|1. Project Data:
ICR Review Date Posted:
|Rural Electrification And Transmission Project
Project Costs(US $M)
Loan/Credit (US $M)
|Energy and Mining
Cofinancing (US $M)
Board Approval Date
|Power (78%), Central government administration (14%), Renewable energy (8%)|
|Rural services and infrastructure (25% - P)
Infrastructure services for private sector development (25% - P)
Rural policies and institutions (24% - P)
Climate change (13% - S)
Regulation and competition policy (13% - S)|
||ICR Review Coordinator:
|2. Project Objectives and Components:|
The Project Development Objectives were to:
(a) Improve power sector efficiency and reliability and reduce electricity supply costs;
(b) Improve standards of living and foster economic growth in rural areas by expanding rural electricity supplies; and
(c) Strengthen electricity institutions, the regulatory framework and the “enabling environment” for sector commercialization and privatization.
[From Project Appraisal Document (PAD p.4) and Schedule 2 of the Development Credit Agreement ( p. 20)]
The Project also included a Global Environmental Objective which was to overcome barriers to renewable energy development in Cambodia, including those related to lack of a policy framework, financing, information and institutional capacity.
b. Were the project objectives/key associated outcome targets revised during implementation?
Part A. The Transmission Line ( TL ) (appraisal estimate US$ 90.6 million): (1) construction of a 109 km long double circuit 220 kV line from the border with Vietnam to Phnom Penh and two associated substations; (2) reinforcement of the 115 kV grid around Phnom Penh involving about 20 km of 115 kV lines and modifications to three 115 kV substations and 22 kV extension; (3) a National Control Center to optimize load dispatch operations in the Electricite du Cambodge's (EDC) system and increase system security; and (4) building EDC’s capacity in project management, land acquisition, resettlement and environmental monitoring and mitigation.
(Part A (1) of the Project within Cambodia would be financed by the Asian Development Bank. Complementary investments in the 220kV system relating to Part A (l) above, on the Vietnam side would be financed by surplus funds in an ongoing IDA Credit 3034-VN.)
Part B. Rural Electrification (RE) (appraisal estimate US$ 14.8 million): EDC's grid extension program covering 516 km of medium voltage and 536 km of low voltage lines and electrification of about 50,000 households. The Project would also support the symbiotic relationship of EDC and the Rural Energy Enterprise's (REEs), and whenever feasible, would make use of private sector providers in the operation of rural distribution systems. EDC would identify existing REEs and options for public private partnership including distribution licensing, billing and collection arrangements, management contracts, and leasing arrangements.
Part C. Pilot Rural Electrification Fund (REF): (appraisal estimate US$ 28.2 million): to implement an innovative mini and off-grid electrification program providing assistance to private sector developers for: (a) provision of about 45,000 new connections; (b) provision of electricity to about 12,000 households using solar home systems; and (c) addition of at least 6 MW of mini-hydro and 850 kW of micro hydro capacity.
Part D. Institutional Development and Sector Reform TA component (appraisal estimate US$ 9.3 million): consulting and advisory services to: (1) Ministry of Industry, Mines and Energy (MIME) in renewable energy policy development, power market analysis, and development of a power sector master plan; (2) REF for implementation support, promotion of rural income generation options, renewable energy business development, REE improvement and association building, and capacity building of financial institutions; (3) Energy Authority of Cambodia (EAC) for institutional strengthening; and (4) EDC for services of a project implementation consultant and in-house advisor, creation of an independent monitoring agency and a project grievance committee, improvement of commercial practices, management training, capacity building for land acquisition, resettlement and environment, and power investment planning.
Following three sub-components were revised through the restructuring in 2010:
- Solar Homes Systems (SHS) component C (b). By December 2009, only 93 SHS had been installed compared to the target of 12,000 because rural households could not afford the up-front payments to the suppliers. Therefore, the delivery model was revised from an “output based subsidy” approach to a “hire-and-purchase” approach in order to jump start installations. A new technical assistance package was also added to help REF supervise the supply and installation of the 12,000 SHS.
- Mini and Micro Hydro Component C(c). The installation of 6 MW of mini hydro and 850 kW of micro hydro was dropped. Instead a Feasibility Study for 6,850 kW and installation of 1,200 kW of mini-micro hydro and biomass capacity was added. The funds were reallocated for construction of an office building.
- Technical Assistance (TA) to EDC component D(d). Additional TA was included for a study on MV line planning to support EDC in MV network expansion planning, identifying power loss locations in its distribution networks for immediate upgrading; and to develop standard MV line technical specifications and bidding documents for speedy expansion of MV lines to scale up rural electrification.
d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Project Cost and Financing: At appraisal the total project cost was estimated about US$150.1 million. The actual project cost at closing was US$ 131.6 million based on the financing table in Annex B of the ICR. This was mainly due to less disbursement from the Asian Development Loan (US$84.3 million at appraisal vs US$ 74.5 million at closing) and lower Government counterpart funds.
There is discrepancy in IDA financing amounts in Annex Table (a) "Project Cost by Components" which puts IDA financing at US$ 41.5 million while according to Annex Table (b) "Financing" IDA financing is US$ 35.6 million (p. 29-30). The project team clarified that the actual Bank financing was US$ 40.55 million (US$ 35.59 million from IDA and US$ 4.96 million from GEF).
Borrower Contribution: The actual Borrower Contribution was US$ 13.3 million compared to the appraisal estimate of US$ 29.7 million.
Dates: The closing date was extended three times: the first was from June 30, 2009 to September 30, 2009; the second was from September 30, 2009 to February 28, 2010; and the third was to January 31, 2012. The first two extensions were granted to allow the Rural Electrification Fund Secretariat time to address financial management issues that arose in 2009. The 2010 restructuring and extension was approved in order to allow adequate time to achieve the Project Development Objectives, especially Solar Home Systems installation, and included a reallocation of funds to accommodate the new Technical Assistance and construction of the REF office building.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:Rated high.
The project objectives remained consistent with the most recent Country Assistance Strategy (April 18 2005) which among other things focussed on improving rural livelihood sand creation of an enabling environment for private sector investment. In the energy sector, the Bank strategy was to support the updating of the national power development master plan; facilitate improvement of sector governance and increase competition for private participation in power supply; as well as continue assistance to rural electrification.
b. Relevance of Design:Rated high.
The project design, which brought together the transmission line extension and reinforcement component, a rural electrification component, the piloting of a REF to deliver electricity access to remote and off-grid areas, accompanied by technical assistance and capacity building for key entities in the sector, was clear and internally consistent. These components are logically expected to contribute to the achievement of project objectives.
In order to improve sector efficiency and reliability, the design included new high voltage lines for power import, reinforcing high voltage lines, upgrading substations, and building medium and low voltage lines. These investments are expected to also contribute to transmission and distribution efficiency by reducing system losses. The construction of the 230 kV line is a critical component of the effort to alleviate power supply shortages and ensure the security of supply over the medium term.
|4. Achievement of Objectives (Efficacy) :|
(a) Improve power sector efficiency and reliability and reduce electricity supply costs: rated substantial.
- The 230 kV line and 3 substations became operational in 2009.
- The 115 kV network was reinforced.
- 168.8 km Medium Voltage (MV) line extensions from West Phnom Penh and Takeo substation were installed.
- At appraisal, the total installed generation capacity in the country was 109 MW, or about 10% short of demand (118MW), forcing EDC to cut power supply to about three hours per day. At closing, the capacity was able to meet demand, with installed generation capacity at 620 MW, and with generation capacity owned by EDC having increased from 52 MW at appraisal to 153 MW.
- By March 2012, 117,861 household connections were achieved, exceeding the target of 112,000 households.
- Average supply capacity increased by about 19% between 2005 and 2011, exceeding the target of 13%
- Rural Electricity coverage increased from 9% (baseline) to 14.5 percent(at project closure) but was lower than the target of 22.5%.
- The project improved capacity through investments in High Voltage (HV), and Low Voltage (LV) system expansion.
Power sector efficiency was improved.
- Systems losses were reduced from from 14% at appraisal (2003) to 9.8% at closing (2012), achieving the appraisal target. The project assisted in the installation of Financial Accounting and Utility Management Information System, leading to reduction of technical and nontechnical losses.
- About 53% of Rural Electricity Enterprises retired their relatively small, inefficient diesel generators and switched to the EDC grid for their energy supply
Power sector reliability was improved.
- The Average Interruption Duration Index was nearly halved in the first part of 2012 alone, decreasing from 60 minutes per customer per day in February to 31 minutes by the end of May.
- The ICR reports (p. 13) that as EDC supply became more reliable, industrial customers with an aggregate demand of nearly 40 MW switched from generating their own electricity to using grid electricity supplied by EDC.
- The reliability of rural electricity supply also improved. The daily service hours of Rural Energy Enterprises (REEs) increased from four hours at appraisal (2003) to 12 hours by project closing (2012), substantially higher than the target of eight hours. About some 54% of REEs provided 24 hour service.
Reduction in EDC's cost of power supply was not achieved.
- The average cost of power supply was slightly reduced from US$0.150/kWh at appraisal (2003) to US$0.145/kWh (including VAT and imported tax) in 2012, but fell short of the target of US$0.11/kWh. This was due to rising international oil prices and less than expected power imports from Vietnam over the project period. The cheaper imported power that was expected to come from Vietnam did not fully materialize.
- The retail tariff charged for electricity supply to households in rural areas covered by licensed REEs declined from US$0.60/kWh to US$0.35/kWh, exceeding the US$0.425/kWh target. This reduction was made possible when REEs switched from inefficient, expensive self-generation to EDC’s grid supply.
(b) Improve standards of living and foster economic growth in rural areas by expanding rural electricity supplies: rated substantial.
- The project expanded rural electricity coverage to 565,733 people (117,861 households), nearly meeting the target of 567,000 people through the expansion of distribution networks.
- The retail tariff charged for electricity supply to households in rural areas covered by licensed Rural Electricity Enterprises declined from US$0.60/kWh at the start of the project to US$0.35/kWh at project closing, far exceeding the target of US$0.425/kWh target.
- The ICR reports (p. 14) that the expansion of electricity in rural areas as well as lower tariffs was expected to provide income-generating opportunities. The project provided training on various types of income-generating activities such as sewing clothes for the garment industry, dress-making, tailoring, hair-dressing, and agricultural processing. Although the impact of electricity access on income generation was not carried out, anecdotal evidence from Bank supervision suggested that about 15% of newly electrified households started up businesses and their self reported increase in income ranged between Riel 300,000 (US$75) to Riel 1,000,000 (US$250) per month, depending on the type of business. Also, the households reported use of refrigerators, fans, water pumps, radios and televisions for the first time.
(c) Strengthen electricity institutions, the regulatory framework and the “enabling environment” for sector commercialization and privatization: rated substantial.
- Power Sector Master plan was developed by the Ministry of Industry, Mines and Energy.
- The project provided Technical Assistance to support development of Regulations and Codes for the Electricity Authority of Cambodia (EAC) and facilitated the licensing and operation of private Rural Energy Enterprises in the electricity business.
- By project closing, all 11 required Regulations and Codes were issued and are being used by EAC. According to the Project team, the Distribution Codes were finalized in December 2012. This enabled EAC to issue licenses to 297 Independent Power Producers and Rural Energy Enterprises (REEs), far exceeding the original target of 180. The licensing of the REEs, contributed to the extension of grid supplied electricity services to 50,000 new households.
- The project developed of four private renewable energy companies instead of five as planned due to the reluctance of local commercial banks to finance renewable energy and/or rural electrification businesses.
Global Environmental Objective (GEO) "to overcome barriers to renewable energy development in Cambodia, including those related to lack of a policy framework, financing, information and institutional capacity: rated substantial.
- The project contributed to the Renewable Energy Policy that created a level playing field for renewable energy private sector investors based on renewable energy assessments and least cost planning. The project provided a channel for continued policy dialogue with the government. For example, as a result of the dialogue carried out through the project, the government recognized that the relatively high cost of imported Solar Home Systems was one of barriers in renewable energy development. To remove this barrier, on August 21, 2009, the Government issued a circular to exempt renewable energy technologies and equipment from import taxes.
- The project also financed capacity building of financial institutions and Rural Energy Enterprises (REE) and contributed to improving their understanding of renewable energy technologies, the business, and enhanced their skills to appraise and supervise renewable energy projects. About 122 trainees participated in renewable energy business development, 229 participated in capacity building for financial institutions, and 60 REE representatives participated in renewable energy promotion training sessions.
- The planned installation of micro hydropower capacity of 1,200 kW which was approved during the 2010 restructuring was not carried out as the feasibility study of the five selected sites concluded they were not economically or financially viable.
- The implementation of the Solar Home System (SHS) component faced challenges and was not fully completed due to delays in procurement (see section 2c above). By December 2011, about 9,875 SHS were installed compared to the target of 12,000.
- The GEO target of increasing the local commercial lending and other financing for rural electrification and renewable energy development was not achieved because the financing environment was not conducive to lending to REEs, and the unwillingness of local commercial banks to lend for rural electrification and renewable energy.
Grid extension under Electricite du Cambodge (EDC).
The ex-post Economic Rate of Return (ERR) was 28.9% compared with 19.8% at appraisal. The ICR notes that the higher ex-post ERR is mainly due to the higher consumer willingness-to-pay based on the actual weighted average tariff off-grid households paid in the project area in 2008. At appraisal, the willingness-to-pay estimate was based on the average cost of off-grid supply in 2003 when fuel prices were substantially lower (p. 17). The ex-post Net Present Value (NPV ) was US$ 64.9 million compared with US$7.9 million at appraisal.
Grant-assisted household connections under Rural Energy Enterprises (REEs).
The ex-post ERR was 17.5% compared with 22.3% at appraisal. The ex-post Net Present Value (NPV ) was US$8.9 million compared with US$ 9.6 million at appraisal. The ICR reported that the lower ERR and NPV were primarily due to higher costs of supply from diesel based generation (p. 17). However, this contradicts with the fact that the cost of supply was decreased from US$0.35/kWh at appraisal to US$0.15-0.28/kWh at completion.
Installation of Solar Home Systems (SHS).
No economic or financial analysis was conducted for the Solar Home System (SHS) program at appraisal. At completion the ERR for 30W SHS without interest free financing and all capital costs paid up front was 35.4% and with interest free financing was 59%. The EIRR for 50W SHS without interest free financing and all capital costs paid up front was 36.6% and with interest free financing was 71.8%.
The above shows positive aspects of the project in terms of efficiency. However, the economic and financial analysis for transmission components, which at appraisal accounted for more than half of the total project cost, was not conducted, although analysis for 220kV transmission line was conducted at appraisal. The ICR states that this will be carried out by the Asian Development Bank. As the ICR did not contain project cost of each component, the relative weight of each project component in efficiency at project closure is unclear. The project was delayed by 2.5 years.
Overall, efficiency is rated modest (lack of information in the ICR partly contributed to the modest rating for efficiency).
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated