Completion Report - Asian Development Bank...1 September 2008 28 July 2015 Nu1.00 = $0.023 $0.016...
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Completion Report Project Number: 37399-013 Loan Numbers: 2463, 2464, and 3034 Grant Numbers: 0119 and 0141 August 2017 Bhutan: Green Power Development Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011
Transcript of Completion Report - Asian Development Bank...1 September 2008 28 July 2015 Nu1.00 = $0.023 $0.016...
Completion Report
Project Number: 37399-013 Loan Numbers: 2463, 2464, and 3034 Grant Numbers: 0119 and 0141 August 2017
Bhutan: Green Power Development Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011
CURRENCY EQUIVALENTS
Currency Unit – ngultrum (Nu)
At Appraisal At Project Completion 1 September 2008 28 July 2015
Nu1.00 = $0.023 $0.016 $1.00 = Nu43.95 Nu64.20
ABBREVIATIONS
ADB – Asian Development Bank ADF – Asian Development Fund BPC – Bhutan Power Corporation CDTA – capacity development technical assistance CO2 – carbon dioxide DGPC – Druk Green Power Corporation DHPC – Dagachhu Hydro Power Corporation DOE – Department of Energy EIRR – economic internal rate of return FIRR – financial internal rate of return GWh – gigawatt-hour MW – megawatt OCR – ordinary capital resources PPP – public–private partnership SDR – special drawing right TA – technical assistance
NOTES In this report, "$" refers to United States dollars, “₹” refers to Indian rupees, and “€” refers to euros.
Vice-President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director P. Wijayatunga, Energy Division, SARD Team leader S. Kurimoto, Energy Specialist, SARD Team members H. Austria, Project Officer, SARD
M.C. Lantican, Senior Project Assistant, SARD J. Son, Energy Economist, SARD
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 i
I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 1
A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 8
III. EVALUATION OF PERFORMANCE 9
A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 12
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13
A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14
APPENDIXES
1. Design and Monitoring Framework 15 2. Contribution to the ADB Results Framework 18 3. Status of Compliance with Loan Covenants (Dagachhu Hydropower) 19 4. Compliance with Environmental and Social Requirements 31 5. Status of Compliance with Loan Covenants (Rural Electrification) 33 6. Technical Assistance Completion Report 41
BASIC DATA
Loan 2463 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
Bhutan 2463 Green Power Development Project Kingdom of Bhutan Druk Green Power Corporation $51,000,000 1652
B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower
10 July 2008 23 July 2008 15 September 2008 17 September 2008 29 October 2008 13 February 2009 13 May 2009 4 May 2009 0 31 December 2013 2 April 2014 0 Determined in accordance with the Asian Development Banks’s London interbank offered rate-based lending facility 30 5 Terms same as the main loan agreement except that the borrower takes foreign exchange risk Dagachhu Hydro Power Corporation
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9. Disbursements a. Dates
Initial Disbursement
25 September 2009
Final Disbursement
22 November 2013
Time Interval
50 months
Effective Date
4 May 2009
Original Closing Date
31 December 2013
Time Interval
55 months
b. Amount ($ million)
Category or Subloan
Original Allocation
Last Revised Allocation
Amount Canceled
Net Amount Available
Amount Disbursed
Undisbursed Balance
01 Works 45.50 50.11 0.00 50.11 50.11 0.00
02 Interest and commitment charges
5.50 0.89 0.00 0.89 0.89 0.00
03 Unallocated 0.00 0.00 0.00 0.00 0.00 0.00
Total 51.00 51.00 0.00 51.00 51.00 0.00
10. Local Costs (Financed)—not applicable to Loan 2463
- Amount - Percent of Local Costs - Percent of Total Cost
Loan 2464 A. Subsidiary Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report
Number
Bhutan 2464 (SF) Green Power Development Project Kingdom of Bhutan Druk Green Power Corporation SDR18,832,000 1652
B. Subsidiary 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
10 July 2008 23 July 2008 15 September 2008 17 September 2008 29 October 2008 13 February 2009
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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) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower
13 May 2009 4 May 2009 0 31 December 2013 2 April 2014 0 3.15% 32 8 Terms same as the main loan agreement except that the borrower takes foreign exchange risk Druk Green Power Corporation
9. Disbursements a. Dates
Initial Disbursement
14 October 2009
Final Disbursement
27 November 2013
Time Interval
50 months
Effective Date
4 May 2009
Original Closing Date
31 December 2013
Time Interval
55 months
b. Amount (SDR million)
Category or Subloan
Original Allocation
Last Revised Allocation
Amount Canceled
Net Amount Available
Amount Disbursed
Undisbursed Balance
Druk Green Power Corporation’s investment in Dagachhu Hydro Power Corporation
18.83 18.83 0.00 18.83 18.83 0.00
Total 18.83 18.83 0.00 18.83 18.83 0.00
10. Local Costs (Financed)—not applicable to Loan 2464 - Amount - Percent of Local Costs - Percent of Total Cost
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Loan 3034 A. Additional Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report
Number
Bhutan 3034 (SF) Green Power Development Project Kingdom of Bhutan Druk Green Power Corporation SDR25,689,000 1652
B. Additional 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) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower
2 July 2013 9 July 2013 20 August 2013 20 August 2013 30 September 2013 2 October 2013 30 December 2013 9 October 2013 0 31 December 2014 28 July 2015 1 1.0% per annum during grace period and 1.5% per annum thereafter 32 8 Relending terms the same as the main loan agreement except the interest rate is 10% and the borrower assumes foreign exchange risk Dagachhu Hydro Power Corporation
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9. Disbursements a. Dates
Initial Disbursement
6 November 2013
Final Disbursement
1 February 2015
Time Interval
15 months
Effective Date
9 October 2013
Original Closing Date
31 December 2014
Time Interval
14 months
b. Amount (SDR million)
Category or Subloan
Original Allocation
Last Revised Allocation
Amount Canceled
Net Amount Available
Amount Disbursed
Undisbursed Balance
01 Works 21.47 22.68 0.00 22.68 22.58 0.11
02 Finance charges
1.91 1.91 0.00 1.91 0.20 1.71
03 Unallocated 2.30 1.09 0.00 1.09 0.00 1.09
Total 25.69 25.69 0.00 25.69 22.78 2.91a a The balance was canceled on 28 July 2015.
10. Local Costs (Financed)—not applicable to Loan 3034
- Amount - Percent of Local Costs - Percent of Total Cost Grant 0119 A. Grant Identification 1. Country 2. Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report
Number
Bhutan 0119 (SF) Green Power Development Project Kingdom of Bhutan Bhutan Power Corporation $25,280,000 1652
B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement
10 July 2008 23 July 2008 15 September 2008 17 September 2008 29 October 2008 13 February 2009
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5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions
13 May 2009 21 April 2009 0 31 December 2013 28 February 2015 1
7. Disbursements a. Dates
Initial Disbursement
30 July 2009
Final Disbursement
20 November 2014
Time Interval
64 months
Effective Date
21 April 2009
Original Closing Date
31 December 2013
Time Interval
57 months
b. Amount ($ million)
Category or Subloan
Original Allocation
Last Revised Allocation
Amount Canceled
Net Amount Available
Amount Disbursed
Undisbursed Balance
01 Works 1.31 1.31 0.00 1.31 1.12 0.19
02 Equipment 0.33 0.33 0.00 0.33 0.18 0.15
03 Materials 20.18 23.18 0.00 23.18 22.70 0.48
04 Unallocated 3.46 0.46 0.00 0.46 0.00 0.46
Total 25.28 25.28 0.00 25.28 24.00 1.27a a The balance was canceled on 28 February 2015.
8. Local Costs (Financed)—not applicable for Grant 0119 - Amount - Percent of Local Costs - Percent of Total Cost
Grant 0141 A. Grant Identification 1. Country 2. Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report
Number
Bhutan 0141 Green Power Development Project Kingdom of Bhutan Ministry of Economic Affairs $1,000,000 1652
B. Grant Data 1. Appraisal – Date Started – Date Completed
10 July 2008 23 July 2008
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2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Loan Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions
15 September 2008 17 September 2008 26 December 2008 13 February 2009 13 May 2009 21 April 2009 0 31 December 2013 2 April 2014 0
7. Disbursements a. Dates
Initial Disbursement
20 July 2009
Final Disbursement
28 September 2012
Time Interval
39 months
Effective Date
21 April 2009
Original Closing Date
31 December 2013
Time Interval
57 months
b. Amount ($ million)
Category or Subloan
Original Allocation
Last Revised Allocation
Amount Canceled
Net Amount Available
Amount Disbursed
Undisbursed Balance
01 Capacitor, controllers, and LED
0.56 0.56 0.00 0.56 0.64 (0.08)
02 Photovoltaic module
0.10 0.10 0.00 0.10 0.06 0.04
03 Transportation and installation
0.05 0.05 0.00 0.05 0.00 0.05
04 Consulting services
0.22 0.22 0.00 0.22 0.22 0.00
05 Contingencies 0.07 0.07 0.00 0.07 0.00 0.07
Total 1.00 1.00 0.00 1.00 0.92 0.08a
( ) = negative, LED = light emitting diode. a The balance was canceled on 2 April 2014.
10. Local Costs (Financed)—not applicable for Grant 0141 - Amount - Percent of Local Costs - Percent of Total Cost
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Loans 2463, 2464, and 3034 Grants 0119 and 0141
A. Project Data
1. Project Cost ($ million)
Cost Appraisal Estimate Actual
Foreign exchange cost
1. Dagachhu Hydropower 2. Rural electrification
Subtotal
160.0 24.7
184.7
187.6 23.7
211.3
Local currency cost
1. Dagachhu Hydropower 2. Rural electrification
Subtotal
41.4
8.3 49.7
47.0
8.0 55.0
Total 234.5 266.3
2. Financing Plan ($ million)
Cost Appraisal Estimate Actual
ADB
OCR loan Hard-term ADF loan Hard-term ADF loan (additional) ADF grant ACEF under CEFPFa
Subtotal
51.0 29.0
25.3
1.0
106.3
51.0 29.4 35.1 24.1
0.9
140.5
Austrian Export Credit Agency
Government and Public Sponsorsb
Tata Power Company
Total
55.5
51.7
21.0
234.5
54.1
50.2
21.5
266.3
ADB = Asian Development Bank, ACEF = Asian Clean Energy Fund, ADF = Asian Development Fund, CEFPF = Clean Energy Financing Partnership Facility, OCR = ordinary capital resources. a The ACEF was established by the Government of Japan, and is administered by ADB. b Includes the Government of Bhutan, Druk Green Power Corporation, and National Pension
and Provident Fund. Sources: Asian Development Bank estimates; Bhutan Power Corporation estimates; Dagachhu Hydro Power Corporation estimates.
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3. Cost Breakdown by Project Component ($ million)
Component Appraisal Estimate Actual
1. Regional Clean Power Trade (Dagachhu Hydropower)
a. Construction Costs i. Civil works ii. Electrical and mechanical equipment iii. Infrastructure development: road and power lines iv. Administration, supervision, and preoperative
costs
b. Interest during construction
c. Export Credit Guarantee
d. Contingencies
Subtotal (1)
2. Renewable Energy Access for the Poor
(Rural Electrification)
a. On-grid subcomponent i. Materials ii. Civil works (delivery, erection, and installation) iii. Tools, equipment, administrative, and overhead
expenses
b. Off-grid subcomponent i. Materials ii. Administrative and overhead expenses iii. Consulting services
c. Contingencies
Subtotal (2)
80.2 59.2 13.9
8.6
14.4
5.1
20.1
201.5
20.2
5.2 2.0
0.7 0.1 0.2
4.5
33.0
103.4
84.2 14.3
8.2
18.5
5.9
0.0
234.6
22.7
5.6 2.5
0.6 0.1 0.2
0.0
31.7
Total 234.5 266.3
4. Project Schedule
Item Appraisal Estimate Actual
1. Dagachhu Hydropower Component
1.1 Endorsement and disclosure of the resettlement plan to affected people
1.2 Advance procurement 1.3 Endorsement and disclosure of the summary initial
environmental examination 1.4 Completion of physical land acquisition and
compensation with revised rates 1.5 Contract award 1.6 Physical construction completion 1.7 Operation
2. Rural Electrification Component
2.1 Advance procurement 2.2 Contract award 2.3 Physical construction completion
3. Promotion of Clean Power Export Development
(Capacity Development Technical Assistance)
3.1 Consultant selection 3.2 Contract award 3.3 Consultant fielding 3.4 Completion of capacity development technical
assistance
June 2008
July 2008
September 2008
Q4 2008
Q1 2009 2012
Q2 2012
Q4 2008 Q1 2009
2012
Q4 2008 Q1 2009 Q1 2009 Q4 2010
June 2008
July 2008 July 2008
September 2011
July 2009
February 2015 February 2015
January 2009 May 2009
August 2013
December 2008 March 2009 March 2009
December 2011
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5. Project Performance Report Ratings
Implementation Period
Ratings
Development Objectives
Implementation Progress
From 29 October 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 On Tracka From 1 January 2012 to 31 December 2012 On Tracka From 1 January 2013 to 31 December 2013 On Tracka From 1 January 2014 to 31 December 2014 On Tracka From 1 January 2015 to 28 July 2015 On Tracka
a Based on new ratings for project performance from 2011 using e-operations.
B. Data on Asian Development Bank Missions
Name of Mission
Date
No. of Persons
No. of Person-Days
Specialization of Membersa
Fact-finding 5–23 May 2008 7 Up to 70b a, b, c, d Appraisal 10–23 Jul 2008 5 50 a, b, e Consultation 4–13 Dec 2008 1 7 a Inception 16–19 Feb 2009 3 12 a, f Review 24 Aug–7 Sep 2009 2 20 a, b Review 4–13 Nov 2009 3 24 a Review 12–19 Oct 2010 2 10 a Review 8–14 Mar 2011 3 15 a, f Review 14–22 May 2012 2 14 g Review 26 Feb–8 Mar 2013 3 27 a, g Fact-finding and review 2–9 July 2013 3 15 a, g Inception and review 7–15 Oct 2013 2 12 g Review 28 Apr–1 May 2014 3 12 a, g
a a = energy specialist, b = environmental specialist, c = economist, d = social development specialist, e = counsel, f = project officer, g = portfolio management specialist.
b It is not known if all mission members were in the country for the whole duration, although it is unlikely that this was the case.
I. PROJECT DESCRIPTION
1. The mountainous terrain and the network of rivers and streams in Bhutan provide an abundant potential source of clean and renewable energy. The Green Power Development Project aimed to support the strategic objective of the government to develop these resources for hydropower production in an environmentally acceptable manner. The project had two components: (i) regional clean power trade, and (ii) renewable energy access for the poor. The first component supported the generation of electricity from renewable hydroelectric resources for export to India, and the second component provided access to electricity, generated from renewable resources, to households and other public facilities such as schools, health clinics, and monasteries in remote rural areas. 2. Under the first component, the Dagachhu hydropower development—a 126-megawatt (MW) run-of-the-river type hydroelectric power plant—was constructed and is exporting power from Bhutan to India through the existing transmission grid. The Asian Development Bank (ADB) provided this component with three loans totaling $115.5 million. The project was the first public–private partnership (PPP) in the Bhutanese power sector and was also the world’s first cross-border project to earn Certified Emission Reduction credits 1 under the Clean Development Mechanism defined in the Kyoto Protocol. 3. The second rural electrification component has improved access to electricity in rural areas. It included two subcomponents. The first, funded by a $24 million ADB grant from the Asian Development Fund (ADF), has extended the high-voltage distribution network and provided a grid electricity connection to 9,586 households. The second, funded by a $1 million grant from the Asian Clean Energy Fund, has provided off-grid solar electricity to 116 remote public institutions in locations where access to grid electricity is difficult. A feature of this subcomponent is its use of emerging technologies, including super-bright light-emitting diode lighting and lithium-ion batteries and capacitors for energy storage.
II. EVALUATION OF DESIGN AND IMPLEMENTATION
A. Relevance of Design and Formulation
4. The Green Power Development Project was implemented to help the Government of Bhutan accelerate its two energy sector objectives of hydropower export and rural electrification. In the Tenth Five-Year Plan, 2008–2013,2 the government set targets of (i) developing a total of 10,000 MW of hydropower generation by 2020, and (ii) expanding rural electrification coverage to 100% by the end of 2013. The project was thus designed to (i) increase hydropower exports to India and related revenues for Bhutan; and (ii) extend electricity supply to unelectrified rural households throughout Bhutan in the form of grid connections where possible, or solar systems in remote areas where a grid connection is not feasible. The project was also in line with ADB’s country partnership strategy,3 which aimed to support the government’s priorities as well as the enhancement of cross-border energy trade in the region.
1 Certified Emission Reduction credits are tradable carbon credits issued by the Clean Development Mechanism
(CDM) Executive Board for emission reductions achieved by registered CDM projects under the rules of the Kyoto Protocol.
2 Gross National Happiness Commission. Royal Government of Bhutan. 2009. Tenth Five-Year Plan, 2008–2013. 3 ADB. 2005. Country Strategy and Program (2006–2010): Bhutan. Manila; ADB. 2014. Country Strategy Program
(2014-2018): Bhutan. Manila.
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5. To enable private sector participation in this first hydropower project under PPP modality in Bhutan, the government issued the Sustainable Hydropower Development Policy in 2008. The government also established the Druk Green Power Corporation (DGPC) as a state enterprise to oversee the development of overall hydropower projects in Bhutan. Along with the PPP’s policy formation, the Dagachhu Hydro Power Corporation (DHPC) was also incorporated as a DGPC’s subsidiary, and joint-ventured with Tata Power Company, one of India’s premier private companies. The Dagachhu hydropower plant was designed to mitigate climate change under the Clean Development Mechanism (CDM). A capacity development technical assistance (CDTA)4 was attached to the project to enhance the capacity of DGPC as the holding company that was to strategically manage the development of hydropower projects in Bhutan. 6. To address poverty alleviation, the Government of Bhutan established a goal of electrifying all rural households during the period covered by the Tenth Five-Year Plan, 2008–2013. Since 1995, ADB has supported Bhutan in expanding rural electrification through five consecutive loan and grant projects, including this project and another that is currently ongoing,5 covering almost 37,000 households, or 43% of rural households in Bhutan. As of December 2016, Bhutan had electrified more than 99% of households through on-grid connections or installation of off-grid solar systems, using its own effort along with support from donors, including ADB and the Japan International Cooperation Agency. The off-grid electrification component piloted emerging technologies like lithium-ion capacitors, super charge lithium-ion batteries, and high-brightness light-emitting diode lights. Lithium-ion batteries and capacitors are lighter and have a shorter charge time, longer life, and lower environmental impact than traditional lead-acid batteries used in solar applications, and thus have the potential to mitigate many of the shortcomings in the use of solar energy for rural electrification. 7. On 25 July 2013, the Development Impact Honors Program of the United States Department of the Treasury awarded the project for its excellence, based on innovative solutions and achievements through the PPP formation and energy access improvement. B. Project Outputs
8. The Dagachhu power plant was commissioned in March 2015 and is now fully operational. The installed capacity was designed at 114 MW at appraisal, but it was optimized to 126 MW during implementation. As a result, the designed annual generation was increased from 500 gigawatt-hours (GWh) to 515 GWh. The transmission line from the plant to the grid was constructed by December 2012. In 2015, exported power from Bhutan to India increased by 497 GWh compared to 2014. The status of project outputs and outcome in the design and monitoring framework is described in Appendix 1, and the contribution to the ADB results framework is shown in Appendix 2. The CDTA (footnote 4) enhanced the capacity of DGPC through a corporate strategic plan, corporate guidelines and manuals, enterprise resources planning information systems, and skills development programs. 9. The on-grid rural electrification achieved 9,586 on-grid connections against the target of 8,767. For the off-grid subcomponent, the number of connections achieved was slightly less than the appraisal target because more connections were shifted to on-grid connections. Some of the larger institutions required more than one solar system, so a total of 163 discrete off-grid systems
4 Attached to ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Loans,
Asian Development Fund Grant, Technical Assistance Grant, and Administration of Grant to Bhutan for the Green Power Development Project. Manila (TA 7157-BHU).
5 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Grant to Bhutan for the Rural Renewable Energy Development Project. Manila (Grant 0228-BHU).
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were installed. As a result, the amount of total electrification was larger than the appraisal target (Table 1).
Table 1: Rural Electrification Component Outputs
Item Appraisal Target Achieved at Completion
No. of on-grid connections 8,767 9,586
No. of off-grid connections 119 116 (163 sets)a a Some large institutions installed more than one solar system set. As a result, the total number of sets installed
was larger than the initial target. Sources: Bhutan Power Corporation and Department of Renewable Energy.
C. Project Costs
10. At completion, the actual cost of the Dagachhu hydropower component stood at $234.6 million against the appraisal estimate of $201.5 million (Table 2), with a cost increase of 16% primarily attributed to the unexpected geotechnical issues that arose during construction. Bad rock conditions required extra reinforcement works during the underground tunneling excavations. Other factors that contributed to the cost increase included the large escalation of labor and material costs and adverse foreign currency movements during the construction period. The cost overrun was analyzed and described in detail in appraising the additional financing in 2013.6 Based on this, ADB provided an additional financing of $35.1 million through a supplementary hard-term ADF loan. The debt–equity ratio in the final project cost was 65:35, slightly higher than the 60:40 envisaged at appraisal (Table 3).
Table 2: Dagachhu Power Plant Construction Costs ($ million)
Item Appraisal Estimate Actual Cost
Civil works 80.2 103.4 Electromechanical 59.2 84.2
Infrastructure: roads and distribution linesa 13.9 14.3
Project management 8.6 8.2 Subtotal 161.9 210.2
Interest during construction 14.4 18.5 Export credit guarantee 5.1 5.9
Subtotal 19.5 24.4
Contingencies 20.1 TOTAL 201.5 234.6
a Excludes related transmission costs of $5.6 million, supported by the Bhutan Power Corporation. Sources: Asian Development Bank and Dagachhu Hydro Power Corporation.
6 ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Loan for Additional
Financing to the Kingdom of Bhutan for the Green Power Development Project. Manila (Loan 3034-BHU).
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Table 3: Dagachhu Power Project Financing
Appraisal Plan Actual
Item
Amount
($ million)
Equity Share
(%)
Amount
($ million)
Equity Share
(%)
Equity
DGPC 18.0 23 19.6 24 DGPC (through ADB hard-term ADF
loan) 29.0 36
29.4 35
National Pension and Provident Fund 12.0 15 12.4 15 Tata Power Company 21.0 26 21.5 26
Subtotal 80.0 100 82.9 100
Debt
ADB (OCR loan) 51.0 51.0 ADB (additional hard-term ADF loan) 35.1 National Pension and Provident Fund 15.0 11.5 Austrian Export Credit Agency 55.5 54.1
Subtotal 121.5 151.7
Total Project Cost 201.5 234.6
Debt-equity ratio 60:40 65:35
ADB = Asian Development Bank, ADF = Asian Development Fund, DGPC = Druk Green Power Corporation, OCR = ordinary capital resources. Sources: Asian Development Bank and Dagachhu Hydro Power Corporation.
11. The rural electrification component of the project, which was financed by the ADB-administered grant funding, was completed at a cost of $31.7 million against the appraisal estimate of $32.9 million (Table 4).
Table 4: Rural Electrification Component Costs ($ million)
Item Appraisal Estimate Actual Cost
On-Grid ADF grant 25.3 24.1 Government 6.6 6.7
Subtotal 31.9 30.8
Off-Grid ACEF grant 1.0 0.9 Governmenta 0.0 0.0
Subtotal 1.0 0.9 Total 32.9 31.7
ACEF = Asian Clean Energy Fund, ADF = Asian Development Fund. a The government’s contribution to the off-grid component was in-kind support, the value
of which was not quantified by the Department of Renewable Energy. Sources: Bhutan Power Corporation; Government of Bhutan, Department of Renewable Energy.
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D. Disbursements
12. The financing structure for the construction of the Dagachhu hydropower plant is shown in Table 3. ADB’s cofinancing totaled $119 million and comprised the following three loans:
(i) Loan 2643. This $51 million loan was funded from ADB’s ordinary capital resources (OCR) and contributed to the debt-funded portion of the project. The loan, which was ADB’s first OCR loan to Bhutan’s energy sector, was relent by the government to Dagachhu Hydro Power Corporation (DHPC) through a subsidiary loan agreement on the same terms and conditions as the ADB loan.7 The loan was approved on 29 October 2008 and closed on 2 April 2014, fully disbursed.
(ii) Loan 2644. This was a loan from ADB’s Special Funds resources of SDR18.832 million ($29 million equivalent), which contributed to DGPC’s equity funding of the project. The loan was relent by the government to DGPC through a subsidiary loan agreement on the same terms and conditions as an ADB loan.8 The loan was approved on 29 October 2008 and closed on 2 April 2014, fully disbursed, with the final loan amount being equivalent to $29.41 million. As the loan proceeds were used to finance DGPC’s equity, it was not recorded by DHPC as a project debt.
(iii) Loan 3034. This was a loan from ADB’s Special Funds resources of
SDR25.689 million ($39 million equivalent), which was used to partially finance the construction cost overrun. The loan was relent by the government to DHPC through a subsidiary loan agreement in local currency terms at a fixed interest rate of 10%. The loan was approved on 30 September 2013 and closed on 28 July 2015. At closure, SDR22.780 million ($35.113 million equivalent), or 88.7% of the original amount, had been disbursed and the balance of the loan amount was canceled.
13. The rural electrification component comprised the following two grants:
(i) Grant 0119. This was a grant from ADB’s Special Funds resources of $25.28 million equivalent, which financed on-grid rural electrification. The grant was approved on 29 October 2008 and closed on 28 February 2015. At closure, $24 million (94.9%) had been disbursed, and the balance of the grant was canceled on 28 February 2015.
(ii) Grant 0141. This was a $1.0 million grant from the Asian Clean Energy Fund established by the Government of Japan and administered by the Clean Energy Financing Partnership Facility. The grant was approved on 26 December 2008 and closed on 2 April 2014. At closure, $0.92 million (91.7%) had been disbursed, and the balance of the grant was canceled on 2 April 2014.
14. Disbursements from all three loans and two grants generally followed the schedule prepared at appraisal. As described in the following paragraph, delays in completing the Dagachhu hydropower plant were due to the additional work requirement rather than
7 DHPC was required to take foreign exchange risk. 8 DGPC was required to take foreign exchange risk.
6
implementation delays by the project contractors and therefore did not result in significant delays to loan disbursements. E. Project Schedule
15. In the report and recommendations of the President,9 the Dagachhu hydropower plant was scheduled for completion by December 2012, a little over 4 years after the approval of the ADB loans in October 2008. However, the plant’s two turbines were each released for commercial operation on 20 February 2015 and 15 March 2015. Loans 2463 and 2464 were closed on 2 April 2014, and loan 3034 (additional financing) was extended from 31 December 2014 to 30 June 2015, and closed on 28 July 2015. The problems that led to these delays include the following:
(i) Shortly after DHPC recommended a civil works contractor in December 2008, a major shareholder of the first-ranked bidder was found to have financial irregularities and DHPC rescinded its recommendation. After renegotiation with the second-ranked contractor, the civil works contract was signed in July 2009.
(ii) Several unforeseen geological problems arose during construction, causing delays for additional civil works. Most significantly, geotechnical conditions in parts of the northern headrace tunnel were found to be much worse than anticipated at appraisal, resulting in extensive delays. The loan for additional financing to cover cost overrun was approved on 30 September 2013 and it was extended to 30 June 2015 due to the additional civil works required.
16. During the load test in June 2015 after commissioning, the tailrace tunnel was found to be undersized and plant output was therefore limited to 100 MW. The civil works contractor agreed to widen the tunnel at its own costs, and the plant was subsequently released for commercial operation with no load restrictions on 23 March 2016. 17. The original scope for the rural electrification component was completed before the original grant closing date of 31 December 2013. However, some additional procurement and installation of equipment remained in 2014, so the grant closing date of on-grid electrification was extended until 28 February 2014.10 F. Implementation Arrangements
18. For the Dagachhu hydropower component, DGPC was the executing agency responsible for the overall execution and coordination, and DHPC was the implementing agency responsible for project implementation and administration. There was no change to these arrangements during the implementation of the project. 19. For the rural electrification component, the Department of Energy (DOE) was the executing agency, and the implementing agencies were the Bhutan Power Corporation (BPC) for the on-grid subcomponent and the DOE for the off-grid subcomponent. On 1 December 2011, the DOE was reorganized into the Department of Hydropower and Power Systems, the Department of Renewable Energy, and the Department of Hydromet Services, with all these departments
9 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Loans, Asian
Development Fund Grant, Technical Assistance Grant, and Administration of Grant to Bhutan for the Green Power Development Project. Manila (Loans 2463, 2464, Grants 0141, 0119 and TA 7157-BHU).
10 The winding-up period of the grant was extended until 31 December 2014 in order to settle the balance in commitment letters.
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remaining within the Ministry of Economic Affairs. With this restructuring, the Department of Renewable Energy assumed the role of executing agency for the rural electrification component as well as implementing agency for the off-grid subcomponent. BPC remained as the implementing agency for the on-grid subcomponent. G. Conditions and Covenants
20. A schedule showing the compliance with loan covenants for the Dagachhu power plant is provided in Appendix 3. All conditions and covenants were complied with. Both Bhutan Electricity Authority and the National Environment Commission have expressed satisfaction with DHPC’s compliance with its license conditions and environmental and social requirements during and following construction. Appendix 4 discusses DHPC’s compliance with key environmental and social requirements and the impact of the project on the local community. 21. For the rural electrification component, all conditions and covenants were complied with (Appendix 5). H. Related Technical Assistance
22. A CDTA project, Promotion of Clean Power Export Development (footnote 9), in the amount of $1.488 million was provided from November 2008 to December 2011 under the project. The TA aimed to (i) assist Druk Holding and Investments (the holding company of DGPC) and DGPC to enhance their capability of financing hydropower projects using different financing options, (ii) modernize DGPC’s business systems and develop strategies for the development and management of hydropower projects, and (iii) assist DOE in acquiring additional capacity for accelerating hydropower development. 23. The CDTA was highly successful. The financing strategy and action plan, including assessment of various financing options from foreign and domestic sources, was developed, and DOE, Druk Holding and Investments, and DGPC staff received hands-on training on financial analysis and modeling skills. DGPC, which was newly established as the agency responsible for hydropower development and implementation in Bhutan, introduced enterprise resource planning solutions for the first time ever in Bhutan as part of the TA. The consulting firm also supported DGPC to develop a corporate strategic plan and detailed operations manuals, including in areas such as risk management, accounting, procurement, environment, and safeguards. An analysis of the domestic and Indian power demand and supply in the short term and long term was carried out to assist DOE to develop a road map and hydropower development strategy. The performance of the consulting firm was highly satisfactory. I. Consultant Recruitment and Procurement 24. The procurement was carried out in accordance with ADB’s Procurement Guidelines (as amended from time to time). The civil works contractor of the Dagachhu hydropower plant was selected through international competitive bidding and the contract was signed on 8 July 2009. The electromechanical equipment contractor was funded by a loan from an Austrian commercial bank under the export credit of the Austrian export credit agency, which therefore limited participation in the bid. The contract was signed on 27 July 2009. For on-grid rural electrification, major materials and equipment were procured through international competitive bidding and civil works contractors were selected through national competitive bidding. For the off-grid component, major equipment with advanced technology was procured through limited international bidding.
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25. The recruitment of the individual consultant was in accordance with ADB’s Guidelines on the Use of Consultants (as amended from time to time). ADB approved the use of single-source selection for the individual consultant for the off-grid subcomponent due to the consultant’s previous experience in Bhutan and her specialized knowledge of the developing technologies used in this project. The engineering consultant who monitored the design and construction of the Dagachhu power plant was recruited and funded by the Government of Austria. No consultant was required for the on-grid rural electrification component due to BPC’s previous experience in implementing similar rural electrification projects. J. Performance of Consultants, Contractors, and Suppliers 26. There were two contractors responsible for the construction of the Dagachhu power plant: a civil works contractor and an electromechanical equipment supply and installation contractor. Both contracts were engineering, procurement, and construction contracts, requiring both design and construction. Except for the problem encountered with the tailrace tunnel, which needed to be rectified after the commissioning (para. 16), DHPC considered the civil work contractor’s overall performance to be satisfactory. The electromechanical equipment contractor’s performance was also satisfactory, with all equipment delivered and installed in a timely manner. For the rural electrification component, the performance of the contractors and suppliers was satisfactory. 27. Performance of the consultant under the project was satisfactory. In particular, the performance of the TA consulting firm was highly satisfactory (para. 23). K. Performance of the Borrower and the Executing Agency 28. The performance of the borrower and the executing agencies for both the Dagachhu power plant and the rural electrification loan components was highly satisfactory. All loans became effective in a timely manner and disbursements generally proceeded in accordance with the schedule developed at appraisal. The support provided by DGPC to DHPC during the construction of the Dagachhu power plant was appropriate, and the response of both parties to the problems that arose during construction (para. 15) was professional and competent. Credit should also be given to Tata Power Company, the private sector equity partner. It has significant experience in undertaking similar projects on the Indian subcontinent and, while it was not actively involved in managing the construction, it provided timely advice and support when needed. 29. Both DGPC and DHPC are well managed and have effective business systems in place. The contribution made by the attached TA consulting firm was well received and this is reflected in the business systems that are currently in place. Staff members from DGPC, DHPC, and BPC met by the ADB Project Completion Review mission were knowledgeable, and DGPC’s 2016 annual report was of a high standard.11 L. Performance of the Asian Development Bank 30. The performance of ADB during the project was highly satisfactory, and the government thanked ADB for the support provided. Given the problems during the construction of the power plant (para. 15), the interventions by ADB (particularly the timely approval of the additional
11 DHPC is a wholly owned subsidiary of DGPC and does not publish a separate annual report. It produces annual
accounts, which comply with Bhutanese accounting standards and are audited in accordance with the Minimum Audit Examination and Audit Reporting Requirements issued by the Royal Audit Authority.
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financing loan) were critical in ensuring that construction of the power plant was successfully completed.
III. EVALUATION OF PERFORMANCE
A. Relevance 31. The project was rated highly relevant at appraisal and completion. The project outputs are fully aligned with Bhutan’s strategic priorities to accelerate the development of hydropower for export and to provide electricity supply to all rural households to improve the lives of the rural community. The project is in line with ADB’s country partnership strategy, which aimed to support inclusive economic growth in an environment sustainable manner through hydropower development, and to enhance regional energy trade and energy security. The project was implemented as designed at appraisal without any major change in scope and implementation arrangements. The attached TA helped DGPC enhance its capability to manage hydropower projects by itself. The designed financing modality and overall project formation were appropriate and adequate. 32. The Dagachhu plant is the first medium-sized hydropower plant in Bhutan to be developed on a commercial basis. DHPC is a PPP incorporated under the Companies Act of the Kingdom of Bhutan, 2000; the government (through DGPC), Tata Power of India, and the National Pension and Provident Fund have equity stakes. The PPP structure contributed to improving the governance structure, and adding bringing not only private sector’s additional but also different sets of knowledge and commercial principle in project management. 33. The Dagachhu hydropower component was registered as the world’s first cross-border CDM project through the United Nations Framework Convention on Climate Change on 26 February 2010. DHPC later signed a certified emissions reduction purchase agreement with ADB, which acts as a trustee of the Future Carbon Fund, to sell carbon credits generated from the Dagachhu plant. 34. The off-grid electrification component piloted emerging technologies in rural electrification. The batteries and capacitors installed have longer lifetimes compared to traditional batteries; they are still working in remote areas without replacement. B. Effectiveness in Achieving Outcome 35. The project is rated highly effective. Coupled with other projects in parallel, most of the outcome indicators were achieved or exceeded. More than 99% of households in Bhutan have already been electrified. More than 3,000 MW of additional hydropower capacity is currently under construction. Almost 500,000 tons of carbon dioxide (CO2) were avoided in 2015 on a cross-border basis compared to 2014. While the overall government revenue was increased with a higher pace than the power export revenue, the targeted size of the export revenue was realized.12 36. The physical outputs of all project components met or exceeded the appraisal targets. The Dagachhu power plant’s rating was optimized during design to 126 MW compared to the planned 114 MW. The clean power exported from Bhutan to India in 2015 was 5,541 GWh, an increase of 497 GWh from 2014. A total of 9,586 households were provided with connections to the grid,
12 While hydropower export revenue increased by almost 130% from 2007 to 2015, total government revenue during
the same period increased at a much higher pace (by 178%) due to an increase in revenue from other sectors.
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compared to the appraisal estimate of 8,767. While the number of public facilities receiving off-grid electricity supply was reduced to 116, which is marginally lower than the appraisal target of 119, the remaining facilities were converted to on-grid connections, and more solar systems were installed at some large institutions instead. As a result, the total number of households and facilities electrified either on or off the grid under the project was higher than the appraisal estimate. 37. All the conditions for social and environmental safeguard requirements have been met. The project has supported rural electrification and provided benefit directly and indirectly to local community. No unintended negative outcomes were observed, and Bhutan’s National Environment Commission was satisfied with the project’s full compliance with the government’s regulations and environmental management plan. C. Efficiency in Achieving Outcome and Outputs 38. The project is rated efficient in achieving the intended outcome and outputs. While the commissioning of the Dagachhu hydropower plant was delayed mainly due to unexpected geological problems, the project’s substantial construction period of 5 years was not long compared to similar hydropower projects in the Himalayan Mountains, which are characterized as geologically fragile. The rural electrification component achieved more connections at a lower cost than envisaged at appraisal. The number of households connected to the grid as of the end of 2012 was 9,156, higher than the original target of 8,767. 39. For Dagachhu hydropower development, since the construction cost of the project was 16% higher than estimated at appraisal, the power purchase agreement between DHPC and an Indian offtaker was amended to deal with the cost increase, and the resultant base tariff was increased from ₹2.4 per kilowatt-hour to ₹2.9 per kilowatt-hour with annual price escalation. The economic internal rate of return (EIRR) for the Dagachhu hydropower plant component was determined by valuing costs and benefits in economic terms using the same methodology as at the appraisal stage. The recalculated EIRR at project completion was 19.50%, which is higher than the EIRR at appraisal (16.04%) and at additional financing (13.80%). This difference was mainly due to the increase in incremental benefits of the project on account of the increase in willingness to pay, reflected through two rounds of electricity tariff increase by Bhutan Electricity Authority beginning at the appraisal stage. When the cross-border benefit between Bhutan and India is considered, the EIRR rises to 24.8%. Both components were reevaluated and found to be economically viable, considering the ADB hurdle rate of 12%. 40. The EIRR for the rural electrification component at project completion was 14.3%. Economic benefits of on-grid rural electrification include the following: (i) the incremental benefits to households of increased energy consumption; (ii) Bhutan’s cost savings from reduced consumption of kerosene, batteries, and fuelwood; and (iii) the environmental benefit of avoided CO2 emissions. Incremental benefits are the result of households’ induced consumption of energy when they gain access to a lower-priced energy source (valued at their willingness to pay for incremental energy). Non-incremental benefits were represented by the cost savings from the displaced use of alternative energy due to the project (primarily kerosene for lighting and fuelwood for cooking).13 The environmental benefit through the reduction of CO2 emissions was estimated
13 Fuelwood is the largest source of energy used by households, and the savings in collection costs have been
monetized using a shadow wage rate of Nu100 per day. The financial price of kerosene in Bhutan is Nu15 per liter. This price is highly subsidized; for this analysis, the unsubsidized price was taken to be Nu27 per liter. The replacement value derived from kerosene was based on the assumption that a kerosene lamp consumes 4.7 liters per month. The cost of owning and maintaining kerosene lamps and electric bulbs was considered to be of the same order and was excluded from the analysis.
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using the emission factor of 1.23 tons per household per year.14 The annual emissions reduction expected from the project for 9,586 households per year is 11,790 tons of CO2. The costs of providing grid access are the (i) grid system investment and house wiring costs, (ii) incremental operation and maintenance costs of system investment, and (iii) the opportunity cost of not selling electricity used for domestic consumption to India valued at the border price. The EIRR at the appraisal stage was calculated for each feeder in all the districts to identify suitable allocation of resources; the value ranged from 13% to 26%. D. Preliminary Assessment of Sustainability 41. The project is rated most likely sustainable. The Dagachhu hydropower plant is financially viable and DHPC, with the support of DGPC and the government, has been managing the plant’s operation, resulting in low operational risk institutionally. DHPC’s financial condition will improve by continuing full-year operation, due to the low operational cost of the hydropower project. BPC is earning enough revenue from electricity sales and transmission charges, ensuring the sustainability of the on-grid rural electrification subcomponent. Meanwhile, the government has assured to maintain current budget support for the sustainability of the off-grid electrification. Social and environmental mitigation plans were fully implemented with positive effects (Appendix 4).15 42. The financial internal rate of return (FIRR) for the Dagachhu hydropower plant at project completion was recalculated applying the same methodology used at appraisal. The recalculated FIRR in real terms is 3.81%, which is higher than the weighted average cost of capital of 2.41%.16 While the FIRR was lower at completion than at appraisal due to the increase in project cost,17 it was higher than the figure at additional financing (FIRR 2.61%, WACC 1.60%) due to cost savings from the revised cost estimate. DHPC’s average return on equity (ROE) for project operation was 14.9% on an after-tax basis, higher than the initially expected return on equity of 12.0% envisaged at appraisal; this higher ROE indicates better investment. DHPC’s debt service coverage ratio in 2016 was 1.31, which indicated DHPC was earning sufficient cash flow to cover operating expenses and project debt services. 43. The power purchase agreement base cost will constantly increase every year from ₹2.9 per kilowatt-hour, and a benefit sharing mechanism will allow for a favorable adjustment in case the Indian offtaker can sell at a higher price in the Indian market. While any additional benefits are subject to India’s power demand and supply situations, the long-term power purchase agreement will help DHPC substantiate its financial viability and sustainability. 44. While the rural electrification component is not financially viable itself, Bhutan has maintained a regulatory system to compensate for any financial loss arising from rural electrification component through the subsidy by the government from the royalty energy for the power exported to India. Despite the rapid progress of rural electrification with the support of ADB and other donors, BPC has maintained its debt service coverage ratio at acceptable level and the recent ratio was 7.4 in 2015. BPC is financially and operationally robust.
14 Bhandari, O. 2006. Socio-economic Impact of Rural Electrification in Bhutan. A thesis submitted in partial fulfillment
of the requirements for the degree of Master of Engineering, Asian Institute of Technology, Bangkok. 15 For example, DHPC implemented social and environmental activities more proactively than planned. They
specifically include a fish latter construction, more than 10% minimum ecological water flow, more forestation, and more local community support programs.
16 In nominal terms, the FIRR at project completion was 8.45%, compared with a WACC of 7.24%. 17 The FIRR at appraisal was 10.44% in nominal terms, compared with a WACC of 5.63%.
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45. For the purpose of the sustainability of off-grid electrification systems, the Department of Renewable Energy retains ownership of all off-grid solar installed under the project and has contracted BPC to (i) visit locations where off-grid systems are installed twice a year, and (ii) maintain the systems on its behalf, using the Department of Renewable Energy’s budget allocation. Further, the government has committed to provide support from the Renewable Energy Development Fund, which is to support renewable energy and will be funded from the royalties paid by hydropower producers. It is intended that this will, in part, be used to support the sustainability of off-grid solar systems. E. Impact 46. The impact of the project is rated highly satisfactory. The commissioning of the Dagachhu hydropower plant has contributed to increasing energy sector gross domestic product and increased government revenue through additional capacity for clean energy exports to India. Considering the track record of similar hydropower projects around the world, the Dagachhu project can be expected to continue to produce revenue for the government long after all the project loans have been repaid. The rural electrification component has helped the government achieve more than 99% electrification.18 No major negative impact derived from the project has been identified. 47. Dagachhu hydropower was the first hydropower development with a PPP structure promoted by the initiative of government and public undertakings of Bhutan. The management and key staff of DHPC are all Bhutanese citizens, and the experience and knowledge acquired through the project is being utilized for subsequent project development, including the Nikachhu hydropower development. 19 The Dagachhu hydropower development also enhanced cross-border power trade between Bhutan and India through the private sector power offtaker. 48. The project makes positive environmental benefits. Electricity exported to India displaces electricity that would otherwise be generated through the burning of hydrocarbons; this is recognized through DHPC’s entitlement to carbon credits for electricity exported to India. The availability of clean electricity to the rural community not only provides economic opportunities and improved quality of life, but can also displace the use of kerosene lamps for lighting, and wood fires for cooking and space heating. 49. The project was classified as category B for environment. In accordance with ADB’s Environment Policy (2002) and Environmental Assessment Guidelines (2003), a summary initial environmental examination was prepared and reviewed by ADB. ADB’s environmental due diligence covered all project-associated facilities, including access roads and a transmission line from the Dagachhu plant. The Dagachhu component used a run-of-river design and did not encroach on any protected areas. The project’s environment performance was satisfactory. The environmental mitigation measures proposed in the environmental management plan were implemented well. Waste, soil, and air quality were monitored and the parameters were within the national standard. Fish species observed in the fish population survey were neither rare nor endangered. DHPC constructed the fish ladder and maintains a 1.4 cubic meter per second environmental flow at all times. Water discharge was measured during 2010–2011, with measurements showing that discharge from the fish ladder and two tributaries immediately below
18 The government explained that the electrification rate was marginally less than 100% because newly constructed
houses were still waiting to be provided with a connection. 19 ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Loans, Grant, and
Technical Assistance Grant to the Kingdom of Bhutan and Tangsibji Hydro Energy Limited for the Second Green Power Development Project. Manila (Loans 3225, 3226, Grant 0421 and TA 8791-BHU).
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the weir will maintain at least a 10.2% environmental flow throughout the year. DHPC and the civil works contractor have restored most of the Dagachhu project sites and the damp yards and planted grass and trees. Restoration work was ongoing at one of the sites as of September 2016, but it will be completed by the contractor before the warranty period ends in March 2018. For the rural electrification component, the cutting of trees was adequately monitored by the Department of Forest and Park Services and the civil works were done using manual labor in the forest to minimize the impact. No adverse impacts have been reported. 50. The project was classified as category B for involuntary resettlement, and category C for indigenous peoples. Consultations with local communities were held throughout the project. No resettlement of houses was required for either of the two project components. The 25 households that lost part of their land chose land compensation, and received substitute land plots. The project brought social benefits to local communities, including upgraded local roads, improved access to school through the provision of school buses, improved access to electricity, and enhanced business and employment opportunities, among others. 51. The power plant employs 146 staff as of June 2017, including temporary staff, many of whom are from within the local project area. The money injected into the local community is providing business for shops and other small commercial enterprises. Some families not directly employed by the project have moved into the area to take advantage of the economic benefits the project has provided.
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 52. Overall, the project is rated highly successful. It was highly relevant to the strategies and priorities of ADB and the government to accelerate hydropower development utilizing internal resources and private equity and to achieve 100% rural electrification. The Dagachhu hydropower plant was the first PPP model in Bhutan’s energy sector and the world’s first cross-border project under the Clean Development Mechanism. The project was highly effective as it achieved or exceeded the targeted outputs and outcome. The rural electrification component achieved electricity connection to rural households and contributed to the government’s achievement of more than 99% electrification. The project is efficient, with high disbursement rates of loans and grants. The delays encountered were attributed to difficulties in construction due to geological issues. Despite the extended implementation, the EIRRs of the project were computed at 19.5% for the Dagachhu hydropower development and 14.3% for the rural electrification component. The project is most likely sustainable due to the financial viability and adequate capacity of the Dagachhu hydropower component and the sustainable implementation arrangements of the rural electrification component. Deleted. This is redundant. B. Lessons 53. The project has highlighted the technical and commercial uncertainties associated with hydropower development. The cost of constructing such projects might be affected by the geotechnical conditions of the project area, which are very difficult (and expensive) to fully assess during appraisal.
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54. Due to the nature of middle-scale hydropower development, thorough risk assessment on possible impacts on the environment is essential, and careful monitoring of impact during construction phase is required. C. Recommendations
1. Project-Related
55. ADB should monitor the policy development and actual implementation of cross-border trade of electricity between India and neighboring countries. It is important for power offtakers that have signed power purchase agreement with hydropower companies to have access to the power trade market. 56. The project performance evaluation report should be deferred until the project has been in full operation for more than 3 years to further assess more development impacts.
2. General
57. In developing and appraising hydropower projects, construction cost overruns due to geotechnical uncertainty should be identified as major project risks. Cost contingency should be assessed (taking into account such risks), and strategies to mitigate such risks should be identified and explicitly described in the recommendation of the President.
Appendix 1 15
DESIGN AND MONITORING FRAMEWORKa
Design Summary
Performance Targets and Indicators with
Baselines
Revised Performance
Targets Achievements
Impact
Cross-border power trade and increased domestic electricity access sustain inclusive economic growth of Bhutan
Energy sector share of GDP raised from 25% (2007) to 40% (2017), with annual GDP growth increased at least 2%–3% from 2012 to 2017
Yet to be determined While the energy sector’s GDP increased almost 90% from 2007 to 2015, total GDP during the same period increased by 156% due to growth in other sectors. The resultant energy sector’s share of GDP is likely to be the similar level.
Energy sector share of government revenue raised from 45% (2007) to 75% (2020) through clean energy export to India with an additional 10,000 MW power generation (2020)
Yet to be determined Meeting the target depends on the progress of large hydropower projects under construction through India’s bilateral assistance.
Use of electric lighting (to replace kerosene lamps) increased from 40% (2007) to 100% (2013) of rural households
Achieved With support of ADB and other development partners, more than 99% of households have been electrified via on-grid extensions and off-grid solar home systems.
Outcome
Coverage of sustainable clean power supply expanded
Access to electricity of rural and urban households increased, with a cumulative national electrification ratio up from 60% (2007) to 84% (2012)
Exceeded More than 99% of households have been electrified via on-grid extensions and off-grid solar home systems.
Hydropower export revenue of the total government revenue increased from 40% (2007) to 45% (2014)
Increase in hydropower export revenue from 2014
Achieved While hydropower export revenue increased almost 130% from 2007 to 2015, total government revenue during the same period increased by 178% due to revenue growth in other sectors. Hydropower export revenue will significantly increase after the commissioning of large hydropower projects currently under construction.
Investment size from the public and private sectors to hydropower development projects increased by at least 1,314 MW by 2014
Achieved More than 3,000 MW of additional hydropower capacity is currently under construction.
16 Appendix 1
Design Summary
Performance Targets and Indicators with
Baselines
Revised Performance
Targets Achievements
Annual emissions equivalent to 500,000 tons of CO2 avoided on a cross-border basis in 2013 and onward
Increase in saving in CO2 emission realized from 2014
Achieved Avoided annual emissions of CO2 was equivalent to 508,790 tons, comprising: (a) 497,000 tons on a cross-border basis compared to 2014, mainly due to the commissioning of the Dagachhu power plant, and (b) 11,790 tons annually avoided from the rural electrification component.
Overall power system loss maintained below 10%, and power sector’s financial health stable as indicated by sufficient debt service coverage (minimum 1.2) and net profit generation
Achieved Bhutan’s transmission and distribution loss has been below 10% (4.83%) in 2015. DGPC’s debt service coverage ratio was 2.30 and BPC’s was 7.40 in 2015.
Increase in hydropower export revenue and saving in CO2 emission realized by 2014
Outputs
1. Hydropower plant constructed
114 MW run-of-river Dagacchu hydropower plant constructed by 2012
Dagacchu hydropower plant constructed by 2013 within the original loan closing time and its capacity optimized from 114 MW to 126 MWb
Achieved with delay The 126 MW hydropower plant was released for commercial operation in February 2015.
19 km transmission line to evacuate to the grid system constructed by 2012
Achieved Construction of the 19 km transmission line was completed by December 2012.
Clean and renewable energy of additional 500 GWh exported to India after 2012
Clean and renewable energy of additional 500 GWh exported to India after 2013
Achieved 5,541 GWh of hydropower was exported from Bhutan to India in 2015, which was 497 GWh higher than the amount exported in 2014.
Appendix 1 17
Design Summary
Performance Targets and Indicators with
Baselines
Revised Performance
Targets Achievements
2. Rural electrification extended
Power supply and services to additional 8,767 rural households and additional 119 off-grid public institutions (schools, health clinics, and other community facilities) provided in seven subprojects by 2012
Exceeded An on-grid supply was provided to an additional 9,586 rural households and an off-grid supply to 116 public institutions. The number of off-grid connections was less than the target because some public institutions were shifted to on-grid connections. As a result, the total number was larger than the appraisal target.
3. DGPC management system improved
DGPC’s corporate policies (2009) and integrated management information system (2011) adopted
Achieved DGPC’s corporate strategic plan was established and a hydropower financing strategy was developed. Manuals using the information system for key activities were developed and training was provided.
Hydropower Development Policy implemented through two sample projects with public and/or private investments by 2012
Achieved The Hydropower Development Policy 2008 was implemented through two public–private partnership projects (Dagachhu and Nikachhu).
Financial and engineering assessment proposed for Nikachhu (210 MW) and Khomachhu (326 MW) hydropower development before 2011
Achieved The assessments were done, and the Nikachhu project was subsequently financed by ADB in 2014.
ADB = Asian Development Bank, BPC = Bhutan Power Corporation, CO2 = carbon dioxide, DGPC = Druk Green Power Corporation, GDP = gross domestic product, GWh = gigawatt-hour, MW = megawatt. a The changes in the performance targets were dully done during the processing of additional financing. b While this optimization improved the generation efficiency, the generation production in gigawatt-hours was little
changed. Sources: Asian Development Bank; Bhutan Power Corporation, and Dagachhu Hydro Power Corporation.
18 Appendix 2
CONTRIBUTION TO THE ADB RESULTS FRAMEWORK
No.
Level 2 Results Framework Indicators (Outputs and Outcomes) Targets Methods/Comments Achievements
1 Installed energy generation capacity (MW)
126 Run-of-the-river type hydropower generation plant
126
2 New households connected to electricity (number)
8,886 New households to be electrified on an on-grid and off-grid basis
9,586
3 Distribution lines installed or upgraded (kilometers)
1,709 Includes 33 kV and 11 kV overhead lines, and aerial bundled cables
1,681.48
4 Greenhouse gas emission reduction (tons of CO2 equivalent/year)
500,000 Cross-border power export and rural electrification
508,790a
ADB = Asian Development Bank, CO2 = carbon dioxide, kV = kilovolt, MW = megawatt, UNFCC = United Nations Framework on Climate Change. a Includes (a) an amount of 497,000 tons avoided in 2015 from hydropower export compared to 2014, and (b) an
amount of 11,790 tons from rural electrification. Sources: Asian Development Bank; Bhutan Power Corporation; Dagachhu Hydro Power Corporation.
Appendix 3 19
STATUS OF COMPLIANCE WITH LOAN COVENANTS (Dagachhu Hydropower)
Product Schedule Para No. Description Status of
Compliance
Loans 2463, 2464
5 1 DGPC shall be the Project Executing Agency and shall be responsible for the overall execution and supervision of the Project. The Borrower shall cause DGPC to, and DGPC shall, follow the implementation arrangements set forth in this schedule.
Complied with
Loan 2463 5 2 DHPC shall be the Implementing Agency and shall be responsible for day to day coordination, implementation and administration of the Project and all activities required for carrying out the successful implementation of the Project. Such activities include: (a) the procurement of Goods and Works; (b) construction supervision; (c) maintenance of separate project accounts; (d) monitoring and reporting upon implementation of the Project; (e) the provision of coordination, support, and liaison activities; and (f) disbursement, accounting, logistics management, reporting, monitoring, supervision, organization of research activities, and local training.
Complied with
Loans 2463, 2464
5 3 The Borrower, through DGPC, shall cause DHPC to follow the implementation arrangements set forth in this schedule. The Borrower shall also ensure that (a) DHPC is managed by a full-time Project director; and (b) the Project director is supported by competent full-time personnel.
Complied with
Loans 2463, 2464
5 4 Counterpart Funding:
The Borrower and DGPC shall ensure, and shall cause DHPC to ensure, that (a) all local and foreign currency counterpart financing necessary for the Project shall be provided in time to enable completion of the Project activities; (b) additional counterpart financing shall be provided if necessary for any shortfall of funds or cost overruns, and (c) counterpart financing for compensation and entitlements under the Resettlement Plan are fully provided directly to affected people prior to their displacement from housing and land.
Complied with
Loan 2463 5 5 Subsidiary Loan Agreements:
The Borrower shall execute (a) the DGPC Subsidiary Loan Agreement with DGPC; and (b) the DHPC Subsidiary Loan Agreement, with DHPC, each upon terms and conditions satisfactory to ADB. The Borrower shall obtain all necessary approvals to enter into both such Subsidiary Loan Agreements and make any subloan thereunder, and shall have executed and validly entered into such Subsidiary Loan Agreements.
Complied with
Loan 2464 5 5
Subsidiary Loan Agreement:
The Borrower shall execute the DGPC Subsidiary Loan Agreement with DGPC upon terms and conditions satisfactory to ADB. The Borrower shall obtain all necessary approvals to enter such Subsidiary Loan Agreement and make any subloan thereunder, and shall have executed and validly entered into such Subsidiary Loan Agreement.
Complied with
Loans 2463, 2464
5 6 Co-Financing:
The Borrower and DHPC shall (a) keep ADB informed of their discussions on any proposed financing arrangements with other public, commercial, bilateral, and multilateral financial institutions on the Project, and (b) provide ADB with an opportunity to comment on any resulting proposals. The Borrower shall consider ADB’s views before finalizing any such
Complied with
20 Appendix 3
Product Schedule Para No. Description Status of
Compliance
proposals.
Loans 2463, 2464
5 7 Corporate Governance:
The Borrower shall cause DGPC and DHPC to ensure, and DGPC and DHPC shall ensure, to the satisfaction of ADB that: (a) DGPC retains the majority shareholding and majority representation on the Board of Directors of DHPC, and a majority representation from DGPC is required for a quorum for any meeting of DHPC’s board of directors; and (b) no material changes are made to the Shareholders Agreement without consultation with ADB
Complied with
Loans 2463, 2464
5 8 Debt Service Ratio:
DGPC and DHPC shall maintain a debt service coverage ratio of a minimum of 1.2 from the date commercial operations commence.
Complied with
Loan 2463 5 9 Hedging:
DGPC shall cause DHPC to, and DHPC shall, (a) deliver a proposal to ADB for currency hedging or an alternative proposal that serves the purpose of hedging the Loan; and (b) arrange currency hedging or an alternative proposal that serves the purpose of hedging the Loan in a form satisfactory to ADB.
Complied with
Loans 2463, 2464
5 5
10 9
Commercial Agreement:
The Borrower, DGPC, and DHPC, shall consult with ADB before making any changes to the Power Purchase Agreement, the Shareholders Agreement or to authorize new capital of DHPC.
Complied with
Loans 2463, 2464
5 5
11 10
No later than 28 February 2009, the Tata ER Underwriting Agreement shall have been executed and delivered, and all conditions precedent to its effectiveness shall be fulfilled (except for the condition that it has achieved registration with CDM executive board) and a legal opinion in a form acceptable to ADB stating the same shall have been provided.
Complied with
Loans 2463, 2464
5 5
12 11
The Borrower shall cause DGPC and DGPC shall cause DHPC to use its best effort to achieve validation and registration of the Project under the Clean Development Mechanism of the Kyoto Protocol as soon as possible.
Complied with
Loans 2463, 2464
5 5
13 12
Licensing:
Within 60 days of the effective date, the Borrower shall cause DHPC to, and DHPC shall, obtain all necessary construction licenses for the Project from the Bhutan Electricity Authority.
Complied with
Loans 2463, 2464
5 5
14 13
Institutional Aspects and Financial Management:
The Borrower shall cause DGPC and DHPC to, and DGPC and DHPC shall, apply a new corporate accounting policy, satisfactory to ADB, by no later than 31 Dec 2009.
Complied with
Loans 2463, 2464
5 5
15 14
The Borrower shall cause DHPC to, and DHPC shall, prepare the design for an integrated management information system, satisfactory to ADB by 31 December 2010, and install such integrated management information system by 31 December 2011.
Complied with
Loans 2463, 2464
5 5
16 15
Environmental Safeguards:
The Borrower, DGPC and DHPC shall each ensure that the Project is implemented in accordance with all environmental safeguard measures. DGPC and DHPC shall adequately supervise the construction works carried out by private contractors to ensure compliance with these environmental safeguard measures.
Complied with
Loans 2463, 2464
5 5
17 16
The Borrower, DGPC and DHPC shall each ensure that the Project is undertaken, and all facilities and associated equipment are assessed, operated and maintained, in accordance with applicable
Complied with
Appendix 3 21
Product Schedule Para No. Description Status of
Compliance
laws and regulations of the Borrower, ADB’s Environment Policy (2002), and internal environmental policies and safeguard operational rules of DGPC and DHPC.
Loans 2463, 2464
5 5
18 17
The Borrower, DGPC and DHPC shall each ensure that the outcomes of the EIA, SIEE, and IEEs and mitigation measures identified in the EMP and relevant government agencies are complied with during design, construction and operation of the Project. The Borrower shall and shall cause DGPC and DHPC to monitor and audit the implementation of EMP, and provide reports to ADB twice a year on the implementation of EMP.
Complied with
Loans 2463, 2464
5 5
19 18
The Borrower, DGPC and DHPC shall each ensure that construction (a) does not take place within national parks, wild and planted forests and wildlife sanctuaries without prior environmental clearances obtained from all relevant government agencies and (b) avoids monuments of cultural or historical importance.
Complied with; environmental clearances obtained from relevant government agencies
Loans 2463, 2464
5 5
20 19
The Borrower shall cause DGPC and DHPC to, and DGPC and DHPC shall, (a) monitor the air, soil and water quality baseline and the minimum ecological water flow for a minimum of two years, (b) update the EMP in consultation with, and to the satisfaction of, ADB if any of these baselines suggests that changes to the existing EMP be required; and (c) revise and update the EMP in consultation with and to the satisfaction of ADB if any unanticipated environmental impacts arise.
Complied with
Loans 2463, 2464
5 5
21 20
Land Acquisition and Resettlement:
The Borrower, DGPC, and DHPC shall ensure that (i) all land and rights-of-way required by the Project are made available in a timely manner; (ii) any involuntary resettlement will be avoided or minimized; (iii) in collaboration with the competent authorities, title deeds for the new plots of land will be made available to all affected persons by 31 December 2008; (iv) the provisions of the Resettlement Plan, including compensation and entitlements for affected households and persons, will be implemented; and (v) the Project is in compliance with all applicable laws and regulations of the Borrower, including those amended from time to time, and the entitlement benefits as listed in the Borrower’s applicable laws, and ADB’s Involuntary Resettlement Policy (1995).
Complied with
Loans 2463, 2464
5 5
22 21
The Borrower, DGPC, and DHPC shall ensure that (a) sufficient budgetary resources are made available to cover all such compensation and associated costs; (b) all such compensation will be paid at the applicable rates for the implementation of the Project as per the Resettlement Plan; (c) rates will be revised by 30 September 2008 to ensure the application of the actual market price and the entitlement matrix in the Resettlement Plan should be used in determining the suitable compensation; (d) payments are made in a timely manner, in any case before dispossession and beginning of civil works; (e) all people affected by the Project are compensated fairly, such that their living standards are not adversely affected; and (f) any relocation, resettlement and compensation of any persons who are adversely affected by the Project, or who will be relocated as a consequence of the Project, shall be promptly and efficiently carried out in accordance with (i) the Resettlement Plan, and (ii) ADB’s Policy on Involuntary Resettlement (1995), such that project-affected persons will at least maintain their standard of living at the same level as before implementation of the Project.
Complied with; compensation has been paid at the revised rate published by the Property Assessment and Valuation Agency
Loans 2463, 2464
5 5
23 22
The Borrower, through DHPC, shall conduct monthly monitoring of the implementation of the Resettlement Plan. The Borrower and DGPC shall ensure that DHPC shall submit progress and
Complied with
22 Appendix 3
Product Schedule Para No. Description Status of
Compliance
completion reports on land acquisition and resettlement under the quarterly progress reports for the Project, and each of the Borrower, DGPC, and DHPC shall ensure that the compensation completion report is submitted to ADB within three months of completion of the implementation of the Resettlement Plan.
Loans 2463, 2464
5 5
24 23
If any changes are made to the design of the Project that affect the land to be acquired or used for the Project in any way, the Resettlement Plan shall be updated based on detailed design, disclosed to affected persons, and submitted to ADB for review and approval prior to award of civil works contracts. The Borrower, DGPC, and DHPC shall ensure that prior to land acquisition and any resettlement under the Project, the Updated Resettlement Plan, including its update based on consensus of affected peoples is disclosed with all necessary information made available to persons affected by the Project and confirm that it is uploaded onto ADB’s website. The Borrower, through DHPC, shall ensure that essential public infrastructure that may be affected under land acquisition and resettlement are replaced as appropriate in an expeditious manner in accordance with the Resettlement Plan and DHPC shall be responsible for associated costs and expenses.
Complied with
Loans 2463, 2464
5 5
25 24
DGPC and DHPC shall ensure that all construction contracts contain binding requirements for construction contractors to (a) fully reinstate pathways, other local infrastructures, and agricultural land to at least their pre-project condition upon the completion of construction; and (b) adequately record the condition of roads, agricultural land and other infrastructure prior to transport of material and construction commencement.
Complied with
Loans 2463, 2464
5 5
26 25
Labor and Health:
The Borrower, through DGPC and DHPC, shall (a) ensure that all civil works contracts require contractors employed under the project to incorporate minimum workplace occupational safety norms and the core labor standards as identified by the fundamental ILO conventions; (b) provide timely payment of wages to all workers including male and female workers (with such requirements being included in civil works contract and monitored by construction supervision consultants); (c) provide women’s employment, where appropriate, and pay equal wages to women for work of equal value; (d) not employ child labor in Project activities, in compliance with the relevant laws and regulations of the Borrower; and (e) monitor the implementation of these provisions, including, the effects of the Project on women, through collection and compilation of gender-disaggregated data, where relevant, including in the relevant Resettlement Plan, social development action plan, and PPMES and provide monitoring reports of these activities to ADB.
Complied with
Loans 2463, 2464
5 5
27 26
The Borrower, through DGPC, and DHPC, shall cause the contractors to disseminate information on the risks of socially and sexually transmitted diseases, including HIV/AIDS and malaria, to their employees during Project implementation.
Complied with
Loans 2463, 2464
5 5
28 27
Governance and Anticorruption:
The Borrower shall comply with, and shall cause DGPC and DHPC to carry out the Project in accordance with, ADB’s Anticorruption Policy (1998, as amended to date) and all applicable laws, including the Companies Act of the Kingdom of Bhutan. The Borrower acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and shall ensure that DGPC and DHPC cooperate fully with any such investigation and extend all necessary assistance as may be necessary for successful completion of the investigation.
Complied with
Appendix 3 23
Product Schedule Para No. Description Status of
Compliance
Loans 2463, 2464
5 5
29 28
Disbursement and Performance Audits: The Borrower shall ensure that DHPC reviews invoices from firms engaged in implementing the Project, and makes payments within 30 days of receipt or inform the contractors of any shortfalls in its ability to make payments of the invoices.
Complied with
Loans 2463, 2464
5 5
30 29
The Borrower shall allow and facilitate ADB’s representatives to conduct spot and random checks on (i) flow of funds and their use for the Project in accordance with the Loan Agreement, (ii) work-in-progress; and (iii) Project implementation.
Complied with
Loans 2463, 2464
5 5
31 30
Project Performance Monitoring and Evaluation System:
During Project implementation, the Borrower shall cause DHPC, through the DGPC, to develop a Project Performance Monitoring and Evaluation System (“PPMES”) including baseline performance monitoring, and systematic Project performance monitoring, including benefits monitoring and evaluation acceptable to ADB and the other donors. DHPC shall carry out surveys (a) at the start of Project implementation to establish baseline data, (b) at Project mid-term, and (c) at the time of Project completion and not later than six months after Project completion, to evaluate the Project benefits. Data to be compiled and analyzed for the purpose of performance monitoring and evaluation shall be in a format acceptable to ADB. Key indicators shall be proposed by DGPC and acceptable to ADB.
Complied with
Loans 2463, 2464
5 5
32 31
Annual Budget Plan:
By 31 December of each year of Project implementation, the Borrower shall cause DGPC to, and DGPC shall cause DHPC to, and DHPC shall, provide ADB with an annual budget plan for the following fiscal year.
Complied with
Loans 2463, 2464
5 5
33 32
Semiannual Reviews:
The Borrower and ADB shall carry out semiannual reviews of the Project during Project implementation. The semiannual reviews shall include an examination of budgetary allocations for the Project, operation and maintenance costs, staffing, implementation arrangements and achievements under the Project. The review shall include assessing progress for each Project component, identifying difficulties and constraints, and determining ways to overcome them.
Complied with
Loans 2463, 2464
5 5
34 33
Midterm Review:
The Borrower and ADB shall jointly carry out a midterm review of the Project during the third year of Project implementation or at any other time as may be agreed upon by the Borrower and ADB. The results of the midterm review shall be discussed by the Borrower and ADB and if required, appropriate corrective measures shall be formulated to ensure successful Project implementation and achievement of the Project objectives by the Loan Closing Date.
Complied with
Loan 2463 Established, Staffed, and Operating PMU or PIU Complied with
Loan 2463 Fielding of Consultants Complied with
Loan 2463 Art IV Sec 4.01 (a) The Borrower shall carry out or cause to be carried out the Project with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental and hydropower practices. (b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth herein and Schedule 5 to the Loan Agreement.
Complied with
Loan 2463 Art IV Sec 4.02 The Borrower shall cause DGPC to enable ADB’s representatives to inspect the Project, the Goods, and Works financed out of the proceeds of the Loan, all other plants, sites, properties and equipment, and any relevant records and documents relating to the Project.
Complied with
24 Appendix 3
Product Schedule Para No. Description Status of
Compliance
Loan 2463 Art IV Sec 4.03 The Borrower shall make available or shall cause to be made available, to DHPC, promptly as needed and on terms and conditions acceptable to ADB, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.
Complied with
Loan 2463 Art IV Sec 4.04 The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.
Complied with
Loan 2463 Art IV Sec 4.05 The Borrower shall take all action that shall be necessary on its part to enable DGPC and DHPC to perform their respective obligations under the Project Agreement, and shall not take or permit any action that would interfere with the performance of such obligations.
Complied with
Loan 2463 Art IV Sec 4.06 (a) The Borrower shall exercise its rights under the DHPC Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. (b) No rights or obligations under the DHPC Subsidiary Loan Agreement shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.
Complied with
Loan 2464 Art IV Sec 4.01 In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement.
Complied with
Loan 2464 Art IV Sec 4.02 The Borrower shall cause DGPC to enable ADB’s representatives to inspect the Project, the Goods, and Works financed out of the proceeds of the Loan, all other plants, sites, properties and equipment, and any relevant records and documents relating to the Project.
Complied with
Loan 2464 Art IV Sec 4.03 The Borrower shall take all action that shall be necessary on its part to enable DGPC to perform its obligations under the Project Agreement and shall not take or permit any action that would interfere with the performance of such obligations.
Complied with
Loan 2464 Art IV Sec 4.04 (a) The Borrower shall exercise its rights under the DGPC Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. (b) No rights or obligations under the DGPC Subsidiary Loan Agreement shall be assigned, amended, or waived without the prior concurrence of ADB.
Complied with
Loan 3034 Art IV Sec 4.01 In the carrying out of the Project and the operation of the Project facilities, the Borrower shall perform, or cause DGPC and DHPC to perform, all obligations set forth in Schedule 5 to the Initial Loan Agreements.
Complied with
Loan 3034 Art IV Sec 4.02 The Borrower shall ensure that DHPC carries out the Project with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental, and hydropower practices.
Complied with
Loan 3034 Art IV Sec 4.03 The Borrower shall cause DGPC and DHPC to enable ADB’s representatives to inspect the Project, the Goods and Works, and any relevant records and documents.
Complied with
Loan 3034 Art IV Sec 4.04 The Borrower shall make available or cause to be made available, promptly as needed and on terms by conditions acceptable to ADB, the funds, facilities, services, land, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.
Complied with
Loan 3034 Art IV Sec 4.05 The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.
Complied with
Appendix 3 25
Product Schedule Para No. Description Status of
Compliance
Loan 3034 Art IV Sec 4.06 ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting them on ADB’s website.
Complied with
Loan 3034 Art IV Sec 4.07 The Borrower shall take all actions which shall be necessary on its part to enable DGPC and DHPC to perform their obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.
Complied with
Loan 3034 Art IV Sec 4.08 (a) The Borrower shall exercise its rights under the Initial Subsidiary Loan Agreements and the Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. (b) No rights or obligations under the Initial Subsidiary Loan Agreements or the Subsidiary Loan Agreement shall be assigned, amended, or waived without the prior concurrence of ADB.
Complied with
Loan 3034 Art IV Sec 4.09 Within a period of time satisfactory to ADB, the PPA Supplement shall have been duly authorized or ratified by and executed and delivered on behalf of each party thereto and all conditions precedent to its effectiveness shall have been fulfilled, or arrangements satisfactory to ADB shall have been made for the fulfillment thereof.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.01 (a) DGPC and DHPC shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental, hydropower, and public utility practices. (b) In the carrying out of the Project and operation of the Project facilities DGPC and DHPC shall perform all obligations set forth in the relevant Loan Agreement to the extent that they are applicable to DGPC and DHPC, respectively.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.02 DGPC and DHPC shall make available, promptly as needed, the funds, facilities, services, equipment, land and other resources which are required, in addition to the proceeds of the OCR Loan and the ADF Loan, for the carrying out of the Project and the operation and maintenance of the Project facilities.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.03 (a) In the carrying out of the Project, DGPC and DHPC shall employ competent and qualified contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB. (b) Except as ADB may otherwise agree, all Goods, Works, and services to be financed out of the proceeds of the OCR Loan and the ADF Loan shall be procured in accordance with the provisions of Schedule 4 and Schedule 5 to the relevant Loan Agreement. ADB may refuse to finance a contract where Goods, Works, or services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.04 DGPC shall cause DHPC to, and DHPC shall, carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. DHPC shall furnish, and DGPC shall cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.05 (a) DGPC shall cause DHPC to, and DHPC shall, take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. (b) Without limiting the generality of the foregoing, DHPC undertakes to insure, and DGPC undertakes to cause to be insured, the Goods to be imported for the
Complied with
26 Appendix 3
Product Schedule Para No. Description Status of
Compliance
Project and to be financed out of the proceeds of the OCR Loan or the ADF Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.
Loans 2463, 2464
PA, Art II Sec 2.06 DGPC shall cause DHPC to maintain, and DHPC shall maintain, records and accounts adequate to identify the Goods, Works, and services and other items of expenditure financed out of the proceeds of the OCR Loan or the ADF 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.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.07 (a) ADB and DGPC and DHPC shall cooperate fully to ensure that the purposes of the OCR Loan and the ADF Loan and the Project will be accomplished. (b) DGPC and DHPC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, the DGPC Subsidiary Loan Agreement or the DHPC Subsidiary Loan Agreement, or the accomplishment of the purposes of the OCR Loan and the ADF Loan. (c) ADB and DGPC and DHPC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, DGPC or DHPC, and the OCR Loan and the ADF Loan.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.08 (a) DGPC and DHPC shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the OCR Loan and the ADF Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works, and services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of DGPC and DHPC; and (v) any other matters relating to the purposes of the OCR Loan and the ADF Loan. (b) Without limiting the generality of the foregoing, DGPC and DHPC 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 problems, and proposed program of activities and expected progress during the following quarter. (c) 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, DGPC and DHPC shall prepare and furnish to ADB a 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 DGPC and DHPC of its obligations under this Project Agreement and the accomplishment of the purposes of the OCR Loan and the ADF Loan.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.09 (a) DGPC and DHPC shall each (i) maintain annual separate accounts for the Project and for their overall operations, with detailed descriptions of the sources of receipts and expenditures, including separate accounts for the OCR Loan and the ADF Loan; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, statement of cash flows, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and
Complied with
Appendix 3 27
Product Schedule Para No. Description Status of
Compliance
financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the OCR Loan and the ADF Loan proceeds and compliance with the covenants of each Loan Agreement), all in the English language. DGPC and DHPC 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. (b) In addition to annual audited financial statements referred to in paragraph (a) of this Section, DGPC and DHPC shall furnish to ADB: (i) within three (3) months after the end of each fiscal year, unaudited annual financial statements on its operations for such fiscal year; and (ii) within three (3) months after the end of each fiscal year, an operational budget plan (including sources and expenditures of fund) for the ensuing year. (c) DGPC and DHPC shall enable ADB, upon ADB's request, to discuss DGPC and DHPC financial statements and its financial affairs from time to time with the auditors appointed by DGPC and DHPC respectively pursuant to Section 2.09(a) hereabove, 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 DGPC and DHPC respectively unless DGPC and DHPC shall otherwise agree.
Loans 2463, 2464
PA, Art II Sec 2.10 DGPC and DHPC shall enable ADB's representatives to inspect the Project, the goods, works, and services financed out of the proceeds of the OCR Loan or the ADF Loan, all other plants, sites, works, properties and equipment of the DGPC and DHPC and any relevant records and documents.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.11 (a) DGPC and DHPC 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 franchises which are necessary in the carrying out of the Project or in the conduct of its business. (b) DGPC and DHPC shall at all times conduct its business in accordance with sound administrative, financial, environmental, and hydropower practices, and under the supervision of competent and experienced management and personnel. (c) DGPC and DHPC 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, hydropower practices, and maintenance and operational practices.
Complied with
Loans 2463, 2464, 3034
PA, Art II Sec 2.12 Except as ADB may otherwise agree, DGPC and DHPC shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.13 Except as ADB may otherwise agree, DGPC and DHPC shall apply the proceeds of the OCR Loan and the ADF Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works, and services financed out of such proceeds are used exclusively in the carrying out of the Project.
Complied with
Loans 2463, 2464
PA, Art II Sec 2.14 Except as ADB may otherwise agree, DGPC and DHPC shall duly perform all its obligations under the DGPC Subsidiary Loan Agreement and the DHPC Subsidiary Loan Agreement, respectively, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the DGPC Subsidiary Loan Agreement and
Complied with
28 Appendix 3
Product Schedule Para No. Description Status of
Compliance
the DHPC Subsidiary Loan Agreement, respectively.
Loans 2463, 2464, 3034
PA, Art II Sec 2.15 DGPC and DHPC shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of their respective articles of incorporation and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.
Complied with
Loan 3034 PA, Art II Sec 2.01 (a) DGPC shall cause DHPC to, and DHPC shall, carry out the Project with due diligence and efficiency, and in conformity with sound applicable technical, financial, business, and development practices. (b) In the carrying out of the Project and operation of the Project facilities, DGPC and DHPC shall perform their respective obligations set forth in the Loan Agreement.
Complied with
Loan 3034 PA, Art II Sec 2.02 DGPC and DHPC shall make available, promptly as needed, and on terms and conditions acceptable to ADB, the funds, facilities, services, land and other resources as required, in addition to the proceeds of the Subsidiary Loan, for the carrying out of the Project.
Complied with
Loan 3034 PA, Art II Sec 2.03 (a) In the carrying out of the Project, DGPC and DHPC shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB. (b) Except as ADB may otherwise agree, DGPC and DHPC shall procure all items of expenditures to be financed out of the proceeds of the Subsidiary Loan in accordance with the provisions of Schedule 3 to the Loan Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.
Complied with
Loan 3034 PA, Art II Sec 2.04 DGPC and DHPC shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. DGPC and DHPC shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.
Complied with
Loan 3034 PA, Art II Sec 2.05 (a) DGPC and DHPC shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. (b) Without limiting the generality of the foregoing, DGPC and DHPC undertake to insure, or cause to be insured, the Goods to be imported for the Project against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.
Complied with
Loan 3034 PA, Art II Sec 2.06 DGPC and DHPC shall maintain, or cause to be maintained, records and accounts adequate to identify the items of expenditure financed out of the proceeds of the Subsidiary 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.
Complied with
Loan 3034 PA, Art II Sec 2.07 (a) ADB, DGPC and DHPC shall cooperate fully to ensure that the purposes of the Subsidiary Loan will be accomplished. (b) DGPC and DHPC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of their respective obligations under this Project Agreement, the Loan Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Subsidiary Loan.
Complied with
Appendix 3 29
Product Schedule Para No. Description Status of
Compliance
(c) ADB, DGPC and DHPC shall from time to time, at the request of any of them, exchange views through their representatives with regard to any matters relating to the Project, DGPC, DHPC or the Subsidiary Loan.
Loan 3034 PA, Art II Sec 2.08 (a) DGPC and DHPC shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Subsidiary Loan and the expenditure of the proceeds thereof; (ii) the items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of DGPC and DHPC; and (v) any other matters relating to the purposes of the Subsidiary Loan. (b) Without limiting the generality of the foregoing, DGPC and DHPC shall furnish to ADB periodic 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 period under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following period. (c) Promptly after physical completion of the Project, but in any event not later than 3 months thereafter or such later date as ADB may agree for this purpose, DGPC and DHPC shall prepare and furnish to ADB a 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 DGPC and DHPC of its obligations under this Project Agreement and the accomplishment of the purposes of the Subsidiary Loan.
Complied with
Loan 3034 PA, Art II Sec 2.09 (a) DGPC and DHPC shall (i) maintain separate accounts and records for the Project; (ii) prepare annual financial statements for the Project in accordance with accounting principles acceptable to ADB; (iii) have such financial statements for the Project audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report (which includes the auditors' opinion on the financial statements, use of the Subsidiary Loan proceeds and compliance with the financial covenants of the Loan Agreement and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any); and (v) furnish to ADB, no later than 6 months after the close of the fiscal year to which they relate, copies of such audited financial statements, audit report and management letter, all in the English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request. (b) ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting them on ADB's website. (c) In addition to annual audited financial statements referred to in subsection (a) hereinabove, DGPC and DHPC shall (i) provide their respective annual financial statements prepared in accordance with national accrual-based financing reporting standards acceptable to ADB; (ii) have their financial statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to, ADB; and (iii) furnish to ADB, no later than 1 month after approval
Complied with
30 Appendix 3
Product Schedule Para No. Description Status of
Compliance
by the relevant authority, copies of such audited financial statements in the English language and such other information concerning these documents and the audits thereof as ADB shall from time to time reasonably request. (d) DGPC and DHPC shall enable ADB, upon ADB's request, to discuss the financial statements for the Project and their financial affairs where they relate to the Project with the auditors appointed by DGPC and DHPC pursuant to subsections (a)(iii) and (c) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of DGPC and DHPC, unless DGPC and DHPC shall otherwise agree.
Loan 3034 PA, Art II Sec 2.10 DGPC and DHPC shall enable ADB's representatives to inspect the Project, the Goods and Works and any relevant records and documents.
Complied with
Loan 3034 PA, Art II Sec 2.11 (a) DGPC and DHPC shall, promptly as required, take all action within their powers to maintain their corporate existences, to carry on their operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of their operations. (b) DGPC and DHPC shall at all times conduct their operations in accordance with sound applicable technical, financial, business, development and operational practices, and under the supervision of competent and experienced management and personnel. (c) DGPC and DHPC shall at all times operate and maintain their 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 applicable technical, financial, business, development, operational and maintenance practices.
Compiled with
Loan 3034 PA, Art II Sec 2.13 Except as ADB may otherwise agree, DGPC and DHPC shall apply the proceeds of the Subsidiary Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all items of expenditures financed out of such proceeds are used exclusively in the carrying out of the Project.
Complied with
Loan 3034 PA, Art II Sec 2.14 Except as ADB may otherwise agree, DGPC shall cause DHPC to perform, and DHPC shall duly perform, all of DHPC's obligations under the Loan Agreement, and DGPC shall cause DHPC not to take or concur in, and DHPC shall not take or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Loan Agreement.
Complied with
ADB = Asian Development Bank, ADF = Asian Development Fund, CDM = Clean Development Mechanism, DGPC = Druk Green Power Corporation, DHPC = Dagachhu Hydro Power Corporation, EIA = environmental impact assessment, EMP = environmental management plan, ER = emission reduction, IEE = initial environment examination, ILO = International Labor Organization, MOF = Ministry of Finance, OCR = ordinary capital resources, PA = Project Agreement, PIU = Project Implementation Unit, PMU = Project Management Unit, PPA = power purchase agreement, PPMES = Performance Monitoring and Evaluation System, SIEE = summary initial environmental examination.
Appendix 4 31
COMPLIANCE WITH ENVIRONMENTAL AND SOCIAL REQUIREMENTS 1. Environment. The project was classified as category B for environment. In accordance with the Environment Policy (2002) and Environmental Assessment Guidelines (2003) of the Asian Development Bank (ADB), a summary initial environmental examination was prepared and reviewed by ADB. ADB’s environmental due diligence covered all project-associated facilities, including access roads and a transmission line from the Dagachhu plant. The project’s category was not changed when additional financing was approved. In accordance with national legislation, an environmental impact assessment was completed for the Dagachhu component in July 2006, and the National Environment Commission granted the environmental clearance in June 2007. The Dagachhu component uses a run-of-river design and does not encroach on any protected areas. There has been no project activity in national parks, wildlife sanctuaries, and cultural or historical monuments. Mitigation measures included in the environmental management plan were designed to avoid damage to the local environment or communities, or disturbance of important habitats. The National Environment Commission and Department of Forest and Park Services provided national environmental and forestry clearances for the rural electrification component, and initial environmental examinations were issued for each district of the project area. The environmental management plan covered mitigation measures, including the reduction of clearance areas for the rights-of-way, installation of covered conductors in areas close to protected areas and sensitive habitats, and alignment of distribution lines along public roads (on curbs) that are excluded from the protected status according to the Road Act of Bhutan 2004. In addition, all civil works were to be performed by manual labor, and the cutting of trees was monitored by staff from local offices of the Department of Forest and Park Services.
2. Evaluation. The project’s environmental performance was satisfactory. The environmental mitigation measures proposed in the environmental management plan were implemented well. Waste, soil, and air quality were monitored and the parameters were within the national standard. During construction, compliance with the environmental management plan was regularly monitored by the National Environment Commission and the Bhutan Electricity Authority, which both confirmed to the ADB Project Completion Review mission that they were satisfied with the environmental and regulatory precautions taken during construction. When dust along the access roads was raised as an issue, Dagachhu Hydro Power Corporation (DHPC) promptly blacktopped the access roads to reduce dust. Environmental monitoring reports were submitted biannually. 3. Fish ladder and minimum environmental flow. A fish population survey showed five fish species were observed in the Dagachhu River. The fish in the Dagachhu River are neither rare nor endangered. Only one species, which is very common in the region is a seasonal migrant (moving upstream from March to April, and then downstream in September). Because of its presence, the National Environment Commission recommended a fish ladder, and DHPC adopted its design. DHPC constructed the fish ladder, and it maintains a 1.4 cubic meter per second environmental flow at all times. Water discharge was measured during 2010–2011, and measurements show that discharge from the fish ladder and two tributaries immediately below the weir will maintain at least a 10.2% environmental flow, which is considered sufficient. 4. Site restoration and reforestation. DHPC and the civil works contractor have restored most of the sites and the dumping yards, and have planted grass and trees. Restoration work was ongoing at one of the sites as of September 2016, but it will be completed by the contractor before the warranty period ends in March 2018. In the meantime, the Department of Geology and Mines is holding a deposit of more than Nu2 million, which will not be refunded until the area is restored
32 Appendix 4
to its satisfaction. DHPC is also undertaking a reforestation program. DHPC has planted more than 20,000 trees with an 80% survival rate, which is above the number of trees cut under the project (around 5,000). 5. Rural electrification. For the rural electrification component, the cutting of trees was adequately monitored by the Department of Forest and Park Services, and the civil works were done by manual labor in the forest to minimize impacts. No adverse impacts have been reported. 6. Safeguards. The project was classified as category B for involuntary resettlement, and category C for indigenous peoples. Consultations with local communities were held throughout the project.
7. Resettlement. No resettlement of houses was required for either of the two project components. In accordance with the resettlement plan prepared by DHPC, a census and asset inventory of the affected persons was concluded. The resettlement plan, along with the entitlement matrix, was disclosed on the ADB website. A series of consultations was conducted by DHPC with all the affected persons and other stakeholders. A total of 25 affected landowners were offered a choice of (i) compensation for the lost land, or (ii) replacement with government-owned land of equal value. All landowners chose the land replacement option and were given title to their choice of available land within the general area of the project. Landowners were also compensated for any lost crops at the rate published by the Property Assessment and Valuation Agency of Bhutan at the time the land was taken in 2008.
8. The Dagachhu power plant employs 146 staff as of June 2017 including temporary staff, many of whom are from within the local project area. Apart from providing employment for local people, the project injects money into the local economy, which has enabled local residents to set up shops and other small businesses that would not otherwise have been possible. The ADB Project Completion Review mission spoke to a number of residents who were very supportive of the project, largely for that reason. 9. DHPC provides school buses to transport children from the project area to their primary and secondary schools in Dagapela, some 16 kilometers away. This service is provided to all families living in the project area, not just those directly associated with the project. During construction, it renovated and constructed additional classrooms at the local primary school. 10. DHPC sponsored a number of initiatives during construction to increase awareness within the project workforce and the local communities of health and environmental issues. These included an HIV/AIDS awareness program; screening of workers for various diseases, including high blood pressure, diabetes, HIV/AIDS, and tuberculosis; a mass cleanup campaign in both Dagana and Dagapela towns.
Appendix 5 33
STATUS OF COMPLIANCE WITH LOAN COVENANTS (Rural Electrification)
Product Schedule Para No. Description Status of
Compliance
G0119 PA, Art II Sec 2.01 (a) BPC shall carry out the Project with due' diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental and rural electrification practices. (b) In the carrying out of the Project and operation of the Project facilities, BPC shall perform all obligations set forth in the ADF Grant Agreement to the extent that they are applicable to BPC.
Complied with
G0119 PA, Art II Sec 2.02 BPC shall make available, promptly as needed, the funds, facilities, services equipment, land and other resources which are required, in addition to the proceeds of the ADF Grant, for the carrying out of the Project and the operation and maintenance of the Project facilities.
Complied with
G0119 PA, Art II Sec 2.03 (a) In the carrying out of the Project, BPC shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB. (b) Except as ADB may otherwise agree, all Goods, Works, and services to be financed out of the proceeds of the ADF Grant shall be procured in accordance with the provisions of Schedule 3 and Schedule 4 to the ADF Grant Agreement. ADB may refuse to finance a contract where Goods, Works, or services have not been procured under procedures substantially in accordance with those agreed between the Recipient and ADB or where the terms and conditions of the contract are not satisfactory to ADB.
Complied with
G0119 PA, Art II Sec 2.04 BPC shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. BPC shall furnish, *or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.
Complied with
G0119 PA, Art II Sec 2.05 (a) BPC shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of the Project facilities and any equipment financed from the proceeds of the ADF Grant to such extent and against such risks and in such amounts as shall be consistent with sound practice. (b) Without limiting the generality of the foregoing, BPC undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the ADF Grant against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.
Complied with
G0119 PA, Art II Sec 2.06 BPC shall maintain, or cause to be maintained, records and accounts adequate to identify the Goods, Works, and services and other items of expenditure financed out of the proceeds of the ADF Grant, to disclose the use thereof in the Project, to record the progress of the Project and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.
Complied with
G0119 PA, Art II Sec 2.07 (a) ADB and BPC shall cooperate fully to ensure that the purposes of the ADF Grant will be accomplished. (b) BPC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the BPC Subsidiary Financing 'Agreement, or the accomplishment of the purposes of the ADF Grant. (c) ADB and BPC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, BPC and the ADF Grant.
Complied with
G0119 PA, Art II Sec 2.08 (a) BPC shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the ADF Grant and the expenditure of the proceeds thereof; (ii) the Goods, Works, and services and
Complied with
34 Appendix 5
Product Schedule Para No. Description Status of
Compliance
other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of BPC; and (v) any other matters relating to the purposes of the ADF Grant. (b) Without limiting the generality of the foregoing, BPC 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 problems, and proposed program of activities and expected progress during the following quarter. (c) 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, BPC shall prepare and furnish to ADB a 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 BPC of its obligations under this Project Agreement and the accomplishment of the purposes of the ADF Grant.
G0119 PA, Art II Sec 2.09 (a) BPC shall (i) maintain separate annual accounts for the Project and for its overall operations, with detailed descriptions of the sources of receipts and expenditures; (ii) have such accounts and related annual financial statements (balance sheet, statement of income and expenses, statement of cash flows, and related statements) audited, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 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 auditors' opinion on the use of the ADF Grant proceeds and compliance with the financial covenants of the ADF Grant Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. BPC 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. (b) In addition to annual audited financial statements referred to in paragraph (a) of this Section, BPC shall furnish to ADB: (i) within 3 months after the end of each fiscal year, unaudited annual financial statements on its operations for such fiscal year; and (ii) within 3 months after the end of each fiscal year, a budget plan (including sources and expenditures of fund) for the ensuing years. (c) BPC shall enable ADB, upon ADB's request, to discuss BPC financial statements and its financial affairs from time to time with the auditors appointed by BPC pursuant to Section 2.09(a) hereabove, 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 BPC unless BPC shall otherwise agree.
Complied with
G0119 PA, Art II Sec 2.10 BPC shall enable ADB's representatives to inspect the Project, the Goods, Works, and services financed out of the proceeds of the ADF Grant all other plants, sites, Works, properties and equipment of the BPC, and any relevant records and documents.
Complied with
G0119 PA, Art II Sec 2.11 (a) BPC 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 franchises which are necessary in the carrying out of the Project or in the conduct of its business. (b) BPC shall at all times conduct its business in accordance with sound administrative, financial,
Complied with
Appendix 5 35
Product Schedule Para No. Description Status of
Compliance
environmental, power and rural electrification practices, and under the supervision of competent and experienced management and personnel. (c) BPC 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, power and rural electrification practices, and maintenance and operational practices.
G0119 PA, Art II Sec 2.12 Except. as ADB may otherwise agree, BPC shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under the ADF Grant or the Project Agreement.
Complied with
G0119 PA, Art II Sec 2.13 Except as ADB may otherwise agree, BPC shall apply the proceeds of the ADF Grant to the financing of expenditures on the Project in accordance with the provisions of the ADF Grant Agreement and this Project Agreement, and shall ensure that all Goods, Works, and services financed out of such proceeds are used exclusively in the carrying out of the Project.
Complied with
G0119 PA, Art II Sec 2.14 Except as ADB may otherwise agree, BPC shall duly perform all its obligations under the BPC Subsidiary Financing Agreement, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the BPC Subsidiary Financing Agreement.
Complied with
G0119 PA, Art II Sec 2.15 BPC shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its Articles of Incorporation and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.
Complied with
G0119 GA, Art IV Sec 4.01 In the carrying out of the Project and operation of the Project facilities, the Recipient shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this ADF Grant Agreement.
Complied with
G0119 GA, Art IV Sec 4.02 The Recipient shall enable ADB’s representatives to inspect the Project, the Goods, Works and consulting services financed out of the proceeds of the ADF Grant, and any relevant records and documents.
Complied with
G0119 GA, Art IV Sec 4.03 The Recipient shall take all action which shall be necessary on its part to enable BPC to perform its obligations under the Project Agreement and shall not take or permit any action which would interfere with the performance of such obligations.
Complied with
G0119 GA, Art IV Sec 4.04 (a) The Recipient shall exercise its rights under the BPC Subsidiary Grant Agreement in such a manner as to protect the interests of the Recipient and ADB and to accomplish the purposes of the ADF Grant. (b) No rights or obligations under the BPC Subsidiary Grant Agreement shall be assigned, amended, or waived without the prior concurrence of ADB.
Complied with
G0119 4 1 Project Executing Agency:
DOE shall be the Project Executing Agency and shall be responsible for the overall execution and supervision of the Project. The Recipient shall cause DOE to follow the implementation arrangements set forth in this schedule.
Complied with
G0119 4 2 Project Implementing Agency:
BPC shall be the Implementing Agency and shall be responsible for day to day coordination, implementation, and administration of the Project and all activities required for carrying out the successful implementation of the Project. Such activities include: (a) the procurement of Goods and Works; (b) construction supervision; (c) maintenance of separate project accounts;
Complied with
36 Appendix 5
Product Schedule Para No. Description Status of
Compliance
(d) monitoring and reporting upon implementation of the Project; and (e) the provision of coordination, support, and liaison activities, including with contractors, district offices and relevant government departments especially the Department of Roads.
G0119 4 3 The Recipient, through DOE, shall follow the implementation arrangements set forth in this schedule. Complied with
G0119 4 4 Project Implementation Support Unit:
The Recipient shall ensure that (a) the project implementation unit established in 2004 by DOE for three ADB rural electrification projects shall function as the Project Implementation Unit (“PIU”) for the Project and (b) such PIU shall oversee day-to-day operations of the Project, including in particular disbursement, accounting, logistics management, reporting, monitoring, supervision, organization of research activities, local training and study tours, and coordinating with DOE, relevant government departments, and the Development Partners.
Complied with
G0119 4 5 The Recipient shall also ensure that (a) the PIU is managed by a full-time Project director, acceptable to ADB; and (b) the Project director is supported by competent full-time personnel acceptable to ADB.
Complied with
G0119 4 6 Counterpart Funding:
The Recipient and DOE shall ensure that (a) all local and foreign currency counterpart financing necessary for the Project shall be provided in time to enable completion of the Project activities; (b) additional counterpart financing shall be provided if necessary for any shortfall of funds or cost overruns; and (c) counterpart financing for compensation and entitlements under any Resettlement Plan that becomes necessary for the Project are fully provided directly to affected people prior to their displacement from housing and land.
Complied with
G0119 4 7 BPC Subsidiary Financing Agreement:
The Recipient shall execute a BPC Subsidiary Financing Agreement with BPC upon terms and conditions satisfactory to ADB. The Recipient shall have obtained all necessary approvals to enter such Subsidiary Financing Agreement.
Complied with
G0119 4 8 Financial Indicators:
The Recipient shall cause BPC to, ensure that BPC shall, (a) maintain the following annual financial ratios: (i) a debt service coverage ratio of 1.5; (ii) a debt to equity ratio of 70:30; and (b) incorporate measures to achieve these financial ratios in the corporate capital expenditure plan.
Complied with
G0119 4 9 Commercial Accounts Receivable Collection:
The Recipient shall and shall cause BPC to maintain accounts receivable that have overdue accounts of less than two months.
Complied with
G0119 4 10 Environmental Safeguards:
The Recipient, DOE and BPC shall ensure that the proposed project investments are undertaken and all facilities and associated equipment are assessed, operated and maintained in accordance with applicable laws, and regulations of the Government, ADB’s Environment Policy (2002), and internal environmental policies and safeguard operational rules of BPC and the National Environment Commission.
Complied with
G0119 4 11 The Recipient, DOE and BPC shall ensure that the outcomes of each of the IEEs conducted for each geographical area set forth in paragraph 2 of Schedule 1 in which the Rural Electrification Project will be implemented, and the mitigation measures identified in each environmental management plans (EMP) approved by ADB and relevant government agencies are complied with during the design, construction and operation phases of each subproject. The Recipient shall ensure that, and DOE and BPC shall monitor, audit, and report to ADB twice a year on the implementation of the consolidated EMP for the
Complied with
Appendix 5 37
Product Schedule Para No. Description Status of
Compliance
Project.
G0119 4 12 The Recipient, DOE and BPC shall each ensure that the subprojects (a) does not take place within national parks, wild and planted forests and wildlife sanctuaries without prior environmental clearances obtained from all relevant government agencies; and (b) avoids monuments of cultural or historical importance.
Complied with
G0119 4 13 Land Availability and Resettlement:
The Recipient, DOE and BPC shall ensure that any damage to crops or trees or any other asset occur during the implementation of the Project will be compensated at market rates to the eligible affected person or community.
Complied with
G0119 4 14 The Recipient, DOE and BPC shall ensure that construction contracts contain binding requirements for construction contractors to (a) fully reinstate pathways, other local infrastructures, and agricultural land to at least their pre-project condition upon the completion of construction; and (b) adequately record the condition of roads, agricultural land and other infrastructure prior to transport of material and construction commencement.
Complied with
G0119 4 15 The Recipient shall ensure, and shall cause DOE and BPC to ensure that (a) any land and rights-of-way required by the Project are made available in a timely manner; and (b) the subprojects shall not require Significant Involuntary Resettlement and any involuntary resettlement will be avoided or minimized. If land acquisition and/or involuntary resettlement are required for any Subproject, the Recipient shall, or shall cause the DOE and BPC to, prepare a Resettlement Plan for such Subproject in accordance with (a) applicable laws and regulations; and (b) ADB’s Policy on Involuntary Resettlement (1995) and related requirements. Such Resettlement Plan shall be submitted to ADB for review and approval, prior to any land acquisition being initiated and no later than the award of civil works. Any such Resettlement Plan shall be prepared based on the final detailed design for such Subproject, and such Resettlement Plan shall be disclosed to affected people in accordance with ADB’s applicable information disclosure requirements for resettlement.
Complied with
G0119 4 16 Labor and Health:
The Recipient, through DOE and BPC, shall ensure (a) that all civil works contracts require contractors employed under the project to incorporate minimum workplace occupational safety norms, including the core labor standards as identified by the fundamental ILO conventions; (b) provide timely payment of wages to all workers including male and female workers (with such requirements being included in civil works contract and monitored by construction supervision consultants); (c) provide women’s employment, where appropriate, and pay equal wages to the women employees for equivalent work; (d) not employ child labor in project activities, in compliance with the relevant laws and regulations of the Recipient; and (e) monitor the implementation of these provisions, including the effects of the Project on women, through collection and compilation of gender-disaggregated data, where relevant, including in any Resettlement Plan that becomes necessary for the Project, social development action plan, and PPMES and provide monitoring reports of these activities to ADB.
Complied with
G0119 4 17 The Recipient, DOE, and BPC shall cause the contractors to disseminate information on the risks of socially and sexually transmitted diseases, including HIV/AIDS and malaria to their employees during project implementation.
Complied with
G0119 4 18 Governance and Anticorruption:
The Recipient shall comply with, and shall cause DOE and BPC to carry out the Project in accordance, Complied with
38 Appendix 5
Product Schedule Para No. Description Status of
Compliance
with ADB’s Anticorruption Policy (1998, as amended to date) and all applicable law. The Recipient acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and shall ensure that DOE and BPC cooperate fully with any such investigation and extend all necessary assistance as may be necessary for successful completion of the investigation.
G0119 4 19 Disbursements and Performance Audits:
The Recipient shall ensure that the PIU reviews invoices from firms engaged in implementing the Project, and makes payments within 30 days of their receipt or inform the Contractors of any shortfalls in its ability to make payment of the invoices.
Complied with
G0119 4 20 The Recipient shall allow and facilitate ADB’s representatives to conduct spot and random checks on (i) flow of funds and their use for the Project in accordance with the Grant Agreement; (ii) work-in-progress; and (iii) Project implementation.
Complied with
G0119 4 21 Project Performance Monitoring and Evaluation System:
During Project implementation, the Recipient shall cause BPC, through the PIU, to develop a Project Performance Monitoring and Evaluation System (PPMES) including baseline performance monitoring, and systematic Project performance monitoring, including benefits monitoring and evaluation acceptable to ADB and the other donors. DOE shall carry out surveys (a) at the start of Project implementation to establish baseline data, (b) at Project mid-term, and (c) at the time of Project completion and not later than six months after Project completion, to evaluate the Project benefits. Data to be compiled and analyzed for the purpose of performance monitoring and evaluation shall be in a format acceptable to ADB. Key indicators shall be proposed by DOE and acceptable to ADB.
Complied with
G0119 4 22 Annual Budget Plan:
By 31 December of each year of Project implementation, DOE shall cause BPC to, and BPC shall, provide ADB with an annual budget plan for the following fiscal year.
Complied with
G0119 4 23 Semiannual Reviews:
The Recipient and ADB during Project implementation. The semiannual reviews shall include an examination of budgetary allocations for the Project, operation and maintenance costs, staffing, implementation arrangements and achievements under the Project. The review shall include assessing progress for each Project component, identifying difficulties and constraints, and determining ways to overcome them.
Complied with
G0119 4 24 Midterm Review:
The Recipient and ADB shall jointly carry out a midterm review of the Project during the third year of Project implementation or at any other time as may be agreed upon by the Recipient and ADB. The results of the midterm review shall be discussed by the Recipient and ADB and if required, appropriate corrective measures shall be formulated to ensure successful Project implementation and achievement of the Project objectives by the Grant Closing Date.
Complied with
G0141 GA, Art IV Sec 4.01 (a) The Recipient shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound applicable financial, business, power, rural electrification, and development practices. (b) In the carrying out of the Project, the Recipient shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this ACEF Grant Agreement.
Complied with
G0141 GA, Art IV Sec 4.02 The Recipient shall make available to DOE, as needed, the funds, facilities, services and other resources Complied with
Appendix 5 39
Product Schedule Para No. Description Status of
Compliance
that are required, in addition to the proceeds of the ACEF Grant, for the carrying out of the Project.
G0141 GA, Art IV Sec 4.03 The Recipient shall enable ADB's representatives to inspect the Project, the Goods, Works, and consulting services financed out of the proceeds of the ACEF Grant, and any relevant records and documents.
Complied with
G0141 GA, Art IV Sec 4.04 The Recipient shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project are conducted and coordinated in accordance with sound administrative policies and procedures.
Complied with
G0141 GA, Art IV Sec 4.05 The Recipient shall take all action that shall be necessary on its part to enable DOE to perform its obligations under the Project Agreement, and shall not take or permit any action that would interfere with the performance of such obligations.
Complied with
G0141 GA, Art IV Sec 4.06 (a) The Recipient shall exercise its rights under this Grant Agreement in such a manner as to protect the interests of the Recipient and ADB and to accomplish the purposes of the ACEF Grant. (b) No rights or obligations under the financing arrangements shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.
Complied with
G0141 4 1 Project Executing Agency and Project Implementing Agency:
The Recipient shall designate DOE as the Project Executing Agency with overall responsibility for Project coordination and implementation, and liaison with ADB and government agencies concerned. DOE shall be directly responsible for the planning, design, and other activities under the Project. Such activities include: (a) the procurement of Goods and Works; (b) construction supervision; (c) maintenance of separate project accounts; (d) monitoring and reporting upon implementation of the Project; and (e) the provision of coordination, support, and liaison activities, including with contractors, district offices and relevant government departments especially the Department of Roads.
Complied with
G0141 4 2 The Recipient, through DOE, shall follow the implementation arrangements set forth in this schedule. Complied with
G0141 4 3 Counterpart Funding:
The Recipient and DOE shall ensure that (a) all local and foreign currency counterpart financing necessary for the Project shall be provided in time to enable completion of the Project activities; (b) additional counterpart financing shall be provided if necessary for any shortfall of funds or cost overruns; and (c) counterpart financing for compensation and entitlements under any Resettlement Plan that becomes necessary for the Project are fully provided directly to affected people prior to their displacement from housing and land.
Complied with
G0141 4 4 Governance and Anticorruption:
The Recipient shall comply with, and shall cause DOE to carry out the Project in accordance with, ADB's Anticorruption Policy (1998, as amended to date) and all applicable law. The Recipient acknowledges ADB's right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and shall ensure that DOE cooperate fully with any such investigation and extend all necessary assistance as may be necessary for successful completion of the investigation.
Complied with
G0141 4 5 Disbursements and Performance Audits:
The Recipient shall ensure that DOE reviews invoices from consultants engaged in implementing the Complied with
40 Appendix 5
Product Schedule Para No. Description Status of
Compliance
Project, and makes payments within 30 days of their receipt or inform the Contractors of any shortfalls in its ability to make payment of the invoices.
G0141 4 6 The Recipient shall allow and facilitate ADB's representatives to conduct spot and random checks on (i) flow of funds and their use for the Project in accordance with the ACEF Grant Agreement, (ii) work-in-progress; and (iii) Project implementation.
Complied with
G0141 4 7 Project Performance Monitoring and Evaluation System:
During Project implementation, the Recipient shall cause DOE to develop a Project Performance Monitoring and Evaluation System (PPMES) including baseline performance monitoring, and systematic Project performance monitoring, including benefits monitoring and evaluation acceptable to ADB and the other donors. DOE shall carry out surveys (a) at the start of Project implementation to establish baseline data, (b) at Project mid-term, and (c) at the time of Project completion and not later than six months after Project completion, to evaluate the Project benefits. Data to be compiled and analyzed for the purpose of performance monitoring and evaluation shall be in a format acceptable to ADB. Key indicators shall be proposed by DOE and acceptable to ADB.
Complied with
G0141 4 8 Annual Budget Plan:
By 31 December of each year of Project implementation, the Borrower shall cause DOE to provide ADB with an annual budget plan for the following fiscal year.
Complied with
G0141 4 9 Semiannual Reviews:
The Recipient and ADB shall carry out semiannual reviews of the Project during Project implementation. The semiannual reviews shall include an examination of budgetary allocations for the Project, operation and maintenance costs, staffing, implementation arrangements and achievements under the Project. The review shall include assessing progress for each Project component, identifying difficulties and constraints, and determining ways to overcome them.
Complied with
G0141 4 10 Midterm Review:
The Recipient and ADB shall jointly carry out a midterm review of the Project during the third year of Project implementation or at any other time as may be agreed upon by the Recipient and ADB. The results of the midterm review shall be discussed by the Recipient and ADB and if required, appropriate corrective measures shall be formulated to ensure successful Project implementation and achievement of the Project objectives by the ACEF Grant Closing Date.
Complied with
ACEF = Asian Clean Energy Fund, ADB = Asian Development Bank, ADF = Asian Development Fund, Art = article, BPC = Bhutan Power Corporation, DOE = Department of Energy, EMP = environmental management plan, G = grant, GA = Grant Agreement, IEE = initial environment examination, ILO = International Labor Organization, PA = project agreement, PIU = Project Implementation Unit, PPMES = Project Performance Monitoring and Evaluation System, Sec = section.
Appendix 6 41
TECHNICAL ASSISTANCE COMPLETION REPORT
TA Number, Country, and Name: Amount Approved: $1,488,000
TA 7157-BHU: Promotion of Clean Power Export Development Revised Amount: Not applicable
Executing Agency: Department of Energy, Ministry of Economic Affairs
Source of Funding: ADB
Amount Undisbursed: $24,483.13
Amount Utilized: $1,463,516.87
TA Approval Date:
TA Signing Date:
Fielding of First Consultants:
TA Completion Date Original: 31 March 2011
Actual: 30 December 2011
29 October 2008 20 November 2008 17 March 2009 Account Closing Date Original: 31 March 2011
Actual: 31 December 2012
Description
This TA is associated with the Green Power Development Project. At the time of appraisal, DGPC had recently been formed and its focus was on managing the four operating hydropower projects (Bosochhu, Chukka, Kurichhu, and Tala) that had been developed with the assistance of the Government of India. In 2006, the government signed the Indo-Bhutan agreement on long-term cooperation in the field of hydropower development, which envisaged the construction of an additional 10,000 megawatts of hydropower capacity, most of which would be financed by the Government of India though a mixture of grant and loan funding. It was intended that projects would also be developed in cooperation with the private sector using various commercial financing modalities.
The TA was designed to support this vision by (i) providing Druk Holding and Investments (DGPC’s holding company) and DGPC with the skills needed to
understand different commercial project financing modalities and the available options for attracting foreign investment in the hydropower sector;
(ii) assisting DGPC to develop internal capacities for managing hydropower projects under the public–public and public–private partnership routes; and
(iii) building internal capacity within the DOE, now the Department of Hydropower and Power Systems, for accelerating hydropower development in line with Bhutan Sustainable Hydropower Development Policy, 2008.
Expected Impact, Outcome, and Outputs
The C DTA was expected to result in (i) a strategy and action plan to broaden financing avenues for future large hydropower projects for DGPC and Druk
Holding and Investments; (ii) internal capacity development within DGPC to manage the development of hydropower projects by supporting
DGPC’s adoption of integrated management information systems to effectively conduct project management; and
(iii) internal capacity building within DOE for promoting more projects in line with bilateral programs and/or Bhutan Sustainable Hydropower Development Policy, 2008.
DGPC holds a majority of the equity shares of DHPC and needs to extend support for Dagachhu hydropower development by overseeing management and providing skilled personnel, among other tasks. The TA was designed to enhance the capacity of DGPC in managing hydropower development for Dagachhu and other hydropower projects.
Delivery of Inputs and Conduct of Activities
The TA consultant firm worked very closely with DOE and DGPC staff throughout the course of the TA and delivered a total of 16 workshops to DOE, DGPC, and other stakeholders on different topics related to hydropower project development and the development of internal business strategies, systems, and processes. In addition, the consultant firm held training sessions on financial modeling, accounting, and procurement. The TA also assisted DGPC to implement (i) enterprise resource planning; (ii) the development of a corporate strategic plan; (iii) the preparation of detailed operational manuals, including in areas such as risk management, accounting, procurement, environment, safeguards, and Clean Development Mechanism; and (iv) the development of a human resources strategy and plan. The period was extended for 9 months to complete the task without amending the contract price.
In implementing the TA, the consultant firm (i) realigned the work plan to focus on the priority areas identified by DOE and DGPC (this was done with the
knowledge and agreement of ADB); (ii) adopted a collaborative approach that involved working closely with counterpart and project teams and
conducting regular discussions on draft deliverables to get organizational participation and ownership; and
42 Appendix 6
(iii) focused on capacity building through the presentation of workshops, provision of hands-on training, development of manuals, and provision of ad-hoc support where appropriate.
The performance of the consultant firm was highly satisfactory. DOE and DGPC were satisfied with the outputs and hands-on support provided by the consultant firm. The performance of DOE and DGPC was highly satisfactory as both actively coordinated with ADB and the consultant firm to identify their capacity development needs. Additionally, DGPC implemented enterprise resource planning and various manuals well. The performance of ADB was satisfactory in designing the TA.
Evaluation of Outputs and Achievement of Outcome
A major focus of the TA was on the development of an integrated management information system and documentation of modern business systems and processes to increase the efficiency of DGPC’s planning and operations. The consultant firm successfully assisted with (i) Bhutan’s first enterprise resource planning implementation for DGPC; (ii) the development of a corporate strategic plan; (iii) the preparation of detailed operational manuals, including in areas such as risk management, accounting, procurement, environment, safeguards, and Clean Development Mechanism; and (iv) the development of a human resources strategy and plan, in close coordination with DGPC staff and with hands-on support.
Other work completed under the TA included the development of a hydropower financing strategy and the development of a power import and export strategy. Various financing options for raising funds (both debt and equity) for hydropower development from foreign markets and domestic sources were assessed; skills for financial analysis and modeling of DOE, Druk Holding and Investments, and DGPC staff were enhanced through phased trainings; and a financing strategy and action plan were developed.
The TA also assisted DOE to enhance capacity for strategic planning for power system development. An analysis of domestic and Indian power demand and supply in the short and long terms was carried out, and DOE developed a road map for dealing with the cross-border power market. To supplement hydropower policy, the drafts for the Renewable Energy Policy and the Captive Power Policy were also prepared under the TA.
Overall Assessment and Rating
The TA is rated highly successful. The TA was highly relevant, as it was quite important for the Government of Bhutan to enhance capacity of DGPC to accelerate hydropower development. The TA was highly effective, because the consultant firm delivered more than planned at appraisal. The TA was efficient, as identified tasks agreed at the inception stage were fully achieved in a timely manner. The TA is most likely sustainable, as DGPC is now an efficient, well-managed organization, which manages operation of four hydropower plants and four subsidiary companies. DOE and DGPC expressed satisfaction with the work done by the TA consultant firm, especially with its collaborative approach to the TA and quality of work.
Major Lessons
Active discussion was held between the TA consultant firm, DOE, DGPC, and ADB at the inception stage. The terms of reference and work programs were immediately updated based on the requirements identified at the inception workshop and during the related discussion. This approach would be one of the key reasons for the successful TA outputs.
Recommendations and Follow-Up Actions
While DGPC’s internal management capacity has been enhanced, DGPC might face new challenges after handover of the large-scale hydropower projects that are currently under construction with bilateral assistance from India. Given the important role of DGPC in Bhutan’s economic development, it is recommended that ADB continue to work closely with DGPC through the ongoing Second Green Power Development Project and attached TA.
ADB = Asian Development Bank, DGPC = Druk Green Power Corporation, DHPC = Dagachhu Hydro Power Corporation, DOE = Department of Energy, TA = technical assistance. Prepared by: Satoshi Kurimoto Designation and Division: Energy Specialist, Energy Division 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.
