Proposed Grant Assistance: Development of Mini Hydropower … · 2014-09-29 · (v) capacity...

Grant Assistance Report

Project Number: 42094 November 2008

Proposed Grant Assistance Islamic Republic of Afghanistan: Development of Mini Hydropower Plants in Badakhshan and Bamyan Provinces (Financed by the Japan Fund for Poverty Reduction)

CURRENCY EQUIVALENTS (as of 1 November 2008)

Currency Unit – Afghani/s (AF)

AF1.00 = $0.0193 $1.00 = AF51.80

ABBREVIATIONS ADB – Asian Development Bank ANDS – Afghanistan National Development Strategy CPS – country partnership strategy CSPU – country strategy and program update DABS – Da Afghanistan Breshna Sherkat

(Afghanistan Electricity Corporation) GDP – gross domestic product GTZ – Deutsche Gesellschaft für Technische Zusammenarbeit

(German Agency for Technical Cooperation) JBIC – Japan Bank for International Cooperation JICA – Japan International Cooperation Agency KfW – Kreditanstalt für Wiederaufbau

(Reconstruction Credit Institute) MEW – Ministry of Energy and Water MFF – multitranche financing facility MDG – Millennium Development Goal MHP – mini hydropower plant MRRD – Ministry of Rural Rehabilitation and Development NEPS – North East Power System NGO – nongovernment organization NSP – National Solidarity Program O&M – operation and maintenance USAID – United States Agency for International Development

WEIGHTS AND MEASURES

GWh – gigawatt-hour (1,000,000 kilowatt-hours) kV – kilovolt (1,000 volts) kW – kilowatt (1,000 watts) kWh – kilowatt-hour MW – megawatt (1,000 kilowatt) W – Watt

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 20 March. FY

before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 20 March 2008.

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

ii

Vice-President X. Zhao, Operations 1 Director General J. Miranda, Central and West Asia Department (CWRD) Director H. Wang, Infrastructure Division, CWRD Team leader T. Kadono, Energy Specialist, CWRD Team members A. de Dios, Administrative Assistant, CWRD R. Jayewardene, Senior Social Development Specialist (Resettlement),

CWRD B. Konysbayev, Counsel, Office of the General Counsel M. Kunzer, Environment Specialist, CWRD A. Quraishi, Project Implementation Officer (Energy), CWRD R. Sanda, Investment Specialist, CWRD J. Tokeshi, Senior Portfolio Management Specialist, CWRD

Mazar-e-Sharif Kunduz

Samangan

KABULJalalabad

Khost

Torkham

Ghazni

Kandahar

Herat

Shindand

Qala-i-Naw

Chaghcharan

Tarin Kot

Khadir

Lashkar Gah

Zaranj

Qalat

Sharan

Sheberghan

Faizabad

Eshkashem

Asadabad

Kamdish

Maidanshahr

Bamyan

BaghlanPul-e-Khumri

Doshi

Taloqan

Kholm

Sar-e-Pul

Mehtar Lam

Delaram

Farah

Gardez

Keleft

Islam Qala

Andkhoi

Maimana

Mahmood-e-RaqiBazarak

Charikar

Hairatan

Pul-e-Alam

Balkh

Kudbar

Landay

Mukur

HELMAND KANDAHARNIMRUZ

FARAH

BADGHIS

HERATGHOR

SAR-E-PUL

BALKH

KUNDUZ TAKHAR BADAKHSHAN

GHAZNI

DAIKONDI

ORUZGAN

PAKTIKA

PAKTIA

KHOST

NANGARHAR

LAGHMANKAPISA KONAR

NURISTANPANJSHIR

BAMYAN

SAMANGAN BAGHLAN

ZABOL

JOWZJAN

FARYAB

LOGAR

WARDAK KABUL

PARWAN

TURKMENISTAN

TAJIKISTAN

PEOPLE'SREPUBLIC

OFCHINA

UZBEKISTAN

PAKISTAN

I R A N

Project Province

National Capital

Provincial Capital

City/Town

National Road

National Road (unpaved)

Other Road

River

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

AFGHANISTAN

DEVELOPMENT OF MINI HYROPOWER PLANTS INBADAKHSHAN AND BAMYAN PROVINCES

0 50 100 150 200

Kilometers

N

08

-44

16

HR 64 00'Eo

64 00'Eo

72 00'Eo

72 00'Eo

32 00'No32 00'No

36 00'No 36 00'No

JAPAN FUND FOR POVERTY REDUCTION (JFPR) JFPR Grant Proposal

I. Basic Data Name of Proposed Activity Development of Mini Hydropower Plants in Badakhshan and Bamyan

Provinces

Country Islamic Republic of Afghanistan

Grant Amount Requested $12,000,000

Project Duration 37 months

Regional Grant Yes / No

Grant Type Project / Capacity building

II. Grant Development Objectives and Expected Key Performance Indicators Grant Development Objectives: The Project’s objective is to improve the quality of life of rural communities in Badakhshan and Bamyan provinces through the provision of electricity services supplied by mini hydropower plants (MHP) with generating capacity below 1,000 kilowatts (kW). The Project outcome will include: (i) provision of affordable and stable electricity, (ii) increase in rural commercial activities from establishment of enterprises using electricity, (iii) increased employment opportunities, (iv) reduction of indoor pollution caused by the use of indigenous sources of energy, and (v) capacity building in small hydropower development. The Project outputs are the identification, planning, designing, and establishment of a maximum of four off-grid MHPs, each with an installed capacity in the order of magnitude of 500 kW. Target areas are district centers that are not planned for grid connection in the foreseeable future or are being supplied through expensive and unreliable diesel generation. Communities will receive support to establish income-generating activities during the day-time (i.e., off-peak hours). The MHPs will be operated and maintained by the Afghanistan Electricity Corporation (DABS), the national power utility. To ensure sustainable management, capacity building is integrated as an essential component of the Project. Similarly, the entire project cycle is regarded as an on-the-job training opportunity in which counterpart staff of the Executing Agency, DABS, will be closely engaged in subproject preparation and implementation. Expected Key Performance Indicators (maximum 5 indicators): 1. A maximum of four MHPs, each with installed capacity of around 500 kW totaling up to 2.0 MW

commissioned 2. Cheap and reliable electricity supplied to up to 5,000 households (400 watts[W]/household) 3. Small enterprises propagated in the supply area 4. Capacity building of Ministry of Energy and Water (MEW) and DABS staff in the

implementation and operation of MHPs 5. The design and monitoring framework is in Appendix 1.

III. Grant Categories of Expenditure, Amounts, and Percentage of Expenditures

Category Amount of Grant Allocated ($ ‘000)

Percentage of Expenditures

1. Civil Works (including component A civil works) 3,948 32.9 2. Equipment and Supplies 2,686 22.4 3. Training and Workshops 124 1.0 4. Consulting Services (including capacity building inputs)

3,512 29.3

5. Grant Management 530 4.4 6. Contingency 1,200 10.0 Total 12,000 100.0

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JAPAN FUND FOR POVERTY REDUCTION

JFPR Grant Proposal Background Information

A. Other Data Date of Submission of Application

12 September 2008

Project Officer T. Kadono, Energy Specialist Project Officer’s Division, E-mail, Phone

Infrastructure Division, Central and West Asia Department (CWRD), [email protected], +63 2 632 5594

Other Staff Who Will Need Access to Edit and/or Review the Report

R. Jayewardene, Senior Social Development Specialist (Resettlement), CWRD B. Konysbayev, Counsel, Office of the General Counsel M. Kunzer, Environment Specialist, CWRD A. Quraishi, Implementation Officer, CWRD R. Sanda, Investment Specialist, CWRD J. Tokeshi, Senior Portfolio Management Specialist, CWRD A. de Dios, Administrative Assistant, CWRD

Sector Energy Subsector Renewable energy generation Themes Sustainable economic growth, inclusive social development Subthemes Developing rural areas, human development Targeting Classification Targeted intervention Name of Associated Asian Development Bank (ADB)-Financed Operations

Multitranche Financing Facility (MFF) – Energy Sector Development Program (proposed for 2008): Proposed JFPR will cofinance the MFF. Power Transmission and Distribution Project (Loan 2165-AFG) Regional Power Transmission Interconnection Project (Loan 2304-AFG)

Executing Agency Afghanistan Electricity Corporation (DABS) Grant Implementing Agencies

Ministry of Energy and Water (MEW) Address: Darul Aman Main Road, Kabul, Afghanistan Contact Person: Shujahuddin Ziaie, Deputy Minister Phone: +93 700 283 979 Da Afghanistan Breshna Sherkat (DABS) Chamne Huzuri, near Kabul Nendari, Kabul Contact person: Dr. Jalil Shams, Chief Executive Office Phone: +93 20 2100 394

B. Details of the Proposed Grant

1. Description of the Components, Monitorable Deliverables and/or Outcomes, and Implementation Timetable

Component A Component Name Selection and Design of Mini Hydropower Subprojects

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Cost ($) $1,924,800 including contingency Component Description

Component A comprises (i) desk study, (ii) site visits, (iii) preliminary design and site selection, and (iv) detailed design and procurement. Desk Study A number of potential MHP sites have been identified by previous studies and some are being studied by MEW, Ministry of Rural Rehabilitation and Development (MRRD), and various international development partners. The desk study will review all available information regarding these sites and identify additional potential sites using available topographical maps and hydrological data. Based on secondary information, the load requirements in district centers and adjacent villages that would be supplied by such potential sites will be assessed. The information will be synthesized in a desk study report that will include the following:

(i) tentative locations of potential sites; (ii) gross head, discharge, and installed capacity of the identified

sites; (iii) electricity demand and forecast in each of the supply areas; (iv) ranking of sites in terms of technical, financial, economic, social,

and environmental parameters; and (v) site visit plan of the consultant, including work schedule.

Site Visits Following the desk study, site visits will be conducted to the potential sites for reconnaissance and preliminary survey work on topography, geology, and hydrology. The information required to undertake a preliminary design of the sites will be collected. Additional sites may also be verified through information from stakeholders. Attempts shall be made to ensure an equitable distribution of sites in two provinces, taking into account hydropower potential, demand, local socioeconomic conditions, and environmental impacts. Five to ten sites in two provinces will be identified. Preliminary Design and Site Selection A preliminary design for each of the identified sites will be prepared based on the findings of the site visit. Preliminary designs will include the following:

(i) technical parameters (gross head, design discharge, installed capacity, length and dimensions of waterway structures, transmission and distribution line lengths and specifications, turbine and generator types, and appurtenant equipment);

(ii) estimated mean monthly discharge of the river at the proposed intake site and corresponding energy generation;

(iii) prefeasibility level drawings; (iv) possibility of integrating power generation with irrigation; (v) socioeconomic conditions in the distribution area of the

identified power plant, land acquisition, and right of way;

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(vi) estimated current electricity demand in the distribution area and projection within the medium term (~15 years);

(vii) assessment of willingness to pay and affordability; (viii) preliminary cost estimates; (ix) economic and financial evaluation; and (x) environmental and social impact assessment.

The preliminary design report will recommend four sites, each with an installed capacity of about 500 kW. Selection of the subprojects will be mutually agreed by the Government of the Islamic Republic of Afghanistan and the Asian Development Bank (ADB) based on technical, financial, economic viability; socioeconomic conditions of the area; environmental and social impact; and regional balance. Additional site visits and topographic, hydrological, and geological surveys will be conducted for the selected subprojects. Detailed Design and Procurement Once the topographical maps are produced, the consultant will undertake the detailed design of the subprojects and prepare bid documents. The consultant will assist the project management unit under MEW to procure contractors and suppliers as discussed in section D: Implementation of Proposed Grant and in accordance with ADB's Procurement Guidelines (2007, as amended from time to time).

Monitorable Deliverables/Outputs

Institution (i) Project management unit established and operating effectively

with permanent staff. Selection and Design of Mini Hydropower Subprojects

(i) Submission of desk study report and preliminary design report, including findings from site visits.

(ii) Selection of a maximum of four sites with an aggregate installed capacity of about 2.0 MW for implementation.

(iii) Preparation of detailed designs and bid documents. Procurement

(i) Civil works contractors are engaged. (ii) Electro-mechanical equipment and transmission and distribution

line suppliers are contracted. Implementation of Major Activities: Number of months for grant activities

10 months

Component B Component Name

Implementation and Project Management

Cost ($) $9,647,600 including contingency Component Description

Component B comprises (i) construction of up to four MHPs, and (ii) project management.

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Construction of Up to Four MHPs Although there may be a time lag among the four subprojects and across different contract packages, procurement in component A is expected to be completed within 14 months from the singing of the Project Agreement with the Government. Implementation of this component is expected to take 28 months. The MHPs will be handed over to DABS for operation and maintenance (O&M). However, given the expected remoteness of the sites, the possibility to grant a lease agreement to private parties and/or communities will be pursued during the implementation stage. Project Management Project management is crucial for the timely completion of up to four MHP subprojects. The Project will be managed, monitored, and evaluated via a central project management unit comprising staff from MEW and DABS, and supported by the consultant. The consultant will establish a central office in Kabul and site liaison offices in each of the two province capitals. The consultant will report to the project management unit and ADB. The implementation arrangements and fund flows are in Supplementary Appendixes D and E, respectively. The project management unit will be responsible for managing the Project and will undertake the following activities:

(i) Monitor the progress and work of the consultant. (ii) Ensure timely completion of all milestones. (iii) Implement and participate in the training programs. (iv) Ensure that the necessary national approvals are obtained on

time to advance project implementation. (v) Provide oversight to procurement and contract management

with assistance from the consultant. (vi) Ensure that all environmental standards and regulations of the

Government and ADB are followed. Land acquisition and resettlement are not expected to be a major issue, given that the MHPs are run-of-river. However, the Project involves construction of waterways (headrace and tailrace canals), powerhouses, and distribution lines that will occupy land. The use of productive land, including access, needs to be compensated. A suitable entitlement package will be developed after due consultation with all stakeholders and in accordance with relevant ADB guidelines to adequately compensate each loss. An entitlement matrix and indicative environmental management plan (EMP) are in Supplementary Appendix A.

(vii) Monitor the progress and work of the contractors. (viii) Certify completed subprojects testing and commissioning, with

support from the consultant. (ix) Verify invoices submitted by the contractors and recommend

payments.

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(i) Monthly progress reports submitted by the project management unit

(ii) Regular meetings between the project management unit, MEW,DABS, Embassy of Japan, and ADB

(iii) Implementation and commissioning of up to four MHPs with an aggregate installed capacity of about 2.0 MW

(iv) Requisite reports (e.g., inception, progress, interim, completion, impact assessment, and audits) submitted on time

Implementation of Major Activities: Number of months for grant activities

21 months

Component C Component Name

Capacity Building and Support of Community-Based Organizations

Cost ($) $427,600 including contingency Component Description

Component C comprises (i) capacity building of staff at MEW and DABS, and (ii) support for community-based organizations to assist in the day-to-day O&M of MHPs and to promote the establishment of small enterprises. Capacity Building The entire project cycle is regarded as an on-the-job training where counterpart staff of MEW and DABS will be closely engaged in subproject preparation and implementation. Under component A, the counterpart staff, mostly engineers, will enhance their capacities in planning, site reconnaissance, survey and design of MHPs, and procurement and contract management. Under component B, the counterpart staff are required to enhance their capacities in project management and contract management. Staff from DABS will also participate in specific training programs to prepare themselves for the O&M of the MHPs upon completion. Capacity building with respect to O&M will deal not only with technical aspects, but will also cover metering, billing, tariff collection, and accounting. Support of Community-Based Organizations The MHPs are to be handed over to DABS for operation, since 500 kW-scale MHPs cannot be operated solely by the communities. However, given the expected remoteness of the MHPs, community participation is required for day-to-day maintenance, including the clearing of trashracks and monitoring of waterways, and assisting in minor restorations. Community-based organizations need to be strengthened to undertake these tasks in cooperation with DABS. In both Bamyan and Badakshan provinces, CBOs have been established under the National Solidarity Program (NSP) of the MRRD for various community development activities. The Project will strengthen these community-based organizations once the subprojects have been selected for implementation.

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Depending on the nature of the MHPs, community-based organizations may be called upon to conduct metering, billing, and tariff collection on behalf of DABS. In addition, community-based organizations will also be responsible for coordinating water usage for generating power, irrigation, and other purposes. During the implementation of the Project, the consultant will provide trainings to the community-based organizations to build their capacities to undertake these tasks. The Project will also establish and strengthen small enterprises and other income-generating activities. Project support will target the community-based organizations and include activities such as setting up microfinance systems, providing business training for entrepreneurs, offering vocational and technical trainings, and teaching electrical safety.


Capacity building (i) Counterpart engineers from MEW (about 15) will receive on-the-

job training in planning, site reconnaissance, survey and design of MHPs, procurement, and project and contract management.

(ii) Comprehensive institutional-strengthening and capacity-building programs will be developed and implemented by the consultant.

(iii) DABS staff will be prepared for O&M of the MHPs through courses on civil structures; electro-mechanical equipment and transmission and distribution systems; and metering, billing, tariff collection, and accounting.

Support of Community-Based Organizations

(i) Community-based organizations will be consulted on development opportunities in each subproject site.

(ii) Community-based organizations will be trained in day-to-day operation of the MHPs.

(iii) Community-based organizations will learn about the use of electricity for small enterprises and other income-generating activities, and become the focal point for such ventures.

Implementation of Major Activities: Number of months for grant activities

31 months

2. Financing Plan for Proposed Grant to Be Supported by JFPR

Funding Source Amount ($)

JFPR $12 million

Government $1 million (maximum; land acquisition, licensing, in-kind contribution)

Communities $0.5 million (connection fee, house wiring, etc.)

Total $13.5 million

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3. Background

1. Afghanistan's power sector infrastructure is in dismal condition as a result of unrelenting conflict over the past three decades. Less than 10% of the population is connected to the government-operated electrical grids and rural areas, where the majority of the population lives, are virtually un-served. Afghanistan's annual per capita electricity consumption is among the lowest in the world at about 27 kWh. Poverty is pervasive and the gross domestic product (GDP) per capita was only $180–$190 in 2003. Estimates suggest that 60%–80% of the population lives in dire poverty and suffer from food insufficiency, as measured by consumption of less than 2,100 calories a day. A detailed poverty analysis is presented in Supplementary Appendix B. 2. The Government recognizes the importance of economic growth in reducing poverty and to averting future conflicts. In its Afghanistan National Development Strategy (ANDS), the Government emphasized the development of infrastructure and highlighted the importance of "enhancing access to cost-effective and uninterrupted power".1 Specifically, the Government’s draft Power Sector Strategy2 recognized the importance of enhancing rural energy availability and imposed an ambitious target of delivering 100 MW to electrify 25 small towns and rural villages by 2013 through micro-hydropower and decentralized stand-alone systems. 3. The Project to be financed a JFPR grant aims at developing four MHPs in the provinces of Bamyan and Badakhshan, each with a scale of magnitude of 500 kW, totaling an aggregate capacity of 2,000 kW (2.0 MW). The MHPs are expected to provide basic infrastructure in support of improving services, increasing productivity, facilitating income- generation, and contributing towards improved health and environmental protection through increased access to electricity. 4. The Project conforms to the Government's national development strategy and the power sector strategy, and was prepared in close consultation with the MEW, MRRD, their respective line agencies, and other international organizations. The targeted provinces of Bamyan and Badakhshan are among the most impoverished provinces of Afghanistan. According to the National Risk and Vulnerability Assessment survey of 2005, the poverty level in Bamyan and Badakhshan were 93.5% and 96.2%, respectively, compared to the national average of 84.4%.3 The extension of the national grid to either province is not envisaged in the foreseeable future. Through the construction of MHPs, these rural areas can be supplied with electricity in an off-grid mode within 3 years. 5. Through the proposed Project, an estimated 5,000 households will benefit directly from the power connection at a cost of about $0.14 per kilowatt hour (kWh). This is less than one-quarter of the tariff for diesel-generated power, which is about $0.56/kWh in the case of the two private sector diesel power plants in Faizabad in Badakhshan province. Other indirect project benefits include:

(i) enhanced income-generating opportunities for end-users, including irrigated agriculture and power-based enterprise establishments;

(ii) reduced labor-intensive work for women operating grain processing mills; and

1 Islamic Republic of Afghanistan. 2005. Afghanistan National Development Strategy. Kabul. 2 Islamic Republic of Afghanistan. 2007. Power Sector Strategy. Afghanistan. Kabul. 3 Ministry of Rural Rehabilitation and Development and the Central Statistics Office of Afghanistan. 2007. The

National Risk and Vulnerability Assessment 2005. Kabul.

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(iii) attractive returns to society and the country in terms of regionally-balanced growth, employment opportunities, capacity building at various levels, and poverty reduction.

6. The economic return is estimated to be at least above 21%. Detailed financial and economical analyses of the Project are in Supplementary Appendix C. 7. Since the Project will directly benefit communities, their involvement in decision making, project management, and addressing social safeguards will be built into the Project. In order to facilitate the community approach, the Project will consult with community-based organizations in the subproject areas and provide them with capacity-building support. The community-based organizations will be responsible for assisting DABS in the day-to-day operation of the MHPs, and also may be given responsibility for metering, billing, and tariff collection. The community-based organizations will be the focal point for the Project's efforts to establish small enterprises and other income-generating activities. 8. The subprojects may require small land donations for waterways and powerhouse structures. Any land requirements will first be discussed with the affected local community through public consultation and a commensurate compensation package will be provided. The consultant will assist in addressing social and environmental safeguards in accordance with ADB guidelines. The entitlement matrix in Supplementary Appendix A will serve as guidelines for the compensation package. Similarly, environmental concerns that may arise during the implementation phase are addressed in the tentative environmental mitigation plan in Supplementary Appendix A.

4. Innovation

9. Key innovations introduced in the Project include:

(i) Capacity building. The capacity to plan and implement projects in Afghanistan is currently limited and has not been enhanced notably in recent years despite a number of international development partner activities. Since fast-tracked rehabilitation and restoration efforts are regarded as keys to development and peace, the void in capacity building are often filled by international consultants. It is crucial to seriously engage in capacity building of public sector human resources through hands-on experience in pursuit of long-term sustainable development. Thus, capacity building is an essential element that is integrated into the Project’s fabric. The entire project cycle is regarded as on-the-job training. Counterpart staff of MEW and DABS will actively engage in all components of the Project to enhance their capacities in planning, site reconnaissance, surveys, prioritization and selection, engineering design, environmental and social safeguards, procurement, and contract and project management. The targeted development scale of 500 kW is envisaged to be appropriate to acquire knowledge and skills applicable to a much broader range of development.

DABS has offices both in Badakhshan and Bamyan provinces. There are up to three small hydro power projects in Badakhshan managed by DABS, and about a dozen micro to mini hydro power projects in Bamyan that are primarily managed by the local communities. Reasonable management capacity exists both within

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DABS and the local communities, and can be expanded by additional trainings to prepare for the management of new MHP projects.

(ii) Community empowerment. One of the factors behind pervasive poverty in

Afghanistan, especially in the vast rural areas, is a lack of employment opportunities. Electricity is indispensable to promote economic activities that in turn can create employment. However, the provision of electricity will not automatically give rise to economic development. Support must be extended to communities so that they can devise new businesses and effectively use electricity. At the MHP sites and supply areas, community-based organizations will be consulted with on development opportunities. The community-based organizations will decide among themselves appropriate allocation of river water for power generation vis-à-vis irrigation and other purposes. Although 500 kW MHPs may be difficult for community-based organizations to operate entirely on their own, they are expected to be entrusted with day-to-day maintenance and possibly also metering, billing, and tariff collection. Community-based organizations generally have their own traditional way of managing assets. For example, they normally collect money from each household to pay for maintenance and servicing of community assets. Once the MHP subprojects are identified, the consultant will work in close cooperation with the executing agency and implementing agency, existing local bodies (e.g. community development councils), and local nongovernment organizations (NGOs) to identify development opportunities. The consultant will also provide technical assistance to the community-based organizations and provide guidance on how the new MHPs can bring maximum benefits to the community.

(iii) Private Sector Participation in the Hydropower Sector. There are privately-

operated, small-scale diesel power plants in the project area, but apart from community-managed, micro-hydropower plants (generally limited to 25 kW) under NSP the private sector has yet to participate in operating hydropower plants. The Project will seek private sector participation for plant O&M under lease agreements. Ownership of the MHPs will remain with DABS, while private parties will operate the facilities under a performance-based contract. It is hoped that these pilot projects will attract private sector investment in the hydropower sector, as operators and owners of new hydropower schemes.

5. Sustainability

10. Technical Sustainability. The MHP system will use proven designs. The electro-mechanical equipment supplier along with the consultants will train local staff on the technical skills required for O&M through an on-the-job training program. The equipment operation and management training would be provided by the respective suppliers, whereas the consultant will provide training on metering, billing, tariff collection, accounting, and logistic support activities required. 11. Financial Sustainability. The MHPs are expected to be profitable and financially self-sustaining. As seen in Supplementary Appendix C, even at $0.14/kWh, which is less than one-quarter the tariff of diesel power generator at $0.56/kWh, the financial internal rate of return is over 12%, which is a reasonable rate for small scale hydropower projects. As there is currently no regulatory body to set tariff structure, the consultant will work closely with DABS to establish a tariff structure comparable with that elsewhere in the country and affordable for lower income

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households. The consultant, along with the executing agency and implementing agencies, will design user’s rules such as electricity tariff, and billing and collection procedures. 12. Environmental Sustainability. The initial environmental examination and the environmental assessment and review procedure, including the subproject selection and public consultation procedure, have been prepared. MHPs are environmentally clean as they (i) do not combust fossil fuels, (ii) do not emit gaseous pollutants, (iii) do not generate solid or liquid wastes, and (v) can improve indoor air quality. MHPs are usually run-of-river, without any reservoirs and with only a short waterway. The impact of an MHP on a river’s ecosystem and the limit it places on other uses for water are in significant. Nonetheless, the Project’s environmental impacts will be studied further in accordance to relevant ADB guidelines once the candidate sites are identified. 13. Organizational Sustainability. DABS will be the owner of the MHPs. However, other modalities of operation will be considered, including private sector O&M through a performance-based lease contract and outsourcing day-to-day maintenance and metering, billing, and tariff collection to community-based organizations. The optimum modality will be selected through a transparent process, and various training and capacity-building programs will be provided to ensure sustainability.

6. Participatory Approach

14. To ensure effective participation from all stakeholders, the Project will work in close coordination with MEW, DABS, other line agencies, and local authorities (e.g., community development councils and municipalities) in the two provinces. In addition, local NGOs will be involved at the grassroots level in capacity building and awareness programs. 15. The following criteria will be used to select the subprojects:

(i) technically-, environmentally-, economically-, and financially-sound and simple project design;

(ii) year-round generation; (iii) low cost of supply (i.e. low tariff); (iv) balance of night-time peak demand and hydropower potential; (v) day-time, off-peak uses of power (e.g. income-generating activities); (vi) distance of MHP site from the demand centers; (vii) willingness to pay and affordability; (viii) commitment of owners and beneficiaries; and (ix) distance from the main electrical grid and plans for grid extension, if any.

Primary Beneficiaries and Other Affected Other Key Stakeholders and Brief

Groups and Relevant Description Description The primary beneficiaries are about 5,000 households in the two provinces that will be supplied electricity from the MHPs. A much greater number will benefit indirectly from increased access to electricity (e.g., additional items available in markets due to refrigeration, and improved healthcare through the storage of vaccines.) The targeted provinces are remote and fall below the national average in poverty rates. The majority of the population in both provinces has an income of less than $1 per day. The

MEW and DABS staff will benefit from improved skills in planning and implementing hydropower schemes. The local governments will gain from the social and economic development derived from the availability of electricity. Compared with the current use of electricity generated from diesel

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Primary Beneficiaries and Other Affected Other Key Stakeholders and Brief Groups and Relevant Description Description

Project’s benefits include: (i) general improvement in the quality of life, (ii) increase in employment opportunities, (iii) decrease in price of goods and services that are

dependent upon electricity, (iv) prolonged hours of activity in households during

evenings, and (v) reduction in labor-intensive work for women through

the use of mechanized agro-processing facilities.

generators, local entrepreneurs will have the opportunity to tap into low cost and reliable electrical energy generated from the MHPs.

7. Coordination

16. The project concept was developed based on discussions and inputs from an array of stakeholders, including the Embassy of Japan in Afghanistan, MEW (including DABS), MRRD, their respective line agencies, and other international development partners. Comments and recommendations from these stakeholders have been incorporated into the project design. In particular, the Embassy of Japan recommended that activities financed under JFPR must be carefully designed, and adequate technical assistance should be provided to backstop MEW. This was addressed in the proposal by including adequate technical assistance through consulting services to be engaged under the Project. See Supplementary Appendix D for detailed terms of reference for the proposed consultants.

17. The Project has identified the primary actors in rural energy development that it intend to coordinate with and will provide a platform for interaction with MEW and MRRD, and the Japan International Cooperation Agency (JICA), United States Agency for International Development (USAID), Department for International Development of the United Kingdom, and German Agency for Technical Cooperation (GTZ). 18. The Project’s objectives and activities support those of MEW and MRRD. The Project leverages MRRD’s continuing efforts to implement micro hydropower plants and to establish and promote community development councils through the NSP. Community development council members will help conduct participatory rural appraisal and contribute in social mobilization aspects. 19. USAID, Department for International Development of the United Kingdom, and GTZ are each implementing alternative livelihood programs, in Bamyan and Badakhshan provinces to provide economic alternatives to poppy production. These programs build or rehabilitate productive infrastructure and support income-generating and training activities for vulnerable households. However, they do not include a comprehensive rural electrification program. Thus, the Project will complement the alternative livelihood program of other development partners to improve the quality of life of rural population through a comprehensive range of approaches. As discussed earlier, electricity generated from the MHPs constructed under the Project will add value to and improve the agriculture sector. The Project will concentrate on rural electrification and build upon the achievement of other international development partners based on lessons learned. 20. These coordination activities will strengthen all stakeholders. Lessons learned will be exchanged through a series of local and national consultations and workshops with the participation of local communities, Afghan NGOs, and other key stakeholders.

13

8. Detailed Cost Table

21. Please refer to Appendix 2 for a summary of cost estimate, Appendix 3 for the detailed cost estimates, and Appendix 4 for the fund flow arrangement. C. Link to ADB Strategy and ADB-Financed Operations

1. Link to ADB Strategy

22. The Country Strategy and Program Update (2006–2008): Islamic Republic of Afghanistan4 is ADB’s latest strategy and program document for Afghanistan. The Government endorses the three-pronged approach to reconstruction that ADB articulates in the country strategy and program update (CSPU). The approach emphasizes (i) building capacity, (ii) establishing appropriate policy and institutional frameworks, and (iii) rehabilitating essential infrastructure. 23. ADB is currently formulating the 2009–2013 Afghanistan country partnership strategy [(CPS) 2009–2013] which is fully aligned with key I-ANDS priorities and outcome. At the Government request, and congruent with ADB’s Medium Term Strategy,5 ADB assistance to Afghanistan will continue focus on a limited number of priority sectors that contribute to Afghanistan’s economic and social development. Agriculture and energy, including rural electrification, are priority sectors identified in the CPS. 24. In accordance with the CPS, a key development outcome in the power sector to which ADB will contribute is increase in the amount of urban and rural households with access to electricity to 65% and 25%, respectively, by 2010.

2. Link to Specific ADB-Financed Operation

Project Name Multitranche Financing Facility (MFF) – Energy Sector (proposed) Project Number Grant 42094-01

4 ADB. 2005. Afghanistan: Country Strategy and Program Update (2006–2008). Manila. 5 ADB. 2001. Medium-Term Strategy (2001–2005). Manila

Document

Document Number

Date of Last Discussion

Objectives

Country Strategy and Program Update 2006–2008, Islamic Republic of Afghanistan. August 2005

DOC. Sec.M65-

05

No objection/ Summary Procedure Recorded

but not discussed.

The Project addresses poverty reduction and economic development as articulated in the CSPU and confirmed by the Government. It promotes alternative livelihood development, which is a critical component of the CSPU and the Government’s National Development Strategy.

2009–2013 Afghanistan Country Partnership Strategy (CPS) [under preparation]

The CPS emphasizes access to energy, value adding in the agricultural sector through the provision of energy, private sector investment, and employment generation as important elements in poverty reduction. The Project has incorporated these elements and is fully compatible with the CPS.

14

Date of Board Approval November 2008 (expected) Loan Amount ($ million) $570 million (proposed)

Project Name Regional Power Transmission Interconnection Project Project Number 37078 / Loan 2304-AFG (SF) Date of Board Approval 19 December 2006 Loan Amount ($ million) $16.5 million

Project Name Power Transmission and Distribution Project Project Number 40043-02 / Loan 2165-AFG Date of Board Approval 14 May 2005 Loan Amount ($ million) $50 million (ADF; including ADF Grant of $23.5 million)

Project Name Afghanistan Rural Business Support Project Project Number 40586 (JFPR) Date of Board Approval 10 December 2006 Loan Amount ($ million) $18 million

Source: Asian Development Bank.

3. Development Objective of the Associated ADB-Financed Operation

25. The development objective of the Project is to support access to energy, through grid extension and hydropower development, that can be used by rural communities for productive purposes such as irrigation, and small-scale agro-processing, and to bring lighting to communities that previously relied on diesel-fuelled generators or other conventional sources of energy.

4. Main Components of the Associated ADB-Financed Operation

No. Component Name

Brief Description

1. MFF – Energy Sector Development Program (proposed)

The Program aims to improve the power supply in Afghanistan by rehabilitating and extending the power transmission and distribution systems, adding generation capacity, and extending the availability of power. Tranche-1 Project will comprise (i) transmission and distribution systems of the North East Power System (NEPS), (ii) off-grid small hydropower (1 MW to 10 MW) development with an isolated grid system, and (iii) capacity development and support for O&M of the NEPS 220 kV system. The proposed JFPR grant will cofinance the Program. The JFPR complements the Program by targeting areas that are not being supplied power through assistance under the MFF.

2. Regional Power Transmission Interconnection Project

The Project is being implemented in parallel with Loan 2303-TAJ. The objective of Loans 2303/2304 is to improve power availability by importing electricity from Tajikistan. Loan 2303-TAJ deals with the portion of the transmission line in Tajikistan and Loan 2304-AFG deals with the portion in Afghanistan. The transmission interconnection will enable Afghanistan to import 1,000 gigawatt-hours (GWh) of energy annually. However, this power will only be made available to customers connected to the NEPS. The JFPR project will compliment this Project by supplying power from MHPs to the rural areas that are not scheduled for grid connection in the foreseeable future.

3. Power Transmission and Distribution Project

The Project is being implemented with the objective to increase the capacity and reliability of the NEPS. The Project will construct transmission lines and substations to interconnect Kabul–Puli and Khumri–Termez (Southern Uzbekistan), thereby adding over 90,000 new connections into the grid system. However, NEPS is not expected to be extended to Badakhshan and Bamyan provinces for economic reasons, including low population density

15

No. Component Name

Brief Description

and the long transmission line required. Thus, the proposed MHPs to be financed under JFPR will complement the Project by supplying power to the areas that cannot be supplied through the NEPS.

4. Afghanistan Rural Business Support Project

The Project’s objective is to sustain the increase in farm incomes in four rural provinces (Balkh, Bamyan, Kandahar, and Nangarhar) by enabling farmers, agro-processors, and traders to engage in profitable production, processing, and marketing industries by establishing four rural business support centers. The Project will help processors and traders identify marketable products and then facilitate investments to process and market the products. Farmers will commit to investments to produce raw materials required by processors and traders. The Project will directly link farmers, processors and traders, and the market. Thus, in Bamyan the proposed MHPs may be able to supply power to facilitate the growth of the agro-industry that is supported by this Project.

AFG = Afghanistan, GWh = gigawatt hour, JFPR = Japan Fund for Poverty Reduction, kV = kilovolt, MFF = multitranche financing facility, MHP = minihydro plant, MW = megawatt, NEPS = North East Power System, O&M = operation and maintenance, TAJ = Tajikistan. Source: Asian Development Bank.

5. Rationale for Grant Funding versus ADB Lending

26. There are compelling reasons for implementing the Project on a full grant basis. Since the Project is distinct from the conventional intervention in terms of size and nature, ADB should avoid imposing the cost of this pilot program on the Government, which is already faced with significant bilateral and multilateral debt. 27. The Project is also expected to be implemented as a quick-yielding venture. The processing, as per ADB convention, usually take at least 2 years, while processing for a JFPR grant requires a much shorter period (6 months). D. Implementation of the Proposed Grant

1. Name of the Implementing Agencies 1. Ministry of Energy and Water (MEW) 2. Afghanistan Electricity Corporation (DABS)

28. As one of the implementing agencies, MEW will be engaged in all activities under all three components of the Project. As aforementioned, the entire project cycle is regarded as an on-the-job training activity to enhance the capacity of MEW in the planning, designing, procurement, and management of hydropower projects. MEW is also expected to address social and environmental impacts through a transparent and participatory approach. 29. DABS, the other implementing agency, is the vertically-integrated national power company that will be responsible for the O&M of the MHPs once they have been constructed. DABS will also participate in capacity-building training programs to enhance its ability to engage in technical O&M, metering, billing, tariff collection, accounting, and financial management. As the operator of the MHPs, DABS will be engaged from the early stages of the Project (component A) in selecting the subprojects. The implementation arrangement is described in Appendix 5. 30. All procurement and recruitment of consultants will be in accordance with ADB's Procurement Guidelines (2007, as amended from time to time) and ADB's Guidelines on the Use of Consultants (2007, as amended from time to time). National competitive bidding will be

16

adopted for civil works contracts equal to and below $1 million as well as for goods contracts between $100,000 and $500,000, International competitive bidding will be used for civil works contracts above $1 million and for goods contracts above $500,000. For civil works and goods contracts below $100,000 shopping may be used, and direct purchase may be used for contracts below $10,000. The procurement plan is in Supplementary Appendix E. 31. A total of 267.0 person-months (83.5 person-months for international and 183.5 person-months for national of consulting services will be required under the Project. A consulting firm will be recruited using the quality-based selection method. The proposal will be a full technical proposal. Terms of reference for consultants is in Supplementary Appendix D.

2. Risks Affecting Grant Implementation

32. The major risks are security risks and institutional and governance risks, which are discussed herein. 33. Security Risks. Ongoing conflict and general insecurity pose a major risk to the effective delivery of public services and other development activities in Afghanistan, including ADB supported projects. Insecurity is also a critical impediment to increased private sector investment, which has a negative impact on employment creation. In addition to the difficulties created by insecurity with respect to field-level planning, implementation, and monitoring of development activities, poor security can increase the overall cost of development projects by as much as 20% due to direct security mitigation measures, high security-related salary and other personnel costs, and implementation delays of up to 1 year that can often result in cost-overruns. To mitigate security risks, ADB’s strategy calls for making an increased effort to engage communities in project areas. With the involvement of local NGOs in community mobilization works and national contractors undertaking civil works (along with petty contractors and subcontractors from the local area), ADB’s community engagement strategy will be applies under the Project. In addition, ADB’s Afghanistan Resident Mission will provide security advice and support to contractors in the development and implementation of project-specific security plans. 34. Institutional and Governance Risks. A second risk for ADB operations is the Government’s limited institutional capacity and weak systems of accountability. Given limited capacity and a large number of external agencies operating in Afghanistan, the Government has requested that assistance focus on providing the long-term support needed for sustained improvements in institutional capacity. In response, the recruitment of international consultants and a capacity-building component have been made integral parts of the Project. 35. The Government has agreed to assign a team of counterpart staff from MEW and DABS exclusively for the Project to ensure the Government’s continuous participation in capacity-building efforts (component C). 36. Project specific risks are discussed in the table below.

Type of Risk Brief Description Measures to Mitigate the Risk Safety and Security General insecurity exists

throughout the country; while the two targeted provinces are relatively less volatile.

Closely monitor the security situation; adhere to ADB-approved security rules and regulations; engage local NGOs with work history in the target provinces.

17

Type of Risk Brief Description Measures to Mitigate the Risk Governance Lack of transparency and

accountability of the implementing agencies and executing agencies; possible misuse of project funds.

ADB’s close monitoring of funds use and detailed approval procedures for specific project activities provides safeguards. Submission of audited annual financial reports and project progress reports by consultants will facilitate monitoring.

Weather and Road Conditions

Some districts in Bamyan are inaccessible from October to April because of heavy snow and poor roads.

Project planning schedules and appropriate time frame for activities.

Construction Delays Procurement is difficult and time-consuming, which could delay plant commissioning.

Detailed plans and schedules are obtained in bid proposals; Penalty for being over budget or for late delivery. Government collaboration in import procurement.

Inadequate maintenance after project completion

MHPs might not be properly operated and maintained after completion.

Proper training on O&M and involvement of community-based organizations; lease agreement to private sector will also be pursued.

Inadequate metering, billing, and tariff collection

Billing and revenue collection might not be properly carried out.

Selection of site will be focused on willingness to pay and affordability, and community-based organizations' involvement during construction and ongoing operation. MEW and DABS will be asked to provide operating results for the next 3 years of operation after commissioning.

3. Incremental ADB Costs

Component Incremental ADB Cost

Amount requested No incremental ADB costs as envisioned.

Justification Type of work to be rendered by ADB

4. Monitoring and Evaluation

Key Performance Indicator Reporting Mechanism Plan and Timetable for Monitoring and Evaluation

Maximum of 10 potential MHP sites identified at desk study level

Progress reports and desk study report

Three months after consultant mobilization

Maximum of four MHP sites with aggregate installed capacity of about 2.0 MW recommended with results of site visit and preliminary design

Progress reports and preliminary design report

Six months after consultant mobilization

Procurement of contract packages Progress reports and interim report on component A

Twelve months after consultant mobilization (end of component A)

Community-based organizations consulted on development opportunities and provided trainings

Progress reports and ADB review missions

20 months after consultant mobilization

Four MHPs with aggregate installed capacity of about 2.0 MW installed in two provinces

Progress reports, commissioning test reports, draft final report, and ADB review missions

32 months after consultant mobilization (end of component B)

Up to 5,000 households electrified Project specification, draft final report, ADB review missions, and accounting statements

33 months after consultant mobilization (end of Project)

Day-time load is about 30% of peak MHP operation records of DABS, 33 months after consultant

18

Key Performance Indicator Reporting Mechanism Plan and Timetable for Monitoring and Evaluation

load or higher (as a proxy for the level of income-generating activities supported)

ADB review missions mobilization (end of Project) and quarterly for 1 year (day-time demand takes longer to grow as it requires investments)

MEW and DABS trained in designing and implementing hydropower projects.

Training and capacity development reports

Quarterly throughout project implementation

5. Estimated Disbursement Schedule

Year Amount ($ million) 2009 – year round 1.0 2010 – year round 4.5 2011 – year round 6.0 2012 – first half 0.5 Total Disbursements 12.0

19

Appendixes 1. Design and Monitoring Framework 2. Summary Cost Table 3. Detailed Cost Estimates 4. Fund Flow Arrangements 5. Implementation Arrangements 6. Summary Poverty Reduction and Social Strategy Supplementary Appendixes (available upon request) A. Initial Environmental Examination B. Afghanistan Poverty Analysis C. Detailed Economic and Financial Analysis D. Terms of Reference of Consulting Services E. Procurement Plan

Appendix 1

20

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets

and/or Indicator Data Sources and/or

Reporting Mechanisms Assumptions and Risks Impact Rural economic growth in project areas in Badakhshan and Bamyan provinces

Increased per capita income in the provinces over baseline of July 2010

National Risks and Vulnerability Assessment survey publication Independent socioeconomic surveys

Assumption • Increased economic

activities equally benefit the general population

Risk • External factors, such as

a volatile security situation, hamper economic growth

Outcome Increased economic activities in project areas through provision of electricity Improved quality of life in project areas through direct and indirect use of electricity

Day-time (off-peak) load reaches 30% of peak load (as proxy for level of economic activity conducted) Increased time for education in evenings, reduction in women's time spent on manual labor, and reduction in indoor pollution Increased availability of foodstuff in market and better health services

Power generation logs of mini hydropower plants (MHPs) provided by Afghanistan Electricity Corporation (DABS) Independent socioeconomic surveys Independent socioeconomic surveys

Assumptions • MHPs are operated and

maintained in a sustainable manner

• Metering, billing, tariff

collection, and accounting performed transparently

Risk • Hydrological risk:

reduction and fluctuation in river discharge

Outputs Identification of maximum 10 potential MHP sites out of which a maximum of four sites will be constructed Construction of up to four MHPs with aggregate installed capacity up to 2.0 MW Consultation on development opportunities and training programs for community-based organizations Up to 5,000 households supplied with basic electricity services from MHPs Up to 15,000 households gain indirect benefits from electricity services in their communities. Counterpart engineers and technicians trained in

Four viable projects (technically, economically, financially, environmentally, and socially) are designed in a timely manner Commissioning of MHPs in two provinces Consultations and training programs implemented Evaluation against final design of MHPs Evaluation against final design of MHPs At least 15 engineers and

Desk study report, preliminary design report, and detailed design and bid documents Site visits, as-built drawings and commissioning test report Consultation and training reports Detailed design, construction record, and independent socioeconomic survey Independent socioeconomic survey.

Assumptions • Suitable sites with

hydropower potential identified near load centers

• Government agrees with

selection of sites Risks • Security situation

deteriorates and hinders study and works in the targeted provinces

• Delays in Government

approval on implementation

• Counterpart engineers

are not assigned full time for on-the-job trainings and workshops

• Investment environment

is not conducive for private sector participation

Appendix 1

21

Design Summary Performance Targets

and/or Indicator Data Sources and/or

Reporting Mechanisms Assumptions and Risks planning, design, and operation and maintenance (O&M) of MHPs. Potential local entrepreneurs trained on businesses opportunities using electricity O&M contracted out to private sector on lease agreement

technicians participate in on-the-job training and workshops, and enhance their capacities. About 50 entrepreneurs participate in workshops and understand the subjects At least one MHP contractsout O&M to private sector, if private sector is judged to be more suitable than DABS

Attendance and course evaluation by participants Attendance and course evaluation by participants Lease agreement contract

Activities with Milestones Component A: Selection and Design of Mini Hydropower Subprojects Desk study report (by month 5) Preliminary design of subprojects (by month 8) Detailed engineering design of subprojects (by month 11) Procurement of all contract packages (by month 15) Component B: Implementation and Project Management Mobilization of contractors (by month 16) Completion of civil works construction (by month 34) Turbine and generator installation(by month 35) Commissioning of MHPs (by month 38) Component C: Capacity Building and Support of Community-Based Organizations Training needs identified (by month 4) On-the-job training commences (by month 5) Completion of capacity building on MHP planning and design (by month 13) Community-based organizations are consulted on development opportunities and trained on O&M and use of electricity (by month 27) Completion of capacity building on project management and O&M (by month 38) Completion of capacity building for entrepreneurs (by month 38) Post construction support (up month 39)

Inputs Component A International consultants 36.5 person-months National consultants 61.5 person-months Component B International consultants 37.5 person-months National consultants 114.0 person-months Component C International consultants 9.5 person-months National consultants 8.0 person-months [Note: These are inputs exclusively allocated for conducting workshops. Consultants will provide on-the-job training using inputs of components A and B] • JFPR Grant: $12 million • Government contribution

for land compensation, etc: $1 million (maximum)

• Community contribution for connection fee and house wiring: $1 million (maximum)

DABS = Afghanistan Electricity Corporation, JFPR = Japan Fund for Poverty Reduction, MHP = mini hydro plant, MW = megawatt, O&M = operation and maintenance. Source: Asian Development Bank.

Appendix 2

22

SUMMARY COST TABLE Component A

Selection and Design of Mini Hydropower Subprojects

Component B Implementation

and Project Management

Component C Capacity Building

and Support of Community-

Based Organizations

Total (Input) %

1. Civil Works 108,000 3,840,000 3,948,000 32.9

2. Equipment and Supplies 55,100 2,631,200 2,686,300 22.4

3. Training, Workshops, Seminars, and Public Campaigns 123,600 123,600 1.0

4. Consulting Services 1,433,000 1,818,000 261,500 3,512,500 29.3

5. Grant Management 136,200 393,400 529,600 4.4

6. Other Inputs 0 0.0

7. Contingencies (0 10% of total estimated grant fund) Use of Contingencies requires prior approval from ADB.

192,500 965,000 42,500 1,200,000 10.0

Subtotal JFPR Grant Financed 1,924,800 9,647,600 427,600 12,000,000 100.0

Government Contribution (land acquisition and in-kind contribution; maximum value) 50,000 950,000 1,000,000

Other Donor(s) Contributions (e.g. from NGOs, multi-and bilateral aid agencies) 0

Community's Contributions (connection fee, house-wiring, etc.): 500,000 500,000

Total Estimated Costs 1,974,800 11,097,600 427,600 13,500,000

Inputs / Expenditure Category

Grant Components

Source: Asian Development Bank estimates.

DETAILED COST ESTIMATESa

Code Supplies and Services Rendered Unit Quantity Cost TotalUnits Per Unit $ Amount MOP

Component A: Selection and Design of Mini Hydropower Subprojects Subtotal 1,974,800 1,924,800 50,000 0 01. Civil Works

1.1 Topographic survey sites 4 20,000 80,000 80,000 DP or S1.2 Geological survey (test-pit) sites 4 5,000 20,000 20,000 DP or S1.3 Hydrological survey sites 4 2,000 8,000 8,000 DP or S

108,000 108,0002. Office Equipment and Supplies

2.1 Telephone, fax machine nos 4 400 1,600 1,600 DP2.2 Internet installation and office network set 1 4,500 4,500 4,500 DP2.3 Laptop computers nos 5 2,000 10,000 10,000 DP2.4 Printers (with scanner) nos 4 800 3,200 3,200 DP2.5 Photocopier nos 1 2,000 2,000 2,000 DP2.6 Digital camera nos 4 300 1,200 1,200 DP2.7 Office equipment/furniture set 1 10,000 10,000 10,000 DP2.8 Office running costs (paper, toner, small equipment, cleaning, etc.) month 36 300 10,800 10,800 DP2.9 Communication costs (telephone, internet, cell phones, etc.) month 36 300 10,800 10,800 DP

2.10 Reports and documents LS 1,000 1,000 1,000 DP2.11 Office space LS 50,000 50,000 50,000

105,100 55,1003. Training, Workshops, Seminars, and Public Campaigns

4. Consulting Services4.1 International consultants

4.1.1 Hydropower development specialist/team leader p-m 4.0 25,000 100,000 100,0004.1.2 Hydrologist p-m 3.5 25,000 87,500 87,5004.1.3 Geologist/geotechnical engineer p-m 2.5 25,000 62,500 62,5004.1.4 Civil engineer p-m 12.0 25,000 300,000 300,0004.1.5 Electrical engineer (turbine/generator) p-m 1.5 25,000 37,500 37,5004.1.6 Electrical engineer (transmission/distribution) p-m 2.5 25,000 62,500 62,5004.1.7 Mechanical engineer p-m 1.5 25,000 37,500 37,5004.1.8 Environment specialist p-m 2.0 25,000 50,000 50,0004.1.9 Sociologist/resettlement p-m 2.0 25,000 50,000 50,000

4.1.10 Institutional expert p-m 1.0 25,000 25,000 25,0004.1.11 Financial expert p-m 1.0 25,000 25,000 25,0004.1.12 Business development expert p-m 1.0 25,000 25,000 25,0004.1.13 Legal expert p-m 1.0 25,000 25,000 25,0004.1.14 Training expert p-m 1.0 25,000 25,000 25,000

36.5 912,500 912,500

n/a

JFPRCosts Contributions

Commu-nities

Govern-ment

Other Donors

Appendix 323



Commu-nities

Govern-ment

Other Donors

4.2 National Consultants4.2.1 Hydropower development specialist p-m 7.0 3,000 21,000 21,0004.2.2 Hydrologist p-m 8.5 3,000 25,500 25,5004.2.3 Geologist p-m 8.5 3,000 25,500 25,5004.2.4 Civil engineer p-m 17.0 3,000 51,000 51,0004.2.5 Electrical engineer (turbine/generator) p-m 3.0 3,000 9,000 9,0004.2.6 Electrical engineer (transmission/distribution) p-m 3.5 3,000 10,500 10,5004.2.7 Environmental specialist p-m 4.5 3,000 13,500 13,5004.2.8 Sociologist/resettlement p-m 4.5 3,000 13,500 13,5004.2.9 Institutional expert p-m 2.0 3,000 6,000 6,000

4.2.10 Economist p-m 1.5 3,000 4,500 4,5004.2.11 Legal expert p-m 1.5 3,000 4,500 4,500

61.5 184,500 184,5004.3 Travel and Accomodation

4.3.1 International travel person-trips 35 2,000 70,000 70,0004.3.2 Domestic travel (air) person-trips 50 200 10,000 10,0004.3.3 Vehicle hire vehicle-month 30 3,500 105,000 105,0004.3.4 Accomodation (Kabul) nights 730 150 109,500 109,5004.3.5 Accomodation (site) nights 830 50 41,500 41,500

336,000 336,0005. Grant Management

5.1 Office running costs (paper, toner, small equipment, bank charges, etc) month 12 300 3,600 3,6005.2 Communication costs (telephone, internet, cell phones, courier, etc) month 12 300 3,600 3,6005.3 CAD operator p-m 10 500 5,000 5,0005.4 Translator p-m 24 500 12,000 12,0005.5 Secretary p-m 24 500 12,000 12,0005.6 Security LS 100,000 100,000 100,000

136,200 136,200

6. Contingencies 192,500 192,500

Appendix 324



Commu-nities

Govern-ment

Other Donors

Component B: Implementation and Project Management Subtotal 11,097,600 9,647,600 950,000 0 500,0001. Civil Works

1.1 Intake weir and structures sites 4 400,000 1,600,000 1,600,0001.2 Headrace canal and head tank sites 4 320,000 1,280,000 1,280,0001.3 Penstock sites 4 80,000 320,000 320,0001.4 Powerhouse and tailrace sites 4 160,000 640,000 640,000

960,000 3,840,000 3,840,0002. Equipment and Supplies

2.1 Electro-mechanical Equipment2.1.1 Turbine, generator, appurtenant equipments, and step-up transformer sets 4 320,000 1,280,000 1,280,0002.1.2 Transmission and distribution sets 4 320,000 1,280,000 1,280,000

640,000 2,560,000 2,560,0002.2 Office Equipment and Supplies (site)

2.2.1 Telephone, fax machine nos 4 400 1,600 1,600 DP2.2.2 Internet installation and office network set 4 4,500 18,000 18,000 DP2.2.3 Laptop computers nos 4 2,000 8,000 8,000 DP2.2.4 Printers (with scanner) nos 4 800 3,200 3,200 DP2.2.5 Cell phones nos 4 300 1,200 1,200 DP2.2.6 Digital camera nos 4 300 1,200 1,200 DP2.2.7 Office equipment/furniture set 4 4,000 16,000 16,000 DP2.2.8 Diesel generator nos 4 5,000 20,000 20,000 DP2.2.9 Reports and documents LS 2,000 2,000 2,000 DP

2.2.10 Office space LS 250,000 250,000 250,000321,200 71,200

3. Training, Workshops, Seminars and Public Campaigns

4. Consulting Services 4.1 International Consultants

4.1.1 Hydropower development specialist/team leader p-m 4.0 25,000 100,000 100,0004.1.2 Geologist/geotechnical engineer p-m 1.0 25,000 25,000 25,0004.1.3 Civil engineer p-m 1.0 25,000 25,000 25,0004.1.4 Electrical engineer (turbine/generator) p-m 3.5 25,000 87,500 87,5004.1.5 Electrical engineer (transmission/distribution) p-m 3.5 25,000 87,500 87,5004.1.6 Mechanical engineer p-m 0.5 25,000 12,500 12,5004.1.7 Site supervision engineer p-m 15.0 25,000 375,000 375,0004.1.8 Sociologist/resettlement p-m 2.0 25,000 50,000 50,0004.1.9 Institutional expert p-m 2.0 25,000 50,000 50,000

4.1.10 Financial expert p-m 1.0 25,000 25,000 25,0004.1.11 Business development expert p-m 3.0 25,000 75,000 75,0004.1.12 Training expert p-m 1.0 25,000 25,000 25,000

37.5 937,500 937,500

n/a

NCB or S (for low value

contracts)

ICB or S (for low value

contracts)

Appendix 325



Commu-nities

Govern-ment

Other Donors

4.2 National Consultants4.2.1 Hydropower development specialist p-m 7.0 3,000 21,000 21,0004.2.2 Hydrologist p-m 1.0 3,000 3,000 3,0004.2.3 Geologist p-m 2.0 3,000 6,000 6,0004.2.4 Electrical engineer (turbine/generator) p-m 3.5 3,000 10,500 10,5004.2.5 Electrical engineer (transmission/distribution) p-m 7.5 3,000 22,500 22,5004.2.6 Site supervision engineer p-m 79.0 3,000 237,000 237,0004.2.7 Environment specialist p-m 2.5 3,000 7,500 7,5004.2.8 Sociologist/resettlement p-m 5.5 3,000 16,500 16,5004.2.9 Institutional expert p-m 3.0 3,000 9,000 9,000

4.2.10 Economist p-m 1.0 3,000 3,000 3,0004.2.11 Legal expert p-m 2.0 3,000 6,000 6,000

114.0 342,000 342,0004.3 Travel and Accomodation

4.3.1 International travel person-trips 30 2,000 60,000 60,0004.3.2 Domestic travel (air) person-trips 50 200 10,000 10,0004.3.3 Vehicle hire vehicle-month 80 3,500 280,000 280,0004.3.4 Accomodation (Kabul) nights 750 150 112,500 112,5004.3.5 Accomodation (site) nights 1,520 50 76,000 76,000

538,500 538,5005. Grant Management

5.1 Office running costs (paper, toner, small equipment, bank charges, etc.) month 24 300 7,200 7,2005.2 Communication costs (telephone, internet, cell phones, courier, etc.) month 24 300 7,200 7,2005.3 CAD operator, other support staff p-m 20 500 10,000 10,0005.4 Translator p-m 24 500 12,000 12,0005.5 Secretary p-m 24 500 12,000 12,0005.6 External audit times 3 10,000 30,000 30,0005.7 Baseline survey and impact assessment times 3 5,000 15,000 15,0005.8 Security LS 300,000 300,000 300,000

393,400 393,4006. Other Inputs

6.1 Land acquisition, resettlement, licensing, etc. (if required) LS 700,000 700,0006.2 Connection fee and house wiring LS 500,000 500,000

1,200,000


Appendix 326



Commu-nities

Govern-ment

Other Donors

Component C: Capacity Building and Support of Community-based Organizations Subtotal 427,600 427,600 0 0 01. Civil Works

2. Equipment and Supplies

3. Training and Workshops3.1 Lectures and Workshops

3.1.1 Training aids and materials LS 3,100 3,100 3,1003,1,2 Workshop/training for MEW/DABS times 4 5,000 20,000 20,0003.1.2 Workshop/training for O&M times 3 5,000 15,000 15,0003,1,3 Workshop for CBOs times 3 5,000 15,000 15,000

10.0 53,100 53,1003.2 On-the-job training (OJT) expenses

3.2.1 Per diem days 450 20 9,000 9,0003.2.2 Domestic travel (air) person-trips 45 200 9,000 9,0003.2.3 Vehicle hire vehicle-days 150 200 30,000 30,0003.2.4 Accomodation (site) nights 450 50 22,500 22,500

70,500 70,5004. Consulting Services

4.1 International Consultants4.1.1 Hydropower development specialist/team leader p-m 0.5 25,000 12,500 12,5004.1.2 Hydrologist p-m 1.0 25,000 25,000 25,0004.1.3 Geologist/geotechnical engineer p-m 0.5 25,000 12,500 12,5004.1.4 Civil engineer p-m 1.0 25,000 25,000 25,0004.1.5 Electrical engineer (turbine/generator) p-m 1.0 25,000 25,000 25,0004.1.6 Electrical engineer (transmission/distribution) p-m 1.0 25,000 25,000 25,0004.1.7 Mechanical engineer p-m 0.5 25,000 12,500 12,5004.1.8 Site supervision engineer p-m 1.0 25,000 25,000 25,0004.1.9 Environment specialist p-m 0.5 25,000 12,500 12,500

4.1.10 Sociologist/resettlement p-m 0.5 25,000 12,500 12,5004.1.11 Institutional expert p-m 0.5 25,000 12,500 12,5004.1.12 Financial expert p-m 0.5 25,000 12,500 12,5004.1.13 Business development expert p-m 0.5 25,000 12,500 12,5004.1.14 Legal expert p-m 0.5 25,000 12,500 12,500

9.5 237,500 237,500

n/a

n/a

Appendix 327



Commu-nities

Govern-ment

Other Donors

4.2 National Consultants4.2.1 Hydropower development specialist p-m 1.0 3,000 3,000 3,0004.2.2 Hydrologist p-m 0.5 3,000 1,500 1,5004.2.3 Geologist p-m 0.5 3,000 1,500 1,5004.2.4 Civil engineer p-m 1.0 3,000 3,000 3,0004.2.5 Electrical engineer (turbine/generator) p-m 0.5 3,000 1,500 1,5004.2.6 Electrical engineer (transmission/distribution) p-m 1.0 3,000 3,000 3,0004.2.7 Site supervision engineer p-m 1.0 3,000 3,000 3,0004.2.8 Environment specialist p-m 0.5 3,000 1,500 1,5004.2.9 Sociologist/resettlement p-m 0.5 3,000 1,500 1,500

4.2.10 Institutional expert p-m 0.5 3,000 1,500 1,5004.2.11 Economist p-m 0.5 3,000 1,500 1,5004.2.12 Legal expert p-m 0.5 3,000 1,500 1,500

8.0 24,000 24,000


Components A to C = Subtotal Subtotal 13,500,000 12,000,000 1,000,000 0 500,000 CAD = computer aided design, DABS = Afghanistan Electricity Corporation, DP = direct purchase, LS = lump sum. MEW = Ministry of Energy and Water, MOP = method of procurement, nos = numbers, O&M = operation and maintenance, p-m = person-months. a Equipment under component A2 will be handed over to MEW at the end of the project period. Source: Asian Development Bank estimates.

Appendix 328

Appendix 4

29

FUND FLOW ARRANGEMENTS 1. The disbursement procedure for eligible expenditures of the Japan Fund for Poverty reduction (JFPR) fund is in accordance with the Loan Disbursement Handbook (2007, as amended from time to time) of the Asian Development Bank (ADB). 2. The project management unit under the executing agency (EA) will establish the imprest account for the JFPR grant. The JFPR imprest account will be managed, replenished, and liquidated in accordance with ADB’s Loan Disbursement Handbook and detailed arrangements will be agreed upon by the Government and ADB. The project management unit will prepare and submit the budget requirements for project activities to the executing agency. Upon approval of the consolidated requirements, the executing agency will submit to ADB a formal request for fund release. The executing agency may request an initial advance based on approved contracts and planned expenditures for the first 6 months of the Project that are to be paid through the imprest account. Total outstanding advances should not exceed ADB’s share of eligible expenditures to be financed through the imprest account for the next 6 months or 10% of the JFPR amount, whichever is lower. The statement of expenditures (SOE) procedure will be used for reimbursement, liquidation, and replenishment of eligible expenditures, for any individual payment not exceeding $100,000 or its equivalent. Some civil works and consulting contracts would be paid through the direct payments’ system. The use of the JFPR imprest account and SOE procedure will be audited annually by auditors acceptable to ADB. A separate audit opinion on the use of the JFPR imprest account and SOE procedure will be included in the annual audit report. 3. Replenishment will be subject to the liquidation of expenditures. The accounts should be replenished regularly to ensure that sufficient funds are always available. All withdrawal applications will be monitored by and approved in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). The designated commercial bank will provide monthly statements of the imprest account to the EA and project management unit, which will claim liquidation on the basis of the statement and other supporting documents. Arrangements such as the flow and administrative procedures will be detailed in the grant implementation manual. The schematic fund flow for the Project is shown in Figure A4. 4. As confirmed by the Government of Japan, interest earned on the JFPR imprest account minus bank charges will be returned to the JFPR fund. At the end of the Project, the interest should be remitted to the JFPR fund account maintained at ADB.

5. An independent public accountant will be engaged by the executing agency to conduct annual financial audits related to project implementation. Annual audits will be undertaken at the end of each year of the project implementation phase. Audit reports will be submitted to ADB within 6 months of the end of each fiscal year throughout the project implementation period. Audit reports should include a separate audit on the use of imprest account and statement of expenditure procedure.

ADB = Asian Development Bank, DABS = Afghanistan Electricity Corporation, MEW = Ministry of Energy and Water. Source: Asian Development Bank estimates.

Afghanistan Electricity Corporation (DABS)

[Executing/Implementing Agency]

ADB

Letter of agreement

Imprest Account

Consultant

Contractors/ suppliers

Contracts

Recommendation

Endorsement

Component A: Selection and Design of

Mini Hydropower Subprojects $1,924,800

Component B: Implementation and Project

Management $9,674,600

Component C: Capacity Building and

Support of Community-Based Organizations

$427,600

Invoice

Payments

Invoice and certification

Contract

Withdrawal application, and ADB endorsement and replenishment

Ministry of Energy and Water (MEW)

[Implementing Agency]

Support in project management and technical expertise

Direct payment for claims of larger values

Figure A4: Fund Flow Arrangements

Appendix 430

Appendix 5

31

IMPLEMENTATION ARRANGEMENTS A. Entities Involved

1. The Ministry of Energy and Water (MEW) will be the implementing agency. MEW has been the recipient of significant capacity-building development assistance over the past several years, and it continues to receive such assistance. The Asian Development Bank (ADB) will provide additional support via capacity-building technical assistance. There are a large number of international and national advisors who are tasked with providing technical advice and consultations with the minister, vice ministers, and other decision-makers. These factors build and add to the capacity of MEW to implement externally-funded projects. MEW is gaining experience in implementing development projects. However, the Project will ensure that a strong project management unit is in place to support and bolster the ministries in their implementation efforts. The project management unit will have a head (specialist in hydropower development), a procurement specialist, an accountant/financial manger, and logistical support personnel. To further develop MEW’s implementation capacity, the Project emphasizes the need to build capacity in project management and technical skills in hydropower development. 2. As formulated, the head of the project management unit will be a representative from MEW. The project management unit head and staff will be responsible to ensure that the consultant’s activities are monitored in a timely fashion and project accounts are adequately maintained. The project management unit head will report to the executing agency (MEW), and will also coordinate with ADB and officers of the Japan Fund for Poverty Reduction (JFPR) as necessary. B. Procurement and Consulting Services

2. The procurement and consulting services recruitment procedures shall be conducted in accordance with ADB Guidelines as discussed earlier (section D. Implementation of the Proposed Grant) C. Consultant Staff

3. Offering competitive remuneration is a necessary, yet insufficient, condition for engaging international consultants to work in Afghanistan. The project budgets for competitive remuneration. Another necessary condition is job satisfaction. Consultants possessing work experience in Afghanistan, or other post-conflict countries, are preferred as they will be aware of their work conditions. The Project does not intend to post international consultants to the targeted provinces for a long-term period. However, to ensure that the province-based national staff has the tools and capacity needed to implement project activities, emphasis will be given to (i) developing reliable communications systems between project sites and Kabul, (ii) providing training for national staff, and (iii) bringing province staff to Kabul on a systematic basis. D. Accounting, Auditing, Reporting, and Project Monitoring

4. Consultants will prepare monthly and quarterly progress reports. The quarterly report will include descriptions and formative evaluations of the project activities implemented during the reporting period and planned activities for the next quarter. The project management unit will be responsible for compiling semiannual reports to be submitted to the executive agency and ADB. A project completion report will be prepared by the project management unit and submitted to

32 Appendix 5

the executing agency and ADB within 3 months of the completion of the Project. The project management unit will also prepare a project replication assessment report and an implementation completion memorandum. The implementation completion memorandum and the semiannual reports will be featured in the JFPR website. 6. The executing agency shall maintain a separate project accounts for the JFPR grant. Annual financial audits shall be performed for the project accounts at the end of each fiscal year. Audit reports shall be submitted to JFPR and ADB within 6 months after the end of each fiscal year throughout the project implementation period and after the closing date of the project. The audit reports should include a separate audit opinion on the proper use of imprest account and the statement of expenditures as required by the 2008 JFPR guidelines. 7. The activity schedule for project implementation along and a timeline are presented in Table A5.

Appendix 5

33

Table A5: Activity Schedule for Project Implementation

YearMonth 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

Month No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39Project Preparation

Letter of Agreement ▲

Consultant

Evaluation and Recruitment

Mobilization ▲

Component A: Selection and Design of Mini Hydropower Subprojects

Prefeasibility Study

Desk Study

Site Visit

Hydrological Survey Preferable to make measurement in June as it is month with lowest precipitation

Shortlisting of 10 Sites ▲

Preliminary Design

Selection of 4 Sites ▲

Topographic Survey

Detailed Design of 4 Sites

Procurement for 4 Sites

Bid Document Preparation

Bid: Civil Works (NCB)

Bid: Electro-michanical Equipment (ICB)

Bid: Transmission & Distribution Lines (tbd)

Component B: Implementation and Project Management

Implementation

Civil Works 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Electro-mechanical Equipment (fabrication, shipping, installation) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Transmission and Distribution Lines

Testing

Commissioning Testing/Commissioning before dry season is preferable ▲

Project Management

Monitoring and Operational Support

Component C: Capacity Building and Support of Community-Based Organizations

[DABS]Planning, Design, and Procurement

Project Management

O&M

[Communities]Social Surveys, Consultation, Participation

Establishment of CBOs ▲

Metering, Billing, Tariff Collection, O&M

Business Support and Efficient/Effective use of Power

Document Submission

Desk Study/Inception Report ▲Preliminary Design Report ▲Interim Report/Bid Documents ▲Bid Evaluation Report ▲Quarterly Progress Reports ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲As-built Drawings ▲Final Report ▲

Implementation Schedule - Proposed2009 2010 2011 2012

Limited civil works construction during winter

Continuous

Intermittent

DABS = Afghanistan Electricity Corporation, ICB = international competitive bidding, NCB = national competitive bidding, O&M = operation and maintenance, Source: Asian Development Bank.

Appendix 6

34

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: Afghanistan/Development of Mini Hydropower Plants in Badakhshan and Bamyan Provinces

Lending/Financing Modality: Project (Japan Fund for Poverty Reduction) Department/

Division: Central and West Asia Department/ Infrastructure Division

I. POVERTY ANALYSIS AND STRATEGY

A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy Based on the country poverty assessment, the country partnership strategy, and the sector analysis, describes how the project would directly or indirectly contribute to poverty reduction and how it is linked to the poverty reduction strategy of the partner country. The Country Strategy and Program Update (2006–2008): Islamic Republic of Afghanistan1 is ADB’s most current strategy and program document. The Government of Afghanistan endorses the three-pronged approach to reconstruction that ADB articulates in the country strategy and program update (CSPU). The approach emphasizes (i) building capacity, (ii) establishing appropriate policy and institutional frameworks, and (iii) rehabilitating essential infrastructure. ADB is currently formulating the Afghanistan country partnership strategy (CPS) for 2009–2013, which is fully aligned with key Interim Afghanistan National Development Strategy (I-ANDS) priorities and outcomes. At the Government request and congruent with ADB’s Medium Term Strategy,2 ADB assistance to Afghanistan will continue to focus on a limited number of priority sectors contributing to Afghanistan’s economic and social development. Agriculture and energy, including rural electrification, are priority sectors stated in the CPS. In accordance with the CPS, key development outcomes in the power sector to which ADB will contribute include the following: at least 65% of urban households and 25% of rural households will have access to power by 2010. The major output of the Project is hydroelectricity, which is strongly linked to the CPS. Hydroelectricity is not only environmentally the cleanest and renewable form of energy, but also the least expensive compared to other sources of energy available in the country. Calculations show that the local average production cost per kilowatt hour (kWh) will be about AF7, which is about three-quarters less than the cost for the same amount of the more readily available and widely used diesel-generated power. When energy is affordable and reliable, it becomes more accessible to the poor and thus has significant positive impact on their living standard. The Project will benefit various stakeholders both directly and indirectly. Stakeholders include users of energy for household and business enterprise purposes; consumers of goods and services readily available as a function of low cost energy; and local business community, which will have a less expensive and more stable source of energy for enterprise establishment and/or expansion.

B. Poverty Analysis Targeting Classification: General intervention 1. Key Issues The Project will be launched in Badakhshan and Bamyan provinces. Although the Government has not defined a national poverty income line nor has there been any living standards survey for reliable poverty estimates, the available statistical data on poverty is the National Risk and Vulnerability Assessment survey results of 2003 and 2005. These surveys are considered precursors to the detailed Living Standard Measurement Survey (LSMS). The surveys show that Afghanistan is among the poorest country in the world. The country has been looming near the bottom of global economic and social rankings involving about 200 countries. For example, Afghanistan was ranked 177th in 2004 in the United Nations Human Development Report, and was only marginally ahead of 6 countries with high levels of poverty—Burundi, Mali, Burkina Faso, Niger, and Sierra Leone. The life expectancy of an average Afghan is only 44.5 years, which is 20% less than its neighbors and about 6% less than the average of all least-developed countries. In terms of poverty rankings within Afghanistan, both Badakhshan and Bamyan fall in the bottom half of the country. The Project entails implementing four mini hydropower plants (MHPs) in the two provinces with a total aggregate installed capacity of about 2.0 megawatts (MW). The Project will directly employ 300,000 person days equivalent of unskilled labor during the establishment phase. This will involve the poor (unemployed and underemployed)

Appendix 6

35

local population. Once the MHPs become operational, the benefits will accrue directly to 5,000 households that will have access to electricity and indirectly to a large number of other local residents. For example, the lower cost of goods and services produced from the use of the new lower cost energy sources will benefit all purchasing consumers. Such indirect beneficiaries are estimated to be about 15,000 households. Afghanistan’s Millennium Development Goals (MDG) state that by the end of 2010 the proportion of people living on less than $1 a day will decrease by 3% per year and the proportion of people who suffer from hunger will decrease by 5% per year. If project implementation starts by the end of 2008 or early 2009, income generation through new employment opportunities will contribute towards these goals in the two provinces. Once the power plants become operational, the combined annual electrical energy they generate will be equivalent to 2.2 million liters of diesel (about $2.4 million at the current market price for diesel [at a 50% load factor]). In terms of diesel displacement alone, the Project investment cost can be recovered within 5 years. Given the fact that petroleum products have to be imported in Afghanistan and their world prices are increasing at an accelerated rate, the savings could potentially increase annually. From a macroeconomic perspective, displacement of diesel itself becomes a significant justification for developing MHPs in the provinces. Household lighting is one of the priorities of rural communities that lack electricity. Respondents to a survey conducted by the Asia Foundation (A survey of Afghan People – Afghanistan in 2006)3 named access to electricity as the second highest priority in local areas. The opportunity for employment was cited as the highest priority by 34% of respondents, followed by electricity, which was considered the highest priority by 25% of respondents. By providing electricity to parts of the two selected provinces, the Project will be responding to the urgent needs of the local population and will also provide employment opportunities during the construction phase, which has been identified as the highest priority. From the perspective of regional balance, social justice, political stability, and national security, it is important to provide development alternatives to provinces that will not be served by the national electricity grid. Increased economic activities and enterprises established as a result of new MHPs will provide jobs for Afghan returnees, who are unable to go back to their provinces due to lack of employment opportunities. Many Afghan returnees have spent years in Pakistan and other neighboring countries and have acquired skills as builders, electricians, and mechanics. The provision of electricity in their home provinces offers the possibility of employment in their areas of expertise. On the other hand, if they were to remain unemployed in urban areas, they could become a potential source of instability. Together with push factors, such as poppy eradication programs, it is equally important to create strong pull factors to attract the unemployed population to legal, well-paying, income-generating opportunities in district and province market centers. 2. Design Features. Direct poverty reduction mechanisms are:

(i) employment opportunities created for community members during the implementation phase; (ii) employment opportunities in small industries established in the vicinity of the MHPs during the

post-implementation or operation phase; (iii) access to electricity that is one third of the current tariff, resulting in monthly household savings

in energy expenditures among the direct beneficiaries; (iv) decrease in the price of goods and services that will utilize the MHP-generated electricity; and (v) displacement of petroleum products that the country currently imports, which will result in

savings of hard currency that can be used for other development activities. Given low population density and relatively poor infrastructure, the two provinces are likely to be neglected unless proactive development initiatives are undertaken. Provision of electricity through MHPs is such a development initiative. In addition, investment in MHPs is likely to yield optimum returns in the short and medium terms (per unit of investment). The central electricity grid has not reached either of the Project’s two provinces. A few communities are served by isolated MHPs, while some affluent households in the provincial capitals use electricity supplied by expensive diesel generators. If electricity is to be made widely available and have a significant impact on poverty reduction, the cost of generation and therefore the tariff must be lowered. Given the remoteness of the two provinces, favorable site topography, and the availability of water resources, MHP development is the least expensive option for providing energy to a large rural population.

C. Poverty Impact Analysis for Policy-Based Lending Not applicable since the proposed project is not “Policy Based Lending” type.

Appendix 6

36

II. SOCIAL ANALYSIS AND STRATEGY

A. Findings of Social Analysis The Project will bring about various positive social impacts. It will directly contribute to economic growth and will reduce poverty by lowering household energy costs and removing energy constraints to enterprises that offer employment opportunities to the poor. Direct benefits will extend to all categories of electricity consumers served by the MGPs; poor and vulnerable, and indigenous groups. Benefits will include improvements to the existing quality of electricity supplied to households, better quality lighting at cheaper prices than required for kerosene and/or diesel, and improved air quality within homes. Infrastructure development is critical to generating economic activity, employment, accelerating growth, and providing better integration and social welfare. The Project will contribute to poverty reduction and will specifically benefit people living in remote areas through a new source of electricity, and improved frequency and voltage levels for various uses that will ultimately result in socioeconomic growth. The efficient and reliable provision of electricity not only indirectly contributes to poverty reduction through economic growth, but electricity access also has a direct bearing on poverty reduction because it is central to the basic human needs of health and education. Poor and vulnerable consumers, as well as social utilities such as hospitals and schools, are often particularly disadvantaged by an inadequate power supply, load shedding, and poor power quality. Therefore, they will benefit directly from the Project. The socioeconomic impacts of the Project are not expected to be different for indigenous people as compared with the mainstream population. Although estimates vary, the ethnic composition of Afghanistan is around 38% Pashtun, 25% Tajik, 19% Hazara, 6% Uzbek, and 12% other groups. However, all groups are in the mainstream and do not fall under ADB’s definition of indigenous people. No negative effects on indigenous peoples are expected. Benefits should accrue evenly to all sections of the population regardless of ethnicity. The implementing agency will be the Ministry of Energy and Water (MEW). MEW has been the recipient of significant capacity-building development assistance over the past years, and continues receiving such assistance. There are a large number of international and national advisors who have been tasked with providing technical advice to and hold consultations with the minister, vice ministers, and other MEW decision makers. These factors are building the capacity of MEW to implement externally-funded projects. MEW is gaining experience in implementing development projects. The Project will ensure that a strong project management unit is needed to support MEW in its implementation efforts. To further develop its implementation capacity, the Project will emphasize the need to build capacity in project management and technical skills in hydropower development. MEW will be assisted by the consultant and nongovernment organizations (NGOs) for community development through the provision of electricity. Consultants will be short listed based on clearly-defined selection criteria, institutional assessments, and their ability to undertake the required scope of work. Consultants will be recruited through an ADB-approved competitive selection process based on ADB’s Guidelines on Use of Consultants (2007, as amended from time to time). Quality- and cost-based selection will be adopted. MEW will be fully consulted in the selection process. During the actual implementation stage, community development councils, the elected representatives of the communities, will be involved in mobilization, finalization of layouts, and other key processes. The MHPs will be owned by DABS the utility. The feasibility will be explored of leaving day-to-day operation and management of the power plants to the private sector under a performance-based lease contract, or to the CDCs (with initial backstopping support).

B. Consultation and Participation

1. Provide a summary of the consultation and participation process during the project preparation. Discussions and consultations were held among various sector actors as follows: Donor agencies: German Development Cooperation through KfW and GTZ, Mission East, Aga Khan Development Network, and Embassy of Japan in Kabul Government offices: Ministry of Finance, Ministry of Energy and Water and Ministry of Rural Rehabilitation and Development 2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring?

Information sharing Consultation Collaborative decision making Empowerment

Appendix 6

37

3. Was a C&P plan prepared? Yes No A C&P plan will be prepared during the initial stage of the implementation phase. The reason why it was not prepared at the proposal stage is because the specific power plant sites need to be first identified. Only when the sites are finalized during the initial implementation stage, the stakeholders can be identified and then the C&P plan prepared. However, C&P plan from other ADB supported project in the provinces have been reviewed and incorporated in the Environmental Mitigation Plan (EMP).

C. Gender and Development 1. Key Issues. Women in the project areas are engaged in agricultural activities, household activities, and carpet making. The Project will provide benefits to women in the form of access to electricity, which will enhance their living standards and help them perform household business activities such as carpet weaving. No women-headed families will be affected as a result of the Project. Women will also not be affected disproportionately by the Project. Instead, the amount of labor-intensive work they perform, such as grinding grains, will be reduced with the introduction of electrical milling. The Project activities will enhance the quality of life of women in the project area. 2. Key Actions. Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services, resources, assets, or opportunities and participation in decision-making process: Gender plan Other actions/measures No action/measure Women are expected to benefit equally from access to electricity, especially with the reduction in drudgeries from electrical/mechanical milling of grains, smoke free environment in the households and income generation opportunities during evenings. Summarize key design features of the gender plan or other gender-related actions/measures, including performance targets, monitorable indicators, resource allocation, and implementation arrangements.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Issue Significant/Limited/

No Impact Strategy to Address

Issue Plan or Other

Measures Included in Design

Involuntary Resettlement

No Impact (i.e., no resettlement envisioned.) Only some agricultural land may be required for the waterways and in such cases adequate compensation will be provided.

An environmental mitigation plan (EMP) has been prepared to address land compensation issue

Full Plan Short Plan Resettlement

Framework No Action

Indigenous Peoples

No negative effects on indigenous peoples are expected; benefits should accrue evenly to all sections of the population regardless of ethnicity.

Plan Other Action Indigenous

Peoples Framework

No Action Labor

Employment opportunities Labor retrenchment Core labor standards

Significant labor employment opportunities are envisioned.

An EMP has been prepared to address issues related to safety standard and other labor related issues.

Plan Other Action No Action

Affordability At less than one third the current price of electricity from diesel or petrol generators, hydroelectricity is expected to be affordable to more poor residents.

Action No Action

Other Risks and/or Vulnerabilities

HIV/AIDS Human trafficking Others(conflict,

Limited impact (if any) expected

An EMP has been prepared to address HIV/AIDS and health issues.

Plan Other Action No Action

Appendix 6

38

political instability, etc), please specify

IV. MONITORING AND EVALUATION

Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No Social indicators including targets set such as number of households with access to electricity, employment opportunities, number of enterprises established, and other major parameter are included in the design and monitoring framework.

1 ADB. 2005. Afghanistan: Country Strategy and Program Update (2006–2008). Manila. 2 ADB. 2001. Medium-Term Strategy (2001–2005). Manila 3 The Asia Foundation. 2007. Afghanistan in 2007: A Survey of the Afghan People. Kabul.

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