Page 1 PROJECT INFORMATION DOCUMENT (PID) [REVISED] APPRAISAL STAGE Report No.: AB5243 Project Name Rural Electrification Phase II Project of the Rural Electrification (APL) Program Region EAST ASIA AND PACIFIC Sector Power (85%); Renewable energy (15%) Project ID P110978 Borrower(s) LAO PDR (GOL) Implementing Agency Ministry of Energy and Mines PO Box 4708 Nong Bone Road Lao People's Democratic Republic Tel: (856-21) 415-388 Fax: (856-21) 413-013 anousak_pv@yahoo.com ; Electricite du Laos PO Box 4708 Nong Bone Road Lao People's Democratic Republic Tel: (856-21) 451-519 Fax: (856-21) 414-039 edlpj@laotel.com Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared December 14, 2009 Date of Appraisal Authorization October 6, 2009 Date of Board Approval January 12, 2010 1. Country and Sector Background With a population estimated at 5.9 million in 2008, and growing at a relatively rapid rate of 2.1 percent annually, Lao People’s Democratic Republic (Lao PDR) is characterized by a rich cultural and ethnic diversity where almost half of the population belongs to minority groups concentrated in the upland areas. Population density in Lao PDR is very low, although it has increased from only 15 persons per square kilometer in 1985 to 24 person per square kilometer in 2005. About 73 percent of the population lives in the rural area. A large majority of the population relies for its livelihood on agriculture, which accounts for over half of gross domestic product (GDP). Reliance on external support to the budget remains high; donor-funded programs account for nearly 40 percent of total public expenditures. Progress towards Rural Development and Poverty Reduction. Lao PDR has continued to make progress in poverty reduction. GDP growth between 1990 and 2006 averaged 6 percent a year. In 2007, it reached 7.6 percent before slowing in 2008 to about 7 percent as the effects of the global Page 2 financial crisis began to be felt in the second half of the year. The average real GDP growth between 2006 and 2008 is 7.6 percent. Approximately 27 percent of the population is living below poverty in 2007/2008. The Government of Lao PDR (GoL)’s National Growth and Poverty Eradication Strategy (NGPES), which provided the policy framework for rural electrification (RE), was succeeded by the National Socio-Economic Development Plan (NSEDP 2006-2010), approved by the National Assembly in July 2006. The overall development strategy for the NSEDP includes transforming the multi-sectoral economy from uneven performance to fast and stable development within the market mechanism guided by the state. Poverty reduction remains the key thematic area of the Plan. This will be achieved through enlarging economic opportunities, the provision of basic social and essential economic services, ensuring security and facilitating the participation and empowerment of the poor in economic, social, political and other arenas to reduce poverty on a sustainable basis. Rural Electrification . Rapid expansion of RE is one of the major priority of GoL for the power sector. GoL has an ambitious goal of electrifying 90 percent of the country’s households by 2020 (70 percent by 2010 and 80 percent by 2015). Increasing household connections from about 16 percent in 1995 to about 45 percent in 2004, and 63 percent as of June 2009 was a remarkable achievement in the socio-economic development of Lao PDR. Through implementation of four projects funded by the International Development Association (IDA), Norwegian Agency for Development Cooperation (NORAD), and Global Environment Facility (GEF), and one project Funded by the Asian Development Bank (ADB), EdL’s planning and implementation capabilities for conventional RE have markedly improved. However, as electrification moves to increasingly remote areas, on-grid RE becomes more and more costly and this has led GoL to promote off-grid options, with emphasis on renewable technologies. Hydropower Development. Another priority of the power sector is to develop the rich hydropower resources to increase hydropower exports to neighboring countries for revenue earning. Despite the global economic downturn over the past years, which has stalled a number of hydropower and mining developments in the country, the drivers of development in the hydropower sector in Lao PDR have remained fundamentally unchanged. Demand in the Greater Mekong Sub-region 1 (GMS) for hydropower from Lao PDR will continue to expand as neighboring economies such as Thailand, Vietnam, and – not the least – China further develop their economies. Government strong commitment to private sector-led investment in hydropower development is evidenced by the approval of the revised Electricity Law by the National Assembly in 2008, and the country’s active participation in the GMS Forum to promote international investment in hydropower for cross-border power trade. All hydropower projects currently under construction, most of which are for export with foreign investments, will lead to a five-fold expansion of installed capacity from the current 682 MW to 3,236 MW by 2013, with annual gross revenues increasing from some US$ 130 million to US$ 500-600 million. Power Sector Sustainability. Financial sustainability of the power sector is also one of the main objectives of GoL. EdL is the utility company owning and operating the transmission and distributions system in the country as well as the existing hydropower plants except for the NT2. EdL was corporatized in 1997, remaining wholly GoL-owned. Cost/profit centers were created 1 The Greater Mekong Sub-region consists of Lao PDR, Thailand, Cambodia, Vietnam, People’s Republic of China and Myanmar. Page 3 within EdL. EdL’s operational efficiency and financial viability have been improved remarkably over the past years as a result of implementation of the Action Plan for Financial Sustainability of the power sector (Sustainability Action Plan, 2005-2011) under the Rural Electrification Phase I Project (REP I) of the Bank-supported Rural Electrification APL Program. EdL has reported profit for the first time in 2007 due to the tariff adjustments since 2005 in line with the agreed tariff reform over 2005 to 2011, reduction of distribution system losses from more than 20% in 2005 to about 13% in June 2009; and reduction of arrears owned by the Government agencies after settlement. At the same time, EdL has improved significantly its technical capacity and is able to carry out independently system planning, design, supervision of construction, operation and maintenance, and safeguard management of medium voltage (MV) and low voltage (LV) network expansion projects for RE. Power System Planning and Inter-Connection Issues. Lao PDR has four principal unconnected grids. All these grids are connected with Thailand system and export hydropower to Thailand (and will soon export hydropower to Vietnam and Cambodia as well) over high voltage links, and simultaneously imports thermal-based electricity from Thailand at MV. This situation will persist, certainly over the tenure of the Rural Electrification (APL) Program, until Lao PDR has a fully integrated transmission grid, which can facilitate development of national integrated generation expansion plans and help maximize utilization of domestic hydro generation. The increased substitution of thermal energy in the neighboring countries by renewable energy and development of an energy efficiency (EE) program in Lao PDR have specific implications for Global Environment Facility (GEF) involvement. Demand Side Management and EE. Demand Side Management (DSM) and EE have just— during the REP I—received attention by the GoL. Under the REP I, a DSM and EE unit was created within EdL; an Action Plan for DSM and EE was prepared by consultants; EE program focusing on demand side were piloted in four government buildings reaching an 8 percent electricity consumption reduction. Public awareness on DSM and EE is still in its infancy stage. Continued support are needed for implementation of the action plan and to remove the barriers, which were identified in the REP I, including: (i) lack of basic data on electricity consumption and end use patterns by rate class; (ii) lack of public or private sector capacity for program planning and implementation; (iii) lack of technical expertise or awareness among end-use customers as regards EE technologies and practices; (iv) lack of available financing mechanism to support investment, and (v) little or no appreciation of the benefits of EE. Policy Fit with Lao PDR Climate Change Strategy. The Water Resources and Environmental Agency (WREA) in the Prime Minister’s Office is responsible for GoL’s Climate Change Strategy. The climate change issues are of great concern to WREA include consumption of fossil fuels, especially lignite for power generation and diesel oil by the industry, transport and agriculture sectors; methane emissions from paddy fields; use of fuel wood and charcoal in the rural areas; and reforestation and grasslands conservation. REP I and Rural Electrification Phase II Project (REP II) provide a close fit with GoL’s Climate Change Strategy: (i) emphasis on DSM, energy conservation and EE improvements; (ii) fostering more efficient advanced technologies in all fields of electrification; and (iii) promotion of renewable energy development, such as small-scale hydropower, solar and biomass energy. Page 4 2. Objectives The development objectives of the Phase II Project are to: (i) increase access to electricity of rural households in villages of targeted provinces; and (ii) further improve the financial performance of EdL. Achievement of the project development objective would be measured by: (i) number of households electrified; (ii) rate of return on revaluated assets of EdL; (iii) EdL ’s account receivables; and (iv) EdL’s distribution system loss. For the DSM and EE activities, monitoring and evaluation (M&E) will focus on keeping track of increased awareness of practices and benefits of EE on the part of government agencies, and industrial, commercial and domestic consumers. NSEDP and CAS Objectives. In supporting rural infrastructure development, which aims at targeting especially the poor rural population, and promoting sector-wide reforms and institutional capacity building, the REP I & II would contribute significantly towards meeting GoL’s NSEDP goals of poverty reduction and establishment of an enabling environment for growth and development especially in the rural area. The REP II would, likewise, support the current Country Assistance Strategy (CAS) objectives of: (i) sustained growth through improved management of rural and national infrastructure development and the overarching IDA goal of poverty reduction; and (ii) capacity development and partnerships through strengthened key sectoral and provincial capacities and partnership with donors in RE. The REP II would also support the 2006-10 NSEDP priorities and seek, in particular, to: (i) invest in infrastructure such as roads, power and water supply, and expand access to these services; (ii) invest in rural development and natural resource management - including support for agricultural, mining, forestry and hydropower development; and (iii) strengthen national capacity and institutions. 3. Rationale for Bank Involvement Since 1987 IDA has supported four successive RE projects in Lao PDR. Over the past two decades IDA has directly supported grid-electricity connection of about 150,000 households. In addition to investment in grid-extension for connection rural households to the grid, these projects provide a platform for continued Bank support to GoL in policy dialogue, sector reform and capacity building in the power sector and are instrumental to the fast expansion of RE and remarkable improvement of the financial performance achieved so far in the power sector. Rural Electrification. Acceleration of RE is an explicit thrust of GoL in its poverty reduction efforts. An IDA and GEF financed RE project, Southern Provinces Rural Electrification (SPRE), which was closed on December 31, 2004, helped reinforced the foundations of a sound RE program in Lao PDR. The Rural Electrification APL Program builds on the lessons and experiences of SPRE and the capacity created within the Ministry of Energy and Mines (MEM) and EdL. Concessionary lending terms are vital for RE, which requires capital subsidies to achieve social objectives. It is also recognized that there is scope for attracting funding for RE from non-traditional sources, if mechanisms are devised to blend necessary funding with private funding. During the implementation of REP I, IDA and GEF have provided grant and NORAD have provided parallel financing for MEM to support its RE off-grid program and lay foundation Page 5 for a Rural Electrification Fund (REF), which was established in Aug 2005. With support from these grants under the REP I the necessary legal, regulatory and institutional arrangements were completed. As a result, private sector investors, who are interested in investing in RE projects, will be able to gain access to the REF, which is capitalized through the repayments by all off- grid consumers electrified under SPRE, the REP I and other donor-financed off-grid projects. Under this funding scheme, MEM would initialize the operation of the REF Secretariat (REFS) at the beginning of the REP II and both local and international consultants will be hired through the REP II to assist MEM in the initial operation and management of the REF and the REFS. Continuing support from IDA, GEF, NORAD, and Energy Sector Management Assistance Program (ESMAP) to MEM is important for successful implementation of GoL’s RE program. Commercialization of EdL. IDA and ADB have collaborated in the commercialization of EdL in the early stage. The IDA adjustment of tariff structure and levels over 2006-2011 is considered not only a critical part of the Sustainability Action Plan for both the REP I & II, but also has supported separation of EdL’s commercial objectives from GoL’s social objectives. Implementation of the tariff adjustment under REP I have been highly satisfactory and have helped improving EdL’s financial sustainability. EdL has continuously reported profits since 2007. Large industrial consumers from the mine and cement industries have emerged recently and EdL has to increase import power from neighboring countries to supply the associated load growth. The large industrial customers were not anticipated and was not accounted for during the REP I appraisal when the tariff reform was designed. However, a review for updating the tariff structure and levels for 2009-2014 is close to completion and will be initiated in 2009, with the IDA allocations under both REP I and the Bank-support Greater Mekong Subregion Power Trade Lao Project. Continued support to the tariff reform is critical for furthering improving the financial sustainability of EdL. Financing Strategy . In its efforts to attract private sector financing, GoL has prepared the adoption of new models for public-private partnership, associated with regular updating of least- cost planning scenarios, and upstream development work on the most promising hydropower projects. It is expected that these efforts will enhance the development of Lao PDR’s hydro potential. In addition, GoL has established the REF, with technical assistance under the REP I, to provide subsidies as needed to facility private investment in off-grid renewable energy development to support RE. During the implementation of REP I, IDA mobilized additional resources from ESMAP and supported capacity building of SMEs to facilitate invest in renewable energy. Continued support to productive use of electricity is critical for promotion of off-grid renewable energy use and scale up social impacts.   IDA’s ability to bring global knowledge to sector reform and capacity building for long-term sustainability of the power sector is its primary “value added” beyond the provision of the grant. The ability to play this role derives from IDA’s deep knowledge of the Lao power sector and the relationship developed between IDA and GoL/EdL over a decade, which merits continuation. 4. Description The Project has two components one to be executed by each beneficiary EdL and MIH. Page 6 The EdL component will contribute to the achievement of project objectives through electrification of rural households by grid extension, and indirectly through further advancing the commercia lization of EdL, thus increasing EdL’s self-financing capability. It consists of the following sub-components: A.1. Grid Extension: (a) install and commission medium voltage (MV) and low voltage (LV) transmission lines, transformers and house wiring to cover about 27,000 households in the Project Provinces; and (b) provide technical advisory services to EdL in, inter alia: (i) project implementation and supervision; and (ii) building capacity on economic and financial evaluation, project management and procurement; A.2. Loss Reduction: (a) enhance EDL’s loss reduction efforts through the provision of goods to, inter alia, support the implementation of prioritize investment projects recommended by the Loss Reduction Master Plan; and (b) provide technical advisory services to EDL for non technical loss reduction activities; A.3. Information Technology System and Financial Management: Provide technical advisory services to EdL to: (a) integrate the operation of EdL headquarters and branch offices in the Project Provinces by making the existing information technology system fully operational; and (b) strengthen its financial management by making the computerized Billing and Accounting Systems, as part of the Information Technology System rolled out to all branch offices, fully operational; A.4. Safeguards Capacity Building: Provide goods and training to EdL and its provincial authority counterparts to strengthen their capacity in environmental and social assessment and impact management; and A.5. Demand Side Management and Energy Efficiency Program: Provide to EdL: (a) goods to support the implementation of the action plan under the Demand-side Management and Energy Efficiency Master Plan; and (b) technical advisory services to support the implementation of the said action plan. The MEM component will contribute to the project development objective through scaling up the Off-grid Investment Program of rural electrification. It will also establish the enabling environment to encourage other participants to develop and finance power sector expansion. It consists of the following subcomponents: B.1. Off-grid Investment Program: Apply off-grid renewable energy technologies, including, inter alia: solar home systems (SHS) and pico hydro to provide electricity to about 10,000 households in the Project Provinces; B.2. Institutional Strengthening: Provide technical advisory services to MEM to support, inter alia: (a) The implementation of its comprehensive program of management; and (b) the monitoring of the performance of the outsourced management and the off grid investment program, including provincial ESCOs and VEMs; B.3. Alternative Rural Electrification Delivery Models: Provide technical advisory services to MEM to, inter alia: (a) promote alternative renewable energy development and develop associated delivery models and financing mechanisms; and (b) support to small and medium enterprises in income generation linked to the use of the renewable energy; B.4. Rural Electrification Master Plan and Database: Provide technical advisory services to MEM to, inter alia: (a) maintain the rural electrification database; and (b) update the Rural Electrification Master Plan; and Page 7 B.5. Organizational Strengthening of MEM: Provide technical advisory services to MEM to: (a) support the PMU in the implementation of Part B of the Project; and (b) establish, and support the initial operation of a REFS to enable REF in its mandate. The total cost of Phase II project is estimated at US$34.82 million including contingencies, out of which US$28.35 million is for the EdL Component and US$6.47 million for the MEM Component. Proposed financing sources include an IDA Grant of US$20.0 million (about 57.4 percent), NORAD co-financing of US$4.0 million (about 11.5 percent), ESMAP grant of US$ 0.5 million (about 1.4 percent), EdL/MEM counterpart funds of US$8.22 million (about 23.6 percent) and consumer contributions for house wiring and SHS installation of US$2.10 million (about 6.0 percent). 5. Financing Source: ($m.) BORROWER/RECIPIENT 8.22 International Development Association (IDA) 20.00 Local Communities 2.10 Energy Sector Management Assistance Program 0.50 NORWAY: Norwegian Agency for Dev. Coop. (NORAD) 4.00 Total 34.82 6. Implementation REP II will be implemented over four years, beginning in January 2010 to December 2013. Implementing Agencies. The Project would be implemented by EdL and MEM jointly. The same EdL Project Office for REP I will be responsible for implementation of the EdL Component and overseeing the implementation of individual physical subprojects by EdL’s BOs in the seven central and southern provinces. The same MEM PMU for REP I will also be responsible for implementing the MEM Component. Implementation and management of the off-grid component will be outsourced due to limited staff and capacity of DOE. As part of the capacity building program under the REP I, local consultants have developed adequate capacity to assist DOE in managing the off-grid program developed under the SPRE and REP I. Both international and local consultants will be hired to support the initial operation of the REFS and provide training to the REF Staff. 7. Sustainability and Replicability Sustainability of the Off-grid Component. The SHS delivery model developed over the SPRE and REP I has proven its sustainability by providing electricity to almost 15,000 households over the past decade. With support of the GEF, NORAD, AusAID and ESMAP financed technical assistance, the REP II includes features that will further improve sustainability of off-grid electrification in Lao PDR and other countries: (i) developing and maintaining a self-sustaining REF to provide subsidies to off-grid electrification; (ii) outsourcing the implementation of the off-grid program through a performance-based management contract to ensure operational effectiveness, customer services, diversification of technologies, and collection of repayments; and (iii) providing continued technical assistance to MEM to enable it to focus on other Page 8 important functions, such as regulation of RE, management of the REF, off-grid electrification planning integrated with on-grid planning, and supervision of the management contract execution. Sustainability of the On-grid Component. It was proven that the grid extension investment under the SPRE and REP I was based on sound and cost-effective technology. The sustainability of the on-grid electrification depends mainly on (i) a tariff structure and levels to ensure affordability of rural households and cost recovery of electricity supply; and (ii) a sound financial position of EdL. Tariff reform since 2005 has been highly satisfactory. EdL’s financial position has been enhanced remarkably with the implementation of the Sustainability Action Plan (2005-2011) under REP I and further enhancement is expected through continued tariff adjustment, technical assistance and EdL’s regular investments in system loss reduction, and settlement of government arrears in line with the Plan under REP II. Sustainability of the DSM and EE Component. DSM and EE are new concepts in Lao PDR. Moreover, historically low electricity tariffs have made EE a relatively unattractive investment. To ensure the sustainability of this component an incremental approach was taken. REP I was designed to lay the foundations for EE by creating public awareness, building institutional capacity, and creating early interest through small pilot projects in government buildings. With technical assistance under REP I, a DSM cell within EdL was established and a Master Plan for DSM and EE developed. REP II will take further steps for capacity building of the DSM cell, implementation of the Master Plan, and broadening EE programs to include other consuming sectors (e.g., households). Replicability. The design of both on- and off-grid components is already an amalgam of RE programs in Lao PDR, Bangladesh, Chile, and elsewhere. In Asia, it is very important that the innovation in a basic framework for off-grid components is undertaken within a national on- and off-grid RE program, where renewable energy plays a critical role, and financing is from concessionary and other sources coordinated by a REF . Other countries likely to benefit from variants of this model include Nepal, Bangladesh, and Papua New Guinea. Key elements of the replication approach include: (i) a knowledge management activity to document key aspects; (ii) an outreach and information dissemination effort, including annual workshops (a stakeholder participation workshop was organized by MEM as a start); (iii) documentation and dissemination of key features of REP, especially the outsourcing process, integrated RE planning, and the REF; (iv) bilateral and regional experts’ forum on sustainable and renewable RE; and (v) replication of REP innovations components beyond the region with ESMAP support. 8. Lessons Learned from Past Operations in the Country/Sector The Project takes into account lessons learned from the four previous Bank-supported RE projects and associated studies. Key lessons and experiences learned for RE through grid- extension included: (i) RE in a country with weak capacity should be utility-driven and can reach rapid expansion, if proper incentive mechanism and government support are in place, and market-driven approach can play a complimentary role; (ii) the elasticity of connection rates to upfront connection and house-wiring costs is highly negative and about 30 percent of the households – usually poor households – are unable to pay the upfront costs; (iii) support to the poorest group for payment of connection charges in simple way and with limited resources can Page 9 achieve significant impact; (iv) large cost savings are achievable by optimizing grid-extension designs; and (v) investments in loss reduction are very cost effective. For safeguard management, implementation of REP I suggested for (i) the application of a more flexible safeguard instrument, (ii) more training of BO staffs, and (iii) mainstreaming of safeguard requirement into EdL operations. These lessons learned and experiences are incorporated in the design of the grid component under REP II. The off-grid program supported by GEF under the SPRE and REP I was also very successful in achieving its objectives. The delivery model for SHS —reducing upfront payment by end users through a hire-and-purchase contract and undertaking marketing, planning, installation, operation and maintenance service through five Provincial Electricity Service Companies (PESCOs) hired and managed by the DOE Off-grid Office—has been refined and scaled up (to fifteen PESCOs covering the entire country) under REP I and helped achieve its objectives efficiently. Outsourcing the day-to-day management and implementation of off-grid electrification program was proven an effective arrangement to mitigate the limited staff and capacity of DOE. Same arrangement will continue for the SHS program under the REP II. Another lesson learned under REP I is that the expected private sector investment in off-grid renewable energy will not materialize if loans from banks are not available. Also, use of electricity from mini/micro hydro by rural households needs to be promoted to ensure sufficient load factor for private investors to justify investment. The REP II will provide technical assistance to promote private sector participation in bio-energy and mini/micro hydropower development. In addition, ESMAP will support small and medium enterprises (SME) to increased uses of electricity for income generation. Other lessons learned under REP I include (i) with limit staff resources of DOE, implementation of off-grid electrification program needs to be out-sourced; (ii) limited procurement capacity of DOE can often delay project implementation; (iii) quality of services to end users can not be timely and effectively monitored and ensured by international consultants since frequent local travels are required to reach the mass of end users in remote villages; (iv) continued support to DOE for financial management is needed and qualified local consultants are available; and (vii) unexpected price escalation can create significant cost overrun, jeopardizing achievement of project objectives. REP I safeguard performance suggested that there was no impacts due to SHS but safety aspect should be considered for Pico hydro. This concern has been incorporated in REP II. Key lessons from GEF co-financed projects in Cambodia, Chile, Swaziland and Ethiopia, reflected in the design of the REP I off-grid component, include: (i) to ensure institutional and financial sustainability, rural energy programs must maximize private sector participation; (ii) to achieve impacts on living standards, an integrated approach linking RE services with livelihood support and income generating activities should be taken; (iii) the most critical role for government is to put in place a sound regulatory framework, an adequate tariff structure, and a dedicated RE agency that can look after mobilization of concessionary financing; and (iv) RE program should be an integral part of the overall power sector development strategy. 2 2 A Review of the ESMAP Rural Energy & Renewable Energy Portfolio , April 2004, a joint UNDP/ESMAP Publication. Page 10 9. Safeguard Policies (including public consultation) The REP II project will not create any potential large scale, significant, and/or irreversible impacts. The safeguard issues/impacts and proposed mitigation measures are discussed below. Environment: Experience during the planning and implementation of REP I suggested that providing transmission line of low voltage to local communities (on-grid) will involve small scale civil works and the negative impacts (dust, noise, wastes, site clearance) on local environment during construction are temporary, localized and can be mitigated by good engineering practices. Most of the REP I subprojects follow existing roads however many of the final subproject routes were changed after extensive consultation with the local community and local authority. Application of appropriate safeguard instrument and ensuring adequate safeguard capacity of EdL divisions and branch offices will increase EdL capacity to implement safeguard measures. To mitigate the limited impacts of REP II, EdL proposed to apply good engineering practices and provide training to EdL branch office. Given that the subproject routes have not been finalized, EdL also prepared an Environment and Social Safeguard Framework (ESSF) to be applied to all the on-grid subprojects, including the Resettlement Policy Framework (RPF) and the Ethnic Groups Development Framework (EGDF) –see below. Execution of the off-grid electrification (MEM component) using the SHS carried out under REP I does not create any negative impacts. Experience from the pilot study of Pico Hydro suggested that safety aspect of local people during operation can be an issue, but this can be mitigated through communication and increase awareness of local population. Although this component plans to provide about 1200 units of Pico Hydro and if additional fund is available some pilot studies for other alternative technology (such as household biogas, village hydro, and village biomass) will be conducted, any adverse impacts are not anticipated. Given that the subproject locations and scale have not been identified, the off-grid ESSF, which includes a RPF and EGDF, has been prepared to ensure that adverse impacts will not occur, or can be adequately mitigated. Indigenous Peoples: The project is not expected to generate adverse impacts on ethnic peoples. However, some on-grid and off-grid subprojects may be located in areas inhabited by ethnic minority groups, but community-specific negative impacts on ethnic groups’ culture or traditional means of livelihood are not likely to occur. Indeed, ethnic group communities generally expect to benefit significantly from improved access to electrification. To make sure that the ethnic groups are aware of, and have access to the potential benefits from the project, a revised Ethnic Group Development Framework (EGDF) has been prepared (as part of ESSF). The EGDF describes the screening requirements, the principles and procedures for consultation, and reporting and monitoring activities to be followed, includes guidelines for conducting free, prior and informed consultations with ethnic communities. This is to ensure that (a) any concerns they may have are identified and (b) opportunities to provide culturally appropriate benefits are considered. The consultation process will be applied during the planning of the subprojects. Page 11 Resettlement and land acquisition: The project is not expected to cause significant land acquisition nor resettlement. However, extension of on-grid electrification may involve minor land acquisition or restrictions (temporary or permanent) on land use. A Resettlement Policy Framework (RPF) has been prepared (as part of the ESSF) and will be applied to both the on- grid and the off-grid subprojects. Experience from the implementation of REP I suggested that the subproject may involve acquisition of extremely small parcels of land (e.g. a fraction of a square meter) for placement of concrete poles. In keeping with local practice, compensation will be made by EdL in the form of community improvement, typically as no-cost electrical hook-ups to community facilities (e.g. schools). EdL will keep documentation on amounts of land acquired for distribution poles in each village, as well as community improvements provided in lieu of direct compensation. Land acquisition and community compensation practices will be reviewed by the Bank in field supervision. Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4.01) [X] [ ] Natural Habitats ( OP / BP 4.04) [ ] [X] Pest Management ( OP 4.09 ) [ ] [X] Physical Cultural Resources ( OP/BP 4.11 ) [ ] [X] Involuntary Resettlement ( OP / BP 4.12) [X] [ ] Indigenous Peoples ( OP / BP 4.10) [X] [ ] Forests ( OP / BP 4.36) [ ] [X] Safety of Dams ( OP / BP 4.37) [ ] [X] Projects in Disputed Areas ( OP / BP 7.60) * [ ] [X] Projects on International Waterways ( OP / BP 7.50) [ ] [X] 10. Contact point Contact: Mr. Jie Tang Title: Sr. Energy Spec. (EASTS) Tel: 5778+8347 Email: jtang@worldbank.org Location: World Bank Office, Bangkok, Thailand 11. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 12