Completion Report Project Number: 43576-013 Loan Numbers: 2892 and 2893 Grant Number: 0303 March 2021 Sri Lanka: Clean Energy and Network Efficiency Improvement Project This document is being disclosed to the public in accordance with ADB’s Access to Information Policy. CURRENCY EQUIVALENTS Currency unit – Sri Lankan rupees (SLRs) At Appraisal At Project Completion (14 August 2012) (30 June 2019) SLRe1.00 = $0.00758 $0.005666 $1.00 = SLRs131.95 SLRs175.50 ABBREVIATIONS ADB – Asian Development Bank APFS – audited project financial statement BSC – breaker switch capacitor CEB – Ceylon Electricity Board CPS – country partnership strategy DMF – design and monitoring framework EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GSS – grid substation MOP – Ministry of Power OSPF – Office of the Special Project Facilitator PMU – project management unit PPP – public–private partnership SLSEA – Sri Lanka Sustainable Energy Authority SPS – Safeguard Policy Statement TA – technical assistance WEIGHTS AND MEASURES GWh – gigawatt-hour (1,000 megawatt-hours) km – kilometer kV – kilovolt kW – kilowatt (1,000 watts) kWp – kilowatt-peak MVA – megavolt-ampere MVAr – megavolt-ampere reactive MW – megawatt (1,000 kilowatts) MWh – megawatt-hour (1,000 kilowatt-hours) MWp – megawatt-peak NOTES (i) The fiscal year (FY) of the Government of Sri Lanka ends on 31 December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 December 2021. (ii) In this report, “$” refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Chen Chen, Country Director, Sri Lanka Resident Mission (SLRM), SARD Team leader Prathaj Haputhanthri, Associate Project Officer, SLRM, SARD Team members Mohamed Asmi, Project Analyst, SLRM, SARD Saranga Gajasinghe, Safeguards Officer, SLRM, SARD Indunil Ranatunga, Associate Financial Management Officer, SLRM, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 Project Design and Formulation 1 Project Outputs 2 Project Costs and Financing 7 Disbursements 8 Project Schedule 8 Implementation Arrangements 8 Technical Assistance 9 Consultant Recruitment and Procurement 9 Safeguards 10 Monitoring and Reporting 11 III. EVALUATION OF PERFORMANCE 11 Relevance 11 Effectiveness 12 Efficiency 12 Sustainability 12 Development Impact 13 Performance of the Borrower and the Executing Agency 14 Performance of the Asian Development Bank 14 Overall Assessment 14 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 15 Issues and Lessons 15 Recommendations 15 APPENDIXES 1. Design and Monitoring Framework 17 2. Implementation and Management Arrangements 24 3. Project Effectiveness Summary 28 4. Polpitiya-Pannipitiya Transmission Line Grievance and Problem-Solving Process 31 5. Rooftop Solar Power Generation Pilot 44 6. Technical Assistance Completion Report 51 7. Project Cost at Appraisal and Actual 53 8. Project Cost by Financier 54 9. Disbursement of ADB Loan and Grant Proceeds 56 10. Contract Awards of ADB Loan and Grant Proceeds 57 11. Status of Compliance with Loan Covenants 58 12. Economic Reevaluation 67 13. Financial Reevaluation 76 BASIC DATA A. Loan Identification 1. Country Sri Lanka 2. Loan and grant numbers and 2892 (ordinary capital resources) financing sources 2893 (concessional OCR lending) 0303 (grant, Clean Energy Fund) 3. Project title Clean Energy and Network Efficiency Improvement Project 4. Borrower Democratic Socialist Republic of Sri Lanka 5. Executing agency Ministry of Power 6. Amount of loan and grant Loan 2892-SRI: $100.0 million Loan 2893-SRI: $30.0 million Grant 0303-SRI: $1.50 million 7. Financing modality sovereign project B. Loan Data 1. Appraisal – Date started not applicable1 – Date completed 2. Loan negotiations – Date started 30 July 2012 – Date completed 31 July 2012 3. Date of Board approval 18 September 2012 4. Date of loan agreements 8 May 2013 5. Date of loan effectiveness – In loan agreements 8 August 2013 – Actual 30 September 2013 – Number of extensions 1 6. Project completion date – Appraisal 30 June 2017 – Actual 30 June 2019 7. Loan closing date – In loan agreements 30 June 2017 – Actual 30 June 2019 – Number of extensions 1 8. Financial closing date – Actual 24 March 2020 9. Terms of loan Loan 2892 (OCR) 1 Based on available information, there was no appraisal mission reflected in the processing schedule of the project. ii – Interest rate London interbank offered rate (LIBOR) plus 0.6% per annum, less credit of 0.2% – Maturity 20 years – Grace period 5 years Loan 2893 (COL) – Interest rate 1.0% during grace period and 1.5% – Maturity thereafter – Grace period 32 years 8 years 10. Terms of relending – Interest rate Sri Lanka average weighted deposit rate, subject to the maximum rate of 10 percent – Maturity 20 years – Grace period 5 years – Second-step borrower Ceylon Electricity Board 11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval Loan 2892 14 November 2014 24 February 2020 64 months Loan 2893 16 December 2014 6 December 2019 60 months Grant 0303 2 June 2014 2 November 2018 53 months Effective Date Actual Closing Date Time Interval Loan 2892 30 September 2013 24 March 2020 78 months Loan 2893 30 September 2013 24 March 2020 78 months Grant 0303 30 September 2013 24 March 2020 78 months b. Amount Loan 2892 ($) Increased Cancelled Last Original during during Revised Amount Undisburse Allocation Implementation Implementation Allocation Disbursed d Balance Category (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) 1. Works 28,750,000 67,630,000 - 96,380,000 87,519,729 8,860,271 2. Equipment 67,630,000 - 66,930,000 700,000 - 700,000 3. Credit Line 1,500,000 - 700,000 800,000 864,327 (64,327) 4. Interest 2,120,000 - - 2,120,000 2,120,000 - Charges Total 100,000,000 67,630,000 67,630,000 100,000,000 90,504,056 9,495,944 Loan 2893 ($)a Increased Cancelled Last Original during during Revised Amount Undisbursed Allocation Implementation Implementation Allocationb Disbursed Balance Category (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) 1. Works 14,020,206 15,519,156 - 27,272,420 23,693,699 3,578,720 2. Equipment 15,519,156 15,519,156 - - - 3. Interest - - 429,809 391,888 37,921 Charges 460,638 Total 30,000,000 15,519,156 15,519,156 27,702,229 24,085,587 3,616,641 a,$L2893 in various currencies equivalent to SDR 19,994,000 at original allocation. b $2.30 million reduction due to currency fluctuation iii Grant 0303 ($) Cancelled Last Original Increased during during Revised Amount Undisbursed Allocation Implementation Implementation Allocation Disbursed Balance Category (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) 1A. Equipment 610,000 - - 610,000 604,232 5,768 (subsidy for private sector) 1B. Equipment 580,000 210,000 - 790,000 277,743 512,257 (universities) 2. Consulting 100,000 - - 100,000 98,119 1,881 Services 3.Unallocated 210,000 - 210,000 - - Total 1,500,000 210,000 210,000 1,500,000 980,094 519,906 C. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost 104.24 79.75 Local currency cost 95.76 54.15 Total 200.00 133.91 2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation cost Borrower financed 54.63 18.34 ADB financed 128.92 113.05 Other external financing 0.00 0.00 Total implementation cost 183.55 131.39 Interest during construction costs Borrower financed 13.87 0.00 ADB financed 2.58 2.51 Other external financing 0.00 0.00 Total interest during construction cost 16.45 2.51 3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual A. Base cost 1. Transmission infrastructure in the Northern province 42.87 31.14 2. Transmission and distribution network efficiency improvement 99.22 97.87 3. Solar rooftop power generation 2.79 1.84 B. Taxes and duties 24.88 0.54 C. Contingencies 13.79 0.00 D. Financing charges during implementation 16.45 2.51 Total 200.00 133.91 4. Project schedule Item Appraisal Estimate Actual Transmission system strengthening in Northern province Q3 2012–Q4 2015 Q2 2015–Q2 2019 Network energy efficiency improvement Q3 2012–Q4 2015 Q1 2015–Q2 2019 Solar rooftop power generation pilot Q1 2013–Q4 2014 Q4 2015–Q2 2019 Advisory and capacity building support Q1 2013–Q4 2014 Q2 2013–Q3 2015 iv 5. Project performance report ratings Implementation Period Single Project Rating From 1 January 2013 to 31 December 2013 On Track From 1 January 2014 to 31 March 2014 On Track From 1 April 2014 to 30 September 2014 Potential Problem From 1 October 2014 to 31 December 2014 On Track From 1 January 2015 to 31 March 2015 On Track From 1 April 2015 to 30 September 2015 Potential Problem From 1 October 2015 to 31 December 2015 On Track From 1 January 2016 to 31 December 2016 On Track From 1 January 2017 to 31 December 2017 On Track From 1 January 2018 to 31 December 2018 On Track From 1 January 2019 to 30 June 2019 On Track D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Consultation mission 14–23 May 2012 4 32 a, k, d, e Fact finding mission 29 May–1 Jun 2012 2 8 a, k Procurement review mission 1 19–23 Nov 2012 3 15 a, e,