The World Bank Electric Power Project (P143988) REPORT NO.: RES36503 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ELECTRIC POWER PROJECT APPROVED ON SEPTEMBER 24, 2013 TO MINISTRY OF FINANCE ENERGY & EXTRACTIVES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Ellen A. Goldstein Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Julia M. Fraser Task Team Leader: Sunil Kumar Khosla, Alan David Lee The World Bank Electric Power Project (P143988) I. BASIC DATA Product Information Project ID Financing Instrument P143988 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 24-Sep-2013 30-Apr-2019 Organizations Borrower Responsible Agency Ministry of Electricity and Energy,Electric Power Ministry of Finance Generation Enterprise Project Development Objective (PDO) Original PDO Increase the capacity and efficiency of gas-fired power generation in Myanmar and strengthen the institutional capacity of relevant agencies. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-53060 24-Sep-2013 12-Oct-2013 14-Jan-2014 30-Apr-2019 140.00 106.87 23.34 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Electric Power Project (P143988) A. Project Status 1. The Myanmar Government’s Electric Power Project (the Project) is financed by International Development Association (IDA) Credit 53060 for SDR 92.6 million, equivalent to US$140 million at the time of IDA approval in September 2013. The Project has two components: (1) construction of a new combined-cycle gas-fired power plant to replace an old, inefficient power plant in Thaton, Mon State; and (2) technical assistance and advisory services to build the capacity of relevant agencies for (a) policy making and regulation in the power sector, and (b) project implementation. At appraisal, the estimated cost was $130 million for Component 1 and $10 million for Component 2. 2. The construction of a new combined-cycle gas-fired power plant under Component 1 was completed including two gas turbines, a steam turbine, and associated generators which are connected to the national grid system. Commissioning of the power plant has been ongoing since April 2018 with positive results but experiencing unexpected technical difficulties. The gas turbines and steam turbine have required extensive troubleshooting due to various technical and design errors by original manufacturer General Electric (GE). In addition, there are delays caused by the plant design, supply and installation (DSI) contractor China Energy Engineering Group Co. Ltd. (CEEC) such as incomplete design documentation and partial installation preventing timely commissioning of the plant. On top of that, the natural gas supplied by implementing agency does not meet pipeline gas quality, insufficient volume and low pipeline pressure. For instance, oil and dust dislodged from the gas pipeline supplying the plant has clogged critical plant equipment, leading to interruptions in plant activities for inspections and repairs. Commissioning tests, however, indicated the plant could generate up to 130 MW capacity (compared to the appraisal estimate of 109 MW and contracted design value of 119 MW). 3. Component 2 has successfully delivered plans for national electrification and for power sector financial viability (both of which are now being implemented by the Government), and an economic analysis of natural gas supply to inform strategic decisions on Myanmar’s energy future. In addition, Component 2 is building the capacity of the Ministry of Electricity and Energy (MOEE) and Electric Power Generation Enterprise (EPGE) in areas of regulation and policy analysis, and project implementation. 4. The last Implementation Status and Results Report (ISR), dated January 2019, rated progress towards achievement of the PDO as Satisfactory, and overall implementation progress as Moderately Satisfactory (Moderately Satisfactory for both Component 1, and Component 2). These lower ratings are primarily due to expected delay in achieving ‘Operational Acceptance’, the final milestone of new power plant, which is unlikely to be met before the current project closing date and is likely to be achieved in August, 2019. It would mean that one of the key PDO indicators may not be met, before the closing date. These delays are beyond the control of implementing agency. 5. The Project is fully complied with all legal covenants under financing agreement IDA-53060. The environmental and social safeguards are rated as Moderately Satisfactory primarily due to delays in complying with environmental safeguard requirements. However, it does not have a material impact on compliance with policy requirements or achievement of development objectives and implementation progress. Indigenous Peoples (OP) (BP 4.10) and Involuntary Resettlement (OP) (BP 4.12) are fully complied and rated as Satisfactory. Measure to implement the Environment, Health and Safety Management System (EHS-MS) are ongoing. Electrification work for project affected villages was successfully completed with new 400 households were connected to the national grid. 6. Procurement performance is rated Moderately Satisfactory as most procurement activities have been completed and all contracts were signed. The implementing agency needs to closely monitor and follow up to make sure all outstanding deliveries and final acceptances are completed and recorded properly. The World Bank Electric Power Project (P143988) 7. The total amount disbursed as of mid-April 2019 is Special Drawing Rights (XDR) 75.67 million or 82% of the IDA Credit. Although additional disbursements are planned before the current project closing date, most of them will skip the deadline because payments under IDA-financed contracts with main contractor (CEEC) and the owner’s engineer Tractebel Engineering (TE) are linked to ‘Operational Acceptance’ milestone. 8. This Project's Audit Report for fiscal year ending March 2018 was received in October 2018 and its English version was received by the Bank in December 2018. Financial management performance complies with Bank requirements. B. Rationale for Restructuring 9. Restructuring is required to extend the Project closing date only, and the extension does not affect Project's results framework (indicators, target values) except end target dates, which will be adjusted to new closing date. 10. Closing date: The Ministry of Planning and Finance requested in its official letter dated 12 April 2019 for extension of the Project closing date for six months to 30 October 2019 to meet all contractual obligations and to complete remaining testing and commissioning of the new combined cycle gas turbine (CCGT) in Thaton. This would be the second extension of the closing date as it was previously extended one year from original closing date of 30 April 2018 to 30 April 2019. In accordance with Bank Directives regarding a change in closing date, the team confirms that the PDO remains achievable, the implementing agency’s performance is satisfactory, and the Bank and implementing agency have agreed actions that the implementing agency will undertake to complete the Project. The extended closing date will accommodate the time expected for full commissioning of the new power plant under Component 1 of the Project. The extended closing date will also facilitate completion of technical assistance and advisory services under Component 2, including consulting assignments to support EPGE’s responsibilities for a short period of operation after commissioning of the new plant. EPGE, its Owner’s Engineer consultant, the DSI contractor, and the World Bank team, are closely monitoring the schedule of progress for construction of the new plant, and have agreed measures to ensure timely commissioning and implementation of associated technical assistance. 11. Results framework: The results framework indicators including PDO indicators and intermediate results indicators will not be affected by this restructuring and these indicators will remains the same except updating the end target date of each indicator to reflect the new closing date of October 30, 2019. 12. Electric Power Project is the very first World Bank supported project after re-engagement with Myanmar and it will be the first project to be closed. The successful completion of the project with achievement of all PDO indicators are critical for both Bank and the host country Myanmar. The current status of commissioning shows that Project's objectives and all PDO indicators can be reasonably achieved if the project closing date is extended for six month to 30 October 2019. II. DETAILED CHANGES LOAN CLOSING DATE(S) The World Bank Electric Power Project (P143988) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-53060 Effective 30-Apr-2018 30-Apr-2019 30-Oct-2019 29-Feb-2020