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World Bank Document Report Number ::: ICRRICRR1398613986 ICR Review IEG Independent Evaluation Group Public Disclosure Authorized 1. Project Data: Date Posted ::: 01/14/2013 Country::: Cambodia Project ID ::: P105329 Appraisal Actual Project Name ::: Gms Power Trade Project Costs (((US$M(US$MUS$M):):):): 22.19 0.19 (cambodia) Project LLL/L///CC Number::: CH301 LoanLoan////CreditCredit (((US$M(US$MUS$M):):):): 18.50 0.19 Sector Board ::: Energy and Mining Cofinancing (((US$M(US$MUS$M):):):): Cofinanciers ::: Board Approval Date ::: 06/05/2007 Closing Date ::: 12/31/2011 10/05/2011 Public Disclosure Authorized SectorSector((((ssss):):):): Power (100%) ThemeTheme((((ssss):):):): Regional integration (40% - P); Infrastructure services for private sector development (40% - P); Rural services and infrastructure (20% - S) Prepared by ::: Reviewed by ::: ICR Review GroupGroup:::: Coordinator ::: Ramachandra Jammi Robert Mark Lacey Soniya Carvalho IEGPS1 2. Project Objectives and Components: a. Objectives: The project development objective as stated in the legal agreement and the Project Appraisal Document (PAD) was “to enhance power trade within the Greater Mekong Sub -Region (GMS) with a view to bringing affordable grid-based electricity to selected provinces in Cambodia through importing power from Lao Peoples' Democratic Republic (Lao PDR) and Vietnam.” Public Disclosure Authorized b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components: Component 1: 115 kV (kiloVolts) Transmission System: Vietnam border to Kampong Cham; (at appraisal: US$ 9.85 million; at completion: US$ 0.00). To facilitate importing power from the south of Vietnam to the province of Kampong Cham in Cambodia by constructing a 64 km, 115 kV double-circuit line from the supply point at the Vietnam border (Tan Bien located in Viet Nam) and three distribution substations in Kampong Cham, Suong, and in Kraek towns. Component 2: 115 kV Transmission System: Lao PDR border to Stung Treng; (at appraisal: US$ 5.70 million; at completion: US$ 0.00). To facilitate importing power from southern Lao PDR to the province of Stung Treng in Cambodia by building a 56 km, 115 kV double-circuit line from the Lao PDR border (at Veun Kham) and a substation in Stung Treng provincial town . Public Disclosure Authorized Component 3: Activities to Facilitate Implementation of Components 1&2 (at appraisal: US$ 1.75 million; at completion: US$ 0.19 million). To support consultancy services for : (i) project design and management for components 1 and 2; (ii) a procurement agent; and (iii) vehicles, computers and office equipment . Component 4: Institutional Development of Electricité du Cambodge (at appraisal: US$ 1.00 million; at completion: US$ 0.00). This was aimed at: (i) strengthening the internal auditing capacity of Electricit é du Cambodge; (ii) engaging the services of experts for designing high voltage transmission systems (including lines and substations) and optimizing system dispatch; (iii) providing overseas training of Electricit é du Cambodge staff in the aforementioned fields; and (iv) procuring both hardware and software d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Only US$ 0.19 million was utilized out of the planned US$ 18.5 million IDA grant, to support consultancy services for components 1 and 2.. This is attributed to the procurement delays in the early stages of the project arising from shortcomings in inter-agency arrangements and coordination; Vietnam's decision to not export power to Cambodia, which necessitated a restructuring and re -design of the project; and the Bank's decision to not extend the project duration as requested by the borrower due to the slow pace of progress as well as the Bank ’s holding back on all Board presentations for Cambodia due to an Inspection Panel case relating to Cambodia's Land Management and Administration Project. Prior to project appraisal, the Government of Cambodia had decided that procurement for all IDA projects - including the project under review - would be carried out by a Procurement Agent contracted by the Ministry of Economy and Finance. The Procurement Agent (Crown Agents, a private entity) would have primary responsibility for the procurement process and appoint a Project Implementation Consultant that would provide technical inputs to the implementing agency, Electricité du Cambodge, which would be responsible for subsequent contract administration and execution. A detailed division of responsibilities was specified between the Procurement Agent, Electricit é du Cambodge, and the Project Implementation Consultant . However, as of May 2009, there was little progress in procurement due to poor cooperation between these entities . After project implementatiojn had commenced, Vietnam decided not to export power due to its increased domestic demand. To make up for this shortfall, the Government of Cambodia decided to import more power from Lao PDR . For this, on August 6, 2010, the Government of Cambodia officially requested the Bank for a restructuring to upgrade the Cambodia-Laos transmission line from 115 kV to 230 kV to increase the line’s firm capacity from 80 MW to 300 MW per circuit and to use the savings from the dropped Component 1 (Cambodia-Vietnam line) to finance the increased cost of the Cambodia-Laos 230 kV line. Cancellation of Component 4 (Institutional Strengthening of Electricité du Cambodge) was also proposed in order to use those savings as well to upgrade this line . Preparation work to upgrade the 230 kV transmission line was initiated in June 2010, on both the Lao PDR and Cambodia sides. Based on the pace of implementation, Electricit é du Cambodge, Electricité du Laos, and the Bank concluded that a two-year extension of the closing date would be needed, from December 31, 2011 to December 31, 2013, to align with the closing date of the Laos GMS Power Trade Project . Preparation for the new 230 kV transmission line was slow. In June 2011, the Bank informed Electricité du Cambodge that the Government's request for project restructuring could not be processed due to country program conditions (principally reflecting the Inspection Panel case referred to above ). Without the two year extension of the closing date, and with no IDA or other external financing, Electricit é du Cambodge could not proceed with International Competitive Bidding (ICB) procurement for the supply and installation of the 230 kV line. Electricité du Cambodge was also concerned that it might suffer huge financial losses if it did finance the line but Lao PDR was unable to meet the agreed schedule. Seeing no viable options, the Government of Cambodia requested a full cancellation of the Grant on October 4, 2011. 3. Relevance of Objectives & Design: a. Relevance of Objectives: The Greater Mekong Subregion (GMS) — comprising Cambodia, Lao PDR, Myanmar, Thailand, Socialist Republic of Viet Nam, and the Yunnan province of China, spread over 2.3 million square kilometers — houses a population of about 260 million. Despite a large endowment of energy resources, the region ’s per capita consumption of electricity in 2004 was low — ranging from about only 63 kWh (kilowatt-hours) per year in Cambodia to about 1,900 kWh per year in Thailand. The six GMS member countries have been largely characterized by national electricity demands that do not match with their national electricity producing resources . For example, Lao PDR's electricity supply (potential) exceeded domestic demand, while Cambodia’ demand for power exceeded domestic generation capacity and electricity cost was one of highest in the region, thereby creating opportunities for power trade . To address the rapid demand growth and concerns on energy security, the GMS countries decided to enhance regional cooperation in the power sector, to strengthen regional transmission networks, to promote cross -border investments in energy resources, and to develop a regional electricity market in a phased manner through a GMS Forum established in the early 1990s with the support of the Asian Development Bank (ADB). The GMS countries signed an Inter-Governmental Agreement on Regional Power Trade in 2002, which was ratified by their respective law -making bodies between 2004 and 2005. While a competitive electricity market was a long -term objective, there was consensus among the countries that it was important to develop an appropriate framework for strengthening trade and to start increasing the regional transmission inter -connections and generation capacity . Momentum for regional economic integration and, in particular, integration of electricity systems among the countries in the GMS region had been growing steadily. The Asian Development Bank, World Bank, and other development partners had been actively fostering a coordinated approach toward developing the GMS countries ’ resources. The latest Bank's Country Assistance Strategy for Cambodia (2005) noted the important challenges in the power sector in the following terms: "Cambodia has one of the lowest electrification rates outside sub -Saharan Africa; it has no power transmission system and has no large generation capacity . Where electricity is available, firms and individual consumers face some of the highest energy prices in the world ." With respect to the GMS as a whole, the Bank ’s strategy was articulated in the “Strategy Note on Economic Cooperation across the Mekong Sub -Region” dated April 2007. It provided support to develop frameworks for the power sector
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