The World Bank Andhra Pradesh 24X7 Power for All (P155038) REPORT NO.: RES43119 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ANDHRA PRADESH 24X7 POWER FOR ALL APPROVED ON MAY 26, 2017 TO INDIA ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: Guangzhe Chen Practice Manager/Manager: Simon J. Stolp Task Team Leader(s): Mani Khurana, Amol Gupta The World Bank Andhra Pradesh 24X7 Power for All (P155038) ABBREVIATIONS AND ACRONYMS AIIB Asian Infrastructure Investment Bank APCPDCL Andhra Pradesh Central power Distribution Company Limited APEPDCL Andhra Pradesh Eastern power Distribution Company Limited APSPDCL Andhra Pradesh Southern power Distribution Company Limited APTRANSCO Transmission Corporation of Andhra Pradesh CPTD Compensatory Plan for Temporary Damages DEA Department of Economic Affairs GoI Government of India GoAP Government of Andhra Pradesh IBRD International Bank for Reconstruction and Development IUFR Interim Unaudited Financial Report kV Kilovolt kWh kilowatt-hour M&E Monitoring & Evaluation MU Million Units MVA Megavolt-Ampere MW Mega Watts PDO Project Development Objective PIU Project Implementation Unit RAP Resettlement Action Plan TPDP Tribal People Development Plan TPDPF Tribal People Development Planning Framework The World Bank Andhra Pradesh 24X7 Power for All (P155038) BASIC DATA Product Information Project ID Financing Instrument P155038 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 26-May-2017 30-Jun-2022 Organizations Borrower Responsible Agency Government of Andhra Pradesh,Andhra Pradesh Central Power Distribution Corporation Ltd,Andhra Pradesh Eastern Power Distribution Company Ltd,The INDIA Transmission Corporation of Andhra Pradesh,Andhra Pradesh Southern Power Distribution Company Ltd.,Andhra Pradesh Central Power Distribution Company Ltd. Project Development Objective (PDO) Original PDO The development objective of the project is to increase the delivery of electricity to customers and to improve the operational efficiency and system reliability in distribution of electricity in selected areas in Andhra Pradesh. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed COFN-C1420 26-May-2017 22-Sep-2017 01-Dec-2017 30-Jun-2022 150.64 74.43 76.21 IBRD-87550 26-May-2017 22-Jun-2017 01-Dec-2017 30-Jun-2022 240.00 113.34 126.66 The World Bank Andhra Pradesh 24X7 Power for All (P155038) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The World Bank Board of Directors approved the Andhra Pradesh 24X7 Power for All on May 26, 2017, and the project became effective in December 2017. The project aims to increase the supply of reliable electricity to the consumers in Andhra Pradesh particularly in the rural areas. The project is co-financed in the ratio of 60:40 between the World Bank (US$240 million) and the Asian Infrastructure Investment Bank (US$160 million) respectively. As on January 03, 2021, the ratings of the project towards achievement of PDO and implementation progress are both Moderately Satisfactory. Of the total revised project cost of US$ 533.29 million as per table 1 below, 70.7% of the project cost has been committed, and additionally, contracts for 24.6% of the project cost are in advanced stages of procurement. The disbursements are at 41.94% (US$ 100.67 million on the original net commitment of US$ 240 million from IBRD financing). The project is scheduled to close on June 30, 2022. 2. To achieve the development objectives, the project is making critical investments in improving the electricity distribution and transmission infrastructure, adoption of modern information and operational technologies and institutional development of the existing implementing agencies i.e. Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL), Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) and Transmission Corporation of Andhra Pradesh (APTRANSCO). 3. As per Government’s order MS No 41, dated December 12, 2019, the Government of Andhra Pradesh has divided the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) into two distribution companies (i) APSPDCL with its headquarters at Tirupati and (ii) newly formed AP Central power Distribution Company Limited (APCPDCL) with its headquarters at Vijaywada. The newly formed company APCPDCL is also fully owned by the State Government. With effect from April 01, 2020, APCPDCL was also granted distribution license by Andhra Pradesh Electricity Regulatory Commission to distribute electricity in 4 circles namely, Vijaywada circle in Krishna District, Guntur circle and CRDA circle in Guntur District and Ongole circle in Prakasam District which were erstwhile supplied electricity by APSPDCL. 4. The Bank has received a letter dated October 1, 2020 from the borrower i.e. Department of Economic Affairs (DEA), Government of India forwarding and supporting GOAP’s request to restructure the project and include APCPDCL as an implementation agency. 5. Further, the Bank has also received a letter dated March 8, 2021 from DEA forwarding the request of Andhra Pradesh Government to cancel US$ 23.4 million from the IBRD financing on account of exchange rate savings in the project. Furthermore, upon soliciting clarification, DEA revised the cancellation request to the World Bank through their email dated April 1, 2021 to US$ 14.04 million from the IBRD financing as the project is co-financed with AIIB and the exchange rate savings in the total loan amount is to be cancelled by respective lenders in proportion to their The World Bank Andhra Pradesh 24X7 Power for All (P155038) loan amounts. Accordingly, DEA has also sent a request to AIIB to cancel US$ 9.36 million from their loan share. AIIB has cancelled US$ 9.36 million from their loan share on April 12, 2021. 6. This restructuring proposes to (i) cancel US$ 14.04 million of IBRD financing due to savings arising from INR depreciation against USD and, (ii) add AP Central power Distribution Company Limited (APCPDCL) as an implementation agency. Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL), Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) and Transmission Corporation of Andhra Pradesh (APTRANSCO) are showing as new implementing agencies (IA) in this paper but have been in place as IAs since the project was approved. II. DESCRIPTION OF PROPOSED CHANGES 7. The Government of Andhra Pradesh has divided the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) into two distribution companies (i) APSPDCL with its headquarters at Tirupati and (ii) newly formed AP Central power Distribution Company Limited (APCPDCL) with its headquarters at Vijaywada. The newly formed company APCPDCL is also fully owned by the State Government. With effect from April 01, 2020, APCPDCL was also granted distribution license by Andhra Pradesh Electricity Regulatory Commission to distribute electricity in 4 circles namely, Vijaywada circle in Krishna District, Guntur circle and CRDA circle in Guntur District and Ongole circle in Prakasam District which were erstwhile supplied electricity by APSPDCL. Government of Andhra Pradesh has requested to add APCPDCL as an implementation agency in the AP 24x7 Power for All project. As an implementing entity, APCPDCL would be responsible for implementing the various components under the project in its jurisdiction. 8. APSPDCL (from which the new distribution company APCPDCL has been carved out) was assessed during the preparation of the project and has been performing well as per World Bank’s requirement. APCPDCL, thus is well- versed with the project and the Bank team has been interacting with the counterparts in APCPCL. APCPDCL will follow the World Bank Procurement Regulations as well as Safeguards policy requirements through the implementation of the Environmental and Social Management framework (ESMF) that was agreed under the Project. To further enhance APCPDCL’s capacity, the Bank will provide them with required training and handholding support on Procurement. Training will also be provided on Environmental and Social aspects to the personnel responsible for handling Environment and Social issues in APCPDCL. 9. A rapid Financial Management assessment of the new implementing entity APCPDCL has been carried out. APCPDCL is governed by Board of Directors, that is headed by Chairman, cum Managing Director, and supported by functional Directors - Director (Technical) and Director (Finance), with all posts nominated by GoAP. A part of the existing staff of APSPDCL has been transferred to APCPDCL. A PIU has been formed within APCPDCL to implement the Project activities and it will follow the extant FM arrangements that was already agreed under the Project, which is currently been followed by other three implementing agencies (APSPDCL, APEPDCL and APTRANSCO). APCPDCL will open a separate project bank account into which funds will be drawn based on budget provisions approved by GoAP. All project payments will be centralized at Head Office of APCPDCL and accounted for in the existing ERP application (SAP). Interim Unaudited Financial Report (IUFR) will form the basis of disbursement by WB and AIIB to GoAP. The internal audit and year-end financial audit of APCPDCL will be carried by private firm of chartered accountants that are acceptable to WB. The financial audit report of APCPDCL will be submitted to WB and AIIB within 9 months (i.e December 31) from end of each FY (April to March). The financial audit of FY2019-20 (April 01, 2019 to March 31, 2020) for the three existing project implementing agencies (APSPDCL, APTRANSCO and APEPDCL) is ongoing and audit report is expected to be submitted to the WB and AIIB as per extended timelines. The World Bank Andhra Pradesh 24X7 Power for All (P155038) 10. Further, there has been a depreciation of INR with respect to USD from USD/INR of 66.8 at the time of appraisal to 72.91, which has resulted savings in total loan amount. It was agreed in the recent Tripartite Review Meeting in Jan 2021 that savings in loan amount on account of INR depreciation will be cancelled. Accordingly, the Government of Andhra Pradesh, through Government of India have requested for a cancellation of US$ 23.4 million from the IBRD financing and AIIB in the project vide letter dated January 1, 2021. In proportion to the loan amounts, DEA has requested World Bank to cancel US$ 14.04 million and AIIB to cancel US$ 9.36 million respectively from their loan amounts. AIIB has cancelled US$ 9.36 million from their loan share on April 12, 2021. 11. The original and revised allocation of costs are summarized below: Table 1: Project Cost and Financing Summary (All figures in US$ million) Original Revised [before restructuring] [after restructuring] Project Components Counter- Counter- Project IBRD AIIB Project IBRD AIIB part part Cost Financing Financing Cost Financing Financing2 Financing Financing3 Component 1: Power Transmission 100.0 42.0 28.0 30.0 93.38 39.54 26.36 27.49 System Strengthening Component 2: Smart Grid 210.0 88.2 58.8 63.0 196.11 83.03 55.35 57.73 Development in Urban Areas Component 3: Distribution System 250.0 105.0 70.0 75.0 233.46 98.84 65.89 68.72 Strengthening in Rural Areas Component 4: Technical assistance for Institutional 10.0 4.2 2.8 3.0 9.34 3.95 2.64 2.75 Development and Capacity Building Total Project 570.0 239.4 159.6 171.0 532.29 225.36 150.24 156.69 Costs Front-end Fees 1.0 0.6 0.4 0.0 1.0 0.6 0.4 0.0 1 As considered by GoAP in their request for cancellation 2 Assuming AIIB cancels US$ 9.36 million in-line with the request from GoAP and DEA 3 Please note that the counterpart funding remains the same in INR terms, and is shown less in the revised table only due to revision in the exchange rate for calculation purposes (1US$=INR 72.9, as on Feb 9, 2021) The World Bank Andhra Pradesh 24X7 Power for All (P155038) Total Financing 571.0 240.0 160.0 171.0 533.29 225.96 150.64 156.69 III. SUMMARY OF CHANGES Changed Not Changed Implementing Agency ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Legal Covenants ✔ Institutional Arrangements ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ The World Bank Andhra Pradesh 24X7 Power for All (P155038) Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action Government of Andhra Pradesh Implementing No Change Agency Andhra Pradesh Eastern Power Distribution Implementing New Company Ltd Agency The Transmission Corporation of Andhra Implementing New Pradesh Agency Andhra Pradesh Southern Power Implementing New Distribution Company Ltd. Agency Andhra Pradesh Central Power Distribution Implementing New Company Ltd. Agency OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Power Component 1: Power Transmission System 42.00 Revised Transmission System 39.54 Strengthening Strengthening Component 2: Smart Grid Component 2: Smart Grid 88.20 Revised 83.03 Development in Urban Areas Development in Urban Areas Component 3: Distribution Component 3: Distribution 105.00 Revised System Strengthening   98.84 System Strengthening   Rural Rural Component 4: Technical Component 4: Technical Assistance for Institutional Assistance for Institutional 4.20 Revised 3.95 Development and Capacity Development and Capacity Building Building Front end fees 0.60 No Change Front end fees 0.60 TOTAL 240.00 225.96 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE The World Bank Andhra Pradesh 24X7 Power for All (P155038) CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN COFN- Disburs 150,640,000.0 150,640,000.0 RESTRUCTUR USD 0.00 12-Apr-2021 C1420-001 ing 0 0 ING, COST SAVINGS LOAN IBRD- Disburs 240,000,000.0 225,960,000.0 RESTRUCTUR USD 14,040,000.00 08-Mar-2021 87550-001 ing 0 0 ING, COST SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed COFN-C1420-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Gds,Wks,NCS,CS Trng 150,640,000.00 64,434,803.45 150,640,000.00 28.00 28 Total 150,640,000.00 64,434,803.45 150,640,000.00 IBRD-87550-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Gds,Wks,NCS,CS Trng 239,400,000.00 96,649,178.76 225,360,000.00 42.00 42.00 Total 239,400,000.00 96,649,178.76 225,360,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes The World Bank Andhra Pradesh 24X7 Power for All (P155038) Year Current Proposed 2017 0.00 0.00 2018 0.00 17,411,978.00 2019 0.00 21,321,371.00 2020 54,000,000.00 39,048,519.00 2021 60,000,000.00 40,000,000.00 2022 80,000,000.00 80,000,000.00 2023 7,700,000.00 28,178,132.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement: Subsidiary Agreement | Description :GoAP to make the proceeds of the Loan available to APEPDCL, APSPDCL and APTRANSCO After delay complied IBRD-87550 (collectively the €€Implementing Agencies€€) pursuant Revised with to individual subsidiary agreements to be entered under terms and conditions acceptable to the Bank. | Frequency :CONTINUOUS Finance Agreement: Subsidiary Agreement | Description :GoAP to make the proceeds of the Loan available to APEPDCL, APSPDCL, APCPDCL and Proposed APTRANSCO (collectively the Implementing Agencies) Expected soon pursuant to individual subsidiary agreements to be entered under terms and conditions acceptable to the Bank Finance Agreement :Project Implementation Units | Description :GoAP to ensure that the Implementing Agencies maintain their respective project IBRD-87550 implementation unit for carrying the day-to-day Complied with No Change implementation of the activities under their respective parts of the Project (including compliance with the safeguard documents) | Frequency :CONTINUOUS The World Bank Andhra Pradesh 24X7 Power for All (P155038) Finance Agreement :Internal Audits | Description :GoAP to cause the Implementing Agencies to select and engage, and thereafter maintain the services of one or more consulting firm(s) under the terms agreed with IBRD-87550 Complied with No Change the Bank, in order to carry out the Implementing Agencies'€€ internal audits on financial management performance, procurement process and decisions and contract administration. | Frequency :CONTINUOUS Finance Agreement :Project Management Consultant | Description :GoAP to ensure that, if and when required by the Bank, APEPDCL and APSPDCL hire a project management consulting firm with qualifications and IBRD-87550 under terms of reference agreed with the Bank, to Complied with No Change assist their respective PIUs with the planning, implementation and execution of activities under their respective parts of the Project. | Frequency :CONTINUOUS Finance Agreement :Operations Manuals | Description :GoAP to ensure that the Implementing Agencies carry IBRD-87550 out their respective parts of the Project in accordance Complied with No Change with their respective operations manuals. | Frequency :CONTINUOUS Finance Agreement :Safeguard Documents | Description :GoAP to cause the Implementing Entities to carry out their respective parts of the Project pursuant to, and in compliance with, the ESMF (including the IBRD-87550 CPTD) as well as the respective EMP(s), RAP(s) and Complied with No Change TPDP(s) prepared or to be prepared pursuant to the ESMF (the ESMF, ESMP(s), RAP(s) and TPDP(s) collectively referred to as the (Safeguard Documents ) | Frequency :CONTINUOUS IBRD-87550 Finance Agreement :Screening of Project Activities | Complied with No Change Description :The Implementing Agencies to refrain from commencing any civil works for each transmission line, substation or distribution network to be erected/built or augmented under Components 1, 2 and 3 of the Project, or undertaking any activities ancillary thereto, until and unless: (i) the proposed activities/civil works The World Bank Andhra Pradesh 24X7 Power for All (P155038) have been screened in accordance with the ESMF; (ii) the respective EMPs, RAPs and/or TPDP(s), as required by the ESMF, have been prepared and submitted to the Bank for review and no-objection; and (iii) these safeguard documents have been disclosed by concerned Implementing Agency in local language(s) at the relevant Project s sites at least thirty (30) days prior to the award of the contract for such activities/civil works. | Frequency :CONTINUOUS Finance Agreement :Permits and Clearances | Description :GoAP and the Implementing Agencies to ensure, prior to commencing any civil works for each transmission line, substation or distribution network to be erected/built or augmented under Components 1, 2 and 3 of the Project, that: (i) all necessary permits and IBRD-87550 clearances have been obtained; (ii) all pre-conditions Complied with No Change imposed in those permits/clearances shall have been complied with; and (iii) all resettlement measures set forth in the applicable RAPs shall have been executed (including full payment of compensation prior to displacement or the provision of relocation assistance to affected persons). | Frequency :CONTINUOUS Finance Agreement :Civil Works Contracts | Description :GoAP to ensure and cause the Implementing Agencies IBRD-87550 to ensure that each contract for civil works includes the Complied with No Change obligation of the relevant contractor to comply with the Safeguard Documents | Frequency :CONTINUOUS Finance Agreement :M&E Safeguard Protocols | Description :GoAP to cause the Implementing Agencies to maintain monitoring and evaluation protocols and - record keeping procedures adequate to GoI, GoAP and Complied with No Change the Bank to supervise and assess the implementation of/compliance with the Safeguard Documents. | Frequency :CONTINUOUS IBRD-87550 Finance Agreement: Grievance Redress Mechanism | Complied with No Change Description :GoAP and the Implementing Agencies to maintain and operate a multi-layered grievance redress mechanism acceptable to the Bank for the handling of The World Bank Andhra Pradesh 24X7 Power for All (P155038) any stakeholder complaints arising out of the implementation of their respective activities under the Project. | Frequency :CONTINUOUS Finance Agreement :Ineligible Expenditures | Description :GoAP and the Implementing Agencies to ensure that: (i) all land acquisition required for the Project, (ii) any compensation, resettlement, and rehabilitation payment to Affected Persons as per the RAPs and/or CPTD; (iii) any compensatory afforestation payments (including as required by the ESMF); (iv) any IBRD-87550 Complied with No Change interest during construction; (v) any retention money deducted from contract payments and not released by the Closing Date; and (vi) any expenditures objected or considered ineligible by the independent auditors in the Financial Statements, are financed exclusively out of GoAP and/or the Implementing Agencies  own . resources. | Frequency :CONTINUOUS