The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) REPORT NO.: RES33861 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CENTRAL ASIA SOUTH ASIA ELECTRICITY TRANSMISSION AND TRADE PROJECT (CASA-1000) APPROVED ON MARCH 27, 2014 TO ISLAMIC REPUBLIC OF AFGHANISTAN, REPUBLIC OF TAJIKISTAN, ISLAMIC REPUBLIC OF PAKISTAN, KYRGYZ REPUBLIC ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Shubham Chaudhuri Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Demetrios Papathanasiou Task Team Leader: Husam Mohamed Beides, Anh Nguyet Pham, Takhmina Mukhamedova The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) ABBREVIATIONS AND ACRONYMS CASA-1000 Central Asia South Asia Electricity Transmission and Trade Project CPPA Central Power Purchasing Agency DABS Da Afghanistan Breshna Sherkat EBRD European Bank for Reconstruction and Development EIB European Investment Bank EMP Environmental Management Plan EPP “Electric Power Plants” JSC ESIA Environmental and Social Impact Assessment HVAC High Voltage Alternating Current HVDC High Voltage Direct Current IsDB Islamic Development Bank JSC Joint Stock Company NEGK National Electric Grid of Kyrgyzstan NTDC National Transmission and Despatch Company PPA Power Purchase Agreement RAP Resettlement Action Plan The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) BASIC DATA Product Information Project ID Financing Instrument P145054 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 27-Mar-2014 30-Jun-2020 Organizations Borrower Responsible Agency Da Afghanistan Breshna Sherkat,National Electric Grid of Islamic Republic of Afghanistan,Ministry of Finance,Islamic Kyrgyzstan,Barki Tajik,National Transmission and Republic of Pakistan,Kyrgyz Republic Despatch Company (NTDC) Project Development Objective (PDO) Original PDO The objective of the project is to create the conditions for sustainable electricity trade between the Central Asian countries ofTajikistan and Kyrgyz Republic and the South Asian countries of Afghanistan and Pakistan. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-54090 27-Mar-2014 11-May-2015 24-Jan-2018 30-Jun-2020 120.00 0 108.53 IDA-54380 27-Mar-2014 24-Apr-2015 29-Jan-2018 30-Jun-2020 38.25 0 34.65 IDA-H9270 27-Mar-2014 24-Apr-2015 24-Jan-2018 30-Jun-2020 316.50 12.06 274.84 IDA-H9410 27-Mar-2014 24-Apr-2015 24-Jan-2018 30-Jun-2020 45.00 17.17 23.49 IDA-H9420 27-Mar-2014 24-Apr-2015 29-Jan-2018 30-Jun-2020 6.75 0 6.10 TF-A4615 14-Sep-2017 14-Sep-2017 14-Dec-2017 30-Jun-2020 1.00 0 1.00 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) TF-A4613 12-Sep-2017 30-Jun-2020 .10 0 .10 TF-A4614 02-Aug-2017 02-Aug-2017 02-Aug-2017 30-Jun-2020 1.00 .37 .63 TF-16252 29-Jul-2014 29-Jul-2014 24-Nov-2014 30-Jun-2017 .50 .50 0 TF-16254 28-Jul-2014 05-Aug-2014 04-Nov-2014 30-Jun-2017 .65 .65 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. The Project was approved by the World Bank on March 27, 2014. Over the next several years the Project had experienced delays due to inadequate market response received to the procurement package for the three HVDC converter stations in Tajikistan, Pakistan and Afghanistan, one of the most critical infrastructure packages of the project. B. Due to this delay in procurement, the effectiveness date for the Project had to be extended four times. The project was declared effective on January 24, 2018. The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) C. Simultaneously with the declaration of effectiveness, the World Bank agreed, at the request of all four CASA-1000 countries, to waive the enforcement of dated legal covenant requiring the CASA countries to sign Core Construction Agreements1 by December 30, 2018. As per the legal agreements, several covenants were also triggered upon the effectiveness, requiring the CASA Parties to complete the following activities within 12 months after the effectiveness date, i.e. by January 24, 2019. D. Since effectiveness all CASA Countries have achieved considerable progress in procuring and signing Core Commercial Agreements2 and Core Construction Agreements. On September 21, 2018 during the meeting of the Intergovernmental Council in Almaty, the CASA-1000 countries declared the Construction Start Date and declared the effectiveness of the Master Agreement. E. Therefore, the CASA Countries have requested the World Bank to amend the Financing Agreements and Project Agreements to align them with the Project’s progress, disbursement arrangements, and requirements for completing the site-specific safeguards documentation. The CASA Countries also requested the Bank to consider extension of the Project’s Closing Date as the Project progresses. The amendments will not require changes in the Project Development Objectives or outcome indicators. There is also no change in the Project's safeguard category, and no change in the Project's implementation arrangements. There are no overdue financial audits, previous audits have been found satisfactory to the Association. II. DESCRIPTION OF PROPOSED CHANGES Based on the requests from the Governments, the following changes are proposed: 1. Amend the provisions of Section I.B.2 in Schedule 2 to the Financing Agreements and the corresponding provisions in the Project Agreements for all four CASA countries to require the execution and effectiveness of Core Commercial Agreements within twenty-four (24) months after the effectiveness date, instead of 12 months as originally stated. 2. Amend the provisions of Section I.B.1 (b) in Schedule 2 to the Financing Agreements and the corresponding provisions in the Project Agreements for all four countries requiring the signing the contracts for the HVDC lines in the three countries not later than September 30, 2019. 3. Amend the provisions of Section I.B. 1 (d) in Schedule 2 to the Financing Agreements and the corresponding provisions in the Project Agreements for all four countries allowing the signing of the Operations and Maintenance Agreement not later than June 30, 2020. 1 The CASA-1000 Financing Agreements define core construction agreements as the contracts between the respective contracting companies and the respective Project Implementing Entities for: (a) the HVDC converter stations under Part A.2 of the Project; (b) the HVDC transmission line under Part A.1 of the Project; (c) the HVAC transmission line under Part A.3 of the Project; and (d) the operations and maintenance operator. 2 The “Core Commercial Agreements" are defined by the CASA-1000 Financing Agreements to mean the following: (a) the CASA Power Purchase Agreements; (b) the Master Agreement between the parties to the PPAs and NEGK; (g) the Account Bank Agreement between the Account Bank and the parties to the PPAs; (h) the Technical Code; (i) the Coordination Agreement between entities designated by the governments of Kyrgyzstan and Tajikistan; and (k) the Host Government Agreements between each of the Participating Countries and its project implementing entity The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) 4. Amend the provisions of Section I.B.3 in Schedule 2 to the Financing Agreements and the corresponding provisions in the Project Agreements with Republic of Tajikistan and Kyrgyz Republic requiring the adoption and implementation of the Revenue Management Program within twenty- four (24) months period after the effectiveness date instead of 12 months after effectiveness; 5. Amend the disbursement provisions of Financing Agreement with Islamic Republic of Pakistan by including activities under Part B.1 of the Project as part of the Eligible Expenditures that may be financed out of the proceeds of the financing (“Category”) specified under Section IV.A.2. of Schedule 2 to the Financing Agreement. Category Amount of the Percentage of Credit Allocated Expenditures to be (expressed in Financed SDR) (inclusive of Taxes) (1) Goods, works, non- 78,300,000 100% consulting services, and consultants’ services for activities within the territory of the Recipient for Parts A.1, A.2(iii) and Part B.1 of the Project TOTAL AMOUNT 78,300,000 6. Amend the safeguard provisions in Section I.D.2 (a) of the Schedule to the Project Agreements. with all four CASA-1000 countries by requiring the preparation and approval of the country-specific ESIA, EMP and RAP “Prior to commencing any civil works and installation activities under the Project” to replace “Prior to commencing any activity under the Project”. 7. Delete Section I.B.2 of Schedule to the Project Agreement with DABS. 8. Add new Section IV – “Other Undertakings” in Schedule to the Project Agreement with the Kyrgyz Republic to read as follows “The Project Implementing Entity shall adopt, no later than January 30, 2019, a disbursement protocol satisfactory to the Association indicating the disbursement arrangements among the Co-financiers under Part A.3 of the Project.” 9. Extend the Project Closing Date from June 30, 2020 to March 31, 2023. III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) Legal Covenants ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-54090 Effective 30-Jun-2020 31-Mar-2023 31-Jul-2023 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) IDA-54380 Effective 30-Jun-2020 31-Mar-2023 31-Jul-2023 IDA-H9270 Effective 30-Jun-2020 31-Mar-2023 31-Jul-2023 IDA-H9410 Effective 30-Jun-2020 31-Mar-2023 31-Jul-2023 IDA-H9420 Effective 30-Jun-2020 31-Mar-2023 31-Jul-2023 30-Jun-2016, 31-Oct- 2016, 28-Apr-2017, TF-16252 Closed 30-Jun-2015 30-Jun-2017, 21- Dec-2017 31-Dec-2015, 30- Jun-2016, 31-Oct- TF-16254 Closed 30-Jun-2015 2016, 28-Apr-2017, 30-Jun-2017, 05- Dec-2017 TF-A4613 Not Effective 30-Jun-2020 TF-A4614 Effective 30-Jun-2020 TF-A4615 Effective 30-Jun-2020 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Core Construction Agreements. The contracts for the HVDC converter stations will be signed by April 29, 2016. The contracts for the HVDC transmission line will be signed by April 29, 2016. The contracts for the HVAC transmission line will be signed by April 29, 2016. The operations and maintenance contracts will be signed by Partially complied IDA-54090 Revised June 30, 2016. The Core Construction Agreements shall with not be amended, suspended, abrogated or waived by any party thereto in a manner that would affect materially and adversely the carrying out of the Project. This convenant also applies to IDA-54380, IDA-H9270, IDA-H9410, IDA-H9420. Core Construction Agreements. The contracts for the HVDC converter stations will be signed by December Proposed 2018. The contracts for the HVDC transmission line will Not yet due be signed by September 30, 2019. The contracts for the HVAC transmission line will be signed by December 30, The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) 2018. The operations and maintenance contracts will be signed by June 30, 2020.This covenant also applied to IDA-54380, IDA-H9270. Revenue Management: Tajikistan and the Kyrgyz Republic shall adopt and implement a transparent IDA-54380 revenue management program by no later than 12 Not yet due Revised months after the Effective date. This covenant also applies to IDA-H9410, IDA-H9420. Revenue Management: Tajikistan and the Kyrgyz Republic shall adopt and implement a transparent Proposed revenue management program by no later than 24 NYD months after the Effective date. This covenant also applies to IDA-H9410, IDA-H9420. Co-financing: Additional Co-Financing for Parts A and B of the Project (for Tajikistan, Kyrgyz Republic and Pakistan) shall be secured in a manner satisfactory to Partially complied IDA-54380 No Change the Association by no later than 12 months after the with Effective Date. This covenant also applies to IDA-54090, IDA-H9410, IDA-H9420. Guidelines for Community Support Programs: Prior to the commencement of construction work for the HVDC transmission line, the operational manual for the Community Support Programs for Pakistan and Partially complied IDA-54090 No Change Afghanistan will be finalized and financing secured, for with the purpose of implementing said component, in form and substance acceptable to the Association. This covenant also applies to IDA-H9270. IDA-54090 Off-take Arrangements for Sustainability of the Project: Partially complied Revised The Core Commercial Agreements (PPAs, Master with Agreement, the Coordination Agreement, Host Government Agreements, Technical Code and the Account Bank Agreement), with terms and conditions satisfactory to the Association, shall: (a) become effective by the date which is 12 months after Effective Date; and (b) not be amended, abrogated or waived by any party thereto in a manner that would affect The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) materially and adversely the carrying out of the Project. This covenant also applies to IDA-54380, IDA-H9270, IDA-H9410, IDA-H9420. Off-take Arrangements. The Core Commercial Agreements (PPAs, Master Agreement, the Coordination Agreement, Host Government Agreements, Technical Code and the Account Bank Proposed Not yet due Agreement), with terms and conditions satisfactory to the Association, shall become effective by 24 months after Effective Date. This covenant also applies to IDA- 54380, IDA-H9270, IDA-H9410, IDA-H9420. Inter-Governmental Agreements: Additional Event of Suspension. Any of the Host Government Agreements, the Coordination Agreement, the Inter-Governmental Agreement, or any IGC Resolution has been amended, suspended, abrogated or waived so as to affect IDA-54090 Complied with No Change materially and adversely the ability of any of the Participating Countries or the IGC to carry out their respective responsibilities in connection with the Project. This covenant also applies to IDA-54380, IDA- H9270, IDA-H9410, IDA-H9420. Core Financing Agreements: Additional Event of Suspension. The right of any of the Participating Countries under any of the Core Financing Agreements to withdraw the proceeds of such financing is IDA-54090 Complied with No Change suspended, canceled or terminated, in whole or in part, pursuant to the terms of such agreement. This covenant also applies to IDA-54380, IDA-H9270, IDA-H9410, IDA- H9420. Legislation of National Transmission Companies: Additional Event of Suspension. Any National Transmission Company’s Legislation has been amended, suspended, abrogated, repealed or waived so as to IDA-54090 Complied with No Change affect materially and adversely the ability of the Project Implementing Agency to perform any of its obligations under the Project. This covenant also applies to IDA- 54380, IDA-H9270, IDA-H9410, IDA-H9420. The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) (P145054) Performance under Subsidiary Agreements: Additional Event of Suspension. Any of the parties to the Subsidiary Agreements (between the Participating Countries and National Transmission Companies) has IDA-54090 Complied with No Change failed to perform any of its obligations under its respective Subsidiary Agreement. This covenant also applies to IDA-54380, IDA-H9270, IDA-H9410, IDA- H9420. Core Construction Agreements. The contracts for the HVDC converter stations will be signed by December 2018. The contracts for the HVDC transmission line will be signed by September 30, 2019. The contracts for the IDA-H9410 Not yet due New HVAC transmission line will be signed by December 30, 2018. The operations and maintenance contracts will be signed by June 30, 2020.This covenant also applied to . IDA-H9420.