Document of The World Bank Report No: ICR00002312 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44440 TF-94257) ON A CREDIT IN THE AMOUNT OF SDR 91.1 MILLION (US$ 150 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR A RURAL DISTRIBUTION PROJECT December 24, 2013 Vietnam Sustainable Development Unit Vietnam Country Department East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2008) Currency Unit = Vietnam Dong (VND) 16,110 VND = US$ 1 US$ 1.646542 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AusAID Australian Agency for International Development LDU Local Distribution Utility CPC Central Power Corporation (formerly PC3) LV Low Voltage CPS Country Partnership Strategy MV Medium Voltage DNPC Dong Nai Power Company MVA Mega Volt Ampere DPO Development Policy Operation NPC Northern Power Corporation (formerly PC1) EIA Environmental Impact Assessment NPT National Transmission Company EMDP Ethnic Minority Development Plans NPV Net Present Value EMPF Ethnic Minority Policy Framework PAD Project Appraisal Document EMS Environmental Monitoring System PAH Project Affected Household EPTC Electricity Power Trade Unit PC Power Corporation (or Power Company) ERR Economic Rate of Return PDO Project Development Objective EVN Electricity of Viet Nam PFRP Policy Framework for Resettlement Plans FIRR Financial Rate of Return PIU Project Implementation Unit Genco Generation Company PMU Project Management Unit GOV Government of Vietnam RCM Retail Competitive Market HDPC Hai Duong Power Company RD Rural Distribution HH Households ROW Right of Way HPPC Hai Phong Power Company RP Resettlement Plans IDA International Development Association SEDP Socio-economic Development Plan IFR Interim Financial Reports SEDS Socio-economic Development Strategy IFRS International Financial Reporting Standards SEM Strategy for Ethnic Minorities km Kilometer SPC Southern Power Corporation (formerly PC2) KVA Kilo Volt Ampere VCGM Vietnam Competitive Generation Market KWh Kilowatt hour WCM Wholesale Competitive Market   Vice President: Axel von Trotsenburg Country Director: Victoria Kwakwa Sector Manager: Jennifer J. Sara Project Team Leader: Hung Tan Tran ICR Team Leader: Tendai Gregan ii VIETNAM Rural Distribution Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ........................................................... 1 2. Key Factors Affecting Implementation and Outcomes ........................................................... 8 3. Assessment of Outcomes ...................................................................................................... 15 4. Assessment of Risk to Development Outcome ..................................................................... 20 5. Assessment of Bank and Borrower Performance.................................................................. 21 6. Lessons Learned.................................................................................................................... 24 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....................... 26 Annex 1. Project Costs and Financing ...................................................................................... 27 Annex 2. Outputs by Component .............................................................................................. 28 Annex 3. Economic and Financial Analysis ............................................................................. 45 Annex 4. Bank Lending and Implementation Support/Supervision Processes ......................... 49 Annex 5. Beneficiary Survey Results ....................................................................................... 51 Annex 6. Stakeholder Workshop Report and Results ............................................................... 52 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ................................. 53 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ................................... 62 Annex 9. List of Supporting Documents .................................................................................. 63 MAP iii A. Basic Information Rural Distribution Country: Vietnam Project Name: Project Project ID: P099211 L/C/TF Number(s): IDA-44440,TF-94257 ICR Date: 10/16/2013 ICR Type: Core ICR SOCIALIST Lending Instrument: SIL Borrower: REPUBLIC OF VIETNAM Original Total XDR 91.10M Disbursed Amount: XDR 81.26M Commitment: Revised Amount: XDR 91.10M Environmental Category: B Implementing Agencies: Northern Power Corporation (NPC, formerly PC1) Southern Power Corporation (SPC, formerly PC2) Central Power Corporation (CPC, formerly PC3) Hai Phong Power Company (HPPC) Hai Duong Power Company (HDPC) Dong Nai Power Company (DNPC) Electricity of Viet Nam (EVN) Co-financiers and Other External Partners: AusAid B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/09/2006 Effectiveness: 03/16/2009 03/16/2009 Appraisal: 12/19/2007 Restructuring(s): Approval: 05/22/2008 Mid-term Review: 12/15/2010 02/21/2011 Closing: 06/30/2013 06/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory iv C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Power 100 100 Theme Code (as % of total Bank financing) Rural services and infrastructure 100 100 E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg James W. Adams Country Director: Victoria Kwakwa Ajay Chhibber Sector Manager: Jennifer J. Sara Hoonae Kim Project Team Leader: Hung Tan Tran Hung Tien Van ICR Team Leader: Tendai Gregan ICR Primary Author: Tendai Gregan F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the proposed project is to improve the reliability and quality of medium voltage service to targeted retail electricity distribution systems. The project will achieve this though investment in rehabilitating and increasing the capacity of existing distribution lines and substations and standardizing them to 22, 35 and 110 kilovolts (kV). v It will enable distribute systems to meet the growing demand more efficiently, provide better quality and quantity of electric power for productive uses, and reduce power system losses. Technical assistance will complement the physical investment by supporting the development of the PCs into modern power distribution utilities. Revised Project Development Objectives (as approved by original approving authority) The development objectives and key indicators were not revised. (a) PDO Indicator(s) Formally Original Target Actual Value Achieved Revised Indicator Baseline Value Values (from at Completion or Target approval documents) Target Years Values Interruptions in MV service at MV/LV transformer, in the project areas net of interruptions Indicator 1 : caused by failure of upstream transmission system or power shortage: Number/Duration (hours) PC1: 285/570 PC1: 250/ 490 PC1: 194/ 410 PC2: 1,954/5,519 PC2: 1,283/3,957 PC2: 328/334 Value PC3: 110/48 PC3: 50/20 PC3: 6.2/7.4 quantitative or PC Hai Phong: 10/22 PC Hai Phong: 0/0 PC Hai Phong: 0/0 Qualitative) PC Hai Duong: 309/78.5 PC PC Hai Duong: 250/60 PC Hai Duong: 245/55 Dong Nai: 48/19 PC Dong Nai: 38/14 PC Dong Nai: 36/12.5 Date achieved 12/31/2008 06/30/2013 03/31/2013 At project completion, the reduction of power interruptions to MV service at the MV/LV Comments transformer level – in both the number and duration – surpassed the original target values in (incl. % all six project areas. That is, this indicator was fully (100%) achieved. PC1, PC2 and PC3 achievement) exceeded their original reliability targets by a wide margin, and the remaining PCs either achieved or just exceeded their targets. Indicator 2 : Losses of MV system in the project areas (percent) PC1: 7% PC1: 6.0% PC1: 5.9% PC2: 5.42% PC2: 4.11% PC2: 3.0% Value PC3: 6.84% PC3: 5.24% PC3: 4.76% quantitative or PC Hai Phong: 7.9% PC Hai Phong: 5.0% PC Hai Phong: 5.0% Qualitative) PC Hai Duong: 6.4% PC Hai Duong: 5.6% PC Hai Duong: 5.45% PC Dong Nai: 4.9% PC Dong Nai: 4.7% PC Dong Nai: 4.34% Date achieved 12/31/2008 06/30/2013 03/31/2013 Comments 100% of the targeted reductions in MV system losses were achieved, with achieved (incl. % reductions in MV system losses actually exceeding targets in five of the six project areas. achievement) Voltage excursions outside 200-240 Volts at MV/LV transformer, in the project areas: Indicator 3 : Number, duration PC1: 600/4,800 C1: 30/ 240 PC1: 30/ 230 PC2: 2,232/3,150 PC2: 381/655 PC2: 0/0 Value PC3: 214/205 PC3: 70/20 PC3: 65/18 quantitative or PC Hai Phong: 112/20 PC Hai Phong: 50/10 PC Hai Phong: 50/10 Qualitative) PC Hai Duong: 150/35 PC Hai Duong: 80/15 PC Hai Duong: 80/15 PC Dong Nai: 50/2.5 PC Dong Nai: 38/1.9 PC Dong Nai: 0/09 Date achieved 12/31/2008 06/30/2013 03/21/2013 Comments The quality of power supplied to the six project areas improved dramatically, when measured (incl. % at the MV/LV transformer level, as demonstrated by the fact that voltage excursions outside achievement) the 200-240 Volt band fell in both number and duration and 100% of the original targets were vi achieved. Indicator 4 : Consumption in the project rural areas (KWh) PC1: 1.7x10^9 PC1: 2.4x 10^9 PC1: 3.3x 10^9 PC2: 4.6x10^9 PC2: 8.1x10^9 PC2: 27.7x10^9 Value PC3: 211x10^6 PC3: 464x10^6 PC3: 466x10^6 quantitative or PC Hai Phong: 278x10^6 PC Hai Phong: 360x10^6 PC Hai Phong: 360x10^6 Qualitative) PC Hai Duong: 350x10^6 PC Hai Duong: 550x10^6 PC Hai Duong: 570x10^6 PC Dong Nai: 172x10^6 PC Dong Nai: 345x10^6 PC Dong Nai: 543x10^6 Date achieved 12/31/2008 06/30/2013 03/31/2013 Comments 100% of targets achieved. Total electricity consumption in the project’s rural areas exceeded (incl. % targets in all six distribution networks. Standing out is the energy consumption in rural parts achievement) of PC2 (CPC), which at 27.7GWh was 3.4 times higher than the 8.1GWh target for PC2. Indicator 5 : Percentage of MV lines overloaded in the project areas PC1: 25% PC1: 10% PC1: 9.5% PC2: 15% PC2: 10% PC2: 0% Value PC3: 6% PC3: 0% PC3: 0% quantitative or PC Hai Phong: 15% PC Hai Phong: 0% PC Hai Phong: 0% Qualitative) PC Hai Duong: 12% PC Hai Duong: 5% PC Hai Duong: 4.5% PC Dong Nai: 2% PC Dong Nai: 1% PC Dong Nai: 0% Date achieved 12/31/2008 06/30/2013 03/31/2013 Comments 100% achieved, with actual reductions in overloaded MV lines in project areas either meeting (incl. % or exceeding original targets. These reductions in line overloading contribute to improved achievement) reliability of supplies and improved electrical safety. Indicator 6 : Percentage of MV transformers overloaded in the project areas PC1: 34% PC1: 12% PC1: 10% PC2: 15% PC2: 10% PC2: 0% Value PC3: 8% PC3: 0% PC3: 0% quantitative or PC Hai Phong: 12% PC Hai Phong: 0% PC Hai Phong: 0% Qualitative) PC Hai Duong: 15% PC Hai Duong: 5% PC Hai Duong: 4% PC Dong Nai: 0.61% PC Dong Nai: 0.45% PC Dong Nai: 0% Date achieved 12/31/2008 06/30/2013 03/31/2013 Comments (incl. % 100% of the targeted reductions in overloading of MV transformers were achieved. achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Distribution lines rehabilitated or newly constructed (km) under project: PC1, PC2, PC3, Indicator 1 : PC Hai Phong, PC Hai Duong, PC Dong Nai PC1: 472.7 PC1: 989.1 PC2: 617.4 PC2: 1,571.4 Value PC3: 387.3 PC3: 451.1 (quantitative NA PC Hai Phong: 74.4 PC Hai Phong: 75 or Qualitative) PC Hai Duong: 29.99 PC Hai Duong: 35.5 PC Dong Nai: 124 PC Dong Nai: 141.5 Date achieved 12/31/2008 06/30/2013 03/31/2013 Comments 100% achievement of the original targeted increase in length of distribution lines either (incl. % rehabilitated or newly built, across all project areas. PC1 achieved more than twice its achievement) target, and PC2 2.5 times its target. These new lines are constructed to better quality than vii many of the lines they replace, which benefits customers in terms of reliability and of supply and electrical safety. Distribution substations rehabilitated or newly constructed (KVA), under projects: PC1, Indicator 2 : PC2, PC3, PC Hai Phong, PC Hai Duong, PC Dong Nai PC1: 139,511 PC1: 367,790 PC2: 17,888 PC2: 105,530 Value PC3: 39,875 PC3: 64,970 (quantitative NA PC Hai Phong: 0 PC Hai Phong: 0 or Qualitative) PC Hai Duong: 10,440 PC Hai Duong: 10,500 PC Dong Nai: 7,920 PC Dong Nai: 72,410 Date achieved 12/31/2008 06/30/2013 03/31/2013 All of the targets for rehabilitating or building new distribution network substations were Comments achieved during the course of the project. In four of the five PCs, targets were exceeded, (incl. % thereby extending the reliability benefits of improved transformer capacity and power achievement) system reliability to a broader set of rural electricity consumers. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/16/2009 Satisfactory Satisfactory 0.00 2 06/25/2010 Satisfactory Satisfactory 51.38 3 06/28/2011 Satisfactory Satisfactory 76.26 4 03/25/2012 Satisfactory Satisfactory 96.60 5 12/01/2012 Satisfactory Satisfactory 112.56 6 06/25/2013 Satisfactory Satisfactory 122.82 H. Restructuring (if any) Not Applicable I. Disbursement Profile viii 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and Sector Context The project focused on improving the quality, reliability and efficiency of electric power services in rural Vietnam, and thereby helping to improve productivity in the power sector and in the economy as a whole. Vietnam’s rapid economic growth and electrification in the period 1996 to 2007 resulted in rising demands for electricity, which strained supplies and adversely affected the quality and reliability of electricity supply; particularly in rural areas. The aims of this project supported both the Government of Vietnam’s (GOV) Socio- economic Development Plan for 2006 - 2010 and the Bank's Country Partnership Strategy (CPS Report 38236-VN) for the same period. Both aim to sustain high economic growth to reach middle-income status by 2010 while improving social achievements, upholding social coherence, and sustaining the natural resource base. The project sought to contribute to improving Vietnam's electric power service provision and thereby help to improved Vietnam’s international competitiveness by boosting productivity in the power sector and in the economy as a whole. Gradual reforms to Vietnam’s power sector have been underway since 2005. The objective of these reforms is to improve efficiency of the power sector, through structural separation of EVN into separate functional business units, commercialization, the introduction of competition in generation and effective regulation. The reforms build on the Electricity Law (2005) and the Power Sector Reform Roadmap specified in the PM Decision 26 in 2006 (amended by PM Decision 63 of November 08, 2013) that defines a three phase gradual approach to sector reform with each phase split into two stages: an initial pilot to test and improve the design and then full implementation.  Phase 1 (2005-2014): Introduction of competition among state-owned generators through the establishment of the Vietnam Competitive Generation Market (VCGM), in which generators sell to a Single Buyer.  Phase 2 (2015-2022): Expansion of competition at the wholesale level –- Wholesale Competitive Market (WCM), allowing generators to sell electricity to multiple wholesale purchasers including PCs and qualified large customers.  Phase 3 (from 2023): Full competition by the introduction of Retail Competitive Market (RCM), in which the PCs’ monopoly as retail suppliers of small and medium sized customers is phased out. 1 In coordination with the restructuring of the power sector, establishment of cost-reflective tariff system, and promotion of demand side efficiency measures, the phased approach aims to ensure stable power supplies with adequate level of investment, improve efficiency of the sector performance and achieve reasonable price levels. The condition of Vietnam’s rural power supplies at the time of appraisal was poor, with frequent interruptions in supply arising from power quality issues, including: i) interruptions in service at the Medium Voltage (MV) level arising from overloading of transformers; ii) voltage excursions outside of 200-240 volts in the MV and Low Voltage (LV) networks; iii) overloading of MV distribution lines; iv) older distribution lines and substations requiring rehabilitation. The consequences of these power quality and reliability issues in rural Vietnam included: a) frequent and long disruptions to power supplies adversely affecting economic activities and the delivery of services to rural communities; b) damage to customer’s electrical equipment from voltage excursions; c) low levels of electrical consumption in rural areas; d) electrical losses being inefficiently high, thereby reducing the efficiency of power supplies across the country. At the time of appraisal there were – and continue to be – requirements for massive investments in all aspects of Vietnam’s power sector, simply to keep up with its rapidly growing power demands and to support ongoing economic development. Four critical challenges for Vietnam’s power sector at the time of appraisal were: 1. Optimizing power investments - particularly for generation; 2. Financing the investments that must be made; 3. Implementing the reforms in the power industry and restructuring EVN; and 4. Improving access and service quality. The Rural Distribution project supported Vietnam in addressing these challenges through:  Supporting network investments that form part of optimized power system plans;  Bolstering capacity in power system planning, load forecasting, demand side management;  Financing needed investments in the rural distribution network and in supporting the implementation of commercialization at power companies that would assist in them on attracting private sector finance;  Assisting in the implementation of structural reforms of the Vietnam power sector, in particular through the corporate development of PC1, PC2, and PC3, so that they can in future act as independent participants in the evolving power market.  Improving access and service quality, especially in rural areas. Rationale for Bank Assistance There were three primary reasons for the Bank’s assistance with this project. First, it was consistent with the strong and deep engagement that IDA has had with Vietnam since the late 1990s, covering the full range of power sector issues. The Bank 2 has achieved this through a combination of economic and sector work, technical assistance and investment lending. There has been a rich and diverse dialogue centered on expanding and upgrading power service and supporting long-term reforms, backed by a lending program designed to support investment needs. This twin track approach of policy development and lending within a well-defined but flexibly-structured program has proved effective in achieving major impacts in generation, transmission and distribution, private sector participation in generation, rural electrification, renewable energy and demand side management. Second, in the early years several donors financed rural electrification, often focusing on specific geographic areas of Vietnam. Improving access is, however, a long term and complex process. IDA complemented these early investments, and developed a comparative advantage, particularly as the issues have transitioned from traditional rural electrification - connecting large numbers of consumers – to the more complex combination of policy, management and physical outcomes. While other donors and multilateral institutions could, and are welcome to, parallel finance investments, there are none that were willing to undertake IDA's pivotal role over the long term. Third, this project was consistent with IDA’s agreed ten-year power sector program with Vietnam, which included four discrete operations that prioritize and deal selectively with the issues while underpinning GoV's long term objective of universal access. This RD project was the third in a planned series of four. The first Rural Energy Project (Cr. 3358- VN, closed FY07) focused on increasing the number of basic connections. The second Rural Energy Project (Cr. 4000-VN, FY05, ongoing) addresses rehabilitation of the existing LV systems and the development of institutions and actors to ensure service delivery at the retail level. This Rural Distribution (RD) project focused on the improvement of the medium voltage systems and support the corporate development of the electric power distribution entities, known as Power Companies (PCs). The fourth operation, the Distribution Efficiency Project (Cr.5156-VN, started from FY13) supports Vietnam’s PCs in providing quality and reliable electricity services and to reduce greenhouse gas emissions through demand side response and efficiency gains. The RD project thus forms a key part of the country’s rural electrification program, with which the World Bank has been a major strategic partner since the late 1990s. Vietnam’s concerted effort with rural electrification has achieved remarkable results in providing access to more than 80 million people in over 33 years — from 1.2 million having access in 1976 (2.5% of population) to 82 million having access in 2012 (98% of population). The electrification program and its priorities have evolved over time from providing simple connections, to developing and implementing strategic plans to securely and efficiently meet rapidly growing demands for energy and ensuring quality of supplies. The RD project fits into the fifth and sixth phases of Vietnam’s 38 year electrification program: “focus on quality and regulation” (Phase 5) and “consolidation for the last mile” (Phase 6). During Phase 5 (2005 to 2008), Vietnam’s government focused on quality of supply and power sector regulation, in addition to continued expansion of electricity access. There was also: (i) greater emphasis on the enforcement of regulations; (ii) a shift in focus from network extension to rehabilitation; and (iii) direct government support for extending 3 electricity access, particularly to minorities and those in remote areas. The government’s focus was not only on increasing electrification rates, but also on ensuring efficiency and addressing institutional shortcomings in the sector. The Bank’s RE2 project was developed to support these government objectives. Phase 6 (Consolidation for the last mile) extends from 2009 to now and the focus of Vietnam’s rural electrification program has shifted to ensuring sustainability of the rural supply business. In parallel, the government is pushing for greater accountability, working to determine the most appropriate strategies for extending access to those without electricity, and ensuring affordability of electricity to the poor. Key milestones include: (i) tariff reforms (Prime Minister’s Decision 21, issued February 2009); (ii) approval of the Vietnam Distribution Code (2010); and (iii) consolidation of rural electricity distribution and retail businesses into larger, more financially robust, PCs. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objective of the project is to improve the reliability and quality of medium voltage service to targeted retail electricity distribution systems.1 The project will achieve this through investment in rehabilitating and increasing the capacity of existing distribution lines and substations and standardizing them to 22, 35 and 110 kilovolts (kV). It will enable distribution systems to meet the growing demand more efficiently, provide better quality and quantity of electric power for productive uses, and reduce power system losses. Technical assistance will complement the physical investment by supporting the development of the PCs into modern power distribution utilities. The six key performance indicators at Project Development Outcome level were: 1. Reduction in interruptions in MV service at MV/LV transformer, in the project areas net of interruptions caused by failure of upstream transmission system or power shortage: number/duration (hours); 2. Decrease in losses of MV system in the project areas (percent); 3. Reduction in voltage excursions outside 200-240 Volts at MV/LV transformer, in the project areas, both in number and duration; 4. Increase in energy consumption in the project rural areas (KWh); 5. Reduction in percentage of MV lines overloaded in the project areas; and 6. Reduction in percentage of MV transformers overloaded in the project areas. 1 There is an inconsequential discrepancy in the wording of the PDO in the Project Appraisal Document (PAD) and the Financing Agreement (FA). The PDO in the FA is: “The objective of the Project is to improve the reliability and quality of medium voltage service to targeted retail electricity distribution systems within rural areas of Vietnam” [italics added]. It appears a slight change to the PDO wording in the FA was made for purposes of legal precision. The ICR uses the PDO from the PAD because it was always implicit that all the “targeted retail electricity distribution systems” were in rural areas of Vietnam, and indeed all the investments actually made were consistent with the FA. 4 The two key performance indicators at the Intermediate Outcome level were:  Increase in distribution substations rehabilitated or newly constructed (KVA), under projects: PC1, PC2, PC3, PC Hai Phong, PC Hai Duong, PC Dong Nai;  Increase in distribution lines rehabilitated or newly constructed (km) under projects: PC1, PC2, PC3, PC Hai Phong, PC Hai Duong, PC Dong Nai. Section F of the data sheet (see above) lists both the development objective level and the intermediate outcome level indicators for each component of the project. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The development objectives and key indicators were not revised. 1.4 Main Beneficiaries The project’s direct beneficiaries are electricity consumers in the rural areas of Vietnam targeted by the project. The benefits of improving the reliability and quality of power supplies in MV and LV systems accrue through reduced power interruptions, enhanced economic opportunities (through increased productivity in energy intensive industries), increased access and energy consumption, and relatively lower costs of energy due to efficiency improvements. The project also sought to indirectly benefit all energy consumers by enhancing the capability of PCs to: i) develop their power systems using least cost capacity expansion planning methods; and ii) operate commercially, including improving customer services. 1.5 Original Components (as approved) The project had seven components, six of which were aimed at improving MV service in the territories of participating PCs. Each of the six components contained two types of subprojects involving new construction, rehabilitation, strengthening or a combination of any of the three, of: (i) all of the 22 or 35 kV system requiring improvements within a single province falling within the territory of a participating PC; or (ii) a single substation or line at the 110 kV level feeding the 22/35 kV systems in rural areas within a province or provinces falling in the territory of a participating PC. The seventh component supported the corporate development of selected PCs through technical assistance. The seven components are listed below, with financing amounts at the time the project was approved. Component 1: Improvement of the rural distribution system in the Northern Region (Total cost $66.83 million, of which IDA $47.44 million). This component aimed to rehabilitate and strengthen rural distribution networks in about 15 provinces in the northern region of Vietnam, which are the responsibility of Power Company No.1 (PC1). Component 2: Improvement of the rural distribution system in the Southern Region 5 (Total cost $36.99 million, of which IDA $27.73 million). This component aimed to rehabilitate and strengthen rural distribution networks in about 19 provinces in the southern region of Vietnam, which are the responsibility of Power Company No.2 (PC2). Component 3: Improvement of the rural distribution system in the Central Region (Total cost $63.14 million, of which IDA $46.53 million). This component sought to rehabilitate and strengthen rural distribution networks in about 11 provinces in the central region of Vietnam, which are the responsibility of Power Company No.3 (PC3). Component 4: Improvement of the rural distribution system in the area of Hai Phong City (Total cost $1 7.85 million, of which IDA $13.16 million). This component aimed to rehabilitate and strengthen rural distribution networks in the rural areas and islands surrounding Hai Phong City, in the north of Vietnam, which are the responsibility of Hai Phong Power Company (PC Hai Phong). Component 5: Improvement of the rural distribution system in Hai Duong Province (Total cost $6.45 million, of which IDA $5.06 million). This component aimed to rehabilitate and strengthen rural distribution networks of Hai Duong Province in the northern region of Vietnam, which are the responsibility of Hai Duong Power Company (PC Hai Duong). Component 6: Improvement of the rural distribution system in Dong Nai Province (Total cost $11.38 million, of which IDA $8.59 million). This component aimed to rehabilitate and strengthen rural distribution networks in Dong Nai Province in the southern region of Vietnam, which are the responsibility of Dong Nai Power Company (PC Dong Nai). Component 7: Corporate development of PCs (Total cost $4.5 million, of which IDA$1.5 million and AusAID $3 million). This component aimed to support the corporate development of PCs 1, 2 and 3. It focused on building capacity of the PCs so that they could in the future act as independent participants in the power market as it develops according to the Government's road map for reform. Five main areas were addressed:  Developing PCs' financial management practices for greater autonomy;  Increasing capacity to forecast market development and to undertake commercially-based investment decisions;  Planning and implementing monitoring systems for performance standards;  Supporting PCs as they prepare for further reform of the power sector; and  Preparation of plans for completing GoV's program of universal electrification. Phasing of project implementation Each of the six investment components would be executed in two phases. The first phase consisted of subprojects that had been appraised and were ready for implementation upon approval by the World Bank's Board of Executive Directors. The second phase comprised subprojects that are brought forward by implementing agencies when their preparation is complete. IDA financing of the second phase subprojects were on a first-come, first appraised basis; until all funds allocated to the component were committed. The technical assistance component took place in a single phase over the lifetime of the project. 6 1.6 Revised Components The seven components remained the same, but the number of sub-projects under each component evolved during project implementation. This is discussed in Section 1.7. 1.7 Other Significant Changes The overall structure of the project did not change during implementation, with the seven components remaining in place. However, there were significant changes to: a) the scale and scope of each component; b) the schedule of implementation; and c) the funding allocations across the first six investment components. The scale and scope of the project increased after significant cost savings, arising from competitive tendering for goods and works, enabled extra sub-projects to be developed and approved. These extra sub-projects went beyond the original scope of the Phase 1 and Phase 2 investments envisaged when the project was approved in 2008. The original schedule of project implementation was revised, following: a) the delay in project effectiveness;2 and b) broader power sector reforms contributing to delays in the implementation Component 7 (Technical Assistance). Despite the delay in project effectiveness and start up, all implementing agencies were able to execute their capital works sub-projects as per original plan and have them completed and commissioned by June 30, 2013. In short, the time lost with the delay in the start - up was made up and this overall ‘catch up’ occurred even with additional investment sub-projects being added on. Two important changes took place early on during the implementation period: 1. Electricity tariff reform was introduced in 2009 (PM Decision 21) establishing the market mechanism for the annual update of electricity tariffs and the adoption of national incremental block tariff for all residential consumers (of PCs and of Local Distribution Utilities (LDUs)), and requiring LDUs to prepare business plans and those unable to prove financial viability under the new tariff regime be absorbed by PCs; and 2. Reform of the distribution sector in 2010, with the establishment of 5 Power Corporations (PCs) created from existing Power Companies. A key reason for this consolidation was to ensure distribution companies had sufficient scale to upgrade and continue to improve the efficiency of their distribution network services. These reforms are considered to be positive developments that contributed to improving the sustainability of the Vietnam’s power sector and its ability to efficiently expand to reliably meet load growth. Four other key power sector reforms during the course of project implementation were: 1. In 2009, the GoV issued the principles for the power sector structure to be in place during the Vietnam Competitive Generation Market (VCGM). The National 2 The project became effective on March 16, 2009, four months after it was signed on November 4, 2008. The project was approved by the World Bank Board on May 22, 2008. 7 Transmission Company (NPT) was created as a subsidiary of EVN, concentrating on the investment, operation and maintenance of the national high voltage transmission grid. The consolidation of distribution companies, including LDUs, into five large PCs in 2010 was a key step in the move to VCGM. 2. The VCGM commenced full operation in July 2012 with participation of 48 direct trading generators with total capacity of 11,630 MW, which corresponds to approximately 35% of the total national system capacity. VCGM spot market provides generation price signals that both reflect daily supply and demand balance and impacts of seasonal change of hydropower resources. 3. In 2012, the GoV decided to transfer ownership and operations of all EVN power plants (except for strategic multi-purpose hydropower plants) to three generation companies (Gencos) of sufficient scale and diversification of generation technologies to participate in the VCGM and to develop generation projects. It further limits the scale of any generator to 25% of the generation capacity installed in the power system, and establishes that there should not be shared commercial interest between generation, the single buyer (EVN Electricity Power Trade Unit – EPTC) and NPT. 4. In 2013, three Gencos were created as corporations fully owned by EVN. Each Genco owns subsidiary power plants, and sells power into the VCGM. The ongoing structural reforms to Vietnam’s power sector require the PCs to commercialize and adapt their operations toward operations in a market based environment. Component 7 of the project supported the development of capacity of the PCs to make this transition over time. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The project quality at entry was satisfactory. First, the project responded to the priorities and wishes of the GoV and built on the lessons of earlier power sector programs in Vietnam by having: 1. A clear roadmap, with objectives focused on remedying some of the most pressing weaknesses in the country’s rural distribution network; 2. A design that sought to ensure decentralized implementation and ownership, and flexibility to allow any cost savings during the course of implementation to be switched across sub-projects; 3. Cost sharing arrangements that were appropriate to the financial capacity of participants to sustain debt servicing requirements; and 4. Effective consultations and strong commitments from the large number of parties involved in implementation; including PCs, their Provincial Supply Departments (PSDs, for PCs 1, 2 and 3) and the LDUs. 8 Second, the design supported rapid start-up and by the time of project negotiations, 25 of the 54 sub-projects identified for implementation (by value $123 million out of $202 million in total) had obtained approval for their feasibility studies and about 50 per cent of approved subprojects had detailed designs and procurement documents approved. Such readiness was unusual in the Vietnam portfolio at the time. However, despite this readiness for implementation, in the twelve months after the project was approved by the Board, there had been no disbursements due to the five month delay in the project signing and effectiveness. Given Vietnam’s country context, a five month delay in project effectiveness is not rare. The cost allocation across investment components was designed to be flexible, so that during implementation any subproject could be added or substituted, provided that the changes proposed were consistent with the project objective. This flexibility was used soon after the project became effective and extra subprojects were added by PCs. By March 2010, most of the contracts planned in the appraisal stage had been signed and it was apparent that the whole credit allocation for each PC would not be fully utilized. The PCs sought to use the residual funds for new subprojects, which were subsequently prepared, appraised and approved. The residual funds arose from the savings from strong competition in the tendering of goods and works. However, these savings were partly offset by the appreciation of the US$ against the SDR between April 2008 and March 2009, which resulted in a reduction in total SDR91.1 million in IDA funds expressed in US$ from US$150 million to about US$139 million. At appraisal, the key risks to the Development Objective were identified as being related to: (i) market restrictions having a negative impact on power system planning; (ii) weak financial capacity of the PIUs; (iii) energy shortages or surpluses due to demand and supply forecasting errors; (iv) fraud or corruption resulting in cost overruns or poor quality outputs or subprojects. The key risks to Implementation Progress identified during appraisal were: (i) implementation and disbursements starting slowly; and (ii) fiduciary compliance issues. A shortcoming was that the PDO definition and key performance indicators (KPIs) did not adequately cover capacity building and technical assistance elements of the project (Component 7); most likely because it was a small share of the overall project costs and was of secondary consideration to the capital investments in terms of immediate impacts on rural electricity supplies. There was no review of quality at entry by the Bank’s Quality Assurance Group (QAG). 2.2 Implementation Four of the six implementing agencies had previous experience in implementing a variety of IDA financed projects — including RE2 (implemented by PC1, PC2 and PC3), SEIER (PC1, PC2, PC3, DNPC), TD2 (PC3) — and were familiar with Bank procedures. The other two implementing agencies (HDPC and HPPC) had not implemented Bank assisted projects before, and had to acquire an understanding of the fiduciary requirements, processes and procedures of the Bank – both ahead of and during implementation. 9 Supervision missions, and the March 2011 Mid-Term Review, highlighted a number of issues for management attention, as detailed below. Delay in project effectiveness  The delay in signing and making effective the Financing Agreement resulted in a 10 month elapsed time between the project approval by the World Bank Board on May 22, 2008 and effectiveness on March 16, 2009.3 This delay undercut earlier efforts to ensure a rapid start-up of the project.  Despite the effectiveness delay, by the time of the Mid-Term Review the six PCs had made substantial progress in project implementation, with $65 million (or 44.8%) of the $142 million in project funds disbursed by March 30, 2011 and all the subprojects, including those under Phase 2 and Phase 3, having been approved. Strong competition for goods and works generated significant savings  At the time of the Mid-Term Review, the tendering of goods and works contracts had on average generated savings of between 10-15% of the official pre-bid cost estimates. These cost savings were a key reason why additional (Phase 2 & 3) subprojects could be financed using the available project finance. Banking credit crunch had negative effect on construction timeframes  The banking credit crunch in Vietnam in the period 2011 to 2013 resulted in a number of works contractors having severe difficulties in accessing lines of credit to finance construction works ahead of submitting claims for payment once construction milestones were met. In some cases the credit squeeze led to significant delays in the implementation of subprojects because contractors could not finance construction works. Some of these delays were so significant that a number of works contracts had to be terminated by the implementing agencies and the works contracts re-tendered for award. This resulted in further delays in the completion of sub-projects in cases where there were inadequacies in the documentation and handover process between the original contractor and the new one. Two factors had a positive impact on the implementation and outcomes of the project: 1. Community supervision of environmental safeguards. Community supervision proved to be a very effective means of ensuring community ownership, minimizing disputes, and having rapid and ongoing compliance with environmental management plans. Community supervision worked well for 22/35 kV system subprojects. 2. Flexibility of project design. The inherent project flexibility allowed it to adapt to unexpected changes in circumstances that arose during project implementation. 3 An effectiveness delay flag is triggered when the elapsed time between project approval and effectiveness is longer than nine months. 10 For example, during project implementation, the significant cost savings were flexibly used to deliver new investments that effectively increased the delivery of project benefits to a larger number of people than originally envisaged. There was no QAG review of the quality of supervision for this project. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The KPIs used in the project, both at the PDO outcome level and the Intermediate outcome level, were appropriate and will remain relevant and suitable into the future. The KPIs provide readily quantifiable measures of the physical PDO outcomes; specifically improvements in the quality of service, reliability of supply, efficiency of supply, and changes in the average consumption of electricity in the rural areas targeted by the project. The KPIs for intermediate outcomes were also straightforward and useful: i) Length of distribution lines rehabilitated or newly constructed (km) under the project; ii) Capacity of distribution substation rehabilitated or newly constructed (kVA) under the project. However, the six PDO level indicators and the two intermediate level KPIs in the results framework do not adequately cover Component 7 (Technical Assistance/Capacity Building). The design, collection and utilization of the M&E data for the project was carried out effectively by the PCs throughout the project and served a useful means of tracking both progress and measuring impacts of the investments financed by the project. 2.4 Safeguard and Fiduciary Compliance At appraisal, it was determined that the project triggered three safeguards policies, all of which were related to sub-components in the Transmission and Distribution System Expansion and Reinforcement activities of the PCs (Components 1 to 6), including:  OP/BP 4.01, Environmental Assessment;  OP/BP 4.12, Involuntary Resettlement; and  OP 4.20, Indigenous Peoples (which in Vietnam are referred to as Ethnic Minorities). The social and environmental impacts of the project are discussed below, together with a short assessment of compliance with the safeguards policy requirements. Social safeguards The RD project, like many rural electrification projects, caused modest land acquisition for the individual project affected household and small community-wide socioeconomic impacts. Many of the subprojects aimed to upgrade systems based on an existing right of way (ROW). The project was assessed as not causing culturally specific impacts on ethnic minority communities. The triggering of social safeguards policies OP/BP 4.12 (Involuntary Resettlement) and OP 4.20 (Indigenous Peoples) at project appraisal resulted in EVN and the PCs having to 11 prepare the following instruments to meet IDA’s social safeguards requirements: (i) a Social Assessment; (ii) a Policy Framework for Resettlement Plans (PFRP); (iii) a Strategy for Ethnic Minorities (SEM); and (iv) separate Resettlement Plans (RP) and Ethnic Minority Development Plans (EMDP) for each of the subprojects. There was a range of major challenges in carrying out land acquisition by PCs. The slow progress on land acquisition on sub-projects had a negative impact on the ability of implementing agencies to finalize construction contracts or resulted in delays once works had commenced. Some of the difficulties with land acquisition arose from weaknesses in the level of collaboration between PCs and local authorities (provincial, commune, and village) in terms of land acquisition and compensation. Other significant land acquisition challenges during the course of the project implementation were: (i) finalization of compensation for impacts in ROW; (ii) disagreements by affected households with proposed compensation rates; (iii) coordination with relevant agencies to finalize the administrative procedures around consultations and compensation. To improve the land acquisition process the following measures were taken: i) a strengthened working relationship between implementing PCs and local authorities; and ii) ensuring a smooth translation from approved safeguard documents (prepared by PCs) into actual implementation (performed by local authorities). In addition, independent monitoring reports were used as effective tools to track and improve the implementation of safeguard activities. A good example of the effectiveness of strengthened working relationship between PCs and local authorities is SPC, which found that once it began to closely collaborate with PPC the land acquisition process was significantly accelerated. At the end of the project, the overall compliance with social safeguard policies triggered by the RE project was satisfactory. Regarding OP 4.10 on Indigenous People, although this policy did not apply to all sub- projects, where relevant (typically in mountainous areas with ethnic minorities), implementing agencies were able to prepare Ethnic Minority Development Plan (EMDP) in accordance to the agreed Ethnic Minority Policy Framework (EMPF) of the project. Local community consultations on the EMDPs were conducted to ensure that the public was fully informed of the planned investment projects, their impacts, and safeguards arrangements. Independent monitoring consultants were also mobilized to oversee the execution of those social safeguard instruments. Given that most subprojects brought direct benefits to affected communities, local people were generally supportive of their implementation. The land acquisition and compensation activities by Implementation Agencies satisfactorily complied with OP 4.12, Involuntary Resettlement. At the time of project closing, the civil work of nearly all subprojects was completed, and had satisfactorily met the requirements of OP 4.12 (e.g. compensation payment, mobilization of independent consultant, etc.). Environmental safeguards 12 The project triggered OP 4.01 (Environmental Assessment) and its environmental issues were rated as Category B at project appraisal. Since each subproject was stand alone, each required a separate review of its environmental safeguards issues, through preparation of Environmental Assessments and Environmental Management Plans (EA/EMPs). The defined impacts included dust, noise pollution, soil erosion, traffic disturbance, and road damage; which are minor and could be mitigated effectively. The limited negative impacts were identified and mitigation measures were carried out by each PMU. The use of independent monitoring consultants throughout project implementation added capacity to support PCs in assessing environmental impacts, designing appropriate mitigation measures, and supervising compliance with the EMP and Safeguard Policy Framework. The environmental safeguards compliance of the project was satisfactory, with it being consistently in compliance with the environmental safeguard policies and environmental performance requirements. The Environmental Monitoring System (EMS) put in place operated effectively using a cooperative mechanism between contractors, PMUs, local authorities, and local communities. In general, any adverse environmental impacts or concerns were reported and solved with the participation of relevant stakeholders. Procurement At the time of appraisal, the overall project risk for procurement was assessed as moderate. The key issues and risks around procurement were seen to be: (i) potential understaffing in all PMUs, given their other procurement workload; and (ii) the PIUs under PC1’s PSDs, PC Hai Phong, PC Hai Duong and PC Dong Nai having inadequate knowledge and experience of the Bank’s procurement processes and how they would apply to their respective components. To mitigate these procurement risks during implementation, the following countermeasures were proposed: (i) procurement training for all implementing agencies at the start of the project; (ii) PC1 (now NPC) implementing training of its PSDs; (iii) procurement consultants being hired by PC Hai Phong, PC Hai Duong and PC Dong Nai; and (iv) procurement training, support and advice by the Bank’s procurement specialists during the course of project implementation. During implementation, the overall procurement performance of the project was satisfactory. The large and diverse range of subprojects required a mix of ICB contracting for goods and NCB contracting for works, and these were generally well executed by the PIUs using the Bank’s procedures. However, as discussed in Section 2.2., once contracts were entered into, difficulties sometimes arose when: (i) the provision of goods was not well coordinated with the works schedules; (ii) contractors encountered financial liquidity issues arising from the credit crunch and works were delayed; and (iii) works had to be re-tendered following prolonged difficulties in contractors meeting their obligations, in particular those faced with liquidity issues. During the project period no cases of fraud and corruption were detected. Financial Management 13 Financial management performance ranged between Moderately Satisfactory and Satisfactory throughout the Project period. Quarterly Interim Financial Reports (IFRs) submitted were acceptable to the Bank despite a few delays in timely submission. Audited financial statements and audit reports were generally submitted to the Bank on time and were of acceptable quality. With the exception of the noncompliance with some financial covenants — which has been a sector/corporate issue rather than being specific to the Project — the implementing agencies were proactive in dealing with the recommendations from the task team’s missions. Although FM aspects were generally in compliance with Bank procedures, there were a number of issues for improvement during the course of the project including: (i) quality of financial reporting oversight; (ii) accounting, financial reporting and expenditure verification on trust fund expenditures (TF094257); (iii) timely payment processing; and (iv) use of materials and equipment financed by the Project. There were clear indications that the quality of financial reports (both IFR and annual audited financial statements) has not been good. For example, during the course of the project there was at times: (i) inadequate accounting and financial reporting for the trust funds; (ii) lack of review of audit reports and audited financial statements before their submission to the Bank; and (iii) qualified entity audit reports. This signifies that the performance of the overall accounting function and the control framework has been below expectation, suggesting accounting and financial reporting supervision by both PCs and EVN management has been weak or lacking. For future projects it is recommended that EVN and the PCs explore the possibilities of: (i) establish an internal audit function in both the PCs and EVN; and (ii) EVN including accounting/financial reporting experts in the regular supervision missions to strengthen the control environment over PCs accounting and financial reporting. The EVN internal audit team or the experts would participate in project supervision missions and report to EVN management on the compliance of PCs against fiduciary requirements. Diversions of project materials and equipment to non-project activities and/or sites have been an ongoing problem with EVN and its subsidiaries, mainly due to the constraints to resolve emergency power outages. It is recommended that tighter inventory management processes be developed and adopted in future to avoid such diversions. Some significant delays to disbursements arose from the poor collaboration between the implementing agencies and the expenditure verification agencies (both VDB and State Treasury). These issues were only resolved late in the life of the project. It is recommended that for future projects, greater care and attention be given up front to establishing effective communications and collaboration between PCs and expenditure verification agencies, and that both MoF and EVN more closely monitor and supervise this collaboration. 14 2.5 Post-completion Operation/Next Phase Following completion and commissioning of new MV and LV network augmentations, the operation and maintenance of assets was transferred from the PMUs to the operational divisions of each PC. The sustainability of benefits arising from the project will be contingent on the power infrastructure in the project areas continuing to be capable of reliably meeting increased electrical loads over time. The financing of new investments across Vietnam’s power sector will require ongoing large annual investments, and the challenges of this are well understood. The capacity building provided by the Technical Assistance in the area of power system planning will contribute to sustaining the outcomes of the project. Other technical assistance provided through the course of the project has also bolstered institutional capacity in the areas of: a) economic and financial analysis; b) asset valuation and transfer procedures; c) using International Financial Reporting Standards; d) internal auditing; e) load forecasting, network planning, and network modeling; f) information technology and management information systems; g) procurement; h) project management; i) demand side management and smart grids; and (j) connecting wind turbines to the grid and managing their operation. The broader power sector reform agenda is also expected to contribute to sustaining reforms, including through: (i) critical assessments of the cost of service and revisions to electricity tariffs to recover costs; (ii) improvements in the financial management of PCs; (iii) regulatory reforms; and (iv) further commercialization of PCs. The ongoing engagement of the Bank in Vietnam’s power sector has a range of strategic follow up operations to this project, including: a) Energy DPO3, which supports the ongoing reforms to the power sector; b) Distribution Efficiency Project, which includes a pilot demand side management project in HCMC PC’s network; c) Trung Song hydropower project; and d) dialogue on options to finance generation capacity expansion. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The project objectives and design remain highly relevant to the development priorities of Vietnam. While Vietnam is close to achieving universal access to electricity, the quality and reliability of power supplies in rural areas deteriorates as electrical consumption in those areas rapidly grows from a low base. Vietnam’s Socio-economic Development Plan (SEDP) for 2011 – 2015 and its Socio-economic Development Strategy (SEDS) 2011-2020 both emphasize needed “breakthroughs” in relation to the development of market-based institutions, infrastructure, and more skilled human capital. The Bank’s Country Partnership Strategy (CPS) for Vietnam, covering the period FY2012 to FY2016 is aligned with both the SEDP and SEDS. This project contributes to those objectives because it has supported the ongoing power sector reform agenda, a key part of which is the commercialization of power sector institutions and the financing of new infrastructure to support Vietnam’s economic growth and development. 15 3.2 Achievement of Project Development Objectives The project has fully achieved its project development objective of improving the reliability and quality of MV service to targeted retail electricity systems. Targets for 47 out of 48 key performance indicators have already been achieved and/or exceeded. The Project contributed to improvement of reliability and quality of Medium Voltage (MV) service, as demonstrated by significant reductions achieved in project areas in: (i) Interruptions to MV service at MV/(Low Voltage) LV transformers: At project completion, the reduction of power interruptions to MV service at the MV/LV transformer level – in both the number and duration – surpassed the original target values in all six project areas. That is, this indicator was fully (100%) achieved. PC1, PC2 and PC3 exceeded their original reliability targets by a wide margin, and the remaining PCs either achieved or just exceeded their targets; (ii) Reductions in MV system losses: 100% of the targeted reductions in MV system losses were achieved, with achieved reductions in MV system losses actually exceeding targets in five of the six project areas. The average losses of MV system in the project area were reduced from 6.41% to 4.74% compared to the target of 5.1%. (iii) Reductions in both the number and duration of voltage excursions outside normal ranges at MV/LV transformers: The quality of power supplied to the six project areas improved dramatically, when measured at the MV/LV transformer level, as demonstrated by the fact that voltage excursions outside the 200-240 Volt band fell in both number and duration and 100% of the original targets were achieved. (iv) Reductions in the overloading of MV lines: 100% achieved, with actual reductions in overloaded MV lines in project areas either meeting or exceeding original targets. These reductions in line overloading contribute to improved reliability of supplies and improved electrical safety. Besides, 100% of the targeted reductions in overloading of MV transformers were achieved. The average percentage of MV lines overloaded in the project area was reduced from 12.5% to 2.33% compared to the target of 4.3%. In addition, the total electricity consumption in the project’s rural areas exceeded targets in all six distribution networks. Standing out is the energy consumption in rural parts of PC2 (CPC), which at 27.7GWh was 3.4 times higher than the 8.1GWh target. In total, 3,950.7km and 621,200kVA of 22kV-35kV power lines and distribution transformer substations were built and installed, compared to the target of 1,705km and 215,634kVA. Three subprojects were not completed by the closing date because they were included in the project scope later on during implementation in order to use the remaining available funds. The overall PDO achievement is not affected by results of those subprojects. Capacity of the 6 PCs has been improved and sound regulations and procedures of internal financial audit have been put in place. 16 The Rural Distribution project was completed on time, within budget, and with successful implementation of nearly all investment subprojects before the project closing date. The technical assistance activities in Component 7 supported capacity building objectives by improving capabilities in core areas needed for PCs to operate as commercialized and market-ready entities; including:  Financial Management — International Financial Reporting Standards (IFRS), asset valuation and transfer procedures, financial forecasting, internal audit;  Procurement — public procurement, use of INCOTERMS;  Project Management;  Economic and Financial Analysis of distribution network investments;  Regulatory Affairs — Performance Based Rate Setting;  Load Forecasting and Network planning — Load forecasting methods and their application, improving efficiency through Demand Side Management and smart grid technology, network load flow modeling, connecting wind farms to the grid;  Information Technology; and  Enhancing Customer Services. The Results Framework in the Data Sheet and Annex 2 describes the outcomes, outputs and achievements of each of the seven components of the project. 3.3 Efficiency An ex-post economic analysis has been undertaken of the investment subprojects of each PC. The input costs relate to the construction costs incurred and estimated lifecycle O&M costs. The benefits arise from the opportunity costs of unserved energy that would otherwise result if the investments did not occur and power interruptions in rural areas continued or worsened over time. The economic analysis for the project components was carried out using two scenarios: (i) with the project; and (ii) without the project. The 'with' project scenario includes the investment in the rural networks. The 'without' project scenario assumes that there is no investment for the rehabilitation and expansion of the MV networks, and consequently the power quality and reliability situation of the existing distribution system would further deteriorate. For the estimation of the economic indicators, namely ERR and NPV, the following assumptions were made for the ex-post analysis: (i) all the costs are expressed in constant 2007 prices; (ii) the capital investment costs are those actually incurred, measured at 30 June 2013, and analyses are made over a project economic life of 20 years (2013-2033); (iii) the cost for compensation, land acquisition and environmental mitigation are included in the economic cost of the project; (iv) the operation and maintenance costs are estimated at 2 percent of the investment costs; (v) the buying price of energy was assumed to increase 5 per cent each year; and (vi) EIRR of the project component is the discount rate at which the present value of the costs and benefits streams are equal, and the NPV is based on a discount rate of 10 percent, which is approximately the opportunity cost of capital in Vietnam. The results of the ex-post economic cost-benefit analysis are contained in Annex 3. In summary, the results indicate that all the investments were economically viable for all 17 components, with EIRRs ranging from around 1 % in the SPC area to 58% in CPC’s area (the Chan May 110kV substation). The ex-post financial analysis results in Annex 3 indicate that the FIRR on subprojects/components ranges from a low of 0% in the SPC area to over 30% on sub- projects in the CPC and NPC areas. No sensitivity analysis has been undertaken ex-post on how changes in key variables might impact the ex-post economic evaluation. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory The project achieved its project development objective of improving the reliability and quality of power services in selected rural areas of Vietnam, with investments having a positive EIRR. Improvements in reliability and quality of supply arising from the project contributed to an increase in average consumption across all in rural areas, but this was also affected by other investments elsewhere on the networks. The result is measurably improved quality and reliability of electricity services to customers in rural Vietnam. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The impacts of rural electrification in Vietnam are assessed in two World Bank studies (2011 and 2013), both of which used longitudinal survey data of rural households. The 2011 study concluded that the electrification of households in rural Vietnam has resulted in a better quality of life for many rural families.4 The benefits include: a) financial savings from reduced use of kerosene for lighting and batteries; and b) increased ownership of time-saving appliances, such as rice-cookers, freeing up time otherwise spent on household chores for other productive activities, as well as reading, socializing and leisure. The availability of electricity has also contributed to greater school enrollments for rural youth, increased farm productivity, and higher household incomes. The 2013 study contrasts electricity consumption and poverty between 2010 and 2012 using the Vietnam Household Living Standard Surveys of 2010 and 2012. 5 The key findings of the 2013 study include:  The poverty rate decreased in Vietnam from 20.7% in 2010 to 17.3% in 2012. The reduction in poverty occurred across all regions, in both urban and rural areas, and across ethnic minorities and the Kinh/Hoa majority of the population. In addition, poverty reduced across households with differing gender compositions. 4 World Bank 2011, “The Vietnam Rural Electrification Experience: State and People, Central and Local, Working Together”, The World Bank & Asia Sustainable and Alternative Energy Program (ASTAE), The World Bank, Washington DC. 5 World Bank 2013, “Note on Power Sector and Poor in Vietnam: Using the Vietnam Household Living Standard Surveys 2010 and 2012”, World Bank, Hanoi. 18  While access to electricity in rural Vietnam increased fractionally, from 96.4% of rural households being connected to the grid in 2010, to 96.6% in 2012, the average monthly consumption rose 10% from 79.6kWh to 87.6 kWh, and the share of rural household consuming less than 50kWh per month fell from 38.1% in 2010 to 34.6% in 2012.  The large increase in ownership of electric appliances in the period 2002-2008 continued in the 2010-2012 period. In rural areas in 2012, 90.3% of households owned TVs, 86.2% fans, 77.5% electric cookers, and 49.5% pumps. These appliances are relatively cheap to buy and operate. In contrast, the ownership of luxury appliances — such as a fridge, washing machine, water heater, stereo and computer — was significantly lower in rural areas, ranging from 38.3% of rural households owning fridges to only 9.2% owning computers.  The share of households with access to electricity varies significantly across regions, with the Midlands and Northern Mountains having the lowest household access to electricity (90.4%), while other regions have access rates between 97 to 100% in 2012.  By gender composition of households, there is little difference in the access to electricity.  Nearly 70% of the poor consumed less than 50Wh per month in 2012, but across all expenditure deciles average consumption rose and the share of households using less than 50kWh per month fell.  The lifeline tariff for poor customer, who consume less than 50 kWh per month, has remained the same in the period 1 March 2010 to 31July 2013 — 993 VND/kWh — whereas all other tariffs have been adjusted upwards. This lifeline tariff, combined with a targeted 30,000 VND/month cash subsidy for the poorest households, has contributed to electricity remaining affordable to the poorest of households. While there are no similar studies on the specific impacts of the RD project on household poverty and social development in the project areas, it is evident from the project’s results indicators that both the quality and reliability of supply to project areas increased significantly. The increased quality and reliability of supply in the project areas should, in principle, have had similar impacts on rural households as assessed in the two earlier nationwide surveys. It is suggested that a study be commissioned to better assess the social, poverty and social development impacts of the RD project on the communities in the project areas. (b) Institutional Change/Strengthening The RD project was implemented through a time of significant institutional change in Vietnam’s electricity sector, and supported through Component 7 of the project which strengthened the capabilities of PCs in several critical business areas, including: load forecasting and power system planning; financial management; customer service; and project management. 19 The structural shifts of consolidating LDUs into larger PCs and devolving financial and planning responsibilities from EVN to the PCs requires that PCs adapt and be ready for the next phase of reforms. The institutional development aspects of the RD project appear to have been appropriate, tailored to the needs and priorities of the PCs, and resulted in the training of large number of staff across the PCs. The combination of in-country training and overseas study tours has resulted in the adoption of new, more commercial, practices across PCs and of more robust capabilities in load forecasting and power system planning and economic and financial analysis of investment projects. The stronger capacities of PCs in these areas are expected to benefit both the PCs and their customers over time. (c) Other Unintended Outcomes and Impacts (positive or negative) Not applicable. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. 4. Assessment of Risk to Development Outcome Rating: Moderate The three key risks to sustainability are: i) increasing energy consumption in project areas results in a deterioration in the reliability and quality of services over time; ii) insufficient future investment in the power system to meet future load growth; iii) slow or weak implementation of improved planning, financial management, accounting, procurement and project management and other reforms that support commercialization of the PCs. The first two risks can be mitigated through improved power system planning and ongoing investment activity, both of which EVN and the PCs are seeking to carry out. Component 7 of this project specifically included a number of capacity building activities in the area of power system planning, including load forecasting, economic and financial analysis of distribution investments, and performance based rate setting — all of which support better system planning and the financing of further investment. In addition, Component 7 of this project also included technical assistance on financial management, accounting, procurement and project management. The capacity building activities are expected to contribute to diminishing both the probability and likely impact of three threats to the project’s development outcomes. Other reforms underway in the Vietnam energy sector — including ongoing tariff reforms, the planned equitization of generation companies, efforts to attract further private sector investment, and further power market and regulatory reforms — will also mitigate the risks to the development outcomes achieved by this project. 20 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The Bank’s performance in project identification, preparation and appraisal is rated satisfactory. The design of the project effectively accounted for structural changes in Vietnam’s electricity sector and sought to address critical issues of strategic importance at this stage of Vietnam’s electrification and market reform process through: i) improving the reliability, efficiency and quality of rural electricity supplies; and ii) commercialization of PCs as they become increasingly independent of EVN and operate in a wholesale power market and under a new regulatory framework. The implementation arrangements were suitable, given the combination of centralized and decentralized institutional and governance structures in Vietnam. The project’s design was flexible, ready for rapid-start up and could be implemented on a decentralized basis. From a technical, financial and economic perspective, the investment subprojects were sound — targeting the greatest weaknesses in the rural power distribution network. In hindsight, one area where the preparation of the project could have been improved is the monitoring and evaluation arrangements around: (a) the poverty, gender and social development aspects of the project; and (b) project development outcome and intermediate outcome indicators for the capacity building element of the project (i.e. Component 7). (b) Quality of Supervision Rating: Satisfactory The Bank’s supervision of this nationwide project was satisfactory. While there were some implementation difficulties, the Bank team was pro-active in its supervision and implementation support to help identify and address the issues emerged. Examples of their proactivity and responsiveness include:  Mobilizing individual consultants to assist the clients in designing and implementing Component 7 of the project. In April 2010 national and international consultants assisted NPC, CPC and SPC scope and design the Capacity Building Technical Assistance, which had been delayed due to a combination of major structural reforms to the power sector in 2009 and the PCs’ lack of familiarity with engaging consultants using Bank procurement methods.  Providing clear and constructive advice on how to better manage contractor performance and to deal with situations where works contractors were faced with financial difficulties arising from the credit shortage in Vietnam. 21  Being very clear on fiduciary compliance requirements, and providing training to all PCs in FM and IFSR requirements, especially those PCs lacking experience with the implementation of IDA projects.  Rapidly reviewing and clearing a large number of goods and works procurement packages in the first 12 months of the project to enable rapid start-up and disbursements after the project became effective.  Giving constructive advice throughout the project on how PCs could more effectively engage with provincial, district, commune and village level authorities in order to ensure land acquisition and compensation matters could be resolved in a timely manner, in accordance with Social Safeguards policies and the law, and to the satisfaction of all parties. The Bank team maintained a focus on development impacts, by: (i) focusing client attention on the economic and social outcomes arising from the delivery of more reliable and efficient electricity supplies to rural areas; and (ii) supporting with the scoping, design and implementation of the Capacity Building Technical Assistance (Component 7). (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank responded to client requests in a timely manner and provided suitable advice on how to adapt to changes and address challenges that arose over time. Proactive engagement with implementing agencies helped to reinforce safeguards, procurement and fiduciary controls, in particular with PCs who were relatively inexperienced in implementing Bank assisted projects. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory There was strong government commitment to the project investment components, which contributed to the timely completion of the project. Through the course of the project a stronger and more effective dialogue developed between the implementing agencies and the various levels of government (central, provincial, district, commune and village). This dialogue contributed to the resolution of a number of long-standing land acquisition issues that had delayed the construction and commissioning of a range of subprojects. The government has also demonstrated strong commitment to broader energy reform and commercialization aspects of the project. The government has implemented key aspects of the Power Reform Roadmap, including establishing the PCs, implementing adjustments to electricity tariffs so that they recover a greater share of service costs and contribute to sustainable operations and investments in the power sector, and establishing the VCCM in 2012. 22 (b) Implementing Agency or Agencies Performance Rating: Satisfactory The implementation agencies performance was mixed.  NPC (PC1) — encountered some initial challenges with varying quality in the technical designs of its subprojects, which were prepared by consulting engineers. These detailed design challenges were effectively overcome. NPC was able to complete all its subprojects before the project closing date.  SPC (PC2) — SPC faced a range of challenges regarding land acquisition, which it initially struggled to address by more effectively engaging with local government authorities and householders. These land issues, especially around Ben Tre province, resulted in long delays in construction. SPC also had issues with project management, arising in part from the mismatch between scheduling of goods delivery and works construction.  CPC (PC3) — found that International Competitive Bidding (ICB) took a long time because of difficulties with tender specification, evaluation, clearance and contracting. Civil works contractors were adversely affected by mismatches between the scheduling of goods delivery and works construction, which held up construction. CPC’s investment works were also negatively affected by the financial difficulties faced by works contractors hit hard by the credit crunch in Vietnam during 2011-2013. Finally land clearances and compensation proved challenging, resulting in delays to construction and commissioning of network upgrades.  Hai Phong PC — had very long delays in goods procurements that impacted construction and major difficulties with work contractors, both of which led to large delays in commissioning, in particular the 110kV line to Cat-Ba.  Hai Duong PC — was able to implement its four sub-projects and have them commissioned before the project closing date. HDPC’s MV rural network upgrade was executed in two stages. During the first stage, seven of the substations could not be built, with three of these due to difficulties arising from changes in the alignment of the Hanoi to Hai Phong highway, and four due to other construction difficulties. However, the equipment purchased for these seven substations was reassigned and used during the HDPC’s second stage MV network upgrade.  Dong Nai PC — two subprojects were not completed in DNPC area. There were long delays in project implementation by DNPC throughout the course of project. These delays appear to stem from a combination of issues relating to: (i) effective management of procurement; (ii) project and contract management; (iii) difficulties with land acquisition/resettlement; (iv) works contractors being hard hit by the credit squeeze and being unable to finance construction works ahead of milestone payments being made under the contracts. 23 However, in nearly all cases, the PCs were able to overcome implementation difficulties and deliver all their appraised investment subprojects by the project closing date. This is a significant achievement that has resulted in improved quality and reliability of supply to rural areas of Vietnam. In addition, all PCs were able to cement a range of institutional gains arising from the technical assistance component of the project (Component 7). The institutional gains include: improved understanding of financial management structure and practices for commercialized entities; stronger load forecasting and power system planning capability; technical skills improvements in economic and financial evaluation, and engineering; and in key aspects of management and strategy. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory Based on the GOV’s and implementing agencies’ strong commitment and performance to achieving the project objectives, overall Borrower’s performance is rated satisfactory. 6. Lessons Learned a) Financial Management  Effective implementation of projects demonstrates the importance of developing modern and robust FM systems, sound internal audit functions, and documentation and training within an organization that provides for continued adherence to FM procedures and requirements. b) Procurement  Selection of works contractors is critical to successful delivery. Contractors need to have a strong balance sheet and be able to finance construction works ahead of contract payment milestones being met. The financial strength of works contractors should be given greater weight when short-listing eligible firms, especially for large capital works contracts.  The manufacture and delivery of equipment should be properly sequenced with civil works; otherwise construction can be delayed. Alternatively, if equipment is purchased and left on site for long periods ahead of works proceeding, there are risks that it could be damaged, stolen or deteriorate. c) Project and Contract Management  Project Management is a core skill for any power distribution company, and requires a range of skills including knowledge of contracts, risk management, dispute resolution, critical path analysis, engineering and construction, and people management. Project managers also need to have a keen eye for details and strong understanding of the commercial and financial risks arising from contract terms. Development of project management skills within each 24 implementing agency should be seen as a vital part of capacity building within the PCs, as they become increasingly independent on EVN for such services.  Poor consultations with all potentially affected parties along a route or inadequate survey and design work can result in significant delays. Redesigning subprojects once construction has started can result in major cost blow-outs, as new rights of way and equipment might need to be purchased.  The coordination between the authorities involved in the project implementation needs to be strengthened further. Roles and responsibilities should be clearly assigned to subordinate agencies (local authorities at district level and below), contractors, and project management units.  Significant delays in the procurement of goods have a very negative impact on construction and the delivery of improved services to your customers.  Mismatches in the sequencing of goods delivery and works risk contractors seeking price adjustments or compensation under the contract. d) Land acquisition  Early, comprehensive, effective and on-going engagement by power companies with all levels of local government and with affected persons is essential to resolving land acquisition and clearances in rural areas of Vietnam.  Where land values are rising rapidly or people expect them to due to development, there is a large disparity between statutory land valuations and market valuations that can result in extended delays in land acquisition or access. EVN and the PCs may wish to give consideration to lobbying for reforms to the framework used for statutory land valuations, so that statutory land valuations are more closely aligned to market valuations. e) External factors can adversely affect projects  Economic slowdowns can result in dramatic reductions in forecast load growth, which in the DNPC case meant that major housing developments stopped in the area where some investments were planned for (e.g. 110kV Nhon Trach Substation and transmission line). f) Safeguards  Community supervision of environmental safeguards is a highly effective means of ensuring community ownership, minimizing disputes, and having rapid and ongoing compliance with environmental management plans. Community supervision also helps to resolve issues faster. Community supervision worked well for 22/35 kV system subprojects, and consideration should be given to promoting this role for future 110 kV projects. g) Flexibility  Flexibility is essential when a project has a large numbers of sub-components that have to be implemented in difficult areas over a long period of time. Flexibility is required in relation to changes in design and gaining approvals, in order to allow 25 for adaptation to unexpected changes in circumstances — such as case cost savings — that may arise during project implementation. Such flexibility can facilitate the benefits of the project being increased via the delivery of project outcomes to a larger number of people. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies See Annex 7. (b) Co-financiers AusAID was the only co-financier of the Rural Distribution project, allocating US$3 million for capacity building technical assistance. No specific comments from AusAid. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not applicable 26 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Estimate Actual(USD Percentage of Components (USD millions) millions) Appraisal 1. NPC (PC1) 51.05 49.49 96.9% 2. SPC (PC2) 30.98 24.36 78.6% 3. CPC (PC3) 52.82 83.81 158.7% 4. Hai Phong PC (HPPC) 17.17 19.88 115.8% 5. Hai Duong PC (HDPC) 4.24 9.19 216.7% 6. Dong Nai PC (DNPC) 9.54 14.74 154.5% 7. Corporate Development of PCs 4.50 3.19 70.9% Total Baseline Cost 170.29 204.66 120.2% Physical Contingencies 8.56 0.00 0.00% Price Contingencies 15.86 0.00 0.00% Total Project Costs 194.71 204.66 105.2% Interest During Construction 12.43 13.94 112.1% Total Financing Required 207.14 218.6 105.5% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) AUSTRALIA: Australian Agency for Grant 3.00 3.19 106.3% International Development Counterpart Borrower 54.15 81.24 150% Funding International Development Association 150.00 123.42 82.3% (IDA) 27 Annex 2. Outputs by Component For each of the six investment components, the overall budget allocation, total value of contracts (including estimated values of the price adjustments and variation orders) and disbursement status are presented in Table A2.1. Table A2.1: Investment Components: budget, commitments and disbursements (US$ million) Component Description Budget Contract Disbursement Percentage Allocation commitments ($ million) disbursed ($ million) ($ million) 1 Improvement of rural distribution 43.9 43.4 40.6 94% system in the Northern Region 2 Improvement of rural distribution 25.8 20.9 20.7 99% system in the Southern Region 3 Improvement of rural distribution 43.0 40.1 39.2 98% system in the Central Region 4 Improvement of rural distribution 12.0 15.9 10.7 67% system in Hai Phong City 5 Improvement of rural distribution 4.6 5.4 4.6 85% system in Hai Duong province 6 Improvement of rural distribution 7.9 8.7 7.6 87% system in Dong Nai province TOTAL 137.2 134.5 123.4 92% Some reallocations of project funds took place towards the end of the project, with unused funds originally allocated for Component 1, 2 and 3 being transferred to make up shortfalls in the funding of Component 4, 5 and 6. This reallocation took place after EVN and PCs worked with MoF to amend the Subsidiary Agreements with MoF. Component 1: Improvement of rural distribution system in the Northern Region NPC was responsible for implementation of this component, which consisted of 17 subprojects, specifically:  nine (9) subprojects for rehabilitation and strengthening of the MV system (22/35 kV) in nine provinces (Thai Binh, Ving Phuc, Bac Giang, Nam Dinh, Thanh Hoa, Quang Ninh, Tuyen Quang, Ha Nam, Nghe An); and  eight (8) subprojects for rehabilitation and expansion of the 110kV system. These are summarized in Table A2.2. Overall implementation progress of this component was satisfactory. At the close of the project all the MV system upgrades across the 9 provinces were completed, following the commissioning into service of last MV upgrades in Nghe An province. MV system upgrades in the other 8 provinces had energized between September 2011 and March 2013 (i.e. in Thai Binh, Vinh Phuc, Bac Giang, Nam Dinh, Thanh Hoa, Quang Ninh, Tuyen Quang and Ha Nam). In addition, all nine 110kV subprojects were commissioned by the project’s 30 June 2013 closing date. The last three subprojects to be completed and put into operation in June 2013 were the three subprojects added on to Component 1 late in its implementation, specifically: i) the Son Tay–Yen Mao–Pho Vang power line; ii) Tang Loong 2 substation; and iii) Cai Dam substation. 28 Actual costs totaled US$48.5 million, which was 76% of the estimated amount at time of appraisal (US$63.8 million). Table A2.2: Component 1 – summary list of NPC (PC1) subprojects Cost Completion date T/D line (USD millions) Capacity Components length (MVA/KVA) At At (km) Actual Actual appraisal appraisal 110 kV system subprojects 110kV Son Tay – Yen Mao – Pho Vang T/L 12/2009 06/2013 4,930 3,840 48.520 110kV Thuan Thanh – Phu Chan – Tien Son 01/2010 12/2012 5,420 4,150 23.560 T/L 110kV Phu Chan substation and branch 09/2009 10/2010 3,830 3,150 63 3.945 110kV Phu Ninh substation and branch 10/2010 11/2011 3,473 2,861 40 0.800 110kVThanh Nong – Kim Boi T/L and 110kV 06/2010 08/2012 12,398 9,351 25 45.500 Thanh Nong substation 110kV Trung Ha substation and branch in Phu 03/2011 10/2012 2,887 1,002 25 8.480 Tho province 110kV Cai Dam township substation and 06/2012 06/2013 2,728 2,750 40 0.348 branch 110kV Tang Loong 2 Substation 06/2012 06/2013 3,310 2,880 40 Sub-total 110kV system 38,976 29,984 233 131.153 MV (22/35 kV) system subprojects Improvement of 22/35kV system of Nam Dinh 10/2011 03/2012 4,400 3,149 31,110 94.0 Improvement of 22/35kV system of Thanh Hoa 07/2011 12/2011 4,621 3,999 28,455 125.019 Improvement of 22/35kV system of Thái Bình 12/2010 09/2011 2,239 2,125 24,930 51.65 Improvement of 22/35kV system of Bac Giang 12/2010 10/2011 1,691 0,990 10,100 34.00 Improvement of 22/35kV system of Vinh Phuc 12/2010 09/2011 2,167 2,028 8,810 15.307 Improvement of 22/35kV system of Nghe An 12/2011 04/2013 4,386 3,278 22,540 120.945 Improvement of 22/35kV system of Ha Nam 06/2012 02/2013 1,857 1,386 22,920 57.724 Improvement of 22/35kV system of Tuyen 12/2011 03/2012 1,541 1,152 4,510 38.350 Quang 12/2011 05/2012 1,960 1,406 19,840 77.783 Improvement of 22/35kV system of Quang Ninh Sub-total MV system 24,862 18,523 173,215 614.778 TOTAL MV & 110kV Systems 63,838 48,507 406.215 745.931 29 Changes in scope of 110kV sub-projects There were significant changes in the scope of the 110kV subprojects of NPC’s Phase 2 implementation (see Table A2.3). The total number of 110kV subprojects in Phase 2 of Component 1 increased from five (5) to seven (7), with:  one of the original subprojects being dropped (110kV Dong Hoa–Thai Binh T/L);  three new subprojects added (110kV Cai Dam township substation and branch, 110kV Tang Loong 2 Substation, 110kV Trung Ha substation and branch in Phu Tho province); and  the scope of works in several original subprojects increased. Table A2.3: Change in Subprojects of Component 1 - phase 2 at 110kV level No. Original Phase 2 sub-projects Revised Phase 2 sub-projects Changes 1 110kV Thanh Nong – Kim Boi T/L 110kV Thanh Nong – Kim Boi T/L Added 110kV Thanh and 110kV Thanh Nong substation Nong substation 2 110kV Pho Noi – Tien Son T/L 110kV Thuan Thanh – Phu Chan – Change in route and/or Tien Son T/L length of T/L 3 110kV Phu Chan substation 110kV Phu Chan substation and Branch line added branch 4 110kV Dong Hoa – Thai Binh T/L ---- Dropped 5 110kV Phu Ninh Substation 110kV Phu Ninh substation and Branch line added branch 6 ---- 110kV Cai Dam township substation Added this sub-project and branch 7 ---- 110kV Tang Loong 2 Substation Added this sub-project 8 ----- 110kV Trung Ha substation and Added this sub-project branch in Phu Tho province The 110kV substations at Cai Dam and Tang Loong 2 were added to the project at a later stage in order to use up the funds allocated to NPC. Cost savings in the procurement of goods and works procurement enabled these two sub-projects to be added, and it also enabled the scope of works for other sub-projects to be increased. The 110kV Dong Hoa – Thai Binh T/L, which was originally part of the Phase 2 works, was dropped. Component 2: Improvement of rural distribution system in the Southern Region SPC was responsible for the implementation of this component, which comprised 19 subprojects for the rehabilitation and strengthening of the MV system and four subprojects for rehabilitation and expansion of the 110kV system (see Table A2.4). Table A2.4: Component 2 – summary list of SPC (PC2) subprojects Completion date Cost T/D line (USD) Capacity No. Subproject length At (MVA) At appraisal Actual Actual (km) appraisal MV (22/35kV) System Improvements, Phase 1 1 Ben Tre Province 22-Apr-10 25-Oct-11 4,377,476 2,951,918 3.725 304.950 2 Binh Duong Province 26-Mar-10 24-Apr-11 2,214,030 1,103,506 7.325 128.928 3 Dong Thap Province 6-Feb-10 8-Sep-10 1,085,951 446,699 0.025 66.833 4 Ba Ria — Vung Tau Province 17-Jan-10 31-Oct-12 1,159,778 634,495 5.412 37.992 5 Vinh Long Province 15-Feb-10 26-Jul-12 943,526 416,905 0.235 45.787 30 MV (22/35kV) System Improvements, Phase 2a 6 An Giang Province 9-Aug-11 9-Dec-11 1,607,714 781,252 0 49.314 7 Binh Phuoc Province 2-Jul-11 6-Dec-11 971,346 485,296 0 55.244 8 Binh Thuan Province 14-Aug-11 31-Jul-12 1,836,820 1,223,042 0.850 94.843 9 Ninh Thuan Province 6-May-11 12-Dec-11 311,800 267,917 1.137 8.180 10 Can Tho City 15-Sep-11 14-Dec-12 1,269,408 639,975 1.000 76.970 11 Long An Province 25-Jun-11 20-Aug-12 1,611,363 854,091 0 76.549 12 Tay Ninh Province 27-May-12 21-Sep-12 1,617,562 1,199,978 0.960 71.100 13 Tien Giang Province 5-Jul-11 8-Dec-12 1,624,802 879,342 0 49.855 MV (22/35kV) System Improvements, Phase 2b 14 Bac Lieu Province 25-Oct-11 9-Oct-12 1,184,643 754,410 0 62.658 15 Hau Giang Province 31-Oct-11 22-Nov-12 495,485 340,055 0 19.587 16 Kien Giang Province 30-Nov-11 25-Oct-12 2,843,302 1,737,607 0.650 156.235 17 Lam Dong Province 12-Dec-11 8-Dec-11 1,457,846 1,056,542 5.202 53.287 18 Soc Trang Province 15-Oct-11 21-Dec-12 1,729,834 1,216,032 0.245 126.098 19 Tra Vinh Province 24-Aug-11 12-Dec-11 902,330 578,903 0 52.649 Additional 110kV Subprojects – Phase 3 (enabled by earlier cost savings) 20 110kV Tay Ninh – Chau Thanh Transmission line, Tay Ninh 19-Nov-12 17-Dec-12 1,928,748 1,184,392 0 13.486 Province 21 110kV Chau Thanh Substation, 5-Aug-12 17-Dec-12 2,243,613 1,802,494 40.000 0 Tay Ninh Province 22 110kV Giong Trom – Binh Dai Transmission line, Ben Tre 26-Oct-12 27-Nov-12 3,121,645 2,092,227 0 20.900 Province 23 110kV Binh Dai Substation, Ben 21-Oct-12 27-Nov-12 2,210,450 1,711,455 40.000 0 Tre Province TOTAL MV & 110kV Systems 38,749,473 24,358,532 106,766 1571.44 As a result of costs cost savings in the procurement of goods and works, four 110kV subprojects were added in early 2012, including the 110kV substation Chau Thanh with 110kV transmission line; Tay Ninh-Chau Thanh and Binh Dai 110kV substation; and the Giong Trom-Binh Dai transmission line. SPC was able to complete these four additional subprojects before the end of 2012 - a remarkable achievement (see Table A2.4). All SPC’s MV and 110kV sub-projects were completed and put into operation by the end of 2012 — well before the project closing date. The actual costs incurred to 31 October 2013 totaled US$26.25 million, which was 67% of the estimated amount at time of appraisal (US$38.74 million). The actual costs incurred at the closing date totaled $24.35 million, which is the figure shown in Table A2.4 Component 3: Improvement of rural distribution system in the Central Region CPC implemented Component 3, which consisted of: i) rehabilitation and strengthening of the MV system in six provinces (Quang Binh, Quang Tri, Thua Thien Hue, Quang Ngai, Binh Dinh, and Phu Yen); and ii) 10 subprojects for the rehabilitation and expansion of the 110kV system (Table A2.5). 31 Table A2.5: Component 3 – summary list of CPC (PC3) subprojects Cost, Total Installed investments capacity of T/D line (including EVN Completed station or Length of No. Subprojects funding) date additional line US$ millions transformer (Km) At (MVA) Actual appraisal 22/35kV system 26.76 16.92 68.65 453.27 Quang Binh rural distribution 1 project 12/2012 1.78 1.42 10 39.77 Quang Tri rural distribution 2 project 8/2012 3.64 2.99 9 42.81 Thua Thien Hue rural distribution 3 project 6/2013 7.11 4.04 21 130.42 Quang Ngai rural distribution 4 project 5/2013 2.70 1.20 1 15.12 Binh Dinh rural distribution 5 project 5/2013 10.09 6.16 28 185.27 6 Phu Yen rural distribution project 6/2012 1.44 1.11 0.5 39.87 110kV Substation and line 43.14 32.64 275.00 175.06 7 Duy Xuyen 110kV substation 12/2010 2.27 2.04 25 - 8 Son Hoa 110kV substation 12/2010 3.32 2.69 16 23.00 9 Krong Ana 110kV substation 6/2011 2.57 2.40 25 8.00 Chu Prong 110kV substation and 10 branch line 12/2011 4.24 3.52 16 20.80 11 Chan May 110kV substation 7/2012 2.92 1.91 40 1.30 12 Cu MGar 110kV substation 5/2012 4.30 3.24 25 20.00 13 Tan Mai 110kV substation 12/2012 4.33 3.02 63 2.60 Ea Kar - Krong Pak 110kV 14 substation and branch line 5/2013 7.16 4.44 40 27.60 15 Dong Hoi - Ba Don 110kV line 6/2013 5.71 3.98 - 40.70 Ta Rut 110kV substation and 16 branch line 6/2013 6.33 5.40 25 31.06 TOTAL 69.90 49.56 343,65 628.33 Changes in scope – four additional 110kV sub-projects Strong competition for the supply of goods and works for subprojects in original Phases 1 and 2 of Component 3 resulted in considerable savings. In 2011 CPC sought to apply these implementation savings to 4 new 110kV sub-projects, which involved the construction of 82km of 110kV lines, and three 110kV substations with total capacity of 151MVA (see Table A2.6). These four new 110kV subprojects were appraised and approved. Overall implementation progress was satisfactory. By the close of the project, all of MV subprojects for six provinces were fully completed and commissioned into service. By March 2013, seven out of 10 110kV subprojects had been completed and put into operation. Between March 2013 and the project closing date, CPC successfully pushed to complete the last three remaining 110kV subprojects – the Dong Hoi-Ba Don 32 transmission line, Eakar – KrongPak transmission line, and 110 kV Ta Rut substation and branch line. All three were commissioned into service by 30 June 2013, meaning all CPCs subprojects, including those added on during Phase 3, were completed before the project closing date. Table A2.6: Phase 3 subprojects, Component 3, SPC (PC3) EVNCPC IDA Total No. Sub-projects (million USD) (million USD) (million USD) Tan Mai Kon Tum 110 kV substation and 13 1.02 3.42 4.44 branch line Ea kar - Krong Pak 110 kV line and 110 kV 14 1.28 2.80 4.08 substation Dong Hoi – Ba Don 110 kV double circuit 15 0.48 1.93 2.41 line 110kV Ta Rut 110 kV substation and branch 16 0.74 3.60 3.80 line Total 6.04 14.30 20.67 Actual costs totaled US$ 61.8 million, which was 71% of the estimated amount at time of appraisal (US$ 87.1 million). Component 4: Improvement of rural distribution system in Hai Phong City Hai Phong Power Company implemented this component, which comprised three subprojects for rehabilitation and strengthening of 110kV lines. Table A2.7: Component 4 – summary list of Hai Phong City (HPPC) subprojects Cost, Total Installed investments (including capacity of T/D line Completed EVN funding) station or Length of No. Subprojects $/US millions date additional line transformer (Km) At appraisal Actual (MVA) 110kV system Cho Roc – Cat Ba 110kV 1 June 2013 7.03 5.51 - 38.6 line Dong Hoa – Long Boi 2 June 2013 10.82 7.90 - 35.8 110kV line Nam Đình Vũ 110kV 3 On going 7.81 3.23 63 4.0 substation TOTAL 26.44 16.64 63 78.4 Overall implementation was satisfactory. The two subprojects originally appraised for Component 4 were the 110kV Dong Hoa – Long Boi line and 110kV Cho Roc – Cat Ba line. During the final supervision mission in April 2013, it was noted that: 1. the 110kV Cho Roc – Cat Ba subproject would only be completed before the project closing date if HPPC worked much more effectively with local governments to finalize landowner compensation and sort out contract 33 termination issues with the former works contractor. Both of these issues were adversely affecting the ability of the new works contractor to complete the civil works; 2. the 110kV Nam Dinh Vu substation would most likely not be completed before the project closing date of June 30, 2013. This substation was added to the project in 2011 in order to make use of surplus funds that arose from cost savings. All the goods contracts of this subproject been executed and the goods were delivered before June 30, 2013. It was agreed that Hai Phong PC would pay for any remaining works carried out after 30 June 2013 using its own funds, and return any unused IDA Credit funds to the designated account. Component 5: Improvement of rural distribution system in Hai Duong province Hai Duong Power Company was responsible for implementing this component, which consisted of four subprojects for the rehabilitation and strengthening of 110kV and MV systems. Table A2.8: Component 5 – summary list of Hai Duong PC (HPPC) subprojects Completion date Cost (USD millions) No. Subproject At appraisal Actual At appraisal Actual 1 Tien Trung 110kV Substation Oct-12 Feb-12 2.605 2.223 Haiduong Rural Medium Voltage 2 Feb-12 Dec-11 1.511 0.960 Distribution 3 Hai Duong - Lai Khe 110kV Line Dec-12 May-13 2.696 1.586 Haiduong Rural Medium Voltage 4 Mar-13 Dec-12 0.792 0.876 Distribution (Stage 2) TOTAL 7.604 5.645 Overall implementation of Component 5 was satisfactory. All of the physical investment subprojects were completed and commissioned into service before the project closing date, June 30, 2013. The outcomes and impacts of the improvements to the rural power distribution network in Hai Duong province have met or exceeded the key results indicators, as shown in the data sheet at the front of this report. Towards the end of the project, some of the unused IDA Credit funds of other PCs were reallocated to Hai Duong PC to ensure that HDPC made use of the available IDA funds across the project to meet contract commitments in excess of its original IDA Credit allocation. Component 6: Improvement of rural distribution system in Dong Nai province Dong Nai Power Company implemented Component 6 of the project: the rehabilitation and strengthening of 110kV and MV systems in Dong Nai province (see Table A2.9). 34 Table A2.9: Component 6 – summary list of Dong Nai PC (DNPC) subprojects Cost (USD Completion date T/D line millions) Capacity No. Subproject length At At (MVA) Actual Actual (km) appraisal appraisal May 12, September 30, 1 MV System, Dong Nai 2.681 1.250 7.608 119.500 2010 2011 The110kV substation completed on November 21, 2011. 110kV Xuan Loc - Cam My October 22, 2 transmission line and 5.090 3.660 25.000 19.338 2010 The 110kV Cam My Substation transmission line has not completed due to one position T32. 110kV Dau Giay Substation December February 29, 3 3.847 2.576 40.000 3.546 and transmission line 14, 2010 2012 110kV Nhon Trach The subproject August 18, 4 Substation and is being 3.058 1.616 40.000 0.500 2013 transmission line implemented TOTAL 14.676 9.102 112.608 142.884 Overall project implementation was satisfactory. While the MV subproject, 110kV Dau Giay substation, and 110kV Xuan Loc – Cam My line subproject were completed by 30 June 2013, the 110kV Nhon Trach substation, which was added to the project scope at a later stage in order to use the remaining available funds, was not. The goods contracts for the Nhon Trach substation were executed and the goods delivered before June 30, 2013. During the final supervision mission in April 2013, Dong Nai PC confirmed that it would pay for the remainder of the delayed Nhon Trach substation works contract out of its own funds, and return any unused funds to the designated account. Component 7: Corporate Development of PCs Technical Assistance to PCs was funded by a US$ 3.4 million grant from Australia (through AusAID) and about US$1.5 million from the IDA Credit. Technical assistance activities under Component 7 supported capacity building objectives by improving capabilities in core areas needed for PCs to operate as commercialized and market-ready entities; including:  Financial Management — International Financial Reporting Standards (IFRS), Asset Valuation and Transfer procedures, Financial forecasting, Internal Audit;  Procurement — public procurement, use of INCOTERMS;  Project Management;  Economic and Financial Analysis of Distribution Network investments;  Regulatory Affairs — Performance Based Rate setting; 35  Load Forecasting and Network planning — Load Forecasting methods and their application, Improving efficiency through Demand Side Management and Smart Grid Technology, Network load flow modeling, Connecting wind farms to the grid;  Information Technology; and  Enhancing Customer Services. Table A2.11 summarizes the capacity building activities undertaken and completed by the close of the project on June 30, 2013. Table A2.11: Component 7 (Technical Assistance) - List of activities and costs, by implementing PC Value (US$ Activity thousand) NPC 1 Performance Based Rates Setting and Indicators (including training workshop) 71.86 2 Financial Analysis and Medium Term Financial Forecasting (including training 124.34 workshop) 3 Developing Asset Valuation & Transfer Procedures (including training workshop) 127.20 4 Study tour on Advanced Distribution Systems (to Brazil and Columbia) 221.77 5 Efficient distribution and introducing smart grid technologies in Vietnam (including 171.73 training workshop) 6 Capacity Improvement of Corporate Financial Management in NPC 114.37 7 Economic and finance analysis in distribution investment (including training workshop) 81.53 8 Workshop on Capacity Building and Project management (in Nha Trang) 67.66 9 Training on procurement, disbursement according to the WB Guidelines and 45.46 INCOTERMS 2010 for NPC staff Sub-Total NPC 1,025.92 SPC 1 Support to PCs on International Financial Reporting Standards (including training 222.40 workshop and study tour to Australia) 2 Load Forecasting and Network Planning (including training workshop and study tour to 207.54 Australia) 3 Connection of Wind Farms to Grid (study tour to Spain) 60.19 4 Efficient distribution system planning and engineering (study tour to Japan) 71.52 5 Training in Procurement management in public sector (in Italy) 112.24 6 Enhancing Distribution and Retail Supply Customer Services (including training 563.96 workshop and study tour to Australia) Sub-Total SPC 1,237.86 CPC 1 Information Technology strategy (study tour to USA) 43.88 2 Training Workshop for Capacity Building and Project Management (in Da Nang) 103.92 3 Management Capacity Building (including workshop in Da Nang and training course 229.22 about work efficiency and persuasion skills) 4 International program for development evaluation training course (in Canada) 162.12 5 Internal audit procedures training 36.41 6 Network Modeling (including training workshop and study tours to Australia and 218.59 Thailand) 7 Organization of district power distribution companies (including training workshop and 163.21 study tour) 8 Workshop on Technical Assistance outcomes and lessons learnt 63.72 Sub-total CPC 1,021.08 TOTAL 3,284.86 36 After initial delays, Component 7 got underway in 2010. The delays in starting Component 7 were due to: the major structural reforms to the power sector in 2009; PCs lack of familiarity with engaging consultants using World Bank procurement methods; and the delayed signing of subsidiary agreements between Ministry of Finance and PC1, PC2, and PC3 regarding the use of the Australian Trust Fund monies. The subsidiary agreements were only signed on 29 October 2010, nearly two years after the signing of: i) the IDA project and financing agreement (by World Bank and GoV); and ii) the Grant Agreement for TF094257. In April 2010, a decision was made to implement Component 7 using a two pronged approach whereby the three PCs would cooperate on specific activities of common interest, and act independently of each other on TA tailored for their specific requirements. For each topic of common interest, one PC was appointed the leading PC. The 24 technical assistance activities developed by the PCs can be grouped into five main topics:  Financial (5 activities);  Business and planning (3 activities);  Technical (6 activities);  Project Management and Procurement (6 activities); and  Corporate restructuring (4 activities). A summary of the activities’ objectives and results follows. Financial 1. Developing Asset Valuation & Transfer Procedures  Implementation Unit: NPC  Objective: To procure or develop software capable of valuing assets according to International Financial Reporting Standards (IFRS) and to provide training to PCs in how to understand and use the software to value their assets using IFRS. Draft plans for the transfer of fixed assets to and from the asset register.  Results: (i) The consultant provided to PCs the software for asset valuation under IFRS and the plans for procedures transferring assets when divestments are made by PCs. (ii) Training was given to 156 Finance and Accounting staff from 5 PCs in how to distinguish between Vietnamese Accounting Standards (VAS) and IFRS software and asset valuation under IFRS. 2. Financial Analysis and Medium Term Financial Forecasting  Implementation Unit: NPC 37  Objective: Helping PCs understand the rules, procedures, analysis and medium- term financial forecasts by VAS and IFRS standards and the difference when making the forecast by 2 standards.  Result: The consultant has introduced two analytical and medium-term financial forecasts models by VAS and IFRS standards and training for 156 leaders and officials in charge of Finance and Accounting from 5 PCs to self-analysis and evaluation medium-term financial units in 2 standard. 3. International Financial Reporting Standards  Implementation Unit: SPC  Objective: To enable PC staffs to prepare annual accounts using IFRS.  Results: (i) The consultant introduced sample financial statements according to international standards and guidelines for financial officers of 5 PCs to implement them. (ii) A 17 person delegation drawn from EVN and the PCs travelled to Australia to learn from and exchange experience with a number of companies on the preparation of annual financial statements that comply with International Financial Reporting Standards (IFRS). 4. Strengthening Capacity for Corporate Financial Management for NPC  Implementation Unit: NPC  Objective: To compile a management handbook in accordance with the corporate governance model-management financial, management of cash flow for NPC suitable with production models, the level of staff from NPC.  Results: A Consultant critically assessed the current limitations in the financial management of NPC and provided training to 180 leaders from NPC and its various units (e.g. Director, Chief Accountant, Head of Planning, Business, Technical Dept.) to improve their understanding of key areas where financial management could be improved. The consultant also compiled a financial management handbook for NPC. 5. Consulting service of Internal Audit Workshop (CPC)  Implementation Unit: CPC  Objective: Fostering knowledge of internal audit staff working in accounting finance for implementation of projects funded by the World Bank loan.  Results: A consultant developed a handbook of general internal audit process (for projects using World Bank loans). 25 officers from 5 PCs in charge of internal audit received training in internal audit structure and procedures. 38 Business and planning 6. Load Forecasting and Network Planning  Implementation Unit: SPC  Objective: Develop a training program to help EVN and PCs to perform load forecasting and gird planning.  Results: An evaluation report on the status and a plan for capacity building in load forecasting and grid planning was proposed for 5 PCs by consultants. 15 officers from 5 PCs and EVN also went on a study tour to Australia to exchange information and learn about the load forecasting and power system planning processes used in Australia for transmission and distribution networks. Australia has a competitive wholesale energy market, with a mixture of centralized and decentralized power system planning processes. 7. Study tour to Brazil and Columbia on Advanced Distribution Systems  Implementation Unit: NPC  Objective: To learn from power companies in Brazil and Columbia about the application of smart grid measurement technology, business management, reducing power losses, and the use of Advanced Metering Infrastructure (AMI) technology in business operations..  Result: 23 officers from PCs, EVN and state agencies exchanged experiences, and learned from a selection of electricity companies in Brazil and Columbia on how they applied AMI (or Smart Meters) in their business & customer service management models. AMI, together with related management information systems, can help reduce power losses, improve the efficiency of both metering and billing processes, and improve the quality of utilities customer service. 8. Enhancing Distribution and Retail supply customer services  Implementation Unit: SPC  Objective: A comprehensive assessment of the status of the customer services in 5 PCs thereby making roadmap to improve the quality of customer services, training delivery methods and assessment of customer satisfaction.  Results: (i) A consultant was engaged to prepare an evaluation report on the strengths and weaknesses of the current customer services and roadmap for improving the quality of customer services in 5 PCs; (ii) 19 staff from EVN and 5 PCs exchanged knowledge with some Australian electricity companies on how they provided customer services and sought to be customer focused businesses. (iii) Assessment of customer satisfaction in 7 provinces and cities; 39 (iv) 330 staff were trained in customer services skills and methods of assessing customer satisfaction. Technical 9. Connection of Wind Farms to Grid Study tour  Implementation Unit: SPC  Objective: Capacity building and awareness for SPC in the technical and operational issues associated with connecting wind power plants to the grid.  Results: 4 SPC staff visited a number of companies in Spain to study and exchange knowledge and experience on the technical and operational aspects of grid connected wind turbines. 10. Efficient Distribution and Introducing Smart Grid Technologies in Vietnam  Implementation Unit: NPC  Objective: Assess the current state of power distribution networks in Vietnam and design a roadmap to develop smart distribution grids for 5 PCs.  Results: A consultant provided a report that: assessed the current state of the grids of 5 PCs; examined options for introducing smart grid technology; and outlined a roadmap for the 5 PCs to develop smart grids. The results of this report were presented to a workshop with 50 participants drawn from the five PCs. 11. Network Modeling  Implementation Unit: CPC  Objective: For planning staff to gain skills and the ability to use the power system analysis software, PSS/E, to simulate, analyze, and optimize power system performance. Power flow computational analysis is a core competency required by PCs for power system planning and operational contingency analysis.  Results: After surveying the 5 PCs, a consultant researched, developed and conducted training for 25 engineers from 5 PCs over 3 weeks. The training aimed to develop better understanding of the application of PSS/E software and proficiency its use for power flow and contingency analysis. 11 engineers went on study tours to observe how PSS/E was used by Ausgrid, one of the largest power distribution companies in Australia. The lessons from this training program have been implemented and applied to power system planning by the PCs. 12. Information Technology Strategy Training  Implementation Unit: CPC  Objective: Help the IT staff of CPC in understanding the functional and operational specifications of information technology used by commercialized Power Companies to provide effective and efficient customer services and information. 40  Results: 5 staff from CPC received training in how a Power Company’s IT Strategy could be developed to focus on customer services by providing better information and customer relations services. 13. The development of efficient distribution system engineering  Implementation Unit: SPC  Objective: To enhance the knowledge base of PCs staff in the critical areas of: a) effective operation and maintenance of power distribution systems, so as to reduce losses; and b) improving electric system reliability.  Results: 12 staff from various PCs exchanged experiences with Japanese power distribution system operators on: operations and maintenance, electricity loss reduction and power measurement. 14. Smart Grid Training  Implementation Unit: CPC  Objective: To help staff better understand smart grids, the application of smart-grid technologies to power distribution networks, and a roadmap for implementing smart grids.  Results: 15 CPC staffs were involved in training and South-South knowledge exchange on smart grids operated by Electric Companies in Thailand. Project Management and Procurement 15. Economic and Financial Analysis of Distribution Investment  Implementation Unit: NPC  Objective: To develop model building methods, forms and guidelines for the calculation and analysis of economic and financial analysis for the project of power distribution networks.  Result: Provided financial and economic analysis model that was applied to sub- projects financed by the WB and provided training to 84 staff from 5 PCs. 16. Organization of Training on Procurement according to the WB guideline  Implementation Unit: NPC  Objective: To develop capacity in executing the procurement, and disbursement procedures associated with World Bank sponsored activities 41 and understand the 2010 changes the International Commercial Terms (INCOTERMS) referred to in procurement documentation.6  Results: 247 staff from 5PCs working on procurement and disbursement of the WB projects trained to better understand World Bank procurement procedures and were provided with guidance on how to overcome practical difficulties and obstacles during the project implementation. These staff were also advised on the application of the 2010 version of INCOTERMS. 17. Training in Procurement Management in the Public Sector  Implementation Unit: SPC  Objective: To enhance and develop the skills of of EVN and PCs in conducting public sector procurement in accordance with international regulations.  Results: 11 staff from EVN and 5 PCs participated in courses to develop skills in executing public procurement processes in accordance with the international regulations. The training took place at ILO International,Italy, over 3 weeks. 18. International Program for Development Evaluation Training  Implementation Unit: CPC  Objective: Provide a common tool needed to evaluate policies, programs and projects.  Results: 13 staff from EVN and PCs were engaged three weeks training in Canada on methods, techniques to monitor and evaluate projects. 19. Workshop for Capacity Building and Project Management according to the WB Guidelines  Implementation Unit: NPC  Objective: Provide information to PCs on procedures, processes and regulations in the management of projects using the World Bank loans with procedure from project preparation and disbursement.  Results: 143 staff were provided with the documents and complete information on procedures, processes and regulations in the implementation of projects funded by WB, as well as guidelines for the implementation of the PC in bidding, disbursement, security policies according to the World Bank guidelines. 6 The INCOTERM rules or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) that are widely used in International commercial transactions or procurement processes. 42 Corporate restructuring 20. Training guide (capacity building project management)  Implementation Unit: CPC  Objective: Guide PCs involved in the Project in how to prepare World Bank related project documentation (investment projects, environmental management plans, security policies, procurement, disbursement).  Results: 101 staff from PCs were trained to handle situations and problems encountered in the procurement, disbursement and settlement of security policies under the provisions of the World Bank. 21. Management Capacity Building  Implementation Unit: CPC  Objective: To build appropriate training and development frameworks for enhancing the management capacity of CPC, SPC, NPC.  Results: Consultant surveyed management status of 3 PCs, and identified the most suitable management training and capacity building approach for each of CPC, NPC and SPC. 22. Organization of District Power Distribution Companies  Implementation Unit: CPC  Objective: To assess the organization, functions, duties and management of District Power Companies and to set up an organizational model and implementation roadmap for a District Power Company.  Results: Consultant conducted analysis and evaluation activities of the district power companies and proposed organizational structure and operations for reformed district power companies, building a roadmap for implementing new organizational structures and activities. 23. Corporate Training Courses about work Efficiency Evaluation and Persuasion Skills  Implementation Unit: CPC  Objective: To develop staff knowledge and skills in persuasive communications, and how to critically evaluate the efficiency and performance of their professional tasks and management functions.  Results: 90 staff from CPC were trained in work Efficiency Evaluation and Persuasion Skills. 43 24. Performance Based Rates  Implementation Unit: NPC  Objective: To assist PCs to understand the important aspects of theory and applied methodology used to develop Performance Based Rates (PBR), which can be used to establish distribution network and retail tariffs. PCs were also informed of the potential efficiency gains that a PBR mechanism can help achieve by focussing PCs on key performance and costs areas.  Results: Introduce the PCs the PBR mechanism, PBR application in determining electricity prices as well as a set of proposed indicators to evaluate the performance of power distribution corporations. 44 Annex 3. Economic and Financial Analysis Project Economic Analysis Methodology at Appraisal The economic analysis for the project components are carried out using two scenarios: (i) with the project; and (ii) without the project. The 'with' project scenario will be the investment in the rural networks and the 'without' project scenario will mean doing nothing; there would be no investment for the rehabilitation and expansion of the MV networks, and the situation of the existing distribution system would further deteriorate. For the estimation of the economic indicators, namely ERR and NPV, the following assumptions were made: (i) all the costs are expressed in constant 2007 prices; (ii) ) the capital investment costs for the first phase are considered in 2009, and analyses are made over a project economic life of 20 years (2009-2029); (iii) the cost for compensation, land acquisition and environmental mitigation are included in the economic cost of the project; (iv) the operation and maintenance costs are estimated at 2 percent of the investment costs; (v) the buying price of energy was assumed to increase 5 percent each year; and (vi) EIRR of the project component is the discount rate at which the present value of the costs and benefits streams are equal, and the NPV is based on a discount rate of 10 percent, which is approximately the opportunity cost of capital in Vietnam. Methodology at project completion Identical to that used at appraisal, except that actual costs at 30 June 2013 are used and 20 year time horizon covers 2013 to 2033. Project Financial Analysis Methodology at Appraisal The following cost assumptions are made: (i) capital costs are baseline costs plus physical and price contingencies; (ii) power purchase prices are assumed to remain constant after 2020; (iii) operating and maintenance (O&M) costs for MV lines are estimated at 2 percent of investment costs; (iv) transmission and distribution losses are estimated at 3.5 - 7 percent for MV networks after project implementation; (v) foreign costs are converted to VND at the rate of 17,500 to the US dollar, assuming all investments will be implemented during the first year. Methodology at project completion Identical to that used at appraisal, except that actual costs at 30 June 2013 are used and 20 year time horizon covers 2013 to 2033. 45 Results Component 1 (NPC) At sub-project At Appraisal Subproject Completion EIRR FIRR EIRR FIRR 110 kV subprojects 110kV Son Tay – Yen Mao – Pho Vang T/L 14% 21.3% 13% 20.6% 110kV Thuan Thanh – Phu Chan – Tien Son T/L 25% 29.2% 22% 32.5% 110kV Phu Chan substation and branch 19% 32.5% 22% 31.5% 110kV Phu Ninh substation and branch 23% 21.5% 23% 20.2% 110kVThanh Nong – Kim Boi T/L and 110kV Thanh Nong 12.9% 21.3% 13% 20.4% substation 110kV Trung Ha substation and branch in Phu Tho province 17% 14.9% 15% 15.6% 110kV Cai Dam township substation and branch 21% 21% 25% 19% 110kV Tang Loong 2 Substation 25% 19.6% 28% 17.7% MV (22/35 kV) system improvements Nam Dinh province 18.2% 16.5% 16% 15% Thanh Hoa province 25.2% 17.2% 12% 11.4% Thái Bình province 11.4% 20.8% 21% 17.6% Bac Giang province 10.83% 15.6% 18% 15.7% Vinh Phuc province 12.5% 11.9% 10.32% 12.9% Nghe An province 15.5% 17.5% 11.93% 16.1% Ha Nam province 27.3% 21.2% 22.84% 26.9% Tuyen Quang province 15.4% 18.9% 10.05% 15.1% Quang Ninh province 15.1% 16.8% 16.73% 20.1% Component 2 (SPC) No. Subproject At Appraisal At sub-project Completion EIRR FIRR EIRR FIRR (%) (%) (%) (%) MV (22/35 kV) system improvements, Phase 1 1 Ben Tre Province 2.35 0.14 1.13 0.32 2 Binh Duong Province 2.23 0.13 1.68 0.00 3 Dong Thap Province 1.32 0.03 3.49 0.38 4 Ba Ria _ Vung Tau Province 1.14 1.04 1.00 0.05 5 Vinh Long Province 1.30 0.03 1.05 0.30 MV (22/35 kV) system improvements, Phase 2a 6 An Giang Province 1.14 0.02 1.94 0.29 7 Binh Phuoc Province 2.18 0.12 2.88 0.64 8 Binh Thuan Province 1.62 0.08 1.61 0.30 9 Ninh Thuan Province 0.74 -0.04 0.72 0.12 10 Can Tho City 3.02 0.23 1.42 0.30 11 Long An Province 1.06 0.00 1.76 0.15 12 Tay Ninh Province 1.52 0.06 2.46 0.22 13 Tien Giang Province 1.29 0.04 1.88 0.29 MV (22/35 kV) system improvements, Phase 2b 14 Bac Lieu Province 2.30 0.15 1.69 0.39 15 Hau Giang Province 1.16 0.05 2.77 0.63 16 Kien Giang Province 2.37 0.17 3.99 1.23 17 Lam Dong Province 0.87 0.00 0.62 0.10 18 Soc Trang Province 1.27 0.03 0.71 0.14 19 Tra Vinh Province 2.07 0.13 2.15 0.63 Additional 110kV Subprojects, Phase 3 20 110kV Tay Ninh – Chau Thanh Transmission line, Tay Ninh Province 3.16 0.15 0.97 0.18 21 110kV Chau Thanh Substation, Tay Ninh Province 46 22 110kV Giong Trom – Binh Dai Transmission line, Ben Tre Province 2.27 0.09 1.52 0.25 23 110kV Binh Dai Substation, Ben Tre Province No. Subproject At Appraisal At sub-project Completion ENPV FNPV ENPV FNPV (US$ mill) (US$ mill) (US$ mill) (US$ mill) MV (22/35 kV) system improvements, Phase 1 1 Ben Tre Province 97.48 2.75 96.01 12.62 2 Binh Duong Province 46.39 1.19 43.63 -1.21 3 Dong Thap Province 12.62 -0.23 15.46 1.41 4 Ba Ria _ Vung Tau Province 11.29 -0.40 11.26 -0.05 5 Vinh Long Province 10.73 -0.21 10.95 1.33 MV (22/35 kV) system improvements, Phase 2a 6 An Giang Province 16.08 -0.52 54.12 1.64 7 Binh Phuoc Province 20.23 0.42 26.85 3.47 8 Binh Thuan Province 28.82 0.14 37.18 2.90 9 Ninh Thuan Province 1.88 -0.19 2.12 0.12 10 Can Tho City 46.12 1.96 33.65 2.42 11 Long An Province 14.65 -0.62 19.76 0.51 12 Tay Ninh Province 22.47 -0.08 20.75 1.24 13 Tien Giang Province 18.65 -0.27 24.03 1.37 MV (22/35 kV) system improvements, Phase 2b 14 Bac Lieu Province 27.25 0.82 17.21 2.71 15 Hau Giang Province 5.87 -0.06 16.36 2.58 16 Kien Giang Province 78.30 2.62 82.98 25.19 17 Lam Dong Province 11.91 -0.65 6.52 0.31 18 Soc Trang Province 20.08 -0.36 10.78 0.75 19 Tra Vinh Province 18.37 0.46 22.06 4.06 Additional 110kV Subprojects, Phase 3 20 110kV Tay Ninh – Chau Thanh Transmission line, Tay Ninh Province 118.5 2.19 75.09 5.46 21 110kV Chau Thanh Substation, Tay Ninh Province 22 110kV Giong Trom – Binh Dai Transmission line, Ben Tre Province 76.96 -4.60 58.32 5.95 23 110kV Binh Dai Substation, Ben Tre Province Component 3 (CPC) Economic Financial No Subprojects NPV EIRR NPV FIRR (US$ mill) (%) (US$ mill) (%) 1 Quang Binh rural distribution project 0.55 15.00 1.20 13.4 2 Quang Tri rural distribution project 1.76 17.48 7.34 22.7 3 Thua Thien Hue rural distribution project 3.94 22.61 10.53 24.8 4 Quang Ngai rural distribution project 0.82 18.80 2.36 21.7 5 Binh Dinh rural distribution project 3.79 17.42 30.37 31.4 6 Phu Yen rural distribution project 0.30 13.79 1.70 17.8 7 Duy Xuyen 110kV substation 28.89 36.95 14.99 20.4 8 Son Hoa 110kV substation 6.59 20.58 0.34 7.0 9 Krong Ana 110kV substation 12.83 29.34 4.35 12.8 10 Chu Prong 110kV substation and branch line 9.61 24.08 0.68 7.4 11 Chan May 110kV substation 29.19 58.08 14.05 28.4 12 Cu MGar 110kV substation 30.73 34.29 4.48 10.7 13 Tan Mai 110kV substation (0.95) 8.68 4.40 (4.40) 14 Ea Kar - Krong Pak 110kV substation and branch 43.45 25.71 24.94 15.1 47 line 15 Dong Hoi - Ba Don 110kV line 43.40 43.45 19.23 20.4 16 Ta Rut 110kV substation and branch line 2.93 17.87 1.70 17.8 Component 4 (Hai Phong PC) At Appraisal At Completion Sub-project EIRR FIRR EIRR FIRR Cho Roc – Cat Ba 11% 4.5% 13% 18.4% 110kV line Dong Hoa – Long Boi 17.5% 2.8% 21% 21.3% 110kV line Component 5 (Hai Duong PC) At Appraisal At Completion Sub-project EIRR FIRR FIRR FIRR All 4 sub-projects 21.9% 3% 339% 72% Component 6 (Dong Nai PC) Economic Financial Overall NPV @ 10% ($ NPV @ 10% ($ EIRR (%) FIRR (%) million) million) At appraisal (phase 1) 6.06 18.6 5.5 4.99 At appraisal (phase 2) 56.02 260.23 27.74 204.06 At completion (all phases) 114 294.34 27 26.73 48 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending EASEN- Phillip Brylski Country Sector Coordinator HIS Quang Ngoc Bui Operations Officer EASVS Isabelle Daverne Consultant AFTEG Hoi-Chan Nguyen Consultant OPCIL Lien Thi Bich Nguyen Program Assistant EACVF Cung Van Pham Sr Financial Management Specialist EAPFM Tran Thi Thanh Phuong Senior Environmental Specialist EASVS Kurt F. Schenk Consultant AFTEG Richard Jeremy Spencer Country Sector Coordinator SASDE Robert P. Taylor Consultant EASCS Nguyen Chien Thang Senior Procurement Specialist EAPPR Hung Tien Van Senior Energy Specialist EASVS Teresita G. Velilla Temporary FEUUR Vladislav Vucetic Lead Energy Specialist MNSEG Christophe de Gouvello Senior Energy Specialist LCSEG Supervision/ICR Franz Gerner Lead Energy Specialist EASVS Hung Tien Van Senior Energy Specialist EASVS Hung Tan Tran Power Engineer EASVS Aidan Tendai Padraic Gregan Energy Specialist EASNS Defne Gencer Energy Specialist EASWE Beatriz Arizu de Jablonski Senior Energy Specialist EASWE Pedro Antmann Lead Energy Specialist AFTG1 Lien Thi Bich Nguyen Program Assistant EACVF Dung Kim Le Team Assistant EACVF Ly Thi Dieu Vu Environmental Specialist EASVS Nghi Quy Nguyen Social Development Specialist EASVS Khang Van Pham Environmental Specialist EASVS Son Van Nguyen Environmental Specialist EASVS Hanh Thi Huu Nguyen Financial Management Specialist EASFM Thao Thi Do Finance Analyst CTRLN Nguyen Chien Thang Senior Procurement Specialist EAPPR Mai Thi Phuong Tran Financial Management Specialist EAPFM Daisuke Miura Energy Specialist EASVS Ky Hong Tran Senior Energy Specialist EASVS Joel Maweni Operations Advisor EASSD Nghia Cong Le Driver EACVF 49 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY06 28.63 97.63 FY07 14.90 35.97 FY08 37.09 95.87 Total: 80.62 229.47 Supervision/ICR (as of December 23, 2013) FY09 27.11 69.49 FY10 32.74 66.95 FY11 33.76 83.59 FY12 32.73 122.00 FY13 22.07 66.93 FY14 4.46 19.38 Total: 152.87 428.34 50 Annex 5. Beneficiary Survey Results Not applicable 51 Annex 6. Stakeholder Workshop Report and Results Not applicable 52 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR A. Assessment of Bank and Borrower Performance NPC: The PCs, EVN and World Bank coordinated closely during project design and implementation of the project. The World Bank supported NPC and other PCs and was very responsive to queries and requests which made a significant contribution to the successful implementation. The three PCs (NPC, SPC, CPC), with the help of a grant by AusAid for Technical Assistant Component, had a chance to improve ability of staff in all fields such as finance, technical, business. Management and staff of NPC had a chance of working with international consultants, acquiring new knowledge and technology applied in the world, visiting and studying practices in developed countries in Europe, America, and Australia. This has helped meaningful PCs to improve customer services and engineering practices. CPC: Project design: Initial project design of component 3 - Improvement of rural distribution system in Central Region with 12 component sub-projects include 6 sub-projects of constructing power lines and 110 kV substations. The initial design that did not include savings costs obtained when bidding resulted in fund-surplus comparing to distributed funds. CPC had timely registered to add and completely performed further 4 sub-projects of construction of power line and 110 kV substations in accordance with the agreement schedule prior to June 30, 2013. Design of component 7- Corporate development of PCs to be equitized was rational and appropriate to the development and implementation and brought efficiency that reached at high rate. Project aim: The project aim according to the first proposal is basically rational and suitable to actual requirements. Sub-projects performed by CPC partially reached proposed aim, including:  Create capacity of providing sufficient quantity and ensured quality at the retail level in rural areas;  Effectiveness of power loss reduction: Sub-projects that put into operation contributed have helped bring about efficiency of power loss reduction of whole CPC. This has been especially significant in the current period when power loss data has approximately approached technical loss as calculated and gradually entered the period of saturation.  Effect in reducing failure, duration of power interruption to customers and scale of power interruption when failure happened on a power line or at a substation.  Effect in improving voltage quality. 53  Effect for improving transmission capacity, grid anti-overload of current power grid thereby expanding scope of electrified area and increasing proportion of electrified households  Helping get access to modern operation and management technology through sub-projects investments. Improving capacity, corporately developing CPC into modern distribution utility. This is shown through achieved effects at high level in following programs: Project organization: Since sub-projects are numerous, scattered and distributed over large areas, performed in many phases, the organization and implementation of project is quite complicated. Nevertheless, CPC tried its best to reasonably organize and complete all subprojects and comply with the requirements and commitments to the lending organizations, Law of Vietnam in order to meet the proposed objectives. Consulting contractors selected by CPC mainly by form of direct contracting to perform works such as creating investment projects, surveying, designing, making plan of compensation and resettlement, environmental management, etc. These bidding packages are performed by counterpart fund of CPC. In general, all consulting contractors met qualification requirements to perform these packages; project documents prepared by subsidiaries substantially satisfied the requirements. Contractors supplying materials and equipment selected by CPC through form of international competitive bidding in accordance with the bidding requirements stipulated and issued by World Bank. These packages used World Bank loans. Steps of bidding process and bidders selection had been approved by Bank such as: plan of procurement, bidding documents, bids selection results. Bidding procedure had been organized rationally, publicly, transparently, followed strictly the requirements of lending organizations and Law of Vietnam. Bidding results show highly competitiveness, significant cost savings compared with the approved cost estimate. Capacity of project implementation units:  Project owner: CPC is the project owner who has enough experience and strong ability to well organize and perform their projects. Thereby, they directly performed projects as well assign and direct the project management units to successfully organize and proceed with project implementation.  Project management units: are the subsidiaries under CPC have enough experience and ability to perform and manage assigned sub-projects. Social, environmental factors and the range of WB’s safeguard policies taking part in the project. WB’s safeguard policies are quite reliable, ensure efficient use of funds and for the right purpose, especially the regulations on public procurement and contracts in order to select qualified contractors and create binding obligations for contractors involved in the project to the bidders to fully perform the contract at the request of the project owner. The policies in terms of finance and payment are also reasonable, ensuring to provide timely adequate capital to the project owner paid to bidders, creating favorable conditions 54 to bidders for successful project implementation of bidders and contributing to the overall success of project Assessment of Risk:  There is no significant risk of scope of policy about investment progress as well as operation progress after putting the project into operation.  For any organizational capacity, EVN in general and CPC in particular have effective organizational structure, skillful human resource, and ability to adjust the structure if necessary to meet the actual request. Therefore, there is no remarkable risk in investment progress and operation progress after putting the project into operation. Project implementation: Before signing the Loan Agreement, CPC has started to register and approve the sub- project list, survey, prepare plan for compensation and resettlement, environmental management plan. Thanks to the well-prepared investment procedures, implementation project schedule has been shortening significantly. The process of project implementation has some impact factors, solving methods are as follows:  Weather was variable; storms, floods frequently occurred in the Central – Highlands region, causing many problems for construction and installation. In bad weather days and rainy season, it was imperative to stop construction. In case rain made roads become muddy, material truck could not go. Then, the project management unit required construction unit to supplement labors and applied progress accelerating measures in order to cover a part of temporary execution period.  The lay-out of power cut for construction and connection was much difficult, especially extended transformers and those having feeder cell. Thus, it needed to plan and register the power cut monthly/weekly to take the initiative in construction power cut arrangement. Simultaneously, maximum human resource was mobilized in power cut days to increase work volume and finish at the registered time.  Difficult financial situation of contractors supplying goods and constructing also slowed down the progress of implementation compared to the original plan. However, CPC and PMB have provided maximum support regularly so that contactors could fulfill the contract. In the context of the mutual economic difficulties from 2010 to 2012, there were some construction contractors facing severe difficulties that could not finish the work leading to contract termination. CPC has reported in time and got approval from the WB to stop the construction contracts and to extend the other contracts to continue implementation and hold re-procurement for the package of supplying materials and equipment. In order to mitigate risks for contractors in process of implementing contracts due to depreciation, WB agreed and CPC adopted price adjustment form for works contracts. 55 The conduct of compensation and resettlement was difficult, complicated and long-lasted. Compensation unit price in provinces was low as compared with average price of the market, interfering significantly in compensation declaration to local residents. Simultaneously, some problems arose such as people did not accept compensation, obstructed construction and made long solving time. Therefore, PMB coordinated closely with local authorities, had government’s support, implemented the compensation procedures strictly following regulation, established compensation board, arranged staff for frequent site monitoring, well-done public relations, and persuaded people step by step. In case problems arose, we discussed with people and the local authorities to find out the most reasonable solution. As a result, compensation and ground clearance were basically completed, having enough conditions and construction progress. The changes of local planning also had impact on project implementation. In some projects, location for constructing line and substations had been selected, nevertheless, since the local changed planning, the power sector had to adjust position to be appropriated, costing execution time. The equipment and materials supply was not synchronized with construction, affecting construction schedule. This delay was mainly because time of equipment procurement bidding was too long (international bidding) and time to manufacture and supply materials was also long (at least 4-8 months). Besides, it was partly because bidders supplying goods late comparing with the schedule of requirements. This is a valuable experience in synchronizing schedule of supplying goods and construction schedule to hold the proper procurement. Some construction contractors did not really concentrate and was late in holding the construction, making the progress be late compared to the contract. PMB also monitored, supervised and applied effective methods to improve and speed up construction progress. When designing some sub-projects, it did not foresee all situations so that the design has been adjusted to comply with actual situation which also affected the process partly. The course of problem handling was performed promptly and complied with regulation, meanwhile CPC enhanced examination and appraisal improving designed proposal quality to restrict later amendment to the lowest level. SPC: The project responded to identified objectives of World Bank and the Government’s Plan period 2008 – 2012 for investment in rural infrastructure of power sector. In term of technique, the investment project was well prepared. World Bank supported demand of finance for SPC to strengthen and rehabilitate rural distribution system, to supply sufficiently power for rural households in southern Vietnam. Project preparation: Regulations & policy: Works is complying with Decrees and Circulars of Government, consisting of arrangement of funds for the project, investigation for engineering, feasibility study report, definite design and grand total estimated investment cost. Some subprojects were designed many times because of reasons as follows: 56  To comply with Decree 81/2009/ND-CP dated October 12th, 2009, the designs of the sub-projects in phase 2 had been approved before October 12th, 2009, so all designs had been modified to ensure safe high being 14 meters from land to the lowest sagging point of conductor for 35kV voltage level. It took more eight months for going back to survey and redesigning these sub-projects when increasing the height of poles/towers.  Some sub-projects were designed before Planning of approved provincial traffic, so many transmission lines redesigned leading up coincidence of transmission lines invested by Government.  Quantity of transmission lines were improved reducing due to delay in implementation of sub-projects and the demand of consumption for local residents, power companies invested to improve these transmission lines, so consultant had to redesigned some routes. Project implementation: Most sub-projects were improvement of transmission lines from one-phase to three-phase and construction of 22/35kV substations, so they need material/goods at site when starting sub-project. But, construction works were implemented simultaneously with goods procurement, so goods delivery schedule was not matched with construction progress, it caused delay on implementation of sub-projects. Delays of goods procurement derived from the high inflation in Vietnam during period of 2008-2009 leading up fluctuation of goods prices. Consequently, procurement contracts of sub- projects had to be terminated and/or re-tendered. In accordance with planning of provincial traffic, there were changes of transmission line routes in sub-projects, so consultant had to go back for survey and design again such as Binh Thuan, Kien Giang, Ba Ria – Vung Tau, Tay Ninh, Long An. For Ben Tre sub- project, transmission line route crossing residents’ land/gardens with trees of high value, so it took a lot of time for inventory and resettlement as well as land compensation rates are unsatisfactory because of the high inflation in Vietnam during period of 2008-2009, it also cause extension of construction schedule. Besides, construction work is discontinued in some provinces such as Bac Lieu, Soc Trang, Kien Giang and Can Tho city due to flooding. The positive side The first was cost saving. The cost saving allowed additional four sub-projects in Tay Ninh and Ben Tre provinces including Chau Thanh 110kV substation with Chau Thanh - Tay Ninh transmission line, and Binh Dai 110kV substation with Giong Trom – Binh Dai transmission line respectively. Reasons of saving costs were as follows:  There were very strong competitive for works contracts and goods procurement, these saved approximately 25.6 percent of construction cost in comparison with total value of works contracts at appraisal time, and 22 percent of material and equipment cost in comparison with total value of procurement contracts at appraisal time. 57  The 22/35kV transmission line routes were changed after designing due to planning of provincial traffic, they went through areas which had some MV transmission lines constructed by local governments, so they were rejected from initial design of sub-projects.  For improving transmission lines, quantities of MV dismantled transmission lines at site were less than in design, leading up saving manpower and material costs. Quantities of dismantled transmission lines reducing, due to delay in implementation of Works, they were improved by power companies such as Vinh Long, Tien Giang, Bac Lieu, Binh Phuoc, Tay Ninh, Tra Vinh. The next, to overcome the delay in delivery of goods and construction schedule, goods of other projects was delivered for these sub-projects. Simultaneously, there were co- ordination of PCs, SPC/SPPMU and contractors. Contractors arranged many construction units to work overtime, PCs supported to cut power for connection the transmission line to the grid, SPC’s supervisors and consultant monitored permanently and managed strictly constructed schedules as well as solving immediately the difficulties at site to reducing delays in implementation of sub-projects. Consequently, all sub-projects were put into operation the end of 2012. Local Power Companies and Southern Power Project Management Unit (SPPMU) - under SPC - were the good bridges between Southern Power Corporation and Local Governments to solve the difficulties during construction of 22/35kV sub-projects. Thank to Local government’s mobilization, residents allowed using provisionally their land during construction of transmission line without compensation of their lands. SPC only paid for clearance in Right of Way (ROW) in some sub-projects including: Binh Duong and Vinh Long (phase 1), Tay Ninh (phase 2a), Lam Dong and Soc Trang (phase 2b). Technical Assistance component helped EVN and SPC in particular recognizing current situations of power sector, having correct approach to improve in areas of power sector such as finance, technique, procurement bidding, customer service, and planning for network development. Troubles: The positive side was also the negative side that was strong competition for works contracts and procurement contracts. Due to low bid and inflation during period 2007- 2009, some procurement contracts of sub-projects had to be terminated and/or re- tendered as mentioned above. It was the reason of delay in schedule of sub-projects. Technical assistance: Time for learning and exchanging experience is very short, it was hard for us to go deeply in each area for example how to manage and operate SCADA system in 110kV substations without operators. B. The lessons learned. NPC: In subjective assessments, PCs has completed Technical Assistance Component – RD project with good results in training contents, training objects, meeting time and project progress, using efficiently the amount of money allocated. 58 The project could finish with the implementation progress of each activity as scheduled, quick disbursement, efficient use of money allocated; it’s because of following factors: a. EVN assign content research, implementation plan to a leading PC. The leading PC would coordinate with others PCs. b. At the leading PC, the contact point would be assigned to one contact department. The specialized department would be in charge of content of activities. c. The specialized department monitor and provide information to consultant in order to focus in required objectives. d. Coordination PCs (departments) must be good cooperation. e. Closely manage funds to support effective use (conversion rate between currencies) f. Consultant in capacity improvement implemented WB’s consulting activity: it is the first time PCs received a non-refundable grant to support the selection of consultancy to improve staff’s capacity. In the early time, PCs faced many difficulties and unfamiliarity in implementation, for example: preparing Terms of Reference, estimating the cost of consultancy, plan procurement, etc. Beside, consulting procedures in WB’s projects are different from those of material and equipment procurements and constructions; and also there are some differences in rules of selecting consultants between WB and Vietnam. g. The project implementation structure: One of the reasons that helps Technical Assistance Component of RD project at PC run smoothly, ensure the process of consulting contracts and projects, disbursements, quick settlement is the method of operating project. International Relation Department (IRD) is assigned to coordinate the technical assistance component in RD project, which has responsibilities in managing, monitoring and coordinating implementation of all activities within the scope of the technical assistance Component h. NPC project implementation structure: One of the reasons that helps Technical Assistance Component of RD project at NPC run smoothly, ensure the process of consulting contracts and projects, disbursements, quick settlement is the method of operating project. International Relation Department (IRD) is assigned to coordinate the technical assistance component in RD project, which has responsibilities in managing, monitoring and coordinating implementation of all activities within the scope of the technical assistance Component CPC: A lesson learned for the purpose of ensuring the project launch quickly and the allocation of resources using in each sub-project of CPC. World Bank loan is used for the procurement and construction of the project implementation phase. 59 The counterpart fund is used for the initial preparation phase where the project launch was ready to reach at high level. Flexible project design allowing use of saving costs or fund transfer between sub-projects is important, although it have to ensure the project management, monitor the implementation process. In project implementation, CPC proposed to revise and complement timely, reasonably the design and the list of sub-projects, transfer fund between the utilities of EVN, extend time for project implementation, use remaining fund from savings of investments to add new sub-projects to effectively use loans. WB reviewed, approved and timely extended a support to the proposals of CPC. The main reason of WB’s intervention is to be suitable to the situation of practical implementation according to the reports and rationally explanations, in order to bring highest efficiency. SPC: Works and Procurement Bidding were complied with regulations of World Bank and Viet Nam, in common with transparence of bidding leading up strong competition and reducing prices of works and procurement contracts. The goods procurements should have been implemented promptly when Conceptual Designs or Definite Designs of Sub-projects are approved to supply sufficiently and instantaneously goods, equipment and accessories for construction and erection at sites. It should coordinate closely between Southern Power Project Management Unit (SPPMU), provincial Power Companies (PCs) and local authorities to propagandize households’ support for site clearance. For economic assets where transmission line going through, SPPMU, PCs and local authorities should be co-ordinate to inventory and pay compensation before starting construction of project. PCs and SPPMU - under SPC - were the good bridges between Southern Power Corporation and Local Governments to solve the difficulties during construction of 22/35kV sub-projects. Thank to Local government’s mobilization, residents allowed using provisionally their land during construction of transmission line without compensation of their lands. SPC only paid for clearance in Right of Way (ROW) in some sub-projects such as Binh Duong and Vinh Long (phase 1), Tay Ninh (phase 2a), Lam Dong and Soc Trang (phase 2b). There was good co-ordination of divisions of Southern Power Corporation, so the decisions of redesigning, arisen estimates, etc. were approved timely to avoid more delays in implementing sub-projects. To overcome the delays in construction schedule, PCs supported works contractor in cutting power schedule for connection of grid. Besides, contractors arranged many construction units to work overtime, strengthening transporting goods, material and equipment to remote areas, and SPPMU’s supervisors and consultant presented permanently to solve difficulties at site such as change of transmission line route, stringing across the streets/roads and rivers. 60 Consultant should investigate carefully areas under planning of provinces before design to avoid design coincidence with project invested by local authorities. C. Findings and recommendations NPC: By practical experience, NPC realized that it should be better to have a unit to coordinate all activities, information and communication among parties as NPC, EVN, WB, other PCs, and consultants, etc. On behalf of PCs, a unit will supervise all activities of consultant and Technical assistant component from preparation of TOR to implementation of contract, disbursement, settlement to ensure progress of contracts and project (especially, payment procedure for foreign consultant) Besides, this unit is responsible for supervising allocated loan, used loan and saving loan to make timely proposal of new activities. Last but not least, the PCs should strictly control and predict the volume and value of the contract payment for the project, avoid the excess of costs that leads to additional approval, adjusted to prolong the implementation and disbursement of project. 61 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable 62 Annex 9. List of Supporting Documents All documents filed in IRIS, WBDocs and Project Portal, such as aide memoires, reports, email correspondences, etc. World Bank 2011, “The Vietnam Rural Electrification Experience: State and People, Central and Local, Working Together”, The World Bank & Asia Sustainable and Alternative Energy Program (ASTAE), The World Bank, Washington DC. World Bank 2013, “Note on Power Sector and Poor in Vietnam: Using the Vietnam Household Living Standard Surveys 2010 and 2012”, World Bank, Hanoi. World Bank, 2007. Implementation Completion and Results Report for Vietnam Transmission, Distribution and Disaster Reconstruction Project, December 28, 2007. World Bank, 2011. Implementation Completion and Results Report for Vietnam Demand-Side Management and Energy Efficiency Project, March 28, 2011. 63 IBRD 35990 VIETNAM 102º 104º 106º 108º 110º RURAL DISTRIBUTION 4 CHINA PROJECT Hà Giang 5 ` ˘ Cao Bang PROVINCE CAPITALS NATIONAL CAPITAL Lào Cai PROJECT PROVINCES: Phong Tho PROVINCE BOUNDARIES 9 1 3 8 PHASE 1 22º ` Can ˘ Bac INTERNATIONAL BOUNDARIES 12 Tuyên 7 Quang Thái Lang Son ' 8 PHASE 2* Yên Bái Nguyên 10 2 13 _ 11 PHASES 1 & 2* Diên Viêt Trì 12 ˜ 14 Biên Phu Son Vinh Yên 15 ' La 11 ˘ Bac` Giang *Phase 2 Project Provinces and works are subject to change. 16 ` Ninh Bac ˘ 6 17 Ha Long HÀ_ NÔI Project Systems: Hà Dông 20 19 Hai Hai Phòng Provinces 22/35 kV 110 kV Hòa Bình Hung ' 22 18 Yên Duong ' ' 21 1 Lai Châu Hà Nam 23 24 2 _ Diên Biên Nam Thái Bình 25 _ Dinh26 3 Lào Cai Ninh Bình 20º 20º 4 Hà Giang 27 5 Cao Bang ` ˘ LAO PEOPLE'S Thanh Hóa 6 Son' La 7 Yên Bái DEMOCRATIC Gulf 8 Tuyên Quang • 28 Hainan I. 9 Bac ˘ Can REPUBLIC (China) of 10 Lang Son ' Vinh 11 Phú Tho •1&2 Tonkin 12 ˜ Phúc Vinh • 29 13 Thái Nguyên ˜ Hà Tinh 14 ˘ Giang Bac • 18º 18º 15 Quang Ninh • Me k 16 Hà Noi on _` g 17 ˘ Ninh Bac • Dông Hói ' 30 18 Hà Tây 19 Hung ' Yên 20 Hai Duong'' • • _ Dông Hà 21 Hai Phòng • 31 22 Hòa Bình • 23 Hà Nam • Hue 24 Thái Bình •1 •2 32 _ 33 25 Ninh Bình 16º T H A I L A N D ˜ ˘ Dà Nang 16º 26 Nam _ Dinh • 27 Thanh Hóa • 34 ` Tam Ky 28 Nghe An • 29 Hà Tinh˜ Quang Ngãi 30 Quang Bình • 35 31 Quang Tri • 36 32 Thùa ' Thiên Huê •2 •1 _ ˜ Kon Tum 33 Dà Nang ˘ 34 Quang Nam • 38 35 Quang Ngãi • 14º 14º Plei ku Quy Nhon 36 Kon Tum ' 37 37 Gia Lai • _ 38 Bình Dinh • 39 Phú Yên •2 •1 39 _ 40 ˘ Lak Dak ˘ • Tuy Hòa 41 _ Dak ˘ Nông C A M B O D I A 40 42 Khánh Hòa Buôn Ma Thuôt 43 Bình Phuóc • _ ` 44 Lâm Dong • 42 Ninh Thuan 41 Nha Trang 45 • ˜ Gia Nghia 46 Tây Ninh • _ 12º 12º Dà Lat 47 Bình Duong • 43 _ ` _` 45 48 Dông Nai •1&2 • 1 Dong Xoài 44 Bình Thuan 46 Phan Rang- 49 • M Tây Ninh Tháp Chàm 50 Hô` Chí Minh City 47 48 ekong ` 49 51 ˜ Tàu Bà Ria – Vung • Thu Dau ' Môt Phan Thiêt 52 Long An • Biên Hòa 50 53 ` Giang Tiên • Gulf 54 ` Chí Minh City Hô _ ` 52 51 54 Dông Tháp • of 56 Cao Lãnh Tân An 55 Bên Tre • Long Xuyên 53 My˜ Tho 56 An Giang • Thailand Phu ˜ Long Vinh ' Tre Bên Vung ˜ Tàu Quoc 60 55 ˜ Long Vinh Rach Giá ` Tho 57 10º 57 • 10º Cân ' 58 Trà Vinh • 59 61 Trà Vinh Vi Thanh 58 59 Kiên Giang • 60 ` Tho Cân • 62 Sóc Trang ˘ VIETNAM ' 0 50 100 150 Kilometers 63 61 Hâu Giang • Cà Mau Bac Liêu 62 Sóc Trang ˘ • 63 Bac Liêu • 0 50 100 Miles 64 64 Cà Mau • This map was produced by the Map Design Unit of The World Bank. •1 to be implemented in Phase 1 only. The boundaries, colors, denominations and any other information shown •2 to be implemented in Phase 2 only. on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or •1&2 to be implemented in both Phases. acceptance of such boundaries. 104º 106º 108º MARCH 2008