The World Bank TA for Capacity Development in Hydropower and Mining Sector () REPORT NO.: RES38393 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TA FOR CAPACITY DEVELOPMENT IN HYDROPOWER AND MINING SECTOR APPROVED ON JANUARY 12, 2010 TO LAO PEOPLE'S DEMOCRATIC REPUBLIC ENERGY & EXTRACTIVES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Gevorg Sargsyan Regional Director: Ranjit J. Lamech Practice Manager/Manager: Jie Tang Task Team Leader: Takafumi Kadono The World Bank TA for Capacity Development in Hydropower and Mining Sector () I. BASIC DATA Product Information Project ID Financing Instrument Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 12-Jan-2010 30-Sep-2019 Organizations Borrower Responsible Agency Lao People's Democratic Republic Ministry of Energy and Mines Project Development Objective (PDO) Original PDO Development objective is to increase human capacity and improve the performance of Government oversight institutions for the hydropower and mining sectors. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-54490 03-Jun-2014 14-Aug-2014 23-Sep-2014 30-Sep-2019 8.90 8.02 .13 IDA-H9470 03-Jun-2014 14-Aug-2014 23-Sep-2014 30-Sep-2019 8.90 8.03 0 IDA-H5390 12-Jan-2010 08-Feb-2010 04-Aug-2010 30-Sep-2018 8.00 7.58 0 TF-99572 09-Apr-2012 09-Apr-2012 22-Aug-2012 01-Mar-2014 2.54 2.54 0 The World Bank TA for Capacity Development in Hydropower and Mining Sector () Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. Background and Project Status: 1. The Technical Assistance for Capacity Building in Hydropower and Mining Sectors Project (HMTA) in the amount of US$8.0 million equivalent was approved on January 12, 2010. The Project Development Objective (PDO) is “to increase human capacity and improve the performance of Government oversight institutions for the hydropower and mining sectors”. 2. In June 2014, the World Bank approved an Additional Financing (AF) in the amount of US$ 17.8 million equivalent to scale up the impact of the institutional and human capacity development efforts that were being supported under the original project. The AF became effective on September 22, 2014; the project closing date was extended from September 30, 2015 to September 30, 2018. In June 2018, the project was further restructured to extend the closing date from September 30, 2018 to September 30, 2019 to enable the completion of project activities that were already under implementation, particularly to support the preparation of a cross-border power trade project with Vietnam. 3. The progress toward meeting the PDO and the Overall Implementation Progress are both currently rated Satisfactory. Capacity building for the Ministry of Energy and Mines (MEM) continued to be carried out under various components aiming to strengthen technical knowledge in sector planning and management. Institutional oversight to better govern the hydropower and mining sectors is continuing to improve. All critical technical assistance packages are under implementation – most of which have been completed while a few are near completion – to develop the tools and management systems to enhance MEM’s oversight capacity. In the energy sector, among others, HMTA supported the development of a road map and action plan for implementing the power market reform; policy, institutional and regulatory arrangements; formulation of a financial improvement plan for Electricité du Laos, and a tariff methodology; capacity building to improve institutional process and procedures for Concession Agreement compliance monitoring, and to strengthen the management of private sector-led development of hydropower projects; operationalization of the Policy on Sustainable Hydropower Development; and reinforcement of dam safety. The amended Electricity Law (approved by National Assembly in May 2017 and Presidential Decree issued in August 2018) is among the major achievements through the support from HMTA, which helps inverting the investor driven paradigm by pursuing system wide planning that considers sectorial trade-offs, allowing Government of Lao PDR (GoL) more proactive role in determining what projects to move forward and how benefit sharing is implemented to promote inclusive growth. In addition, the project has supported the update of the Lao Electrical Power Technical Standards, development of eight Dam Safety Guidelines, and their application to the national emergency dam safety inspection. In the mining sector, HMTA delivered policy, regulatory and legal advice and training that contributed to mining sector strategic plans, reform of the Mineral Law and regulations, a modern mineral rights cadaster, improved mines inspection capacity and improved geodata knowledge and management. The World Bank TA for Capacity Development in Hydropower and Mining Sector () 4. All the PDO indicators have been achieved and/or exceeded the target, and almost all intermediate result indicators have been achieved and are on-track to achieving the targets. The support extended under HMTA to the preparation of the proposed Laos-Vietnam Interconnector Project has been scaled back due to multiple export schemes being pursued by various stakeholders in southern Laos, and the commercial issues and challenges in coordinating between two countries/utilities. However, the Bank’s support as an honest broker to facilitate the commercial negotiation on power export tariff will continue under the [proposed] Lao PDR Energy and Extractives Advisory Program (P171029), as it will be the cornerstone of any power trade between EdL and Vietnam Electricity (EVN) regardless of type of interconnection or location of the export node. Remaining support on dam safety review is under implementation. Disbursement from the IDA grants H5390 (original project) and H9470 (AF) are 100%. IDA credit 54490 (AF) is 97% disbursed. An uncommitted amount of approximately $250,000 is reported as of August 28, 2019. The project is in compliant with the legal covenants and financial audit requirements. There are no outstanding audit report, legal, fiduciary, safeguards and INT related issues. B. Proposed Changes: 5. The PDO remains valid, namely: “to increase human capacity and improve the performance of government oversight institutions for the hydropower and mining sectors”. The PDO outcome indicators remain relevant and achievable by the current project closing date of September 30, 2019. The proposed extension to September 30, 2020 will not affect the current Results Framework as the indicators have either already been achieved and targets have been exceeded or are on track to being achieved prior to the revised closing date. 6. The proposed change is the extension of the project closing date by 12 months from September 30, 2019 to September 30, 2020. The extension has been requested by GoL to use the remaining available funds to continue supporting MEM to implement the National Emergency Dam Safety Inspection (NEDSI), which has been a top priority for GoL since the tragic Xepian-Xenamnoy Hydropower Project’s (XPXNN) saddle dam failure incident on July 23, 2018. Under the instruction of the Prime Minister, NEDSI requires over fifty owners of all hydropower projects with installed capacity larger than 15MW to conduct emergency self-inspection of their facilities for review by MEM. The Bank supported the MEM to design and set up a transparent and objective structure/framework grounded on existing legislation, and HMTA funds the NEDSI Project Secretariat established in MEM. The International Advisors required by MEM to review the self-inspection reports are being dispatched by a wide range of development partners including Australia, China, European Union, France, Germany, New Zealand, Switzerland and the United States of America. These development partners have also requested the Bank to continue supporting MEM to implement the NEDSI and to coordinate across the development partners. 7. The implementation of NEDSI, which started in February 2018, is a complex undertaking to follow-up with over fifty Dam Owners and to coordinate the review process with 15 International Advisors. NEDSI Project Secretariat, consisting of the Head of Secretariat and the Coordinator, plays a crucial role in this NEDSI exercise in providing coordination support between MEM, development partners, International Advisors, and dam owners. 8. The first phase of NEDSI was initially expected to complete by September 2019 which coincided with the closure of HMTA. However, the mobilization of the International Advisors by the development partners experienced delays, and self-inspection report submission by the Dam Owners was also not on schedule. As of August 2019, only 49 out of 55 self-inspection reports have been submitted. The review process by the International Advisors is also running behind schedule due to the complexity in coordinating advisors dispatched by different development partners, and also to group them into various teams to avoid conflict of interest with the parties involved in the development of the dams. The revised schedule is for the first phase (i.e. self-inspection) of NEDSI to be completed in March 2020. It is expected The World Bank TA for Capacity Development in Hydropower and Mining Sector () that the second phase examination for those dams requiring further inspection will take longer subject to the nature of the issues identified and the recommended remedial measures to be implemented by the Dam Owners. 9. The proposed extension has been agreed with the Ministry of Finance and Ministry of Energy and Mines to use the remaining available funds to continue supporting NEDSI implementation. While a longer extension was discussed, it was agreed to extend only for one year since the remaining funds are only sufficient to support the NEDSI Project Secretariat and other relevant experts for one year. One-year extension will ensure the conclusion of the first phase of NEDSI and allow MEM the time to consider alternative sources of assistance for the implementation of phase two. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-54490 Effective 30-Sep-2018 30-Sep-2019 30-Sep-2020 30-Jan-2021 30-Sep-2015, 30-Sep- IDA-H5390 Closed 30-Sep-2014 2018, 07-Feb-2019 IDA-H9470 Effective 30-Sep-2018 30-Sep-2019 30-Sep-2020 30-Jan-2021 TF-99572 Closed 01-Mar-2014 09-Jul-2014