largely dependent on government support through periodic tariff revisions. Without such support, EVN would not be able to generate consistent cash flow to maintain its operations, service its debt, and fund future capital investments; * Large Investments of EVN. To sustain power sector growth, EVN must be able to meet the huge capital investment of the sector. External financing and government support would not be sufficient to support the investment needs of EVN. Hence, the Government should accelerate the pace of opening the power sector to even greater private sector participation. 5.3 Factors generally subject to implementing agency control: * Weak coordination by EVN: Although Project Management was satisfactory, particularly the coordination provided by the Project Management Units (PMUs), suppliers, contractors and subcontractors, there were some problems with internal procedures which could have been solved sooner if there had been stronger coordination by EVN; * Equipment interface problens: This caused some delays in project implementation in the Northern Region where Soviet-built equipment was replaced by western-built equipment (e.g. protection relaying); * EVN operating andfinancing efficiency. Because of the capital intensiveness of EVN's business and lengthy periods necessary to construct power facilities and networks, EVN requires extensive and flexible capital planning systems. The ability to limit the use of debt is also dependent of EVN's skill in managing construction projects and completing new facilities on schedule and within cost estimates. 5.4 Costs andfinancing. Total project costs were estimated at appraisal at US$230 million. Actual project cost was US$216.2 million, a reduction of 6%. The main reduction in project costs was for the Phu My component which was 15% lower than estimated and this was mainly due to: (a) procurement through ICB; (b) controlled -9- construction schedule; and (c) excellent project management resulting in the commissioning of Phu My 1, Phase 1, in record time. 6. Sustainability 6.1 Rationale for sustainability rating. Sustainability is rated as highly likely, considering that: * The GTs are operational and the long-term gas supply contract has been signed. Satisfactory arrangements have also been made for maintenance and environmental control of emissions and effluents from the GTs . * It is expected that the transformer additions will be productive for many years. The transformers and other substation components financed under the Project are equipped with modem technologies, do not need much maintenance, and in certain cases are even maintenance free. However, as some of the new transformers are already overloaded, additional transformer capacity is needed urgently so as to minimize the decreasing technical life of the transformers caused by conitinuous overloading. * EVN financial performance is satisfactory. EVN is projected to generate consistent cash flow to service its debt, finance its operations, and fund its investments. A staged tariff increase would allow tariffs to reach 7 USą/kWh by March 2001. * On the policy siLe the 14th Draft of the Electricity Law is expected to be approved by early 2001. This Electricity Law would provide a clear structure for the sector and an adequate regulatory framework, as well as enhanced private sector participation. * The institutional gains demonstrated by the realization of Phu My 2.2 under a joint venture/BOT type of arrangement in promoting a competitive environment and in the low prices obtained from Phu My bidders, would ensure the likelihood of lower prices through competitive bids for subsequent offers. 6.2 Transition arrangement to regular operations: All project components are now fully operational and appropriate technical provisions are in place to ensure sustainable operation. The long-term gas supply agreement for Phu My 2-1 was negotiated and finalized. Financial, economic, and environmental policies required for continued operation and maintenance are also in place. Agreements have been reached on adequate electricity prices which will ensure the financial health of EVN. The enactment of the Electricity Law providing a regulatory framework is likely to promote a more commercial and stable environment and more efficient operation. The performance indicators in Annex I are suitable for monitoring project operation. It is expected that no future monitoring or other follow-up by IDA would be needed. 7. Bank and Borrower Performance Bank 7. 1 Lending: IDA's performance in all phases of the Project is highly satisfactory. The project was identified in April 1995 during negotiations of the earlier project when the Government informed IDA of their need to commission on a very urgent basis and in a staged manner, Phu My 2. The Government formally requested the Bank to provide the funds for the Project on a fast track basis and to pre-appraise the project in July 1995. Various units of the Bank Group (i.e. FIAS, IFC, ESMAP, Region) participated in project processing. IFC and ESMAP, particularly, worked closely with the Task Team on the project since the - 10- concept stage. The processing of the Project was particularly strenuous largely due to IFC's view that the Project be redesigned (i.e. create a separate entity to own and operate Phu My which would include IFC's participation in the capital structure at the outset). The issue was resolved with the Government deciding that it was not prepared to risk possible delays with the IFC's proposal and that it was not ready to establish a separate entity with a majority private ownership. However, the Government agreed to have Phu My 2-2 constructed under a BOT approach, the condition laid down by IDA to ensure private sector participation. The project objectives fitted well with the prevailing sectoral objectives. Preparation and appraisal were generally thorough; project appraisal was concluded in October 1995, the Credit was approved by the Board on February 20, 1996 and the Credit signing took place on February 26, 1996. The entire project preparation was accomplished on schedule and took 10 months. The design of the procurement arrangements was straightforward, and the decision was right to allow procurement of consulting services for the two GTs on a sole-source basis due to the tight schedule for the commissioning of the two units. Although the appraisal recognized the risk in securing gas supplies, the expectation that it could be concluded by the end of 1998 proved to be overly optimistic. 7.2 Supervision: Overall, project supervision by IDA was highly satisfactory, with about two missions a year on average. IDA's project team worked closely with both EVN and the Power Projects Management Boards. Project supervision also benefited from decentralization of Bank work, i.e. the presence of a fully-functioning energy team in the Bank's office in Hanoi. 7.3 Overall Bank performance: Highly Satisfactory. Borrower 7.4 Preparation: The Borrower's preparation of the Project is rated as satisfactory. The appropriateness and timing of the Government's overall sector strategy was satisfactory. EVN, the Power Projects Management Boards, and other entities involved in the Project were active in assisting IDA missions in the overall design and in providing relevant inputs on technical, financial, economic, environmental, and institutional aspects. The feasibility study for Phu My 2-1, prepared by consultants, was comprehensive and well prepared. However, the preparatory work to determine the need of new transformer capacity to decrease the overloads in the system was somewhat inadequate, particularly in the forecasts. Thus, some of the new transformer extensions have already loading levels reaching 80% after only one year of operation. 7.5 Government implementation performance: The Government implementation performance is rated as satisfactory. The Government was fully supportive through all phases of the project cycle. The Government's reaffirnation to the Project's development objectives, particularly on the tariff issue, was instrumental in moving the Project forward and in the satisfactory rating of the Project at completion. Although the establishment of a legal and regulatory framework was delayed, partly due to IDA's and the Government's unrealistic expectations of the political process, approval of the Electricity Law is expected in 2001, about three years behind the schedule. 7.6 Implementing Agency: The Power Projects Management Boards of the PCs have satisfactorily provided coordination between purchasers, suppliers, contractors and sub-contractors. The technical management of EVN was highly - 1 1 - satisfactory and consultants inputs were used effectively. There were no procurement delays and disbursement was exemplary. 7. 7 Overall Borrower performance: The Borrowers overall performance is rated, on balance, as satisfactory. The Borrower and the implementing agency were fully committed to the successful implementation of the Project. 8. Lessons Learned The key lessons than can be drawn from this Project are: * Flexibility in all aspects of project design and implementation exhibited by the Borrower and the Bank was critical to the successful implementation of the Project. * The need for utmost coordination with IFC in the preparation of a fast track project involving the private sector within time and budget constraints would ensure smooth project preparation. * The risks associated with a protracted process of govemment approvals (i.e. long-term gas contract, tariff adjustment) was much higher than originally envisioned. O There are no short cuts to a successful complex operation; above-average inputs of Bank resources and broad staff skill mix for project design, appraisal and supervision, are required. 9. Partner Comments (a) Borrower/implementing agency: * Phu My 2. Phase 1: During project implementation, Bank's staff have followed the project closely to timely solve difficulties. The Bank has organized a training course on project implementation matters and has given guidance to PMBRMB to carry out the requirements of the loan agreement according to the Bank's instructions. * HV substation expansion project: Bank's performance was recognized in all project-stages. Bank's instructions were very important in project implementation especially in preparation of ICB bidding documents, in bid evaluation, etc. Project implementation was strictly followed by the Bank through inspections and working visit, by which the problems raised during the project implementation were also carefully checked by the Bank's staff and remedies were timely recommended. In parallel to the physical progress implementation, disbursement schedule was also monitored and timely updated. * Intensive specific training such as training on procurement, procurement monitoring, project tracking and management, etc. should be conducted more frequently for the EVN head office's experts and staff from PMBRMB as this would enormously increase their effectiveness in project implementation. (b) Cofinanciers: (c) Other partners (NGOs/private sector): - 12 - 10. Additional Information Table 1. Number of PAPs, Total Number of Trees, and Land Acquired Item At Appraisal Actual Phu My Site T/L Phu My Site T/L No. of project Affected People 46 51 61 54 Total number of cashew trees 2,577 702 2,577 702 Total number of other trees 9,037 569 9,037 569 -Total amount of land acquired (ha) 16.64 0.058 36.02 0.2136 Table 2. Compensation Rates Appraisal Estimate Actual/Latest Estimate (IOOOD) (IOOOD) Compensation Cash Production Total Cash Production Total Items Compensation Assistance Compensation Assistance Price Price Cultivated Land 0.07 5.0 5.07 0.07 5.0 5.07 (VND 1000/mn) Cashew tree 45 105 150 57 135 192 Eucalyptus 16 4 20 16 4 20 CoconutTree 120 30 150 240 60 300 Mango 120 30 150 480 120 600 Custard-apple 28 7 35 67 17 84 Cajuput 16 4 20 16 4 20 Blue dragon 83 21 104 83 21 104 Guava 80 40 120 80 40 120 Others 240 60 300 480 120 600 Table 3. Level of suspended solids in waste water. Quota Unit Value Standard of Vietnam 5945(1995) PH - 7.3 5.5 - 9 BOD5 mg/l 35 50 SS mg/I 55 100 NH3 mg/I RPH I T-N mg/i 7.2 60 T-P mg/l 1.1 6 Phenols mg/l RPH 0.05 COD mg/l 54 100 Temperature oC 28.5 40 Organic oil mg/I 0.05 1 Manganese mg/[ 0,001 I Microorganism MPN/IOOml 2.500 10.000 -13 - Annex 1. Key Performance Indicators/Log Frame Matrix Projecfs Key Perfornance Indicators Development Performance Actual Objective indicators/Target A. Help Meet (I a) Annual output of Phu (I a) Plant factors Demand My GT: GT2. 1 GT2.2 Growth Target annual plant factor 1997: 49% 37% 68%. 1998: 75% 89% 1999: 54% 40% Note: In 1999, both GT underwent a complete overhaul. (I b)Monthly GWh till the present in Table I below. (1 b) Record monthly GWh generation for 5 years (2a) Annual availability of (2a)Annual availabilities in Phu My GT: Target: 85% GT2. I GT2.2 1997: 94% 91% 1998: 77% 95% 1999: 79% 38% (2b) Record planned and (2b) forced outage hours Planned GT2.1 GT2.2 monthly for 5 years. 1997: 0% 00/o 1998: 12.8% 3.7% 1999: 0% 0% Unplanned GT2.1 GT2.2 1997: 6.1% 8.7% 1998: 3.4% 00/0 1999: 1.8% 1.9% (3) MVA loading of (3) Information available on File. substation. Record substation peak annual MVA and % utilization for 5 years. B. Assist the (I) Number and capacity Prepare table of actual IPP status Government in of private power units Phu My 2-2 is expected in early 2003. the Target: PHUMY2-2 by Phu My 3 is expected in 2004. introduction of 1999; PHUMY-3 by 2000 PPA under negotiation. private power in the country. (2) Record annual for 10 Refer to Table 2 below. years: (a) number, size, and type of private power units; and (b) total GWh purchased - 14- C. Strengthen (1) Introduction of (i) Introduction of Private Power. IDA's strategy was successful EVN's management systems. in introducing the process and procedures for ICB and for BOT institutionally Record key institutional projects. Negotiations are still under way with the first ranked and financially. developments annually for bidder. Phu My 2-2 IPP is expected on line by 2003 5 years (ii) Strengthening Institutional Capacity of EVN. (a) adoption of uniform accounting policies, procedures, and chart of accounts; (b) adoption of computerized and comprehensive accounting systems; (c) implementation of a procurement monitoring system; and (d) external audit by independent auditors; (e) the Electricity Authorities of Hai Phong City and Dong Nai Province were separated from PCI and PC2, respectively, and named Hai Phong Power Company and Dong Nai Power Company, as financially independent from EVN; (f) Decision No. 1477 (DVN/TCCB-LD - dated October 5, 1998) was issued by EVN to improve customer service including fair and polite communication with customers, collect electricity bills, and prompt installation of meters; (g) the right of approval of the Power Companies on investment budgets was also increased up to VND 15 billion, given them flexibility ir investment decisions, and (h) Power Companies have been assigned by EVN of managing the electrical network for voltages upto 110kV. (2) Number of persons receiving training and type Note: Accurate number of persons trained from project initiation of training is not available. For Phu My 2 there were 143 staff trained in of training 1997, 191 staff in 1998 and 242 staff in 1999. This number of staf was trained in power plant operation and maintenance following the contract signed between EVN/PMBRPP with ABB/Marubeni. The staff were also trained in following the processes and procedures set up and applied in Vietnam's power sector. (3) Self-financing ratio and 1997 1998 1999 2000 2001 debt service coverage ratio Targets: SFR: 30%; DSC: SFR (%) 38.5 26.5 31.2 30.0 31.9 2 x. DSCR 6.7 3.6 3.2 2.4 2.0 Monitor tariff changes annually (4) Introduction of tariff 1997 1998 1999 2000 2001 reforms. Target: US$ 0.07/kWh by Tariff (c/kWh) 5.6 5.0 5.2 6.2 7.0 1999. Record tariff changes annually D. Assist in the Completion of Master Plan The recommendations of the study served as a basis for the formulation of for Rural Electrification preparation of the Rural Energy Project. a National and implementation of Strategy and study recommendations Master Plan for Rural Electrification - 15 - Table 1. Monthly Output of Phu My 2-1 Month/Year GWh Month/Year GWh Month/Year GWh 01/1997 01/1998 215.2 01/1999 194.8 02/1997 02/1998 142.4 02/1999 166.8 03/1997 03/1998 216.6 03/1999 84.5 04/1997 70.5 04/1998 205.5 04/1999 100.5 05/1997 101.6 05/1998 210.5 05/1999 195.9 061997 137.8 061998 204.7 061999 61.1 071997 92.4 071998 200.9 071999 58.5 081997 109.1 081998 82.9 081999 53.1 091997 102.8 091998 142.1 091999 44.8 10/1997 106.1 10/1998 104.0 10/1999 42.7 11/1997 138.4 11/1998 124.9 11/1999 73.9 12/1997 203.7 12/1999 190.4 12/1999 112.7 Table 2. Actual status of existing IPP No Type/Name Installed Status GWh capacity Purchased (MW) I Hiep Phuoc Oil-fired plant 3 x 125 =375 In commercial operation since 1997 792 2 Amata 7 In commercial operation since 1999 3 Nomura 50 Commissioning expected on October 2000 4 Ayun Ha 3 PPA agreed 5 Ryning 2 7.8 PPA agreed (20 years term) 6 Bourbon sugar mills PPA signed 7 Vedan 60 (estimated) PPA under negotiation 8 Soc Trang CC (Enron) 475 PPA under negotiation 9 Phu My2.2 CC 3 x 240 PPA under negotiation 10 Phu My 3 CC 3 x 240 PPA under negotiation 11 Small Diesels - 16 - Annex 2. Project Costs and Financing Proiect Cost by Component (in US$ million equivalent) Appraisal ActuaULatest Estimate Estimate Percentage of Proiect Cost by ComDonent (US million) (US million) Appraisal Physical Components PHMY2-1, 2x150MW GTs 127.00 108.55 -14.5% HV Transformer Addition 94.00 100.87 7.3% Consulting Services PHMY2-1 CC Block 4.50 2.30 -48.9% Dai Ninh Hydropower Project Studies 2.00 1.94 -2.8% Technical Assistance Strengthening of EVN (Institutional Development Study 0.50 (under 2724-VN) (under 2724-VN) Development of PHMY2-2 on BOT-JV Basis 1.50 1.09 -27.3% Rural Electrification Master Plan(DAN134042-Cowi) 0.50 1.10 120.0% Total Project Cost 230.00 215.86 -6.2% Interest during construction (IDC) 12.00 0.33 -97.3% Total Financino Required 242.00 216.19 -10.7% Note: December 1995 price levels. Exchange rate: US$1 = VN Dong 11,100. The latest estimates are reckoned based on data provided by respective power projects management boards - 17 - Proiect Cost by Procurement Arrangement (in US$ million equivalent) Procurement Method Procurement Method Appraisal Estimate Actual/Latest Estimate Expenditure Category ICB Other NIF Total ICB Other NIF Total Costs Costs Goods 2xl5OMWGTsand 109 109 101.12 101.12 Auxiliaries for PHMY2-1 (99) (99) Transformers 32 32 30.17 30.17 (32) (32) Switching/Control 39 39 41.84 0.33 42.17 Equipment/ (39) (39) 1.0 1.0 Testing Equipment, (1.0) (1.0) Computer H/W and S/W and others Consultancies Design/Supervision of 4.5 4.5 2.30 2.30 PHMY2-1 CC Block (4.5) (4.5) Technical Studies: Dai 2.0 2.0 1.94 1.94 Ninh Hydropower project (2.0) (2.0) Technical Assistance and Training Strengthening of EVN 0.5 0.5 under (0.5) (0.5) 2724-VN Development of PHMY2- 1.5 1.5 1.09 2on BOT-JV Basis (1.5) (1.5) Rural Electrification 0.5 0.5 1.10 Master Plan (0.5) (0.5) Miscellaneous Eng. and Admin 7.0 0.05 Overheads Duties and Taxes 16.5 Resettlement and 1.0 Compensation 36.25 2 36.25 Local Civil and Erection 15.5 Works /Installation Supervisory fee Total 180.0 10.0 40.0 230.0 179.61 36.58 216.19 (170.0) (10.0) (0.0) (180.0) Refer to SAR page 39 Figures in parenthesis refer to amounts financed from the IDA credit The latest estimates are reckoned based on data provided by respective power projects management boards. a! Subtotal for Duties and Taxes; Resettlement and Compensation; and Local and Civil Erection Works/ Installation Supervisory Fee. - 18- Proiect Financing by Component (in US$ million eauivalent) Appraisal Estimate Actual/Latest Estimate Component IDA GOV Other Total IDA GOV Other Total Goods 2xl50 MW GTs and Auxiliaries for 109.0 101.12 PHMY2-1 (99.0) Transformers 32.0 30.17 (32.0) Switching/Control Equipment 39.0 (39.0) 41.84 0.33 Testing Equipment, Computer H/W 1.0 and S/W (1.0) Consultancies Design/Supervision of PHMY2-1 CC 4.5 2.30 Block (4.5) Technical Studies: Dai Ninh 2.0 1.94 Hydropower project (2.0) Technical Assistance and Training Strengthening of EVN 0.5 not (0.5) under 2820- VN Development of PHMY2-2on BOT- 1.5 1.09 JV Basis (1.5) Rural Electrification Master Plan 0.5 1.10 (0.5) Miscellaneous Eng. and Admin Overheads 7.0 0.05 Duties and Taxes 16.5 36.25 ; Resettlement and Compensation 1.0 Local Civil and Erection Work 15.5 Total 190.0 40.0 230.0 179.61 36.58 216.19 (180.0) (0.01 (I 80.0) a/ Subtotal for Duties and Taxes; Resettlement and Compensation; and Local and Civil Erection Works/ Installation Supervisory Fee. - 19 - Annex 3: Economic Costs and Benefits Phu My Combined Cycle Power Project Economic Rate of Return based on the actual costs and benefits Investment Investment O&M O&M for Fuel Total Energy Losses Revenue Net in in T&D for T&D cost generated benefits Year Generation Generation US$ mil US$ mil USS mil US$ mil US mil USS mil GWh ° USS mil US$ mil 1995 3.98 0 0 3.98 0 0 -3.98 1996 93.45 18 0 0 111.45 0 0 -111.45 1997 10.82 23 5.67 34.02 73.51 1,062 17% 61.7 -11.81 1998 23 7.17 l 65.33 96.50 2,040 17% 118.5 22.02 1999 1.58 23 7.17 1.5 38.01 71.26 1,187 16% 69.8 -1.47 2000 58.87 13 7.17 1.68 49.05 129.77 1,532 16% 90.1 -39.70 2001 58.34 13 7.18 1.68 49.05 129.25 1,532 15% 91.1 -38.11 2002 13.2 13 9.58 1.68 49.91 87.37 1,800 15% 107.1 19.71 2003 10.71 1.68 45.88 58.27 2,249 14% 135.4 77.15 2004 10.71 1.68 45.88 58.27 2,249 14% 135.4 77.15 2005 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2006 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2007 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2008 10.71 1.68 45.88 58.27 2,249 13/ 137.0 78.72 2009 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2010 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2011 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2012 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2013 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2014 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2015 10.71 1.68 45.88 58.27 2,249 13Y 137.0 78.72 2016 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2017 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2018 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2019 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2020 10.71 1.68 45.88 58.27 2,249 13% 137.0 78.72 2021 - -10.71 1.68 45.88 58.27 2,249 13 137.0 78.72 EIRR- 18.9% - 20 - Transformer Additions In South Vietnam Economic Rate of Return based on 'with' and 'without' Project with the Droiect - without the nroieCt - Year Trans Sub- Tech. Unserved Losses Unserved Total Tech. Unserved Losses Unserved Total Net trans&distr Losses energy value energy cost Losses energy value energy cost Benefits - SS mj IUSS mil. GWh Gwh USS mil USS mil. I ni Gwh Gwh ImUSS mul. USS mi USS mil. 1996 3 45 798.4 85.5 36.726 42.6 127.3 798.4 85.5 36.7 42.6 79.3264 -48.0 1997 15 45 1277.9 1 5.5 58.78 64.7 183.5 1277.9 115.5 58.8 64.7 123.483 -60.0 1998 20 45 1521.8 134.0 70.00 79.1 214.1 1521.8 134.0 70.0 79.1 149.103 -65.0 1999 2.57 45 861.1 103.4 39.61 63.1 150.3 1817.6 155.1 83.6 94.6 178.21 27.9 200 0 45 846.6 103.5 38.94 63.1 147.0 2163.6 178.7 99.5 109.0 208.526 61.5 2001 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2002 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2003 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2004 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2005 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2006 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2007 0 0 846.6 103.5 38.94 63.1 102. 2163.6 178.7 99.5 109.0 208.52 106.5 2008 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2009 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2010 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2011 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2012 0 0 846.6 103.5 38.94 63.1 102.0 2163,6 178.7 99.5 109.0 208.526 106.5 2013 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2014 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2015 0 0 846.6 103.5 38.94 63.1 102. 2163.6 178.7 99.5 109.0 208.526 106.5 2016 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2017 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2018 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 2019 0 0 846.6 103.5 38.94 63.1 102. 2163.6 178.7 99.5 109.0 208.526 106.5 20 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109. 208.526 106.5 2021 0 0 846.6 103.5 38.94 63.1 102.0 2163.6 178.7 99.5 109.0 208.526 106.5 ___ _ IEIRR- 34%- - 21 - Transformer Additions in the rest of Vietnam Economic Rate of Return based on 'with' and 'without' Project with the Drolect - without the D iect - Trans Sub- Tech. Unserved Losses Unserved Total Tech. Unserved Losses Unserved Total Net trans&distr Losses energy value energy cost Losses energy value energy cost Benefits Year ____ US$ mil US$ mil. GWh GWh US$ mi US$ mil. JSS mi GWh GWh Smi U US$mil. US$ mil US$ mil 1996 0 84 1434.3 153.7 65.98 83 233.0 1434.3 153.7 65.978 83 147.5 -85.5 1997 20 84 1782.8 182.8 82.01 102.4 288.4 1782.8 182.8 82.0 102.4 182.6 -105.8 1998 30.4 84 2092.6 210.5 96.26 124.2 334.9 2092.6 210.5 96.3 124.2 218.4 -116.5 1999 15 84 2457.1 241.7 113.03 147.4 359.4 2457.1 241.7 113.0 147.4 258 -101.4 2000 5 84 1309.7 160.1 60.25 97.7 246.9 2881.3 276.5 132.5 168.7 298.3 51.4 2001 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2002 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2003 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2004 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2005 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2006 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2007 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2008 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2009 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2010 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2011 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2012 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2013 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2014 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2015 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2016 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2017 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2018 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 2019 0 0 1309.7 160.1 60.25 97.7 157. 2881.3 276.5 132.5 168.7 298.3 140.4 2020 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140. 2021 0 0 1309.7 160.1 60.25 97.7 157.9 2881.3 276.5 132.5 168.7 298.3 140.4 =_______ EIRR= 221%, - 22 - Annex 4. Bank Inputs (a) Missions: ,Stage of Projet Cycble No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation Not available in file HS Appraisal/Negotiation October 1995 2 Power Engineers S I Resettlement Specialist I Lawyer Supervision May 1996 1 Power Engineer HS S I Financial Analyst I Restructuring Specialist June 1996 1 Power Engineer HS S I Financial Analyst I Restructuring Specialist October 1996 1 Power Engineer HS S I Financial Analyst I Financial Specialist I Lawyer March 1997 1 Power Engineer HS S I Financial Specialist I Resettlement Specialist I Lawyer April 1998 1 Power Engineer HS U 1 Financial Analyst I Institution Specialist I RE Specialist December 1998 0 S S (Update only) March 1999 1 Energy Adviser HS S I Financial Analyst 1 Power Consultant I Operation Officer August 1999 1 Regional Advisor HS S I Operations Officer I Power Consultant I Technical Assistant Financial Analyst December 1999 1 Regional Advisor HS S (not recorded in SAP) I Operations Officer I Power Consultant I Resettlement Expert - 23 - ICR February 2000 1 Power Engineer S S I Operations Officer 1 Financial Analyst I Task Assistant (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ (,000) Identification/Preparation 41.8 126.5 Appraisal/Negotiation 7.4 22.4 Supervision 147.5 446.5 ICR 6 18.2 Total 202.7 613.5 -24 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA-Not Applicable) Rating IMacro policies O H OSUOM O N * NA FSector Policies O H *SUOM O N O NA Z Physical O H *SUOM O N O NA f Financial OH OSU*M O N O NA 1Z Institutional Development 0 H * SU O M 0 N 0 NA Z Environmental 0 H O SU O M 0 N 0 NA Sociazl Z Poverty Reduction O H *SUOM O N O NA a Gender O Other (Please specify) Z Private sector development O H * SU O M O N O NA El Public sector management El Other (Please specify) - 25 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Z Lending OHS OS OU OHU Z Supervision * HS OS OU OHU N Overall *HS OS O U O HU 62 Borrowerperformance Rating 2 Preparation OHS *S O U O HU Z Government implementation performance 0 HS 0 s 0 U 0 HU I Implementation agency performance * HS OS O U O HU Z Overall OHS OS O U O HU - 26 - Annex 7. List of Supporting Documents 1. Borrower's Implementation Completion Reports 2. Engineers' Project Completion Report for Phu My 2, Phase 1, Open-Cycle Gas Turbine Project. 3. Loading of Substations. - 27 - Annex 8 VIETNAM POWER DEVELOPMENT PROJECT (Cr. 2820-VN) IMPLEMENTATION COMPLETION REPORT (ICR) MISSION AIDE-MEMOIRE March 2, 2000 Introduction 1. An IDA mission composed of Kurt Schenk (Senior Power Engineer), Van Tien Hung (Officer, Resident Mission), Anil Malhotra (Task Team Leader/Regional Energy Adviser), Pham Nguyet Anh (Consultant, Power) visited the power sector agencies in Vietnam from February 22 to March 4, 2000, for preparation of the Implementation Completion Report (ICR) for the Power Development Project (Cr. 2820-VN). Mr. To Hai Au (Project Coordinator, ICD, EVN) accompanied the mission as coordinator for the data collection and Borrower's Report preparation, and review of completion reports from the Management Boards. 2. This Aide-Memoire records the mission's findings and understandings reached. It would be ratified by IDA management and sent to EVN soon. The mission would like to thank EVN, the Northern Vietnam Power Projects Management Board (NPPMB) in Hanoi, Central Vietnam Power Projects Management Board (CPPMB), Southern Vietnam Power Projects Management Board (SPPMB), and the Phu My Baria Management Board (PMBRMB), the respective Power Engineering Consulting Companies, the National Load Dispatch Center, and other entities involved, for the excellent preparation work and cooperation. Project Components 3. The Project financed: (a) the installation of 2x150 MW gas turbines for the first 450 MW Combined Cycle (CC) power block of the Phu My power station; (b) addition of about 900 MVA of high voltage transformer capacity at existing substations in the South of Vietnam and about 1,350 MVA of such capacity in other parts of the country; (c) resettlement and compensation of persons affected by the Phu My plant; and (d) consulting services for: (i) project design and supervision for Phu My; (ii) development of BOT type of arrangement for the second CC power block of Phu My on the basis of competitive bidding; (iii) technical assistance and training for EVN managerial staff; (iv) master plan for rural electrification; and (v) technical studies for the Dai Ninh hydropower project. In addition, ESMAP group of the World Bank provided technical assistance for development of the legal and regulatory framework for the power sector. Review of Physical Components 4. Phu My 2-1, Gas Turbines (PMBRMB). This component was satisfactorily carried out. Phu My 2-1 was executed by a turnkey contract, the first such contract undertaken by EVN. Completion time for the project was a record 419 days. The project was implemented on a "fast- track" schedule in order for the plant to be in commercial operation to meet load in the late dry - 28 - season from March-May 1997, when the output of the hydro-plant on the Vietnamese network is lowest. Project Management was satisfactorily carried out by PMBRMB. Unit I was synchronized in 2 February 1997 and Unit 2 was synchronized in 3 March 1997. The gas turbines are currently operating on gas from the White Tiger field. The long-term supply contract, according to the credit covenant, which was supposed to have been signed by December 1996, was finally signed on December 1999, for a period of 17 years starting from the year 2000. 5. The RAP has been implemented. Phu My 2-1 is in compliance with social and environmental requirements. Social impacts have been kept to a minimum, and the project has improved the local infrastructure as well as welfare of the affected people. EVN is satisfactorily implementing the recommendations of the environmental expert's report of March 1997. The gas turbines are burning natural gas, which is considered environmentally benign. The GTs are equipped with low NOx burners and NOx levels have been kept below 25 ppm (SAR 50 ppm). Noise levels range from 47-53 dBA (SAR 55 dBA at night). 6. Transformer Additions in: Northern Region (NPPMB), Central Region (CPPMB), and Southern Region (SPPMB). In the north, seventeen (five 220 kV and twelve 110 kV) existing substations were extended, adding a total transformer capacity of 1,410 MVA. Dong Anh 110 kV substation was transferred to the Hanoi Power Company in May 1999 and energized before loan closing. Of the remaining sixteen, fifteen were energized by December 1999. Only Viet Tri 110 kV substation remains to be energized with completion expected in end of March 2000. EVN is financing the balance of work. Transformer loadings were reduced; however, about 40% of the new transformers have loading levels already exceeding 80% at peak demand times. In Central Vietnam, six (one 220 kV and five 110 kV) existing substations were extended, adding 207 MVA of transformer capacity to the system. There was a 1 Y2 year delay, for the 1 10 kV substations, caused by the financial crisis in the region as the supplier could not deliver the control and protection panels. In addition, the 220 kV transformer was ruptured after four months into service. Since it was still under warrantee, the supplier arranged for its repair, and placing back into operation. In spite of these problems, all substations were energized by loan closing. The transformers are presently loaded to levels over 40 % thus relieving the overloaded situation before substation extension. In South Vietnam, twenty-three (three 220 kV and twenty 110 kV) existing substations were e xtended, adding 830 MVA to the system and improving the recurrent overloading and undervoltage situation in the netwoTk. All substations except My Tho substation (some equipment got damaged (luring the long period of storage - equipment was delivered in 1996) were energized by loan closing. The My Tho substation is expected to be energized by end of March 2000 with financing from EVN. As a portion of the demand was met by diesel plant, as soon as the capacities of the substations were increased, the loading levels in some transformers increased rapidly as the load was transferred to the grid. More than half of the additional transformer capacity is now loaded over 80%, and the forecast for the year 2000 is that 65 % of the new transformers will be fully loaded. Review of Technical Assistance 7. Phu My 2-2 BOTProject. Although negotiations have been delayed by many factors (i.e. guarantee for foreign exchange; mechanism for compensation of exchange rate fluctuations; guarantee of project loan; project development expenses; legal status of MOI to sign BOT agreement on government behalf; and specific issues for the project such as tax, GSA and extension of bid - 29 - validity), closing negotiations are expected to be finalized by I st quarter of 2000 with commercial operation expected in 2003. The mission reminded MOI that there were only about 25 days remained in funds provided by a PHRD grant for consultant services to assist in contract negotiations. Hence the urgent need to finalize the negotiations. 8. Rural Electrification Master Plan Study. The consultants, COWI, have submitted the Final Report on master plan for rural electrification and the T/A was closed on 30 June 1999. Findings and recommendations of this study were used for preparation of the Rural Energy Project. 9. Legal and Regulatory Framework. A draft overview of the Electricity Law was prepared and forwarded to MOI on September 23, 1996. A first draft of the Electricity Law was discussed with Government in early 1997 and a 10th version of the Electricity Law has been completed by the Electricity Lay Working Group and is at present under review. Although passage of an Electricity Law is critical for enhanced private participation through definition of clear government policy and the creation of a regulatory framework, approval of the Electricity Law is now only expected in 2001 at the earliest. More clarification by Government on the institutional setting appears to be needed. The Bank has recommended issuing of a Policy Statement delineating, (a) an integrated strategy for gas and electricity since there is a lack of coordination between policy, prices and projects, (ii) clarifying issues on ownership and equitization of distribution, and (iii) a policy on import and exports of electricity. This will assist in clarifying the institutional setting and in moving towards the required legislation for the legal and regulatory framework. 10. Trainingfor EVN. To include up-to-date information on TA and training provided to EVN, the mission requested EVN to provide a summary of the training activities undertaken under this project to improve and strengthen managerial and operational functions of the power sector. Performance Indicators 11. The mission reviewed the performance indicators for the project and requested EVN to (i) thoroughly review them, and (ii) provide the missing information. Details of needed information are given in the Annex. Financial Performance and Compliance with Financial Covenants 12. The average tariff increase to US 5.2ą/kWh (see next para) allowed EVN to maintain the 30% SFR (31.2%) and debt service coverage ratio (3.2x), under the Credit Agreement for FY 99. The SFR in year 2000 is expected to be 30%, and debt service coverage ratio of 2.4x. Electricity Tariffs 13. On the basis of agreements reached between the Government and the Bank, EVN had made the fist step and raised the average tariffs to US 5.2ą/kWh, with effect from October 1, 1999. The next agreed step of the tariff adjustment is to increase the average tariff to 6.2 USą/kWh from 1 July 2000, and to 7.0 USą/kWh from March 2001. Recalculation of Economic Rate of Return 14. An Economic Rate of Return (EIRR) of 16.9% for Phu My Combined Cycle Power Project was projected at the time of project appraisal on the basis of converting the GTs to combine cycle operation for gas prices above US$ 1.75/MMBTU. For the transformer additions, the EIRR was - 30 - calculated at appraisal as 42.6% including unserved energy and downstream investments. For the Rest of Vietnam the appraisal EIRR was evaluated as 40.1%. Such EIRRs are being recalculated utilizing the same methodology and based on current projections and actual project costs. Next Steps and Agreements Reached 15. PMBRMB. Attachment 1 gives details of the additional data and information required. As agreed, this information is to be sent to the Bank by mid March 2000 at the latest. 16. NPPMB, CPPMB, and SPPMB. Attachment 2 provides a summary of the additional infiormation required. For the improvements in undervoltage condition before and after the substation extensions, the information may have to be collected from the National and/or Regional Load Centers. As agreed, this information is to be sent to the Bank by mid-March 2000 at the latest. 17. Consolidated Borrowers Completion Report. As agreed, EVN will prepare a consolidated Borrowers Completion Report, including updated tables for Performance Indicators, project costs, project costs by procurement arrangement, and project financing by component, technical assistance, and institutional developments, for the Project. The mission requested that this information be submitted to the Bank by end of March 2000. The Bank will review the draft and give EVN its comments in mid April 2000, and EVNwillfinalize the report and submit it to IDA in end of early mid May 2000. 18. Financial Statements and Projections. EVN to provide the latestfinancial statements (i.e. income statement, balance sheet, and funds flow statement for the years 1995-1999), and financial projections up to 2005, and sent to the Bank by mid-March 2000. 1!3. Draft ICR. The Bank will submit a draft ICR to EVNfor comments by end of April 2000. EVN will send its comments, if any, by end of 15 May 2000. - 31 - Attachment I A. Information/review to be obtained from Phu My-Baria Power Projects Management Board (PMBRMB) 1. Resettlement and Land Acquisition (a) No of PAPs (i.e. Project Affected People) and land acquired Item At Appraisal Actual Comments Phu My T/L Phu My T/L site site No. of Project Affected People number of_cashew. Total number of cashew trees Total Number of other trees Total amount of land acquired (ha) T/L = transmission line (b) Compensation Rates Item At Appraisal Actual (1000 VND) (1000 VND) Cash Total Production Cash Total Production Compen Assistance Compen Assistance sation sation Price Price Compensation for Cultivated land (1000 VND/m2) Compensation for cashew tree Compensation for eucalyptus tree Compensation for coconut tree Compensation for Mango tree Compensation for custard-apple Compensation for cajuput Compensation for Blue - 32 - dragon Compensation for other (please specify) (c) Improvements in Standard of Living: Per Capita Income of Project Affected People. Year 1995 1997 1999 2000? Per Capita Income in (VND) ________ /, increase 2.. Performance Indicators: Annual Plant Factors, Availabilities, and Planned Outages for each unit at Phu My 2-1 (a) Please check carefully the plant factors (i.e. capacity factors) and unit availabilities as given in your Completion Report. Include from 1997 to end of 1999. (b) Please check monthly generation table. (c) If the target annual plant factor of 68% is too high, please explain reasons why. The same question for the availability target of 85%. (d) Expand the table provided in your Completion Report to include (1997, 1998 and 1999) for: > Monthly planned outage hours t Monthly forced outage hours and reasons (e) On a yearly basis for 1997, 1998, 1999: > Total days for maintenance (i.e. inspection, overhaul, etc) 3. Environmental Issues In reference to your Completion Report, please state the actual situation (a) Waste Water Requirements: sewage discharge treated? Actual level of suspended solids since beginning of operation. (b) Oil Spill Requirements: > Are procedures now in place for delivery of oil and inspection of all facilities? Please explain. > Is an Emergency Spill Response Plan in place? Please explain. (c) Dredging Requirements: - 33 - > Is dredging material transported away from the site and used for land reclamation? Please explain (d) Environmental Programs. Please explain what was done specifically. 4. Operation and Maintenance. (a) Number of operating personnel at the plant. (b) Qualifications of personnel. (c) Maintenance budget and total operating budget. Ratio of maintenance budget to total budget. (d) Training activities and number of staff trained in each activity. - 34 - Attachment 2 B. Information/review to be obtained from Northern Power Project Management Board (Nl'PMB) in Hanoi, Central Power Project Management Board (CPPMB) in Da Nang, Southern Power Project Management Board (SPPMB) in HCM 1. Transformer Loading levels. Review the information on transformer loading levels for all the transformers as described in your Completion Report. Provide reason (s) for the high loading levels, if any. Be very specific. For overloaded transformers, please provide the number of hours in which the transformer is allowed to remain overloaded. What is the standard that applies in your region? What measures are being taken to reduce the overloading of the new transformers? 2. Transformer Energization Date. Please provide the dates at which all the transformers were energized. 3. Transformer Maintenance and Budget. What is the maintenance program that you have for each substation for which an extension was provided by the IDA loan? What are the maintenance and total operating budgets? 4. Improvement to Network. This information may have to be obtained from the national or regional Load Dispatch Center. > Reduction of overloads in the system due to the new transformer extensions. > Reduction of undervoltage conditions due to the new transformer extensions. What is your standard for the various voltage levels in your system? C. Information/review to be provided by EVN Reference is made to the information provided in communication of 15 February 2000, by Mr. Tran Minh Kham, Director, ICD, to Mr. Anil Malhotra, Regional Energy Adviser, and WB. 1. Completion Report (Attachment 1). > This table is incomplete. In particular in reference to the "Actual" situation, a description is needed regarding item. Under C. Strengthen EVN's Institutionally and Financially. - Introduction of management systems. Please provide a description of the actual situation. What management systems have been introduced? ) Number of persons receiving training and type of training. This information is altogether missing. Please provide a brief summary. tJnder D. Assist in the formulation of a national Strategy and Master Plan for Rural Electrification.. - 35 - > Please provide a description of the recommendation and any follow-up to this study. If you are dissatisfied, please also state so. 2. Completion Report (Attachment 1-B). > Please complete the table with the year at which the IPP was put in commercial operation or when the PPA was signed. 3. Completion Report (Attachment 1-C). > When were the Hai Phong Power Company and the Dong Nai Power Company separated? > What were the customer improvements (Decision No. 1477 DVN/TCCB-LD dated 5 October 1998)? 4. Completion Report (Attachment 3). > Please complete the column "Main Recommendations and Impact of Activity". Be specific on the recommendations, impact and any follow-up. Please also include a statement if you were "satisfied" to "dissatisfied" with the work of the Consultant. - 36 - Annex 9 Power Development Project (IDA. 2820-VN) Borrower's Completion Report A. Introduction This report was prepared as a part of the Implementation Completion Report (ICR) of the Power Development Project under the World Bank Credit No. 2820 VN. The project was prepared in 1995, appraised by the Bank in January 1996. The Credit, for a total of SDR 121 millions, was signed in February 1996 and became effective in May 20, 1996. The project was successfully implemented; all the project components designed under the project have been effectively put into operation. The credit was closed in December 31, 1999 with 99.6% of the funds disbursed. An undisbursed balance of US$ 410,568.96 will be cancelled. There were no loan cancellations. B. Objectives of the Project The main objectives initially set for the project are: (a) to help meet rapid growth in the electricity demand in the south of Vietnam through the addition of new gas-fired generating capacity, (b) to increase the high voltage transmission capacity in Vietnam; (c) to facilitate independent power production on a competitive bid BOT basis, (e) to assist the Government in the fonnulation of a national strategy and master plan for rural electrification and (d) to strengthen the institutional capability of EVN through technical assistance and training; C. Assessment of Outcome 1. Achievement of the Objectives To achieve the above set of objectives for the project following components and activities were designed for the project (a) Installation of 2x 150MW gas turbines for the gas-fired Phu My 2- 1 project (b) Expansion of 46 high voltage substations, (c) consulting services for (i) project design and supervision of Phu My 2-1; (ii) development of Phu My 2-2 gas fired turbines power plant: BOT power project to be implemented through international competitive bidding; (iii) Master Plan for Rural Electrification, and (iv) Strengthening the capacity of EVN. (EVN's assessment on how and what way these components meet the set objective) (a) This component meet the set objective by timely put into commercial operation of the 2 x 150MW gas turbines power plant. The project was successfully implemented through ICB procedures. Good outcome of the project has been achieved thanks to the support of the governmental authorities, good coordination between EVN's involved department and local authorities. Long term (17 years) gas supply contract for the plant has been signed. (b) This component meets the set objective by: energizing 44 over total 46 substations included in the project. Assemble and installation works for the remaining two substations were completed. Procurement of goods was implemented through ICB and local construction companies performed installation works. - 37 - (c) (i)This sub-component meets the set objective by the works of EVN and the selected consultant ESBI. These works were strictly followed to the conditions written in the consulting contract. (ii)This sub-component meets the set objective by the works of the chosen consultant, EVN, MOI and other relevant authorities. Standard documents on the BOT basis were formed to facilitate IPP. (iii) This subcomponent was done by the works of EVN and Cowi consultant. The report to assist in the formulation of a national strategy and master plan for rural electrification was issued. (iv) The institutional development study of this subcomponent is not included in this 2820-VN credit. 2. Implementation Status of the physical components: - Original implementation schedule - Actual implementation schedule Original and Actual implementation schedules were given in the completion reports of respective Power Projects Management Boards as well as in the quarterly progress reports which were sent to WB for number of times. - Reason for delaying, if any There was no delay in the PM2.1 project. There were some delays in the works on substation expansion due to mainly following reasons: (i) incompatibility between the old and new equipment; (ii) low quality of the F/S and technical designs as well as budget estimation in some cases of the NPPMB and SPPMB; (iii) The bidding and approval procedures in general took more time than initially scheduled; (iv) Financial crisis in the region and in some cases the supplier could not deliver the equipment on time.; (v) Many troubles raised when power cut needed for the works on energizing of the substations. 3. Economic viability of the project 1) Estimated cost and actual cost of the project Please refer to Attachment 1 There is difference between the estimated cost and actual cost, the main reasons are: (i) ICB (ii) savings in local expenditures. 2) Economic variability of the project - Original project estimation of EIRR: - Revised EIRR, based on the actual costs and actualproject benefits (the evaluation of the EIRR follows the same methodology as that used in the ICR (refer to SAR Chapter VI and Annex 18). The original and revised EIRRs of PM2. 1 project were given in details in the ICR and its supplementary report of PMBRMB. Both reports have been sent to WB. 4. Environmental and Social Aspects of the project - 38 - 1. Environmental: - Describe all the environmental impacts of Phu My 2-1 during construction and operation, - List all the measures , which have been or will be taken to minimize the adverse environmental impacts mentioned above. See details in PMBRMB's ICR and supplementary report. 2. Social Impact, and compensation for Phu My 2-1 - Describe all the actual social impacts due to the project construction, - Compare the actual costs for land acquisition and compensation estimated in the RAP and actual costs duringproject implementation. List all the measures that have been applied to rehabilitate and improve the living standards of the Project Affected People (PAP). (Refer to Attachment 2) See details in PMBRMB's ICR and supplementary report. 5. Technical Assistance for the project - Give the actual status of the Technical Assistance included in the project: PM2.2, TA for Master Plan for Rural Electrification, TA for Legal and Regulatory Framework (Refer to Attachment 3) - Provide a summary of EVN's assessment of the benefits of the TA: PM2.1 consulting services: PMBRMB was transferred the knowledge and experience of procedures to develop project following intemational practice: Preparation of bidding documents, Designs, evaluation, negotiation, RAP.... (Refer to Attachment 3 for more details) 6. Project Sustainability a/ For project sustainability of each component please refer to Attachment 1 and ICRs of the respective management boards that were already sent to the Bank. bl - Long term (17 years starting from the year 2000) Gas Supply Contract has been signed for gas sales to Phu My 2.1 power plant. - Expansion of HV substations posed neither negative effect nor any risks to environment. Expansion of substations has effectively contributed to meeting the load growth in the country. c/ Tentative EVN's generation, transmission and distribution plans were already sent to the Bank d/ Sales and Sales Forecast, Power balance and highlights are included in Attachment 1. - 39 - e/ The most recent audited financial reports were already sent by EVN to the Bank. D. Performance Assessment 1. Bank performance - PM2.1 Project: During the project implementation, the Bank's staff have followed the project closely to timely solve difficulties. The Bank has organized a training course and given guidance for PMBRMB to carry loan agreement accordingly the Bank's instruction - HV substation expansion project: Bank's performnance was recognized in all project- stages. Bank's instructions were very important in project implementation especially in preparation of ICB bidding documents, in bid evaluation etc. Project implementation was strictly followed by the Bank through inspections and working visit, by which the problems raised during the project implementation were also carefully checked by the Bank's staff and remedies were timely recommended. In parallel to the physical progress implementation, disbursement schedule was also monitored and timely updated - Note: Intensive specific training such as training on procurement, procurement monitoring, project track and project management etc should be conducted more frequently for the EVN head office's experts and staff from PPMBs as it would enormously increase the effectiveness in project implementation. 2. Borrower performance Borrower perfornance on implementation of most of the project components is considered impressive thanks to the effort from EVN headoffice and PPMBs. In general, coordination between EVN, its subunits and relevant authorities was good. By the closing date of 31 December 1999 almost all physical components were completed and put into operation. All PPMBs have carefully carried out instructions from EVN headoffice. Recommendations from the Bank were carefully studied and proceeded. Relatively good coordination between PPMBs with designing companies, suppliers, contractors and subcontractors was done. However, there were still some delays in some cases for the works on substation expansion due to the reasons given in C, item 2. Some other reasons given by separate PPMBs could be found in their respective reports that were sent to the Bank. Counterpart funds in general considered sufficient satisfying project scope. For PM2.1 project, environmental and resettlement works were performed strictly following the required standards and commitments. For the expansion of substations there were no problems on resettlement as the works were performed in the areas of existing substations. - 40 - E. Key Lesson learned from the project PM2.1: i/Technical specifications should be reviewed carefully before issuance of Tender documents so that there would be wide competition between potential tenders and suppliers; ii/ The time frame for project completion defined in general conditions of contracts should include the time schedule for tests on completion Expansion of HV substations: Some selected lessons drawn from PPMBs are listed below - NPPMB: i/ Synchronism is required for the anti-overloaded program. It would include investment both in substation and transmission line projects especially the 22 kV feeders going out from the substations/ Bidding documents for good procurement should cover main equipment and auxiliaries as well. Equipment for operational and managerial purposes would be also upgraded. iii/ Quality of the FS and technical designs would be improved. - CPPMB: i/ ICB could help the Borrower save a lot of money from the allocated budgets/ Project management and implementation much depend on approval procedures, disbursement process and action coordination. Quality improvement and effectiveness increase would require simplification of the working procedures between involved parties. iii/Equipment selection would be done with most caution to ensure continuos and safe operation of the network.iv/ For I lOkV and 220 kV projects foreign consulting services are not required. - SPPMB: i/ Long time bidding procedure may cause expire of the equipment guarantee, so long term guarantee would be required, ii/Specific training on project management would be more frequently given. - 41 - Attachment 1 Total Project Costs Appraisal Estimate (USSM) Actual/Latest Estimate (USSM) item Fo0gLocal rn II Total Local FOreign Total Cost Costs Costs Costs Phyial tCoponentts PHY 1,2xI5OMWGTs 27.0 100.0 127.0 7.35 101.20 108.55 HVTAnstioneA ddition 23.0 71.0 94.0 28.89 71.97 100.87 Cosulting Services PkMYl2- CC BlOck 0.0 4,5 4.5 0.0 2.3 2.30 Dai NinhH RH: Projoct 0.0 2.0 2.0 0.0 1.94 1.94 Technical Assistance ForStrengthemnggEVN 0.0 0.5 0.5 0.0 (under (under 2724- 2724- (1ntitti~ia DeelPMen tuy VN) VN) Developient tfPMYHI on BOT- 0.0 1.5 1.5 0.0 1.09 1.09 N Basis Rural EectrificationMastemPlan 0.0 0.5 0.5 0.0 1.1 1.1 ?(DAN302.Cw) : 0: : : Tt Proj Cosi 50.0 180.0 230.0 36.25 179.43 215.86 Inteedui consotrution (itDC) 12.0 0.0 12.0 0.33 0.33 (PM2.1) Totalot clgqulred 62.0 180.0 242.0 [ 36.58 179.43 216.19 Note: December 1995 price levels. Exchange rate: US$l - VN Dong 11,100 The latest estimates are reckoned based on data provided by respective power projects management boards - 42 - Financing Plan ---I -. - Apprabal Aetuaftest Estimaie .I EstI#aate (USSM) (US$M) Source Local Foreign. Total Local Forelga. Total Costs Costs Costs Costs 0.0 180.0 180.0 0.0 179.61 179.61 Intemal Cash Generation and 62.0 0.0 62.0 36.58 0.0 36.58 Local Bonowing TOTAL 62.0 180.0 242.0 36.58 179.43 216.19 Note: a) Original costs were estimated by September 1995 price level and with the Exchange rate of US$1=VND1 1,100. b) The latest estimates are reckoned based on data provided by respective power projects management boards. - 43 - Project Costs by Procurement Arrangements Expenditure ~~~Ptrontreent Method ProcurenWa method A~raisa1i Estimiate Acual/Lats stm Goods 2~~~l5OMWGTsand 109 ~~~~~~~~109 101.12 101.12 Auxiliaries for PHMY2-l (99) (99) i~~ii7sT&mers ~~3-2 32 30.17 3-- _________ ~~(32) (32) Switching/Control ~~39 39 41.84 0.33 .. .. - -- 42-1 'Equipm t ..394) (39) 1.0 1.0 Testing Eqiuipmnt, (1.0) (1.0) Cornputer HIWand sIW PHMY2~~~~ CC Block ~~~~4.5) . (4.5) 2.0 2.0 1L94 1.94 Niob Hydropower project ~~(2.0) (2.0) (0.5) (0.5) 2724- VN DevelopmentofPllMY2~~~ - -------- - 1.5... 1...5 1.09...... Zoo BOT-JV Basis (1.5) ~~~~~~~(1.5) Rural Blectritication ~~~~0.5 0.5 1.10............. Master Plan ~~~~~ ~ ~~(0.5) (0.5) Mdiscelaos Bog d~~~~~~n~~~i7~~~~ 7.0 0.05.- DutiesandTaxes ~~~~~~~~16.5 Rite etad1.0 Coato_ LocalCvladEeto 15.5 36.25 36.25 Work/Supervisory feo (170.0) (1 0.0) (0.0) (180.0) Refer to SAR page 39 Figures in parenthesis refer to amounts financed from the IDA credit The latest estimates are reckoned based on data provided by respective power projects management boards 44 - Project Financing by Component Component Appraisat Estimate Actual/ Latest Estimate IDA GOV |Oter Total IDA GOV Other Total Goods xi5 Mi d. .xili- ris -. lO9.b0-- -- - ----lO 10 12. . -. . . for PHMY2-1 (99.0) Transfomirs - . . ~ .... -~-~ - -----320 30 .17 (32.0) Switchitag/Control Equipmnent 39.0I (39.0) 41.84 0.33 T e tmp u ter ... . ... .. _j . . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. . . . .. .. .... . . .. . . . .. . . .. . -Testing Equipment, Computer 1".0O H/W and S/W (1.0) . _ 9 ..................~~~~~... .... .. . ...... . ... ... .... .... ..... ......... ..... .....I.......... ... ....... .... . ....... ....... ......... .... ............ ............ ....... ...................... ........................................ Consultancies De sign/Supervision of PHhMYY2-1 4.5 - - - - -- - - - - . ............. ......_.... ... .. .........I CC Block (4.5) Technical Studies: D ii . . 2.1 9 4 --- - --- -- - ............ .... . . . .. Hydropower project (2 0) Technical Assistance and Training _ S ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . _........ ... .. . ..... ...... ........ . _ ........ . ....... .... ..... ... .... ..... .. . ... .......... .......... ...................................... ........................ .......... ............ ....... ...... ................ ........ Strengthening of EVN 0.5 not under (0.5) 2820-VN Development of PHMY2-2on 1.5 1.09 BOT-N Basis (1.5) Rural Electrification Master Plan 0.5 1.10 (0.5) , . . ............................ ~~~.. . .............. ...... . ........................ ........... .... ........ ......... ............. ...............- -......... .................... ..... . .. .............. .... .. ...................... IMiscellaneous ... ... ... .......... . . ............... _ ... _ ... _ ......... ........... ........ .... .... ..... . ........ .... ... ..... . ..... .. .. ... . .... .... ..... ...................... .... . .... .................. ........ Eng. and Adrin Overheads 7.0 0.05 Ta ~~~~~~~~~~~~.. .. .... .. .. ...... . .... -- .... ..... .. ... .. . .. .. .... -. - - Duties and Taxes 16.5 Resettlement and Compensation 1.0 ~~~~~~~~~~~~~- --- -- -._ . i. ..... .... .. _._ ...... ............. _. ...... . . __ .... ... . _. .......... . ......... ...................... . .... . ... ..... .... ...... ........ ............ ... .... .... . ...-.- .......... ... ........... . .......... ... Loca Ciil an Ereto Work _15 5 |- 36.25 Total 190.0 40.0 230.0 179.61 36.58 216.19 (180.0) (0.0) (180.0) Note: The latest estimates are reckoned based on data provided by respective power projects management boards - 45 - Attachment 2 Average Compensation Rates in SAR and Actual Compensation items ApprailEstimate 1 Actual/Latest Estimate Cas : Production Fotal Cash _ r ucfti-r Total _______Cot_np_611ensati sAtsitnce : Compensation Assistance Cu1tivated Land 0.07 5.0 5.07 0.07 5 0 5.07 (VID 1000/mz):, .. Mango 12 30 . .t o 1 50 4----0- 120- - 600-- 28 7 35 67 17 84 _1..6 4 20 i 7 4 i 20 G ua T02 4 30 150 240 40 . 300 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... . .. ..... . ......... ! Ot.ers 240 . 60 300 . 480 ..... 120 600 Note: This information is provided by Phu My-Baria Power Projects Management Board - 46 - Attachment 3 Consulting Services/Technical Assistance Included in Project Purpose as Defined at Main Recommendations Item Appraisal/Redefined Status and Impact of .__ ._ _ _ _ _ _ ____ __ ___ _ Activity Consulting Services 1. CC Block of Consulting Services to assist in C Strictly following the PHMY2-1: engineering, design, procurement, and schedule, the plant was construction supervision commissioned since 1997 2. Dai Ninh Technical Studies of Dai Nimnh The part Project's FS approved, Hydropower: financed Detail designed and under WB Bidding documents done. credit has been completed Technical Assistance 1. PHMY2-2 For development on a BOT-JV basis to: The TA provided (a) Review the Government's overall the project development private sector policy and legal on a BOT-JV basic: framework vis-a-vis development oj deVeloper ownership, and operation of private Under MOrs selected. power projects; direct selec (b) recommend the necessary legal and management - BOT standard incentive framework for the documents have been implementation of power generation done projects by the private sector in Vietnam; (c) develop the solicitation package of PHMY2-2 (including selection criteria and security package) and evaluate the proposals; and (d) assist the Government in contract negotiations and executing the contract with the selected project sponsor. w_ _ ~~~~~~~~~~~~~~~~~~~~~.. . . _..... .-... . ............ ... .. . I .... ... ... .... ........ ............... ........_.. .. ......... ...... .... . ....... ........... .. ... ........................... .. ..... . .. 2. TA and training for Institutional Development Study C Not included in 2820-VN EVN 3. TA for Master Plan Development of a Master Plan that lays C See attachment 1-D for Rural Electrification down policies, strategies and criteria for meeting provincial rural area _________ development pfiorities _ 1 development p r o ites ....... .............. ....... . . . ......_ . .... ..... ........... 4. TA for Legal and Assist the Government in identifying the Ongoing 14th draft under Regulatory Framework issues and options in creating a legal and preparation and regulatory framework for the power submission to the sector that would be conducive to Govemment of Vietnam private sector participation. - 47 - Key Performance Indicators Dev*topmentObjective t Performance indicators/Targe Actua pA.HelpMeetDemandi1 Gow th 0 (I a) Annual output of Phu My GT: (I ) Plant factors Target annual plant factor 68%. 1997: 1998: See PMBRMB's ICR and it's supplementary report 1999: (I b) Record monthly GWh generation for 5 (1 b)Monthly GWh till the present in separate years table. See PMBRMB's ICR and it's supplementary report (2a) Annual availability of Phu My GT: (2a)Annual availabilities in Target: 85% 1997 1998 See PMBRMB's ICR and it's supplementary report 1999 (2b) Record planned and forced outage (2b)Planned and Forced outages till the present hours monthly for 5 years. in separate table. See PMBRMB's ICR and it's supplementary report (3) MVA loading of substation. (3) Prepare separate table from first Record substation peak annual MVA and % commissioning of substations till the present utilization for 5 years. SeerespectivelCRsof NPPMB, MBand PPSR (I) Number and capacity of private power Prepare table of actual IPP status lntrpdncfilsn of prtsatą pwer In ?units 0thev,00000000000000 country. 0 iVf Target: PHMY2-2 by 1999; PHMY-3 by See separate list (Att 1-B) 2000 (2) Record annual for 10 years: Prepare table with information from project (a) number, size, and type of private power initiation till the present units; and (b) total GWh purchased See available information on separate list (Aft 1-B) (I) Introduction of management systems. Described key institutional developments with finstitutionlly and financially. S A 0 Record key institutional developments their impact. annually for 5 years See separate list (Att I-C) (2) Number of persons receiving training Prepare table with information from project and type of training initiation till the present See separate list (Attl-C) (3) Self-financing ratio and debt service Prepare table with information from project coverage ratio initiation till the present Targets: SFR: 30%; DSC: 2 x. Monitor tariff changes annually See separate list (Att l-C) (4) Introduction of tariff reforms. Prepare table with information from project Target: US$ 0.07/kWh by 1999. initiation till the present Record tariff changes annually See separate list (Att 1-C) tD, AXssist Inrmi0 the fefl of aVE Completion of Master Plan for Rural Prepare brief description of status. National $ ite~y a}MasterU Plan 0Electrification and implementation of study f,r Rural ~Ie~r1&atlon recommendations Completed. See separate list (Attl-D) - 48 - MAP SECTION A Nonkng X.T CHINA A \\ < < Ngj:}l. '! j0MYANMAR CHINA eg 'E P THAILAND R B ^ <- -* CAMBODIA hoi BoNinh Ph L 5 n--ri T. -w* - k* * ** 2VSUSTADON T 0 0 0*#VET NAM,H ( Sf \-/\\ ~~~fi . g ukY j in~~~~~~~~rn R20ERS f G 20R - I LAO PEOPL 0 50 100 150 200 50 nil \) > T"- r 8 0 '-,,ii 'g,i TH ILAND ER 1 W1.Q r I I I Ia bryr I . -'\ 1- - ~m ;--i < > Shem djvKILOMETERS 0 % $ 2PhnomPnn1Xg GMo) 4 ,< - - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ KD uEi~~~~~~>crn Dran igng Nait ff ATC ;~~~~~~~~~~~o L g \0_f ) PHNOM PENH So;t~~~~~~~~~~~~~~~~~Vih ha n . ', 'f'- 'X',~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 3-1t , tI Trrz $1 X > 0~~~~~T No ! -- RiVERS L Can F Sb;fW~~~aiL Tb ---- -~~ PR0VINCE BODUNa4RES A= : _b m <~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~wh k.,. [IENTl; - crrstasolsfnrrr 3 BUNDARIES _ .rciwl ir