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Implementation Completion Report (ICR) Review - Gms Power Trade (cambodia) Project


  
1. Project Data:   
ICR Review Date Posted:
01/14/2013   
Country:
Cambodia
PROJ ID:
P105329
Appraisal
Actual
Project Name:
Gms Power Trade (cambodia) Project
Project Costs(US $M)
 22.19  0.19
L/C Number:
CH301
Loan/Credit (US $M)
 18.50  0.19
Sector Board:
Energy and Mining
Cofinancing (US $M)
   
Cofinanciers:
Board Approval Date
  06/05/2007
 
 
Closing Date
12/31/2011 10/05/2011
Sector(s):
Power (100%)
Theme(s):
Regional integration (40% - P) Infrastructure services for private sector development (40% - P) Rural services and infrastructure (20% - S)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Ramachandra Jammi
Robert Mark Lacey Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:
The project development objective as stated in the legal agreement and the Project Appraisal Document (PAD) was “to enhance power trade within the Greater Mekong Sub-Region (GMS) with a view to bringing affordable grid-based electricity to selected provinces in Cambodia through importing power from Lao Peoples' Democratic Republic (Lao PDR) and Vietnam.”

b. Were the project objectives/key associated outcome targets revised during implementation?
No

c. Components:
Component 1: 115 kV (kiloVolts) Transmission System: Vietnam border to Kampong Cham; (at appraisal: US$ 9.85 million; at completion: US$ 0.00). To facilitate importing power from the south of Vietnam to the province of Kampong Cham in Cambodia by constructing a 64 km, 115 kV double-circuit line from the supply point at the Vietnam border (Tan Bien located in Viet Nam) and three distribution substations in Kampong Cham, Suong, and in Kraek towns.

Component 2: 115 kV Transmission System: Lao PDR border to Stung Treng; (at appraisal: US$ 5.70 million; at completion: US$ 0.00). To facilitate importing power from southern Lao PDR to the province of Stung Treng in Cambodia by building a 56 km, 115 kV double-circuit line from the Lao PDR border (at Veun Kham) and a substation in Stung Treng provincial town.

Component 3: Activities to Facilitate Implementation of Components 1&2 (at appraisal: US$ 1.75 million; at completion: US$ 0.19 million). To support consultancy services for: (i) project design and management for components 1 and 2; (ii) a procurement agent; and (iii) vehicles, computers and office equipment.

Component 4: Institutional Development of Electricité du Cambodge (at appraisal: US$ 1.00 million; at completion: US$ 0.00). This was aimed at: (i) strengthening the internal auditing capacity of Electricité du Cambodge; (ii) engaging the services of experts for designing high voltage transmission systems (including lines and substations) and optimizing system dispatch; (iii) providing overseas training of Electricité du Cambodge staff in the aforementioned fields; and (iv) procuring both hardware and software

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Only US$ 0.19 million was utilized out of the planned US$ 18.5 million IDA grant, to support consultancy services for components 1 and 2.. This is attributed to the procurement delays in the early stages of the project arising from shortcomings in inter-agency arrangements and coordination; Vietnam's decision to not export power to Cambodia, which necessitated a restructuring and re-design of the project; and the Bank's decision to not extend the project duration as requested by the borrower due to the slow pace of progress as well as the Bank’s holding back on all Board presentations for Cambodia due to an Inspection Panel case relating to Cambodia's Land Management and Administration Project.

Prior to project appraisal, the Government of Cambodia had decided that procurement for all IDA projects - including the project under review - would be carried out by a Procurement Agent contracted by the Ministry of Economy and Finance. The Procurement Agent (Crown Agents, a private entity) would have primary responsibility for the procurement process and appoint a Project Implementation Consultant that would provide technical inputs to the implementing agency, Electricité du Cambodge, which would be responsible for subsequent contract administration and execution. A detailed division of responsibilities was specified between the Procurement Agent, Electricité du Cambodge, and the Project Implementation Consultant. However, as of May 2009, there was little progress in procurement due to poor cooperation between these entities.

After project implementatiojn had commenced, Vietnam decided not to export power due to its increased domestic demand. To make up for this shortfall, the Government of Cambodia decided to import more power from Lao PDR. For this, on August 6, 2010, the Government of Cambodia officially requested the Bank for a restructuring to upgrade the Cambodia-Laos transmission line from 115 kV to 230 kV to increase the line’s firm capacity from 80 MW to 300 MW per circuit and to use the savings from the dropped Component 1 (Cambodia-Vietnam line) to finance the increased cost of the Cambodia-Laos 230 kV line. Cancellation of Component 4 (Institutional Strengthening of Electricité du Cambodge) was also proposed in order to use those savings as well to upgrade this line. Preparation work to upgrade the 230 kV transmission line was initiated in June 2010, on both the Lao PDR and Cambodia sides. Based on the pace of implementation, Electricité du Cambodge, Electricité du Laos, and the Bank concluded that a two-year extension of the closing date would be needed, from December 31, 2011 to December 31, 2013, to align with the closing date of the Laos GMS Power Trade Project.

Preparation for the new 230 kV transmission line was slow. In June 2011, the Bank informed Electricité du Cambodge that the Government's request for project restructuring could not be processed due to country program conditions (principally reflecting the Inspection Panel case referred to above). Without the two year extension of the closing date, and with no IDA or other external financing, Electricité du Cambodge could not proceed with International Competitive Bidding (ICB) procurement for the supply and installation of the 230 kV line. Electricité du Cambodge was also concerned that it might suffer huge financial losses if it did finance the line but Lao PDR was unable to meet the agreed schedule. Seeing no viable options, the Government of Cambodia requested a full cancellation of the Grant on October 4, 2011.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:
The Greater Mekong Subregion (GMS) — comprising Cambodia, Lao PDR, Myanmar, Thailand, Socialist Republic of Viet Nam, and the Yunnan province of China, spread over 2.3 million square kilometers — houses a population of about 260 million. Despite a large endowment of energy resources, the region’s per capita consumption of electricity in 2004 was low — ranging from about only 63 kWh (kilowatt-hours) per year in Cambodia to about 1,900 kWh per year in Thailand. The six GMS member countries have been largely characterized by national electricity demands that do not match with their national electricity producing resources. For example, Lao PDR's electricity supply (potential) exceeded domestic demand, while Cambodia’ demand for power exceeded domestic generation capacity and electricity cost was one of highest in the region, thereby creating opportunities for power trade. To address the rapid demand growth and concerns on energy security, the GMS countries decided to enhance regional cooperation in the power sector, to strengthen regional transmission networks, to promote cross-border investments in energy resources, and to develop a regional electricity market in a phased manner through a GMS Forum established in the early 1990s with the support of the Asian Development Bank (ADB). The GMS countries signed an Inter-Governmental Agreement on Regional Power Trade in 2002, which was ratified by their respective law-making bodies between 2004 and 2005. While a competitive electricity market was a long-term objective, there was consensus among the countries that it was important to develop an appropriate framework for strengthening trade and to start increasing the regional transmission inter-connections and generation capacity.

Momentum for regional economic integration and, in particular, integration of electricity systems among the countries in the GMS region had been growing steadily. The Asian Development Bank, World Bank, and other development partners had been actively fostering a coordinated approach toward developing the GMS countries’ resources. The latest Bank's Country Assistance Strategy for Cambodia (2005) noted the important challenges in the power sector in the following terms: "Cambodia has one of the lowest electrification rates outside sub-Saharan Africa; it has no power transmission system and has no large generation capacity. Where electricity is available, firms and individual consumers face some of the highest energy prices in the world." With respect to the GMS as a whole, the Bank’s strategy was articulated in the “Strategy Note on Economic Cooperation across the Mekong Sub-Region” dated April 2007. It provided support to develop frameworks for the power sector in GMS for joint action including implementation through analytical work, technical assistance, capacity building, dialogue, and investment. It also helped to ensure that the plans proposed and implemented at the regional level complemented and reinforced country level activities and programs. The Bank’s GMS regional assistance strategy included: (i) continued support to the development of power trade, and (ii) enhanced collaboration on Mekong water resource management. The Bank, with its considerable experience with power markets in other regions (Southeast Europe and Africa), was well positioned to bring this experience to the GMS. At a Bank workshop on international experiences in June 2006, the participants expressed a keen desire for the Bank to deepen its involvement in the GMS.

Relevance of objectives is rated high.

b. Relevance of Design:
The PAD contains two results frameworks, one for the Greater Mekong Sub-Region Strategy, of which power trading is a subset, and one for this project itself. The former presents a clear causal chain between the IDA-financed activities to support power trading (see following paragraph), the outputs expected from these activities and the intended outcomes leading to achievement of the strategic goals and development objectives. Exogenous factors, such as inadequate regional integrated planning and policy harmonization between countries, which could affect outcomes, were identified, though they were not adequately mitigated. To meet the objective of bringing affordable grid-based electricity to selected provinces in Cambodia, the project proposed to import power from Lao PDR and Viet Nam (instead of using local diesel-fired generators with higher unit costs of electricity) to supply two of Cambodia’s provinces: Kampong Cham and Stung Treng. The project design built upon the availability of surplus power generation capacity at that time in both Lao PDR and Vietnam, and the unfulfilled demand in the Cambodian provinces.

All three countries were to be assisted by IDA in this initiative: IDA Grants to Cambodia and Lao PDR (H3010 and H3000, respectively) would finance inter alia cross-border inter-connections between the two countries; the System Efficiency Improvement, Equitization and Renewables Project (US$225 million, Fiscal Year 2002, Credit. 3680-VN) was to be used to finance Vietnam's portion of the Vietnam-Cambodia transmission line to the Cambodian border. By financing priority regional transmission inter-connections, it was expected that these projects, along with counterpart initiatives financed by the respective Governments, would help clients in “learning by doing” to develop modalities for designing, financing, and constructing cross-border transmission links for strengthening electricity trade between electricity systems and power utilities — the first step toward developing a regional market.

Relevance of design is rated substantial .


4. Achievement of Objectives (Efficacy) :

The project objectives were not achieved as the project was not implemented and only activities supporting components 1 and 2 were financed.

5. Efficiency:

Not evaluable as the project was not implemented.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
%
%
ICR estimate:
%
%

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

The project objective was not achieved as the project was not implemented.

a. Outcome Rating: Not Rated

7. Rationale for Risk to Development Outcome Rating:

Cannot be evaluated.

a. Risk to Development Outcome Rating: Non-evaluable

8. Assessment of Bank Performance:

a. Quality at entry:
At appraisal, the project development objectives were in line with the key country and sector issues and needs, both technical and fiduciary. The project design, including implementation arrangements, was appropriate to support the achievement of the project development objective. Several risks to the project's development outcome were considered at appraisal, but mitigation measures were not adequate or effective. Other risks could not be easily foreseen. These are discussed below:

One risk arose from the involvement of three countries and at least three different agencies all of which had been operating in different conditions and environments. Each country/agency had different plans for the development of its own power sector - especially in the timeline for power system (generation and transmission) development and expansion. It was hard for one agency in one country to meet the timeline of another agency in another country. The cancellation of Component 1 underlined this mismatch, as Vietnam’s own growing needs meant that it could no longer supply power to Cambodia. No comprehensive power supply study, including energy mix and cost of generation, was carried out for the dispatching countries. Such a study could have identified options for power-dispatching countries to consider including temporary power purchases in case the supply was forced to be cut because of unexpected surges in domestic power demand.

Other risks arose from interfacing and coordinating the transmission line crossing both Laos and Cambodia, quality of technical specifications, procurement delays, and the fiduciary risk in the broader country context. To mitigate such risks, the following measures were agreed: (a) international consultants would be retained to help with the detailed technical designs and specifications and to coordinate with the Procurement Agent during the procurement process; (b) single responsibility supply and installation contract arrangement (rather than small packages) would be adopted for almost all of the physical investment components; (c) for the transmission line crossing Laos and Cambodia, two separate yet parallel bidding processes will be conducted by the two countries based on properly coordinated implementation schedules; to this end, a Coordination Committee was established jointly by the two countries; (d) all goods would be procured through international competitive bidding; and (e) appropriate procurement planning and scheduling and close coordination would be done among the implementing agencies of the two countries, the Procurement Agent and the Association, along with prior review of contracts and more frequent supervision and follow up by the Association.

The Government of Cambodia had decided that the procurement process would be carried out, on behalf of Electricité du Cambodge, by the Procurement Agent to be contracted by Ministry of Economy and Finance. The project appraisal document notes (page 58) that the overall project risk for procurement is “high” for Electricité du Cambodge, mainly due to the perceived country risk in Cambodia. Yet, the task team could not anticipate the extent to which procurement and implementation would be delayed due to poor cooperation and coordination between Electricité du Cambodge and the Procurement Agent/Ministry of Economy and Finance. These delays made it impossible to complete the project two years before its parallel Lao GMS Power Trade project and, subsequently contributed to project cancellation when the Bank declined to extend the closing date.

Furthermore, some risks could not have been easily foreseen at appraisal. First, Vietnam's default on committed power export was not envisaged for two reasons: (a) a draft negotiated power purchase agreement between the power utilities in both Cambodia and Vietnam was pending signature during project preparation, and (b) Vietnam’s surge in domestic demand in 2010-2011 had not been anticipated in its medium and long-term system planning. Another risk that could not have been easily anticipated was the fallout from the Inspection Panel case relating to Cambodia's Land Management and Administration Project, which affected the Bank's overall relationship with the Government of Cambodia across all sectors of engagement.

Quality-at-Entry Rating: Moderately Unsatisfactory

b. Quality of supervision:
In the face of procurement delays resulting from a lack of coordination and co-operation between the Ministry of Economy and Finance, and the Electricité du Cambodge/Ministry of Industries Mines and Energy, the Bank team made efforts to facilitate cooperation among the key parties, and provide support on various technical and fiduciary issues. The task team supported the efforts of Electricité du Laos and Electricité du Cambodge to update their system expansion planning and to reach an understanding on exports and imports of energy in the changed context of regional power trade. The Bank management teams in the Phnom Penh and Bangkok offices raised issues beyond the control of the project agencies to the highest level of Cambodia's Government and at the country portfolio level. The Bank team also supported Electricité du Cambodge in responding to the unexpected Vietnamese decision not to export power, and facilitated tripartite meetings with Electricité du Laos to respond to the changed regional power trade context. However, these efforts did not result in reviving the pace of project implementation.

Significantly, the Bank team was not able to process or formally respond to Electricité du Cambodge’s request for restructuring and extending the project closing date. This was ultimately due to concerns on the Bank's part on broader engagement in Cambodia because of the Inspection Panel case already referred to. Subsequently, the project under review was cancelled at the request of the Government. Reflecting what the NCO (page 6) describes as “the Bank's inability to make a decision on the extension, [which] eventually impeded the project from achieving its development objective,” supervision is rated moderately unsatisfactory.

Quality of Supervision Rating: Moderately Unsatisfactory

Overall Bank Performance Rating: Moderately Unsatisfactory

9. Assessment of Borrower Performance:

a. Government Performance:
During project preparation, the Government of Cambodia was supportive of the design and preparation of the project. However, during implementation, major delays occurred in procurement, which was managed through the Procurement Agent who was directly contracted by the Ministry of Economy and Finance. Implementation could have benefited from stronger and more regular coordination at suitably high levels among the different government entities involved, including those responsible for procurement.

Government Performance Rating: Moderately Unsatisfactory

b. Implementing Agency Performance:
As explained in section 2d. the implementing agency, Electricité du Cambodge was assisted by a Project Implementation Consultant appointed by the Procurement Agent that was engaged by the Ministry of Economy and Finance. A detailed division of responsibilities between the Procurement Agent, Electricite du Cambodge, and the Project Implementation Consultant was specified. The Procurement Agent was expected to take the primary responsibility throughout the procurement process.

The first year of project implementation was adversely affected by unsatisfactory performance of the Procurement Agent in preparing the bidding documents. As of May 2009, there was little progress in procurement because Electricité du Cambodge and the Procurement Agent failed to co-operate and to coordinate their efforts adequately in completing the bidding documents for supply and installation of the two cross-border transmission lines (Component 1 & 2). While the Procurement Agent complained that technical data provided by Electricité du Cambodge was insufficiently detailed to allow preparation of the bidding documents, the latter maintained that the delays were due to the Procurement Agent ‘s own inefficiency. In addition, Electricité du Cambodge officially proposed to remove the project from the Procurement Agent arrangement. A tripartite meeting involving Electricité du Cambodge, the Ministry of Economy and Finance and the Bank was organized in May 2009 to attempt to resolve this issue and expedite procurement and project implementation. The meeting decided that: (i) the Procurement Agent arrangement would continue for the project; and (ii) a designated team would be appointed within the Procurement Agent to manage the procurement for this Project. However, this did not significantly improve the pace of procurement.

Subsequently, a new Procurement Agent, Korea Electric Power Corporation (KEPCO) was engaged in June 2010 Its role was to assist Electricité du Cambodge in revising the project designs, technical specifications, technical scheduling, and modifying Environmental Impact Assessment, the Environmental Management Plans and the Resettlement Action Plan required for bidding and restructuring. However, the Project Management Unit and the Social and Environmental Management Unit of the Electricité du Cambodge, which were assigned to manage the project with initially three staff, were overwhelmed with other projects financed by different sources. The review and clearance of technical specifications, technical schedules, and safeguard documents revised by their respective consultants, took much longer than expected to be finalized.

Implementing Agency Performance Rating: Moderately Unsatisfactory

Overall Borrower Performance Rating: Moderately Unsatisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:
Key indicators for the achievement of the above objectives were appropriately chosen: (i) an increase of power imports by Cambodia from Lao PDR and Viet Nam as per their Power Purchase Agreements; and (ii) the proportion of demand met through power imports and reduction in cost of supply in selected provinces of Cambodia. Electricité du Cambodge was responsible for M&E. Baseline values for the power imports indicators were zero, since this was the first effort of its kind. Baseline cost of supply data was available within Electricité du Cambodge.

b. M&E Implementation:
Since the project was cancelled, it is not possible to evaluate M&E implementation.

a. M&E Utilization:
Since the project was cancelled, it is not possible to evaluate M&E utilization.

M&E Quality Rating: Modest

11. Other Issues:

a. Safeguards:
The Project was assigned “Category B”, as potential impacts were expected to be moderate, of limited spatial influence and of short duration. Five safeguard policies were triggered: Environment Assessment, Natural Habitats, Physical Cultural Resources, Involuntary Resettlement, and Projects on International Waterways (due to the Lao portion of the project). The project was carefully designed to comply with all five safeguards. There were no issues with compliance since the project was not implemented, with the only expenditure being on US$0.19 million on consultancy services.

b. Fiduciary Compliance:
Fiduciary compliance cannot be evaluated because the project was not implemented.

c. Unintended Impacts (positive or negative):

d. Other:



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Not Rated
Not Rated
 
Risk to Development Outcome:
Non-evaluable
Non-evaluable
 
Bank Performance:
Moderately Unsatisfactory
Moderately Unsatisfactory
 
Borrower Performance:
Moderately Unsatisfactory
Moderately Unsatisfactory
 
Quality of ICR:
 
Satisfactory
 
NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:
Important lessons derived from the ICR are:


Regional energy projects involving multiple countries and implementing agencies should be backed by a comprehensive study of power supply and demand trends as a basis for addressing likely scenarios. This project involved three countries and at least three different agencies, all of which had different operating conditions and environments. To minimize risks and challenges in such a complex situation, the project should have developed a comprehensive study of power supply and demand to plan alternative and back-up scenarios for (i) the energy mix and cost of generation needed for power dispatching countries; (ii) options for power-dispatching countries in case of unexpected surges in domestic power demand; (iii) structuring cross-border power tariff in ways to allow the participating countries to adjust and for relevant parties to willingly trade power.

A sound Bank-client country relationship is crucial for moving a complex project forward. In this project, despite the Bank's intention to help the client in “learning by doing” to develop modalities for cross-border power trade, following the communication (June 2011) to the client that their restructuring request could not be accepted due to the Bank’s decision to hold back on Board Presentations for Cambodia, the Government requested full cancellation of the Grant.


14. Assessment Recommended?

No

15. Comments on Quality of ICR:

The ICR provides an informative narrative of the factors and events that led to the project cancellation as they applied to all stakeholders, as well as resulting from exogenous sources. The role and efforts made by each stakeholder are discussed. In parts, the ICR’s analysis and conclusions seek to justify the Bank’s role and performance more than necessary, though it is clear that the project presented some clearly complex issues during project implementation, many of which were beyond the Bank’s control.

a. Quality of ICR Rating: Satisfactory

(ICRR-Rev6INV-Jun-2011)
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