PCR: Viet Nam: Northern Power Transmission Sector Project · Northern Power Transmission Sector Project Socialist Republic of Viet Nam Electricity of Viet Nam a $ 120,000,000. PCR:

Completion Report

Project Number: 32273 Loan Number: 2128 October 2012

Viet Nam: Northern Power Transmission Sector

Project

CURRENCY EQUIVALENTS

Currency Unit – dong (D)

At Appraisal At Project Completion

1 November 2004 10 May 2012

D1.00 $1.00

= =

$0.0000635 D15,750

$0.0000484 D20,660

€1.00 = $1.2742 $1.2969 $1.00 = €0.784775 €0.777106

ABBREVIATIONS

ADB – Asian Development Bank

AFD – Agence Française de Développement

BER – bid evaluation report

CPRGS – comprehensive poverty reduction & growth strategy

CSPU – country strategy and program update

EIRR – economic internal rate of return

EVN – Electricity of Viet Nam (renamed Vietnam Electricity in 2006)

GDP – gross domestic product

ICB – international competitive bidding

IDC – interest during construction

IEE – initial environmental examination

IMO – independent monitoring organization

NLDC – National Load Dispatch Center

NPPMB – Northern Power Project Management Board

NPTC – National Power Transmission Corporation

OCR – ordinary capital resources

PSMDP – Power Sector Master Development Plan

RRP – report and recommendation of the President

RTU – remote terminal unit

SCADA – supervisory control and data acquisition

TA – technical assistance

WEIGHTS AND MEASURES

km – kilometer

kV – kilovolt (1,000 volts)

kW – kilowatt (1,000 watts)

kWh – kilowatt-hour (1,000 watt-hours)

GWh – gigawatt-hour (1,000,000 kWh)

TWh – terawatt-hour (1,000,000,000) kWh

MVA – megavolt-amperes (1,000 kilovolt-amperes)

MW – megawatt (1,000,000 watts)

NOTES

(i) The fiscal year (FY) of the Government of Viet Nam and its Agencies ends on 31 December.

(ii) In this report, "$" refers to US dollars, unless otherwise stated.

Vice-President S. Groff, Operations Group 2 Director General K. Senga, Southeast Asia Department (SERD)

Country Director T. Kimura, Viet Nam Resident Mission (VRM), SERD

Team leader A.M.Tuan, Senior Project Officer (Energy), VRM, SERD

Team member L.T.Huong, Associate Project Analyst, VRM, SERD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA ii

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1

B. Project Outputs 3

C. Project Costs 4

D. Disbursements 4

E. Project Schedule 4

F. Implementation Arrangements 5

G. Conditions and Covenants 6

H. Consultant Recruitment and Procurement 8

I. Performance of Consultants, Contractors, and Suppliers 8

J. Performance of the Borrower and the Executing Agency 9

K. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10

B. Effectiveness in Achieving Outcome 11

C. Efficiency in Achieving Outcome and Outputs 12

D. Preliminary Assessment of Sustainability 12

E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13

B. Lessons 14

C. Recommendations 14

APPENDIXES

1. Project Framework 16

2. Status of Compliance with Loan Covenants 18

3. Project Costs and Project Financing 28

4. Contracts and Contract Payments 30

5. Disbursement Schedules 32

6. Financial Evaluation 33

7. Economic Evaluation 38

8. Project Outputs 41

9. Project Implementation Schedule 43

10. Land Acquisition and Resettlement 44

11. Quantitative Assessment of Overall Project Performance 48

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Socialist Republic of Viet Nam 2128-VIE Northern Power Transmission Sector Project Socialist Republic of Viet Nam Electricity of Viet Nam

a

$ 120,000,000. PCR: VIE 1345

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Commitment fee 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

26 July 2004 6 August 2004 9 November 2004 9 November 2004 13 December 2004 25 August 2005 23 November 2005 16 December 2005 1 31 December 2009 10 May 2012 1 LIBOR (6 months) + 0.60% per annum 25 5 0.75% per annum LIBOR (6 months) + 0.80% per annum 25 5 Electricity of Viet Nam

a The name Electricity of Viet Nam was changed in 2006 to Vietnam Electricity

iii

9. Disbursements a. Dates Initial Disbursement

1 June 2006

Final Disbursement

19 April 2012

Time Interval

71 months

Effective Date

16 December 2005

Closing Date

10 May 2012

Time Interval

77 months

b. Amounts ($ million)

Category Original

Allocation Latest

Allocation Amount

Canceled Amount

Disbursed

Remaining

Balance (1) (2) (3) (4) (5=3-4) 6 (7=4-6) 1A Transmission Equipment 71.80 87.90 (16.10) 87.90 0.00

1B Load Dispatch Component

18.10 8.90 9.20 8.90 0.00

2A Resettlement Foreign Consultant Services

0.20 0.07 0.13 0.07 0.00

2B Resettlement Local Consultant Services

0.30 0.19 0.11 0.19 0.00

2C SCADA 0.20 0.02 0.18 0.02 0.00 3 IDC 14.40 8.60 5.85 8.60 0.00 4 Unallocated 15.00 0.00 15.00 0.00 0.00

Total 120.00 105.68 14.32 105.68 0.00

SCADA = supervisory control and data acquisition, IDC = interest during construction

10. Local Costs (Financed) - Amount ($) $187,000 - Percent of Local Costs 0.2% - Percent of Total Cost 0.1% C. Project Data

1. Project Cost ($million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 174.6 161.4 Local Currency Cost 99.0 84.5 Total 273.6 245.9

2. Cost Breakdown by Project Component ($million)

Component Cost Estimate Actual Cost

Foreign Local Total Foreign Local Total

Transmission 133.8 81.8 215.6 140.0 79.6 219.6

NLDC Upgrade 21.3 6.4 27.7 8.9 0.8 9.7

Financing Charges 19.5 10.8 30.3 12.5 4.1 16.6

Total Project Cost 174.6 99.0 273.6 161.4 84.5 245.9 NLDC = National Load Dispatch Center

iv

3. Financing Plan ($million)

Cost Appraisal Estimate Actual

A. Implementation Costs 1. ADB Financed 105.6 97.1 2. AFD Financed 50.0 52.0

3. Borrower Financed 87.7 80.2

Subtotal (A) 243.3 229.3

B. IDC Costs 1. ADB Financed 14.4 8.6 2. AFD Financed 0.0 0.0 3. Borrower Financed 15.9 8.0

Subtotal (B) 30.3 16.6

Total 273.6 245.9

AFD = Agence Française de Développement, ADB = Asian Development Bank, IDC = interest during construction. Note: increases in the value of the euro accounts for the increase in dollar equivalents funded by AFD.

4. Project Schedule

Item Appraisal Estimate

Actual

Date of Contracts with Consultants

International Resettlement Consultant Q3-Q4/2004 Nov-05

Local Resettlement - Monitoring & Supervision Q3-Q4/2004 Q4 2006

Completion of Engineering Designs

Part A Dec-05 Dec-05

Part B Phase 1 Dec-05 Nov-07

Part B Phase 2 Dec-05 Aug-09

Completion of Pre-Appraised Sub Projects

Thuong Tin - Quang Ninh T. Line & SSs 500 kV Jun-08 Dec-09

Trang Bach Substation 220 kV Jun-08 Oct-09

Nghi Son Substation 220 kV Jun-08 Oct-09

Dong Hoa Substation 220 kV Jun-08 Nov-09

Thai Binh Substation 220 kV Jun-08 May-09

Van Tri Substation 220 kV Jun-08 May-11

Completion of Additional Subprojects

Tuyen Quang - Yen Bai 220 kV T. Line Jun-09 Dec-07

Ban La - Vinh 220 kV T. Line Jun-09 Feb-10

Son La 220kV Substation and Connection Jun-09 May-11

Phu Ly 220 kV Substation and Connection Jun-09 Aug-09

Hai Duong 220 KV Substation Jun-09 Mar-11

Lao Cai 220 kV Substation Jun-09 Apr-11

Hai Phong - Dinh Vu 220kV T. Line and Jun-09 Aug-09

Hai Phong - Vat Cach T. Line

Van Tri- Soc Son 220 kV T. Line Jun-09 Dec-121

Do Luong 220kV Substation Jun-09 Dec-11

Completion of NLDC Upgrade

Phase 1 (as revised) Jun-09 Nov-11

Phase 2 (as revised) Jun-09 Dec-12 kV = kilovolt , NLDC = National Load Dispatch Center Q = quarter, SS = substation , T. = transmission line

1 Expected to be completed in December 2012

v

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 13 December 2004 to 31 December 2004 Satisfactory Satisfactory From 1 January 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 December 2011 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No of

Person-days Specializations of

Members

Identification 23-28 February 2004 2 10 a, b

Fact Finding 4-7 May 2004 4 12 a, c, b, d

Appraisal 26 July to 06 Aug 2004 9 99 e, a, c, b, f, g, h, i, j

Inception Mission 5-9 September, 2005 4 16 a, b, k, j

Review Mission 15-25 May 2006 4 40 a, k, m, g

Review Mission 2-11 October 2006 4 36 b, k, m, g

Review Mission 25-30 March, 2007 4 20 m, k, g, n

Review Mission 7-11 August, 2007 2 8 b, m

Midterm Review 29 Oct.10-7 Nov, 2007 8 72 m, b, o, k, p, 2g, n

Loan Review 15-18 September, 2008 3 9 o, p, j

Loan Review 9-13 February, 2009 7 28 b, o, g, l, p, k, g

Loan Review 5-14 October, 2009 4 36 b, g, q, p

Loan Review 18-29 January, 2010 5 55 b, l, p. g, n

Loan Review 13-24 September, 2010 9 99 b, r, n, q, p, g, n, k, j

Loan Review 21-29 September, 2011 4 32 p, g, n, k

Project Completion Mission

10 Aug -17 Sep,2012 2 10 I, k

Total 386

Code: a – Project Specialist; b- Energy Specialist; c- Poverty Specialist; d- Economist; e- Director Mekong Infrastructure Division ; f- counsel; g- Resettlement Specialist/Staff Consultant; h- Environment Specialist; i- Project Implementation Specialist; j – Assistant; k- Project Analyst; l- Financial Specialist; m- Energy Economist; n- Environment Specialist/Staff Consultant, o- Infrastructure Specialist; p- Program Officer, q- Social Specialist, r- Procurement Specialist

I. PROJECT DESCRIPTION

1. In 2001 power demand in the northern region of Viet Nam was growing at over 16% per annum and was expected to continue growing at this rate for the next 10 years. In order to help meet this load growth, The Government of Viet Nam decided to construct a 500-kilovolt (kV) ring main transmission system around the major load centers in the north covering Hanoi, Haiphong, and Quang Ninh. The sector project was part of this northern region investment program and part of the government’s national power sector development program. The project had two components: (i) part A was the expansion and upgrading of 500 kV and 220 kV transmission systems and substations; and (ii) part B was an upgrading and expansion of the national power system’s supervisory control and data acquisition (SCADA) system, plus communication facilities at the three regional and national load dispatch centers. The project objectives of strengthening the northern region’s power system have been met. The project has helped Electricity of Viet Nam (EVN) maintain adequate and reliable transmission of electricity, including from new power plants that have come into operation since 2005. Through its loan covenants the project confirmed the importance of ongoing power sector reforms. These covenants addressed programmed interventions that have met the immediate objectives of plans that are designed to increase the commercial orientation of the electricity supply industry. 2. Part A of the project was made up of subprojects that were included in the government’s Fifth Power Sector Master Development Plan1 (PSMDP V) for the years 2001 to 2010. The Asian Development Bank (ADB) adopted a sector loan approach as several of the identified subprojects had not been appraised prior to loan approval. The Agence Française de Développement (AFD) provided parallel cofinancing to complete the project’s requirements for import of equipment. Part B of the project was expected to involve the implementation of a SCADA system and the implementation of remote terminal units (RTUs), but was revised during the project implementation and reduced in scope. Part A was implemented by the Northern Power Project Management Board (NPPMB), a subsidiary of EVN that specializes in construction management. Part B was implemented by the National Load Dispatch Centre (NLDC), which controls the operation of the national power supply system.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation 3. ADB’s Viet Nam country strategy and program update (2002–2004) focuses on pro-poor growth.2 ADB’s strategy was to assist the government create favorable opportunities for the poor to improve their living standards by combining investments that sustain high economic growth rates with targeted measures that benefit the poor. Between 1993 and 2002, rapid economic growth and development of the power supply system had made possible a reduction in the proportion of the population living below the international poverty line (from 58% in 1993 to less than 29% in 2002). The PSMDP V and subsequent revisions that cover 2001–2010 estimated that annual investments of $1.2 billion to $1.5 billion would be required to increase electricity supplies sufficiently to sustain the high rate of economic growth. These expectations proved realistic. From 2005 to 2010 Viet Nam’s gross domestic product (GDP) grew at an average rate of 7.3% per annum, electricity consumption increased at a compound annual growth rate of 13.5%, and the proportion of the population living below the poverty line declined from 19.5% in 2005 to 10.7% in 2011. The project assisted the government achieve these goals. The project was an integral part of a highly effective power sector investment program that enabled: (i) growth in power supply to keep pace with the 13.5% annual growth in demand; (ii) a

1 Prepared in 2001 by the Institute of Energy under the auspices of the Ministry of Industry and Trade

2 ADB 2001. Country Strategy and Program Update: Viet Nam, 2002–2004. Manila.

2

decline in losses of electrical energy within the power network (from 11.8% in 2005 to 9.2% in 2011); and (iii) EVN to supply consumers with low-cost power from newly built power plants. 4. Because of the magnitude of the power sector’s investment, the government concluded in 2004 that the power sector would be commercialized in order to attract investment capital from the private sector (for development of generation facilities), and that external capital would be used to fund investments in the national grid. The government requested its development partners to support development of the national transmission and distribution system. ADB responded by approving project preparatory technical assistance (TA) in December 2002 to help plan and prepare the project.3 ADB also provided advisory and operational TA in 2003 to help Viet Nam prepare a road map of activities for commercialization of the power sector.4 5. Part A of the project comprises subprojects drawn from the PSMDP V. The PSMDP identified overall investment requirements of $8 billion for implementation between 2005 and 2010 and determined the location and type of new generating stations to help meet the country’s projected demand for electricity. The optimal mix of new generation investment favored the development of local energy resources; mainly hydro and coal in the north and gas in the south. The power transmission system investments, including those in part A of the project, were designed to minimize the cost of connecting power plants with load centers and were generally implemented according to the original plan. 6. Part B of the project was based on NLDC’s studies. These studies were revisited by NLDC in 2006 and shortcomings in the plans for improved communication facilities at substations were identified. NLDC revised its plans for part B in 2006 and split the component into two phases. The first phase comprised developments that proceeded as originally intended. The second phase comprised developments that depend on installation of fiber optic communication links; these plans were further reviewed over the next 2 years. Once third parties began to develop economical communication services this enabled NLDC to reduce its investment and still achieve the objectives of Part B. 7. EVN was the executing agency, and together with its subsidiary project implementing agencies (NPPMB and NLDC) has had a long and successful experience in contracting and construction. Plans for reform of the power sector’s institutional and financial framework were being prepared at the time the project was conceived, and a development partners’ financial model (the EVN Independent Creditors Model) indicated that EVN was financially sound and could undertake significant investment and meet its financial obligations. EVN and its agencies were unfamiliar with ADB’s safeguard policies: under the sector loan they managed safeguard measures on subprojects that couldn’t be appraised prior to project preparation. Many of the safeguard tasks that were left to NPPMB occurred on the transmission line subprojects, which are generally more demanding than for substations. NPPMB was ill equipped to deal with them, and the use of a sector loan with relatively inadequate provisions for advisory and operational support proved inappropriate. 8. The terms of reference of the project preparatory TA provided by ADB were designed for a team of individual consultants, but were used to engage a consulting firm. Some 33% of the firm’s resources were allocated by ADB to economic and financial evaluation. The firm’s ability to reallocate time to emerging safeguard issues was limited. ADB staff reported midway through TA implementation that there was a serious deficiency in the design of the TA, as no provision had been made for providing capacity building assistance to NPPMB, despite its unfamiliarity with ADB safeguard requirements. Although some workshops were subsequently incorporated

3 ADB TA 4051-VIE: Preparing the Northern Power Transmission Project.

4 ADB TA 3763-VIE: The Roadmap for Power Sector Reform.

3

into the consultant’s work program they proved ineffective. NPPMB was not convinced that resettlement issues would be a problem and provided limited resources for preparation of resettlement plans. Resettlement issues proved difficult to resolve and contributed to the delays in project implementation. The consulting firm struggled to complete the economic and financial tasks, which had been largely been resolved outside of the TA by the PSMDP V and the EVN Creditors Financial Model respectively, and this unfortunately drew attention away from the shortcomings of the TA. B. Project Outputs 9. The project outputs envisaged at appraisal were (i) in part A, creation, expansion, and upgrading of the 500 kV and 220 kV transmission systems and substations; and (ii) in part B, expansion and upgrading of the national SCADA system through the provision of (a) RTUs at substations and power plants, (b) software and hardware upgrades at national and regional load dispatch centers, and (c) communication facilities to link the three regional load dispatch centers (north, central, and south) to the national load dispatch center in Hanoi. 10. Twenty-three potential subprojects were identified at appraisal for part A, 11 of which were appraised. Up to 12 of the remaining subprojects were expected to be appraised after loan approval. During implementation, EVN withdrew five subprojects from part A due to possible over commitment of ADB and AFD funds resulting from significant increases in equipment costs. The five excluded subprojects were funded by EVN and by other financiers and energized in 2006–2010. One subproject—upgrading of Do Luong 220 kV substation—was added and appraised during the latter stages of implementation. The addition of the Do Luong subproject used some funds released when the SCADA system in part B was deleted (para. 10). At project completion, 19 subprojects were funded under part A. One part A subproject remains to be completed (scheduled for December 2012).5 Twelve transformers, with a combined capacity of 2,075 megavolt-amperes (MVA) plus some 504 kilometers (km) of double-circuit 500 kV and 220 kV transmission lines, will have been added to the national grid. The subprojects identified during appraisal contributed 1,825 MVA and 151 km of transmission lines to the overall capacity increase. The expected and actual outputs are presented in Appendix 8. 11. Part B originally provided for the installation of 226 RTUs, plus some 385 km of fiber optic cable and telecommunications equipment that would link substations to control centers. However, the plans did not take into account conditions at substations, and were revised in 2006 and split into two phases. Phase one, targeted for completion in April 2008, became the installation of 121 RTUs and communication equipment in substations throughout Viet Nam with existing access to telecommunication services. Phase 2 provided for an additional 69 RTUs with fiber optic communication links to be installed at substations. Phase one was completed in November 2011 and phase two in May 2012, about 3 years behind the schedules presented in the revised feasibility study. Despite the delays the planned part B outputs have been achieved. The new facilities are providing timely and accurate information that is helping NLDC to improve management and control of power flows on the national grid. The potential to take advantage of the rise in availability of communication services provided by third parties was a new development that has benefited NLDC, but was a principal cause of the reduction in use of the ADB loan. 12. Power sector restructuring and reform. ADB’s power sector covenants under Loan 2128 were designed around the government’s plans to implement the Electricity Law, 2005. The new law came into effect as planned in 2005 and has created a legal framework for the eventual development of a competitive power market, including the establishment of a regulatory agency

5 The Van Tri–Soc Son 220 kV transmission line is over 80% complete and is due to be energized in December 2012.

4

under the Ministry of Industry and Trade. Immediate sector restructuring goals, which were targeted under the loan covenants, have been met and include the corporatization and/or equitization of EVN’s generation units by 2009, the creation in July 2008 of the National Power Transmission Corporation (NPT), and the implementation of a single-buyer power market. C. Project Costs 13. The project accounts prepared by EVN’s auditors compiled statements from the disbursement records of ADB and AFD, but do not account for local costs or for the value of project assets in EVN and its subsidiaries’ books of account. A detailed breakdown is presented in Appendix 3. 14. The total project cost of $246 million falls short of the original estimate of $274 million, with 92% utilization of foreign cost expenditures, and 85% utilization of the local cost budget. The $13 million reduction in foreign cost expenditure is due to the lack of time to appraise, endorse, and implement new subprojects once staff realized that surplus funds would be available.6 Most of the surplus funds resulted from a reduction in the scope of part B in early 2010 (para. 10), and from a $6 million overestimation in the appraisal budget for interest during construction (IDC). The $15 million drop in local costs resulted from (i) a reduction in the number of subprojects, (ii) foreign currency gains of $3.5 million arising from progressive devaluation of the dong during project implementation, and (iii) a $6.7 million overestimation of local cost IDC. D. Disbursements 15. The disbursement schedule in the report and recommendation of the President anticipated that the bulk of disbursements would be between January 2007 and June 2008.7 The final disbursements were expected to be in June 2009, with loan closing in January 2010. Disbursements actually commenced earlier than anticipated (in August 2006) and continued until April 2012, just before loan closure in May 2012 (refer to Appendix 5 for the disbursement schedule). As most funds were disbursed to equipment suppliers no imprest accounts were required. The original project implementation schedule assumed an orderly program of procurement and disbursements, with all bid documents prepared within a 6-month period beginning in July 2005, and procurement and disbursement of funds for the different packages proceeding in parallel. In practice the procurement and disbursement processes proceeded largely according to the urgency or preparedness of each subproject. Some packages progressed without delay, while others were delayed by the need to prepare land acquisition and resettlement action plans and/or by environmental evaluations. The original disbursement schedule for part A is nevertheless realistic once adjusted for the delay in loan effectiveness. The actual disbursement schedule for part B—extending well beyond appraisal estimates—resulted from inadequate evaluation during project preparation. However, following finalization and acceptance of the revised plans at the midterm review, disbursements were completed within the time frame covered by the extended loan closing date. E. Project Schedule 16. Part A. The delay in completion of the originally identified subprojects was 1–2 years, with the exception of the Van Tri–Soc Son transmission line subproject, which was rerouted. A

6 The full shortfall was not fully clarified until 2010, which was too near to the extended loan closing date of 31

December 2011 for further sub-loans to be appraised and implemented. 7 ADB. 2004. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Socialist Republic of Viet Nam for the Northern Power Transmission Sector Project. Manila.

5

full year was lost by delays in loan effectiveness and consultant recruitment. The additional delays were caused by a variety of shortcomings in administration and safeguard processing, including:

(i) the time between opening of bids by NPPMB to submission of bid evaluation reports (BERs) to ADB averaged 4 to 5 months; the formation of the NPT in July 2008 added another layer of approvals and extended the time taken to make submissions;

(ii) relatively small contract packages discouraged bidders and added to NPPMB’s administrative burdens (e.g., 343 contracts had to be reviewed in 2006); this was later addressed through consolidation of bid packages;

(iii) insufficient detail was provided in many of the BERs submitted to ADB, necessitating requests for clarifications;

(iv) resettlement plans and initial environmental evaluations often did not meet ADB standards and had to be returned and revised;

(v) data collection for preparation of resettlement plans was time consuming; and (vi) local authorities were uncooperative when asked to process applications to

endorse right-of-way and land acquisition for transmission line routes. 17. Many of the delays in Part A were due to the inexperience of NPPMB, which had to resolve contentious resettlement issues over which it had limited direct control. While the problems were predicted during project appraisal, NPPMB was reluctant to fund consultants and the provisions included in the project proved inadequate. In part B, the original plan for development of load dispatch facilities was not evaluated under the project preparatory TA, and was deficient. A revised feasibility study for this component was prepared in October 2006 that split the component into two phases. The first phase proceeded as expected, but the second phase was reduced in scope when the option to use service providers’ telecommunication facilities materialized. This delay resulted in a longer extension of the loan closing date than needed to complete part A. In the case of part B, both NLDC and EVN should have (i) acknowledged that the component was initially not properly prepared, and (ii) required an independent feasibility study prior to confirming funding. F. Implementation Arrangements 18. Viet Nam is the borrower of record and EVN is the sub-borrower. EVN was the project executing agency, and NNPMB the implementing agency for part A, with NLDC the implementing agency for part B. NPT was formed in 2008 as a subsidiary of EVN, and took over the country’s high voltage transmission facility assets and operational responsibilities. Although NPT had no formal role in project implementation it was authorized by EVN as the owner of the assets to endorse procurement and disbursement documents prepared by NPPMB. This added another layer to project administration and extended the time taken for approvals. The NPPMB and the NLDC had no prior experience of ADB safeguard requirements, and division of equipment purchases into many small packages exacerbated their administrative difficulties. Implementation arrangements did prove effective after the NNPMB in particular became accustomed to ADB standards and safeguard requirements. After these issues were resolved and subprojects cleared for implementation, the agencies were able to draw upon EVN’s extensive construction management experience and successfully conclude the subprojects. As noted above, EVN passed on procurement decisions for part A to NPT for approval. However, NPT’s approval procedures were more complicated than those of EVN, which increased the time taken to complete procurement and finalize disbursement during the latter stages of the project. The transfer of responsibility for loan administration to the Viet Nam Resident Mission enabled a closer relationship between ADB and EVN, and led to improved communications and understanding.

6

G. Conditions and Covenants 19. Loan effectiveness was delayed by the execution of the subsidiary loan agreement by the borrower. The loan extension provided the government with sufficient additional time to ensure that the loan documents were valid and could be signed by properly designated government officials. The loan and project agreement covenants are in Appendix 2. One social covenant and five financial covenants were breached. 20. Social covenants. On some transmission line subprojects construction activities were broken down into sections, as were the corresponding processes for completing resettlement plans. This approach divided the task of completing safeguards into administratively manageable sections on transmission line routes that passed through the territories of different local administrations. However, division of subprojects and resettlement plans into sections meant that resettlement plans for a given subproject were not always finalized (as covenanted) before subproject construction had started on sections where section-based resettlement plans had been finalized. This measure achieved the objectives of the social covenants, but was not in accordance with the text of the loan agreement. The use of section-based resettlement plans did not adversely affect the safeguards of any subproject, and was a pragmatic and reasonable administrative measure.

21. Financial covenants. EVN’s financial performance deteriorated during 2005–2011. The decline in EVN’s financial performance and financial status is shown by its failure to meet the financial performance ratio covenants, and is explained in Appendix 6. By 2010 EVN was in breach of all the financial performance ratio covenants. Table 1 lists EVN’s performance for each of the covenanted financial performance ratios.

Table 1: Performance of Electricity of Viet Nam in Meeting Financial Performance Ratio Covenants

Item Self-Financing Debt

Service Debt to Equity

Covenant limit

>25% >1.5 < 70:30

2005 47.1% 2.8 51:49

2006 34.4% 1.9 54:46

2007 44.1% 1.4 a 51:49

2008 15.5%a 1.2

a 63:37

2009 23.6% a 1.2

a 67:33

2010 (11.7%) a 0.7

a 74:26

a

2011 (24.5%) a 0.7

a 81:19

a

( ) = negative Note: Vietnam Electricity was named Electricity of Viet Nam prior to 1996. a

Performance breached covenant Source: EVN’s consolidated audited financial statements.

22. EVN was required to account for all project expenditures and provide annual audited project financial statements. The project financial statements prepared by EVN’s external auditors were compiled from the records of disbursement by ADB and AFD, but did not account for local contributions and/or the carrying values of assets in the borrower’s accounts. The auditor’s reports are an insufficient assurance that the equipment financed by both ADB and AFD has been used as intended. A recommendation for ADB to revise the instructions provided to borrowers and auditors is included in para. 64.

7

23. There has been no change in the amortization schedule of the subsidiary loan agreement and no covenants have been modified, suspended or waived.8 Information on EVN’s consolidated operations is available in Appendix 6 and is summarized below.

Table 2: Operational Performance of Vietnam Electricity

Item 2005 2006 2007 2008 2009 2010 2011

Electricity Balance

Electricity Supply (GWh) 50,919 57,729 65,338 72,574 82,264 94,115 102,765

System Losses (%) 11.8% 11.1% 10.6% 9.2% 9.6% 10.2% 9.2%

Total Energy Sales (GWh) 44,921 51,350 58,438 65,890 74,391 84,562 93,280

Growth in Sales % 13.4% 14.3% 13.8% 12.8% 12.9% 13.7% 10.3%

Sales and Cost of Sales Average Tariff (D/kWh) 792 797 862 872 978 1,075 1,245

Average Tariff Constant (D/kWh)a 1,611 1,511 1,509 1,250 1,322 1,299 1,245

Change in Real Average Tariff (%)b (8%) (6%) 0% (17%) 6% (2%) (4%)

Cost of Fuel and Power (D/kWh)a 815 703 748 674 701 787 676

Gross Margin on Electricity (%) 49% 53% 50% 46% 47% 39% 46%

( ) = negative, GWh = Gigawatt-hour, kWh = kilowatt-hour a

In 2011 constant currency values. b

Change excluding inflation

Source: EVN data and ADB staff estimates.

24. During 2005–2011, (i) energy losses in the national power supply system declined from 11.8% to 9.2%, (ii) electricity transmitted grew from 51 terawatt-hours (TWh) to 103 TWh, and (iii) the inflation-adjusted costs of fuel and power declined as new power plants came on stream. These are remarkable achievements that few countries have matched, and are due in part to substantial investment in transmission lines and substation facilities, including the assets funded by the project. They have enabled EVN to increase the supply of electricity at a compound annual growth rate of 13.0%. However, tariff increases when adjusted for inflation failed to maintain the gross margin on sales of electricity, even although the inflation-adjusted costs of fuel and purchased power (adjusted to 2011 values) declined, from D815/kWh in 2005 to D676/ kWh in 2011. The financial impacts are summarized in the Table 3. 25. The financial performance of EVN is summarized in Table 3 and detailed in Appendix 6. Returns on capital employed that were 5% in 2005 had fallen to –2% in 2011, largely because tariffs increases did not kept pace with cost inflation, but also because interest costs, which absorbed 4% of income in 2005, now account for 8% of income. The deterioration is shown by the covenanted financial ratios, which have all been breached in 2010 and 2011. Some restoration of the sales margins on fuel and power occurred in 2011 after a “dry” hydro year in 2010 increased reliance on expensive fossil fuel generation. A time-slice financial internal rate of return shows returns of 3.4% per year from investment during 2005–2010, which is below EVN’s weighted average cost of capital of 6.9% as estimated at appraisal. The return is sensitive to the tariff and the government is aware that tariffs are not covering power supply costs. In April 2011 the Prime Minister approved a mechanism that allows for gradual increase of the tariff at 3-month intervals, with the aim of improving EVN’s financial performance, but this has not yet had a significant impact on profitability.

8 ADB and World Bank financial covenants were consistent until World Bank reduced its financial performance

covenants for 2008 and 2009 (World Bank Report No: 59965-VN, Second Transmission and Distribution Project.

8

Table 3: Financial Performance of Vietnam Electricity

Summary Financial Statements 2005 2006 2007 2008 2009 2010 2011

Income Statement (D billion)

Income 37,274 43,766 57,003 63,732 78,975 96,944 122,724

Operating Profit (Loss) 5,642 3,894 5,753 (3,890) 2,400 (8,277) (5417)

Net Profit (Loss) after Tax 2,840 1,692 2,590 (7,319) (1,433) (11,012) (15,677)

Balance Sheet( D billion)

Non-Current Assets 89,106 103,072 142,847 164,448 205,029 241,038 257,988

Working Capital 8,457 13,936 15,385 7,923 4,209 (5,477) (11,398)

Equity 47,707 53,262 76,863 64,533 69,830 61,424 47,943

Debt 49,856 63,746 81,369 107,839 139,407 174,137 198,647

Cash Flow (D billion)

Operating Cash Flow 9,421 11,401 14,335 11,302 24,108 15,312 32,207

Investing Cash Flow (20,447) (22,577) (32,820) (31,754) (47,941) (46,708) (46,614)

Financing Cash Flow (20,447) (22,577) (32,820) (31,754) (47,941) (46,708) (46,614)

Financial Covenant Targets

Self-Financing (>25%) 29% 31% 26% 6% 25% (6%) (4%)

Debt to equity (>70:30) 51:49 54:46 51:49 63:37 67:33 74:26 81:19

Debt Service (>1.5) 1.8 1.9 1.4 1.2 1.2 0.7 0.7

Other Financial Ratios

Return on Capital 5% 3% 3% (2%) 1% (2%) (2%)

Current ratio 1.5 1.7 1.6 1.2 1.1 0.9 0.9

Age of Receivables (months) 2.6 2.8 2.9 2.9 2.4 2.8 3.2 ( ) = negative Source: Vietnam Electricity and ADB staff calculations

H. Consultant Recruitment and Procurement 26. Four consulting packages totaling $273,000 were funded by the loan without any change to their original terms. One contract of $19,400 was for services to assist NLDC prepare bid documents and three were to help NPPMB in managing and monitoring resettlement activities. All consultants were recruited with quality- and cost-based selection procedures, in accordance with ADB’s Guidelines on the Use of Consultants. No noteworthy problems were experienced. 27. All equipment financed by both ADB and AFD was procured in accordance with ADB’s Procurement Guidelines (2002). A major procurement issue was related to the small size of several packages for purchase of equipment, which created an administrative burden and was not well received by suppliers. The issue was overcome by consolidating smaller packages into larger lots. The larger lots attracted responses from a greater number of bidders and improved price competition. A total of 37 procurement contracts were funded from the ADB loan, of which all but two were for supply of equipment under part A. The two remaining contracts were for design, supply, installation and commissioning of RTUs and associated communication equipment at substations throughout Viet Nam. I. Performance of Consultants, Contractors, and Suppliers 28. The consultants’ performance was partly satisfactory. The performance of the suppliers was generally satisfactory. All equipment suppliers were able to make deliveries in accordance with their approved contract schedules. The only major problem was the time lost when a set of defective relay equipment had to be replaced.

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29. The service provided by the consultant who assisted NLDC prepare bid documents was highly rated. The performance of the international and national resettlement consultants and independent monitoring organization consultants was not always timely or consistent and they struggled to deal with a larger-than-expected number of affected households, and with gathering the types of data needed to produce resettlement plans meeting ADB standards. Shortcomings in their services resulted in insufficient funding for resettlement of affected households; eventually a total of 252 households were relocated. J. Performance of the Borrower and the Executing Agency 30. The performance of borrower, the executing agency and implementing agencies was partly satisfactory. EVN as the executing agency had responsibility for project implementation and was directly responsible for approving subprojects to be funded under the loan. The implementing agencies were NPPMB for part A (transmission lines and substations) and NLDC for part B (load dispatch facilities). In July 2008 NPT commenced operations and assumed responsibility for endorsing procurement decisions made by NPPMB. 31. Significant difficulties arose with respect to the performance of both NPPMB and NPT. More extensive services by consultants were required to resolve the safeguard requirements of the subprojects than anticipated by NPPMB during project preparation, because of (i) the larger-than-anticipated number of affected households; and (ii) the stringency of ADB’s safeguard requirements, which proved more demanding than NPPMB expected. The safeguard requirements primarily concerned fixing and agreeing with local authorities on compensation for affected households. NPPMB was unable to efficiently and effectively address issues that arose with aggrieved households, and these problems were compounded by submission to ADB of sub-standard reports, which required revision and resubmission. This resulted in the start of several subprojects being delayed, and placed a heavy administrative burden on the ADB staff members dealing with NPPMB’s reports. The addition of NPT to the chain of administrative approval processes was unsatisfactory, because its procedures were cumbersome and time-consuming, and staff members were unfamiliar with ADB policies and procedures (for procurement, land acquisition and resettlement, disbursement, and reporting). 32. ADB was aware at appraisal that NPPMB had limited experience in preparing and implementing resettlement activities that meet ADB standards. Provision was made within the project for resettlement consultants to be engaged for both supervision and capacity building. However, NPPMB’s capabilities were overestimated and the services provided by the main resettlement consultant were insufficient to enable timely resolution of safeguard requirements. NPPMB has subsequently successfully implemented a number of similar projects for development agencies and improved its ability to address safeguard requirements, and the project assisted in developing NPPMB’s competence and capability. However, land acquisition and resettlement is contentious, and protracted disputes still occur throughout Viet Nam and across many sectors. The management of resettlement plans could be improved, but this involves the overall legal and policy framework, rather than a sector-specific or unique organizational issue; a specific area for improvement involves harmonization of assessment criteria and improvement in the decisions made by local authorities and peoples’ committees. 33. Although ADB accepted to add part B to the project, NLDC was directly responsible for the shortcomings in the original design, and for the subsequent delays that occurred as a result of the phase 2 developments. Ultimately the delay associated with taking advantage of the rise of third party providers of communication services (which resulted in a reduction in the required investment) enabled the original objectives to be fulfilled more cost-effectively, and was well justified.

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34. NPPMB failed to fulfill its undertakings to the project in a timely and effective manner. NLDC also failed to perform in a timely fashion, although the final result of part B has to some extent justified the time taken for plan revision. NPT, which took over primary day-to-day responsibilities from EVN for endorsing procurement decisions, also took excessive time to approve procurement decisions and to process disbursement applications. EVN has failed to meet its financial performance covenants, but this has not directly affected the project’s operational outcomes. In other respects EVN has performed satisfactorily, but as executing agency it was ultimately responsible for the unsatisfactory performance of NPT and NPPMB. The performance of EVN, NPT, NPPMB, and NLDC is rated partly satisfactory. K. Performance of the Asian Development Bank 35. The performance of ADB during implementation was partly satisfactory. The delay in part A resulted largely from the safeguard issues, which stemmed from the flawed project preparatory TA design. Some problems were deferred by the sector loan approach, but NPPMB was reluctant to provide adequate advisory and operational support during implementation. Many of the ADB staffs’ activities during implementation involved addressing the substandard plans and reports that ADB received from NPPMB. Most of the pre-appraised subprojects progressed to completion more or less within the original timeframe, which is a credit to the diligence and perseverance of loan administration staff. Other aspects of implementation, including selection of consultants, procurement and disbursements, were satisfactory. The shortcomings in part B stemmed from the lack of an evaluation of load dispatching facilities, and inadequate due diligence during project appraisal. This component was reassessed and changed over time, and satisfactory progress was made once plans were settled at the midterm loan review, when responsibility for loan administration had been transferred to ADB’s Viet Nam Resident Mission. The late reduction in scope meant that the loan was not fully utilized and required extension of the loan closing date. 36. Advisory and training services provided by ADB included (i) project implementation and administration training, with attendance by 1 NLDC and 1 NPPMB staff member of a 10-day ADB seminar in May 2005; and (ii) participation by 6 NPMB and NLDC staff in the regular 2-day procurement seminars conducted by ADB.

37. ADB’ did not contribute directly to the delays during implementation. Loan and project administration (procurement, disbursement and safeguard review) delays were largely due to shortcomings in the documents prepared by NPPMB with the support of the local consultant. ADBs loan administration performance is rated satisfactory. However, insufficient attention was paid by ADB to resolution of the long delay in implementation of Part B, and to overcoming lengthy government approval procedures that contributed to the delays caused by the implementing agencies.

III. EVALUATION OF PERFORMANCE

A. Relevance 38. The project is highly relevant. The project was part of an economically beneficial and financially sound investment program that helped the government achieve its goal of sustained high economic growth, sufficient to help reduce the number of people living below the poverty line. The project’s economic growth objective complemented targeted measures such as rural electrification programs that benefited the poor and were consistent with ADB’s strategy at the time of approval. The impacts of the project should be viewed in the context of the achievements of the national power sector development program. The following table

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summarizes program expectations presented in the RRP and compares them with actual achievements.

Table 4: Forecast and Actual Program Outputs

Item Forecast Baseline Target Actual

2005 2010 2010

Planning Assumptions

Average GDP Growth Rate 2005–2010 (%/year) 7%

7.3%

Electricity Sales 2005–2010 (CAGR) 13%

13.5%

Power Supply

Electricity Sales (GWh) 44,860 82,986 85,609

Generation Capacity (MW) 11,578 20,648 22,013

Transmission Capacity

Transmission Lines 500 kV (km) 3,314 3,714 3,890

Transmission Lines 220 kV (km) 6,472 9,111 10,015

Transformer Capacity

Substations 500/220 kV (MVA) 7,050 11,250 10,650

Substations 220/110 kV (MVA) 16,470 23,908 22,004

CAGR = compound annual growth rate, GDP = gross domestic product, GWh = Gigawatt-hour, km = kilometer, kV = kilovolt, MVA =megavolt-amperes, Source: RRP and Electricity of Viet Nam

39. The targets for increases in generation capacity and energy sales have been exceeded, as have the targets for building transmission lines; substation targets have not. The project fulfilled its contribution to the targeted MVA capacity additions at 500/220 kV substations, but delays in some subprojects contributed to the MVA shortfall at the 220/110 kV level. 40. The power sector development program’s impacts in terms of increased generation capacity, reduced generation costs, and reduced network losses are a major achievement. ADB’s participation was an integral part of this achievement and was magnified by ADB’s ability to leverage its participation with cofinancing from AFD. The justification for funding more efficient and effective facilities under part B was taken to be self-evident, but adequate due diligence should nonetheless have been performed. The problems that arose with the project resulted largely from the inexperience of NPPMB and NLDC and were successfully overcome. B. Effectiveness in Achieving Outcome 41. The effectiveness of the project components is rated less effective. The use of subprojects from the PSMDP was a highly effective and efficient way to formulate the project, and the original outcomes of increased transmission transport capacity and transformation capacity at substations were achieved (quantitative data are in Appendix 11). The cofinancing arrangements with AFD worked as envisaged and helped leverage ADB’s support. However, effectiveness at achieving project outcomes is subject to two key criticisms. First, NPPMB was ineffective in planning and implementing safeguard measures that met ADB standards. ADB was aware of NPPMB’s shortcomings during loan processing, but was unable to devise an effective approach to overcome NPPMB reluctance to acknowledge and address the issue. The resulting delays contributed to a shortfall in national transformer capacity (as of the end of 2010). Second, the advantages of the sector lending modality were not fully realized. All but one subproject was identified prior to loan approval, but the flexibility afforded by the sector loan approach was not used to fully commit the loan and complete additional subprojects. Some progress was made during the midterm review to reallocate surplus funds, and the concurrent

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change in the scope of part B helped improve the overall outcome for NLDC, but efforts to reallocate surplus funds occurred too late in the project to be effective. C. Efficiency in Achieving Outcome and Outputs 42. The project is rated efficient. The benefits of the transmission and load dispatch subprojects, including those funded under the project are interdependent and cannot be readily separated. A sector-wide reevaluation has been used to evaluate benefits that can be readily attributed to investments that would likely have been deferred or dropped if the 2005–2010 development program had been curtailed. This shows that the economic internal rate of return from the power sector investment program is over 14%, and exceeds the economic hurdle rate of 12%. Detailed studies carried out in 2009 by the Stockholm Environmental Institute used the Institute of Energy’s optimization models to comprehensively evaluate several scenarios where investment was constrained. These showed similar economic returns. The financial efficiency in the use of resources to achieve beneficial outcomes cannot be gauged by financial internal rate of return measurements, given that EVN has not been permitted to adjust tariffs sufficiently to recover inflationary cost increases. The financial efficiency of its investments is nevertheless demonstrated by key indicators, such as the reduction in system losses and the reductions in the real costs of generation and power purchases that have been made possible by new and efficient power plants. The efficiencies achieved have far outweighed shortcomings in project management and execution. D. Preliminary Assessment of Sustainability 43. The project is likely sustainable. The project facilities are integral components of essential infrastructure that will continue in operation regardless of changes in ownership or organization and operation. The investments funded under part A comprise transmission lines and substations that are static assets with no moving parts and long economic lives. The assets are owned and operated by NPT, which is expected to have a core function and a fully funded role within the planned power market. The RTUs installed under part B comprise communication and computerized systems that will have relatively short economic lives and will be replaced in due course. Transmission and substation facilities visited during the project completion mission were well maintained and the RTUs were found to be well protected in customized cabinets. 44. The sustainability of further investments at the levels achieved over the last 5 years is much less certain. In 2004 when the project was appraised EVN was a financially strong and profitable organization. This is no longer the case; EVN is unprofitable and its finances and liquidity have been stretched by borrowing and by its inability to pass on inflationary increases in costs. The success or otherwise of ongoing investment and of the plans for development of a power market are therefore very much dependent upon the forbearance of donors, as much as on the intrinsic merits of current plans and programs.

E. Impact

1. Environmental Aspects 45. The project was classified as environmental category B. Initial environmental examinations were undertaken for each new subproject. The substations and transmission lines were designed to avoid environmentally sensitive areas, thereby mitigating the risk of environmental damage. A series of public consultations on project-related environmental issues were carried out in each province prior to loan approval and these continued into the implementation phase of the project. The installation of equipment under part B was made within the control rooms of existing substations and had little if any environmental impact.

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2. Social Aspects 46. By May 2012 land acquisition and resettlement transactions had been completed for 11 of the 12 subprojects. The remaining subproject is the 220 kV Van Tri–Soc Son transmission line, where affected households have been assessed and funds allocated for compensation. This subproject will be completed by the end of 2012. A total of 6,302 households were affected, including 5,741 that were marginally affected; 252 that were relocated; and 309 that were significantly impacted (defined as losing more than 10% of their land). Compensation totaled D207,985 million. Details are in Appendix 10. 47. A resettlement plan was prepared and implemented for each subproject, which specified the entitlements that had been accepted by concerned local authorities and endorsed by ADB. Originally, 901 households were estimated to be affected. However, many of the subprojects appraised prior to loan approval were at existing substations, and affected few if any households, while many subprojects appraised after loan approval were for transmission lines that generally affect many households. The final total of affected households (6,302) was therefore much greater than forecast, greatly increasing the associated workload. The unforeseen large number of affected households combined with the need to meet ADB requirements resulted in a significant extension of compensation and resettlement management and administration. However, substandard resettlement plans were not accepted, and the final outcomes were successful. Surveys made in 2012 by the independent monitoring organization found a very high level of satisfaction on the part of affected householders with the outcomes of the compensation and resettlement processes.

3. Economic Impacts 48. The direct linkage between GDP growth and power consumption means that the country’s sustained economic growth (over 7% per year during 2005–2011) would not have been possible with a less successful power sector development program. The power sector program’s economic internal rate of return was assessed on the basis of the costs and benefits of investments in northern Viet Nam, and is about 14.7% (details are in Appendix 7). This exceeds the economic hurdle rate of 12%, and is conservative given that not all benefits have been taken into account.

4. Poverty Alleviation Aspects 49. Viet Nam has made concerted efforts to improve access to electricity and provide lifeline tariffs that ensure the poor can afford electricity and benefit from connections. In 2004 household access to electricity was 87%. By 2010 an estimated 97.4% of households were electrified. While the project did not include any targeted poverty interventions, the project has helped expand the power supply, which was needed to supply new (mainly poor) consumers. The proportion of the population living below the poverty line dropped from 19.5% in 2005 to 10.7% in 2010.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 50. The overall rating of the project is successful. All but one of the 19 transmission line and substation subprojects funded under the project was identified prior to loan approval, and they were implemented as planned, except for implementation delays. The project helped Viet Nam complete its ambitious power sector development program. The program has doubled the capacity of the power supply system and at the same time improved overall efficiency by

14

reducing energy losses and by economizing generation costs. A time-slice analysis confirms that the power sector investment program for the period 2006 to 2011 was economically beneficial. The project was an integral part of this program. 51. Eight of the 9 subprojects that were completed before the original loan closing date of 31 December 2009 had been appraised prior to loan effectiveness. The remaining seven subprojects that were completed during the 2-year loan extension period were (with the exception of the Van Tri substation subproject) appraised after loan approval. The sector loan approach deferred the appraisal of several subprojects, but left resolution of the safeguard requirements of these subprojects to the NPPMB, which had limited experience and capability. The proposals to upgrade load dispatch facilities were incorporated into the project as a separate component, but the plans were not well founded and this led to a long delay as plans were revised and eventually scaled back. Although the project was soundly based and highly justified, progress was hampered by inadequacies in project preparation and in implementation of safeguards. 52. The quantitative assessment to arrive at the overall project rating is presented in Appendix 11. It is based on ADB guidelines under which four core criteria—relevance, effectiveness, efficiency, and sustainability—are assessed separately, with rating scores aggregated to produce the overall rating.9 B. Lessons 53. ADB’s appraisal of Component B of the project was inadequate. This oversight eventually delayed loan closing and caused the underutilization of the ADB loan. ADB should not approve funding for projects without independent evaluation and diligent review. 54. The transmission and substation subprojects that had not been appraised prior to loan presentation took longer to process than planned and call into question the justification for the sector loan approach. All but one subproject had been identified during implementation, and problems that could have been tackled prior to approval led to significant delays and increased administrative effort during project implementation. ADB should closely review the use of sector loans to ensure that problems that could be addressed during project preparation are not being deferred for the sake of expediency. 55. The delegation of loan administration to the Viet Nam Resident Mission improved ADB’s ability to monitor project progress by allowing for more regular and informal meetings with project management staff in order to obtain information firsthand, rather than relying on quarterly reports, which were sometimes late and/or inadequate. 56. The parallel cofinancing of part A with AFD worked well. The underlying reason was AFD acceptance of ADB rules and procedures for equipment procurement, which enabled consistent processing of ADB and AFD procurement packages. The leveraging of ADB’s participation greatly assisted completion of the national power sector development program and the arrangements could be used in similar circumstances elsewhere. C. Recommendations

1. Project Related

9 ADB. 2006. Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila.

15

57. Future monitoring. The project assets are integrated into the national power supply system rather than comprising a set of stand-alone investments. The focus of monitoring and evaluation of grid development projects should be on EVN’s overall progress and performance. 58. EVN is planning to test a power market and is planning to embark on program of protracted and complicated reforms. The success of a fully commercial power market is critically dependent upon market participants making timely settlements of power market transactions. The success of efforts to strengthen EVN’s finances should be closely monitored before EVN is actively encouraged to make binding commitments to implement a power market. 59. A late change to the 220 kV Van Tri–Soc Son transmission line affected plans for compensation. EVN and the Viet Nam Resident Mission will continue to monitor the resettlement activities of this subproject and will report on progress and the final outcome.

60. Covenants. The self-financing ratio covenant has an imprecise definition of capital expenditure in the loan agreement. The financial covenants have successfully tracked changes in EVN’s performance and should not be changed other than to correct the ambiguity. They define justifiable financial performance targets and provide a sound target for the average tariff. 61. Further action or follow-up and additional assistance. None is recommended. The project has been completed and is assisting EVN meet the performance targets of the national power supply system. The NLDC and the NPPMB have gained invaluable experience and have subsequently implemented successful follow-on projects.

62. Timing of the project performance evaluation report. The project will be completed by 31 December 2012 and a project performance evaluation could then be undertaken. The project performance evaluation could be scheduled for July 2013, when an additional year of financial and operational performance reports will be available to provide a perspective on the impact of the program to gradually restore EVN’s tariffs to full cost-covering levels 2. General 63. The provisions for advisory consulting services should enable capable advisory services on a fulltime basis for the duration of land acquisition and resettlement activities, which in the case of a sector loan with several subcomponents can be extensive. If necessary, the hiring of sufficient and capable consulting services must be required for the sake of successful implementation and include capacity building for staff of the implementing agencies. 64. The risk of revisions and delays to projects during implementation needs to be mitigated by maintaining high standards of due diligence during project preparation. Projects and/or components that have not been independently reviewed or subjected to feasibility study in a project preparatory TA should be avoided. 65. ADB should review its instructions to borrowers and auditors on how to account for project costs so that ADB receives adequate information at regular intervals on how its funds and those of co-financiers, including local cost contributions, have been applied. 66. A sector loan increases the likelihood of multiplication of procurement packages that increase loan administration and reduce the level of bidders’ interest. ADB staff should encourage implementing agencies to consolidate procurement packages.

16 Appendix 1

PROJECT FRAMEWORK

Design Summary Performance

Indicators/Targets Assessment

Goal

To stimulate economic growth in the northern part of Viet Nam and thereby contribute to the reduction of poverty in the north

Economic growth to achieve government targets

High rates of economic growth have been sustained. The national gross domestic product growth rate averaged 7.3% during 2005–2011, and was 5.9% in 2011. The number of people living below the international poverty has continued to decline and is below the targets presented in the report and recommendation of the President.

a

Purpose Expand and strengthen the northern electricity network

Improve the efficiency of the power sector by restructuring and commercializing EVN units

Network able to handle 6,150 MW peak load by 2010

Promulgation of Electricity Law

Establishment of a regulatory authority for the power sector

Corporatize EVN’s thermal generation units by Dec 2007

Establish a national transmission company by June 2009

Northern network peak load in 2010 was 6,547 MW. Electricity Law was promulgated and has been effective since July 2005 The Electricity Regulatory Authority of Viet Nam was established in October 2005. EVN’s thermal generation units were corporatized by December 2007 The National Power Transmission Company was established in July 2008.

Outputs Creation of 500 kV transmission line (Quang Ninh to Thuong Tin) Creation of Quang Ninh 500 kV substation Upgrading of Thuong Tin 500 kV substation Creation/Upgrading of 220 kV substations

151 km of double circuit 500 kV transmission line commissioned and operated by June 2008.

450 MVA of 500 kV and 250 MVA of 220 kV substation capacity developed and operated by June 2008.

500 kV 52 MVAr shunt reactor commissioned and operated by June 2008.

750 MVA of 220 kV substation capacity developed and operated by June 2008.

The Quang Ninh–Thuong Tin transmission line started operations in December 2009. The Quang Ninh substation started operations in December 2009. The Thuong Tin substation upgrade was completed in December 2009. Five 220kV substations were upgraded in 2009. Five 220 kV substations were created in 2009–2011. 1,500 MVA of 220 kV substation capacity was developed.

Creation of 220 kV transmission lines

Five 220 kV transmission line commissioned and operated by June 2009

Five transmission lines were commissioned in 2008–2012 with 352.5 km of double circuit 220 kV lines created.

Upgrading of SCADA and telecommunications system

Commissioned and operated by June 2008

Phase 1 completed in November 2011. Phase 2 was completed in the first quarter of 2012. 190 RTUs and associated telecommunication equipment were commissioned and operated in 2011–2012.

Appendix 1 17

Design Summary Performance

Indicators/Targets Assessment

Households compensated, resettled, and rehabilitated according to approved and updated resettlement plans

Implementation of the updated approved resettlement plans prior to the commencement of works in each area

Resettlement plans were updated and compensation paid in phases to enable construction. Due diligence was carried out for existing substations where land acquisition was required. There was no adverse impact on resolution of safeguard requirements.

Activities

Implementation consultants engaged Part A: Expansion and upgrading of transmission system

Resettlement plans prepared and updated, approved, implemented Procurement, construction , and commissioning of transmission facilities

Part B: Upgrading of SCADA system Procurement, design, installation, and commissioning of SCADA facilities

Resettlement consultants appointed in Q4 of 2004 IMO consultant appointed in Q4 of 2004 Completed by Q2 of 2007 Transmission lines and substations commissioned and operated by 2009 SCADA system upgraded and commissioned by 2008

Resettlement consultants were engaged in 2005. IMO consultant was engaged in 2006 Resettlement plans and due diligence reports of 20 Part A subprojects were prepared, approved, and implemented in 2005–2011. Six 500 kV and 220 kV transmission lines were created and commissioned in 2008–2011; Twelve 500 kV and 220 kV substations were created and expanded in 2008–2011. Start-up delayed because of changes in scope and system design. Phase 1 of SCADA system commissioned and operated in 2011, and phase 2 in early 2012.

Inputs Consulting Services Construction Activities

Consultants: $4.9 million Infrastructure: $212.5 million Total : $217.4 million

Consultants: $3.8 million Infrastructure: $210.2 million Total : $214.0 million

ADB = Asian Development Bank, EVN = Electricity of Viet Nam, IMO = Independent Monitoring Organization, kV = kilovolt, MW = megawatt, NPPMB = Northern Power Project Management Board, Q = quarter, RAP = resettlement action plan, SCADA = supervisory control and data acquisition. a

ADB. 2004. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Socialist Republic of Viet Nam for the Northern Power Transmission Sector Project. Manila.

Source: ADB estimates.

18 Appendix 2

STATUS OF COMPLIANCE WITH LOAN COVENANTS Covenant

Reference in Loan / Project

Agreement

Status of Compliance

Sector

1. Sector Restructuring: Within 6 months after the effective date of the Electricity Law, the Borrower shall have promulgated a decree or regulation establishing a regulatory authority as envisaged under the Electricity Law

LA. Schedule 6 paragraph 3

Complied with. The Electricity Law came into effect on 1 July 2005 and the Electricity Regulatory Authority of Viet Nam (ERAV) was established in late 2005

2. Within 12 months after the effective date of the Electricity Law, the Borrower shall have established the regulatory authority under the Electricity Law

LA. Schedule 6 paragraph 4

Complied with. ERAV established in late 2005.

3. By no later than 30 June 2009, the Borrower shall have ensured that all EVN generation units have been corporatized such that each generation unit either: (i) has become an independent unit, including independent accounting; (ii) has become a single member limited liability company; (or (iii) has been equitized such that ownership is held by EVN and by one or more other investors

LA, Schedule 6, paragraph 5

Complied with.

Environmental

4. The Borrower shall ensure that the Government’s Law and regulations governing environmental and social impact assessments, as well as ADB’s Environment Policy (2002) are followed

LA, Schedule. 5, paragraph 22

Complied with.

5. The Borrower and EVN shall ensure that the contract documents for all civil works under the Project include (i) budgetary provisions for implementation of any specific mitigation measures and monitoring requirements that arise from the environmental assessment and review of subprojects; and (ii) to give due consideration to prevention of damage to the natural environment in the design, construction, operation, and maintenance of Project facilities

LA, Sched.6, paragraph 23

Complied with.

6. The Borrower shall ensure that any Environmental Management Plans (EMP), arising from the environmental assessment and review of subprojects, are implemented under EVN/s supervision in order to adequately monitor and mitigate environmental impacts

LA, Sched.6, paragraph 24

Complied with.

EMPs for the transmission lines have been submitted with the initial environmental examinations. All of the 12 initial environmental examinations were approved.

Social

Appendix 2 19

Covenant


Agreement


7. NPPMB shall be responsible for the timely acquisition of the land required for each subproject and for compensation, and if required, relocation, resettlement and rehabilitation of people affected by any subproject of the Project.

NPPMB shall be responsible for preparing a new Resettlement Plan for any subproject requiring one under the Resettlement Framework and shall submit each RP to ADB for its approval prior to its implementation.

Each RP prepared shall follow completion of a detailed design prior to commencing resettlement activities and shall be prepared in full consultation with affected persons and disclosed to the affected person prior to its submission to ADB.

The RPs shall include detailed measurement surveys compensation unit rates for all categories of losses and allowances and a final database of affected persons. In preparing a RP for subprojects not yet appraised, NPPMB shall specifically assess the subproject’s impact on any minority groups or ethnic minorities likely to be affected.


Complied with.

Complied with.

Complied with.

8. NPPMB shall be responsible for implementing approved RPs for subprojects previously appraised and which RPs shall be updated prior to implementation of the subproject and submitted to ADB for its approval prior to implementation. Each updated RP shall be prepared in full consultation with affected persons and disclosed to such affected persons prior to its submission to ADB.


Partly complied with.

Implementation of some sections of some transmission line projects, where there were no outstanding safeguard requirements, commenced prior to approval of the RP.

9. NPPMB shall be responsible for implementing subproject land acquisition and resettlement programs through the resettlement committees in the relevant province and district and which committees shall be closely involved in resettlement implementation. With the assistance of an international resettlement specialist, NPPMB and its local consultants shall conduct training in compensation standards, procedures, entitlements, implementation, grievance processes, and


Complied with.

20 Appendix 2

Covenant


Agreement


monitoring procedures for the provincial and district resettlement committees.

10. NPPMB shall ensure that such land acquisition, compensation, relocation and resettlement is carried out in accordance with the approved RPs and Resettlement Framework agreed upon between the Borrower and ADB, the Borrower’s laws, regulations, procedures and ADB’s requirements, ADB’s requirements shall apply


Complied with.

11. If, at any time after a RP has been approved, significant realignment of any part of a subproject is required, NPPMB shall revise and update that RP for that subproject to take into account the realignment. The updated RP shall be updated in accordance with ADB’s Policy on Involuntary Resettlement and submitted to ADB for approval prior to commencement of any land acquisition activities for the realigned subproject. Significant realignment occurs when the previously approved alignment is moved entirely outside the construction corridor of the previous design over a distance greater than 100 meters.


Complied with.

All RPs were updated following approval of the detailed designs and the final realignments. The updated RPs were reviewed and accepted by ADB.

12. EVN shall ensure that civil works contractors are not issued a notice of possession of site for any section of construction works unless NPPMB has (i) satisfactorily completed, in accordance with the approved relevant RP for that subproject, compensation payment and relocation to new sites, and (ii) ensured that the rehabilitation assistance is in place and the area required for civil works is free of all encumbrances.


Complied with.

13. NPPMB shall ensure timely provision of counterpart funds for land acquisition, resettlement and monitoring activities specified in the RP, and any unforeseen obligations in excess of the RP estimate to satisfy resettlement objectives. Further, that these are provided directly to affected people prior to their displacement from housing and prior to loss of land, livelihood, income or other assets.


Complied with.

14. NPPMB shall retain a resettlement consultant, prior to commencement of the resettlement process, to assist in preparing, updating and implementing the Resettlement Plans. The resettlement consultants shall: (i) assist NPPMB to prepared subproject resettlement plans, (ii) guide and supervise provincial and

Schedule 6, paragraph 17

Complied with.

Appendix 2 21

Covenant


Agreement


district resettlement committees, and (iii) train NPPMB staff and the provincial and district resettlement committees.

15. NPPMB shall engage an Independent Monitoring Organization (IMO), acceptable to ADB and with terms of reference included in the approved Resettlement Plans, to monitor and evaluate implementation of all the Resettlement Plans. The IMO shall be engaged prior to commencement of the resettlement process. The budget provided to the IMO shall include funds sufficient, in the opinion of ADB, for the IMO to adequately perform its functions.

Schedule 6, paragraph 17

Complied with.

16. The Borrower shall provide to the IMO, acceptable to the ADB and with terms of reference included in the approved resettlement Plans, to monitor and evaluate implementation of all the Resettlement Plans, The IMO shall be engaged prior to commencement of the resettlement process. The budget provided to the IMO shall include funds sufficient, in the opinion of ADB, for the IMO to adequately perform its functions.


Complied with.

17. The Borrower shall provide to IMO, at no cost, all documents required to monitor the resettlement process, specifically including the relevant RPs, detailed measurement survey documents, and all associated documents which maybe reasonably requested by the IMO.


Complied with.

18. The Borrower shall ensure that civil works contractors do not differentiate in wages between male and female works and that no child labor is employed in the Project’s construction activities and camps

LA Schedule. 6, paragraph 20

Complied with.

Financial

19. The Borrower shall perform all actions necessary to ensure that EVN, beginning 1 Jan 05, achieves a self-financing ratio of at least 25 percent. For purposes of this paragraph, the following provisions shall apply;

LA Schedule 6 paragraph 7

Not complied with as of 2008

FY2004: 55% Complied




FY2008: 16% Not complied

FY2009: 24% Not complied

FY2010:–5% Not complied

FY2011:–25% Not complied

a) Except as ADB shall otherwise agree, EVN shall produce, for each of its fiscal years after its fiscal year ending on 31 Dec 2004, cash from internal sources equivalent to not less than 25% of the annual average of EVN’s capital expenditures incurred, or expected to be incurred, for that year and succeeding fiscal years

LA Schedule 6 paragraph 7(a)

22 Appendix 2

Covenant


Agreement


b) Before 30 June in each of its fiscal years, EVN shall, on the basis of forecasts prepared by EVN and satisfactory to ADB, review whether it would meet the requirements set forth in paragraph a) in respect of such year and the next following fiscal year and shall furnish to ADB a copy of such review, upon its completion.

LA Schedule 6 Paragraph 7(b)

Not complied with.

c) If EVN would not meet the requirement in paragraph (b) above, the Borrower and EVN shall promptly take all necessary measures (including without limitation, adjustments of the structure or levels of EVN’s rates (prices) or, upon establishment of the regulatory authority, filing applications seeking tariff / rate increases in order to meet such requirements.

LA Schedule 6, paragraph 7(c)


EVN’s rates have been adjusted, but not sufficiently to meet requirements. A program of regular adjustment of rates has been started in April 2011.

20. The Borrower shall perform all actions necessary to ensure that EVN, beginning 1 Jan 05, shall not incur any debt, unless the net revenues of EVN for the 12 months prior to the date shall be at least 1.5 times the estimated maximum debt service requirement for EVN for any succeeding fiscal year on all debt of EVN, including the debt to be incurred.

LA Schedule 6 Paragraph 8

Not complied with as 2008.

Debt service coverage ratio

FY2004: 4.5 Complied




FY2008: 1.4 Not complied




21. EVN shall not incur any debt if after the debt the ratio of debt to equity shall be greater than 70:30


Not Complied from 2009

Debt to equity

FY2004: 53:46 Complied




FY2009: 72:28 Not complied



Auditing

22. The Borrower shall ensure that:

a) Within 6 months after the end of the fiscal year, EVN submits an audited annual Project account (APA), and

b) Annual financial statement (AFS). The AFS shall consist of an income statement, balance

LA Schedule 6 paragraph 26 (i)

Complied with.

Appendix 2 23

Covenant


Agreement


sheet, statement of cash flows and related notes to financial statement. The AFS shall be consolidated for all of EVN’s operations.

c) Except as otherwise agreed by ADB, EVN shall continue its practice of retaining external auditors satisfactory to ADB to audit its AFS and APA, together with the memorandum of issues identified during the audit process (i.e. management letter) which shall be attached to the respective reports

LA Schedule. 6 paragraph 26 (ii)


Management Letter not provided for 2009.

d) For future contracts or contract revisions with external auditors, the terms of reference of external auditors shall be provided to ADB

LA Schedule 6 Paragraph 26 (iii)

Complied with.

e) The accounts shall be prepared using International Financial Reporting Standards (IFRS) and the audit shall be carried out using International Standards of Auditing (IAS)


Complied with.

Accounts prepared in accordance with IFRS, save for specific noted departures on some asset revaluations and disclosures associated with valuation of financial instruments defined by IAS 32, IAS 39, and IFRS 7.

23. The auditors shall be required to provide an opinion on EVN’s compliance with the financial covenants in this Loan Agreement and indicate the details of the actual calculations for all ratios, in conformity with the definitions contained in this Loan Agreement

LA, Schedule 6 Paragraph 27


Auditors first instructed in 2009 to report on EVN’s compliance. The auditors have not provided opinions on compliance.

Others

24. Established, Staffed, and Operating PMU/PIU. EVN as the Project Executing Agency shall be responsible for overall Project implementation. NPPMB shall act as the implementing agency for the transmission line systems and NLDC shall act as the implementing agency for the SCADA

LA, Schedule. 6 paragraph 1

Complied with.

25. Fielding of Consultants

Consultants shall be utilized in the carrying out of the Project with regard to:

a) assisting NLDC in evaluation or technical proposals for bidders for SCADA and telecoms equipment, and for commissioning of hardware/software at load dispatch centers;

b) assisting NPPMB in preparing resettlement plans for subprojects, guiding and supervising the Resettlement Committees and training NPPMB and Resettlement Committees


Complied with.

24 Appendix 2

Covenant


Agreement


The TORs of the consultants shall be as determined by agreement between ADB and EVN

26. The selection, engagement and services of the consultants shall be subject to the provisions of the “Guidelines on the Use of Consultants by ADB and its Borrowers” dated April 2002, as amended from time to time, which have been furnished to the Borrower and EVN

The consultants shall be selected and engaged by EVN in accordance with the following procedures:

(a) A list of the candidates together with their qualification and a draft contract shall be furnished to the Bank for approval before the selection of consultants;

(b) Promptly after the contract is signed, the Bank shall be furnished with the evaluation of the candidates and a brief justification for the selection, together with three copies of the signed contract;

(c) If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to the Bank for prior approval


LA, Schedule. 5, Clause 4

Complied with.

27. The Borrower shall ensure that all actions required by the Project Administration Memorandum (PAM), as agreed upon by EVN and ADB, and as amended from time to time, shall be implemented as specified in the PAM

The services of the local consultant shall be used for the purpose of monitoring resettlement, The ROR of the consultant shall be as determined by agreement between ADB and EVN


Complied with.

28. Reporting Requirements

The Borrower shall ensure that NPPMB and NLDC each prepares regular progress report for their respective Project components for submission to ADB on a quarterly basis containing the following:

(i) a narrative description of the Project’s physical progress during the period;

(ii) changes in the implementation Schedule

LA, Schedule 6 paragraph 25

Complied with.

Appendix 2 25

Covenant


Agreement


(iii) performance of the Project implementation consultants

(iv) a description of problems encountered and anticipated with suggested corrective action;

(v) a description of implementation of the RP including status of satisfactory completion of compensation, resettlement and rehabilitation activities (this shall be a compilation of the monthly reports required under paragraph 13 of Schedule 6 of the LA and submitted to NPPMB); and

(vi) a summary financial account for the implementing agency’s Project component, including: Project expenditures during the reporting period, year-to-date, and total expenditure to date

29. EVN shall maintain, or cause to be maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition

Project Agreement, Article II, Section 2.06

Complied with.

30. EVN shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the goods and services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of EVN; and (v) any other matters relating to the purposes of the Loan


Complied with.

a. Without limiting the generality of the foregoing, EVN shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these

Project Agreement, Article II, (b)

Complied with.

Quarterly reports are being submitted by the implementing agencies to ADB

26 Appendix 2

Covenant


Agreement


problems, and proposed program of activities and expected progress during the following quarter

b. Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, EVN shall prepare and furnish to AND report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by EVN of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan

Project Agreement, Article II, (c)

Not complied with.

c. EVN shall (i) maintain separate accounts for the Project and for its overall operations; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are satisfactory to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditor’s opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement), all in the English language. EVN shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

d. EVEN shall enable ADB, upon ADB’s request, to discuss EVN’s financial statements and its financial affairs from time to time with EVN’s auditors. And shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of EVN unless EVN shall


Complied with.

Appendix 2 27

Covenant


Agreement


otherwise agree

31. EVN shall enable ADB’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, all other plants, sites, works, properties and equipment of EVN, and any relevant records and documents

Project Agreement, Section 2.10

Complied with.

32. EVN shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchise which are necessary in the carrying out of the Project or in the conduct of its business


Complied with.

33. EVN shall at all times conduct its business in accordance with sound administrative, financial, environmental and public utility practices, and under the supervision of competent and experienced management and personnel


Complied with.

34. EVN shall at all times operate and maintain its plants, equipment and other property and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, public utility, and maintenance and operational practices


Complied with.

28 Appendix 3

PROJECT COSTS AND PROJECT FINANCING

Table A.3.1: Detailed Project Costs ($ million)

Cost Estimate ($ million) Actual Cost ($ million)

Item Subproject Foreign Local Total Foreign Local Total

No. Part A: Transmission Subprojects

Appraised before Loan Approval 91.9 37.2 129.1 88.5 24.7 113.2

A1 Thuong Tin- Quang Ninh 500 kV TL 33.9 29.4 63.3 38.4 15.5 53.9

A2 Quang Ninh 500 kV Substation 20.4 2.8 23.2 22.8 5.7 28.5

A3 Thuong Tin 500 kV Substation 4.2 0.4 4.6 4.7 0.9 5.6

A4 Trang Bach 220 kV Substation 2.2 0.3 2.5 3.3 0.3 3.6

A5 Nghi Son 220 kV Substation 2.6 0.3 2.9 2.8 0.3 3.0

A6 Dong Hoa 220 kV Substation 2.4 0.3 2.8 3.1 0.3 3.5

A7 Thai Binh 220 kV Substation 2.7 0.3 3.0 2.6 0.3 2.9

A8 Vat Cach 220 kV Substation 5.0 0.7 5.7 4.5 0.5 5.0

A9 Van Tri 220 kV Substation 11.3 2.0 13.2 6.3 0.9 7.2

A10 Nam Dinh 220 kV Substation 1.8 0.2 1.9

A11 Spare equipment 500 kV 5.5 0.5 6.0

For Appraisal during Implementation 41.7 17.5 59.2 51.4 36.2 87.6

A12 Tuyen Quang - Yen Bai 220 kV TL 9.6 5.5 15.1

A13 Ban La - Vinh 220 kV T. Line 16.2 14.5 30.7

A14 Son La 220kV SS & Connection 4.5 2.5 7.1

A15 Phu Ly 220 kV SS & Connection 4.7 2.6 7.3

A16 Hai Duong 220 KV SS 4.4 0.7 5.1

A17 Lao Cai 220 kV SS 2.8 4.3 7.1

A18 Hai Phong - Dinh Vu 220kV TL 5.0 3.2 8.3

A19 Hai Phong - Vat Cach 220kV TL 1.5 1.0 2.4

A20 Van Tri - Soc Son 220 kV TL 2.4 0.6 3.0

A21 Do Luong 220kV SS 0.3 1.3 1.6

A22 Yen Bai - Lao Cai 220 kV TL

A23 Van Tri - Chem 220 kV TL

A24 Hai Duong 220 kV Branch

Land Acquisition & Resettlement 13.3 13.3 0.1 13.4 13.5

Project Implementation Consultant 0.2 3.5 3.7 3.5 3.5

Taxes and Duties 10.4 10.4 1.8 1.8

Part A: Base Costs 133.8 81.8 215.6 140.0 79.6 219.6

Part B: NLDC Upgrade 21.1 3.3 24.4 8.9 0.5 9.4

Project Implementation Consultants 0.2 1.0 1.2 0.3 0.3

Taxes and Duties 2.2 2.2

Part B Base Costs 21.3 6.4 27.7 8.9 0.8 9.7

Total Base Costs 155.1 88.2 243.3 148.9 80.4 229.3

Financing Charges (IDC)

IDC ADB 14.4 14.4 8.6 8.6

IDC AFD 5.1 5.1 3.9 3.9

IDC Local 10.8 10.8 4.1 4.1

Total IDC 19.5 10.8 30.3 12.5 4.1 16.6

Total Project Cost 174.6 99.0 273.6 161.4 84.5 245.9 ADB = Asian Development Bank, AFD = Agence Française de Développement, IDC = interest during construction, kV = kilovolt , SS = substation, TL= transmission line, NLDC = National Load Dispatch Center Notes: 1. The allowance for spare parts (item A11) was not included in the totals for project costs.

Appendix 3 29

2. All of the subprojects had been identified prior to loan approval, with the exception of the Duong substation (item A21), which was added at midterm review to help use unallocated funds.

3. Eight of the 10 subprojects that were appraised prior to loan approval were completed under the project. 4. The IDC budgetary allowances in ADB. 2004. Report and Recommendation of the President to the Board

of Directors on a Proposed Loan to the Socialist Republic of Viet Nam for the Northern Power Transmission Sector Project. Manila. are excessive and suggest that finance charges were not consolidated by netting out the foreign lenders’ charges that were passed on to Vietnam Electricity by the government .

Source: ADB and Northern Power Project Management Board

Table A3.2: Project Financing

($ million)

Source

Planned

Actual

Foreign Local Total

Foreign Local Total Exchange Currency Financing

Exchange Currency Financing

ADB 119.7 0.3 120.0

105.5 0.2 105.7

AFD 50.0

50.0

52.0

52.0

Local Resources 4.9 98.7 103.6

3.9 84.3 88.2

Total 174.6 99.0 273.6

161.4 84.5 245.9

ADB = Asian Development Bank, AFD = Agence Française de Développement, IDC = interest during construction Notes: 1. The ADB loan was not fully drawn, as the full extent of the shortfall was not established in time to allow for the

implementation of additional subprojects. The shortfall in utilization of the ADB loan was largely due to the excessive allowance for funding of IDC ($5.9 million) and to the reduction in scope of part B ($8.4 million).

2. The increase in the value of the euro (from €1 = $1.25 to €1 = $1.39) during project implementation increased the value of AFD’s funding to $52 million equivalent.

3. IDC on the ADB loan was funded by ADB. IDC on the AFD loan was funded from local resources. 4. Devaluation of the dong accounted for $3.6 million of the reduced requirement for funding from local resources.

The balance of the reduction in funding from local resources is proportionate to the reduced funding provided by ADB and AFD.

30 Appendix 4

CONTRACTS AND CONTRACT PAYMENT

Contract Amount ($) Contract Name

0001 72,000 CONSULTING SERVICES FOR INTERNATIONAL RESETTLEMENT (INDIVIDUAL)

0002 3,079,786 SUPPLY OF TENSION & SUSPENSION STEEL TOWERS FOR TUYEN QUANG-YEN BAI T.LINE, PKG I.1

0003 5,944,726 PKG III.13, SUPPLY OF CONDUCTOR & GROUNDWIRE

0004 6,594,923 PKG III.14, CONDUCTORS & GROUNDWIRES FOR 500 kV THUONG TIN-QUANG NINH T.LINE

0005 91,020 CONSULTING SERVICES INDEPENDENT MONITORING AGENCY FOR RESETTLEMENT WORKS

0006 298,896 SUPPLY OF OPGW CABLE AND ACCESORIES

0007 6,389,752 SUPPLY OF STEEL TOWERS, PKG. II.1

0008 16,688,149 SUPPLY OF STEEL TOWERS, PKG III. LOTS 10–12

0009 1,989,824 PKG I.2, SUPPLY OF CONDUCTORS & EARTHWIRES FOR TUY EN QUANG-YEN BAI T.LINE

0010 2,260,834 SUPPLY OF CONDUCTORS AND EARTHWIRESFOR TUYEN QUANG–YEN BAI T.LINE, PKG. I.2.2.

0011 986,342 INSULATOR AND FITTINGS, I.3

0012 704,962 OPGW CABLES & ACCS TELECOM EQUIPMENT, PKG II.4

0013 1,654,579 CONDUCTOR AND EARTHWIRES FOR 220 kV BAN LA-VINH T.LINE

0014 3,185,082 CONDUCTORS AND EARTHWIRES FOR 220 kV BAN LA-VINH T.LINE

0015 1,619,855 CONDUCTORS AND EARTHWIRES FOR 220 kV BAN LA-VINH T.LINE

0016 578,433 PRIMARY AND TELECOMMUNICATION EQUIPMENT, PKG I.5

0017 1,685,277 INSULATOR AND FITTINGS FOR 220 kV BAN LA-VINH T.LINE,II.3

0018 1,648,771 CONTROL PROTECTION EQUIPMENT FOR EXT. YENBAI, TRANG BACH & VAT CACH 220 kV SUBSTATIONS

0019 95,939 CONSULTING SERVICES FOR RESETTLEMENT

0020 6,599,932 INSULATORS AND FITTINGS

0021 3,183,397 MATERIALS & EQPT FOR EXT NGHI SON, THAI INH, VAT CACH, TRANG BACH & DONG HOA SUBSTATIONS

0022 926,713 MATERIALS & EQUIPMENT - EXTENSION OF HUNG DONG 20 kV SUBSTATIONS, PKG II, LOT 5

0023 603,499 OPGW CABLES & ACCESSORIES 500 kV THUONG TIN-QUANG NINH T.LINE, PKG III.15

0024 299,121 CONTROL & PROTECTION EQUIPMENT EXTENSION OF DONG HOA SUBSTATION, PKG III.8.1

0025 9,400 CONSULTING SERVICES TO ASSIST IN FINALIZING BID DOCUMENTS

0026 3,569,187 SUPPLY OF MATERIALS AND EQUIPMENT FOR 220 kV VAN TRI SUBSTATION

0027 666,327 ELECOMM EQPT for 500 kV THUONG TIN-QUANG NINH T.LINE & 220 kV VAN TRI SUBSTATION III.PKG III.16

0028 127,666 CONTROL & PROTECTION EQUIPMENT FOR EXTENSION OF VIET TRI 220 kV SUBSTATION

0029 2,172,613 STEEL TOWER (P. VI.4) FOR 220KV HAI PHONG THERMAL POWER PLANT-DINH VU T.LINE AND 220 kV HAIPHONG SUBSTATION

0030 598,192 INSULATORS AND FITTINGS FOR 220 kV TRANSMISSION T.LIN ES

0031 110,129 OPGW CABLE AND ACCESSORIES FOR 220 kV THERMAL POWER PLANTS

0032 1,306,452 SUPPLY OF AUTO-TRANSFORMER 220 kV/125 MVA FOR 220 kV LAOCAI SUBSTATION

0033 4,888,290 MATERIALS AND EQUIPMENT FOR 220 kV SUBSTATIONS

0036 654,268 PRIMARY EQUIPMENT FOR LAOCAI 220 kV SUBSTATION AND CONNECTIONS

0037 3,514,275.03 SUPPLY, INSTALL TEST 220 kV UNDERGROUND CABLE CROSS DINHVU CANAL to HAIPHONG

0038 750,299.84 CONTROL AND PROTECTION EQUIPMENT FOR PAC8.4, 500 kV THUONG TIN SUBSTATION EXTENSION

0039 935,646.92 SECONDARY EQUIPMENT FOR 220 kV LAO CAI SUBSTATION EXTENSION

Appendix 4 31

0040 6,551,751.36 EQUIPMENT SUPPLY, INSTALLATION, TESTING & COMMISSION (RTUS), MULTIPLEXER

0041 2,334,706.03 DESIGN,SUPPLY,INSTALLATION,TESTING AND COMMISSIONING OF RTUS

0042 991,925.99 PRIMARY EQUIPMENT AND MATERIALS & EQUIPMENT FOR 110 kV,220kV CONNECTITION

0043 754,101.46 SECODARY EQUIPMENT AND MATERIAL & SCADA & TELECOMMUNICATION SYSTEM 220 kV DO LUONG SUBSTATION EXTENSION

Totala 105,679,190 Total

kV = kilovolt , RTUS = remote terminal units, T.LINE = transmission line, a

Includes interest during construction of $8,552,147 Source: ADB

32 Appendix 5

Table A5: Asian Development

Year Disbursements

2006 Q2 Q3 Q4 2007 Q1 Q2 Q3 Q4 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1

Q2 Total

ADB = Asian Development Bank, AFD = Agence Francaise de DeveloppSource: ADB and AFD

DISBURSEMENT SCHEDULES

evelopment Bank and Agence Française de Développement Disbursement Schedules

($)

ADB AFD

Disbursements Cumulative Disbursements Cumulative

81,375 28,800

12,393,813 12,503,988 8,393,770 9,087,633 14,595,560

14,458,752 5,472,883 17,767,735 62,211,878 6,897,000 26,965,4435,013,125 17,499,759 5,748,248 3,058,123 3,024,293 0 4,004,794 80,002,337 0 47,523,3253,815,554 1,052,803 2,266,085 0

127,032 0 4,375,513 90,586,520 3,394,069 51,970,197

468,535 990,294 792,733

1,251,386 94,089,467 2,108,448 1,267,176 2,073,412 4,247,111 103,785,614 1,775,988

117,587 105,679,190 105,679,190 51,970,197

ADB = Asian Development Bank, AFD = Agence Francaise de Developpement , Q = quarter

Figure A8: Disbursements

and Agence Française de Développement

Cumulative

26,965,443

47,523,325

51,970,197

ment , Q = quarter

Appendix 6 33

FINANCIAL EVALUATION

1. The operational performance of Vietnam Electricity (EVN) has been highly successful. Between 2005 and 2011 the electrical energy supplied by EVN’s supply system has doubled— from 50,919 Gigawatt-hours (GWh) to 102,765 GWh—and sales to final consumers have increased at a compound annual growth rate of 13.0%. The increase in sales has been accompanied by a significant reduction in systems losses; both of these achievements are largely attributable to investment in transmission and distribution facilities, including the project. The building of hydropower stations as recommended by Viet Nam’s power system development master plan has also assisted EVN’s performance by helping reduce the inflation-adjusted costs of fuel and power from D815/kilowatt-hour (kWh) in 2005 to D676/kWh in 2011.1

Table A6.1: Vietnam Electricity Key Indicators

Key Indicators 2005 2006 2007 2008 2009 2010 2011

Electricity Supply and Demand

Electricity Supply (Gwh) 50,919 57,729 65,338 72,574 82,264 94,115 102,765

System Losses (%) 11.8% 11.1% 10.6% 9.2% 9.6% 10.2% 9.2%

Total Energy Sales (GWh) 44,921 51,350 58,438 65,890 74,391 84,562 93,280

Growth in Sales (%) 13.4% 14.3% 13.8% 12.8% 12.9% 13.7% 10.3%

Tariffs and Cost of Sales

Average Tariff - Nominal (D/kWh) 792 797 862 872 978 1,075 1,245

Average Tariff - Constant (D/kWh) a 1,611 1,511 1,509 1,250 1,322 1,299 1,245

Average Tariff Real Increase (%) -8% -6% 0% -17% 6% -2% -4%

Cost of Fuel & Power Constant (D/kWh)

b

815 703 748 674 701 787 676

Gross Margin Energy (%) 49% 53% 50% 46% 47% 39% 46%

Ratios and Covenants

Return on Capital Employed 5% 3% 3% -2% 1% -2% -2%

Self-financing > 25% 29% 31% 26% 6% 24.8% -6% -4%

Debt to equity <70:30 51:49 54:46 51:49 63:37 67:33 74:26 81:19

Current 1.5 1.7 1.6 1.2 1.1 0.9 0.9

Age of Receivables / months 2.6 2.8 2.9 2.9 2.4 2.8 3.2

Debt Service Cover >1.5 1.8 1.9 1.4 1.2 1.2 0.7 0.7 a,

Average tariff in constant 2011 dong per kilowatt-hour b:Costs of fuel and purchases of power in constant dong per

kilowatt-hour 2. EVN’s financial performance and standing has deteriorated notwithstanding the noteworthy improvements in its operating efficiency. The deteriorating financial performance has resulted from: (i) allowed tariff increases consistently failing to keep pace with increases in the costs of fuel and power (this occurred every year except 2009); and (ii) increase in borrowing costs, which in 2005 accounted for 4% of sales but now absorb 8% of sales revenue. The impacts of the increased debt burden and the reduction in cost recovery have transformed EVN into an unprofitable and financially weak organization. The deterioration is reflected by the breaching, in 2010 and 2011, of all covenanted financial performance ratios. During 2005–2011 the government more than passed on the benefits of improvements in EVN’s operating efficiency to consumers,

1 The returns from the investments in hydropower plants are analyzed in Appendix 7.

34 Appendix 6

and failed to take advantage of opportunities created by real reductions in energy costs and system losses to preserve EVN’s financial performance and financial standing. As a consequence EVN is unlikely to be able to sustain increases in supply system capacity sufficient to meet demand growth. Furthermore, unless EVN can be recapitalized, its lack of financial liquidity will jeopardize the government’s plans for implementation of a competitive power market. A. Financial Costs and Benefits 3. The benefits of the project are dependent upon EVN’s overall investment program. As in the economic evaluation, a time-slice cost–benefit analysis has been used to calculate returns. The financial time-slice analysis evaluates returns from EVN’s investments during 2005–2011 and assumes that changes in EVN’s operating costs and operating income during that period resulted from these investments. All costs and benefits have been transformed into 2011 constant currency values. Use of delayed payment to creditors as a continuing source of working capital has been ignored.

Table A6.2: Vietnam ElectricityFinancial Costs and Benefits of Investment Constant (2011) D Billion

Investment Income Operating Operating Net

Costs Cash-flow Cash-flow

2005 (41,562) (41,562)

2006 (42,782) 8,109 (4,019) 4,090 (38,692)

2007 (57,459) 24,491 (14,879) 9,612 (47,846)

2008 (45,516) 31,927 (22,790) 9,137 (36,379)

2009 (64,813) 47,689 (18,999) 28,689 (36,123)

2010 (56,450) 64,620 (46,920) 17,700 (38,750)

2011 (46,614) 85,450 (46,224) 39,226 (7,389)

2012 85,450 (46,224) 17,185 17,185

2013 85,450 (46,224) 17,185 17,185

2014 85,450 (46,224) 17,185 17,185

2015 85,450 (46,224) 17,185 17,185

2016 85,450 (46,224) 17,185 17,185

2017 85,450 (46,224) 17,185 17,185

2018 85,450 (46,224) 17,185 17,185

2019 85,450 (46,224) 17,185 17,185

2020 85,450 (46,224) 17,185 17,185

2021 85,450 (46,224) 17,185 17,185

2022 85,450 (46,224) 17,185 17,185

2023 85,450 (46,224) 17,185 17,185

2024 85,450 (46,224) 17,185 17,185

2025 85,450 (46,224) 17,185 17,185

2026 85,450 (46,224) 17,185 17,185

2027 85,450 (46,224) 17,185 17,185

2028 85,450 (46,224) 17,185 17,185

2029 85,450 (46,224) 17,185 17,185

2030 85,450 (46,224) 17,185 17,185

2031 85,450 (46,224) 17,185 17,185

2032 85,450 (46,224) 17,185 17,185

2033 85,450 (46,224) 17,185 17,185

2034 85,450 (46,224) 17,185 17,185

2035 85,450 (46,224) 17,185 17,185

FIRR 3.4%

( ) = negative, FIRR = financial internal rate of return, Source: ADB staff estimates.

Appendix 6 35

4. The financial internal rate of return of 3.4% is below EVN’s weighted average cost of capital (estimated as 6.9% at appraisal), and compares with the forecast of 12.8% that was presented in the report and recommendation of the President.2 The lower-than-forecast financial internal rate of return is fully understandable given that tariff increases have been lower than increases in operating costs and that EVN’s financial performance has deteriorated. B. Vietnam Electricity Financial Statements, 2005–2011 5. Audited financial statements of EVN (Table A6.3) were used for the financial analysis and estimation of the returns made from investment from 2006 to 2011. The statements were prepared in accordance with International Financial Reporting Standards (IFRS).

Table A6.3: Vietnam Electricity Audited Financial Statements D billion (current prices)

Item 2005 2006 2007 2008 2009 2010 2011

Revenue

Sales of Electricity 35,594 40,942 50,359 57,469 72,726 90,910 116,115

Sales of Other Products 1,455 2,404 3,965 5,298 5,333 4,712 5,902

Related Services 86 163 184 312 484 305 390

Materials Supplied 284 260 2,522 736 476 1,023 328

Total Sales

37,274 43,766 57,003 63,732 78,975 96,944 122,724

Cost of Goods Sold 32,020 36,865 47,137 54,593 66,493 92,287 107,598

Gross Profit 5,254 6,901 9,866 9,139 12,482 4,657 15,126

Add

Investment Income 0 659 1,202 1,569 1,356 1,776 2,030

Other Operating Income 3,111 547 627 1,277 1,342 762 1,778

Less

Selling Expenses 811 1,307 1,758 2,273 2,724 2,883 3,390

General & Administration Expenses 1,784 2,114 2,594 3,010 3,883 4,437 5,220

Other Operating Expenses 127 791 1,590 10,592 6,173 8,101 15,741

Net Operating Profit

5,642 3,894 5,753 (3,890) 2,400 (8,227) (5,417)

Add

Gain on Revaluation of Property 0 0 0 0 0 3,497 0

Less

Finance Cost 1,608 1,847 2,304 3,047 3,457 6,065 9,996

Corporate Income Tax 1,195 355 859 382 376 216 264

Net Profit After Tax

2,840 1,692 2,590 (7,319) (1,433) (11,012) (15,677)

Attributable to:

Equity Holders of the Parent 2,795 1,334 2,210 (7,599) (1,915) (14,623) (13,683)

Minority Interest 44 358 380 280 482 115 (1,994)

Total 2,839 1,692 2,590 (7,319) (1,433) (14,508) (15,677)

Ratio

Gross Profit / Sales

14% 16% 17% 14% 16% 5% 12% ( ) = negative Note: prepared in accordance with International Financial Reporting Standards Source: Vietnam Electricity audited financial statements.

2 ADB. 2004. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Socialist Republic of Viet Nam for the Northern Power Transmission Sector Project. Manila.

36 Appendix 6

Table A6.4: Vietnam Electricity Balance Sheet Statements, 2005–2011 D billion (current prices)

Item 2005 2006 2007 2008 2009 2010 2011

Current Assets

Cash 9,440 12,384 13,278 11,861 18,576 25,753 23,472

Trade & Other Receivables 7,961 10,280 13,856 15,339 15,537 22,687 32,524

Net Inventories 4,424 5,478 5,696 7,358 6,718 7,140 6,338

Short-Term Investments 3,389 6,045 8,546 4,890 6,918 3,911 2,329

Other Current Assets 250 297 477 296 636 593 569

Total Current Assets 25,464 34,484 41,853 39,744 48,384 60,085 65,233

Non-Current Assets

Property, Plant & Equipment 139,601 163,484 172,828 215,771 294,430 320,527

Depreciation (71,347) (82,428) (81,203) (94,726) (113,504) (132,901)

Net Plant & Equipment 64,540 68,254 81,056 91,625 121,045 180,926 187,626

Construction in Progress 17,995 28,275 48,346 54,642 61,074 33,375 48,509

Total Non-Current Assets 89,106 103,072 142,847 164,448 205,029 241,038 257,988

Total Assets 114,569 137,556 184,700 204,192 253,413 301,123 323,221

Current Liabilities

Trade & Other Payables 11,160 13,807 17,040 20,136 26,152 34,011 41,762

Current Tax Liabilities 534 330 1,030 727 770 833 1,245

Accruals 373 651 854 1,440 3,349 5,103 6,009

Short-Term Loans 857 775 1,077 936 1,345 4,657 7,300

Current Portion borrowings 4,082 4,985 6,467 8,582 12,559 20,959 20,314

Total Current Liabilities 17,007 20,548 26,468 31,821 44,175 65,562 76,631

Non-Current Liabilities

Long-Term Borrowings 49,623 63,526 81,157 107,543 139,132 173,823 198,293

Deferred Tax Liabilities 17 22 4 53

Severance Allowance 216 199 209 243 276 313 355

Total Non-Current Liabilities 49,856 63,746 81,369 107,839 139,407 174,137 198,647

Equity

Capital 45,736 41,435 46,082 52,220 58,376 61,032 60,041

Revaluation Reserve 5,765 17,526 11,856 15,106 18,603 18,603

Funds & Reserves 3,108 8,039 4,734 2,295 2,475 2,549

Retained Earnings 1,215 906 1,527 (7,500) (11,108) (26,528) (38,330)

Minority Interest 756 2,048 3,689 3,223 5,160 5,841 5,080

Total Equity

47,707 53,262 76,863 64,533 69,830 61,424 47,943

Total Liabilities & Equity 114,569 137,556 184,700 204,192 253,413 301,123 323,221

Ratios

Current 1.5 1.7 1.6 1.2 1.1 0.9 0.9

Debt to Equity 1.0 1.2 1.1 1.7 2.0 2.8 4.1

Trade Receivables (months) 2.6 2.8 2.9 2.9 2.4 2.8 3.2 ( ) = negative Note: prepared in accordance with International Financial Reporting Standards Source: Vietnam Electricity audited financial statements.

Appendix 6 37

Table A6.5: Vietnam Electricity Cash Flow Statements 2005–2011

IFRS Cash Flow Statements Vietnam Electricity

(VND billion - current prices)

2005 2006 2007 2008 2009 2010 2011

Operating Activities

Profit Before Tax 2,839.5 1,692.5 2,590.2 (7,319.1) (1,432.7) (11,011.5) (15,677.0)

Adjustment for:

Depreciation & Amortization 9,100 9,993 10,932 12,630 14,443 17,782 22,029

Gain from Sale of Fixed Assets (19) (15) (33) (65) (33)

(Gain) Loss Foreign Exchange (2,662) 499 921 10,126 5,902 7,035 12,055

Gain from Investment Activities (543) (644) (984) (1,569) (1,356)

Finance Cost 1,608 1,847 2,304 3,047 3,457 6,065 9,996

Income Tax Expense 1,195 355 859 382 376 216 264

Increase in Provisions 47 307 230 136 (17)

11,566 14,035 16,819 17,368 21,339 14,772 28,370

Change in Working Capital (182) (258) (12) 1,071 11,462 11,082 22,041

Interest Paid (1,527) (1,706) (2,105) (6,021) (8,062) (10,282) (17,968)

Corporate Income Tax Paid (434) (669) (369) (1,116) (632) (260) (236)

Subtotal (2,144) (2,634) (2,485) (6,066) 2,769 540 3,837

Net Cash Flows Operating 9,421 11,401 14,335 11,302 24,108 15,312 32,207

Investing Activities

Capital Assets & Construction (20,906) (29,076) (32,339) (47,230) (44,954) (53,475)

Change in Investment Accounts (3,011) (3,323) 2,578 244 (441) (247)

Change in Non-Current Assets 502 (4,501) (4,292) (3,611) (2,847) 5,607

Acquire Financial Assets (1,490) (533) 244 (216) (738)

Proceeds from Investing Activities 543 644 984 1,569 1,839 1,638 2,030

Proceeds from Equitization Process 1,318 180 4,554 1,106 471 0 0

Disposal of Fixed Assets 36 15 33 157 102 111 210

Net Cash Flows from Investing (20,447) (22,577) (32,820) (31,754) (47,941) (46,708) (46,614)

Financing Activities

Additional Loans Obtained 12,323 18,988 24,941 28,098 42,143 56,369 45,877

Repayment of Loans (4,058) (4,874) (6,420) (9,282) (12,335) (17,661) (34,017)

Capital Injected 48 0 1,173 448 782 351 341

Dividend Minority Shareholders 0 0 (272) (231) (42) (486) (73)

Net Cash Flows from Financing 8,234 14,120 19,422 19,035 30,548 38,573 12,127

Net Increase in Cash (2,792) 2,944 937 (1,417) 6,715 7,178 (2,281)

Cash at Beginning of Year 12,232 9,440 12,385 13,278 11,861 18,576 25,753

Foreign Exchange Changes

Cash at End of Year 9,440 12,385 13,321 11,861 18,576 25,753 23,473

38 Appendix 7

ECONOMIC EVALUATION

A. Approach 1. The benefits of the transmission and substation subprojects are interdependent and therefore a sector or program approach to cost–benefit analysis was used to evaluate returns from the national power sector investment program. The impacts of investments during 2005–2010 are increases in national energy supply and reductions in both system losses and energy costs. 2. The economic value of the power sector investment program is the difference between the costs and benefits created by the program and the costs and benefits of the “without-program" scenario, which is the likely outcome if the planned program had not been implemented. The valuation of net benefits depends on the definition of the without-program scenario as much as it does on the actual program results. If the power sector investment program had been curtailed, the government and Electricity of Viet Nam (EVN) would probably have deferred investment in new hydropower plants in the northern region, and (i) continued operation of old, inefficient coal fired power plants in the wet season; and (ii) during the dry season either (a) increased imports and/or reduced exports of electricity, or (b) increased gas fired generation in the southern region, and transferred energy over the national transmission system to meet peak demands. 3. The economic benefit of the 2005–2010 investment program that is provided in the report and recommendation of the President was evaluated by using load flow analyses of the northern region’s power supply performance.1 For the reevaluation existing information and reports proved sufficient for a time-slice analysis.

B. Assumptions 4. The following assumptions were used in the re-evaluation:

(i) The “with” minus “without” investment is the cost of adding 1,145 megawatts (MW) of hydro capacity to displace an equivalent capacity of coal fired power generation in the wet season.

(ii) The heat rates of the affected northern coal plants are: Pha Lai 1: 3,147 kilo calories (kcal)/kilowatt-hours (kWh); Pha Lai: 22,352 kcal/kWh; Uong Bi: 3,748 kcal/kWh; and Ninh Binh: 4,155 kcal/kWh.2

(iii) Construction of new hydropower plants started in 2005 and the plants started operation between 2009 and 2011.

(iv) The annual operating cost of hydropower plants is 1.5% of investment cost. (v) Hydro power plants cost D40.7 million/kilowatt (2011 prices) on average (Power

Sector Master Development Plan). (vi) Coal (5,000 kcal/kilogram heating value) is valued at a border price of $88 per ton.3 (vii) Border price for imports and exports of peaking power is $.06/kWh. (viii) All costs and benefits are in constant 2011 border prices. (ix) Incremental consumption induced by the reduction in power prices under the with-

program scenario is valued at the actual average tariff in 2005. Incremental

1 The reevaluation differs from the economic evaluation presented in ADB. 2004. Report and Recommendation of the

President to the Board of Directors on a Proposed Loan to the Socialist Republic of Viet Nam for the Northern Power Transmission Sector Project. Manila, where the without project scenario is complete cessation of investments in the northern region power system. This is effectively a before and after approach, rather than a “with” minus “without” approach.

2 Source: Institute of Energy for the Ministry of Industry and Trade

3 Estimated median border price of coal delivered to power plants in northern region.

Appendix 7 39

consumption is estimated by assuming that electricity demand has a price elasticity of –0.3.

(x) Investments in transmission are the same for both the with- and without-program scenarios.

5. The results of calculations using the above assumptions are in Table A7.1.

Table A7.1: Calculation of Costs and Benefits

Item

2005 2006 2007 2008 2009 2010 2011

Induced consumption With Project GWh 44,921 51,350 58,438 65,890 74,391 84,562 93,280

Without Project GWh 44,921 52,172 59,675 69,841 74,620 82,967 92,430

Incremental Consumption GWh 0 0 0 0 196 826 850

Willingness to Pay D[2011] / kWh 1,611 1,611 1,611 1,611 1,611 1,611 1,611

Incremental Benefit dong billion 0 0 0 0 316 826 1,369

Base Load Costs Coal Plant Capacity MW

250 1,145 1,145

Avoided Plant Load % (wet season operation) 35% 35% 35%

Avoided Generation GWh

828 3,791 3,791

Heat Rate kcal / kWh

3,400 3,000 2,700

Avoided Thermal Energy Gcal

2.8 11.4 10.2

Avoided Coal Tons 5,000 kcal / kg

0.6 2.3 2.0

Coal Cost Power Station $[2011] / ton

88 88 88

Fuel Cost Saving - Base dong billion 0 0 0 0 865 3,691 3,597

Peaking Energy Costs Cost of Peaking Power D[2011] / kWh 1,198 1,198 1,198

Cost Peaking Power dong billion

525 2,403 2,403

Incremental Investment D [2011] billion 1,829 9,293 12,568 11,653 6,549 0

Gcal = Giga-calorie, GWh = Gigawatt-hour, KWh = kilowatt-hour MW = megawatt Source: ADB staff consultant estimates

C. Economic Cost and Benefit Streams 6. The resulting benefit and cost streams used to calculate the economic internal rate of return (EIRR) are in Table A7.2. The net benefits achieved in 2011 are assumed to be maintained for the following 25 years.

40 Appendix 7

Table A7.2: Economic Cost and Benefit Streams D billion (2011 prices)

Investment

Costs Operating

Costs

Cost Savings (Coal)

Cost Savings (Peaking Power)

Benefits Induced

Consumption Net Benefits

2005 0 0 0 0 0 0

2006 (915) 0 0 0 0 (915)

2007 (9,293) 0 0 0 0 (9,293)

2008 (12,568) 0 0 0 0 (12,568)

2009 (11,653) (516) 865 525 316 (10,464)

2010 (6,549) (615) 3,691 2,403 826 (244)

2011 0 (615) 3,597 2,403 1,369 6,755

2012 0 (615) 3,597 2,403 1,369 6,755

2013 0 (615) 3,597 2,403 1,369 6,755

2014 0 (615) 3,597 2,403 1,369 6,755

2015 0 (615) 3,597 2,403 1,369 6,755

2016 0 (615) 3,597 2,403 1,369 6,755

2017 0 (615) 3,597 2,403 1,369 6,755

2018 0 (615) 3,597 2,403 1,369 6,755

2019 0 (615) 3,597 2,403 1,369 6,755

2020 0 (615) 3,597 2,403 1,369 6,755

2021 0 (615) 3,597 2,403 1,369 6,755

2022 0 (615) 3,597 2,403 1,369 6,755

2023 0 (615) 3,597 2,403 1,369 6,755

2024 0 (615) 3,597 2,403 1,369 6,755

2025 0 (615) 3,597 2,403 1,369 6,755

2026 0 (615) 3,597 2,403 1,369 6,755

2027 0 (615) 3,597 2,403 1,369 6,755

2028 0 (615) 3,597 2,403 1,369 6,755

2029 0 (615) 3,597 2,403 1,369 6,755

2030 0 (615) 3,597 2,403 1,369 6,755

2031 0 (615) 3,597 2,403 1,369 6,755

2032 0 (615) 3,597 2,403 1,369 6,755

2033 0 (615) 3,597 2,403 1,369 6,755

2034 0 (615) 3,597 2,403 1,369 6,755

2035 0 (615) 3,597 2,403 1,369 6,755

EIRR 14.7%

( ) = negative, EIRR = economic internal rate of return, Source: ADB staff consultant.

7. The resulting EIRR of 14.7% confirms that the power sector investment program is economically beneficial. The detailed study by the Stockholm Environmental Institute in 2009 estimated that if the environmental benefits of reduced use of fossil fuels are taken into account, the program EIRR increases by 1% to 2%. 8. The reevaluation differs from the economic evaluation presented in the report and recommendation of the President (footnote 1), where the without-project scenario is a complete cessation of investments in the northern region power system. This is a before and after approach rather than a “with” minus “without” approach, and resulted in an EIRR of 40%. The high return rests on what could be regarded as the rather extreme assumption of no investment in the absence of the program.

Appendix 8 41

PROJECT OUTPUTS

Subprojects Planned Actual

I. Subprojects appraised before loan approval

Capacity Completion Date

Capacity Completion Date

Part A: Expansion and upgrading of the 500 kV and 220 kV transmission system

Creation of Van Tri 220 kV substation 250 MVA Jun-2008 250 MVA Jul-2011

Upgrading of Nghi Son 220 kV substation 125 MVA Jun-2008 125 MVA Oct-2009

Upgrading of Dong Hoa 220 kV substation 250 MVA Jun-2008 250 MVA Nov-2009

Upgrading of Trang Bach 220 kV substation 125 MVA Jun-2008 125 MVA Oct-2009

Upgrading of Vat Cach 220 kV substation 125 MVA Jun-2008 125 MVA May-2009

Upgrading of Nam Dinh 220 kV substation 125 MVA

Not selected

Upgrading of Thai Binh 220 kV substation 125 MVA Jun-2008 125 MVA May-2009

Creation of Quang Ninh 500/220 kV substation

500 kV: 450 MVA

220 kV: 250 MVA

Jun-2008 500 kV: 450 MVA

220 kV: 125 MVA Dec-2009

Upgrading of Thuong Tin 500 kV substation 500 kV 52 MVAr shunt

reactor Jun-2008

500 kV 52 MVAr shunt reactor

Dec-2009

Creation of Thuong Tin - Quang Ninh 500 kV transmission line

2 x 151 km Jun-2008 2 x 151 km Dec-2009

Mandatory Spares 3 x 150 MVA 500 kV auto-transformers

Jun-2009 Not selected

Part B: Upgrading and expansion of the SCADA system

Phase 1 (as revised) 121 RTUs Apr-2008 121 RTUs Nov-2011

Phase 2 (as revised ) 69 RTUs Jun-2009 69 RTUs May-2012

II. Subprojects appraised during implementation

Creation of Tuyen Quang–Yen Bai 220 kV transmission line

2 x 117 km Jun-2009 2 x 117 km 2008

Creation of Ban La–Vinh 220 kV transmission line

2 x 150 km Jun-2009 2 x 174 km Mar-2010

Creation of Son La 220 kV substation and connection

125 MVA Jun-2009 125 MVA May-2011

Creation of Phu Ly 220 kV Substation and Connection

125 MVA Jun-2009 125 MVA Aug-2009

Creation of Hai Duong 220 KV Substation 125 MVA Jun-2009 125 MVA Mar-2011

Creation of Lao Cai 220 kV Substation 125 MVA Jun-2009 125 MVA Apr-2011

Creation of Hai Phong–Dinh Vu 220 kV transmission line

2 x 17 km Jun-2009 2 x 16 km Aug-2011

Creation of Hai Phong–Vat Cach 220 kV transmission line

2 x 19 km Jun-2009 2 x 19 km Aug-2009

Creation of Van Tri–Soc Son 220 kV transmission line

2 x 25 km Jun-2009 2 x 26.5 km Dec 2012

Upgrading of Do Luong 220kV Substation 125 MVA Dec-2009

Primary and secondary,

Dec-2011

42 Appendix 8

SCADA, and tele-communication equipment for 220/110 kV connection

Yen Bai–Lao Cai 220 kV transmission line Jun-2009 Not Selected

Van Tri–Chem 220 kV transmission line Jun-2009 Not Selected

Hai Duong–Phu Ly 220/110 kV transmission line

Jun-2009 Not Selected

km = kilometer , kV = kilovolt , MVA = megavolt-amperes , MVAr = megavolt-amperes reactive, RTU = remote terminal unit , SCADA = system control and data acquisition , Note: The “not selected” subprojects were completed under other programs. Source: Northern Power Project Management Board and National Load Dispatch Center.

PROJECT IMPLEMENTATION SCHEDULE

43

A

pp

en

dix 9

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

1 Loan Approval - Plan and Actual

2 Loan Effectivity - Plan and Actual � ��

3 Consultant Recruitment IMO - Plan

3 Consultant Recruitment IMO - Actual

4 Detailed Design - Plan

4 Detailed Design - Actual

5 RP Prepared Approved & Implemented - Plan

5 RPs Prepared Approved & Implemented - Actual

6 Resettlement Monitoring - Plan

6 Resettlement Monitoring - Actual

7 Prepare Bid Documents - Plan

7 Prepare Bid Documents - Actual

8 Review by EVN, ADB - Plan

8 Review by EVN, ADB - Actual

9 Tenders Issued - Plan

9 Tenders Issued - Actual

10 Tendering Period - Plan

10 Tendering Period Actual

11 Bid Evaluation by EVN - Plan

11 Bid Evaluation by EVN - Actual

12 Bank Approval - Plan

12 Bank Approval - Actual

13 Contracts Negotiated and Awarded - Plan

13 Contracts Negotiated and Awarded - Actual

14 Manufacturing and Shipping - Plan

14 Manufacturing and Shipping - Actual

15 First Delivery to EVN - Plan �15 First Delivery to EVN - Actual

16 Implementation / Tests/ Commissioning - Plan

16 Implementation/Tests Commissioning - Actual

17 Loan Closing Data - Plan �17 Loan Closing Data - Actual ��

200820062005 2009

Plan & Actual �

Actual

Plan

ID

��

Actual Plan

Plan

Actual

2010 2011 2012Task

2004 2007

44 Appendix 10

LAND ACQUISITION AND RESETTLEMENT 1. Information used to summarize land acquisition and resettlement activities under the project has largely been extracted from the March 2012 “Final Evaluation Report” of the independent monitoring consultant (IMO)1. This report details how households affected by the project were treated. A. Introduction 2. Twelve of the 19 subprojects implemented under part A of the project affected residents living in 12 provinces and city areas in the north of Viet Nam. The remaining seven subprojects did not affect any householders as they were within the boundaries of existing substations. The 12 provincial and city administrations (local authorities) are: Ha Noi city, Hung Yen province; Hai Duong province; Bac Ninh province; Quang Ninh province; Hai Phong city; Tuyen Quang province; Yen Bai province; Phu Tho province; Nghe An province; Ha Nam province; and Son La province. All 12 subprojects affected householders to varying degrees. Separate resettlement plans were prepared and implemented for each subproject. 3. The objective of each resettlement plan was to identify the effects of subprojects on residents, and develop compensation and/or resettlement plans that mitigate the adverse impacts of subproject implementation. The policy was to establish compensation (for loss of land and other assets) and support requirements (for loss of income) that will restore and improve the lives of affected peoples, such that the conditions they face are equal to or better than those they experienced prior to the project. 4. Land acquisition and resettlement under the project were made in accordance with the laws of Viet Nam and the safeguard policies and procedures of the Asian Development Bank (ADB), most notably ADB’s Involuntary Resettlement Policy (1995). The tools available to mitigate adverse impacts were (i) compensation to replace lost physical and non-physical assets, (ii) assistance for relocation, and (iii) support assistance for rehabilitation. Each resettlement plan specified the entitlements for the identified impacts, and all were subject to endorsement and acceptance by both the relevant local authorities and ADB. B. Scope of Land Acquisition and Resettlement 5. By March 2012 the requirements for resettlement and for payment of compensation had been finalized for all 12 subprojects. A total of 6,302 affected households were affected by the project, with $12.58 million in compensation paid. Of the affected households, 5,741 were marginally affected, and 309 seriously affected (they received compensation, but were not relocated). A further 252 affected households were relocated. The breakdown by subproject is presented in Table A10.

1 The Center for Rural Communities, Research and Development

Appendix 10 45

Table A10: Affected Households and Compensation by Subproject

No

Sub-project

Total No. of

AHs

By Impact

Compensation (D)

Marginally Affected

Households

Severely AHs

Relocated Lost > 10%

1 Thuong Tin–Quang Ninh 500 kV TL

2090 1,674 216 200 156,674,728,697

2 Tuyen Quang–Yen Bai 220 kV TL 1409 1,397 10 2 6,352,499,608

3 Ban La–Vinh 220Kv transmission line

1525 1,497 18 10 11,566,716,660

4 Hai Duong 200 kV substation 31 7 0 24 930,417,200

5 220 kV substations at Vat Cach 27 25 0 2 4,197,242,000

6 Van Tri 220 kV substation 91 44 0 47 4,197,242,000

7 Son La 220 kV substation 148 140 0 8 593,814,007

8 Phu Ly 220 kV SS/branch connection

187 181 0 6 793,801,000

9 Hai Phong–Dinh Vu 220 kV TL 116 116 0 0 4,183,563,650

10 Hai Phong–Vat Cach 220 kV TL 316 308 8 0 6,572,739,670

11 Do Luong 220 kV substation 74 64 0 10 1,501,726,400

12 Van Tri–Soc Son 220 kV TL 288 288 0 0 10,420,591,247

Total 6,302 5,741 252 309 207,985,082,139

AH = affected household, kV = kilovolt, SS = substation, TL = transmission line Note: a household is classified “severely affected” if it loses more than 10% of its land. Source: Final Evaluation Report of Independent Monitoring Organization

C. Information Dissemination and Public Consultation 6. Public consultation procedures for each subproject involved the following schedule of public community meetings and follow-up meetings with individual affected households. 7. First public community meeting. The meeting provided information on the subproject, its expected impacts on the community, the compensation rights of affected households, complaints and grievance procedures, resettlement procedures, location and design of planned resettlement site, responsibilities of the subproject management and contractors, and the implementation schedule. 8. Second public community meeting. The meeting was scheduled after completion of detailed measurements and preparation of an inventory of affected households. The meeting provided affected households with the opportunity to seek clarifications and inspect the inventory, which was also posted at the head office of the commune peoples’ committee. 9. Third public community meeting. The meeting took place 2 weeks after the compensation prices had been distributed to affected households and was held to respond to requests for clarification from affected households. 10. Individual affected household meetings with the resettlement compensation committee. The committee met with people who would be seriously affected and/or were classified as “vulnerable”. The committee also met with any affected households that requested rehabilitation support.

46 Appendix 10

11. Individual affected households’ compensation payment meetings. Affected households were notified by mail and through local broadcasts as to the location, time and procedures for receiving compensation payments and support. 12. Contractor meetings. Contractors were required to make themselves available for meetings with local authorities should new issues arise during construction. D. Detailed Measurement Survey Process 13. The independent monitoring organization (IMO) reported on the accuracy of the inventory of affected assets and on the payment of compensation, both unit prices and total amounts paid. This process identified a relatively small proportion of discrepancies that had been caused by either errors in the initial inventory process or by minor design changes. These discrepancies were corrected and additional compensation paid where necessary. E. Compensation for Assets 14. Compensation prices were managed by district resettlement committees, which followed the prescriptions of the resettlement plans that had been prepared by the Northern Power Project Management Board and endorsed by ADB. The IMO reviewed unit prices and concluded that they were in accordance with replacement costs in the local market. Further, surveys show that 86.1% of affected households were satisfied with their compensation, with 8.5% partially satisfied and 5.4% dissatisfied. Compensation was broken into two payments; the first (70%) and paid in advance of site clearance, with 30% paid after the site was cleared and made available for construction. F. Support Payments for Loss of Income 15. Support payments were provided for restoration of income and living standards for resettled persons using a set of norms based on costs of temporary accommodation and number of persons per household. Additional allowances were made for vulnerable people such as those living in households headed by women. G. Issues and Lessons 16. During project preparation NPPMB underestimated the extensive consultant services that would be required to resolve the safeguard requirements of the subprojects. The number of affected households was larger and the safeguard requirements of ADB more demanding than NPPMB expected. The safeguard requirements mainly concerned fixing and coming to agreement with local authorities regarding compensation for householders who suffered land acquisition, loss of income, and/or resettlement. NPPMB did not deal efficiently with the issues that arose in what were charged circumstances. 17. The national resettlement consultant and IMO consultant also struggled to deal with the expanded number of affected households. Their performance was not always timely or consistent and shortcomings in their services resulted in insufficient budgetary provisions for resettlement of affected households. The major oversight was the failure in the original data gathering phase to obtain various socioeconomic data, including information on the legal status of affected land holdings; householders’ characteristics (whether they were vulnerable or not, and their source and level of income); and householders’ resettlement preferences, including forms of compensation and support . These shortcomings compounded NPPMB’s problems when substandard reports sent to ADB for endorsement were returned and fieldwork had to be revisited and reports reworked and resubmitted.

Appendix 10 47

18. NPPMB applied a two-phased approach to preparation and implementation of resettlement plans on the longer transmission line subprojects that often passed through the jurisdiction of multiple local authorities. In such instances the subprojects and their respective resettlement plans were sectionalized and implemented in phases so that foundations for towers could be begin to be laid on sites that had been turned over to NPPMB. H. Conclusions 19. Although the land acquisition and resettlement procedures proved to be much more extensive and lengthier than expected at appraisal, the requirements regarding adequate compensation for and mitigation of adverse impacts on incomes, including those of vulnerable people, have been achieved. Surveys by the IMO show there is a high degree of satisfaction on the part of affected households with the outcomes.

48 Appendix 11

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Criteria Assessment Rating

(0–3) Weight

(%) Weighted Rating

Relevancea Highly relevant 3 20 0.6

Effectivenessb Less effective 1 30 0.3

Efficiencyc Efficient 3 30 0.9

Sustainabilityd Likely 2 20 0.4

Overall Rating

Successful

2.2

a Project objectives and outputs were relevant to the strategic objectives of the government and the Asian Development Bank.

b Project did not fully achieved its outcome. c Project achieved objectives in an efficient manner. d Project benefits and development impacts are sustainable. Source: Asian Development Bank.

Rating Frame Score Range

(a) Highly Successful > or = 2.7

(b) Successful > or = 1.6 and < 2.7

(c) Partially Successful > or = 0.8 and < 1.6

(d) Unsuccessful < 0.8