Document of The World Bank Report No: ICR0000616 IMPLEMENTATIONCOMPLETIONAND RESULTS REPORT (IDA-30340 SIDA-22228SIDA-50554) ON A CREDIT INTHEAMOUNTOFSDR144.4MILLION (US$199 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VlETNAM FOR A TRANSMISSION,DISTRZBUTION AND DISASTERRECONSTRUCTIONPROJECT ~ - December 28,2007 I Transport, Energy and Mining Unit (Vietnam) SustainableDevelopment Department I East Asia and Pacific Region CURRENCYEQUIVALENTS (Exchange Rate EffectiveJune 30,2007) CurrencyUnit = Dong 1,000 Dong = US$0.06202 US$1.00 = 16,125 Dong US$ 1.OO = 0.6607 SpecialDrawingRights FISCALYEAR January 1-December 31 ABBREVIATIONSAND ACRONYMS ........... ................. .......... ..................... I Kilowatt hour . ............................... LRMC Long-Run Marginal Cost i ....... .. -- . ,.. Industry and Trade -.- ..................... . ty DevelopmentPlan i MOST ; Ministry of Science an ... - . -.. ... .................. -- . i ERAV egulatoryAuthorityof Vietnam MV / + .................. ! MediumVoltage ---. ............ .. "-"+ ......... - I MW . Megawatt .- & ...... ,-*, . . . . . . . . . . . . . . . . . . . . . . . . . . * MVA MegavoltAmpere (1,000 KVA) . i -. - - ; -.............. .; / PAH ! ProjectAffectedHousehold ........ i -- + ... .- ................... -.................... i PC ; PowerCompany . .................................. ..-__. . .: .. i PC1 Power Comp , .. _ .- . ..._ d I PC2 IPower Co Gas Insulated Switchgear PDO Project Development Objective : Government of Vietnam -. .-- .--.................... . 1 -. ........ ....... .- ............................................................ ........... .< Vice Resident: James W. Adarns Country Director: Ajay Chhibber 1 Sector Manager: Hoonae Kim i Project Team Leader: Richard Spencer 1 ICR Team Leader: Richard Spenc ... ...- . VIETNAM TRANSMISSION, DISTRIBUTIONAND DISASTER RECONSTRUCTION PROJECT CONTENTS Data Sheet A. Basic Information ...................................................................................i B. Key Dates ............................................................................................i C. RatingsSummary ...................................................................................i. . D. Sector and Theme Codes ..........................................................................ii E. Bank Staff ...........................................................................................ii .. F. ResultsFramework Analysis ....................................................................... .. ii . G. Ratingsof Project Performancein ISRs ...................................................... .vli H. Restructuring .....................................................................................vii .. I. Disbursement Graph .................................................................. ...........vii .. 1. Project Context, Development Objectives and Design............................................................. 1 2. Key Factors AffectingImplementationand Outcomes .................................... .....................7 3. Assessment of Outcomes ....................................................................................................... 1 4 4. Assessment of Risk to Development Outcome...................................................................... 17 5. Assessment of Bank and Borrower Performance .................................................................-17 6. Lessons Learned......................;............................................................................................. -20 7. Commentson Issues Raised by BorrowerIImplementingAgenciesPartners........................21 Annex 1. Project Costs and Financing......................................................................................23 Annex 2. Outputs by Component............................................................................................... 24 Annex 3. Economic and Financial Analysis..............................................................................29 Annex 4. Bank Lending and Implementation Support/SupervisionProcesses..........................34 Annex 5. BeneficiarySurvey Results.......................................................................................-36 Annex 6. Stakeholder Workshop Report and Results................................................................37 Annex 7. Summary of Borrower's ICR andlorComments on Draft ICR..................................38 Annex 8. Comments of Cofinanciersand Other PartnersIStakeholders....................................42 Annex 9. List of Supporting Documents ...................................................................................43 MAP Numbers: VNM35850 and VNM29172 (Country: 1 i l~ietnarn ihoject Name: 4... transmission, DistributionandDisaster . 1~045628 , IProject ID: /L/C/'I"TNumber(s): ~1~~-30340,~1~~-22228,~~~-50554 1 .. . .-~ . .--.......... i... ....................... IICRDate: :,. - /12/28/2007 i- -"---Type: ~ICR .- /CoreICR ......... .... . ... ...... i i [lendingInstrument:.--- $ 3 1 ~ !Borrower: _ - /SocialistRepublic of Vietnarn A_. --- --"--.-----. i 1 [original~ o t a l 1 lXDR 144.4M Pisbursed Amount: b R 106.0M ! iii i-- J_ . ._ 2 J_ i Category: B- - - . -... i ............... . .... . . . ..-.-.. - . . ilmplementing Agencies: / Electricityof Vietnam (EVN) IHo Chi Minh City Power Company Power Company No. 1 I1 Power Company No.: 2 . . .. - 1 ....... ICofinanciersand Other External Partners: [ JAPAN 1 Swedish InternationalDevelopmentAgency (SIDA) 1 I ! RevisedI Actual ] Process Date I Process I - I i Original Date iz Date(s> 2 . _i d- _i _............ ......I LLL -. \ 4 Concept Review: 1 1 . / 0812211996 I~ffectiveness: -- 02/12/1999 0211211999 Appraisal: 1010611997 i~estructurin~(s): "...-- -,- ", 8 Approval: -- '--term Review: 1213112000 -3 i /Closing: .. 0613012002 i 06/30/2007 i . ..____I_----.-...-. i , PerformanceRatingby ICR .............. .. .... .- ... me: .-.-. ............. ............ .................. . . . . . . . . . .....-........- Borrower Performance: :ModeratelySatisfactory - .- - - ..- ---.- --- - - -. ---- a. - . - Implementing Quality of Supervision: Unsatisfactory Satisfactory AgencyIAgencies: -- - . . - - - verall Borrower oderately Satis:factory .................. .... jC.3 Quality at Entry and Implementation PerformanceIndicators i : Implementation t 1 $ lndicators j QAG Assessments(if any) j Rating Performance 8 I 1 Potential i Problem projecti i I !NO /Qualityat Entry (QEA): /satisfactory \atany time (Yesmo): 1 .---L-- . ".&"i.i.i..... .... ,.."+--- . " / Problem Project at any ! I ! i /Yes I~ualityof Supervision(QSA): isatisfactory 'time (YedNo): 1 4 .- 1 DO rating ........ ................... before /~atisfactoq !ClosindInactivestatus: "i I Original Actual i L .- - ... - . .............. . ..... i I ! 1-- Sector Code(as %of total Bank financing). - I ....... . -- ......... ......... / Power -- -.- -0 1 0 J 100 .. a ....... . .......-.......-........-. --.A" ........ I r - i i l~hemeCode (Primary/Secondnry) d A i --- 1 I I I+ ! Infrastructure services for private sector development primary I Pnmary PA--....-.-....,- , 1 ji--------- disaster management Natural .- -1 Secondary I Primary i .. . -. ... -...+P,-" ............ - -. .- i 1 Other j +. financial and private sector development .............. .---.-.Primary I i .......... i" Primary .......................-. --; 1 Other urban development .... -. ... ... -t---- I Primary.. j Not Applicable ..."A .. i 1 Regulation and competition policy 1 1 1 ........ ."............ Primary Primary .................... .,L .............. i Positions . i--. . At ICR . . . - . ... .- .. 1 Vice President:.. - j~arnesW. Adams.... . ! LCountry Director.:- i. 'AjayChhibber . . . ... . .-. ..- - 1 Sector i Manager: iHoonaeKim iIProject I Team. Leader: . . .- !RichardJeremy Spencer jDarayes BahadurMehta -) ... .. -.......... iICR Team Leader: Richard Jeremy Svencer R Primary Author: /RichardJeremy Spencer ................................ !KurtF.......Schenk............ F. Results Framework Analysis Project DevelopmentObjectives (from Project Appraisal Document) (a) Strengthen the high voltage transmission network to facilitate evacuation of power from generating stations to the load centers; (b) Rehabilitate and expand distribution systems to meet demand, reduce losses and improve reliability; (c) Support sector reform and restructuring through: (i) unbundling "transmission" and I "generation"functions; (ii) the implementationof regulatory reforms; (iii) the introduction of tariff reforms; and (iv) exploring financing of distributionfrom diversifiedsources. (d) Support institutional strengthening and commercialization through: (i) securing greater autonomy for the distribution companies; and (ii) introducing planning capabilities for Demand Side Management. I - 1 Revised Project Development Objectives (as approved by original approving authority) I Project Development Objectives unchanged on restructuring. ~ (a) PDO Indicator(s) 1 i Original Target 1 Indicator I Baseline Value Values (from approval j ! documents) - +- - .-"........ -- .....- 'StrengthenHV transmissionnetwork to facilitate evac Indicator 1: ults/lOOkm/yearat 500kV ansmission losses (%) flows between Center and South (MW) Date achieved... -- . iO6/30/2002 iC~rmnent~ I(inc1. % lachievement) - .............. ... .. .. ce losses and in Interruptions: Indicator 2 : Number Duration(hours) . . " . . . . . . . . - .............. .- No. interruptions Added: :Interruptions,no.: Halong 17 'Halong8 InterruptionsPC1 / ~ a l o0.33 n ~ Vinh 32 Vinh 10 and PC2 area: 3.32 . ~ i n0.24 h Vung Tau 100 :VungTau 5 'Averageduration 'VungTau 2.16 'HoChi Minh City 20 :HoChi MirrhCity 8 ,supply 'HCMC5.39 'intemptions: 27.94'PC1and PC2: 2.34 ;~urationinterruptions (hrs/yr):i~urationinterruptions :hours ;Intem~ptions,rnins: Halong 3 l(hrs/yr): :LossesPC1: 6.78, . ~ a l o I q5~ . . . . . . . . .......... ................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . .--..... ......... Vinh 3.5 iVinh264 Vung Tau 29 Vung Tau 58 Ho Chi Minh City 14.5 HCMC 41 o Chi Minh City 10 !PC1and PC2 43.2 Dist. losses,%: ;Losses Halong 18 Dist. losses,%: 'Halong6.3 ;Vinh15 .Halong10 ivinh5.1 'VungTau 12.5 jVlnh 10 jVung Tau 7.4 Ho Chi Minh City 14.5 -VungTau 8 HCMC 6.7 'HoChi Minh City 10 ' 'PC1 8.15 PC2 7.93 . ........-.- .-...... -. ............ Date achieved :1210511997 ~06/30/2002 ~0512612005 ~0613012007 'Comments '90%.Significant improvementsin overalldistributionsystemreliability, well over targeted ,(incl.% palues. Improvement in losses in originalareas exceeded, but minor shortcomings in PC1 and . iachievement) --............. PC2.. areas. .. -~ ....... .. . . .. ....... . . /Supportsector reformthrough(a) unbundlingof transmission and generationfuncti Indicator 3: implementationof regulatoryreforms;(c) introductionof tariff reforms; and (d) exploring -'financingof distribution fromdiversifiedsources. .. .............. ........... . .... -. .-............... --......................... ,Transmissionbundled with iTransmissionseparate Not revised Four transmission ,generation. icost center 1998, profit ; :companiesoperate as /center1999. ;costcenters. No electricitylaw or iElectricitylaw i ' ElectricityLaw :secondarylegislation. presented to National . passed December No separate regulatoror assembly 1998 i2004 Value procedures. promulgated in 12 Regulatorcreated quantitativeor months. iOctober2005. Qualitative) Separate regulator and functions mid 1999 i ;Regulatoryprocedures : .end1999. Tariff 6.1 cents/kWh /Tariff7 cents/kWhby -Tariffs remain 5.2 ; i1999. cents/kWh 'Date... achieved '1213111997 112/3111999 ............ 05/26/2007 -0613012 -. ...-.7~--.-..-..-...-..-..........--..-......-.............-.......... :Comments '75%. Moderate shortcomkgs: progressson reform slow but 100% achieved by end !(incl.% :Tariffincreasedin VND te- by about 25%. It may have been unrealisticI undesirable toexpect ,achievement) bore rapid progress on reformor such significant tariff increase. .. .- ... ............. Indicator : !Supportinstitutionalstrengtheningand commercializationthrough: (i) securing greaterautonom . forthedistributioncompanies;and(ii)improvingitsFinancialManagementSyst .- ......... .......................... :Nocharters for each !Chartersfor each Not revised distributioncompany. distributioncompany given by delegation No distributionfunction at Increasing operational rather than Deputy Director General level.and management amendmentof Unimproved accountingand autonomy. ;charters. Value budgetingsystems by January Distributionfunction 'DistributionDDG i quantitativeor 1999 Deputy Director :appointedApril 1998.; Qualitative) Generalcreated by :Financial April 1998. management system ! &proved accounting : improved and budgeting systems Comments (incl. % 90%. Qualitative improvementsin PCs' autonomyand commercial management. .- ...... ........ .--. ........ p-normalize.---. economicac .... .. o baselineprovided. rred baseline is absence Value electricityservice innine MV lines and install transformer quantitativeor provinces 320 distribution substationsinstalled transformersubstations :with25MVA aggregate' capacity ._-.....-__ __ Date achieved _ .. ...i . :I210511997 '06/30/1999 . .,0512912005 . i12/31/2000 _...? _. - -_._.._i.____.- .- - i_ :Comments !Theseobjectives areinferred fromthe PAD text as no PDO indicator was established. 100% ! !(id.% achievedbut delayedin completion. ;achievement) i 1 @) Intermediate Outcome Indicator(s) Baseline Value -- - eiku to Phu Lam Transmissionline: 'Actuallength of 1,480lan ;transmissionline Capacity: 2,700 MVA apacity: 4,400 MVA !addedunder isubproject 550km Value and 450h4YA (quantitative transformer or Qualitative) capacity added. 'End of project .valuesfor whole . [syste~n1,530 lan . !and1,800 MVA - - - . .....-.. ....-................ .................... -- .. Date achieved '1213111997 ~0613012007 :Comments i 1100%of original components added. Originalbaseline and target values seem too high (incl. % ifor Vietnam 500kVsystem but too low for Vietnam 500+220kVsystem. achievement) .- . . Be to Tao Dan system.installed(fr -.................. ... ............ n line: Okm i~ransmissionline: Capacity: 0 MVA 1Okrn transrnission line Value Capacity: 626 MVA added and 376 (quantitative mVA of or Qualitative) transformer Comments Transmissionline and substation operational. 60% of transformer capacity added, (incl. % because only one 22011lOkV transformer added rather than two originally planned. achievement) gndicator3: 'Distributionsystems of Halong, Vinh and Vun P-.................I..... ............ .... MV line length: 370km :MVline length: 65 !Value Transformercapacity: .Transformercapacity: ;(quantitative '220MVA j3700MVA !orQualitative). LV line length: 307km . LV line length: ;1,40Oh -- & ...................... ............ c Date achieved .I213111997 106/30/2002 iComments : ~(incl.% :[awaitingfinal data but expected to be loo%] iachievement) C . i i ........... ... Indicator :Capacityof transmissionsystem expanded to meet current needs and power demand : patterns(fromresmcturingmemo) .- ... No 500kV substationat '500kVsubstation at ;blotrevised. Doc Soi substation ;DocSoi Doc Soi ;Projectextended !droppedand No incremental220kV :About2 3 0 h of single by six months to hansferred to iline and substations ;anddouble-circuit 'June30,2007 /anotherCredit. .Noelectrical .220kVline and two ; -324kmof 220kV linterconnectionbetween ;substations single and double- ;Value l~ietnamand Cambodia i~lectrical -circuitline and i(quantitative I interconnection 1125MVA(one 'orQualitative) i ;completed . . Isubstation)added. . . ;Connectionto /Cambodiaready : but not connected(awaiting !lineon Cambodia .... side) i ... - . .. . .- . . . . Date achieved )05/26/2 ........... 11213112006 .1212112006 -061 .... ................................................................ ............ ............... icomrnents ! i(inc1.% ;141% of transmissionline, but 50% of substations(by number). iachievement) !Demandin Hai Duong and Ha Tinh and other demand centers met with high-quality [Indicator5: ........... reliable supply .-.-. . ............ No incremental1lOkV bout 3 0 0 ho 0 2 h line or substations line and 590MVA Project extended of 1lOkV line and MV and LV systems in substations in service by six months to 315MVA Ha Tinh and Hai Duong 22kV MV and LV June 30,2007 substationsin e unrehabiIitated systems in Ha Tinh and service. 341 km ve) - Hai Duong rehabilitated MV lines in Ha Tinh and Hai Duong and [65] MVA installed -- ---- 'Date achieved -0%26/2005 12/2112006 0613012067 -- - - -. - -- ". Comments (incl.% [loo% achieved in all indicators] achievement) - - - - - G. Ratingsof Project Performance in ISRs ....... - .- ... ......... .- 2 1 06/17/1998 Unsatisfacto Satisfactory 0.00 1 --- - .......... i ................ 3 / 01/13/1999 _ i Satisfactory. ! Satisfactory __ : -. ............. ' _.___ _ _ _ _ . _. :._ - 4 i 05/20/1999 i Satisfactory - Satisfactory .- -- ! r q 1._ L-._-.. . ......... .-......., 5 1 12/27/1999 1 Satisfactory i ... . _: i .......... -: / 06/22/2000 . Satisfactory Satisfactory 10..79 --.----v--.-...-------..-... : - ? -t 12/28/2000 _; ! Unsatisfactory ! Satisfactory 12..26 .... .-~.: . ... ..... 1 06/26/2001 Satisfactory Satisfactow 17..31 ......-. &--" i . ...-... ---- ..... i ........ 9 ---- / 12/27/2001 1 Unsatisfactory ! .. .... Satisfactory.. ............. ........... 22.,06 - -..-- - .- - - -. ..i -- .................. .- - '. 1.IIII..___-_I--.. i &- .- 10 06/27/2002 . Satisfactory .. Satisfactory . 25.19 .......... .. 1 --._-..--...._._..l--.-..- .i 11 i 12/25/2002 Satisfactory Satisfactory .. 32.99. .................. - i- ' -- : 12 i 06/30/2003 ! Satisfactory 72.91 2 Satisfactory ........ ---. ...... -..---.--ip.-----.--.-..... 13 / 12/29/2003 Satisfactory Satisfactory 86.69 i .-. ... - - - . . .. -i- . ..i .- ............. : !:.-.+.14 i 06/29/2004 1 Satisfactory .-.- j Satisfactory 95.84. ---- ........ L 15 1 12/28/2004 1 . Satisfactory .... ...... Satisfactory 103.54 . . .-.--.I ". i ; 16 i 06/06/2005 1 Satisfactory....... ......... ; Satisfactory ....... ........ 108.37 ; . _ _ _ - _ _ _ . _ ~ - _ ..... .l.l---.l-l; ! 17 _-__1 03/29/2006 _ Satisfactory Moderately.............Satisfactory ...... 117.01........... . j ....... . . -- -- __...-___ J .. ---.. 18 1 03/23/2007 Satisfactory 129.94 .L .... .............. -- , Satisfactory... i --. ....-..... ..--. ..... ....... --.----....-,.A .... .. I I H. Restructuring (if any) Reason for Restructuring & Key ChangesMade , . I I. Disbursement Profile -Original---- Formally Revised -- Actual vii 1. Project Context, Development Objectivesand Design (this section is descriptive, taken from other documents, e.g.,PAD/ISR, not evaluative) 1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) Ten years after the watershed doi moi restructuring of the economy, Vietnam's progress was tangible: in 1997 GDP stood at $24 billion and had grown at 8.2 percent per year for the past five years; annual per capita GNI was around $300. Poverty had been reduced fronn 58 percent to 37 percent. In 1995- 1997, investment had run at about 24 percent of GDP, of which foreign direct investment made up ten percent. Though the Asian financial crisis was to break later in 1998, the project was prepared against a backdrop of solid macroeconomic growth. The energy sector mirrored the macroeconomic picture. On average each person used quite small amounts of energy but rising demand for energy was forecast on the back of strong industrial sector growth, which had consistentlyoutpaced GDP, and reached 13 percent in 1997. Demand for electricitywas forecast to grow about 70 percent faster than GDP fiom 1997 to 2010. The main issues facingthe electricitysector were: (a) Need for investment. Large sector investments, estimated to cost around $6 billion, were predicted for the period 1997 - 2002. The Government of Vietnam (GoV) planned a twin-track approach of increasing electricity tariffs and attracting foreign investment including the private sector; (b) Inadequate and inefficient electricitv infrastructure. Seasonal and locational differences in generation and demand indicated the need to strengthen the north-south extra high voltage transmission system while distribution losses in the range of 15 -- 30 percent pointed to the need for extensive rehabilitation, to reduce the need for additional investment in generation; (c) Impediments to commercial operation. Although the power sector was consolidated under Electricity of Vietnam (EVN) in 1995, commercialized operation was hindered by the need to unbundle the generation, transmission and distribution hctions and encourages diversified participation; . (d) Inadequate regulatory regme. Government finctioned as policy maker and regulator while also being involved in operational decisions that would have been better devolved to EVN; and ' (e) Need to improve demand side efficiency. Although there was some awart:ness of the potential there was limited capacity, information and incentive for initiatives in demand side management (DSM). On November 3, 1997, after appraisal, Typhoon Linda struck southern Vietnam. Nine provinces were affected, 432 people were killed and 3,800 missing, 76,537 houses 2,250 school rooms and 358,000 hectares of paddy land were ruined. Damage to the electrical distribution network was estimated at $13 million and included 180km of low voltage (LV), 160km of medium voltage (MV) lines and 320 distribution substations destroyed. Supply to about 100,000 consumers was disrupted. The investment and reform objectives of the project were covered in the Country Assistance Strategy (CAS) dated October 25, 1995 (report 15053). Support for the transition to a market economy including investments in the power sector was identified as a priority for IDA; in recognition that neither other donors nor the private sector would be able meet all the financing needs of the sector. The CAS was consistent with the GoV's plans to invest in basic infrastructureand the Bank's strategy in the power sector to focus on needs in transmission and distribution, including high-return rehabilitation, while addressing reform to attract the private sector. The Bank supported the project for three reasons. First, by providing $189 million of IDA funding, it would help meet Vietnam's needs for investment, focusing on reinforcing the transmission and distribution grids to improve their efficiency; it would also introduce DSM to the sector. Second it would broaden and deepen the Bank's policy dialogue on badly needed sector-wide reform and commercialization of EVN. Third, it would provide urgently-needed assistance to reconstruct distributionsystemsfollowingTyphoon Linda. 1.2 Original Project DevelopmentObjectives (PDOs) and Key Indicators (as approved) The PDOs were to: (a) Strengthen the high voltage transmission network in Vietnam to facilitate evacuation of power from generatingstations to the load centers; (b) Rehabilitate distribution systems to meet demand, reduce losses and improve reliability; (c) Support power sector reform and restructuring through: (i) the separation of "transmission" and "generation"functions; (ii) the implementation of regulatory reforms; (iii) the introduction of tariff reforms; and (iv) exploring financing of distribution from diversified sources; (d) Support institutional strengthening and commercialization through: (i) securing greater autonomy for the distribution companies; and (ii) introducing planning capabilities for demand side management; and (e) Help normalize economic activity in the Typhoon Linda affected areas through the reconstructionof the electricity distributionnetwork. The key performance indicatorswere improvements in transmission system reliability, losses and usage; improvements in distribution system reliability and losses; qualitative measures of the progress of reform including the operation of transmission as a cost center, presentation of an electricity law to the national assembly, and creation of a regulatory ofice and regulatory procedures; and qualitative measures of the autonomy of the distribution companies, improvementsto EVN's financial management systems and the measurements in the reduction in peak demand and electricityconsumption. 1.3 Revised PDO (as approved by original approvingauthority) and Key Indicators, and reasons/justiiication The PDOs were unchanged on restructuringin May 2005. 1.4 Main Beneficiaries The main beneficiarieswere the Ministry of Industry, on behalf of the Government, IEVN and its subsidiary Power Companies (PCs), No. 1 (PCl), responsible for electricity distribution in the northern part of the country, No. 2 (PC2) responsible for electricity distribution in the southern part of the country and Ho Chi Minh City PC (HCMC PC) responsible for the metropolitan area of Ho Chi Minh City. EVN directly benefited fiom the investments in the transmission system, by improving stable and reliable operation of the power system, by increasing the capacity to transport power between north to south in line with seasonal demand and generation availability, by enabling connection of additionalgeneration capacity and by reduction in transmission losses. PCs 1 and 2 and HCMC PC benefited through investments designed to improve the capacity and efficiency of their systems, thus enabling them better to meet demand and to improve service to consumers. The Ministry of Industry (MoI), EVN and the PCs benefitedfrom support,during preparation, of the development of a medium term power sector policy. During the project, technical assistance (TA) supported the first steps in implementing the policy to separate generation fiom transmission, to improve transparency and autonomy in the commercial managemeint of power transmission and distribution operations and to establish a legal and regulatory framework. The introduction of a DSM action plan and program further improved the efficiency of EVN and the PCsin meeting consumer demand. Secondary beneficiaries were electricity consumers, primarily in the north and south of the country served by PCs 1 and 2 and in particular in the cities of Ha Long, Ha Tinh, Hai Duong and Vinh in the north and Ho Chi Minh City and Vung Tau in the south. Indirectly, electricity consumers throughout the country were beneficiaries. The gains to consumers in improved quality of power service as a result of the investments can be inferred fiom fewer interruptionsin supply and greater quantitiesof power flowing in the system. The main and secondarybeneficiarieswere not changed by the project restructuring,howeverthe larger number of investments possible through cost savings increased the number o:lsecondary beneficiariesand the benefitsthey gained. 1.5 Original Components The Transmission and Distribution Component was divided into six subcompo~nents: (i) construction of the second circuit of the Pleiku-Phu Lam 500 kV transmission line (TL) and associatedsubstations(SS); (ii) constructionof the Ha Tinh 5001220/1l0kV SS; (iii) construction of the 220 kV Nha Be to Tao Dan circuit and 2201110kV gas insulated switchgear (GIs) Tao Dan substation in Ho Chi Minh City; (iv) rehabilitation of distribution networks in the cities of Halong, Vinh, and Vung Tau; (v) consultant services for the Pleiku - Phu Lam 5OOkV line and the 220kV Nha Be to Tao Dan circuit and substation; and (vi) technical assistance for improving the regulatory framework and for the demand side management (DSM) program. This component supported the first four of the project development objectives, by strengthening the high voltage transmission network, rehabilitating distribution systems, supporting sector reform, and restructuring and supportingcommercializationand institutionaldevelopment. An associated TA component, financed by Japan, initiated the work on sector reform and restructuring. The component financed studies to improve the transmission2anddistribution functions. The Disaster Reconstruction Component consisted of the reconstruction of 180km of LV and 160km of MV distribution lines and 320 distribution substations with an aggregate capacity of 25MVA. The component supported the fifth project development objective of normalizing activityin the Typhoon Linda affected area. 1.6 Revised Components Formal Restructuring withoutChangesto PDO In May 2005, a restructuring of the project was approved by the Board. The PDOs were not changed. The reasons for the restructuringwas to permit additional important and badly-needed investmentsto be included for financing under the project, which would contribute fixher to the PDOs whle also using substantial project cost savings that had built up. The restructuring introduced a more flexible approach which allowed EVN and the PCs to include (and drop) subprojects in response to their investment priorities. A more generic project description was adopted, and appraisal criteria agreed for the subprojects, including their contributionto the PDO, technical, economic and financial efficiency, and compliance with the World Bank's safeguards policies. Three subcomponents under the Transmission and Distribution Component were modified and a further 28 subprojects were proposed for financing with a total cost of $160.6 million, of which $88.3 million was proposed to be financed by IDA. In the event 20 subprojects were financed, with a total cost of $96.30 million, of which $48.70 million was from IDA. The subcomponents modified are detailed in Table1. Table 1: Original and Revised Scope of Subcomponents Original Scope1Subcomponent Revised Scope (a) Pleiku- Phu Lam 500kV Permittedadditional 500kVTL and SS, none implemented. transmission line and associated substations (b) 220kVNha Be-Tao Dan Permitted additional 220kV TL and SS. circuit and Tao Dan substation Implemented: Thot Not - Chau Doc 220kV TL and Chau Doc 2201110kV!$S$20.1 million of which $11.0 million IDA QuyNhon -Tuy Hoa 220kV TL $11.0 millionof which $4.4 million IDA Tuy Hoa -Nha Trang 220kV TL $21.7 million of which $8.'7 million IDA (d) Rehabilitation of distribution Permittedrehabilitation and upgrading of additionaldistribution networksin Halong, Vinhand networks in the northern region and southern region of the country. Vung Tau Implemented: In northern region: Lang Son- Cao Bang 1lOkV TL $7.2 million of which $2.9 million IDA Troi 110135122 kV SS and associatedTL $3.2 million of which $1.9 million IDA ThanhChuong 110135122kVSS$1.6 million of which IDA $1.0 million Rehabilitationof Hai Duong and Ha Tinh cities' distribution networks $11.9 million of which IDA $5.1 million In southernregion: Vinh Long- Cho Lach 1lOkV TL $1.6 million of which IDA $0.6 million Soc Trang- My Tu TL $1.2 million of which IDA $0.7 million Di Linh-Phu Hoi- DucTrong 1lOkV TL $2.6 millionof whichIDA $1.0 million Can Tho-Chau Thanh1lOkV TL $1.2 million of which IDA $0.5 million Phan Thiet- Mui Ne 110kVTL $1.3 millionof which IDA $0.5 million Mo Cay- Cho Lach 1lOkV TL $2.0 millionof which IDA $0.8 million Chau Thanh 110135122kV SS $2.0 million of which IDA $1.2 million Da Lat 2 110135122 kV SS and associatedTL $1.2 million of which $0.7 million IDA My Tu 110135122 kV SS $1.2 million of which IDA $0.7 million Mui Ne 110135122kV SS $2.0 million of whichIDA $1.2 million Cai Be 110135122 kV SS $2.0 million of which IDA $1.2 million dho Lach 110135122 kV SS $1.2 million of which IDA $0.7 million To reflect the changes in the project, the results framework was also modified in May 2005, and aligned with monitoring indicators collected by EVN. 1.7 OtherSignificant Changes Changesin Timing The project was originally scheduled to become effective in March 1998 and close in June 2002. The project was extended a total of five times asfollows: June 2002 To December 31,2003 May 2003 To December 31,2004 December2004 To June30,2005 June 2005 To December31,2006 December2006 Partial, to June 30,2007 Extensions to the closing date of the Credit agreed in June 2002 and in May 2003 were primarily targeted at allowing the completionof the Pleiku to Phu Lam TL and Nha Be to Tao Dan TL and Tao Dan SS subcomponents following a slow start and slow implementation. The third was to allow completion of project restructuring. The fourth extension was given at the time of restructuring in May 2005 to give time to implement the subprojects that were introduced into the project. The fifth was to permit completion of those contracts which had been delayed or rebid ka result of materialsprice increases that occurred duringthe second half of 2006. Covenants At negotiations, the project covenanted a scheduleof increases to bring the averageretail tariff to 7 US cents1kWh by March 1, 2001. This had become contentious even before the start of implementation and was to be the subject of discussion on several occasions during the lifetime of the project, without reaching substantive agreement between IDA and GoV. In consequence, the tariff covenant was replaced by a covenants for EVN to maintain three key ratios: self financing ratio (SFR), of 25 percent or better; debt service coverage ratio (DSCR), of 1.5 times -or more; and debt: equity ratio of no more than 70:30. The same covenants were applied to all projectsin the IDA portfolio providingfinance to EVN. Cancellation After the restructuring, EVN and the PCs were unable to bring forward sufficient subprojects to allow the full balance of the credit amount to be committed and disbursed before the revised closing date of December 31, 2006. Thus on June 30, 2006, IDA cancelled Special Drawing Rights (SDR) 27 million, (equivalentto about $40 million) from the credit. As of December 13, 2007, the actual amount disbursed from the credit was SDR106 million. SDR 11.4 million or about $17 million was thus left unused, mainly accounted for by savings on the estimated costs of subprojectsimplementedfollowing the May 2005 restructuringbut also by the significant depreciationin the dollar against the SDR in the latter stages of the project. 2. Key Factors Affecting Implementationand Outcomes 2.1 Project Preparation, Design and Quality at Entry Project design was straightforward, with one subcomponent per investment subproject. Swedish International Development Agency (SIDA) was the co-financier for two subcomponents, the 500kV Ha Tinh substation extension and the DSM component but this did not present a substantial complicationin the project. The project was underpinned by a major piece of analytical work which was being undertaken simultaneously1. The analysis identified the potential for transmission and distribution system investments to contribute to electricity system growth and efficiency, and the importance of effective policy and regulation. Other studies supported project design. A significant piece of sector work to support the preparation of an electricity law was also started during preparation. Comprehensive feasibility studies were carried out by international consultants fc~rthe major investments at 500 and 220kV. There were multiple dimensions to the PDOs. Taken together these dimensions supported the CAS objective of providing investment support to the power sector and hence the GoV's objective of investment in basic infrastructure as well as helping to increase private sector participation. The parts relating to reform were broad and ambitious and had some:linkages to activities outside the project, such as the preparation of the electricity law. Nonetheless the PDOs areconsidered appropriate and were achievable. Appraisal appears to have relied on cost estimates based on previous procurement of 500kV and 220kV equipment in Vietnam. These had taken place some years before, and had been based on negotiated prices and thus were higher than could be expected from competitive bidding. In addition, high levels of contingencies were included,because of strong institutional and personal incentivesto avoid project costs over-runningestimates. At appraisal risks to the development objective namely: timely availability of counterpartsfunds, implementing agencies' management commitment, Government commitment to sector reform were identified and assessed as moderate. Risks to implementation progress: lack of resources for land acquisition; slow procurement; and delays in appointing consultants, were well identified but their impact - in terms of the length of delays possible - was, with hindsight, somewhat optimistic. Appraisal was based on load forecasts known at the time, but with local demand growth rates sometimes exceeding the national average by a substantial margin, the risk of underestimating or overestimating demand growth was not assessed. The re-evaluation of risks at project restructuring downgraded several, but identified new ones, including subprojects not being identified or appraised in a timely fashion and insufficient attention to safeguards and again may have been over optimistic. 1 Later published as 'Fueling Vietnam's Development- New Challenges for the Energy Sector, Report No. 19037 VN' in December 1998. A weakness in the project design was how it dealt with raising retail tariffs. Staged rises in the average retail were covenanted on EVN, yet it was unable to influence tariff rises directly, since any increase was subject to government approval. Its value as a means of ensuring adequate financial performance by EVN was also questionable. The Government's commitment to raising tariffs was not explicitly identified as a risk to the PDO or to implementation progress, unless inferred as part of 'waning of Government commitment to push with reforms and of EVN commitment to institutional strengthening programs'which was rated moderate. There was a Quality Assessment Group (QAG) review at entry but there are no records of its findings on the project files. 2.2 Implementation Design for initial implementation was straightforward, wifh each subcomponent to be carried out by identified implementing agencies. The technically more complex subcomponents were planned to be supported by international consultants to prepare feasibility studies, support procurement and supervise implementation. Ministry of Industry and EVN were the main agencies involved in the technical assistance activities. They and HCMC PC had some experience of Bank procedures, including procurement and disbursement, gained through previous projects. Mo1 had been engaged with the Bank on policy dialogue for a number of years. No fiduciaryor safeguardsissues were new to the project. Tariffs The level and the timing of tariff increases were discussed extensivelyduring project preparation and were supported by a study carried out by international consultants. Shortly after the project was approved by the World Bank's Board of Directors in January 1998, GoV seems to have had misgivings about committing itself to the level of 7 centskWh by December 31,1999 and thus the signing of the project documentswasdelayed. A fhther round of negotiations resulting in agreement of staged increases such that the tariff would reach 7 cents/kWh by March 1, 2001. This schedule was reflected in the Development Credit Agreement signed in November 1998. During project implementationthere were at least two slippages in the schedule: in May 1999, the tariff of 7 centskWh was expected to be reached by 2002; and in June 2001 only by July 1, 2005. Reflecting tariff concerns, the DO progress indicator was downgraded to unsatisfactoryon three occasions. In VND terms, average tariffs did rise over the project period from VND 680kWh in 1998 to VND 842/kWh from January 1, 2007. In dollar terms it stood still: at the exchange rate prevailing in mid 1998 the tariff was 5.24 cents and at the exchange rate in mid 2007, it was 5.22 centskWh. Although EVN is in some respects financially more exposed today than it was in 1997, in 2005, the last year for which a full analysis has been completed, it maintained its three key performance indicatorsof SFR, DSCR and debt:equity ratio at covenantedlevels. Slow Implementation Progress Implementation of the original subcomponents started slowly, delayed by late signing and effectiveness, since final approvals to subproject technical designs were not giver1 until then. There was also a delay because of uncertainties within government about the timing of the second circuit for the Pleiku - Phu Lam 500kV line. When under way, progress was slow but without major difficulties. There were delays in hiring the consultants to suppoirt EVN and HCMC PC on the Pleiku to Phu Lam TL and the Nha Be to Tao Dan TL and Tao Dan SS. There were significant delaysin procurement. Cost Savings The original subcomponentswere acheved at substantiallylower cost than identifiedat appraisal, not whollyas a result of the East Asian financial crisis. As early as August 2001, GoV requested IDA to use the cost savings, implicitly about $20 million. Estimates of saving rose by stages from then until, by December 2004, they were estimated at $87.5 million, or about 44 percent of the original credit amount. A workshop in early 2004 was held to review progress and to identify subprojects that could be included in a restructured project. This workshop identified a substantial number of subprojects, including those requested by SBV in 2001 that wire at a sufficiently advanced state of preparation to be included in the project. The amendment took a further year to finalize. Other Issues in Implementation The May 2005 restructuringmade the EVN/IDAprocess easier to manage with the rninimum of formalities, but EVN and the PCs remained exposed to the complex and extended GoV approvals process for each subproject. To prepare the restructuring on the Vietrlarnese side required approval of the Prime Minister, and subprojects still required a process of feasibility study, detailed design and preparation of procurement documents which required separate, sequential approvals. The approval of the restructuring by GoV delegated approvals for EVN subprojectsto MoI and for PCs' subprojectsto EVN while all procurement could be approved by EVN. This was a significant improvementcompared with project preparation when ,approvalby the Prime Minister was required at several stages. Towards the end of project implementation,a sharp increase in the prices of several clommodities including aluminum, copper, nickel, steel and zinc further slowed procurement. .A11 are key constituents of electrical systems equipment and as a result a number of procureme~ntpackages had to be rebid. It was the result of this rebidding that the final extension from December 31, 2006 to June 30, 2006 was granted. Price adjustment formulae were not adopted in the project, because it was considered incompatible with the procurement law in Vietnam which only permits deviations from it if a donor's procurement guidelines require it; price adjustment formulaeare not mandated in the Bank's procurement guidelines. There appears to have been a QAG assessment of supervision but there are no records of its findingson the project files. 2.3 Monitoringand Evaluation (M&E) Design, Implementation and Utilization M&E Design The indicators for measuring the PDOs were of reasonable quality. Those related to the investment components were specific, measurable and relied on EVN's and the PCs' own performancemonitoring system. Thoselinked to the sector reform and institutional development of EVN could have been more rigorous. The emergency recovery component was not included in the project logical framework and no indicators for its objective appear to have been developed. The restructuring of the project in May 2005 introduced some additional indicators and revisited the original ones. M&E for the physical investment was aligned with the data collected by EVN for its own internal monitoring purposes and is considered reliable and sustainable. Indicators introduced during the restructuring are less easily attributed to the project. There was also some lack of clarityon which of the originalindicators was retained at the restructuring. The financial performance of EVN and the PCs was designed to be monitored on a consistent basis for each project in the portfolio. An International Creditors' Model (ICM) was developed under a separate project initially to verify appropriate tariff levels and subsequently used to ensure the key financial indicators wereconsistentlycalculated. Implementing agencies were also required to hire independent monitoring consultants, on terms of reference satisfactory to the Bank for monitoring of implementation of environment assessments and environment management plans (EAEMPs) and resettlement plans W s ) . The independent consultants' reports were sent to the Bank for review. M&E Implementation Implementation progress data were captured quarterly. Data on outcomes were collected as the subprojects were completed. Data for all indicators were collected as part of the implementation completion reporting process. Financial indicators were monitored as an annual exercise for all projectsin the portfolio. Data quality for the investment subcomponentshas generally been acceptable. Methods for data collection have generallybeen appropriate, using a 'bottom up' reporting process which is linked to the management hierarchy in EVN and the PCs. Independent monitoring of EMPs has provided data of mixed quality with the main difficulty being insufficient field-based monitoring using appropriatetechniques. M&E Utilization Implementationdata were used to review progress of the project against agreed timetables and to revise the timetables as necessary. Use of the outcome-level indicators has proved problematic, because the indicators chosen are at system level and it is hard to distinguish impact of the project fiom other non-project related factors. It has become increasingly difficult as the system has grown, and consequently the impact of any single subproject is less significant. Financial I I monitoring data have been the basis for dialogue with EVN and the Government on a variety of I issues including tariff levels, forecast future investment needs, and the impactsof equitization2. 2.4 Safeguard and Fiduciary Compliance Environment An EA/EMP was carried out for the second circuit of the Pleiku to Phu Lam 500kV itransmission line. It is not clear what level of environment assessment was carried out for the remaining subprojects. Subprojects that were appraised following the restructuring in May 2005 followed agreed guidelinesfor the preparationof environment assessments. In general the impacts of transmission and distribution lines and substations on the environment were of a mainly temporary nature associated with construction and included noise, dust, disruption to traffic, excavation operations and the need to accommodate workers. Permanent effects were mainly confined to the right of way of the line, which must be kept cllear of high- growing plants and trees. Alignments of lines and siting of substations were chosen to minimize the combined environment and social impacts. Supervision of the implementation of environment management plans (EMPs) by independent monitoringconsultantsand Bank staff revealed no major issues. Indigenous Peoples The project appraisal document noted that a few ethnic minority households wouldl be affected by the Pleiku to Phu Lam TL but "because of the relatively minor nature of the impact, no separate Indigenous People's Development Plan is considered necessary." The EIA alsoincluded . sections that constituted a full ethnic minorities development plan (EMDP). EMLDPs do not appear to have been prepared for the other original subprojects. Followingthe restructuringin May 2005, EMDPs were required based on a framework that was agreed with the GoV and adopted by EVN. EMDPs were prepared for 3 subprojects,affectinga total of 1445 ethnic minorities households,mainly on a single 11OkV TL from LangSon to Cao Bang in the north of the country. All EMDPs have been satisfactorily implemented. Resettlement Just over 2,000 households were identified at appraisal as being affected by the various subprojects, of which about 530 needed to be relocated, based on a resettlement Plan (RP) that was an integral part of the EIA. Most of the affected households and nearly all the relocations were linked to the Pleiku to Phu Lam TL. In the event, nearly 9,000 households were affected by the line, the large discrepancybeing the result of under-estimationat appraisal. 2 Equitizationis the process of creation of a joint stock company and sale of a proportion of shares to the public and employees. Following the restructuringin May 2005, a framework for resettlementplanning was agreed with the Government of Vietnam and adopted by EVN and applied to all additional subprojects. Subsequent subprojects affected around 8,700 households, the majority in a minor way. In most cases appraisal estimates of numbers of households affected, land acquisition and compensation were close to the actual values on implementation. Resettlement was on the whole well implemented by the responsible agencies. Most households that were relocated were allowed to remain in their old houses until the new ones were ready, and all were moved as short a distance as possible, resulting in minimal disruption to livelihoods. No grievances or complaints were brought to the attention of Bank staff during implementation which included independent site visits. Independent monitoring of the RPs revealed no major issues. Procurement Procurement was effectively organized; at the start of the project a procurement management group involving the Ministry of Industry and EVN was used to support EVN's executing agencies and the PCs in the early stages when they were not familiar with some of the in the more complex procurement processes. Procurement progressed slowly, especially with the large packages at the start of the project, which required multiple levels of approval up to the Prime Minister. There were four complaints during procurement of which two were dropped by the complainant, one was invalidated and one resulted in rebidding. There were no instances of procurement irregularities. Financial Management Financial management was generally satisfactory though there were two recurrent issues during the project. One was late submission of financial management reports (FMRs)and audit reports. Towards the end of the project reporting improved but there were still instances of late - submission by the PCs and by EVN itself. Audits were satisfactory throughout the project and continuing entity financial statements were generally unqualified. The second recurrent issue was slow processing of disbursement requests within the Vietnamese system and delays in payments. Under Ministry of Finance rules, all ODA projects must have a controller which, amongst other things, checks disbursement requests made by implementing agencies. For this project, the controller was the Vietnam Development Bank (VDB, formerly the Development Assistance Fund). Some VDB branches' checking was excessive,requiringfor example all contracts (including standard parts) to be translated into Vietnamese and notarized. The effect was for the implementing agencies, which for the most part had to pay their suppliers before the checking was complete, to have to wait long periods for reimbursement by IDA; in late 2006 it was estimated that implementing agencies were waiting for VDB to release $25 million in payments for goods financed under the project. In some cases this had a noticeable effect on financial performance of the PCs since they had built up significant levels of receivables. 2.5 Post-completion OperationINextPhase Each investment subcomponent or subproject was implemented by a Project Management Board (PMB), which is a special purpose, permanent entity within the overall management:structure of EVN or the participating Power Companies. On completion of commissioning the subproject was handed over to the operations department of the implementing agency. Each of the subprojects formed part of the investment plan of the implementing agency, which is also the project's ultimateowner. Each transmission project has been handed over fiom the PMB to one of four .transmission companies which together operate all the transmission assets in the EVN. They are now cost centers of EVN and thus staffing, operations and maintenance are the responsibilityof EVN, the asset owners. EVN recovers its costs from electricityconsumers and thus has adequateresources to ensure proper operation and maintenanceof the entities. By the end of 2007 transmissionwill be merged into a single, national transmission company as part of the reforms to the power market. It will be under separate ownership and will have a regulated tariff structure that will ensure cost recoveryand permit future investment. Power Companies are currently wholly-ownedsubsidiaries of the EVN group and as such profit centers in their own right. The tariff regime now in place ensures that they recover costs and have sufficient retained income for future investment. Policies and standards are !m place that ensuresadequate maintenance. Both EVN and the PCs maintain a reporting system to monitor system performance;(the project M&E indicators are drawn fiom these) though these are not systematic or widespread enough to develop benchmarks or comparative performance by area, supply level or consumer type. As part of the market reforms, the Electricity Regulatory Authority of Vietnam (ERA'V) will have oversight of the performance of all entities in the power sector and will require reports to enable it to monitor system performance. The most relevant indicators remain transmission and distribution system reliability and efficiency, in aggregate covering faults, losses; and power flows. More detailed indicators, which can help prioritize investments, would look at these at specified poinfs (for reliability and efficiency) and parts of the system (for efficiency). These indicatorswill be accessibleto the Bank for future monitoring. Further operations supporting the efficient development of the transmission and distribution system are under way (System Efficiency Improvement, Equitization and Renewables Project, Cr. 3680 VN and Second Transmission and Distribution Project, Cr. 4107 VN). The system is forecast to continue to grow at 15 percent per year, and neither transmission nor diistributionis likely to enter private ownership in Vietnam for some years to come. Sustainedl ZDNIBRD involvement and investment financing to ensure efficient development of the transmission and distribution systems is expected to remain a priority for GoV and EVN. The Bank, through a stand-alone Global Environment Facility (GEF) project has continued to support DSM (Demand Side Management and Energy Efficiency, GEF TF 051256), and the GoV is now preparing an energy efficiency law now that reforms are more advanced. 3. Assessmentof Outcomes 3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities,and Bankassistance strategy) The need for physical infiastructure is still as strong; demand has continued to grow much as predicted at appraisal, at an average of about 15 percent per year. Investment in basic power infiastructureis a priorityof the government'sSocio-EconomicDevelopment Plan for 2006-2010.' The current Country Partnership Strategy (CPS, reviewed by the World Bank's Board of Executive Directors on January 3, 2007) reflects this priority; one of its objectives is to ensure efficient and reliable provision of infiastructureservices. The investment-related PDOs remain highly relevant. The reform objective remains relevant. Reform is a process, not a single action and the project set out the broad direction of power sector reform, which is still being pursued today and initiated many of the essential tasks. The objectives the project espoused were over-ambitious and so the project aimed too far into the future, hence many of the tasks it had hoped to accomplish by1999or 2000 were not completed until 2004 or later. The institutional development objectives were relevant at the time of the project but are less so now, because pushed by the project, much has been decentralized, giving greater autonomy and broadening ownership by implementing agencies. The objective for the disaster reconstruction component was highly relevant at the time of preparation and implementation but following normalization is no longer so. 3.2 Achievementof Project DevelopmentObjectives The project substantiallymet its PDOs and is rated satisfactory in this dimension: StrenHhen the hi& voltage transmission network. Achievement of this objective is satisfactory. There have been gains in transmission reliability and efficiency, and larger power flows are taking place between the central and southern areas of Vietnam. Additional subprojects have further contributed to this objective beyond that which was originally envisaged. Rehabilitate and expand distribution systems. Achievement of this objective is satisfactory. Distribution systems have reduced losses and improved reliability. Anecdotal evidence points to substantial improvementin the quality of supply during the project. Additional subprojects have further contributed to this objective beyond that which was originallyenvisaged. Support power sector reforms. Achievement of this objective is moderately satisfactory. With the exception of the tariff revision to 7 centsIkWh,all the indicators were achieved, though they were significantly delayed from the original timetable. A more rapid implementation may not have been realistic or desirable. Tariffs have increased by 25% in VND terms, about the same amount as originally envisaged in dollar terms Support institutional strengthening and commercialization. Achievement of this objective is satisfactory. The PCs, at which this component was largely (aimed,have become increasingly commercially and manageriallyindependent throughout the lifetime of the project. Accounting systems have been continuously improved. The ongoing follow-onDSM project bears out the achievement of the DSM objective. Normalization of economic activity following Typhoon Linda. Achievement of this - . objective is satisfactory. The component was completed under difficult circumstances and in reasonable time. No indicators are available to assess 'before' and 'after' the Typhoon, however the outputs indicate oee-for-one replacement of MV and LV systems and equipment and thus it may be inferred that at least a similar standard of service was being providedfollowing completion of the component. 3.3 Efficiency The economic analysis for the project components at appraisal and at completion has been carried out using two scenarios: (i) with the project; and (ii) without the project. The ex ante 'with' project scenario assumed that the project as described was carried out based on forecast costs. For investments at 500kV, the 'without' project alternative was to strengthen the 220kV system. For investments at 220kV and below, the 'without' project analysis assumed that no investment would be made. The ex post 'with' project scenario used actual investrrlent costs of the project. The 'without' project scenario assumed that no investment had been made. The same methodology was used for both the original and the new subprojects. A.ll costs are presented in constant 1995 US dollars, to allow comparison. The analysis covers about 88 percent of final project baseline costs, the main items being excluded being the consultant services for physical investments, technical assistance and the rehabilitation of distribution networks in Ha Long and Vinh. The key economic and financial indicators of the first and second phases of the project are summarizedin Table 2 and provided for each subprojectin Annex 3. p At 1995 price levels Not inclided in PAD analysis Note: Appraisal of additional subprojects was done on a subproject-by-subprojectbasis. No overall analysisof the economic and financialbenefits of the set of additional subprojects was undertakenex ante. At appraisal the costs of the original subprojects were over-estimated. The completion analysis takes into account the cost savings - of the order of 30 percent of the original estimates - and shows a much higher rate of return than at appraisal. The net present value of the original subprojects, however, is not as high, principally because of the delays in completion which in some cases were four years longer than the original implementationschedule. During those four years the benefits were reduced by more than could be made up fkom the reduced costs. There may also have been a wider economic impact of overestimating costs since the size of the credit tied up some IDA allocation that may, perhaps, have been used for some other investment. The impact at the financiallevel is less marked, because the financialrevenuesare lower than the economic benefits. Notwithstanding the reduced benefits because of delays, the subprojects were still financially efficient, except possibly the renovation of Halong and Vinh distribution systems for which information is not available. 3.4 Justificationof OverallOutcomeRating Rating: Satisfactory. The overall satisfactory rating for the project is justified on three grounds. The first is that the project maintainedits relevance throughout its (long) lifetime, particularlythe investment aspects, which are responsible for the bulk of the project costs, but also the reform objectives. The second is that four of the five project development objectives were satisfactorily and one moderately satisfactorily achieved. In some respects the project achieved more than its objectives in terms of physical investment, by the inclusion of an additional 20 subprojects. The third reason is that the project was more economically efficient than expected at appraisal, notwithstandingthe delays to implementation and the reduction in benefits, which was offset by use of cost savings for the additional subprojectswhich were also economicallyefficient. There were modest shortcomings in the achievement of the objective: slow implementation reduced the potential benefits of the project. Arguably some of the institutional development objectives such as separation of transmission from generation could have been more fully achieved- there are degreesof separation- but as these are difficult to quantifl. 3.5 Overarching Themes, OtherOutcomes and Impacts No other effects or impactsof the project have been identified. 3.6 Summaryof Findings of BeneficiarySuwey and/orStakeholder Workshops No beneficiarysurvey has been carried out. 4. Assessmentof Risk to DevelopmentOutcome Rating: Moderate. The physical investment aspects of the project are not inherently risky in technical, economic, financialor institutional terms. For the foreseeable future, Vietnam will continue to (dependon a power transmission and distribution network, and, the investments will continue to fulfill an important role. The transmission company, when it is formed and the Power Companies will be regulated by ERAV, with appropriate transmission and distribution tariff methodologies to ensure long term sustained operation of the assets. Experience has shown that the environment and social impacts of transmission and distribution construction are broadly accepted as a price worth paying for the benefits, even by those who are most immediately affected. The physical investments are exposed to some risk of natural disasters, even though design standards incorporatethe extreme weatherconditions frequentlyexperienced in EVN. The reforms that the project championed do not appear to be at risk. Much of the more recent developments in power sector reform are set on the foundations laid by the project, includingthe development of the Electricity Law in 2004 and the roadrnap for reform in 2006. So far, the steady implementation of the law over the past three years, and the political and institutional stability in Vietnam gives confidence that the institutional development and market reform will continuein a positive direction. 5. Assessmentof Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Qualityat Entry Rating: Moderately satisfactory. The project responded to identifiedCAS objectives and the Government's plans for investment in basic infrastructure. The project was in line with the Bank's strategy for the poweir sector and was coordinated with other donors, in particular Sweden, which cofinanced the project. From a technical point of view, the investment projects were well prepared. The range of policy and institutional development activitieswere appropriate for the time; indeed this project set the tone for a broad ranging policy dialogue with government and EVN that continues today. The Bank was highly responsive to the needs for reconstruction of the southern area and the reconstruction subcomponent was prepared in a short time. It seems unlikely that a more flexible project design - which could have included a mechanism to use project cost savings through the addition of firthersubprojectsor by financing more of the ones under implementation - would have been acceptable to the Government. Concepts for flexible designs were new and untested, and neither the Government nor the Bank side had much incentive to introduce such a complication for what appeared to be quite a straightfonvard operation. For similar reasons, it would probably not have been possible for the project to have been further advanced during preparation, with the result that upon approval, a time-consuming two step process was needed to implement the major investment componentsof the project. First, consultants to support the project had to be hired and only then could work start on implementing the projects. The shortcomingin Bank performanceduring preparation was the handling of the tariff issue. It is questionable that a tariff level as high as 7 cents/kWh was appropriate and the risks to the rest of the project of trying to introduce it were poorly assessed. In addition any breach of the covenant permitted only two basic options: either to waive it or to suspend the project. The task team was thus left without leverage to persuade the Government to take action, leaving EVN stuck in the middle. (b) Quality of Supervision Rating: Unsatisfactory. Several of the subcomponents were well supported during implementation, particularly those dealing with reform and restructuring, demand side management, the relatively simple investmentsin rehabilitationof the cities' distribution network and the rehabilitationof typhoon- affected areas. Financial supervision of the project was satisfactory, but the tariff issue was not fully resolved. Although slow in implementation, the two major investment subprojects were well-supported and most of the delay appears to have been on the side of the Government, becauseof the extensive approvals system. The shortcomings in the Bank's supervision were its lack of candor in reporting implementation progress, and slowness in addressing the issue of cost savings and how the project could be adapted to cope with them. By the time the first extension was processed, in June 2002, the project was six months from its original closing date and only 13 percent disbursed. It is understandable that the Government and the Bank were reluctant to contemplate the possibility of 'losing' the savings through cancellation. In addition the extent of the savings only emerged slowly and in the early stages a full-scale restructuring may not have seemed worthwhile given the comparatively small amount of savings and the possibility of cost overruns in the larger subprojects. Nonetheless greater proactivity could have been possible. The opportunity was thus missed for an early, systematic and substantial review of project performance beyond normal supervision reporting. Amore proactive stance by the Bank, with the possibility of a major restructuring and substantial extension - of as much as four years, effectively treating i tas a new project - could have created an environment more conducive to smooth project implementationand offered better chances of full use of the credit amount and a shorter project implementationperiod. As it was, the restructuringin May 2005 was worthwhile, but arguably too late to have the full impactit might have had. (c) Justification of Rating for OverallBank Performance Rating: Moderatelyunsatisfactory. The moderately satisfactory Bank performance during preparation balanced against the unsatisfactory performance during supervision but satisfactory overall outcome suggests an overall rating of moderately unsatisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderatelysatisfactory. The Government cooperated closely with the Bank during preparation, and there was significant policy dialogue as a result, which was carried on subsequently throughout the project. That dialogue has formed a solid foundationfor subsequent engagement in the sector. In elddition,the Government has, during the course of the project, tackled issues of excessive centralization and control, and showed it willing to adopt more flexible approaches to project implementation, including delegation of investment decisions and day to day investment management to EVN and the PCs, acceptanceof the phased approach to project implementation The main weaknessconcerns the reforms to the retail tariff. While it seems quite lkely that the increases were too steep and aimed at a higher level than necessary, a more open dialogue than took place with the Bank was warranted. If the Government did have reservations about the ultimate intention of reaching 7 centsIkWh,it does not seem to have been expressed to the Bank clearly. The Government relied communicating the results of wide consultation within the Government, based on proposals by EVN rather than a more transparent process to agree the basis on which tariffs should be set. (b) ImplementingAgency or Agencies Performance Rating: Satisfactory. Strong commitment and action within the implementing agencies enabled the subprojects and components to be completed. From a technical standpoint, the projects have been well = implemented, with thorough consultation, proper preparation and implementationof engineering, environment and resettlement plans, good fiduciary control and smooth transition to operating mode. There was a high degree of ownership of the project. Over the lifetime of the project there has been a noticeable improvement in the professionalism and quality of the work undertaken by the implementing agencies. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory. The weighting applied to the implementing agencies - and recognizing the substantial improvements in both Government and implementing agencies' performance over the lifetime of the project suggestsan overall ratingof satisfactory. 6. Lessons Learned The lessons from project design are: The tariff issue. While it is important to ensure that pricing is set at proper levels, the approach of agreeing a targeted level of tariffs and a schedule by which they are achieved does not appear to have been successhl. Apart from the possibilities that the level and timing may be set incorrectly or that circumstances might change, ensuring that they are implemented as agreed is difficult. It may be better to avoid tariff covenants altogether and only look at financial performance, since this then opens up the range of options including to cut costs. Better still might be the introduction of an agreed tariff methodology which removes the political dimension to tariff setting; in practice this is the basis on which utility regulators often agree tariffs. If financial performance targets are used, however, they must still be backed by covenants, and again they should not be of the 'all or nothing' kind implied by suspension. Smarter covenants. The adoption of covenants- at least as they were formulated in the project legal agreements - presents difficulties because of the extreme nature of the remedy that is applied. More nuanced covenants, for example by applying interest rate or grace period penalties for the time that the covenant is breached, may be more effective at sustaining the dialogue while providinga clear incentive for action. The lessons from implementationare: Better cost estimates and demand forecasts. The cost estimates used at appraisal were evidently flawed, and, notwithstanding the price decreases resulting from the East Asian financial crisis, could have been developed using more up to date information and a more realistic basis. Demand forecasts,which affect the sizing of equipment (and thus the cost estimates),are risky in a system that is growing as rapidlyas Vietnam's. Delay in taking action had high costs. The second lesson is that early and decisive action to deal with slow project implementation and costs savings are essential. Failing to do so sends mixed signals to the Borrower (and to some extent within the Bank itself) and threatens the project's value. Putting off action, however hard the choices that it may present are, benefits no-one. Incentivesto review and, where necessary, restructure have improved since the early days of this project. Pilots can be usehl low-risk market tests. A positive lesson is the way in which the piloting of DSM was used to assess interest and capacity. This enabled it to be scaled up to a standalone project later, thus reducing risks while learning important lessons about how best to design the project. Several other aspects of the dialogue have also been developed into subcomponentsin other projects, and this technique appears to work well in Vietnam. 7. Comments on Issues Raised by Borrower/ImplementingAgenciesIPartners (a) Borrowerlimplementingagencies EVN and the PCs provided substantial input on each subproject, by preparing a Borrower Completion Report for each of them. It has also provided an overall completion report which is summarizedin Annex 7. EVN has agreed with the contentof this ICR. (b) Cofinanciers SlDA has been informed of the implementation completion reporting process but has not provided any comments. (c) Other partners and stakeholders No comments have been raised by other stakeholders. Annex 1. Project Costs and Financing (a) Project-Cost- by-Componenc(in--USDMillion - --.-. -- - - - - . --- -equivalent) -- I Appraisal EstimateIActu Components (USDmillions) ' ( .... .- .............. ...... 4 -- Pleiku - Lam 500kVTL and SS -Phu 137.00 ' - - -- - -- - - . ---- - -. -.-. -- - h a Tinh 500kV 450MVA SS 14.20 Nha Be -Tao Dan 220kV TL and Tao Dan 2201110kVSS ,.-.-.. ...- .. .-- -. . Rehabilitationof Distributionnetworks in Ha Long, Vinh and Vung Tau --- - .................... -... ...... .Consultingservices for Pleiku -Phu Lam 500kVTL and Nha Be-TaoDan 220kVTL ,andSS Technicalassistancefor regulatory - framework - --- -.----- . - -. -- -- - -- - - Technicalassistancefor DSM Disaster reconstruction 10.94 ' 8.73 80 ... .... ............ ....... ............. ...-... .-..... .. L ,. Additional 220kV subprojects ..... 42.56 40.57 !?5 .&... . ....-... ........ .- .- . - ' Additional 11OkV subprojects .... ... --- 31.29 23.00 '74 ., ............. . ..................... Additional distributionnetworks - ---- - - ---133 -.- - -- -- Total Baseline Cost Physical Contingencies ........ .-- ..................... {PriceContingencies ..... .......................... Taxes and Duties 20.84 i 13.13 IDC 4.61 9.87 214 .. 1 .. < Total Project Cos -- .......... 267.77 (53 ....... - -.... ....- -...... .. -.. ... .....-..... ....... Proiect PreuarationFund Ja~an:JGF Grant (TAfor T/D functions) 0.70 0.69 99 cing Required -- ..- . -...... ctuaULatest ; Percentage Source of Funds . Asian ...... Borrower International ~- e v x o ~ --- - ~weden:SwedishIntl. Dev. Cooperation Agency (SIDA) -. - .-. - - Japan: JGF grant . .--. --- - -- . - --..- - -. Preparation *Financing not used Annex 2. Outputs by Component Physical Outputs Physical outputs from each subcomponent are presented in the following Tables, Al.l to A1.8 and an aggregate is presented at Table A1.9. Table A1.10 identified the incremental outputs from subprojects implemented as a result of the May 2005 restructuring and their proportion as part of the whole project outputs. Zero values at both appraisal and completion are not included. Table Al.l: Pleiku- Phu Lam 500kV Transmission Line TableA1.2: Ha Tinh 500kVSubstation At appraisal At completion %Appraised Substation: 500122011lOkV,number of transformers 1 1 100 5001220/1lOkV,aggregate transformercapacity, MVA 450 450 900 110135122 kV, number of transformers 1 1 100 110135122 kV, aggregate transformercapacity, MVA 63 63 100 Social impacts Compensationcosts, $ million 0.1 0 0 - Table A13: Nha Be- TaoDan 220kV TL and Tao Dan 2201110kVSubstation Table A1.4: Rehabilitationof Ha Long, Vinh and Vung Tau Cities' Distribution Systems At appraisal At completion Distributionline 110 kV, km 8 8 35/22kV, km 312 281 0.4kV, krn 1,059 861 Substation: 110135/22 kV, number of transformersx capacity,MVA 1 1 100 110135/22 kV, aggregate transformercapacity,MVA 90 90 100 35/22/0.4kV,number of transformers 558 518 93 3512210.4kV aggregate transformer capacity, MVA 203 172 85 Meters installed,number 54,000 54,265 100 Social impacts Project affected households, number 376 compensation costs, $ million 3.1 n/a Land acquired,m2 52,776 39,064 Table A1.5: Disaster Reconstruction 100 7 Table A1.6: Additional 220kVSubprojects At appraisal At completion Transmission line: 220kV. km 324 324 -.. Substation: 22011IOkV, number of transformers x capacity, MVA 1 1 100 22011lOkV, aggregate transformer capacity,MVA 125 125 100 I Social imacts I I I I Project affected households, number 2,533 3,784 149 Compensation costs, $ million 0.78 1.192 153 Land acquired, m2 167,050 130050 78 Note: There were 3 additional 220kVsubprojects: Thot Not to Chau Doc 220kVTL and Chau Doc 2201.1110kVSS, the Quy Non to Tuy Hoa 220kV TL and Tuy Hoa to Nha Trang 220kV TL. Table A1.7: Additional llOkV Subprojects I At appraisal I At completion Distributionline I I 1okv. krn 302 302 - -- Ino > - - - - ~ Substation: El 110135122 kV, number of transformers 8 7 110135122 kV, aggregate transformercapacity,MVA 275 250 Social impacts Projectaffected households, number 2,844 3,486 Compensation costs, $ million 0.13 0.48 Land acquired, m2 132,522 108,910 Note: There were 15 additional 1I OkVsubprojects: Thang Chuong, Cai Be, Chau Thanh, Cho Lach, Mui Ne, and My Tu 1 10/35/22kV SS; Da Lat 2, and Troi 1 10135122kVSS and associated TL; and Lang Son - Cao Bang, Vinh Long - Cho Lach, SocTrang- My Tu, Di Linh - Phu Hoi and Phu Hoi - Duc Trong, Phan Thiet - Mui Ne, Can Tho- Chau Thanh, and Mo Cay- Cho Lach 1IOkV TLs. Table A1.8: Rehabilitation of Hai Duong and Ha Tinh Cities' Distribution Systems At appraisal At completion % Appraised Distributionline 35/22kV,km 341 341 100 Substation: 35122/0.4kV,number of transformers 378 378 100 3512210.4kV,aggregate transformercapacity, MVA 146 137 92 Socialimpacts Project affected households,number 388 1,325 341 Land acquired, m2 47,800 30,726 64 Table A1.9: Consolidated Physical Outputs I At appraisal 1 At completion I% Appraised Transmission line: 500kV,km 544 544 100 220kV, km 336 336 100 Distributionline 1lOkV.km 310 310 100 - 0.4kV, km 1,245 1,069 84 Substation: 500122011IOkV, number of transformers 1 1 100 500122011lOkV, aggregatetransformercapacity, MVA 450 450 100 2201110kV.number of transformers 2 2 100 ., Compensation costs, $ rmllion 13.31 13.59* 102 Land acquired, m2 1 818,858 620,950 76 256.6 ha forest Environment impacts(qualitative) land affected *Some data missing: this representsa minimumamount. Table A1.lO: Incremental Outputs Following May 2005Restructuring I Increment from I Total Project (at I%Project 1 May 2005 completion) I restructuring Transmission line: 500kV,km 0 544 0 220kV, km 324 336 96 Distributionline 1 1lOkV, km 302 310 42 35/22kV, km 341 804 96 0.4kV, km 0 1,069 0 Increment from Total Project (at % Project May 2005 completion) restructuring vl Socialimpacts Projectaffectedhouseholds,number 7,854 19,023 Compensationcosts, $ million 1.67 13.59* Land acquired,m2 269,686 620,950 256.6ha forest Environmentimpacts(qualitative) landaffected Outputsfrom TechnicalAssistance The technical assistance componentwas implemented by EVN and the outputs fiom this are as follows: ConsultantSupport for Pleiku-Phu Lam and Nha Be- Tao Dan. International conslultantswere hired to support the technical design, preparation of bidding documents, procurement and construction. ~&xultantoutputs included a system study, basicdesigns, procurement documents and progress reports. Transmission Operations Study. International consultants were hired by EVN to undertake a study on how to improve the efficiency of transmission operations. There were fom-main tasks undertaken: a review of the organizationstructure for management of the transmission business; a more technical evaluation of the National Load Dispatch Center (NLDC) and their regional counterparts to evaluate options to improve transmission operations; establish a timetablefor the establishment of separate transmission operations; and to set out the commercial arrangements between the proposed business units. The main outputs from the study were: A recommendation for a phased transition to a consolidated transmission business unit, consisting of the four transmission companies that then existed, and the NLDC. The formation of an independent regulator was also recommended. The formation of a primary control center to undertake the NLDC and regional load dispatch center (RLDC) functions. It also recommended the introduction of a Supervisory Control and Data Acquisition (SCADA) and Energy Management System (EMS) and updating of short term planning software. An action plan, integratingthe recommendations of the consultant. Legal instruments to: consolidate the assets of the transmission units'and NLDC into a single business unit; establish corporatized distribution companies; and devolve power plants into separate generation companies transacting wholesale power business with distributioncompanies. In many ways this report foreshadowed the subsequent dialogue which is still ongoing. EVN plans to establish a separate, single transmission company by the end of 2007. The detailed market design is under preparation now, and that will determine what other parts of the electricity system are grouped with the transmission company (for example the NLDC and the market system operator). The regulator is now active, having been created in October 2005. The quality of these outputs is rated as satisfactory. Technical Assistance for Demand Side Management. The activities consisted of three main components: (i) a DSM program within EVN; (ii) development of energy-efficientlighting and motor standards for Ministry of Science and Technology; and (iii) development of an energy- efficient building code under Ministry of Construction. Outputs and ratings for each are summarized below: EVN's DSM Promam. Under ths component, a DSM cell was established within EVN with five full-time staff, DSM working groups were created within each PC, a DSM policy framework was fully developed, five pilot lighting programs were developed and evaluated, about 30 energy audits were conducted, a pilot load research program was implemented in 150 customer premises and corresponding load profiles developed, a pilot time-of-use (TOU) metering program was launched and evaluated and a second phase investment program was prepared. One planned component, a pilot street lighting program, was cancelled due to the currency devaluation. This did not represent a major reduction in the overall project deliverables. MoST Standards. Minimum energy performance standards (MEPS) were developed for 3-phase industrial motors, fluorescent tube lamps, ballasts, and incandescent light bulbs. Thesestandards were reviewed by a Technical Committee and MoST is now preparing to issue these standards. An Implementation Plan and Future Development Plan for further standards development and implementation of the MEPS was also prepared and submitted. MoC BuildinnCode. The rating of the achievement of deliverables for this component is satisfactory. Following an extensive building survey exercise covering Hanoi, HCMC and Danang, an energy-efficient building code was developed for high-rise office buildings and hotels. The draft code was reviewed by a Technical Stakeholder Committee and MoC is now preparing to issue the code. An Implementation Plan was also developed and submitted under the project. The quality of the project outputs were all rated as satisfactoiy. Each report was carefully reviewed by the implementing agency (e.g., EVN, MoST, MoC), MoI and the Bank team and, in most cases, detailed comments were provided. Those reports that included more technical information or required consensus building, such as the various policy-related documents, extensive consultations were required along with appropriate stakeholder workshops to ensure that all views were considered and concerns addressed as much as possible. Those reports that required broader consultationor public awareness were appropriately disseminated. Annex 3. Economic and Financial Analysis " Economic Analysis . The economic analysis for the project components at appraisal and at completion has been carried out using two scenarios: (i) with the project; and (ii) without the project. The ex ante 'with' project scenario assumed that the project as described was carried out based on forecast costs. For investments at 500kV, the 'without' project alternative was to strengthen the 220kV system. For investments at 220kV and below, the 'without' project analysis assunned that no investment would be made. The ex post 'with' project scenario used actual investment costs of the project. The 'without' project scenario assumed that no investment had been made. The same methodologywas used for both the original and the new subprojects. The costs and benefits were valued as shown in Table A3.1 Table A3.1: Factor Costs and Benefits for Economic Analysis - Costmenefit Value LRMCof energy at 500/220kV 3.09 centsfkwh LRMCof svstemdevelo~mentat 500/220kV 2.34 centsfkwh 3 LRMCof systemdevelopment at 11OkV 1 0.66 centsfkwh LRMCof system development at 22135kV 1 1.09 centsfkwh LRMC of systemdevelopment at LV 1 2.27 centsfkwh Cost of unservedenergy 1 50 centsfkwh Iberations andmaintenancecost 1 2% of investmentlvear I For the purposes of comparing the ex ante with the ex post costs, all costs were ci~lculatedin . constant 1995 US dollars, the base year chosen in the original appraisal. No shadow wage rates or exchange rates were applied, and taxes and duties were excluded from the calculation. The discount rate used was 10 percent. The values of the economic rate of return and NPV at 10 percent for each original subproject are as shown in Table A3.2. At appraisal, the NPV of the whole project was $286.lmillion % and the EIRR 27.2%. Including the disaster reconstructioncomponent, the NPV was $3510.6 million, and the ERR 26.3%. $ At 1995 price levels * No estimatesavailable The economic indicators for the additionalsubprojects are shown in Table A3.3. TableA33: Economic Indicators for Additional Subprojects At appraisal At completion Subproject EIRR NPV@lO% ElRR NPV@lO% (%I ($ million)$ (%) ($ million)$ Owned by EVN Thot Not to Chau Doc 220kVTL and ChauDoc 38.0 64.7 23.0 26.8 2201110kVSS QuyNon to Tuy Hoa 220kVTL 13.0 3.5 13.2 1.9 Tuy Hoa to Nha Trang 220kVTL 14.0 7.5 12.7 3.6 Owned bv PC1 $ At 1995 price levels Not completedat project close, EIRR and NPV estimates unchanged fromappraisal 7 Results merged with Can Tho- Chau Thanh11OkV TL Financial Analysis Financial analysis for the original subprojects with costs based on investment cost estimates, operations and maintenance costs of two percent of investment cost, cost of incremental energy - purchased at bulk purchase prices for each power company. Revenues were based on energy sales, after allowing for losses, at the averagesales prices for each power company. The values of the financial rate of return and NPV at 7 percent for each original subproject are as shown in Table A3.4 and for the additional subprojects in Table A3.5. The IRR aid NPV for each of the participating companies at completion and for the whole project at appraisal and completionare presented in Table A3.6. TableA3.4: FinancialIndicatorsfor OriginalSubprojects $ At 1995 price levels * No estimates available t Not includedinPADanalysis. The financialanalysis for the additional subprojectsis shown in Table A3.5. Table A3.5: Financial Indicatorsfor Additional Subprojects At appraisal At completion Subproject F R R I NPV@7.0% IFIRR I NPVB7.0 ("A) ($ million)$ (%) ($ million)$ Owned by EVN Thot Not to Chau Doc 220kVTL and Chau Doc 36 74.29 14.9 19.0 $ At 1995 price levels * Not completedat project close, EIRRand NPV estimatesunchanged fromappraisal Resultsmerged with Can Tho-Chau Thanh 11OkV TL At appraisal the costs of the original subprojects were over-estimated. The completion analysis takes into account the cost savings - of the order of 30 percent of the original estimates - and shows a much higher rate of return than at appraisal. The net present value of the original subprojects, however, is not as high, principally because of the delays in completion which in some cases were four years longer than the original implementation schedule. The impact at the financial level is less marked, because the financial revenues are lower than the economic benefits. Notwithstanding the reduced benefits because of delays, the subprojects were still financially efficient, except possibly the renovation of Halong and Vinh distribution systems for which information is not available. The estimates at appraisal and completion for the disaster reconstruction component are quite close. This may reflect both the short time between appraisal and implementation and the relatively short period of implementation. The actual costs were somewhat lower thm appraised but closer: this may be a consequence of the equipment purchased largely being MV and LV distribution,of which PC2 had greater experienceand more recent price information. The additional subprojects were overall less economically and financially attractive than the original ones. This may be the consequenceof the basis for their selection- an advanced state of preparation was an important criterion- but may also be an indicator that marginal investment in transmission and distribution is less attractive in 2004 than in 1997. Notwithstanding that the projects were economically and financially efficient The project was financiallyworth while doing from the standpoint of each of the implementing agencies, as shown in Table A3.6. Each of the agencies has achieved financial returns well abovetheir cost of capital (for this kind of project, estimated to be 5.75%). Table A3.6: Financial Indicatorsfor EVN and PCs Implementingagency At appraisal At completion (original projects only) FIRR NPV@7% FIRR NPV@7% (%I ($ million)$ ("h) ($ million EVN 40.0* 101.3 16.6 HCMC PC 15.8 59.9 29.9 PC1 23.0* 12.4 17.4 PC2 17.0 13.6 20.4 Whole project 13.0* 187.2 20.1 $ At 1995 price levels * Estimatebased on weighted average. Annex 4. Bank Lending and Implementation Support/Supewision Processes (a) Task Team Members ; Responsibility1 Names Title Unit -- Specialty ........ i .. 2-- Lending Darayes Mehta ---- ----- --- EASEG TeamLeader - - -- - - --- -- -- - - -- Rebecca Sekse --- -- - - - - - - EASEG - - ----- Enrique Crousillat -- -- - - -- ------ EASEG - Jack Fritz EASES -- - --- --- - -- --- - Maninder Gill .--rResettlement Svecialist EASES -........-.-.. c-;-- ... e.i- -- .-.-* - ....... !CliffordGarstang .. .. ... .... i---- .................. .... LEGEA -- ;RanjitLamech : A-L kestructuring Specialist . ... IENPD ,......... 'CarolynTaaer - IDSM Suecialist i ASTAE ,-.. ....... -. - , .. , . . A ................... ..-a .. .... j ......... Jas Singh .. SM Specialist .... ASTAE - < Anil Malhotra Energy Advisor - EACVF +.-- -.. .... --- . - . .. -- .- ........ ,HungTienVan I% erationsOffi I -- -.: EACVF j .. - Theresa Garnulo I EASEG ; ...- -.- .. -- ..--. .----- Task Assistant- -. .. - . .-- .... -- -......... .- .-..... --.... iSupervisionnCR -. -...-. . --- . - . . - ...... r-- ---- EASEG ,..... Anil Malhotra........... - ..-.-..- -. -.... Regional Energy.. !TeamLeader (. ...... ......... .-, Hung Tien Van - - - -- ----- -- --- --- --- EASEG .- - - Senior-OuerationsOfficer -- - . 1~eamLeader (to end -2004) - - Richard Spencer Senior Energy specialist EASEGIEASVS [TeamLeader (to closing) - ,- -- --- - - -- -- -- - - - - -- -" - ----- - Rebecca Sekse EASEG 1 -. - - - - - -- --Analyst Financial - - iRanjit Lamech Qes IENPD / .- .-........ .- .. --.... .... -_- .-. -. ...... --L Carolvn Tager DSM Suecialist ASTAE 'Jas Singh ... .. :DSMSpecia ....... -- ..... -..... ... ..... - Kurt Schenk iSeniorPowe .. ................... --. --.- ,- . Resettlement Suecialist EACVF 1 Mariko Oaawa 'FinancialAnalvst EASEG 1 Quang Ngoc Bui . . -. I EASVS .-a --- .--<. . . . . .Hung Viet Le - t- EAPCO.... i .. .... . ..-..-.-. --- -. ............ -..-...... . Lien Thi.Bich Nguyen . --- - --- . - Program Assistant -- Anh NguyetPham - - -SrOperationsOff. -- EAS - - CungVan Pham - -- ------ -.- - - - -- - ~inanciai~anagement -- Specialist-- - -EAP --- Phuong Thi ThanhTran Sr Environmental Spec. . -- EASVS- I - -- --- - * - . .- , -KienTrung Tran .............. .. .. ...... ....... ...... .- (b) Staff Time and Cost i ___- Staff-Time and Cost (Bank--Budget Only) .___ _ __.-- _ ___ 'stageof ProjectCycle 1 USD Thousands (including and consultantcosts) -- --.-.-. -. -- - - ' Staff -travel-- -- - -- --- --- -- - - -- - Lending .-....... ' FY96 .................. -- --- - .....-.. .---. .- -.-....... ............-........-.-.-.. 4 Total:' 283.35 -.-- ....................... . .............. -.......-.... . . Total:; 170 652.87 Annex 5. Beneficiary Survey Results No beneficiary survey was carried out. Annex 6. StakeholderWorkshopReport and Results No stakeholderworkshop was held. Annex 7. Summary of Borrower'sICR and/orCommentson Draft ICR Assessmentof Outcome 1. PhysicalInvestment The transmissionand medium-voltagedistribution system, which is owned and operated by EVN, has undergone substantial improvementin the past decade. Highlights include the construction in 1997 of a 500 kV North-South link, which has been strengthened by a second circuit and additional substations. The overall outcome of the transmission and distribution component is rated as satisfactory.Although having suffered much delay during preparationand bidding stages, the contract implementationstage has gone at acceptable speed. The 1lOkV and 220 kV system has been expanded and upgraded, particularly in major load centers, including cities and provinces in regional areas. These improvements of the system under the project, combined with rehabilitation of urban distribution networks, have reduced losses from 21.4 percent in 1995 to 11.78 percent in 2005. The improvements have also increased stability and permitted better control of the system. The 110 kV system, the highest voltage level at which power distribution takes place, has been expanded to meet growth in local power demand, particularly in urban areas. Commissioned transmission and distribution subcomponents have injected a remarkably dependable output to EVN7spower network, has been signilicantlycontributingto strengthening the high voltage transmission. The line also contributed to reduction of losses and improvement of the system operation and control, thus improving the efficiency and sustainability of EVN's power network. The subcomponents are in line with EVN's Master Plan of 6th for the period 2006-2015 with prospective to 2025 which emphasized the development of hydropower sources in parallel with thermal power sources. After energizing the lines the intervals between blackouts became much longer, and the load centers, especially big cities and provinces, have no longer suffered sudden power shortages. Upgrading the system with new equipment installed replacing old ones contributed improvement of quality and credibility of the power supply. Thanks to the 500kV transmissionline subcomponent,North-Southexchange of power was facilitated. This possibility was clearly seen in Summer of 2005, when the line transmitted a large output to the North and helped to relieve the situation of power shortage there which was caused by severe droughts that rendered the predominantlyhydro based generation system overloaded. The projects were economically efficient and met environment and social safeguards requirementsof the World Bank and of the GoV. 2. Technical Assistance for the Project With assistance of consultants, the System Study was recognized as helpful as those carried out for the North-South 500kV Transmission Project. Moreover, it helped to consolidate the results already obtained and, in the meantime, to find out the ways for designing of the new line in a cost-effective manner. The consultant also carried out evaluation of bids and performed other tasks. Through cooperation with the foreign consultants, the knowledge and skills of implementing agency's staff in engineering and management were improved considerably, especially for projects at 500kV level. Through working with the consultants, the technical design capacity of EVN staff for 500kV projects has improved and has subsequently allowed local consultantsto undertake other projects at 500kV level. In addition, with latest technology on gas-insulated switchgear for 220kV substations the subproject is very helpful in terms of training skilled human resource for EVN. Some engineers had the opportunity to participateoverseas training courses at leading GIs technologycompanies. This has helped many of the staff improve their knowledge of GIs technology in particular and the latest technology general during implementation and operation stage. 3. Project Sustainability With 500kV transmission as the back-bone in the national network, evacuation of power from power plants in the central region via Pleiku substation and the North-South 500kV line and transmitting it to the South, the line can meet the additional demand for power, with higher quality of service. Since the high voltage sptem was expanded and upgraded, the quality of power supply is much improved, contributed to reduction of losses and improvement of the system operation and control, thus improving the eficiency and sustainabilityof ETJlV's power network. Most steel towers and all conductors for the line came from local manufacturers. This has meant more jobs for people involving in manufacturing of such goods and improved the skills and competence of local manufacturers. The substation extensions were equipped with up-to-date equipment and technologies and expected to have a long service-life. The project was prepared and implemented in accordance with Vietnamese Envin~nmentand World Bank safeguard policies would help Vietnam in general and EVN in particular step by step approach to the international practice and standard in terns of environmental sustainable development. The compensation provided was acceptable to PAPS, ensuring that their living after project completion would be better or at least equal to that before project comnencement. Together with the distribution network rehabilitation, people in provinces obtaining access to improved quality and availability of power in rural areas, which is a long-standing Government commitment, and is seen as a source of national unity. The benefits of improvements in the quality of the life of the local people are well understood, including increasing their income through access to improvements in productivity. In addition, the quality of life improvements have positive, but indirect, social benefits. The government is committed to sector reform as evidenced by the passing of the Electricity Law by the National Assembly at the end of 2004 and the start it has made in implementing its provisions. It has given further evidence of its understanding of the need for meeting the financing challenge by launching its equitization program and announcement of its plans to equitize a number of other subsidiaries. At the project level, the government has demonstrated commitment through its approvalsprocess. With the project restructure in June 2005, each subproject has been identified by EVN as a priority and EVN itself has demonstrated commitment to improved service quality and meeting increasingdemand. Besides continued EVN commitment, the sustainability of the project relies on continued growth in demand for power in Vietnam and matching the transmission system growth with expansion of generation capacity. Demand growth appears robust, while the issue of increasinggenerationcapacity is well understood at all levels of government and EVN. PerformanceAssessment 1. Bank Performance The Bank performance of the project initial stages was recognized as satisfactory: fiom preparation of environmental impacts assessment, preparation of RFP for selection of international consultant, bidding documents for goods, to the evaluation of bids. All work was implemented with the Bank's comments being taken into account and the Bank's Guidelines being followed. The Bank's supervision performance was satisfactory. It is clear evidence that through supervision missions and working visits, the work progress and matters arisen were monitored J and measures were recommended. Also, through the Bank's supervision, the implementing agency could make necessary adjustment to develop a realistic work schedule. In order to complete and fulfill the development objectives of the project, the Bank team has contributed and played a very important role. With their strong support and close cooperation, project implementation has been improved in terns of progressspeeding up and avoids longer delays. 2. Borrower performance The transmission and distribution subsector portfolio has generally performed well during the past 10 years. Closed projects have met their objectivesand TD1 has been rated satisfactorywith respect to their development objectives throughout its lifetime. Implementation progress for the project is satisfactoryand has mostly been so during their lifetimes. The good project implementationrecord reflects the increasingcapacity of the EVN subsidiaries. Implementing agencies now manage subprojects throughout the investment cycle, from identification through appraisal, procurement, implementation, and commissioning. International consultant support and "turnkey" approaches are confined to deployment of newer technologies, and they have become the exceptionrather than the rule. Transmission and distribution system must keep up with rapid growth and change in patterns of electricity demand. EVN has respo,nded to this by periodically reviewing and reassigning the priorities for individual sub-projects. The implementing agencies' improved capacity and greater 1 - responsivenessmake this possible. 1 - Key Lessons Learned With very long period of the project implementation, covering sites along the counlry from the North to the South, and being one of the first IDA financed transmissionand distribu1:ionprojects of EVN, implementing agencies have faced many difficulties during project preplaration and implementation. Experience from the project suggests that close cooperation with local authorities and services, departments, and sections would be advantages for agencies during implementing stage and it was a critical reason determining the success of the project. With many subprojects with a large volume of works and goods procurement, it is i,mportantto ensure acceptable packaging and well prepared procurement plans. This would minimize delay in procurement processing. The supply of materials and equipment for overhead lines should be done by National Competitive Bidding and should be included in packages for founclations, pole erection and installation of overhead lines. It is very important to anticipate delay in approval stage of the project documents such as FIS, Technical Design and Cost Estimates in order to have a project implementation plan prepared precisely and realistically. Project implementation was often slower than the schedu.leset out in the feasibility study; the major reason being that changes to the project and direction of undergroundcables and overhead lines was very common. Specific responsibilities of consultant have to be agreed clearly during negotiation arid preparing the contract. For example, the consultants have to take full responsibility for the entire process including design, agreement of intersection between transmission lines and underground works construction, waterway and road construction; preparing bidding documents, evaluation, negotiation and contract signing; review and approval for technical documents, supervision and checking before acceptance stage. The performance of contracts for consulting services must be controlledclosely to avoid expenses rising above the signed and approved total contriict value. All of the high and medium voltage equipment, control, and measurement and protection systems of GIs substationshould be designed simultaneously. Annex 8. Commentsof Cofinanciers and Other Partnerslstakeholders No comments have been received from cofinanciers. Annex 9. List of SupportingDocuments , Borrower-preparedDocuments Project Implementation Plan (refersto the original subcomponents) Feasibilitystudies: Plekiu-Phu Lam 500kVTransmission Line; Ha Tinh 500/220/1IOkV Substation;Nha Be-Tao Dan TL and Tao Dan 2201110kVSS; Halong, Vinh and Vulng Tau cities' distributionsystems; additional 220kVsubprojects;additional 1lOkV subprojectsand Hai Duong and Ha Tinh cities' distributionsystems. EAIEMP, Resettlement Plan and Ethnic MinoritiesDevelopment Plan, Plekiu- Phu Idam500kV TL EAIEMP, Thot Not - Chau Doc 220kV TL and Chau Doc 2201110kVSS EAIEMP, Quy Nhon-Tuy Hoa 220kV TL EAIEMP,Tuy Hoa- Nha Trang 220kV TL EAIEMP, Lang Son - Cao Bang 11OkV TL EAIEMP, Thanh Chuong 110135122kVSS EAIEMP Troi 110135122kVSS and TL EAIEMP, additional 11OkV subprojectsin southern Vietnam EAJEMPs,Hai Duong and Ha Tinh City distributionsystemsrehabilitation. RP, Quy Nhon- Tuy Hoa 220kV TL RP, Tuy Hoa- Nha Trang 220kV TL RP, Lang Son- Cao Bang 1lOkV TL RP, additional 11OkV subprojectsin southern Vietnam EMDP, Lang Son- Cao Bang 1lOkV TL EMDP, additional 1lOkV subprojects in southern Vietnam Consultant-preparedDocuments National Tariff Study, Hagler Bailly,1996 Transmissionand Distribution Study, Hagler Bailly, 1998 Generation-TransmissionTransferPricing System, Economic Consulting Associates, April 2001 Demand Side Management Component Bank-prepared Documents - Project Appraisal Document Aide Memoires, preparation and supervision missions 1996- 2007 ICRs, supervision missions no 1-19 Memorandumof the President: Proposed Amendments to the Development Credit Agreements for the Vietnam: Transmission,Distribution and Disaster Reconstruction Project (Cr. 3034 VN) and the Vietnam: System EfficiencyImprovement,Equitizationand RenewablesProject (Cr 3680 VN), May 17,2005 IBRD35850 CAMBODIA Gulf 0 f DISASTER RECONSTRUCTION Thailand EXISTINGSYSTEM. 110 kVSUBSTATIONS - DISTRIBUTIONAREA 500 kVPOWER LlNES 220 kVPOWER LlNES THERMALPOWER STATIONS NATIONALROADS - ~ ~~~ 500 kVPOWERLINES OTHERROADS ------- -220KVPOWERLlNES -- 4 ~ - RIVERSANDCANALS .............. PROVINCECAPITALS *. 1 10 KV POWER LlNES NATIONALCAPITAL(INSET) 220 KVSUBSTATIONS -- *-- PROVINCEBOUNDARIES 6 1 10 KV SUBSTATIONS -.-.- INTERNATIONALBOUNDARIES