Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES13903-BD RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SIDDHIRGANJ PEAKING POWER PROJECT CREDIT 4508-BD BOARD APPROVAL: OCTOBER 30, 2008 TO THE THE PEOPLE’S REPUBLIC OF BANGLADESH April 11, 2014 SUSTAINABLE DEVELOPMENT DEPARTMENT ENERGY UNIT SOUTH ASIA 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. ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AF Additional Finance BPDB Bangladesh Power Development Board CCPP Combined Cycle Power Plant COD Commercial Operation Date EGCB Electricity Generation Company of Bangladesh EIA Environmental Impact Assessment EIRR Economic Rate of Return EMAP Environmental Management Action Plan EPC Engineering, Procurement, and Construction ERP Enterprise Resource Planning GAAP Governance and Accountability Action Plan GTCL Gas Transmission Company Limited IA Implementing Agency IDA International Development Association IP Implementation Progress JICA Japan International Cooperation Agency KPI Key Performance Indicator kWh Kilowatt-hour LNG Liquified Natural Gas mcf Thousand cubic feet MIS Management Information System ERP Enterprise Resource Planning mmcf Million cubic feet MW Megawatt O&M Operations and Maintenance OE Owner’s Engineer PDO Project Development Objective PGCB Power Grid Company of Bangladesh PPA Power Purchase Agreement PSDTA Power Sector Development Technical Assistance RF Results Framework SIA Social Impact Assessment WTP Willingness to Pay Vice President: Philippe H. Le Houerou Country Director: Johannes C.M. Zutt Sector Manager: Julia Bucknall Task Team Leader: Md.Iqbal 2 BANGLADESH SIDDHIRGANJ PEAKING POWER PROJECT CONTENTS RESTRUCTURING DATA SHEET 4 A. SUMMARY 11 B. PROJECT STATUS 11 C. PROPOSED CHANGES 14 D. APPRAISAL SUMMARY 15 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 19 ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK 23 ANNEX 3: GOVERNANCE AND ACCOUNTABILITY ACTOIN PLAN 30 3 DATA SHEET Bangladesh Siddhirganj Peaking Power Project (P095965) SOUTH ASIA SASDE . Report No: RES13903 . Basic Information Project ID: P095965 Lending Instrument: Specific Investment Loan Regional Vice President: Philippe H. Le Houerou Original EA Category: Full Assessment (A) Country Director: Johannes C.M. Zutt Current EA Category: Full Assessment (A) Sector Director: John Henry Stein Original Approval Date: 30-Oct-2008 Sector Manager: Julia Bucknall Current Closing Date: 31-Mar-2016 Team Leader: Md. Iqbal . Borrower: Responsible Agency: . Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Board Approval Restructuring Level 1 Level: . Financing ( as of 19-Mar-2014 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P095965 IDA-45080 Effective 30-Oct-2008 13-Nov-2008 31-Mar-2009 31-Mar-2016 31-Mar-2016 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P095965 IDA-45080 Effective XDR 222.60 222.60 0.00 81.75 140.85 37 . Policy Waivers Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] . 4 A. Summary of Proposed Changes Following changes to the original project design are proposed: 1) Name of project: 'Siddhirganj Power Project' 2) Project Development Objective (PDO): ‘Increase supply of electricity to Bangladesh grid network’. 3) Components: Component Part A: Power Station- Construction and Installation of a 335 MW combined cycle power plant (CCPP) in place of construction and installation of 300 MW peaking power station. Component Part B: Transmission Evacuation-(i) Construction and Installation of Siddhirganj 230kV AIS substation and (ii) Construction and Installation of Maniknagar 230kV GIS substation, in place of single contract for Construction and Installation of Siddhirganj 230kV AIS and Maniknagar 230 kV GIS substations. Part D: Technical Assistance- New provision of (i) an Owner’s Engineer in supervision and management of construction of the 335 MW CCPP and (ii) an O&M contract in operation and maintenance for the 335 MW CCPP; iii) Core MIS for Electricity Generation Company of Bangladesh (EGCB) and Gas Transmission Company Limited (GTCL) split into a) ERP services and b) ERP supply installation contracts-each for EGCB and GTCL; and iv) a new provision for social, environmental, financial analysis and training support to each of EGCB, Power Grid Company of Bangladesh (PGCB), and GTCL. 4) Costs: IDA allocation for Part B of project reduced to US$ 27.01 million, that for Part C to US$67.00 million but Part D increased to US$ 54.54 million. 5) Results Framework: Change reflects change in PDO, PDO indicator, and intermediate inputs and indicators. Target dates have been updated to reflect the changed implementation schedule. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ X ] No [ ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ ] No [ X ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ X ] No [ ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] 5 Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ X ] No [ ] Appraisal Summary Change in Economic and Financial Analysis Yes [ X ] No [ ] Appraisal Summary Change in Technical Analysis Yes [ X ] No [ ] Appraisal Summary Change in Social Analysis Yes [ X ] No [ ] Appraisal Summary Change in Environmental Analysis Yes [ X ] No [ ] Appraisal Summary Change in Risk Assessment Yes [ X ] No [ ] . B. Project Status The project is under implementation. 88% (US$ 309.93 million) of funds are committed but overall progress is only 46%. Siddhirganj 230 kV AIS substation and Siddhirganj-Maniknagar 230 kV power transmission line are complete. The gas supply line is 75% complete and will be substantially ready for supply to other power plants of Siddhirganj power hub in April 2014. The construction of the combined cycle power plant (CCPP) is only 30% complete because of delay in procurement and lengthy soil consolidation issues. The project entered problem project status in December 2013 due to slow construction of the CCPP (25%) and low disbursement (25%). However, the Government in the MTR mission agreed to a revised construction schedule for simple cycle commercial operation from May 30, 2015 and combined cycle COD from February 13, 2016. Three other contacts (one O&M for CCPP; and ERP Packages for EGCB and for GTCL) are under procurement. The institutional components of the project are ongoing. Disbursement recently picked up to 34.78% and is likely to cross 50% in June 2014. The project is in compliance with the loan covenants. There are no outstanding safeguards issues. . Development Objectives/Results Project Development Objectives Original PDO The primary development objective is to support investments in peaking power supply capability in Bangladesh such that unmet demand for energy is reduced by 1-billion kWh per year. Unmet demand has an economic cost of at as much as 2% of GDP. A secondary development objective is to build capacity among the implementing agencies: Electricity Generation Company of Bangladesh, Power Grid Company of Bangladesh, and Gas Transmission Company Limited (GTCL). Change in Project's Development Objectives Explanation The change in the PDO is due to change of the power plant technology from peaking to an energy-efficient combined cycle that provides higher energy with lower gas consumption and meets base-load energy needs. It will deliver at least 2.49 billion kWh annually to the grid in place of at least 1 billion kWh. The new PDO places the institutional strengthening element as part of intermediate results because a strengthened institution can use project assets efficiently to deliver the increased electricity to grid over long term. An O&M and ERP represent the required institutional supports. 6 Proposed New PDO Increase supply of electricity to Bangladesh grid network. Change in Results Framework Explanation: Change of PDO, outcome indicator, and intermediate indicators are reflected in the RF. The new PDO indicator reflects increased electricity generation (at least 2.49 b kWh) in higher operating hours. It drops the institutional strengthening (IS) element as an effective operations and governance of implementing agencies can rather contribute to the achievement of PDO. Therefore, the IS element (O&M and ERP) is an intermediate result and works together with other intermediate results delivered under the project components to achieving the PDO level results. The intermediate indicators reflect change in power plant capacity, configuration, and technology that require CCPP skills to construct, operate & maintain the CCPP. All the result indicators have been made specific and the target values have been shifted to likely years. The RF is consistent with the project deadline. . Financing Change to Financing Plan Explanation: Due to the change to the CCPP technology that require higher capital cost the GOB allocation has increased keeping the IDA allocation unchanged. The project cost has thus increased substantially. Source(s) At Approval Current (from AUS) Proposed BORR 120,000,000.00 120,000,000.00 312,890,000.00 IDA 350,000,000.00 350,000,000.00 350,000,000.00 Total 470,000,000.00 470,000,000.00 662,890,000.00 Disbursement Estimates Change in Disbursement Estimates Explanation: The revised disbursement estimate follows actual disbursement until end-February 2014 and the projected disbursements in line with expected implementation trend of all contracts (both ongoing and under- procurement) until the project deadline. Disbursement of the project has been low from the beginning due to delay in procurement of large contracts and slow implementation of one contract. The new estimates have been adjusted to take these delays into account. Fiscal Year Current (USD) Proposed (USD) 2009 10,000,000.00 0.00 2010 80,000,000.00 686,041.45 2011 130,000,000.00 2,254,368.80 2012 110,000,000.00 84,978,323.89 2013 5,000,000.00 31,446,540.88 2014 5,000,000.00 31,446,540.88 2015 5,000,000.00 47,169,811.32 2016 5,000,000.00 152,018,372.70 7 349,999,999.92 Total 350,000,000.00 . Components Change to Components and Cost Explanation: Change of Component Part A from 300 MW gas turbine power station to 335 MW combined cycle power plant (CCPP); splitting of one contract in Component Part B to two contracts and similar splitting of contracts of Component Part D; and also addition of new contracts in Component Part D. The changes are proposed to be consistent with change of power plant technology, for better contract administration and development effectiveness of project. Funds saved in Component Part B and Component Part C are allocated to Component Part D as Part D needed additional funds. Current Component Proposed Component Current Cost Proposed Action Name Name (US$M) Cost (US$M) 335 MW Combined Cycle Power Plant 195.90 460.17 Revised (CCPP) 230 kV Power 53.90 39.53 Revised Evacuation System 60 km, 30-inch gas 104.30 101.10 Revised transmission line Technical Assistance and 33.90 50.52 Revised MIS Price/physical contingency of GTCL 11.57 New and TA and exchange rate loss Total: 388.00 662.89 . Other Change(s) Change in Implementation Schedule Explanation: Implementation schedule for three infrastructure components have been revised, within project deadline. These are: completion of Power Evacuation System by June 2014, that for Gas Supply Pipeline by June 2014, and for CCPP it is by February 2016. Due to slow implementation of the project and delayed procurement of the CCPP these changes are made. Other Change(s) Explanation: The project name will be changed to "Siddhirganj Power Project". The borrower will monitor and evaluate progress of the project on the basis of revised monitoring indicators as per the revised Results Framework. (Section IIA.1 of Schedule 2 of Financing Agreement.) 8 The borrower shall ensure that the project is carried out in accordance with the provisions of the Anti- Corruption Guidelines, the TASCRM and the GAAP (Section I.C of schedule 2 of FA). The GAAP shall be added to the Appendix of the Amendments to the Financing Agreement. . Change(s) in Appraisal Summary Appraisal Summary Change in Economic and Financial Analysis Explanation: The power to be generated by the CCPP will partially alleviate the country's estimated 1,500 MW power shortages. The new design will provide continuous base-load power of at least 2.49 billion kWh annually compared to 1 billion kWh in peak period of original design. The design will also save the equivalent of 218.6 billion MJ of gas over project life for the same quantity of electricity generated. The economic cost netting out the financial transfers in the form of taxes, duties, and contingencies is estimated at $519 million. The EIRR is 34% and NPV is $668 million (compared to 20% EIRR and $115 million NPV at appraisal) under assumptions that the plant will be operating at least 84.6% of the time, at an economic price of natural gas estimated at $4.7/mcf and the value of energy conservatively estimated at 11 Tk/kWh. The sensitivity analysis is carried out on a range of scenarios and this analysis reveals that the economic returns from this revised project are robust to a wide variation in assumptions. EGCB has a provisional PPA with BPDB with a levelized tariff of Tk.2.3 per kWh based on 12% discount rate (compared to earlier 5%) that favorably compares to BPDB's bulk supply tariff of Tk. 4.5 per kwh. Under partial gas supply scenario EGCB is financially viable even at 30% load factor. Based on an entity level financial analysis the financial position of EGCB will remain strong throughout the analysis period of 22 years assuming that the PPA will be honored. Appraisal Summary Change in Technical Analysis Explanation: In view of the severe energy shortfall experienced in Bangladesh, the government requested to change the plant technology from a 300 MW peaking to a 335 MW combined cycle operation. Although the capacity upgrade is modest, the important difference is a much higher efficiency due to the change in plant design offering much higher electricity output, with fuel saving. The CC design has a higher capital cost, but produces nearly twice the energy output per unit of gas input. Hence the revised design will help address the more severe power shortage that grips the country, and also conserve scarce natural gas resources. Space and other constraints at the plant location dictate a 1:1:1 CCPP configuration (single gas turbine, one heat recovery steam generator, and one steam turbine). Bid evaluation was designed based on a ‘least lifetime cost’ per unit of electricity produced, to include capital, operational and maintenance costs. This arrangement meets international norms. Appraisal Summary Change in Social Analysis Explanation: Due to rerouting of 6.2 km of power transmission line on complaints of PAPs and change of power plant technology from peaking to combined cycle requiring larger land space for CCPP (9.24 acre in place of original 6 acre), an updated ESIA for both has been done and disclosed in country and the Bank's Infoshop. The other components and contracts remained unaffected. No settlement is required for the expanded power plant and the new transmission route entails less social impact and does not impact on any residential structures. Appraisal Summary Change in Environmental Analysis Explanation: 9 EGCB has updated the Environmental Impact Assessment (EIA) since the technology, and capacity and area requirement have changed due to change to CCPP. Also the EIA for the rerouted transmission line have been updated by PGCB. The revised EIAs report of the combined cycle power plant and power transmission line were disclosed in the Bank's Info-shop and web site of respective agencies on July 15, 2012. EGCB has used the certification of ISO 14001-2004 (Environmental Management Standard) and OHSAS 18001:1999 (Occupational Health & Safety Management Systems) as an Eligibility Criteria for the power station contractor. In addition to the environmental management plan prepared as part of the EIA, the contractor has proposed its own Environmental Action Plan (EMAP) based on the equipment specifications and the standards of the World Bank Group and Bangladesh Government. EMAP for power transmission lines is being followed. Both EGCB and PGCB are in the final stage for establishing their separate environment units to manage all environmental and social/resettlement activities relating to sub- projects and prepare quarterly progress reports on safeguards monitoring. The CCPP is now being constructed in the same location identified for peaking power plant and does not trigger any new environmental safeguards policies. The major environmental impacts are expected from cooling water requirements and discharges; noise and air emissions; and ground level pollution. Most of the adverse impacts are expected to be limited to the local environment and these impacts will be minimized, avoided or compensated with a careful design and implementation of the environmental management plan. Appraisal Summary Change in Risk Assessment Explanation: Some risk ratings have changed from appraisal over 5 years of project implementation and some are affected by change of power plant technology (gas supply risk). EGCB capacity risk remained high as it is a new company and has moderate capacity, especially, in procurement and contract management. The GAAP has been updated inputting actions to strengthen these areas. Risks related to physical implementation and contractual disputes are being managed through the support of world class OEs and consultants and Dispute Boards. EGCB capacity risks are also being addressed through guidance from the Bank and the Power Division. Delivery quality risk can pose a difficulty as a major ingredient to CCPP operation is natural gas which is in short supply. This risk remained substantial. EMR Division and Petrobangla have recently committed full gas supply to CCPP. The project remains viable down to 30% load factor in the event of partial gas supply. Design and technological risks remain low as these are mainly coming from world-class EPC and equipment suppliers. Project stakeholder risk is considered low, as PGCB and GTCL prepared appropriate resettlement action plans and distributed compensation efficiently. Coordination and integration of multiple agencies in implementation pose high risks. Mitigation measures are under implementation and include strengthening the institutional capacity of the three IAs. The Power Secretary is regularly monitoring progress of the CCPP. He is arranging Project Steering Committee meetings, coordinating multiple ministries/agencies, and giving decisions to accelerate the implementation. There is still a substantial risk in terms of completing the CCPP and delivering the electricity to grid on time because the capacity risk at EGCB is high. Therefore, the overall risks of project implementation are rated substantial. 10 A. SUMMARY 1. In view of increasing electricity demand and continued gas and power supply shortages in Bangladesh and following an unsuccessful procurement of the 300 MW peaking power plant of the original project design, the Government proposed to upgrade the power plant to an energy-efficient, combined cycle design. It has higher thermal efficiency; it can deliver higher amount of electricity with lower gas input. EGCB then contracted a 335 MW combined cycle power plant (CCPP) through a rebid. The CCPP will increase power supply in peak and off-peak periods instead of peak times as per original PDO. A Level-1 Restructuring of the project is required to formalize the PDO change. 2. Consistent with the change of the power plant technology, Component Part A: Power Station is upgraded to a 335 MW CCPP; Component Part B: Transmission Evacuation (b) 230 kV Siddhirganj AIS and 230 kV Maniknagar GIS substations is split into two substation-wise contracts; and Component Part D: Technical Assistance (TA) has following changes: a) addition of two new contracts-an Owner’s Engineer in supervision and management of construction of the 335 MW CCPP and an O&M contract in operation and maintenance for the CCPP; b) Core MIS contracts of EGCB and GTCL split into i) ERP services and ii) ERP supply installation contracts; and c) a social, environmental, financial analysis and training support to EGCB, PGCB, and GTCL is introduced. There is also Component-wise cost updating. The project restructuring has been discussed with the borrower and implementing agencies. The borrower has requested the Bank to process the restructuring. B. PROJECT STATUS 3. The Siddhirganj Peaking Power project 1 became effective in March 2009 and is under implementation. Out of the total IDA funding of $350 million, [88% (US$ 309.93 million) is committed] about 34.78 % (US$ 119.334 million) has been disbursed. Only three contracts are at procurement stage (two on ERP and one on O&M for CCPP); rest all contracts have been executed. The institutional components are ongoing and strengthening operations and governance of the IAs. These are building utility capacity in procurement; design review, contract implementation and construction supervision; power plant O&M; monitoring; environmental and social impact assessment and management; financial management; and computerization and business process assessment. 4. Overall progress of the physical infrastructures of the project is 46%. 30% of CCPP contract, 75% of gas pipeline package, and 99% of power evacuation system have been completed. Installation of Siddhirganj substation and Siddhirganj-Maniknagar power transmission line is complete; 98% of Maniknagar substation is complete. A part of the Siddhirganj-Maniknagar Transmission line is transferring electricity at 132 kV level. As per current construction schedule, the whole power evacuation system will be complete in March 2014 and the gas pipeline substantially complete in April 2014. The power plant will be operational in February 2016, with simple cycle operation in May 2015. The project is in substantial compliance with the loan covenants. There are no outstanding safeguards issues. 5. As the major procurements have completed, the profile of governance and corruption related risks of the project has diminished considerably and the remaining risks arise in contract execution. The IAs 1 The Project Development Objective is, ‘to increase the supply of power during periods of peak demand in Bangladesh, and to strengthen the three implementing agencies: Gas Transmission Company Limited (GTCL), Electricity Generation Company of Bangladesh (EGCB), and Power Grid Company of Bangladesh (PGCB).’ The Project is an integrated gas-to-power project encompassing five components: i) a 300 MW peaking power plant, to be implemented by EGCB; ii) a 60 km 30 inch natural gas pipeline by GTCL; iii) an 11 kilometer, 230 kV transmission line for power evacuation, and substations at Siddhirganj and Maniknagar, by PGCB; and iv) technical assistance for an operations and maintenance (O&M) contractor for EGCB's power plants and an Owner's Engineers (OE) for GTCL and PGCB, and core Management Information System (MIS) for EGCB and for GTCL. 11 are complying with the Transparency and Accountability and Risk Control Matrix (Annex-12 of PAD) but with mixed results - only EGCB and GTCL are update on annual governance reporting and PGCB has defaulted on the 2011 and 2012 year reporting. PGCB has agreed to submit the pending reports in April 2014. The borrower in July 2012 further agreed to a GAAP and the IAs are complying with its Action Matrix. The GAAP has been revised in response to observed procurement and contract management risks at EGCB at the beginning of CY 2014. A new row has been inserted in the Action Matrix on assessment and mitigation of those risks. The mitigating actions include-introduction of technically competent experts to advise on procurement, supervision and contract management; an independent engineer to assess technical integrity of CCPP installation and provide interpretation of contract on delays and other claims; and due diligence in procurement. 6. EGCB’s first attempt to procure the 300 MW peaking power plant failed in August 2010 due to a combination of factors 2. At this point the borrower decided to redesign the power plant to a CCPP due to mainly gas shortages in the country and the establishment of many small/medium sized rental power plants and IPPs that are able to meet peak demands. The bidding process for the CCPP was launched on October 14, 2010 using World Bank’s procurement process. EGCB and the Government followed advice from the Bank and took concrete steps to ensure integrity of the procurement process. They formed a bid evaluation committee following an approved terms of reference, they selected competent committee members, maintained confidentiality of information in the bid evaluation and approval process as well as engaging three outside individual consultants in supporting the procurement. OPRC provided its concurrence to the borrower’s bid evaluation report and the draft contract and EGCB executed the EPC contract with the joint venture of Isolux and Samsung in May 2012 for supply & installation of a 335 MW CCPP. Construction of the power plant is thus delayed due to failure of the 1stprocurement and longer time (i.e. 21 months) taken to conclude the 2nd procurement and lately the lengthy soil consolidation issues of the 335 MW CCPP. 7. Component-wise change of the project including their present status is given in Table-1. The major change is in Component Part A where the power plant technology was upgraded from simple cycle to combined cycle, with expectation of more capacity and electricity with lower amount of natural gas input. There is no change in Component Part B (i.e. electricity transmission system), except splitting two contracts into three. Component Part C remains unchanged. There is a minor change in Component Part D but it mostly reflects change of splitting and adding contracts and introducing training to be executed by IA, and in funding source. Table-1 further shows contracts having implementation periods beyond the current closing date of the project. An extension of the project deadline to facilitate the completion of these contracts is subject of an improved project implementation performance to be monitored in December 2014. (see para 10). 2 These include complications related to the Siemens Settlement Agreement and deficiencies in the bidding process. This agreement was signed between the World Bank and Siemens AG in July 2009, but extended to bids submitted after January 2009, for which the Bank’s no-objection was not given prior to July 2009. The Siddhirganj power station bids fell into this category because they were received by EGCB in April 2009, before the agreement was signed, but during the effective period of the agreement, and four bidders became ineligible for offering Siemens equipment. 12 Table-1 Updated Project Components Original Components Revised Components Status (w/estimated completion IAs Remarks time) Part A : 300 MW Gas Part A : 335 MW Combined Under construction and to be EGCB Turbine Peaking Cycle Power Plant (CCPP) completed in February 2016. Power Plant Part B: Electricity Part : B Electricity Transmission Under implementation and on track PGCB Transmission Evacuation System (3 contracts) to be completed by June 2014 Evacuation System (2 contracts) Part C: Gas Supply Part C : Gas Supply Pipeline Under implementation and on track GTCL Pipeline to be completed by June 2014 Part D :Technical Part D :Technical Assistance Under implementation All IAs Assistance D1: TA services for Part D1- EGCB EGCB EGCB (a) EGCB’s O&M contract (two (a) EGCB’s O&M contracts) for: Contract (one contract) (i) 2x120 MW Gas Turbine; Under implementation; to be for 300 MW and and completed in November 2018 2x120 MW (peaking (ii) 335 MW CCPP Under procurement; to be units) completed in December 2018. (b) EGCB Owner’s Engineer Ongoing, completed by June 2016. Earlier the OE funded (b) Core MIS © EGCB ERP by PSDTA (i) supply installation of ERP Under procurement; to be package completed in December 2017 Earlier one (ii) ERP Infrastructure Phase 1 Under procurement; completed in ERP expert December 2015 deployed (iii) ERP Infrastructure Phase 2 -Do- by PSDTA (iv) Individual ERP experts Under implementation, to be completed in December 2016. (d) IA support (social, environmental, financial analysis Will be completed in March 2016 and training) for EGCB TA Services for PGCB Part D2-PGCB PGCB (a) PGCB owner’s engineer Under implementation; completed D2: PGCB Owner’s in December 2014 Engineer (b) IA supports (social, Completed in March 2016. environmental, financial analysis and training)for PGCB TA Services for GTCL Part D3-GTCL GTCL D3: (a) Owner’s (a) Owner’s Engineer for GTCL Under implementation, will be Engineer complete in June 2014 (b) ERP (b) Core MIS (i) supply installation ERP In process of engaging ERP Earlier one package vendors; completed in Dec. 2017 ERP expert (ii) ERP Infrastructure Phase 1 Under procurement; completed in was (iii) ERP Infrastructure Phase 2 December 2015 deployed -Do- by PSDTA (iv) Individual ERP experts To be recruited and be completed in December 2016. © IA Supports (social, environmental, financial analysis Will be completed by March 2016 and training) for GTCL 13 8. Component-wise updated Costs have been given in Table-2. Under the present allocation of IDA fund, new allocation for EGCB’s OE, O&M for CCPP and IA support including training for all IAs, and increased allocation to two ERPs (for EGCB and GTCL) have been financed from savings out of PGCB’s Power Evacuation System, GTCL’s Gas Pipeline contracts (US$26.19) and TA (US$11.18 million). The Government will finance the increased costs of the shift to the combined cycle technology which is already committed. The allocation of counterpart funding increases from US$ 120 million to US$ 312.89 million. Table-2 Component–wise Costs US$ million GOB finance Components IDA including VAT, tax, Total other costs Cost Original Present Original Present Allocation Allocation Allocation Allocation Component (a): Power plant 195.9 195.9 82.0 264.27 460.17 Component (b): Electricity Transmission System 43.3 27.01 10.7 12.52 39.53 Component (c): Gas Transmission Line 76.9 67.0 27.3 36.1 103.1 Component (d): Technical Assistance 33.9 54.54 0 0 54.54 Dollar loss due to exchange rate variation 5.55 5.55 between SDR and Dollars (as of March 3, 2014) Total: 350.00 350.00 120.0 312.89 662.89 C. PROPOSED CHANGES 9. The following changes are proposed: Project Name: The project name will be changed from “Siddhirganj Peaking Power Project” to “Siddhirganj Power Project” reflecting the change in the power plant technology from a peaking to a base-load design. Project Development Objective: The PDO is revised from the “To increase the supply of power during periods of peak demand in Bangladesh and to strengthen the three implementing agencies” to the following: “Increase supply of electricity to Bangladesh grid network”, while retaining the institutional strengthening element as an intermediate result to achieving the new PDO. It is represented in the RF as O&M and ERP that strengthen operations and governance of implementing agencies. The new PDO reflects fulfillment of supply in both peak and off-peak periods. Components: To accord with the change of the power plant technology, following components have been changed: i) Component Part A is changed from “300 MW Gas Turbine Power Station” to “335 MW Combined Cycle Power Station” with change of cost estimate from US$ 277.9 million to about US$ 460.17 million equivalent. Additional equipment needed includes a heat recovery steam generator, a steam turbine and generator package, as well as ancillary equipment, such as a water intake, water treatment and effluent plant, and cooling tower etc. Initial financing commitment of US$ 195.9 million equivalent from the Bank is unchanged even though the component cost has increased. ii) Component Part D1(a) is split from “EGCB O&M contract” one contract into “EGCB O&M contract” two contracts–one for 2x120 MW peaking power stations, and the other 14 for 335 MW CCPP with change of cost estimate from US$ 21.1 million to US$ 18.7 million. iii) Components Part D1 (b) and D3 (b) are changed from “GTCL and EGCB MIS” to “GTCL ERP and EGCB ERP system, ERP Individual Consultants, and ERP infrastructures Phase-1 and Phase-2” for EGCB and GTCL each, with a change of cost estimate from US$ 8.2 million to US$ 18 million. iv) Component Part D1 (b) is added as follows: “EGCB owner’s engineer (US$ 7.5 million)” to support EGCB in the construction supervision and management of 335 MW CCPP. v) Component Part D1 (d) , D2 (b) and D3 (c) are added as follows: “supports for Implementation Agencies in social, environmental, financial analysis, and training (US$ 1.5 million)” Results Framework: The changes in the Results Framework and Monitoring are given in Annex- 1. The KPIs have been revised. The revised PDO indicator reflects increased electricity production in higher operating hours of the CCPP with reduced natural gas consumption, including an added plant capacity (i.e. 35 MW). The CCPP can deliver at least 2.49 billion kWh electricity annually, instead of at least 1 billion kWh. The other changes are coming from the change of components. The revised intermediate indicators reflect change in power plant capacity, configuration and technology, two essential infrastructures (power evacuation system and gas supply line) for the CCPP and other necessary institutional inputs (O&M and ERP) that are key to ensuring the PDO. Given delays in procuring and constructing the CCPP and implement the shortened O&M, the target values have been shifted to the likely years. All the revised indicators have been made specific. The RF is consistent with the current deadline of the project. 10. Future Extension of Closing Date Slow project implementation specially the construction of the CCPP and low disbursement are the key issues. The project performance ratings for both PDO and IP are moderately unsatisfactory (MU). The Bank has urged and the Government and EGCB have agreed to accelerate the implementation of the project. The Bank will assess the implementation performance specially the construction of the CCPP to determine by December 2014 whether the closing date of the project should be extended. Implementation of a few critical contracts (O&M and ERP) will exceed the current deadline (March 31, 2016) and the PDO cannot be monitored when the CCCP will be commissioned in February 2016. An extension of the project deadline will enable the project monitor the PDO indicator and complete the contracts. D. APPRAISAL SUMMARY Economic and financial analysis 11. The proposed additional investment of the Siddhirganj Peaking Power Project would modify the power plant from the original design of 300 MW simple cycle gas-fired peaking station to a 335 MW base-load combined-cycle gas turbine operation. The power generated from this plant will help to alleviate the crippling power shortages in the country which are estimated to be up to 1,500 MW. The new design is envisaged to provide continuous base-load power at an assumed plant load factor of 85%. The plant will be built over a period of the next 2 years and start operations partially in 2015 with a capacity of 217 MW and fully in 2016 with the nameplate capacity of 335 MW. The life of the asset is 22 years until 2036. 12. Economic Returns: A cost-benefit methodology was employed to estimate the net present value (NPV) and economic rate of return (EIRR) of the investments in the 335 MW base-load combined cycle operation. The economic cost netting out the financial transfers in the form of taxes, duties, and contingencies is estimated at $519 million. The EIRR is 42% and NPV is 15 $1,077 million (against EIRR for 20% and NPV $115 million at appraisal) under the assumptions that the plant will be operating at least 84.6% of the time, at an economic price of natural gas estimated at $4.5/mcf and the value of energy conservatively estimated at 11 Tk/kWh. The sensitivity analysis is carried out on a range of scenarios and this analysis reveals that the economic returns from this revised project are robust to a wide variation. 13. Financial Analysis: EGCB will enter into a Power Purchase Agreement (PPA) that would cover the costs of the power plant including the O&M contractor‘s fees, interest charges, and a 12% return on equity. The levelized tariff for the 335 MW combined cycle power plant for the 22 year life is estimated at 2.3Tk/kWh (USc 2.95/kWh at current dollar terms). This compares favorably with the current bulk supply tariff of about Tk 4.5/kWh of the off-taker Bangladesh Power Development Board (BPDB). An entity level financial analysis for EGCB was also carried out that shows that the financial position of EGCB will be strong throughout the analysis period assuming that the terms of the Power Purchase Agreement are honored. EGCB has entered into a Power Purchase Agreement (PPA) with BPDB for the ADB financed 2x120 MW power plants ensuring a cost recovery tariff for the plant. EGCB has also signed a provisional and similar PPA ensuring cost recovery tariff for the proposed 335MW power plant. However the final PPA will be signed only after the power plant cost and dependable capacity have been ensured after the COD. Technical 14. Plant Technology. The capacity upgrade to the 335 MW CCPP is modest but the important difference is a much higher efficiency. The CC design has a higher capital cost, but produces nearly twice the energy output with fuel saving. Hence this design will help address the more severe power shortages of the country, and also conserve scarce natural gas resources. Space and other constraints at the plant location dictate a 1:1:1 CCPP configuration (single gas turbine, one heat recovery steam generator, and one steam turbine) that was included in the bid document. Bid evaluation was designed based on a ‘least lifetime cost’ per unit of electricity produced, to include capital, operational and maintenance costs. This arrangement meets international norms and is satisfactory. 15. Gas Supply. With respect to gas supply, a project-financed gas transmission pipeline is under construction which is sized to remove potential supply bottlenecks at Siddhirganj. Hence, if supply issues arise, the most likely problem will be a periodic reduction in supply pressure, resulting in power generation below the full plant potential. The PPA for the 2x120 MW peaking units signed between EGCB and BPDB, includes payment provisions for both power plant’s available capacity (measured in megawatts) and for the energy generated (measured in megawatt-hours). These payments are structured such that the capacity payments cover EGCB’s fixed costs, including operation and maintenance. Under a partial gas supply scenario, EGCB would still be eligible for full capacity payments, and thus would remain financially viable. The task team modeled the economic and financial impact of partial gas supply and concluded that the project remains viable down to 30% plant load factor. In the unlikely event of a complete gas supply shut-down, EGCB would be eligible for liquidated damages from the gas supplier. Hence the legal arrangements would financially protect EGCB in the event of insufficient gas. EGCB has been receiving regular payments from BPDB on power supply from the 2x120 MW peaking units. 16. EMR Division and Petrobangla have recently committed full gas supply to the Siddhirganj 335 MW CCPP. EGCB is in the process to conclude a Gas Supply Agreement (GSA) with Titas Gas based on a performance-based LD. In the event of Titas’ mismanagement to supply the gas to the CCPP Titas will have to give an LD as per GSA. Over the medium term, the government is developing new production fields in the northern Bangladesh and working on gas pipeline connectivity which would improve local gas availability. It also has longer-term plans for new gas field development. In addition, the Government is developing a Liquefied Natural Gas facility to address gas shortages in the interim before substantial 16 new domestic gas production comes on stream. These arrangements are the strongest practical measures available and are sufficient to minimize gas supply risks and the related financial risk to EGCB. Social 17. Social and environmental assessments for all the three physical infrastructure components (power plant; power evacuation system; and gas transmission line package) satisfactory to the Bank have been prepared and disclosed in country and Info-Shop. Implementation of the land acquisition and compensation distribution of gas transmission line and power transmission line is advancing satisfactorily and more than 80% is complete. The expanded CCPP requires an additional three acres of land. The original and the additional plot of land were allotted to EGCB as per a land lease agreement. During implementation of the 230 kV power transmission line, the original route had to be rerouted in one segment to avoid social impacts and dislocations in a densely populated area. Updating of the ESIA of the rerouted transmission route and the 335 MW CCPP plant have been carried out and disclosed in country and Info Shop. No resettlement is required for the expanded power station site and the new transmission line route entails less social impact and does not impact on any residential structures. Environmental 18. The original project triggered the Environmental Assessment (OP/BP 4.01) safeguard policy, and was classified as Category ‘A.’ The three site specific Environmental Impact Assessments (EIAs) for three physical components (power plant, power transmission line and gas line) had been prepared by respective entities during project preparation and disclosed in- country and Info Shop. The CCPP is now being constructed in the same location identified for the peaking (open cycle) power plant. It does not trigger any new environmental safeguards policies. EGCB has updated the Environmental Impact Assessment (EIA) since the technology, capacity, and area requirement of the CCPP have changed. Also the EIA for the transmission line has been updated by PGCB, since the line route has changed. The revised EIA reports were disclosed in the Info-shop and web site of respective agencies on July 15, 2012. The gas line did not require a revision of the EIA as the scope and line route have remained unchanged. The major environmental impacts of the CCPP are expected from cooling water requirements and discharges; noise and air emissions; and ground level pollution. However, most of the adverse impacts are expected to be limited to the local environment. These environmental impacts will be minimized, avoided or compensated with a careful design and implementation of the environmental management plan, prepared with the EIA report. 19. EGCB has used the certification of ISO 14001-2004 (Environmental Management Standard) and OHSAS 18001:1999 (Occupational Health & Safety Management Systems) as an Eligibility Criteria for the power station EPC contractor. In addition to the environmental management plan, the EPC has proposed its own Environmental Action Plan (EMAP) based on the equipment specifications and the standards of the World Bank Group and Bangladesh Government. EMAP for gas and power transmission lines are being followed. For proper implementation of the EIA, in addition to the supervision of the of the Owner’s Engineer, GTCL already established an Environmental, Health and safety unit. Also both EGCB and PGCB are in the final stage of establishing their separate environment unit/cell, staffed by one Deputy General Manager (DGM), one Manager and one Assistant Manager. These units will manage all environmental and social/resettlement activities relating to sub-projects and prepare quarterly progress reports on safeguards monitoring. Risk 20. Delivery risk can pose a difficulty, as a major ingredient to CCPP operation is natural gas which is in short supply. EMR Division and Petrobangla have recently committed full gas supply to the CCPP. The project remains viable down to 30% plant load factor in the event of partial gas supply. Capacity risk is high in EGCB, as it is a new company and has moderate capacity, especially, in procurement and contract management. The GAAP has been updated recently incorporating with some actions to 17 strengthen these areas. EGCB capacity risks are also being addressed through guidance from the Bank and the Power Division. Design and technological risks remain low as these are mainly coming from world class EPC and equipment suppliers. Risks related to physical implementation and contractual disputes are being managed through the support of world class OEs and consultants. Recently, EGCB has completed construction of a 412 MW CCPP with JICA financing. Project stakeholder risk is considered low, as PGCB and GTCL prepared and implemented appropriate resettlement action plans and distributed compensation efficiently. Coordination and integration of multiple agencies in implementation pose high risks. Mitigation measures are under implementation and include strengthening of the institutional capacity of the three IAs. The Power Secretary is regularly monitoring progress of the CCPP. He is arranging Project Steering Committee meetings, coordinating multiple ministries/agencies, and giving decisions to accelerate the implementation. There is still a substantial risk in terms of completing the CCPP and delivering the electricity to grid on time because the capacity risk of EGCB is high. Therefore, the overall risks of project implementation are rated substantial. 18 ANNEX 1: THE RESULTS FRAMEWORK Project Siddhirganj Peaking Power Project (P095965) Project Stage: Restructuring Status: DRAFT Name: Team Requesting Md. Iqbal SACBD Created by: Md. Iqbal on 25-Feb-2014 Leader: Unit: Product Responsible IBRD/IDA SASDE Modified by: Md. Iqbal on 19-Mar-2014 Line: Unit: Country: Bangladesh Approval FY: 2009 Lending Region: SOUTH ASIA Specific Investment Loan Instrument: . Project Development Objectives Original Project Development Objective: The primary development objective is to support investments in peaking power supply capability in Bangladesh such that unmet demand for energy is reduced by 1-billion kWh per year. Unmet demand has an economic cost of at as much as 2% of GDP. A secondary development objective is to build capacity among the implementing agencies: Electricity Generation Company of Bangladesh, Power Grid Company of Bangladesh, and Gas Transmission Company Limited (GTCL). Results Core sector indicators are considered: Yes Results reporting level: Project Level . Project Development Objective Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Revised Additional annual electricity Text Value 0 Power shortages At least 2.49 billion delivered to grid (in billion Kwh): continued, about kWh delivered to grid. Peak and off-peak: 2.49 1,500 MW of Peak:0.624 billion kwh supply gap. Off-peak :1.87 billion kWh Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment No kWh generated 19 as CCPP is under construction. Marked for Strengthening operations & Text Value Weak corporate Enhancement of the Operations and Deletion governance of the implementing governance institutional governance of the agencies: - Timely implementation system in capacity of the implementing agencies of the project components; - Clear EGCB. PGCB three implementing strengthened. & transparent reporting on and GTCL have agencies continued. governance, financial comparatively Project’s TA is performance, & environment & better producing good social impact management. governance results in specially in contracting, design procurement, review, FM and project construction management. management, monitoring, financial management, environment/ social impact assessment and management. Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment MIS and Annual governance reporting delayed, only EGCB has recently improved. The other supports are on track. Intermediate Results Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Marked for (a) Contribute to meeting peak Text Value Shortages Shortages 2.5 billion kWh delivered Deletion demand for energy during peak continued. to grid substations per period. annum. Date 31-Jan-2012 04-Mar-2014 31-Aug-2015 Comment The peaking capacity is likely to 20 be delayed by a year as the lengthy land compaction works started with 5 month delay that delayed construction of the project. Marked for (b) Strengthen governance of the Text Value Inadequate EGCB is update on Annual governance Deletion implementing entities corporate annual governance reporting. governance reporting. The IAs reporting. are complying with Matrix of Actions of the GAAP. Date 30-Sep-2009 04-Mar-2014 31-Mar-2016 Comment PGCB and GTCL have been defaulting on annual governance reporting since 2011. New Generation Capacity of Megawatt Value 0.00 0.00 335.00 Conventional Generation Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 constructed under the project Comment 335 MW 335 MW CCPP built and Siddhirganj CCPP operational. under construction. New Transmission lines constructed or Kilometers Value 0.00 11.00 11.00 rehabilitated under the project Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment New Transmission lines constructed Kilometers Value 0.00 11.00 11.00 under the project Sub Type Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Breakdown Comment Siddhirganj- 11 km 230 kV power Maniknagar- evacuation system built, Transmission line transfers at least 2.49 21 and Siddghirganj billion kWh to grid. AIS substation built. Maniknagar GIS substation at final stage of commissioning. New 60 km gas transmission line Kilometers Value 0.00 52.00 60.00 constructed Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment Pipeline and other 60 km gas supply line associated works supplies gas to 335 MW ongoing. CCPP and other 1,300 MW power plants at Siddhirganj. New Projected lifetime fuel savings Value 0.00 0.00 218.60 Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment 218.6 billion MJ projected life time fuel saving achieved. New O&M Contracts budgeted and Text Value Limited O&M O&M for 2x120 EGCB runs 335 MW implemented capacity of MW ongoing; RFP CCPP on global O&M EGCB for O&M of CCPP protocols. drafted. Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment New ERP functional and generating Text Value Information ERP bid document ERP go life and is reports based on past in draft form generating reports. data and records Date 01-Apr-2009 04-Mar-2014 31-Mar-2016 Comment . 22 Annex 2 Operational Risk Assessment Framework (ORAF) Bangladesh: Siddhirganj Peaking Power Project (P095965) . . Project Stakeholder Risks Stakeholder Risk Rating Moderate Risk Description: Risk Management: Borrower relations: The project objective is fully in line Appropriate resettlement plans have been prepared and fully implemented. NGOs have with Government’s recent efforts to increase power been appointed by GTCL to help implement Resettlement Action Plans (RAPs). generation to meet the persistent shortage in supply. Resp: Status: Stage: Recurrent: Due Date: Frequency: The transmission components of the project for power Client In Progress Implementation evacuation and gas transmission involve resettlement. The implementing agencies, GTCL and PGCB, have adequate safeguards capacity to address resettlement issues properly (details in Project Risks-Social and Environmental section below). Change to power plant technology to combined cycle involved a larger size of land plot at Siddhirganj power hub but did not entail any resettlements. Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating High Risk Description: Risk Management: The project has technical assistance component to build capacity of EGCB. A globally EGCB, a relatively new company, established with reputed O&M firm will be in place that will oversee the O&M of the CCPP during the existing assets of BPDB at Siddhirganj site, also lacks project period. The O&M will help EGCB build its own capacity to adopt global best adequately trained human resources for operating and practice in O&M of utility. EGCB has been receiving technical support (Owner's maintaining power plants efficiently. GTCL and PGCB Engineer) from globally reputed consultants in design and procurement, in design however have relevant expertise in design, review and installation supervision of the 335 MW CCP. The project- supported OE has implementation, operation, and maintenance of, just made site mobilization. 23 respectively, gas and power transmission assets. A power purchase agreement with BPDB, the off-taker for the power generated from Transfer of assets from BPDB to EGCB has not been the 2x120 MW peaking plants, has been signed and EGCB is being paid on this. BPDB completed but EGCB has a source of revenue to manage signed a land lease with EGCB and handed over the land for the 335 MW CCPP. BPDB its operations from a PPA signed with BPDB for the has also signed a provisional PPA with EGCB on the CCPP and agreed a reasonable 2x120 MW peaking units. There are no asset transfer tariff. issues with PGCB and GTCL. Resp: Status: Stage: Recurrent: Due Date: Frequency: Financial Management: Delays in submitting entity audit Client In Progress Implementation reports are common for all three implementing agencies (EGCB, GTCL and PGCB). The entity audit reports for Risk Management: all three agencies are submitted without Management Financial Management: An action plan with agreed time lines to comply with the Letter. None of the agencies have submitted audit reports financial covenants was agreed with the three agencies since October 2010 and good on the Project Financial Statements. Only GTCL has improvements noticed. Progress on the recent FM issues is given below. submitted interim un-audited financial reports since IUFRs: There is timely submission of IUFRs (end Sept. 2012) and the IAs are effectiveness of the Project in March 2009. compliant. They are using automated accounting systems, only financial reports are done manually. They are to integrate the financial reporting functions with the existing The position of Director (Finance) of PGCB is still vacant. automated systems. The position of Director (Finance) of PGCB is still vacant and the PGCB received a qualified opinion on the financial Bank recommends PGCB to fill in the position immediately. statements of 2012-13. This is the third consecutive Audit Reports (Entity, Project and Internal): In compliance with the FA, all the IAs financial years PGCB received the qualified audit reports. submitted the entity audit reports for the financial year 2012-13. The auditor expressed unqualified audit opinion on the financial statements of GTCL and EGCB. Trade receivables are ten months in EGCB against 3 However, PGCB received a qualified opinion on the financial statements of 2012-13. months required by the Project. This is the third consecutive financial years PGCB received qualified audit reports ( not related to Bank financed operation) on absence of appropriate audit trail for property Procurement: EGCB has low capacity to prepare bidding (BDT 42.11 billion), inventories (BDT 1.66 billion); inappropriate accounting treatment documents and conduct bid evaluation efficiently. There for capital work in progress (BDT 847.63 Million) and exchange rate fluctuation gain are instances that EGCB hesitates to seek clarifications for (BDT 645 Million). PGCB has taken initiative on these and is in process of resolving bid evaluations that delays bid conclusion. these. EGCB and PGCB did not submit internal audits as per stipulated time of the FA, both IAs to submit the internal audit reports by April 30, 2014. Compliance with Covenants: Covenants (Financing Agreement, Schedule-2 Section 1A.2b) to maintain trade receivables at a level not exceeding an amount equivalent to its billing for energy services, for previous three months was found as, PGCB; two months, GTCL; three months and fifteen days, and EGCB ten months. It was however noted that there are few unsettled issues of PPA between EGCB and BPDB and this resulted to unusually high debtor days. The mission strongly recommends that EGCB takes 24 initiatives to resolve the unsettled issues of PPA with BPDB so that they may maintain the accounts receivable as per the covenants. The mission also noted that the covenants (FA, Schedule 2, Section 1A 2c) to prepare and submit ten year financial projections including updated investment and financing plan, was not done regularly by the IAs. Considering the capacity constraints, the mission recommends that the project considers an option for providing technical assistance to prepare the financial projections, including updated investment and financing plan. Table- 1 of the RP has included fund in this regard. There are very recent improvements on the quality and timeliness of submission of the various FM reports. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation Risk Management: Procurement: EGCB’s first attempt to procure the 300 MW peaking power station failed in August 2010 due to a combination of factors . OPRC rejected borrower bid evaluation and advised rebidding within the bidders but the borrower decided to upgrade the power plant to a CCPP on gas shortages. The bidding process for CCPP was launched with an agreement to follow the Bank’s procurement guidelines and the integrity of the process. Government took concrete steps (such as TOR of bid evaluation committee, selection of competent committee members, confidentiality of information in the bid evaluation process and approval process, high level oversight of government team on the integrity of the procurement process, etc.) to improve the procurement process of the second bidding and engaged three outsider individual consultants in supporting the procurement. The bidding was successfully concluded although the need for bid clarifications resulted in a longer-than-expected timeline. OPRC provided its concurrence to the borrower’s bid evaluation report and the draft contract and EGCB finally executed the EPC contract with Isolux in May 2012 for supply & installation of a 335 MW CCPP. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation 25 Governance Rating High Risk Description: Risk Management: EGCB Board is yet to provide an effective oversight on Several interventions for increasing the effectiveness of Boards have been provisioned management. Rather, the Board interferes in day-to-day for in the original loan agreement. The Transparency and Accountability and Risk functioning of management. Such interference is partly Control Matrix of the PAD (Annex-12 of PAD) require each IA to submit annual due to a poor understanding of the role of a Board and the governance reporting for Bank review, a legal covenant. Board audit and other responsibilities of Board members. committees have been set up as per this requirement. Governance reporting obligations for 2009 met, albeit with delay and that for 2010 was submitted late. Presently EGCB PGCB and GTCL, being a corporatized entity, have and GTCL are update on annual governance reporting, and PGCB defaulted on the 2011 separate boards providing oversight of professional and 2012 reporting. PGCB agreed to submit the pending reporting on April 30, 2014. management. The task team is following up on this. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation Risk Management: A Governance and Accountability Action Plan (GAAP) has been prepared identifying the measures for minimizing the risk. Risk mitigation measures would include, among others, addition of international procurement and technical experts as members in the bid evaluation committees for larger packages and forensic audits. As the major procurements of the project have completed, the profile of corruption related risks of the project has diminished considerably and the remaining risks arise in contract execution. The borrower in July 2012 further agreed to a GAAP that identified measures for minimizing the governance risks. The IAs are complying with its Action Matrix. The GAAP has been revised after noticing procurement and contract management risks at EGCB at beginning of CY 2014 and a new row of action has been inserted for assessment and mitigation of those risks. Measures on this risk mitigation would include, among others, addition of international procurement and technical experts as members in the bid evaluation committees for the rest two contracts of EGCB. The revised GAAP has been discussed with borrower in the MTR mission in early 2014. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client Not Yet Due Implementation 26 Project Risks Design Rating Low Risk Description: Risk Management: The combined cycle power plant design has been chosen The gas fired part of the combined cycle plant (217 MW) will be able to generate power as the power plant is expected to support both peak and sooner (10 months earlier). A global technical expert team works on this project to base load. This design is justified when the higher capital ensure selection and construction of reliable and efficient power plant equipment. cost is outweighed by the lower operating cost, since Finally world renowned GE equipment is selected and now under supply and operation is for most or all of the day. This plant will not installation. only provide more output but also would provide 50% more power output per unit of natural gas input. However, Similar support is available to PGCB and GTCL and high quality transmission materials this design takes longer to commission (estimated delay of and equipment have been selected and being installed. one year). No design changes are required for the power evacuation and the gas transmission components of the Monthly coordination meetings are held within the three implementing agencies to project. ensure smooth implementation of the three components. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation Social and Environmental Rating Low Risk Description: Risk Management: The major environmental impacts for the power plant are The original project triggered the Environmental Assessment (OP/BP 4.01) safeguard expected from cooling water requirements and discharges; policy, and was classified as Category ‘A’. The majority of the environmental impacts noise and air emissions; and ground level pollution. are being minimized, avoided or compensated with a careful design and implementation of the environmental management plan. Social and environmental assessments for all the Most of the adverse impacts of the CCPP are expected to three physical infrastructure components (power plant; power evacuation system; and be limited to the local environment. gas transmission line package) satisfactory to the Bank have been prepared and disclosed in country and Info-Shop. Project specific EMP is being implemented. There are some less significant construction related impacts (dust, water pollution, noise etc.) and health and A careful design and implementation of the power plant has been adopted to minimize safety issues for power transmission and gas supply lines. the expected impacts associated with the development of power plant. Relocation, land requisition and acquisition involved in A buffer zone with tree plantation is recommended in the EMP to mitigate the noise the gas line, and small relocation and some loss of crops pollution generated by the power plant. are involved in the power line. 27 The RAPs of power line and gas line have been prepared and fully implemented. No resettlement is required for the expanded power station site. EGCB and PGCB are developing fully functional Environment and social Management Units (EMU). GTCL has this set up already. Resp: Status: Stage: Recurrent: Due Date: Frequency: Client In Progress Implementation Program and Donor Rating Low Risk Description: Risk Management: The project is a top priority of the government in its efforts to increase power generation in the country. The Resp: Status: Stage: Recurrent: Due Date: Frequency: project does not have any other donor financing. Client In Progress Implementation Delivery Monitoring and Sustainability Rating Substantial Risk Description: Risk Management: Gas is the mainstay of fuel options in Bangladesh and The project has got a letter of commitment from Petrobangla for adequate gas supply Siddhirganj is a combined cycle (gas and steam) power and GOB has recently reiterated it full gas supply commitment to the 335 MW CCPP. plant. Gas as an input fuel is in short supply and there is GOB is in the process of implementing a gas debottlenecking and augmentation plan an element of uncertainty in availability of gas when the that has the potential to add 1 bcf per day of gas from 2015. Delivery quality risk can power plant is ready for commissioning. pose a difficulty, as a major ingredient to CCPP operation is natural gas which is in short supply. The project remains viable down to 30% load factor in the event of partial gas Over-reliance on natural gas for power generation without supply. Government is exploring other fuel options to tackle power generation adequate investment in gas exploration and development shortages – including importing LNG, rehabilitation of older power plants to make it has resulted in a gas shortage leaving some of the existing more fuel efficient, and expanding the use of other input fuels such as diesel, furnace oil, power generation capacity unutilized and the government's coal and nuclear. Power Sector Master Plan (PSMP 2010) analyzed various fuel options ambitious power generation expansion program uncertain. for power generation and suggested fuel diversification for power, shifting dependence of power generation to coal (50%) and other fuels (25%) including renewables, nuclear, Policy: The sector financial position is weak stemming and cross border power trade. In addition, IDA has been providing TA support to an from inadequate tariff that requires government subsidy to LNG FSRU terminal and is in dialog with GOB for possible gas debottlenecking and cover shortfall. The ambitious generation expansion development of LNG investment projects. program of more than 12,000 MW by 2015 will be financially unsustainable in the absence of adjustments in Government is working with the independent Regulator on a gradual tariff adjustment 28 retail tariff and application of other non-tariff measures. plan. Bulk electricity tariffs have been raised by 98% and retail by 65% in the last few BPDB, being the off-taker, with its weak finance will pose years. Non-tariff measures have been implemented that has improved distribution utility payment risks to EGCB. BPDB is already state-dependent performances. The Bank has an ongoing technical assistance with the Regulator and a on IPP payments. policy dialogue with government on strengthening the financial position of the sector. Resp: Status: Stage: Recurrent: Due Date: Frequency: Bank In Progress Implementation Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due Date: Frequency: Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due Date: Frequency: Overall Risk Overall Implementation Risk: Rating Substantial Risk Description: The main risk in was in procurement that has been ring-fenced by taking several measures to improve quality of procurement and integrity of the process. Coordination and integration of multiple agencies in implementation pose high risks. Several measures provisioned to strengthen the institutional capacity of the three implementing agencies have improved the inter-agency coordination and integration during implementation. The Power Secretary is regularly monitoring progress of the CCPP. He is arranging Project Steering Committee meetings, coordinating multiple ministries/agencies, and giving decisions to accelerate implementation. There is still a substantial risk in timely completing the CCPP and delivering electricity to grid because the capacity risk at EGCB is high. Overall risks of project implementation are therefore rated substantial. 29 Annex 3 GOVERNANCE AND ACCOUNTABILITY ACTION PLAN (GAAP) BANGLADESH: SIDDHIRGANJ POWER PROJECT This Governance and Accountability Action Plan (GAAP) for the Siddhirganj Power Project (SPP) outlines features of project design, institutional arrangements, and additional specific measures to minimize governance and corruption risks. It builds on the existing project Transparency and Accountability Strategy and Risk Control Matrix (TASRCM) 3 and more generally in the operating environments of the implementing agencies while focusing on risks as of the beginning of CY 2012, i.e. after selection of contractors for the major procurement packages involving installation of plants and equipment. The GAAP is to serve as a management tool for implementing agencies and the World Bank in its implementation support to monitor issues of governance on the project. Through regular monitoring of the issues, the GAAP may be adjusted as is necessary in the course of implementation. As of beginning of CY 2014, the GAAP has been revised taking into account of the experience and limited institutional capacity of EGCB in procurement and contract management. The revisions will protect resources and reputation through assessment and mitigation of the risks of the ongoing procurement of two large contract packages and contract managements of existing contracts of EGCB. Context and Background Bangladesh continues to be a high risk environment for governance. Despite attempts to enhance accountability in the legal framework for corporate governance and public sector regulation such as through strengthening of the right to information (RTI) regime, poor performance and abuse of office are common in the public sector including state-owned enterprises. Governance in the energy sector has posed particular challenges. The past decade has witnessed mixed progress in the power sector’s operational and financial performance, despite efforts of various governments. On the positive side, average system losses have declined to about 12% today from as high as 35% in the recent past. Similarly, revenue collection has increased to about 90% today from a low of 58% in previous years. However, large increases in demand have outpaced supply, and high-cost, short-term measures to add new capacity have put ever greater burdens on the sector. The sector remains affected by political considerations, short-term planning horizons of successive governments, poor incentive structure for managers and regulators, and a not-yet-mature regulatory body. The SPP is being implemented by three agencies: the Electricity Generation Company of Bangladesh Limited (EGCB), the Gas Transmission Company Limited (GTCL), and the Power Grid Company of Bangladesh (PGCB). All of these agencies fall under the 1994 Companies Act, which provides a sound legal framework for the functioning of accountability measures in terms of financial reporting and institutional framework. In accordance with the Act, the companies have constituted Boards which include both public sector and private sector representatives. In addition, the first three years of the project have involved capacity building efforts, particularly in developing asset management and strengthening of their management information systems. The project also concentrated the number of contracts into a total of ten packages in order to allow for focused monitoring of procurement and implementation. As of January 2012, about 87% of project funds have been committed under successfully concluded, Bank-supervised, prior- review procurement procedures. The World Bank and Government are committed to protecting resources and reputation in financing the SPP. The Project falls under a comprehensive framework of measures to underscore this commitment including: 3 The TASRCM is described at Annex 12 of the PAD of the Siddhirganj Peaking Power Project. The Financing Agreement of the project requires the Borrower to implement the project as per the provisions of Anti-Corruption Guidelines and the TARSCM. 30 detailed risk assessments and mitigation measures, implementation of the Bank’s Anti-Corruption Guidelines, and robust project supervision, including a field-based TTL who practices continuous supervision. Governance and Corruption Risks With all major procurements complete, the profile of governance and corruption related risks has diminished considerably. The remaining risks fall into two main categories: (i) risks arising from institutional weaknesses that can lead to poor performance incentives and reduced accountability, which in turn open potential opportunities for abuse; and (ii) risks of corruption or mismanagement in contract implementation. There are also limited corruption risks in connection with resettlement which are addressed in the Resettlement Action Plans. However, in CY 2013 EGCB has been found to have faced governance risks in procurement of the Owner’s Engineer (OE) and in contract management of the supply-installation contract for the 335 MW combined cycle power plant (CCPP), the largest contract of the project. On the other hand, the project is being restructured to comply with the changes of PDO and some component and it is found that the overall risks of the project have been minimized as IDA allocation to lumpy supply-installation contracts has reduced and that for technical assistance has increased. Measures to reduce procurement and contract management risks designed in the original project have been retained and they have been strengthened. A new row in the Action Matrix now reflects some actions to protect EGCB from any possible procurement and contract management related risks. Institutional Risks Institutional weaknesses in the implementing agencies can pose risks to the project. These risks can lead to poor oversight and resulting problems with the delivery of works and goods which in turn undermine project effectiveness. These weaknesses may also provide opportunities for fraud and corruption on the part of some individuals. Such a transgression would hamper effectiveness and efficiency in the use of resources but also constitutes an issue unto itself which neither the implementing agencies, the Government, nor the World Bank will tolerate. As said above, the institutional framework for the project involves the three implementing agencies -- EGCB, GTCL and PGCB. There are as well the oversight entities on behalf of the State by the Power Division of the Ministry of Power, Energy and Mineral Resources (MoPEMR) and the Bangladesh Energy Regulatory Commission (BERC). EGCB is one of four power generation entities overseen by the Power Division. PGCB is the only power transmission entity in Bangladesh, also mapped to the Power Division, and transmits power from the four power generating entities. Finally, GTCL, which is responsible for a balanced and reliable gas transmission network in the country, is under the Energy and Mineral Resources Division of MoPEMR. GTCL and PGCB were created in 1993 and 1996 respectively. They are established, relatively well-run companies, staffed at appropriate levels, with salaries and incentives that are well tuned to Bangladeshi market conditions. In terms of capacity, GTCL and PGCB have relevant experience in the design, implementation, operation, and maintenance of gas and power transmission assets respectively. EGCB is a younger company, created in 2004, with correspondingly less experience and capacity. It is now operating two 120 MW Peaking Power Plants at Siddhirganj (ADB financed) and owns a 100 MW Power Station in Haripur. There are modest risks in terms of corporate governance in all three entities. Boards of these entities have been duly established and include private sector representatives, but are dominated by the Government which appoints all members and determines the Chairperson. Membership tends to reflect the interests of bureaucrats in the sector and/or politicians with specific personal or partisan agendas. To the extent that political or other concerns may influence Government actions, these may influence decision-making in the companies. A more probable risk is the opposite – the failure of boards in carrying out their statutory duties 31 in supervising the companies’ performance, and a failure of Government to hold the boards accountable. Reporting within the companies to the Boards has not been timely in 2010 and 2011, which in turn reflects low levels of oversight by the Boards themselves. Financial reporting and internal audit functions remain relatively weak in the absence of strong internal controls and supervision. Historically, Government (the only shareholder in both companies) has been lax in establishing accountability arrangements with corporate boards. However, the Power Division has recently sought to correct this lapse by signing performance focused Memoranda of Understanding with companies under its oversight. Mitigation measures for these institutional risks include a set of measures to improve corporate governance, consistent with Bangladeshi law. In accordance with the SPP credit agreements, all Boards have established three subcommittees on annual audit and procurement, human resources, and corporate governance to focus attention and follow up on these issues. The SPP credit agreements also provide that at least one of these subcommittees is chaired by a non-Government board member. Each of the subcommittees is tasked with annual reporting on their respective mandates. The human resources committee takes the place of the normal compensation committee and is designed to monitor the company in terms of its commitment to merit-based hiring, firing, promotion, training and compensation. The audit and procurement committee selects and supervises the external auditors and additionally reviews all procurement activities of the financial year and highlights procurement transparency and outcomes as well as any areas for improvement. The corporate governance committee reports on the Board’s performance with respect to its fiduciary responsibilities. Committee reports have been provided to the Bank in a more or less timely manner except for corporate governance reports which have been delayed. The Bank’s supervision has put particular emphasis on this issue, and reporting is now improving. Corporate boards are required to meet at least quarterly. The companies are similarly required to make public their financial reports and corporate governance reports, consistent with the Right to Information Act 2009. SPP suffered from violation of several FM covenants. The Bank then agreed on an FM action plan in March 2010 and monitored the plan regularly. The entities however complied with most of the items except few minor issues (timely receipt of IUFRs, clear presence of project transactions in audits and EGCB has established a computerized accounting system for Bank’s transactions). Items of the plan complied with are: i) establishment of audit committees at EGCB and GTCL, ii) change of auditors at EGCB and PGCB par Bank’s standards, iii) reduced delay in receiving of entity and project audit reports, and iv) submission of internal audit reports and interim unaudited financial reports (IUFRs) albeit with delay. Since all the three entities are Companies incorporated under the Companies Act, they are required by the statute to have their accounts audited by Chartered Accountant Firms within six months of the end of the financial year. The Bank reviewed the profile of the existing auditors of the three entities to ensure that the auditors are acceptable to the Bank. In case of GTCL the existing auditor is a firm of national repute and is acceptable and in case of EGCB and PGCB a new auditor has been appointed. This requirement should be covenanted in the Additional Finance credit agreements. Both project and entity audit reports for each entity will be monitored on the Audit Reports Compliance System of the Bank (ARCS). PGCB has a well-staffed internal audit department which undertakes commercial audit for the Company. The internal audit department in PGCB does not cover internal audit of the Projects. It was agreed that the Internal audit department of PGCB will undertake internal audit of the Siddhirganj operation under agreed TORs. GTCL on the other hand has a system of pre-audit only. Therefore in case of GTCL, the TOR of the external auditor will incorporate a half yearly audit of the internal control framework of the Bank financed operation. There is an additional set of potential institutional risks for the newer EGCB related to performance. The scale of operation and maintenance required for the new power station is beyond the institutional experience of the company. This risk is being mitigated through substantial technical assistance as well as the appointment of an outside O&M contractor to ensure good operations while building capacity within the 32 company to take over full responsibility in six years. O&M contracts in the power generation sector are standard, tried-and-true approaches frequently used by utilities and financial investors, like private equity firms, for the O&M of generation facilities. As such there is little residual risk stemming from contract design features. Contract Implementation Risks With the satisfactory selection of contractors for all of the major procurement packages, the remaining risks arise mainly through contract execution. Corruption risks can possibly emerge either through independent actions on either party – the contracting entity or the contractor – or collusion between them. Actions on the part of the contracting entity can include solicitation of funds based on implicit or explicit threats to fulfillment of the contract. Fraud on the part of the contractor can involve falsifying reports of work completed, requirements for change orders, or other actions in order to obtain funding without the completion of works. There may also be collusion among the two parties, or among their contracted entities working on the project, in agreeing to accept a lower quality/volume of work for official payment by the implementing agency(ies). The central element for risk mitigation in project implementation is to follow the World Bank’s Anti- Corruption Guidelines (the ‘Guidelines’) which apply to the SPP. This includes obligations on parties to the Project to conduct due diligence, supervision of activities, and to take appropriate actions to carry out remedies in the event that governance and/or corruption issues arise. The GAAP contains highlighted elements of the Guidelines as well as supplemental features which shall not be considered to supersede or replace the Guidelines. The potential for corruption and fraud on the part of officials in the implementing agencies is limited by the multiple contract supervision tiers comprised of structurally independent entities. The Project requires implementing agencies to employ a qualified owner’s engineer (OE) to supervise each major project component. Additionally, EGCB will have an O&M Contractor for technical oversight of the Bank-financed power station. This contractor is separate from the O&M contractor for the ADB-financed 2x120 MW peaking power plants also located at the Siddhirganj site. The OEs are globally reputable companies, supervised by the implementing agencies and in turn supervised by the Bank and other development partners working on Siddhirganj. These levels of scrutiny limit opportunities for solicitation or other forms of corruption by officials, as no official will have sufficient discretion over payments to credibly threaten a contractor. The potential for fraud on the part of contractors is mitigated through several measures. Qualifications of the companies and their appropriateness to deliver on contractual obligations were confirmed through due diligence conducted during the procurement stage. If at any stage the Government of Bangladesh, any of the project implementing agencies, or the World Bank determines that further due diligence is required of a contractor or contractors, this shall be conducted by the corresponding implementing agency(ies). All due diligence efforts are in turn subject to review as part of the Bank’s implementation support for the Project. Further due diligence may include exercising rights to access and review audit statements of the contractors. OEs have been retained to ensure technical competence to detect poor performance or cases of fraud. The contracts utilized (and approved by the Bank) build- in penalties and remedies in cases where performance issues occur. The potential for fraud and corruption through collusion among individuals associated with parties to contracts being implemented under the SPP will be countered by the measures described above as well as other features of the project. The first additional feature is that the small number of contracts allows for substantive attention on implementation from each of the tiers of supervision, as well as within each of the implementing agencies by their internal control mechanisms (e.g. internal audit, Boards). The second such feature is that the terms of the contracts are payment of a fixed fee which may be changed only through 33 change orders that base price adjustment on pre-agreed schedules. This precludes discretionary price inflation and discourages arbitrary inflation of works performed since this is unlikely to yield benefit to the contractor. Third, all proceeds of the IDA credit will pass directly from the Bank to contractors through commercial accounts, limiting the interface and opportunity for malfeasance. Project management units and OEs will sign off on invoices before submission to the Bank Monitoring and Bank Supervision The GAAP will be subject to regular monitoring by implementing agencies and in implementation support missions undertaken by the World Bank. The project will also have monthly coordination meetings among the three implementing entities, and additionally the Bank’s procurement specialist monitors overall contracting and implementation. A slightly revised Action Matrix to include updated actions for EGCB is attached for monitoring by both the IAs and the Bank. 34 Matrix of Actions Siddhirganj Power Project Revised Governance and Accountability Action Plan (GAAP) Early Warning Risks/ Agency Responsible; Indicators to Actions/Features Timeline/Target Objective Reporting Framework Trigger Additional Action Institutional Risks Reduce chances of inappropriate Ensuring private sector representation All IAs; Review of minutes of Subcommittees established Changes in Board membership political or bureaucratic on Boards Board meetings at beginning of Project; outside of scheduled rotation; influence in governance of monitoring membership and implementing agencies (IAs) Governance subcommittee oversight Annual governance report minutes semi-annually Large scale changes in staffing and reporting outside of schedule Issuance of Board decisions outside of authorities entrusted in the board Induce pro-activeness of IAs’ Establishment of three subcommittees All IAs Subcommittees established Board not meeting at least quarterly; boards in carrying out on audit & procurement, HR, and at beginning of Project; oversight/fiduciary obligations corporate governance; annual reporting reports received annually Late subcommittee reports from each Weak internal audit and financial Establishment of audit subcommittee All IAs Done. Significant qualifications in the management capacity audit report EGCB has established a computerized accounting system for IDA transactions For the 335 MW CCPP EGCB has not signed a PPA with BPDB, prior EGCB’s PPA for 2x120 MW ADB to COD. funded plants is effective. The COD/dependable capacity tests have not been executed/accepted by BPDB IUFRs/ FMRs have Bank’s qualified observations Overdue project audit reports Early Warning Risks/ Agency Responsible; Indicators to Actions/Features Timeline/Target Objective Reporting Framework Trigger Additional Action Contract Implementation Risks Limited experience and capacity Operations and Maintenance EGCB The O&M to be onboard at O&M performance against base at EGCB Contractor (O&M), with a specific the beginning of pre- performance and incentive targets; obligation of building operational commissioning of the 335 including targets related to training capacity at EGCB MW combined cycle power and certification of EGCB plant operational personnel. Curtail attempts at Hiring of internationally reputable All IAs All actions in place as of Differences between OEs and IAs’ corruption/solicitation by Owner’s Engineers to limit interface; Additional financing on project implementation officials in IAs Processing of payments from IDA credit proceeds directly to contractors Reports on grievances to be Receipt of grievances deemed to Multiple levels of scrutiny of noted at every Board have merit interaction between IAs and contractors meeting Grievance mechanism subject to reporting to the Board Limited procurement and project Appointment of technically competent, EGCB/Bank The RFP for O&M does not meet management capacity at EGCB reputable O&M to help design the required standards including scope O&M contract. of work and selection criteria. EGCB to set up a bid evaluation committee (BEC) with at least two The BEC not formed with global competent experts; one conversant with experts. Bank procurement and anti-corruption guidelines, and the other with modern, state-of-the-art large CCPP. OE in place. Done. The OE did not field required key Appointment of globally qualified OE skills. to supervise CCPP implementation and advise EGCB in contract management. EGCB’s lawyer not conversant with EGCB has a retainer lawyer. contract law. Done EGCB seeks contract management 36 Early Warning Risks/ Agency Responsible; Indicators to Actions/Features Timeline/Target Objective Reporting Framework Trigger Additional Action advice including on disputes from OE and lawyer. Bank’s IE conducts due diligence on The IE to be onboard in EGCB does not act as per advice of EPC delays and other claims, including March 2014. the IE. technical interpretation and implications on the contract. Conducting due diligence during procurement and post-procurement. Reduce fraud by contractors Appointment of technically competent, IAs and their OEs OEs in place- Done Additional information about any reputable OEs to reduce fraud. contractor’s performance or qualifications Additional due diligence as Conducting due diligence during prompted by information on procurement and post-procurement contractor performance Reduce potential collusion Multiple levels of scrutiny: OE, Active IAs and their OEs Ongoing Unexpectedly large or frequent between officials and contractors Boards, Bank Supervision change orders processed Contract terms (fixed fee with price adjustment according to pre-agreed schedules) Direct payment from Bank to contractors to limit interface 37