The World Bank Nepal-India Electricity Transmission and Trade Project (P115767) REPORT NO.: RES41184 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NEPAL-INDIA ELECTRICITY TRANSMISSION AND TRADE PROJECT APPROVED ON JUNE 21, 2011 TO NEPAL ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Idah Z. Pswarayi-Riddihough Regional Director: Guangzhe Chen Practice Manager/Manager: Demetrios Papathanasiou Task Team Leader(s): Rabin Shrestha The World Bank Nepal-India Electricity Transmission and Trade Project (P115767) I. BASIC DATA Product Information Project ID Financing Instrument P115767 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 21-Jun-2011 30-Apr-2020 Organizations Borrower Responsible Agency Nepal Nepal Electricity Authority Project Development Objective (PDO) Original PDO The development objectives are to: (a) establish cross-border transmission capacity between India and Nepal of about 1000 MW to facilitate electricity trade between the two countries; and, (b) increase the supply of electricity in Nepal by the sustainable import of at least 100 MW. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-52630 24-Jun-2013 11-Sep-2013 31-Dec-2013 30-Apr-2020 37.00 25.23 9.81 IDA-H8580 24-Jun-2013 11-Sep-2013 31-Dec-2013 30-Apr-2020 2.00 .58 1.40 IDA-49020 21-Jun-2011 15-Jul-2011 29-Sep-2011 30-Apr-2020 84.00 55.05 20.81 IDA-H6600 21-Jun-2011 15-Jul-2011 29-Sep-2011 30-Apr-2020 15.00 6.60 7.12 The World Bank Nepal-India Electricity Transmission and Trade Project (P115767) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. Project Status The original Project (IDA Credit 4902-NP and IDA Grant H660-NP) was approved on June 21, 2011 and an additional financing (IDA Credit 5263-NP and IDA Grant H858-NP) was approved on June 24, 2013. The Closing Date for the original Project and additional financing was first extended from December 31, 2016 to June 30, 2018, taking into consideration delays caused by the earthquake of 2015 and India-Nepal trade disruptions in 2016. The second extension was for six months only, to December 31, 2018 and the third time extension was till April 30, 2020.The Project has made significant progress over the last extension and disbursed 70 percent of the committed amount. Similarly, the IP and PDO is rated MS in the latest ISR. The component-wise implementation progress of the Project is presented below: (i) Components A1 and A2: Dhalkebar-Muzaffarpur Transmission Line: The construction under this components are completed and operational. (ii) Component B1: Hetauda-Dhalkebar-Inaruwa (HDI) transmission line and substations: There are three substations and one 400 kV transmission line under this component. Out of the three substations, one is competed and is operational. The construction for Hetauda and Inaruwa substations (220/132 kV) is ongoing and Hetauda substation is expected to be completed first as the Inaruwa substation construction was halted for two months due to floods in 2019. The construction of the 400-kV transmission line is under progress and so far, 74 percent of foundation and 69 percent of tower erection work is completed. (iii) Component B3: Transmission Lines and Integrated Financial Management Information System of NEA: a. Hetauda-Bharatpur (HB) 220 kV transmission line and associated substations: The physical progress of the transmission line is halted (74 percent foundation and 45 percent tower erection) as the contract was terminated by NEA on April 29, 2019. The procurement to complete the remaining activities is completed and a new contractor is selected. Similarly, construction work of the two substations (220/132 kV) at Hetauda and Bharatpur implemented under a separate contract is 90 percent complete. b. Bharatpur-Bardaghat (BB) 220 kV transmission line: After termination of the contract and since the new contractor is on-board (August 2018) significant progress has been made, so far 73 percent foundation and 70 percent of tower erection is completed. c. Enterprise Resources Planning (ERP): This activity was delayed and thus procurement of this activity has not been completed. The Bid evaluation report was submitted to the Bank and is under review. However, there is funding gap of 20 Million and this activity will have to finance under other Energy Projects. (iv) Component C: Technical Advisory Services: All the activities proposed under this component are now complete. B. DESCRIPTION OF PROPOSED CHANGES The World Bank Nepal-India Electricity Transmission and Trade Project (P115767) (i) Extend the closing date: The Loan closing date will be extended to October 30, 2020. C. RATIONALE FOR CHANGES The proposed restructuring to extend the Closing Date will not change the Project Development Objectives, Project Components Costs, Institutional Arrangements, and Risk Analysis. Over the past three years, the Project’s implementing agency, Nepal Electricity Authority (NEA), has demonstrated strong leadership and commitment at the managing director and deputy managing director level, strengthened the human and institutional capacity of the project management team, and has been decisive in taking corrective measures against non-performing contractors. The proposed time extension is to allow implementation of ongoing contracts and provide time to assess implementation of actions agreed between Government and the Bank to increase the chances of achieving project development objectives.The Task Team has also taken into consideration the serious impact of COVID-19 on site works starting in January 2020 and likely effect it poses. Furthermore, it is important to note that the Government of Nepal is facing severe fiscal constraint and in the absence of financing available through the Project, NEA would not be able to finance the ongoing contracts on its own or with government support. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 03-Jun-2018, 30-Jun- IDA-49020 Effective 31-Dec-2016 2018, 31-Dec-2018, 30-Oct-2020 28-Feb-2021 30-Apr-2020 30-Jun-2018, 31-Dec- IDA-52630 Effective 31-Dec-2016 30-Oct-2020 28-Feb-2021 2018, 30-Apr-2020 30-Jun-2018, 31-Dec- IDA-H6600 Effective 31-Dec-2016 30-Oct-2020 28-Feb-2021 2018, 30-Apr-2020 30-Jun-2018, 31-Dec- IDA-H8580 Effective 31-Dec-2016 30-Oct-2020 28-Feb-2021 2018, 30-Apr-2020