The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) REPORT NO.: RES37773 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF VISHNUGAD PIPALKOTI HYDRO ELECTRIC PROJECT APPROVED ON JUNE 30, 2011 TO THDC ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Demetrios Papathanasiou Task Team Leader: Simon J. Stolp, Pyush Dogra The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) I. BASIC DATA Product Information Project ID Financing Instrument P096124 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 30-Jun-2011 30-Jun-2019 Organizations Borrower Responsible Agency THDC Tehri Hydro Development Corporation Project Development Objective (PDO) Original PDO The Project Development Objectives are: (a) to increase the supply of electricity to India's national grid through the addition of renewable, low-carbon energy; and (b) strengthen the institutional capacity of THDC with respect to the preparation and implementation of economically, environmentally and socially sustainable hydropower projects. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-80780 30-Jun-2011 10-Aug-2011 07-Nov-2011 30-Jun-2019 648.00 109.66 538.34 TF-58016 24-Apr-2007 24-Apr-2007 24-Apr-2007 31-Mar-2010 .99 .99 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES Immediately after having achieved loan effectiveness, but prior to the award of the principle civil works contract, the Project experienced protracted delays in achieving forest clearance approvals. These delays were associated with a lengthy Government review of all hydropower development on the headwaters of the Ganga River. The project was one of the few hydropower projects that was ultimately cleared, largely because of robust preparation practices. But because of the review, the Project was delayed by two years before the award of the civil works contract. Since then, Project implementation has been further delayed by almost 12 months, mostly due to significant flooding in 2013, which required re-design of downstream structures and additional construction and stabilization works, and also due in part to protests by local citizens over employment opportunities. The Project is located in a remote mountain area with few other economic opportunities leading local communities to regard this public-sector project as a possible source of employment. After project implementation commenced the performance of the civil works contractor, Hindustan Construction Company (HCC) has been generally poor, and extremely poor during 2018. Since project implementation commenced, HCC has been in the midst of a severe corporate liquidity crisis, and unable to allocate sufficient plant, material and human resources to the Project. The Borrower, THDC Limited, made significant efforts to improve implementation progress by providing HCC with secured cash advances, and by making direct payments to subcontractors at some of the more critical work-fronts on the Project. HCC is progressively addressing the liquidity issues that have hampered its performance to date, including through a fully subscribed rights issue, and the liquidation of outstanding contractual claims. HCC has now made all outstanding payments to staff and sub-contractors and is procuring significant new additional plant for the Project. As a result, progress on the civil works contract has improved significantly. Despite increased delays from poor rock conditions in the power station complex, the Project is again on-track to meet its Development Objectives. Given the ongoing influx of additional project resources, implementation progress and disbursements will begin to accelerate over the next several months. The commissioning of the critical tunnel boring machine remains on-track to take place in mid 2019 - this will not only accelerate disbursements, but will also have a significant positive impact on HCC’s cash-flow position and enable accelerated progress across the Project. Due to delays in project implementation, Department of Economic Affairs wrote to the Bank on July 4, 2017, requesting an extension of the Project Closing Date to December 31, 2020. At that stage, the Bank agreed to extend the Project Closing Date to June 30, 2019, with further extension to December 31, 2020 subject to the performance of THDC. In addition to working with closely with HCC to improve project implementation, THDC has also met the further requirements of the Bank for extension to December 31, 2020, namely: - THDC has remobilized its Project Review Team in advance of the commissioning of the tunnel boring machine. - THDC has remobilized its Strategic Advisory Team, which is now providing ongoing expert advice on project implementation. - THDC has provided an update to the level 2 Project Schedule, and has met critical milestones over the past eighteen months, including completion of river diversion, commencement of construction of the upstream coffer dam, and shipment and erection of the tunnel boring machine. The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) - Although THDC has not yet completed procurement of a Local Economic Development Consultant, due to initial bids being well above budget, it is now progressing quickly through a second procurement activity, and will likely finalize this procurement by end July, 2019. In the interim, THDC has strengthened its own CSR activities and engaged in increased community outreach. In addition to requesting that its earlier request for extension of the Project Closing Date to 31 December, 2020 be fully met, THDC has also requested partial cancellation of loan proceeds in the amount of $100 million. Due to savings in the civil works and electro-mechanical works contracts, and a depreciation in the Indian rupee since the loan was signed, THDC no longer requires the full loan amount. The Bank team recommends an extension of the Project Closing Date to 31 December, 2020, as requested by the Borrower. It is understood that the Borrower will also request a partial cancellation of loan proceeds, in the amount of $100 million, which will be processed separately, once received. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-80780 Effective 31-Dec-2017 30-Jun-2019 31-Dec-2020 30-Apr-2021 30-Sep-2009, 31-Mar- TF-58016 Closed 17-Mar-2009 2010, 28-Oct-2010