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Implementation Completion Report (ICR) Review - Rural Electrification And Transmission Project


  
1. Project Data:   
ICR Review Date Posted:
01/27/2014   
Country:
Cambodia
PROJ ID:
P064844
Appraisal
Actual
Project Name:
Rural Electrification And Transmission Project
Project Costs(US $M)
 150.1  131.6
L/C Number:
C3840
Loan/Credit (US $M)
 40  40.5
Sector Board:
Energy and Mining
Cofinancing (US $M)
 55.3  51.8
Cofinanciers:
ADB
Board Approval Date
  12/16/2003
 
 
Closing Date
06/30/2009 01/31/2012
Sector(s):
Power (78%), Central government administration (14%), Renewable energy (8%)
Theme(s):
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)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Kavita Mathur
Fernando Manibog Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:

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?
No

c. Components:

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.

Revised Components:

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.
Outputs
  • 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.

Outcomes

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.

5. Efficiency:

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:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
No
%
%
ICR estimate:
No
%
%

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

6. Outcome:

The relevance of project objectives and design is rated high. Project efficacy is rated substantial. The project improved the power sector efficiency and reliability and expanded electricity coverage in rural areas which is expected to improve standards of living and foster economic growth. However, the reduction in EDC's cost of power supply was not achieved. Project efficiency is rated modest. Overall, outcome is rated moderately satisfactory.

a. Outcome Rating: Moderately Satisfactory

7. Rationale for Risk to Development Outcome Rating:

  • The growth rate of the electricity demand was much higher than initially expected. At appraisal, the annual electricity growth rate was estimated at about 13% after 2003. However, it turned out to be 25% in 2007 and an additional 23% in 2010. Therefore, higher than expected demand growth could put reliability of the power supply at risk, potentially reversing efficiency improvements.. In order to maintain power sector efficiency and reliability it will be important to accurately forecast power demand and make commensurate investments.
  • Due to the surge of domestic demand of electricity, Vietnam has not been able to supply the expected amount of energy to the EDC, while the EDC originally planned to reduce cost of electricity by import from Vietnam. The ICR stated that the quantity of electricity that will be available for import from Vietnam is not certain (page 21). Although a series of hydropower plants (about 800 MW total capacity) are expected to be completed in the short term, their impact on cost reduction is limited. The risk of electricity supply cost increase is substantial, and economic growth in rural areas is also vulnerable.
  • With respect to the transmission and grid extension components, the project used proven technology and National Control Center was sourced from an experienced and reliable manufacturer. The technical risks of the development outcome related to: (a) Improving power sector efficiency and reliability and reducing electricity supply costs and (b) Improving standards of living and fostering economic growth in rural areas by expanding rural electricity supplies, are relatively small.
  • The ICR reported that some households are using their Solar House System (SHS) improperly (page 22). Such practices could negatively affect the durability of the SHS and might deteriorate the achieved outcome of improving standards of living and fostering economic growth in rural areas.
  • In December 2011, the Rural Electrification Fund (REF) Board and the Ministry of Industry, Mines and Energy decided to merge REF and its Secretariat with the Electricite du Cambodge (EDC) to support REF operations. However, this decision would compromise REF’s governance system and may jeopardize the off-grid electrification progress, since REF has been the anchor in achieving off-grid electrification targets. The ICR reported that REF’s current autonomous status is critical in order to enable REF to complement the efforts of EDC and Rural Energy Enterprises, and mobilize resources to provide affordable off-grid electricity services to unserved households (page 21-22).
  • The “enabling environment” for private participation in the power sector would be assured only with the active participation of local commercial banks of financial institutions. Therefore, the enabling environment would be predicated on: (i) a transition strategy for supporting renewable energy lending; (ii) a predictable policy and regulatory environment; and (iii) continued Technical Assistance to REEs and commercial financial institutions. Without these elements, the sustainability of the enabling environment for renewable energy would be in peril. The GEO target of increasing the local commercial lending and other financing for rural electrification and renewable energy development was not achieved.
  • At project closing, out of 297 licensed REEs, about 155 REEs had connected to EDC grids throughout the country.Tariffs for REEs that connected to EDC’s grid declined remarkably from KH Rie 2,800-3,000/kWh (US$0.68-0.73/kWh) to KH Riel 1,100-1,700/kWh (US$0.26 – 0.41/kWh). However, the prospect of getting most REEs to connect is very slim as REEs are facing technical and financial constraints, and EDC has its own challenges. The risk to reducing cost of REEs and subsequently the average off-grid tariffs is significant.

    a. Risk to Development Outcome Rating: Significant

8. Assessment of Bank Performance:

a. Quality at entry:
The Project was built upon the Energy Sector Strategy for Cambodia and the Renewable Energy Strategy of 2001 (PAD p. 18) .The project was tailored to contribute to the implementation of this strategy and to address the sectoral challenges in Cambodia. The project design took into account lessons learned from other countries such as Sri Lanka Energy Service Delivery Project, Indonesia Solar Home Systems Project, Bangladesh Rural Electrification and Renewable Energy Development Project, and Uganda Energy for Rural Transformation Project.
The project team mobilized much needed financial resources to help the Borrower prepare the Project. The Bank processed an advance of US$ 290,840 from the Project Preparation Facility.

However, there were some weaknesses in project preparation. Some risks were not adequately assessed such as: the oil price volatility risk; risk of unavailability of financing from local commercial banks and financial institutions to REEs for investment in small renewable energy and rural electrification; and the risk of significant delays in the REF becoming operational was not foreseen. The delay of 24 months affected the realization of the component’s output targets and was one of the factors leading to the need for extension of the project’s closing date.

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:

The Bank carried out 13 supervision missions and a mid-term review. Field visits were undertaken to ensure compliance with safeguards policies, and to verify physical progress. By 2007, the team leader and most of the core team was field based which allowed for continual implementation support.

The Bank worked closely with the Asian Development Bank and helped the Implementing Agency finalize a joint Resettlement Action Plan which was disclosed in late January 2005, meeting the effectiveness condition. In the case of the Project Affected People (PAP) complaints, the Bank team took immediate action to work with EDC, providing guidance on the required procedures, and advising them to halt construction immediately, and closely worked with the EDC on oversight of the implementation remedial actions (see section 11).

The project team was proactive in fine tuning the Solar Home System model and mini/macro hydropower project.

The main weakness of the Bank supervision was that the Bank task team did not seize the opportunity of the MTR or the 2010 restructuring to address the weaknesses of the project results, framework, and revise certain indicators such as those beyond control of the project (ICR p. 24).

Quality of Supervision Rating: Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

The Government was committed to sustainable energy development and had started the reform process in 2000 with the passage of the Energy Law in 2000, establishment of the Electricity Authority of Cambodia in 2001, the finalization of the Energy Sector Strategy and the Renewable Energy Strategy of 2003, and establishment of REF in 2005. The Government also requested the Bank support for a grant from the Private Participation Infrastructure Advisory Facility (PPIAF) to support preparation of a private policy framework and guidelines to encourage private power investment in power generation and distribution in rural areas.

During implementation, the Government remained committed to the project, despite the various challenges: there was a long delay in the formation of a new government (four-and-a-half months) which delayed the fulfillment of the effectiveness conditions. The finalization of the project implementation plan was delayed. The appointment of staff to complete the set-up and staffing arrangements of the Project Management Unit was also delayed.

The poor procurement capacity of the Ministry of Industry, Mines and Energy led to delays in engaging consultants to support the preparation of select strategies and implementation plans. Therefore, the studies were completed just before project closing, missing the opportunity to implement some key recommendations.

Government Performance Rating: Moderately Satisfactory

b. Implementing Agency Performance:
Performance of the Electricity Authority of Cambodia (EAC): rated satisfactory.
The ICR reports (p 25) that the EAC management closely oversaw project implementation with support of an international advisor. With the knowledge and skills obtained as a result of the project’s institutional strengthening support, EAC licensed 297 REEs, well surpassing the target of licensing 180 REEs.

Performance of Electricite du Cambodge (EDC): rated moderately satisfactory.

The ICR reports (p 25) that the EDC’s performance in implementing the project investments was satisfactory as all the relevant intermediate indicators were achieved. To carry out outreach for its network extensions and new connections, EDC carried out door-to-door consultations, setting up an on-site mobile office to take applications from households, and helped people sign up for connections on the spot.

The procurement delays in the installation of the National Control Center was one of the key contributor to the need for an extension of the closing date. EDC showed weakness in social safeguard management when it allowed contractors to start construction prior to full compensation which resulted in PAP complaints in 2008.

Performance of Rural Electrification Fund (REF): rated moderately satisfactory.

The newly established REF became fully operational in April 2007. REF carried out: (i) the review and appraisal of 135 applications submitted by REEs for off-grid sub-grants for connection to 50,000 new households; (ii) consultations with SHS households, (iii) installation of SHS; (iv) inspection and certification; and (v) collection of payments from SHS beneficiaries.

However, there were two instances of suspected fraud during implementation (see section 11 below). Resolution of these concerns caused delays in processing the restructuring. The ICR reports (p. 25) that with guidance from the Bank team, REF took satisfactory corrective actions outlined in a time-bound mitigation action plan to improve internal controls on financial management.

Overall, the implementing agency performance is rated moderately satisfactory.

Implementing Agency Performance Rating: Moderately Satisfactory

Overall Borrower Performance Rating: Moderately Satisfactory

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

a. M&E Design:
The performance indicators included in the results framework adequately captured the achievement of the project's development objectives. These included:

  • Transmission and distribution losses;
  • Reduction of EDC's electricity supply cost;
  • Reduction in average off-grid tariffs; and
  • Average number of hours per day electricity is supplied.

A key shortcoming of the M&E framework was that some outcome indicators were not fully within the control of the project. For example, the indicator on the reduction of EDC's electricity supply cost, was not fully under control of the project. During project preparation, the lower cost power anticipated to be supplied by Vietnam was expected to be the main driver of cost reduction. However, when the imports from Vietnam did not materialize at the volumes envisaged , there was higher reliance on fossil fuel-fired power plants. The project had no control over how much energy Vietnam was able to deliver through the interconnection, amid its own rapidly growing demand, nor did it have control over international oil prices.

b. M&E Implementation:
During implementation, data relating to the indicators was collected regularly. EDC published its annual reports regularly. Also, the Electricity Authority of Cambodia collected data beyond project indicators and published them for public access annually.

a. M&E Utilization:
The M&E was used to make changes in the delivery modality of Solar Home System.

M&E Quality Rating: Substantial

11. Other Issues:

a. Safeguards:
OP 4.01 - Environmental Assessment. The project was appropriately assigned “Category B”, as potential impacts were expected to be moderate. An Environmental Management Plan (EMP) containing mitigation measures were prepared for the construction and operations of the 230 kV (HV) transmission lines, substations, reinforcement of 115 kV transmission lines, and grid extension. Under the Rural Electrification Fund (REF) pilot program, the EMP provided measures for off-grid connections, construction of mini and micro hydropower plants, and Solar Home System installation.
Monitoring and recording quality of EMP implementation were relatively poor at the beginning, but it gradually improved with assistance from the supervision consultants and the Bank team. During implementation some tree-cutting and pruning occurred and the ICR reports (p. 10) that EDC provided compensation to the private tree owners.

OP 4.12 - Involuntary Resettlement. At appraisal, involuntary resettlement/land acquisition was expected to be minimal as the lines were pole mounted.

The ICR notes (p. 10) that during implementation there was land acquisition of 64,217 m2 for substation construction at West Phnom Penh and land owners were compensated in a timely manner according to the RAP. However, one complaint was registered in November 2008 when construction of the 115 kV line began. The case was satisfactorily resolved in December 2008.

Also, in 2010 in response to the need to acquire land for construction of hydropower plants and transmission lines supported by other sources, EDC increased its Social and Environmental Unit (SEU) staff from three to eight. Since then, all land acquisition and compensation works were been carried out by SEU in cooperation with local authorities and with the involvement of Project Affected People.

An external monitoring consultant was engaged to assess the implementation of safeguard and concluded that “RAP implementation was going well."

b. Fiduciary Compliance:
Financial Management: The ICR reports (p. 11) that two instances of invoice forgery were identified in June 2009. The Financial Management rating was downgraded to unsatisfactory. Following actions were taken to correct the situation: (i) appointment of a new finance manager to replace the old one who was asked to resign; (ii) appointment of a senior accountant; (iii) appointment of an internal auditor; and (iv) reconstruction of the books of accounts and reconciliation of each source of funds (IDA, GEF, and counterpart funds); (v) refunding of the ineligible and un-reconciled amounts found; and (vi) completion of the external audit of the project’s reconstructed books of accounts for the fiscal years 2007 and 2008. Clean audits were received after 2009.
Procurement: A procurement plan was prepared as part of the Project Implementation Plan including procurement packaging, procurement methods, contract types, schedules, etc. More than 95% of the procurement of goods was to be carried out through ICB procedures and subject to IDA prior review.

EDC experienced delays in contracting the National Control Center component. due to complaints lodged by a bidder. The case was resolved and the component was completed in January 31, 2012, about 44 months behind schedule.

c. Unintended Impacts (positive or negative):
None reported in the ICR.

d. Other:
None.



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Moderately Satisfactory
Moderately Satisfactory
 
Risk to Development Outcome:
Significant
Significant
 
Bank Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Borrower Performance:
Moderately Satisfactory
Moderately Satisfactory
 
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:

Adapted from the ICR:
  • To bring private sector investments in renewable energy in rural areas, the basic policy and regulatory enabling environment needs to be complemented with carefully designed and well targeted financing support, technical assistance and capacity building.
  • In designing solar home system programs for rural areas, the choice of appropriate system sizes based on robust up-front analysis, suitable delivery approaches, and post-installation operation and maintenance arrangements is likely to have a positive effect on the cost effectiveness and sustainability of solar home system programs.
  • Support for developing, scaling up and sustaining productive use of electricity is highly likely to make a significant impact on the feasibility and viability of rural electrification investments.

14. Assessment Recommended?

No

15. Comments on Quality of ICR:

The ICR is a bit long, however, it is clearly written, analytical, and assesses the project’s performance in an objective manner. The ICR discussion pays adequate attention to the project outcomes, alongside the discussion of outputs and intermediate outcomes. The lessons are drawn from the project's experience. There is discrepancy in IDA financing amounts in Annex table (a) and (b) (p. 29-30) and total cost figures are not available.

a. Quality of ICR Rating: Satisfactory

(ICRR-Rev6INV-Jun-2011)
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