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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 58368-NP PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 17.3 MILLION Public Disclosure Authorized (US$ 27.4 MILLION EQUIVALENT) AND A PROPOSED GRANT IN THE AMOUNT OF SDR 6.7 MILLION (US$ 10.6 MILLION EQUIVALENT) TO NEPAL Public Disclosure Authorized FOR THE KABELI TRANSMISSION PROJECT April 12, 2011 Sustainable Development Department South Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Exchange Rate Effective = January 31, 2011 Currency Unit = Nepalese Rupee (NRs) NRs. 72 = US$1 US$1.56194 = SDR 1 FISCAL YEAR July 16 – July 15 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank IDA International Development Association AEPC Alternative Energy Promotion Centre IEE Initial Environmental Examination BSPN Biogas Sector Partnership Nepal IFC International Finance Corporation CAS Country Assistance Strategy INPS Integrated Nepal Power System CREP Community Rural Electrification Program IPP Independent power producer DCS Distribution and Consumer Services IPR Implementation Progress Report DDC District Development Committee MOE Ministry of Energy DEES District Energy and Environment Sections MOF Ministry of Finance DEF District Energy Fund MW Megawatt DOED Department of Electricity Development NEA Nepal Electricity Authority Nepal-India Electricity Trade and Transmission EA Environmental Assessment NIETTP Project EIRR Economic Internal Rate of Return OAG Office of Auditor General EMP Environmental Management Plan OBA Output-based aid ESAP Energy Sector Assistance Programme PAP Project-affected Person Energy Sector Management Assistance ESMAP PDO Project Development Objective Program ESSD Environment and Social Studies Department PDP Power Development Project ESMU Environmental and Social Management Unit PEFA Public Expenditure and Financial Accountability ETFC Electricity Tariff Fixation Commission PPA Power Purchase Agreement FRP Financial Restructuring Plan PTC Power Trading Corporation GAAP Governance and Accountability Action Plan RAP Resettlement Action Plan GON Government of Nepal REDP Rural Energy Development Programme GRC Grievance Redress Committee SBD Standard Bidding Document GWh Gigawatt-hour (1 million kWh) SIA Social Impact Assessment IAS International Accounting Standards SMF Social Management Framework ICB International Competitive Bidding SREP Scaling-up Renewable Energy Program Implementation Completion and Results ICCR VDC Village Development Committee Report Vice President: Isabel Guerrero Country Director: Susan Goldmark Sector Director: John Stein Sector Manager (Acting): Malcolm Cosgrove-Davies Task Team Leader: Michael Haney lxxxix NEPAL Kabeli Transmission Project CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 A. Energy in the Context of Development .............................................................................. 1 B. Government’s Response to the Electricity Crisis ............................................................... 3 C. Key Power Sector Development Issues .............................................................................. 3 D. Rationale for Bank involvement ......................................................................................... 5 E. Higher level objectives to which the project contributes .................................................... 5 II. PROJECT DESCRIPTION ................................................................................................. 5 A. Project location ................................................................................................................... 5 B. Lending instrument ............................................................................................................. 6 C. Project cost and financing ................................................................................................... 6 D. Project development objective and key indicators .............................................................. 7 E. Project components ............................................................................................................. 7 F. Lessons learned and reflected in the project design ............................................................ 7 G. Alternatives considered and reasons for rejection .............................................................. 9 III. IMPLEMENTATION ...................................................................................................... 9 A. Institutional and implementation arrangements .................................................................. 9 B. Monitoring and evaluation of outcomes/results ................................................................ 11 C. Sustainability..................................................................................................................... 12 D. Critical risks and possible controversial aspects ............................................................... 12 E. Grant/credit conditions and covenants .............................................................................. 14 IV. APPRAISAL SUMMARY ............................................................................................. 15 A. Economic and financial analyses ...................................................................................... 15 B. Technical ........................................................................................................................... 16 C. Fiduciary ........................................................................................................................... 16 D. Social................................................................................................................................. 17 E. Environment ...................................................................................................................... 19 F. Safeguard policies ............................................................................................................. 21 xc G. Policy Exceptions and Readiness...................................................................................... 21 Annex 1: Sector Background ..................................................................................................... 22 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 28 Annex 3: Results Framework and Monitoring ........................................................................ 29 Annex 4: Detailed Project Description ...................................................................................... 32 Annex 5: Project Costs ............................................................................................................... 35 Annex 6: Implementation Arrangements ................................................................................. 36 Annex 7: Financial Management and Disbursement Arrangements ..................................... 40 Annex 8: Procurement Arrangements ...................................................................................... 45 Annex 9: Economic and Financial Analysis ............................................................................. 49 Annex 10: Safeguard Policy Issues ............................................................................................ 71 Annex 11: Governance Framework .......................................................................................... 76 Annex 12: Operational Risk Assessment Framework ............................................................. 79 Annex 13: Project Preparation and Supervision ..................................................................... 83 Annex 14: Documents in the Project File ................................................................................. 84 Annex 15: Statement of Loans and Credits .............................................................................. 85 Annex 16: Country at a Glance ................................................................................................. 86 Annex 17: Map ............................................................................................................................ 88 xci NEPAL KABELI TRANSMISSION PROJECT PROJECT APPRAISAL DOCUMENT SOUTH ASIA SASDE Date: April 12, 2011 Sectors: Power (50%); Renewable energy (50%) Country Director: Susan G. Goldmark Themes: Rural services and infrastructure (50%); Sector Manager/Director: Malcolm Infrastructure services for private sector Cosgrove-Davies/John Henry Stein development (50%) Team Leader: Michael Haney Project ID: P112893 Environmental category: Partial Assessment Lending Instrument: Specific Investment Joint IFC: Loan (SIL) Joint Level: Project Financing Data [ ] Loan [X] Credit [X] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 38.00 Financing Plan (US$m) Source Total Government of Nepal 7.75 International Development Association 38.00 Community contributions 1.88 District Development Committees and Village Development Committees 0.06 Total: 47.68 Borrower: Nepal Responsible Agencies: Dr. Jivendra Jha Managing Director Nepal Electricity Authority Kathmandu Nepal [email protected]
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