Multitranche Financing Facility India: Madhya Pradesh Power ...

Project Number: 32298 Loan Number: 2323 August 2013

Multitranche Financing Facility

India: Madhya Pradesh Power Sector Investment

Program (Tranche 1)

Completion Report

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CURRENCY EQUIVALENTS Currency Unit – Indian rupee/s (Re/Rs)

At Appraisal At Project Completion (12 December 2006) (30 June 2012)

Re 1.00 = $0.0223 $0.0178 $1.00 = Rs 44.83 Rs 56.05

ABBREVIATIONS

ADB – Asian Development Bank DISCOM – distribution company DSCR – debt service coverage ratio EARF – environmental assessment and review framework EIRR – economic internal rate of return EMP – environmental management plan ESMC – environmental and social management cell FFA – framework financing agreement FIRR – financial internal rate of return GDP – gross domestic product GSDP – gross state domestic product GOMP IDC

– –

government of Madhya Pradesh interest during construction

IEE MFF MOEF

– – –

initial environmental examination multitranche financing facility Ministry of Environment and Forests

MPERC MPTRANSCO NGO PMU PPMS

– – – – –

Madhya Pradesh Electricity Regulatory Commission Madhya Pradesh Power Transmission Company Limited nongovernment organization Project Management Unit project performance monitoring system

WACC – weighted average cost of capita XIDAS MYT ARR

– – –

Xavier Institute of Development Action and Studies multiyear tariff aggregate revenue requirement

WEIGHTS AND MEASURES

cct-km – circuit-kilometer GWh – gigawatt-hour ha – hectare km – kilometer kV – kilovolt kW – kilowatt kWh – kilowatt-hour MVA – megavolt-ampere MW – megawatt

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MWh – megawatt-hour VA – volt-ampere

NOTES

(i) The fiscal year (FY) of India and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2012 ends on 31 March 2012.

(ii) In this report, "$" refers to US dollars.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Vice President X. Zhao, Operations 1 Director General Juan Miranda, South Asia Department, SARD Director

Hun Kim, Country Director, India Resident Mission (INRM), SARD

Team leader J. Banerjee, Project Officer (Energy), SARD Team member N. Munjal, Senior Project Assistant, SARD.

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CONTENTS

Page BASIC DATA iv

I PROJECT DESCRIPTION 1

II EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 2

B. Project Output 2

C. Project Cost 3

D. Disbursements 3

E. Project Schedule 4

F. Implementation Arrangements 4 G. Conditions and Covenants 4

H. Consultant Recruitment and Procurement 5

I. Performance of Consultants, Contractors and Suppliers 5

J. Performance of the Borrower and the Executing Agency 5

K. Performance of the Asian Development Bank 5

III EVALUATION OF PERFORMANCE A. Relevance 6

B. Effectiveness in Achieving Outcome 6 C. Efficiency in Achieving Outcome and Outputs 6

D. Preliminary Assessment of Sustainability 7

E. Impact 7

IV OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 11

B. Lessons 12

C. Recommendations 12

APPENDICES

1. Project Framework 13

2. Chronology of Main Events in Project Processing and Implementation 16

3. Cost Breakdown by Project Components 17

4. Summary of Contracts 18

5. Project Financing Plan 22

6. Projected and Actual Disbursement of Loan Proceeds 23

7. Implementation Schedule 24

8. Organization Chart 27

9. Status of Compliance with Major Loan Covenants 28

10. Financial and Economic Evaluation 39

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BASIC DATA

A. Loan Identification

1. Country India

2. Loan Number 2323-IND

3. Project Title India: Madhya Pradesh Power Sector Investment Program (Tranche 1)

4. Borrower Government of India

5. Executing Agency Madhya Pradesh Power Transmission Company (MPTRANSCO)

6. Amount of Loan $106 Million

7. Project Completion Report Number IND 1405

B. Loan Data

1. Appraisal - Date Started - Date Completed

12 December 2006 14 December 2006

2. Loan Negotiations - Date Started - Date Completed

19 February 2007 20 February 2007

3. Date of Board Approval 4 April 2007

4. Date of Loan Agreement 12 April 2007

5. Date of Loan Effectiveness - In Loan Agreement - Actual

14 May 2007 11 July 2007

6. Closing Date - In Loan Agreement - Actual - Number of Extensions

30 June 2011 30 June 2012 2

7. Terms of Loan - Interest Rate - Maturity (number of years)

- Grace Period (number of years)

London interbank offered rate (LIBOR)-based Sum of LIBOR and 0.6% 20 years 5 years

8. Terms of Relending (if any) - Interest Rate - Second-Step Borrower

Relending between the Government of India and GOMP are on the same terms and conditions as the ones applicable to the Government of India.

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- Maturity (number of years) - Grace Period (number of years)

GOMP on lending to MPTRANSCO, with a 1% point spread.

20 years 5 years

GOMP = government of Madhya Pradesh, LIBOR = London interbank offered rate, MPTRANSCO = Madhya Pradesh

Power Transmission Company Limited

9. Disbursement

a. Dates

b. Amount ($ million)

Note: Reallocation among various categories was undertaken on 12 October 2010. a

For final cancellation: $ equivalent as of date of approval of cancellation (28 Nov 2012).

10. Local Costs (Financed)

- Amount ($) 0

- Percent of Local Cost 0

- Percent of Total Cost 0

Initial Disbursement Final Disbursement Time Interval

6 July 2007

23 October 2012 63 months

Effective Date Original Closing Date Time Interval

14 May 2007 30 June 2011 49 months

Category Category or Original Partial Last Revised Amount Undisbursed

No. Subloan Allocation Cancellations Allocation Disbursed Balancea

(1) (2) (3) (4=3-5) (5) (6) (7=5-6)

1. Works 8.0 8.0 0.0 0.00 0.00

2. Equipment 76.0 (26.0) 102.0 94.02 7.98

3. Interest & commitment charges

9.4 5.4 4.0 3.25 0.75

4. Unallocated 12.6 12.6 0.0 0.00 0.00

Total (loan currency) 106.0 0.0 106.0 97.27 8.73

Total ($ equivalent) 106.0 0.0 106.0 97.27 8.73

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C. Project Data

1. Project Cost ($ million)

2. Financing Plan ($ million)

ADB = Asian Development Bank, IDC = Interest during construction

3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual

Foreign Local Total Foreign Local Total

Equipment cost 84.0 0.0 84.0 94.02 0.00 94.02

Related Service 0.0 0.0 0.0 0.00 0.00 0.00 Erection and Civil Works

0.0 12.5 12.5 0.00 0.00 0.00

Others 0.0 11.0 11.0 0.00 16.78 16.78

Sub total 84.0 23.5 107.5 94.02 16.78 110.80

Contingency Physical 4.2 1.0 5.2 0.00 0.00

0.00

Price 8.4 2.0 10.4 0.00 0.00

0.00

IDC and Construction charges

IDC

8.6 0.0

8.6

3.25 0.00

0.00

3.25 Commitment charges 0.8 0.0 0.8 0.00 0.00 0.00

Total 106.0 26.5 132.5 97.27 16.78 114.05

IDC = Interest during construction

Actual cost of related service, physical contingency and price contingency is included in Equipment Cost

Cost Appraisal Estimate Actual

Foreign Currency Cost 106.0 97.27

Local Currency Cost 26.5 16.78

Total 132.5 114.05

Cost Appraisal Estimate Actual

Implementation Costs

Borrower-Financed 11.0 16.78

ADB-Financed 96.6 94.02

Other External Financing 26.5 0.00

Total 123.1 110.80

IDC Costs

Borrower-Financed 0.0 0.00

ADB-Financed 9.4 3.25

Total 132.5 114.05

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4. Project Schedule

Item Appraisal Estimate Actual

Start End Start End

Transmission lines

Route finalization and pre-tendering Aug 2006 Apr 2007 Jul 2006 Apr 2007

Tendering and contract awards Nov 2006 Jun 2007 Dec 2006 Aug 2007

Manufacturing and delivery of equipment May 2007 Oct 2010 Aug 2007 Oct 2010

Construction and commissioning Aug 2007 Dec 2010 Aug 2007 Mar 2011

400kV & 220kV substations

Land acquisition and pre-tendering Aug 2006 Apr 2007 Jul 2006 Apr 2007

Tendering and contract awards Nov 2006 Jun 2007 Dec 2006 Sep 2007

Manufacturing and delivery of equipment May 2007 Oct 2010 Dec 2007 Oct 2010

Construction and commissioning Aug 2007 Dec 2010 Nov 2007 Dec 2010

kV = kilovolt

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 15 May 2007 to 31 December 2007 Satisfactory Satisfactory

From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory


From 1 January 2010 to 31 December 2010 Partially Satisfactory Satisfactory


From 1 January 2012 to 30 June 2012 Satisfactory Satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission Date

No. of Persons

No. of Person-Days

Specialization of Members

Fact Finding Mission 16–24 Oct 2006 Appraisal Mission 12–14 Dec 2006 Inception Mission 20–25 May 2007 Loan Review Mission 07–17 Jan 2008 Loan Review Mission 01–03 Sep 2008 Loan Review Mission 15–17 April 2009 Loan Review Mission 15–20 June 2009 Special Loan Administration 24–27 Nov 2009 Special Loan Administration 6–16 April 2010 Loan Review Mission 27–30 Oct 2010 Loan Review Mission 29 Nov–01 Dec 2010 Loan Review Mission 11–14 Oct 2011 Loan Review Mission 14–16 Feb 2012 Project Completion Review Mission 10–14 Dec 2012

5 5 5 3 3 1 2 2 2 2 2 2 2 1

45 29 30 33 9 3 12 8 22 8 6 8 6 5

a,c,k,d a,b,c,d

a,b,c,d,e c,f,d c,f,d

l b,e b,e g.h g,h b,e f,i f,j f

a = Senior Finance Specialist (Energy), b = Senior Project Implementation Specialist, c = Energy Specialist, d = Project Implementation Specialist, e = Assistant Project Analyst, f = Project officer (energy), g = Resettlement and social development officer, h = environment officer, i = Team Leader (energy), j = Senior Project Assistant (energy), k

= Social Development Specialist, l = Senior Control Officer

I. PROJECT DESCRIPTION

1. India has faced formidable challenges in achieving balanced infrastructure development in conjunction with the provision of adequate energy, which can play an essential role in reducing poverty through sustainable economic growth.1 Cognizant of the vast impact on the global environment and energy security, the Government developed the Integrated Energy Policy. The vision of the policy is to reliably meet the demand for energy services across all sectors using safe, clean, and convenient energy in a technically efficient, economically viable, and environmentally sustainable manner. The Integrated Energy Policy provides for specific measures, including (i) optimizing the power supply mix through greater use of indigenous hydropower resources and renewable energy; (ii) pursuing technologies that maximize energy efficiency, demand-side management, and conservation; and (iii) continuing related power sector reforms to control technical and commercial losses of the state transmission and distribution utilities, with the restructuring supported by the government’s Accelerated Power Development and Reform Program. 2. To facilitate economic growth in the state of Madhya Pradesh, a diagnostic assessment conducted by the government of Madhya Pradesh (GOMP) revealed that significant investments were needed to enhance transmission capacity, which would also facilitate evacuation of upcoming generation projects constructed by central and state sector generation projects. The multitranche financing facility (MFF) was particularly well suited for the investment program because (i) the aim of the investment program is to support GOMP’s long-term objectives, as stated in the sector road map; and (ii) the MFF offered the flexibility required to enable the investment program to support the participation of four companies with different levels of readiness. 3. Tranche 1 of the Madhya Pradesh Power Sector Investment Program was the first assistance provided by the investment facility; the output of the subproject as designed intended at construction of transmission lines for power evacuation and strengthening of transmission systems with the aim of meeting energy demand growth in Madhya Pradesh. The main objectives of the tranche 1 subproject were (i) to improve the operational efficiency, voltage profile and power delivery capacity of Madhya Pradesh Power Transmission System; (ii) to meet various parameters as defined in the Grid Code issued by the Madhya Pradesh Electricity Regulatory Commission after implementation of this scheme; and (iii) creation of new 220 kV and 132 kV substations and associated transmission lines to reduce overloading on the 132 kV and 33 kV systems; and (iv) to improve the voltage profile. The investment program financed key components of the Madhya Pradesh transmission investment program during 2007–2012, which was based on building sufficient capacity for evacuation of power from existing and planned power stations and substations, and reliably and efficiently delivering power to consumers. The construction of new transmission lines was intended to remove constraints to power flow and to provide additional operational flexibility to Madhya Pradesh Power Transmission Company (MPTRANSCO) in its role as system operator in Madhya Pradesh.

4. At appraisal, the project consisted of (i) 2 circuit kilometers (cct-km) of 400 kV (kilovolt) and about 1500 cct-km of 220 kV; (ii) two new 400/220/132 kV substation having 315 mega volt-ampere (MVA) transformer capacity; (iii) eight new 220/132 kV substations, six transformers of 160 MVA capacity each and two transformers of 260 MVA capacity,

1 ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility for India for the Madhya Pradesh Power Sector Investment Program. Manila

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comprising one of 160 MVA capacity and one of 100 MVA capacity; (iv) ten 220/132 kV independent 160 MVA additional transformers at existing substations; and (v) three 220/33 kV 100 MVA transformers at existing substations. Subsequently, minor changes in originally contemplated project scope were effected and finally the scope consisted of (i) construction of 1.976 cct-km of 400 kV, 1989.50 cct-km of 220 kV, and 305.70 cct-km of 132 kV transmission lines; (ii) construction of one new 400/220 kV substation with 315 MVA transformer capacity; eight new 220 kV substations (six of 160 MVA and two of 260 MVA [160 MVA+100 MVA] capacity); (iii) installation of (a) fourteen 220/132 kV 160 MVA additional transformers, (b) three 220/33 kV 100 MVA transformers, and (c) four 132/33 kV 40 MVA transformers at existing substations; (iv) augmentation of four 132/33 kV substations from 20 MVA to 40 MVA; and (v) procurement of (a) testing instruments and maintenance equipment, and (b) protection equipment.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

5. The main events in project processing and implementation are presented

chronologically in Appendix 2.

A. Relevance of Design and Formulation

6. At appraisal (as of March 2007), the installed generation capacity of Madhya Pradesh State, including the share from the central sector and joint venture power stations, was 6822 megawatt (MW). The restricted peak demand that could be met in 2006–2007 was 6109 MW, while the unrestricted demand was 7114 MW, resulting in a shortage of 1005 MW. Therefore, the project was highly relevant and consistent with the government’s overall development objectives and ADB’s strategy for India on supporting infrastructure-led poverty reduction.2 7. The progressive commissioning of the originally envisaged project components resulted in a project scope that increased transmission capacity to (i) 8170 MW in early 2012, and (ii) 8809 MW in September 2012, enabling peak demand of 8546 MW to be met during 2012. In 2012 system availability increased to 99.23% (from 97.5% in 2009) and technical losses decreased to 3.51% (from 5.2% in FY2006). 8. Execution of the project addressed the transmission capacity constraints in a significant manner, with the added benefit of enhancing system availability and reducing technical losses. The project’s components were implemented in accordance with the designs as originally formulated at appraisal, demonstrating the appropriateness and relevance of the design and formulation. 9. The Project Framework with results is in Appendix 1.

B. Project Output

10. At appraisal, it was envisaged that the works indicated in Table A1.1 (Appendix 1) would be completed. The original scheme, as originally conceived, was completed ahead of loan closure (30 June 2011). Expeditious implementation of the originally contemplated scope, along with economy and efficiency in procurement led to savings and additional

2 ADB. 2004.Country Strategy and Program Update (2004–2006): India. Manilla, and ADB.2005.Country Strategy and Program Update (2005–2007): India. Manila

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schemes were proposed.3 11. The first saving scheme (saving scheme 1) improved operational efficiency and the voltage profile and delivery capacity of the transmission system in line with the grid code, with the associated objective of reducing overloading of the existing 132 kV and 33 kV system. The scope is provided in Table A1.2 (Appendix 1); it was fully commissioned as of August 2011. 12. Saving scheme 2 was designed to facilitate additional evacuation of power from hydroelectric generation units to meet increased in-state demand and interstate transfer. The scope is in Table A1.2; all works have been commissioned, except for the 132 kV Sidhi–Deosar line (steps are being taken to commission this line). However, the delay in commissioning this line has not affected power dispersal, because the Sidhi area is already fed by 132 kV substation Sidhi and by 132 kV substation Beohari. 13. Saving scheme 3 was intended to improve the operational reliability of the state’s transmission system so as to meet the international benchmark for system efficiency and reduction of operational risk. The scope is also indicated in Table A1.2; it was fully commissioned as of June 2012.

C. Project Cost

14. At appraisal, the total cost of the project was $132.5 million, comprising $106 million in foreign currency and $26.5 million in local currency costs. The project cost at completion was $114.05 million, comprising $97.27 million in foreign currency and $16.78 million in local currency costs. The cost saving from the original appraisal estimate of $132.5 million is primarily attributed to (i) lower-than-estimated cost of equipment procurement as a result of competitive bidding; (ii) depreciation of the Indian rupee against the dollar; and (iii) efficient project monitoring and administration, resulting in savings in interest during construction. Appendix 3 shows the completed cost versus the appraisal estimate. The summary of the contracts and dates for various project implementation stages are in Appendix 4, while Appendix 5 shows the project financing plan.

D. Disbursements

15. ADB disbursements totaled $97.27 million from ordinary capital resources, out of the original loan amount of $106 million; $8.73 million was cancelled due to project cost savings. Procurement efficiency and economy combined with efficient project implementation resulted in savings, which were used to fund the purchase of additional equipment (e.g., transformers, and testing and protection equipment). During project inception, actual disbursements exceeded the annual disbursement projections, primarily as a result of advance procurement actions taken by MPTRANSCO, and rapid implementation. Contracts worth $53 million (more than 50% of the total disbursement) were awarded within 1 month of loan effectiveness. The projected and actual disbursement of loan proceeds is in Appendix 6. 16. The imprest account was availed by MPTRANSCO. Though their experience in using new products was limited, MPTRANSCO greatly benefitted from the second-generation

3 Capacity was increased through installation and/or upgrading of (i) transmission lines: 255 km of 132 kV lines,

1,017 km of 220 kV lines, and 1 km of 400 kV transmission lines; and (ii) transformer capacity: at 400 kV was 315 MVA; at 220 kV was 4,020 MVA; and at 132 kV was 240 MVA.

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imprest account and statement of expenditure procedure of disbursement. Although minor shortcomings were noted at the outset, MPTRANSCO’s view is that the imprest account facility used for the project should be used for all loans, because of the benefits to the executing agency, in terms of project implementation.

E. Project Schedule

17. Appraisal and actual project implementation dates for various subprojects are in Appendix 7. At appraisal, all physical subprojects were scheduled for completion by December 2010. MPTRANSCO completed the originally envisaged scheme by March 2011 (prior to the loan closing date). Project management units were appropriately staffed and were established in accordance with project execution requirements (determined by the line length, which spanned about 2000 cct-km, and the establishment of new substations). Successful application of project management techniques and resolution of technically complex issues led to expeditious project completion within the original loan closing date. 18. The loan closing date was extended twice: (i) from 30 June 2011 to 31 March 2012 (9 months) to facilitate utilization of savings for completion of saving schemes, based on a request by MPTRANSCO; and (ii) from 31 March 2012 to 30 June 2012 to facilitate completion of the balance of the 132 kV Sidhi–Deosar line (required because of a delay in obtaining the needed forest clearance). 19. Both extension requests were endorsed by GOMP and the Government of India, and resulted in two need-based extensions, for a total of 12 months from the originally envisaged loan closing date (30 June 2011), to 30 June 2012.

F. Implementation Arrangements

20. The implementation arrangements were as envisaged at appraisal. The Project Management Unit (PMU) (established within MPTRANSCO) had overall responsibility for project implementation. The PMU was guided by the chief executing officer (chairman and managing director), with active involvement by the director(s), which enabled the PMU and MPTRANSCO project team to quickly address complex engineering issues, and execute the project in a timely manner. The PMU had adequate technical, financial and procurement staff. The PMU group head was responsible for overall project coordination. To ensure compliance with ADB procurement guidelines, procurement of all packages was facilitated from the project headquarters in Jabalpur, India. Officers with the rank of chief engineer were in charge of civil works, and erection and commissioning of transmission works. The chief financial officer was responsible for due diligence with respect to financial matters. Regular quarterly progress reports were issued.

21. The MPTRANSCO organizational chart is in Appendix 8. G. Conditions and Covenants 22. The covenants stipulated in the Loan Agreement were generally complied with. No covenants were modified, suspended or waived during implementation. All major loan covenants were complied with, except that compliance with environmental and social safeguards in relation to Loan Agreement – Schedule 5 provisions, was delayed. Efforts were made to comply with the loan covenant regarding the self-financing ratio. The status of

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compliance with covenants is in Appendix 9.

H. Consultant Recruitment and Procurement

23. Consultants. At appraisal, it was assessed that MPTRANSCO had the requisite institutional capability to implement the project and that the services of consultants were not required. Accordingly, no consultants were engaged by ADB for this project. However, MPTRANSCO appointed separate consultants to prepare the environment and social safeguard reports and formulate the resettlement plan. The reports were prepared and submitted to ADB. 24. Procurement. MPTRANSCO made use of advance procurement action as agreed by ADB. About $53 million worth of contracts were awarded within June 2007, immediately after loan effectiveness. ADB cooperated in achieving important project implementation milestones through rapid granting of needed approvals. I. Performance of Consultants, Contractors and Suppliers

25. The contractors and suppliers performed the assigned tasks in accordance with the contracts entered with MPTRANSCO. The performance of all contractors was generally found to be satisfactory. All goods and services procured for the project complied with the specifications and other operational performance standards.

J. Performance of the Borrower and the Executing Agency

26. The overall performance of the borrower and the executing agency was satisfactory. The borrower was the Government of India and the executing agency was MPTRANSCO. All project components were constructed and commissioned successfully and generally within cost and time allowances, with the minor exception of a subproject that could not be constructed until a statutory forest clearance was received. 27. Overall, MPTRANSCO demonstrated its capacity and ability to formulate, appraise, arrange counterpart financing for and carry out engineering, procurement and construction of a variety of technically complex projects across different parts of the vast state of Madhya Pradesh, in a manner that conformed to specification and standards satisfactory to ADB. K. Performance of the Asian Development Bank

28. ADB closely and regularly monitored project progress through review missions and quarterly progress reports, and provided useful advice in several areas including procurement and project management. ADB accorded timely approvals that enabled project milestones to be achieved, contributing to smooth project execution. ADB, MPTRANSCO and officials from the Ministry of Power and Department of Economic Affairs of the Government of India conducted tripartite meeting(s), which assisted project implementation through corrective actions. ADB’s overall performance was satisfactory.

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III. EVALUATION OF PERFORMANCE A. Relevance 29. The project outcome at both appraisal and completion was consistent with India’s development priorities and ADB’s country and sector strategies, which focused on removing transmission bottlenecks to facilitate better utilization of existing and planned generating stations. ADB's country strategy was to fund infrastructure projects in key sectors that contribute to economic growth. Its sector strategy focused on (i) reinforcing and expanding existing transmission and distribution systems relating to existing and new generation; (ii) reforming state power sectors, with particular emphasis on State Electricity Board (SEB) restructuring and commercialization; (iii) rationalizing power tariffs, at bulk and retail levels; (iv) reforming the regulatory framework; and (v) improving energy efficiency. At project completion, ADB's strategy for the power sector in India is in line with the government’s 11th five-year plan (2007–2012) objectives to develop infrastructure for economic growth and poverty reduction. The financing instrument selected was appropriate.

30. The project sought to make the transmission sector more efficient and was relevant at appraisal and completion. The project will continue to be relevant in the future, primarily as a result of astute planning of the transmission system within Madhya Pradesh, and is highly relevant to the objectives of GOMP and the Government of India for the power sector.

B. Effectiveness in Achieving Outcome 31. The transmission capacity increased to (i) 8170 MW in early 2012 and (ii) 8809 MW in Sept 2012, with the result that peak demand of 8546 MW could be met during 2012. Further, system availability increased to 99.23% in 2012 from 97.5% in FY2009 and technical losses were reduced to 3.51% in 2012, from an earlier level of 5.2% in FY2006. The project thus met the objectives of (i) strengthening the transmission system, thereby increasing access to electricity in Madhya Pradesh and reducing system losses (annual value computed to be Rs 196 million, as detailed in Appendix 10); (ii) improving power system operation through reliable and economic dispatches; and (iii) facilitating evacuation of power from generation units. The project achieved all physical targets established at appraisal, although completion of some works of the subsequently sanctioned schemes has been delayed. All project components are being operated and maintained at a high level of efficiency. The project is rated effective, because the project outcome has been achieved as defined in the design and monitoring framework.

C. Efficiency in Achieving Outcome and Output

32. The project is rated efficient. It has been implemented efficiently and all components have been operating continuously to capacity from the date of commissioning. 33. The financial internal rate of return (FIRR) is re-evaluated at 5.27%, which is above MPTRANSCO weighted average cost of capital (WACC) of 3.53%. The economic internal rate of return (EIRR) of all the components has been re-evaluated at 20.6%, higher than appraisal evaluation of 14.9% and the ADB recommended discount rate of 12%. Major assumptions used in the financial evaluation, economic evaluation and detailed calculations of FIRR and EIRR are in Appendix 10.

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D. Preliminary Assessment of Sustainability 34. Technically, the design of the subprojects and the technology adopted are robust and appropriate, given the technical complexities of the Indian power sector.

35. The project helped in meeting demand for power evacuation from existing stations and for wheeling and transferring power, thus ensuring utilization of the transmission system established under the project. The technical specifications of the equipment procured and commissioned in the project make it unlikely the equipment will become obsolete over its expected life span. MPTRANSCO has in-house capacity to operate and maintain the subprojects effectively and efficiently. Therefore, human, institutional and financial resources (the latter supported by internal accruals) are sufficient to maintain the achieved outcome over the economic life of the project, and to manage any risks that may arise. All commissioned components are expected to be used at full capacity throughout their life, making the project technologically and financially sustainable in the long term. Project sustainability is preliminarily rated likely. E. Impact

1. Environmental Impact 36. Background. The proposed interventions included about 1437 cct-km of 400 kV and 220 kV transmission lines across the state, nine new substations, and associated works. The approved environment category of the project was B. An initial environmental examination (IEE) report was prepared during project processing. Site selection for individual lines and substations was undertaken carefully, with preliminary transmission line route selection based on topographic and forest maps. Screening principles—such as avoidance or minimization of impacts on the environment, ecology, human settlements and displacement, and public utilities—were adopted to enable the optimum sites for project components to be selected. Alternative alignments and locations were also considered. These proposed works were not expected to be passing through or be in the vicinity of environmentally and ecologically sensitive areas, or close to archaeologically and historically protected monuments. The works generally traversed barren land with minimal vegetative cover and agricultural areas. The IEE report did not envisage any irreversible, significant or adverse environmental impacts. It outlined key aspects of the proposed investments, environmental benefits and moderate negative impacts. To address the potential, moderate environmental impacts identified during the environmental assessment process, an environmental management and monitoring plan (EMMP) was developed as an integral part of the IEE report. During processing, consultations with affected people and other local communities reported their support for the proposed works, as these were expected to benefit the area in terms of improved electricity supply and some employment opportunities. An environmental assessment and review framework (EARF) was agreed to be applied for subprojects that were not fully defined. The EARF outlined the eligibility criteria, environmental assessment approach, approval procedures, and institutional requirements for subprojects identified during project implementation. MPTRANSCO was responsible for preparing the required environmental assessment reports and obtaining ADB concurrence before implementation. These approvals were required to be in place before contracts were finalized and works commenced. MPTRANSCO had set up an environmental and social management cell (ESMC) in May 2002. In February 2003, it assigned a dedicated fulltime

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officer to the ESMC. The ESMC was responsible for (i) ensuring regulatory compliances, internal monitoring, and quality control; (ii) supervising activities pertaining to safeguards, and reporting on their implementation to MPTRANSCO management and ADB; and (iii) ensuring that ADB's safeguard policies were strictly adhered to. MPTRANSCO continued the ESMC for this project with seven officers (one fulltime, and six part time). The need for additional staff was not envisaged. A provision was included in the project budget to hire local consultants, nongovernment organizations (NGOs), and external agencies for environmental monitoring during implementation. 37. Implementation of environmental safeguards. The April 2010 review of implementation of EMMPs revealed varying levels of compliance with the agreed provisions, which in some cases was assessed to be less than adequate. Several shortcomings and procedural lapses were noted in the implementation of environmental safeguards, which were assessed to be mainly as a result of (i) lack of deployment of appropriately trained or experienced personnel by MPTRANSCO and its contractors to supervise environmental safeguards; and (ii) implementation of safeguards was not considered a priority area by MPTRANSCO, rendering overall functioning of the ESMC less than effective. Engagement by MPTRANSCO of an environmental consultant (even on an intermittent basis) would have been useful to better manage environmental safeguards. Consequently, during the initial stages of implementation, the overall institutional arrangements put in place to supervise and monitor implementation of environmental safeguards-related tasks were assessed to be less than adequate. In response, ADB developed a time-bound corrective action plan to (i) ensure statutory environmental compliance; (ii) develop environmental assessment reports for ADB concurrence in line with the EARF (for ongoing works of substations and transmission lines, where the locations or routes were new, revised or realigned); (iii) amend the contract documents for ongoing works to include provisions as per the agreed EMMP; (iv) undertake an environmental due diligence audit through an external agency (to evaluate the environmental implications of subprojects where the works were completed without following agreed EMMPs); (v) carry out monitoring of environmental parameters at construction sites; (vi) undertake public disclosure of environmental documents in local languages, and hold consultations with local communities and affected people during implementation; (vii) establish a grievance redress committee; (viii) strengthen environmental diligence during execution, and streamlining records management; (ix) hold periodic review meetings of ESMC with the project staff to raise awareness of environmental safeguards and brief MPTRANSCO management; and (x) submit reports to ADB on implementation of environmental safeguards, at the agreed frequency. ADB also conducted focused orientation workshops and site-specific briefings on environmental safeguards for ESMC and project staff. In July 2010, MPTRANSCO recruited a Jabalpur-based academic institution—Xavier Institute of Development Action and Studies (XIDAS)—as the environment specialist (external monitoring agency) for the project. XIDAS carried out an environmental due diligence audit for the completed works. The audit indicated that the completed works had not caused any adverse environmental impacts. The audit also identified certain areas that required remedial measures from MPTRANSCO; XIDAS monitored implementation of these remedial measures by MPTRANSCO, and reported progress in subsequent monitoring reports. With these strengthened institutional arrangements, and implementation of corrective measures listed above, the overall environmental performance of the project improved considerably. MPTRANSCO confirmed that all statutory environmental and forest approvals as applicable under environmental regulations at national, state and local levels were obtained prior to commencing with works in those relevant stretches. It also confirmed

9

that all terms and conditions associated with these approvals were complied with; and the relevant approvals were renewed subsequently as required. MPTRANSCO also confirmed that no complaints had been received from local communities regarding environmental aspects for any of the activities carried out under the project. 38. Effectiveness of implementation of environmental safeguards. Based on the assessment recorded in the environmental due diligence audit report, the nature of activities undertaken, and the available environmental records and monitored data, the implementation of environmental mitigation measures is partially effective. A systematic approach for developing awareness and building capacity regarding ADB’s safeguards requirements in the project staff could address a majority of the shortcomings. The overall management of environmental safeguards improved following engagement of an external monitoring agency. 39. Overall improvement in environmental conditions. The nature of targeted interventions was such that these addressed the transmission capacity constraints with the added benefit of enhancing system availability and reduction of technical losses. These investments also included components that contributed to reduced leakage of sulphur hexafluoride. Thus the long-term environmental benefits resulting from these investments outweigh the moderate negative impacts experienced during the construction phase. Despite several operational and environmental performance-related concerns, the project contributed to an overall improvement in environmental conditions; an absence of data means environmental benefits cannot be quantified. However, the improved environmental awareness of MPTRANSCO staff is sustainable, and reflects positively on their work, regardless of funding source.

2. Social Impact

40. Background. Nine substations and about 1437 km of transmission lines, including additional transmission lines under saving schemes 1 and 2 (Appendix 1), were covered under the project. ADB approved the resettlement plan in 2007. The resettlement plan was updated in 2009 to cover the transmission component, and updated in 2010 to cover three substations (including two substations under Tranche 1). The updated short resettlement plans (SRPs) incorporated changes in the scope of works under the project. The resettlement plan for the identified project components detailed the resettlement policy and framework applicable to the project, the procedure for resettlement plan preparation, institutional arrangements, consultation, disclosure and grievances mechanism, resettlement budget, and monitoring and reporting. The resettlement plans reported insignificant impact on affected persons resulting from the construction of two substations on private land and construction of transmission lines. The project was classified as category B for involuntary resettlement in accordance with the ADB Involuntary Resettlement Policy (1995) and category C for indigenous people’s impacts in accordance with the Policy on Indigenous Peoples (1998). 41. MPTRANSCO, as the executing agency, was responsible for preparing and updating the resettlement plans following ADB procedures and obtaining ADB approval prior to contract awards. MPTRANSCO was also responsible for implementing the ADB-approved resettlement plans prior to commencing civil works. MPTRANSCO had taken the necessary measures to avoid and/or minimize land acquisition and resettlement. Based on alternate route surveys and consultations with local people, the option with least impact was selected for laying the transmission lines and situating the substations.

10

MPTRANSCO established the ESMC in 2002 and designated a fulltime official for resettlement management. 42. Implementation of social safeguards. Of the project’s nine substations, two–Astha (220 kV) and Chhegaon (220 kV), involved private land acquisition, while seven were constructed on government land. For the substation at Chhegaon, land was acquired from the owners following the National Land Acquisition Act, 1894; for the substation at Astha, the land was acquired on a consent basis from the owners, who were compensated at the revenue department’s guidance value and in consultation with them. The registered land value under the Land Acquisition Act, 1894 was considered for the land owners affected under the Chhegaon substation. The land used for both the substations was mostly barren and non-productive land. The stringing of transmission lines and erecting of towers was based on the Indian Telegraph Act, 1885, which does not include provisions for land acquisition for construction of transmission pillars and lines. The Act grants the power to remove trees interfering with transmission lines. The Indian Electricity (Supply) Act, 1948 confers on Madhya Pradesh State Electricity Board (the authority prior to unbundling of the Board) to use all powers that the telegraph authority possesses under section 42, part III of the Indian Telegraph Act, 1885. Under this act land acquisition is not required for placing transmission towers on private land. The compensation for temporary damage to crops resulting from works related to transmission lines was assessed by the local revenue officials based on the market value of crop yields. The cost of trees affected on private land was determined on the basis of a prescribed government rate. The temporarily affected cultivators were compensated for the damage to their crops and trees after the commencement of physical works, because the assessment was done by the revenue department after the loss of crops. 43. The reviews of resettlement plan implementation in 2010 indicated procedural lapses during the initial phase of implementation, resulting mainly from MPTRANSCO (i) not deploying a resettlement specialist in ESMC, (ii) not hiring an NGO for resettlement plan implementation, and (iii) not engaging an independent agency for monitoring and evaluation. The weak institutional arrangements and lack of the requisite social and resettlement expertise resulted in commencement of civil works without an ADB-approved, updated resettlement plan for the changed scope of works. The civil works, particularly the stringing of transmission lines, began before the resettlement plan was updated and compensation was provided to temporarily affected cultivators for crop damage. The vulnerable groups who were owed additional compensation were not identified in accordance with the entitlement matrix. To address these inadequacies, ADB developed a time-bound corrective action plan, and monitored its implementation over the project period. The major corrective actions were (i) preparation of updated resettlement planning documentation in accordance with the resettlement framework and indigenous peoples development framework, incorporating changes in alignments and new components under the subprojects; (ii) conducting social safeguards due diligence by an external agency to evaluate resettlement implementation for subprojects where the works had been completed without an updated resettlement plan; (iii) undertaking monitoring of implementation of ongoing resettlement activities; (iv) public disclosure of resettlement plans in local languages, and regular consultations with the affected persons and other stakeholders; (v) establishing a grievance redress committee and ensuring its functioning; and (vi) submitting monitoring reports on implementation of resettlement plans to ADB. ADB also conducted orientation workshops focusing on project-specific social safeguards issues for ESMC and project staff. XIDAS was engaged to conduct due diligence for the completed works (para. 37), and updated the resettlement plan for the transmission

11

lines component. MPTRANSCO also engaged a resettlement consultant in 2009, who updated the resettlement plan for two substations referred above. The due diligence report indicated that all the affected persons under the completed works were compensated adequately. The compensation of four temporarily impacted affected persons was pending as they could not be traced; MPTRANSCO was committed to compensating them once they had been traced. Information regarding an additional allowance to vulnerable groups could not be obtained from MPTRANSCO. The ESMC and field staff held meetings with affected persons, disclosed resettlement plans and arranged Grievance Redressal Committee (GRC) meetings as required. XIDAS also monitored implementation of resettlement plans and provided monitoring reports to ADB. With these strengthened institutional arrangements, and implementation of corrective measures listed above, the overall social safeguards performance of the project improved considerably. MPTRANSCO confirmed that the agreed short resettlement plans (SRPs) were implemented following ADB policies, and national and state legislation addressing land acquisition and resettlement aspects under the related substations and transmission lines. They also confirmed no court cases had been filed or complaints issued by affected persons with regard to land acquisition, compensation and associated aspects. 44. Effectiveness of implementation of social safeguards. Based on the findings of the social safeguards due diligence report, the implementation of the resettlement plans, including the corrective action plan as reported in the external monitoring reports, the overall social safeguards performance is assessed satisfactory under the Project. The management of social safeguards improved upon engagement of an independent agency, who was assigned the task of conducting due diligence, undertaking monitoring on implementation of resettlement plans and preparing a resettlement planning document for the transmission line component. In addition, one resettlement consultant updated the resettlement plans, including for two substation subprojects under the Tranche 1. Capacity development and sensitization of MPTRANSCO staff regarding ADB social safeguards requirements helped rectify the lapses occurred during initial implementation. The local people and other stakeholders responded to the positive impacts of the project, which will benefit them in terms of improved electricity supply, an enhanced economy and a better quality of life for local people.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 45. Project formulation and design were consistent with ADB's country and sector strategy and with MPTRANSCO's plan to develop a better and more efficient transmission system for Madhya Pradesh. The performance of the executing agency, borrower, and contractors was generally satisfactory. Implementation of all project components was achieved as proposed at appraisal along with additional works from the savings scheme with no cost overrun. 46. All project components and subprojects have achieved a high level of performance. MPTRANSCO has the capability to operate and maintain the operation in the future. The project in general has met its objectives, and is rated successful.

12

B. Lessons

47. Environmental measures. Compliance with environmental requirements associated with ADB assistance can be improved through (i) systematic, ongoing efforts to develop awareness, and periodic capacity enhancement of project staff regarding ADB’s environmental policy, procedures, and requirements; (ii) ensuring timely mobilization and the ongoing participation of environmental experts with the executing agency, consultants, and contractors, beginning during preparation and continuing until loan closure (as appropriate); (iii) systematic supervision, monitoring, data mapping and reporting mechanisms on implementation of environmental safeguards; and (iv) periodic reviews by environment experts associated with the loan to enable timely corrective actions to be taken as needed.

48. Social measures. Compliance with social safeguards requirements associated with ADB assistance can be improved through (i) advance capacity development of project staff regarding ADB social safeguards policies, procedures, and requirements; (ii) deployment of resettlement experts by the executing agency and consultants throughout the loan period, as appropriate; (iii) engagement of an experienced NGO to assist with implementation of resettlement activities; (iv) timely supervision, monitoring, evaluation and reporting on implementation of resettlement plans; (v) periodic social safeguards reviews by ADB experts, with corrective actions undertaken, as required; (vi) addressing issues related to temporary impacts from the use of private land for stringing transmission lines and erecting towers, which are perceived by affected persons to be causing permanent impacts in terms of restriction in access to the affected land portion for cultivation, and devaluation of the land and assets under the corridor of impact; and (vii) ensuring disbursement to affected persons of compensation for damage to crops and trees prior to commencing civil works related to stringing of transmission lines. 49. Integrated project management practices. Implementation of infrastructure projects, even in large regions such as Madhya Pradesh, can be successful given (i) proper planning; (ii) effective project monitoring mechanisms; and (iii) the application of skilled, motivated and well-trained personnel. The knowledge and insights gained by MPTRANSCO in this regard can be disseminated to other executing agencies through appropriate forums.

50. The advance procurement actions greatly helped in timely project execution, and should be adopted for future projects. The partnership that was developed with stakeholders (particularly contractors) enabled complex technological and economic issues to be addressed in an exemplary manner, and the approach could be employed in other ADB projects in India. Good project management practices have been followed through sequencing of activities and structuring of work, and efficiency gains have resulted from adoption of enhanced construction management practices that use a formal project management methodology based on global standards.

C. Recommendations

51. The project has had socioeconomic impacts on the project area. A benefit monitoring and evaluation study should be undertaken by 2015 to assess and document the socioeconomic benefits and the lessons for incorporation in future projects.

Appendix 1 13

PROJECT FRAMEWORK

Design Summary Performance Indicators/Targets Results

Impact Contributed to sustaining economic growth and social development in Madhya Pradesh. Contributed to meeting the energy demand growth in Madhya Pradesh.

Gross state product (GSP) grows by at least 6% annually in 2007–2012. Energy deficit is reduced from 13% in 2007 to 0% in 2012.

GSP at constant price was 9.07% for the 11th Five Year Plan (2007–2012) and state per capita income increased to Rs 37,744 in FY2012 from Rs 12,303 in FY2003. (Source: GOMP Budget, 28-Feb-12). Transmission system capacity increased to 8809 MW while peak demand of 8546 MW met successfully during 2012.

Outcome Improvement in operational efficiency, voltage profile, and power delivery capacity of Madhya Pradesh.

Increase transmission capacity from 5,563 MW in 2005–2006 to 8,170 MW in 2008–2009. Enhance system availability from 95% in 2005–2006 to 97.5% in 2008–2009. Reduce technical losses in transmission system from 5.2% in 2005–2006 to 4.9% in 2008–2009.

As of September 2012, system availability was enhanced up to 99.23% and technical losses in transmission system reduced to 3.51%.

Outputs Transmission expansion: Construction of transmission lines for power evacuation and strengthening of transmission systems.

(As per the PFR DMF) By 2010: 400 kV substation: 315 MVA 400/220 kV 400 kV lines 2 cct-km 220 kV substation: 8x160 MVA 220/132kV 10x160 MVA 220/132 kV additional transformers at existing substations 3x100 MVA 220/33 kV additional transformers at existing substations. 220 kV lines: 1,435 cct-km.

100% of target achieved.

14 Appendix 1

Activities with Milestones

1 . Transmission: 1) Procurement of major equipment: issuance of bidding documents

in December 2006 and contract awards by September 2007 2) Land acquisition for substations by July 2007 3) Construction started by January 2008 4) Commissioning by 2010

All activities and milestones achievement details are provided in Appendix 4.1 and Appendix 7.

Input ADB Loan: $620 million

Loan for Tranche1: $106 million

Actual disbursement was $97.27 million. 100% target was achieved including additional sub projects which were also completed in totality. Additional sub projects are indicated in Appendix 1.1.

ADB = Asian Development Bank, cct-km = circuit-kilometer, DMF = Design Monitoring Framework, GOMP =

government of Madhya Pradesh, GSP = gross state product, kV = kilovolt, MVA = megavolt-ampere, MW =

megawatt, PFR = periodic financing request,

Source: Design Monitoring Framework, Project Financing Request

Appendix 1 15

Table A1.1: Works Envisaged to be Completed at Appraisal

S.No. Amount Description

1. 2 cct-km 1500 cct-km

400 kV (1.976 km) 220 kV

2. 1 New 400 kV/220 kV/132 kV substation with 315 mega MVA transformer capacity.

3. 8 6 new 220 kV/132 kV substations; 6 are 160 MVA and 2 are 260 MVA (160 MVA+100 MVA) transformer capacity.

4. 10 220 kV/132 kV 160 MVA additional transformers at existing substation.

5. 3 220 kV/33 kV 100 MVA transformers at existing substation.

kV = kilovolt, cct-km = circuit-kilometer, MVA = megavolt-ampere Source: Aide Memoirs

Table A1.2: Saving Schemes

Scheme Description

Scheme Number 1

1. LILO one circuit of 220 kV Birsinghpur–Amarkantak DCDS line through Jabalpur

(Sukha) 220 kV substation.

2. Ashta–Dewas 220 kV DCDS line. 3. Shivpuri–Kolaras 132 kV DCSS line. 4. Bairagarh–Shampur 132 kV DCSS line. 5. Sironj–Maksudangarh 132 kV DCSS line.

6. Satna (220 kV)–Pawai 132 kV DCSS line.

Scheme Number 2

1. 220 kV Maheshwar–Nimrani DCDS line.

2. 220 kV Maheshwar–Pithampur DCDS line.

3. Vidisha–Shamshabad 132 kV DCSS line.

4. Sidhi–Deosar 132 kV DCDS line.

Scheme Number 3

1. 132/33 kV, 40 MVA power transformers.

2. Numerical distance protection relays

3. Numerical differential protection relays

4. 220 kV lightening arresters



DCDS = double circuit double strung, DCSS = double circuit single strung, LILO = loop in loop out, kV = kilovolt

Source: Aide Memoirs

16 Appendix 2

CHRONOLOGY: MAIN EVENTS IN PROJECT PROCESSING AND IMPLEMENTATION

Date Event

2006

16–24 Oct Fact-finding

11 Dec Management review meeting

12–14 Dec Appraisal Mission

2007

19 Jan Staff review committee

19–20 Feb Loan negotiations

04 Apr President’s consideration and approval

12 Apr Loan agreement signing

14 May 20–25 May

Loan effectiveness, including Conditions Inception Mission

2008 07–17 Jan 01–03 Sept

Review Mission Review Mission

2009

15–17 April Review Mission

15–20 Jun Review Mission

24–27 Nov Special Loan Administration Mission

2010

6–16 Apr Special Loan Administration Mission

27–30 Oct Loan Review Mission 29 Nov–1 Dec Review Mission

2011

11–14 Oct Review Mission

2012

14–17 Feb Review Mission

10–14 Dec Project Completion Review Mission Source: Asian Development Bank e-Star

Appendix 3 17

COST BREAKDOWN BY PROJECT COMPONENTS ($ million)

Item Appraisal Estimate Revised Estimate Actual Foreign Local Total Foreign Local Total Foreign Local Total I Project

Component Equipment cost 84.0 0.0 84.0

102.0 0 102.0

94.02 0.0 94.02

Related service 0.0 12.5 12.5

0.0 12.5 12.5

0.0 0.0 0.00 erection & civil

works

Others 0.0 11.0 11.0

0.0 11.0 11.0

0.0 16.78 16.78

Sub total (I) 84.0 23.5 107.5 102.0 23.5 125.5

94.02 16.78 110.80

II Contingencies

Physical 4.2 1.0 5.2

0.0 1.0 1.0

0.0 0.0 0.00

Price 8.4 2.0 10.4

0.0 2.0 2.0

0.0 0.0 0.00

Sub total (II) 12.6 3.0 15.6

0.0 3.0 3.0

0.00 0.0 0.00

Interest and commitment charges during construction

9.4 0.0 9.4

4.0 0.0 4.0

3.25 0.0 3.25

Source: Revised estimate and Actual figures – Madhya Pradesh Power Transmission Company Limited Appraisal estimate – Report and Recommendation of the President

18 Appendix 4

SUMMARY OF CONTRACTS

Table A4.1: Contract Amount ($)

PCSS No.

Category No.

Item Description Contract Amount

Contract Disbursed

0001 02 Substation Switchyard Structures for 220kV systems 3,883,383.59 3,453,854.57

0002 02 400kV 315 MVA Transformer 1,748,740.31 1,748,740.31



0005 02 Supply of Tower Parts with Accessories for 220kV Bhopal– Astha DCDS Line

3,175,776.65 3,064,543.01

0006 02 Supply of Tower Parts with Accessories for LILO of 220kV Satpura–Itarsi Line for Handiya DCDS Line

2,836,946.70 2,771,506.63

0007 02 Supply of Tower Parts with Accessories for 220kV Chhindwara–Betul DCDS Line

4,880,696.07 4,880,696.07

0008 02 Supply of Tower Parts with Accessories for 220kV Shujalpur–Rajgarh DCDS Line

2,260,089.49 2,171,653.57

0009 02 Supply of Tower Parts with Accessories for 220kV Jabalpur–Narsinghpur DCDS Line

2,799,237.79 2,413,347.68

0010 02 Supply of Tower Parts with Accessories for 220kV Chhegaon–Nimrani DCDS Line

3,301,603.93 3,096,381.98

0011 02 Substation Switchyard Structures for 400kV systems 325,349.61 325,349.61

0012 02 400kV Circuit Breakers 466,805.31 466,805.31

0013 02 220kV Circuit Breakers 3,061,679.94 3,054,077.02

0014 02 390kV Lightning Arrestor 198kV Lightning Arrestor

256,276.24 256,252.06

0015 02 120kV Lightning Arrestor 30 kV Lightning Arrestor

352,427.58 352,427.58

0016 02 400kV Solid Core Insulators 400kV Operating Rod 220kV Solid Core Insulators

1,827,109.59

1,787,064.44

0017 02 400kV Control & Relay Panel 220 kV Control & Relay Panel

143,533.56 1,019,741.36

0018 02 400kV Pantograph 211,624.35 211,624.35

0019 02 220kV Isolators 730,674.32 690,988.83

0020 02 400kV Current Transformers 212,091.94 212,091.94

0021 02 220kV CTs Ratio 1200-600/1 800-400/1-1

1,596,096.49 1,596,096.49

0022 02 Supply of 220kV Towers 4,148,360.49 4,046,688.09

0023 02 Supply of Tower Parts with Accessories for 220kV Dewas–Ashta & Ashta–Bercha 132kV Line

4,402,034.45 4,193,653.13

0024 02 Supply of Tower Parts with Accessories for 220kV LILO Birsingpur–Amarkantak line

6,945,345.42 6,571,000.39

0025 02 Supply of Tower Parts with Accessories for 132kV Sironj–Maksudangarh line

1,461,639.81 1,284,568.72

Appendix 4 19

BDV = breakdown voltage, PCSS = procurement contract summary sheet, CT = current transformer, DCDS = double circuit double strung, DCRM = dynamic contact resistance measurement, DCSS = double circuit single strung, LPH = litres per hour, SF6 = sulphur hexafluoride Source: Asian Development Bank Loan and Grant Financial Information Services

PCSS No.

Category No.

Item Description Contract Amount Contract Disbursed

0026 02 Supply of Tower Parts with Accessories for 132kV Beragarh–Shyampur & 132kV Chicholi–Betul–Gudgaon line

1,691,100.41 1,406,454.72

0027 02 Supply of Tower Parts with Accessories for 132kV Satna–Pawai line

1,438,979.80 1,402,270.91

0028 02 Procurement of Additional one 220/33 + 33kV, 100MVA Power Transformer through repeat order

896,666.10 892,853.28

0029

02 Supply of Additional (1) 400kV SF6 Circuit Breaker(LOT 1)

67,957.35 67,957.35

0030

02 Procurement of 1 x315 MVA, 400kV Power Transformer

2,172,489.82 2,036,969.40

0031 02 Tower Parts of 220kV Maheshwer–Nimrani DCDS Line & 220kV Maheshwar–Pithampur DCDS Line

3,744,853.72 3,499,895.16

0032

02 Tower Parts of 132 kV Vidisha–Shamshabad DCSS Line

2,012,089.56 1,645,482.22

0033

02

Procurement of Towers Parts & erection of 132 kV Sidhi–Deosar DCDS Transmission Line

1,759,782.18 1,526,418.61

0034

02

Procurement of 30 nos. 220 kV Control & Relay Panels for Bus Bar Protection

811,243.99 769,484.04

0035

02

Procurement of Nitrogen Injection Fire Protection System for 400kV Power Transformers

126,898.71 99,185.45

0036 02 Procurement of 3 nos. 6000 LPH Capacity and 10 nos. 2250 LPH Capacity Oil Filter Plants with Spares

138,661.43 130,762.04

0037

02 Procurement of Tangent Delta & Resistivity Measurement

Test Set for Oil Testing. 44,224.44 43,891.97

0038 02 Procurement of Schering Bridge for Tangent Delta & Capacitance Measurement for Transformer & Bushing.

83,663.59 83,663.59

0039 02 Procurement of DCRM Kit for Circuit Breaker 30,768.38 30,768.38

0040 02 Procurement of Over-head Line Fault Analyzer System 311,300.64 311,300.64

0041

02

Procurement of 100kV Motorized BDV Kit 196,621.02

196,388.53

0042

02

Procurement of Sweep Frequency Response Analyzer Test Set

18,207.96 18,207.96

0043

02

Numerical Distance Protection Relay Numerical Differential Protection Relay

613,140.99 613,140.99

0044

02

220kV Lightening Arrestors 132kV Lightening Arrestors 33kV Lightening Arrestors

256,966.23 248,606.89


TOTAL 98,965,269.69 94,019,805.07

20 Appendix 4

Table A4.2: Contract Award Details

Sr. No.

Bid Identification

No. Item

Contract Value Rs. In Millions

Draft bidding

documents prepared

Draft bidding

documents approved by ADB

Notice of Invitation of Bid

published (ADB-BO)

Bidding documents issued to bidders

Bids received and

opened

Bid evaluation completed and sent to ADB

ADB approval of recommended contract award

Contract award date (Signing of Contract)

1 04-01/ADB-II/

MPPTCL/TR-101 (ICB)

Power Transformers (No. of packages-3)

1266.14 Jul-06 18-12-2006 20-12-2006 10 Nos. 6 Nos. 02-04-2007 11-05-2007

Packages I - 12/06/07 II - 13/06/07 III - 13/06/07

2 04-01/ADB-II/

MPPTCL/TR-102 (ICB)

Circuit Breakers (No. of packages-2)

164.79 Jul-06 18-12-2006 20-12-2006 5 Nos. 5 Nos. 07-05-2007 27-06-2007 I - 16/07/2007 II - 24/07/2007

3 04-01/ADB-II/

MPPTCL/TR-103 (ICB)

Current and Potential

Transformer (No. of packages-2)

82.98 Jul-06 12-10-2006 20-12-2006 11 Nos. 7 Nos.

18-06-2007 08-01-2007

I - 06/9/2007 II - 03/9/2007

4 04-01/ADB-II/

MPPTCL/TR-104 (ICB)

Isolators without support Insulators

(No. of packages-2) 44.17 Jul-06 12-10-2006 20-12-2006 13 Nos. 7 Nos. 07-05-2007 27-06-2007

I - 03/08/2007 II - 10/08/2007

5 04-01/ADB-II/

MPPTCL/TR-105 (ICB)

Lightning Arresters (No. of packages-2)

27.712 Jul-06 12-10-2006 20-12-2006 6 Nos. 6 Nos. 07-05-2007 27-06-2007 I -20/07/2007 II- 20/07/2007

6 04-01/ADB-II/

MPPTCL/TR-106 (ICB)

Solid Core Insulators (No. of packages-1)

90.46 Jul-06 12-10-2006 20-12-2006 3 Nos. 2 Nos. 07-05-2007 27-06-2007 30/07/2007

7 04-01/ADB-II/

MPPTCL/TR-107 (ICB)

Control and Relay panels

(No. of packages-1) 46.99 Jul-06 18-12-2006 20-12-2006 7 Nos. 6 Nos. 07-05-2007 27-06-2007 16/07/2007

8 04-01/ADB-II/

MPPTCL/TR-108 (ICB)

Switchyard Structures

(No. of packages-2) 207.00 Jul-06 16-12-2006 20-12-2006 19 Nos. 6 Nos. 02-04-2007 20-04-2007

I - 18/06/2007 II - 12/06/2007

9 04-01/ADB-II/

MPPTCL/TR-109 (ICB)

Tower Parts (No. of packages-1)

175.69 Jul-06 18-12-2006 20-12-2006 24 Nos. 13 Nos. 18-06-2007 08-01-2007 23/08/2007

10 04-01/ADB-II/

MPPTCL/TR-110 (ICB)

Procurement of Towers & Erection

Contract (No. of packages-6)

984.97 Jul-06 18-12-2006 20-12-2006 24 Nos. 9 Nos. 02-04-2007 24-04-2007 Lot - I to VI 12/06/2007

Appendix 4 21

Source: Quarterly Progress Reports, Madhya Pradesh Power Transmission Company Limited

11 04-01/ADB-II/

MPPTCL/TR-128 (ICB)

Procurement of Towers & Erection

Contract (No. of packages-5) Lot - I,

II, IV, VI, & VII

726.11 Aug-07 Nov-07 16.11.2007 28 Nos. 4 Nos. 13-02-2008 01-03-2008 11/06/2008

12 04-01/ADB-II/

MPPTCL/TR-132 (ICB)

315MVA, 400kV Power Transformer

20.29 Sep-08 Sep-08 23-09-2008 7 Nos. 3 Nos. 08-12-2008 19-01-2009 13/02/2009

13 04-01/ADB-II/

MPPTCL/TR-133 (ICB)

Procurement of Towers and Erection

of 220kV & 132kV Transmission Lines (No. of packages-3 )

79.71 Dec-08 Dec-08 02-01-2009 24 Nos. I - 6 Nos.

II - 3 Nos. III - 3 Nos.

09-03-2009 26-03-2009

I - 27/04/2009 II - 04/05/2009 09/05/2009

III - 04/05/2009

14 04-01/ADB-II/

MPPTCL/TR-134 (ICB)

220kV Control & Relay Pannel for

Bus Bar Protection 34.00 May-09 28-05-2009 16-06-2009 10 Nos. 5 Nos. 09-09-2009 18-09-2009 15.10.2009

15 04-01/ADB-II/

MPPTCL/TR-135 (ICB)

Fire Protection System & Oil Filter

Plants (No. of packages-2 )

14.45 May-09 28-05-2009 16-06-2009 11 Nos. 8 Nos. 17-09-2009 25-09-2009 30.10.2009

16 04-01/ADB-II/

MPPTCL/TR-136 (ICB)

Testing Equipments (No. of packages-6 )

32.11 May-09 28-05-2009 16-06-2009 16 Nos. 11 Nos. 03-12-2009 18-12-2009

I - 15/01/2010 II - 15/01/2010 III - 22/02/2010 IV - 07/01/2010 VI - 12/01/2010 VIII -15/01/2010

17 ADB II

(S)/MPPTCL/TR-214 (ICB)

132kV 40 MVA Transformer

218.79 Dec-10 19-01-2011 28-01-2011 21 Nos. 11 Nos. 05-05-2011 23-05-2011 30.06.2011

18 ADB II

(S)/MPPTCL/TR-215 (ICB)

Numerical Relay & Lightning Arrerstors

66.93 Dec-10 19-01-2011 28-01-2011 11 Nos. 11 Nos. 05-05-2011 17-05-2011 I - 09.06.2011 II - 28.06.2011

TOTAL (Rs. in Millions) 4283.29

22 Appendix 5

Project Financing Plan ($ million)

MPPTCL = Madhya Pradesh Power Transmission Company Limited Source: Asian Development Bank, Loan and Grant Financial Information Services.

Source Appraisal Estimate Actual Foreign Currency

Local Currency

Total Foreign Currency

Local Currency

Total

ADB 106.00 0.00 106.00 97.27 0.00 97.27

MPPTCL 0.00

11.00 11.00 0.00 16.78 16.78

OTHER 0.00

15.50 15.50 0.00 0.00 0.00

Total 106.00 26.50 132.50 97.27 16.78 114.05

Appendix 6 23

Source: Asian Development Bank, Loan and Grant Financial Information Services.

Projected and Actual Disbursements Of Loan Proceeds ($ million)

Calendar Year Projected Actual1

For the year Cumulative For the year Cumulative 2007 0.00

0.00

6.80 6.80

2008 25.00 25.00

25.23 32.03 2009 25.00 50.00

32.40 64.43

2010 25.80 75.80

21.36 85.78 2011 0.00 75.80

7.08 92.87

2012 0.00 75.80 4.40 97.26 1 Includes disbursements

sanctioned for additional projects.

Source: Asian Development Bank, Loan and Grant Financial Information Services.

ADB = Asian Development Bank

$ million

24 Appendix 7

Project Implementation Schedule for Appraisal Scope

kV = kilovolt Note: At appraisal, all the physical sub projects were estimated to be completed by December 2010. However, all the works except for 2 small lines (lines for Chhegaon and Vidisha substation were commissioned on 24.1.11 and 15.3.11 respectively) were completed before March 2010. Source: Madhya Pradesh Power Transmission Company Limited

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M

Transmission Lines

400kV & 220kV Substations

Projected

Actual

Activity2010

Route Finalisation &

Pretendering

2007 2008 20092006

Construction & Commissioning

2011

Tendering & Contract Awards

Manufacturing & delivery of

Equipments


Land Acquisition &

Pretendering



Equipments

Appendix 7 25

Source: Madhya Pradesh Power Transmission Company Limited

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Transmission Lines

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Transmission Lines

Projected

Actual

2012


Pretendering



Equipments



Pretendering



Equipments


PROJECT IMPLEMENTATION SCHEDULE FOR ADDITIONAL WORKS (SAVING SCHEME - 2009)

Activity2008 2009 2010 2011


Activity2007 2008 2009 2010 2011

26 Appendix 7

Note: All the additional subprojects were completed before the June 2012, i.e., the loan closing date Source: Madhya Pradesh Power Transmission Company Limited

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Projected

Actual

Activity

Tendering & Contract Award


Equipments

Installation & Commissioning

2010 2011 2012


Appendix 8 27

ORGANIZATIONAL CHART OF MADHYA PRADESH POWER TRANSMISSION COMPANY LIMITED

MD, MPTRANSCO

Leadership, Coordination & Guidance

CE (T&P) Transmission

line &

Substation

Turnkey

contracts and

Procurement

CE

(Planning) Power System

and Planning

C.F.O. All works

related to

Finance

CE (EHT-

Construction) Construction

work of

Transmission

lines

CE (EHT-

Maintenance) Maintenance

work of

Transmission

lines

CE (T&C) Construction

work in

existing

Substations

CE (Civil) All Civil works

in New &

existing

Substations

Addl. C.E. - 1

S.E. - 3 S.E. - 1

Addl.DIR.- 1

Joint .DIR.- 1

SYSTEM

ANA- 1

Dy.DIR.- 5

EDP OFF- 1

A.O- 7

S.E. Office - 2

S.E. Field - 4

S.E. Office - 1

S.E. Field - 3

S.E. Office - 3

S.E. Field - 11

Addl. C.E. - 1

S.E. - 2

MD = managing director, MPTRANSCO = Madhya Pradesh Power Transmission Company Limited, CE = chief engineer, T&P = transmission & planning, CFO = chief financial officer, EHT = extra high tension, SE = superintendent engineer, DIR = director, Dy. = deputy, OFF = office, Addl. = additional, ANA = analyst, AO = accounts officer, EDP = electronic data processing, OFF = office Source: Madhya Pradesh Power Transmission Company Limited

28 Appendix 9

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenants Reference Responsible

Agencies

Compliance Status

Project Implementation

Executing Agency (EA). The State, acting

through MPTRANSCO, shall be the EA for the

Project and shall be responsible for the

execution of the Project.

LA,

Schedule 5,

para 2

Government/

GOMP/

MPTRANSCO

Complied with.

The Project Management Unit (PMU). The

Project Management Unit (PMU), established

within MPTRANSCO, shall be headed by a PMU

Manager. The PMU Manager shall report all

Project related matters to the Chairman and the

Managing Director of MPTRANSCO. The PMU

shall comprise technical, financial, procurement

and safeguard sections.

LA,

Schedule 5,

para 3

MPTRANSCO Complied with.

PMU had been

established. PMU head

was appointed and

adequate staff in place.

Coordinating Committee. An Investment

Program Coordinating Committee, chaired by

the Chairman and the Managing Director of

MPTRANSCO, shall be established to

coordinate and monitor the overall

implementation of the Investment Program. The

Coordinating Committee shall report to the PD

through a Program Implementation Unit (PIU) to

be established within the PD and to MPERC.

LA,

Schedule 5,

para 4

MPTRANSCO Complied.

The Energy Department

through its Order dated 18

Nov 2009 has established

an Investment Program

Coordinating Committee,

chaired by the secretary

(Energy Department) and

the MD of MPTRANSCO

as its members.

Selection Criteria and Approval Process for

Subprojects. The Government and

MPTRANSCO shall ensure that all subprojects

are selected and approved in accordance with

the criteria and approval process stipulated in

Schedule 4 to the Framework Financing

Agreement (FFA).

LA,

Schedule 5,

para 5

Government/

MPTRANSCO

Complied with.

Financial and Sector Reforms

Counterpart Funding. The Government and

GOMP will ensure and cause the availability and

timely release of counterpart funding for the

timely implementation of each subproject.

LA,

Schedule 5,

para 6

Government/

GOMP

Complied with.

GOMP provides the timely

release of the counterpart

funding, as required.

Appendix 9 29

Cash Management Responsibilities. GOMP

will ensure that the cash management

responsibilities are transferred to MPTRANSCO

from 1 April 2008 so that MPTRANSCO can

commence commercially independent

operations, with any deficits met by commercial

borrowings or other satisfactory means.

LA,

Schedule 5,

para 7

GOMP/

MPTRANSCO

Delayed Compliance.

The cash management

responsibilities have been

transferred to respective

companies through

Madhya Pradesh

Government Gazette

no.140 dated 29.3.2012

Audits. MPTRANSCO will engage independent

private audit firms to conduct annual financial

and procurement audits and submit reports to

ADB promptly after their preparation but in any

event not later than 6 months after the close of

the fiscal year to which they relate.

LA,

Schedule 5,

para 8

MPTRANSCO/

ADB/ GOMP

Complied with.

An independent private

audit firm has been

engaged. The APA and the

AFS for FY2011 was

submitted on 08 Nov 2011.

The APA and AFS for

FY2012 has been

submitted.

In addition MPTRANSCO will ensure that (i)

business process and (ii) performance audits in

all operational areas are conducted annually by

independent private audit firms whose

qualifications, experience and terms of reference

are acceptable to ADB.

LA,

Schedule 5,

para 9

MPTRANSCO/

ADB/ GOMP

Being complied with.

This has been already

covered under the terms of

reference of the audit firm

to whom internal audit of

the company has been

outsourced.

Corporate Governance. The GOMP will ensure

the accountability and transparency of

MPTRANSCO is maintained through the

stakeholders meeting and publication of its

agendas and actions through the duration of the

investment program. MPTRANSCO will ensure

that the following measures to strengthen

corporate governance will have been completed

by 31 December 2007:

(i) independent directors at the board level are

recruited;

(ii) board-level committees, including audit and

risk management committees, are formed;

(iii) internal audit functions strengthened and

internal audit guidelines in line with best

practices are developed (internal audit

scope to cover revenue audit and internal

LA,

Schedule 5,

para 10

GOMP/

MPTRANSCO

Complied with.

MPTRANSCO has

confirmed to ADB that

necessary stakeholders

meeting, publication of its

agenda and actions has

been compiled with in

accordance with project

requirements and the

Indian Companies Act,

1956.

(i) Three independent

directors and 3

government nominees

recruited.

(ii) Audit and risk

management

committee formed.

(iii) Internal audit being

done by chartered

30 Appendix 9

audit reports to the audit committee of the

board);

(iv) internal controllers reporting to the

chairman and managing directors of the

respective EAs on a regular basis are

appointed.

accountants.

(iv) Internal controllers

appointed.

Debt Service Coverage Ratio. The GOMP will

ensure that MPTRANSCO maintain a debt

service coverage ratio of 1.2 from financial

2007-2008 and onwards.

LA,

Schedule 5,

para 15


For FY2011, a ratio of

1.2:1 has been achieved.

Further, if the extra

ordinary interest of bonds

and debentures are not

considered, the DSCR

works out to 1.94:1

Self Financing Ratio. The GOMP will ensure

that MPTRANSCO will maintain historic self-

financing ratio of 20% from 2010 onwards (3

years moving average capital expenditure).

LA,

Schedule 5,

para 16

MPTRANSCO Not Complied with. The

revenue of the company is

decided by the state

electricity regulator

(MPERC). However, this

did not impact project

execution because

MPTRANSCO could

provide the balance of 15%

using their own funds.

Commercial

Turnkey Contracts. MPTRANSCO will (i)

ensure utilization of turnkey contracts, where

appropriate; (ii) negotiate longer terms of

guarantees on equipment; and (iii) include long-

term maintenance provisions in the turnkey

contracts.

LA,

Schedule 5,

para 13


Items (i) and (ii) complied

with.

Item (iii): maintenance is

not a requirement.

Execution of Civil Works Contracts.

MPTRANSCO shall ensure that, subsequent to

award of civil works contract under any

subproject, no section or part thereof under the

civil works contract shall be handed over to the

contractor unless the applicable provisions of

the RF/RP and the EARF/EMP have been

complied with.

LA,

Schedule 5,

para 30


Appendix 9 31

Any changes to the location, land alignment, or

environmental impacts on account of detailed

designs of related subproject shall be subject to

prior approval by ADB and/or MPTRANSCO, as

the case may be, in accordance with the

selection criteria and process stipulated in

Schedule 4 to the FFA.

LA,

Schedule 5,

Para 31


Human Resources

Recruitment. MPTRANSCO will have appointed

managers for operations, information technology

(IT), commercial functions, and finance; and will

have appointed (i) chartered accountants, (ii)

information technology specialists, and (iii)

specialists in commercial areas by not later than

31 December 2008. MPTRANSCO will have

established management training programs in

finance, operations, and commercial functions.

LA,

Schedule 5,

para 14


The chief IT officer has

been appointed.

Accountants are being

appointed.

Safeguards

Land Availability, Resettlement. GOMP will

cause respective MPTRANSCO to ensure that

affected persons by each subproject are fairly

compensated in a timely manner based on

replacement values in accordance with the

related RPs and RF, such that their living

standards are not adversely affected.

MPTRANSCO will submit progress and

completion reports on land acquisition and

resettlement under the quarterly progress reports

for each subproject. In addition, the external

monitoring report shall be submitted to ADB on a

semi-annual basis for review.

LA,

Schedule 5,

para 19

GOMP /

MPTRANSCO /

ADB

Delayed Compliance.

The project involved

construction of substations

and transmission lines and

was categorized as

environment category B

under ADB's Environment

Policy 2002. The section

(para. 37 of this report) on

Environmental Impact

provided a comprehensive

discussion of the

environmental safeguards

issues. The project

required application of

EARF to subprojects that

were identified during

project implementation

and updating of IEEs

where locations or routes

were newly added, revised

or realigned. As noted in

this report (para. 48),

several shortcomings and

procedural lapses

occurred initially in the

implementation of

safeguards. Corrective

32 Appendix 9

action plans were

prepared and

implemented, and

improved the management

of environmental

safeguards. An external

agency was engaged to

conduct a due diligence

audit and monitor

safeguards. The project

also undertook measures

to mitigate global

environmental impact by

reducing leakages of sulfur

hexafluoride.

Tranche 1 is classified as

involuntary resettlement

safeguards category B and

Indigenous Peoples

safeguards category C in

accordance with the 1995

Involuntary Resettlement

Policy and 1998

Indigenous Peoples

Policy, respectively. The

involuntary resettlement

impacts were due to the

acquisition of land from

two landowners for two

substations as well as due

to temporary economic

displacement during tower

installation and stringing

works (i.e., damage to

crops and trees). As such

a short resettlement plan

(RP) was prepared whose

implementation is

adequately discussed in

this report (para. 48). The

section on the tranche's

social safeguards status

provides a frank

assessment of the initial

challenges with RP

implementation. Further,

the sequence of actions

that had been undertaken

Appendix 9 33

in response to these

challenges, culminating in

the preparation and

implementation of a

corrective action plan and

the engagement of an

independent agency to

conduct due diligence on

completed works and the

adequacy of

compensation.

GOMP will cause MPTRANSCO to ensure that

prior to land acquisition and any resettlement

under subproject, the related RP including its

update based on consensus of AP, disclosed

with all necessary information made available to

persons affected by the subproject and confirm

that it be uploaded on to ADB’s web site.

MPTRANSCO will ensure that essential public

infrastructure that may be affected under land

acquisition and resettlement is replaced, as

appropriate, in an expeditious manner in

accordance with the RPs.

LA, Schedule

5,

para 20

GOMP/

MPTRANSCO /

ADB

Complied with.

Almost all subprojects

have passed through

government lands, except

for three substations for

which the updated Short

Resettlement Plan was

submitted to ADB on 3

Nov 2010.

The updated Resettlement

Plan for the complete

project was submitted on

18 Jan 2011 while the Due

Diligence Report was

submitted on 12 Jan 2011.

The Short Resettlement

Plan on Social Task was


May 2011.

The Due Diligence Report

on Social Task has been

submitted on 3 Aug 2011.

All the reports have been

accepted by ADB.


construction contracts contain binding

requirements for construction contractors to fully

reinstate pathways, other local infrastructures,

and agricultural land to at least their pre-project

condition upon construction completion.

Provision should be made for adequate

recording of the condition of roads, agricultural

land, and other infrastructure prior to transport of

material and construction commencement.

LA, Schedule

5,

para 21

GOMP /

MPTRANSCO/

ADB

Complied with.

34 Appendix 9

Environmental. GOMP through MPTRANSCO

will ensure that proposed investments under the

MFF are undertaken and that all subproject

facilities are operated and maintained in

accordance with all applicable laws, rules, and

regulations of the Government and ADB’s

Environment Policy (2002).

LA, Schedule

5,

para 26

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

For each subproject, MPTRANSCO will prepare

and implement the necessary IEE,

environmental impact assessment, and EMP

(with budget) in accordance with the EARF.

Environmental category A or B sensitive

subprojects shall be subject to the 120 days

public disclosure requirement of ADB.

MPTRANSCO shall ensure that the

recommendations of the environmental

assessment and EMPs approved by ADB and

relevant government agencies are adhered to

during design, construction and operation

phases of the subprojects.

LA, Schedule

5,

para 27

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

The updated IEE report for

the entire project, updated

IEE report for the deviated

line and IEE with due

diligence report for 3

transmission lines not

included in the earlier IEE

were submitted to ADB on

16 Dec 2010. The

Environmental Due

Diligence Report has been


May 2011.

MPTRANSCO shall monitor, audit and report to

ADB twice a year on the implementation of the

EMPs for each subproject.

LA, Schedule

5,

para 28

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

The External Monitoring

Report for the period of

April–September 2010

was submitted to ADB on

09 Dec 2010.

MPTRANSCO shall ensure that (i) the

subprojects are not located within national parks

and wildlife sanctuaries, unless prior

environmental clearance is obtained from

relevant government agencies (ii) monuments of

cultural or historical importance are avoided;

and (iii) EMP with adequate budget is

developed and implemented for each

subproject.

LA, Schedule

5,

para 29

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

MPTRANSCO has


subprojects are not

located within national

parks and wildlife

sanctuaries.

MPTRANSCO has


monuments of cultural or

historical importance have

been avoided.

Appendix 9 35

Performance Monitoring and Reporting

The Borrower shall ensure that within 3 months

of the Effective Date, a Project Performance

Monitoring System (PPMS) shall have been

established by the EA in a form and with a

composition acceptable to ADB in accordance

with the Investment Program and Project

performance indicators. The EA shall

undertake periodic Project performance review,

and also the Investment Program in

accordance with the PPMS to evaluate the

scope, implementation arrangements, progress

and achievements of objectives of the related

subproject and overall Investment Program.

LA, Schedule

5,

para 32

Government/

GOMP/

MPTRANSCO/

ADB

Complied with. The ADB

guidelines are being

followed by

MPTRANSCO.

An advisor (project

monitoring) has been

engaged by

MPTRANSCO to

supervise and coordinate

all activities related to the

construction of the

transmission lines.

The EA shall prepare quarterly progress

reports and shall submit these to ADB within

30 days of the end of each quarter. These

reports shall provide (i) a narrative description

of progress made during the period (progress

on compliance with environmental and social

requirements including EMP and RF shall also

be included), (ii) changes in the implementation

schedule, (iii) problems or difficulties

encountered, and (iv) work to be carried out in

the next period. The progress reports shall also

include a summary financial account for the

components, including subprojects, consisting

of expenditures during the period, total

expenditure to date, and reports on

environmental, resettlement and benefit

monitoring.

LA, Schedule

5,

para 33

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

Progress reports have

been submitted as

scheduled.

The Borrower shall ensure the submission to

ADB of a Project Completion Report within 3

months of physical completion of the Project by

the EA, and the Facility Completion Report

within 3 months of physical completion of the

Investment Program. These reports shall cover

a detailed evaluation of the Project and the

Facility respectively, covering the design,

costs, contractors’ and consultants’

performance, social, environmental and

economic impact, economic and financial rates

of return, and other details of the Project and

the Facility, as may be requested by ADB.

LA, Schedule

5,

para 34

Government/

GOMP/

MPTRANSCO/

ADB

Being complied with.

The project completion

report has been prepared

and submitted to ADB.

36 Appendix 9

The EA shall ensure that the current capacity

development program that covers financial

management and human resource

development is implemented on a timely basis

till 2010

LA, Schedule 5,

para 12

Complied with.

Capacity development

program which includes

financial management

development has been

implemented.

MPTRANSCO has

inducted qualified

professionals at

appropriate levels.

Social Safeguards

Land Availability and Resettlement

Without limiting the generality of Schedule 5

to the FFA, including its Annexes, the EA

shall, subject to compliance with the relevant

provisions of the RF/RPs and EARF/EMP

and in accordance with all applicable laws

and regulations of the Borrower, acquire or

make available the land and rights to land

free from any encumbrances, and cleared

the utilities, tress and any other obstruction

from such land, required for commencement

of construction activities in accordance with

the schedule agreed under the related civil

works contract.

LA, Schedule

5, para 17

.


Detailed aspects have

been stated in paras.

47–48 of this report.

Review

ADB, the Borrower and the EA shall meet

regularly as required to discuss the progress of

the Project and any changes to implementation

arrangements or remedial measures required

to be undertaken towards achieving the

objectives of the Project and the Investment

Program.

LA, Schedule

5,

para 35

ADB/

Government/

MPTRANSCO

The first review mission

was fielded on 07–17 Jan

2008.

A mid-term review of the Project shall be

undertaken by ADB and the EA. The mid-term

review shall include a review of issues and any

problems or weaknesses in implementation

arrangements, and agree on any changes

needed to achieve the objectives of the Project

and the Investment Program.

LA, Schedule

5,

para 36

ADB/

Government/

MPTRANSCO

The latest review mission

visited MPTRANSCO on

14–17 Feb 2012.

Appendix 9 37

The EA shall ensure that all land and rights-

of-way required by the subprojects are made

available in a timely manner and that the

provisions of the RPs, including

compensation and entitlements for affected

households and persons are implemented in

conformity with all applicable laws and

regulations of the Borrower, including as

amended from time to time and the

entitlement benefits as listed in the

Borrower's applicable laws, ADB's Policy on

Involuntary Resettlement (1995) and the RF.

LA, Schedule

5, Para 18

MPTRANSCO Being complied with.

Status has been

reported in paras. 38–

42 in PCR.


construction contracts contain binding

requirements for construction contractors to

fully reinstate pathways, other local

infrastructures, and agricultural land to at least

their pre-project condition upon construction

completion. Provision should be made for

adequate recording of the condition of roads,

agricultural land, and other infrastructure prior

to transport of material and construction

LA, Schedule

5,

para 22

Government/

GOMP/

MPTRANSCO/

ADB

Complied with.

Within 3 months of the Effective Date, the EA shall

engage an independent external

expert/agency, acceptable to ADB, for

monitoring and verification of the RP

implementation under each subproject that

will be responsible for providing ADB through

the PMU quarterly monitoring and evaluation

reports on resettlement implementation in

accordance with RPs.

LA, Schedule

5, Para 23


The External Monitoring

Report for the period

April–September 2010

was submitted to ADB

on 06 Dec 2010.

Within 3 months of the Effective Date, the EA shall

establish a grievance redress committee

with representation from all stakeholders for

the project to address any grievances from

Aps concerning resettlement, environment

and other social issues in a timely manner.

LA, Schedule

5, Para 24


The Grievance redress committee is constituted through order no. AS/MPTRANSCO/1230 dtd. 10

th May 2010 and

meetings are being conducted regularly.

38 Appendix 9

Indigenous People

The EA shall prepare and implement the

IPDPs or appropriate indigenous peoples

actions for all subprojects with indigenous

peoples issues in accordance with the

requirements set out in (i) ADB's Policy on

indigenous Peoples (1998), the IPDF, and

(ii) the Borrower's and the State's applicable

laws.

LA, Schedule

5, Para 25


No indigenous peoples

issues have been

reported thus far.

LA = loan agreement, GOMP = government of Madhya Pradesh, MPTRANSCO = Madhya Pradesh Power Transmission Company Limited, MD = managing director, ADB = Asian Development Bank, APA = audited project account, AFS = audited financial statement, MPERC = Madhya Pradesh Electricity Regulatory Commission, IT = information technology, EARF = environmental assessment and review framework, IEE = initial environmental examination Source: Loan agreement, schedule 5

Appendix 10 39

FINANCIAL RE-EVALUATION

1. The financial internal rate of return (FIRR) of the project was recalculated based on actual capital, operation and maintenance (O&M) costs and revenues. The major assumptions used in the FIRR calculation are as follows: (i) The capital costs include all capital expenditure for the project components

excluding interest during construction. The recalculation covered a 25-year period (until 2032).

(ii) The operating costs were calculated at 5% (based on data from MPTRANSCO) of the cumulative capital costs starting from the second year of first capital investment.

(iii) Revenue is taken as Rs 9.22 per MW per annum (based on data from the MPERC Transmission MYT Tariff Order for FY2012). The transmission capacity was taken as 8170 MW, which was the project target achieved on March 2012.

(iv) The weighted average cost of capital (WACC) for the project was re-evaluated at 3.53% following the methodology adopted at appraisal, using values at completion.

(v) The remaining value was calculated following MPERC guidelines of 5.38% per annum for 13 years until 70% of the asset value is reached, and then 1.66% for the next 7 years.

2. Based on these assumptions and estimations, the FIRR was recalculated at 5.27%, which is higher than the estimate at appraisal of 4.8%.Therefore, this project is considered financially viable. Table A10 presents the cash flows and FIRR calculation. No further sensitivity analysis was carried out as MPTRANSCO tariffs are “cost-plus” with a fixed 15.5% return on equity. The tariff determination is carried out by MPERC following a quasi-judicial process.

40 Appendix 10

Fiscal Year

Total Capital Cost

Operating Cost Total Cost

Revenue Earned Net Cash Flow

2007 327.83 0.00 327.83 0.00 (327.83)

2008 1300.39 6.56 1,306.95 0.00 (1,306.95)

2009 1877.23 32.56 1,909.79 0.00 (1,909.79)

2010 1174.83 175.27 1,350.10 0.00 (1,350.10)

2011 392.92 234.01 626.93 0.00 (626.93)

2012 132.93 253.66 386.59 0.00 (386.59)

2013 0.00 260.31 260.31 787.30 526.99

2014 0.00 260.31 260.31 787.30 526.99

2015 0.00 260.31 260.31 787.30 526.99

2016 0.00 260.31 260.31 787.30 526.99

2017 0.00 260.31 260.31 787.30 526.99

2018 0.00 260.31 260.31 787.30 526.99

2019 0.00 260.31 260.31 787.30 526.99

2020 0.00 260.31 260.31 787.30 526.99

2021 0.00 260.31 260.31 787.30 526.99

2022 0.00 260.31 260.31 787.30 526.99

2023 0.00 260.31 260.31 787.30 526.99

2024 0.00 260.31 260.31 787.30 526.99

2025 0.00 260.31 260.31 787.30 526.99

2026 0.00 260.31 260.31 787.30 526.99

2027 0.00 260.31 260.31 787.30 526.99

2028 0.00 260.31 260.31 787.30 526.99

2029 0.00 260.31 260.31 787.30 526.99

2030 0.00 260.31 260.31 787.30 526.99

2031 0.00 260.31 260.31 787.30 526.99

2032 0.00 260.31 260.31 787.30 526.99

Remaining value (1109.40) 1109.40

FIRR 5.27% ( ) = negative, FIRR = financial internal rate of return Source: Calculation based on input from Madhya Pradesh Power Transmission Company Limited

Table A10: FINANCIAL RE-EVALUATION OF THE PROJECT (Rs. Million)

Appendix 10 41

ECONOMIC RE-EVALUATION A. General 1. The Asian Development Bank (ADB) project completion review mission conducted an economic re-evaluation of the project using similar methodology of “with-project” and “without-project” cases as at appraisal. B. Economic Costs 2. The project costs comprise capital, operation and maintenance. The actual annual expenditures for project implementation were used as the capital costs, including financial charges of the loan. The operating costs were calculated at 5% of the cumulative capital costs starting from the second year of first capital investment. The operation and maintenance costs were converted into economic costs with a standard conversion factor of 0.85. C. Economic Benefits 3. The project benefits comprise incremental and non-incremental income. Non incremental income is computed based on loss reduction evaluated as energy (million units) made available to all the state DISCOMS by MPTRANSCO at constant prices of Rs 3.69 per unit as accepted by MPERC in the ARR and Retail Supply Tariff Order FY2013. Energy input in transmission system is obtained from MPERC MYT Tariff Order, and the loss reduction was taken rounded off at 1.2% which is the difference between loss reduction target of 4.7% and achievement of 3.51% for the year 2012. Following a conservative approach, the benefits of displaced generation were considered at appraisal estimates. 4. Incremental income at 2012 constant prices has been computed based on additional contribution to state GDP by way of increase in energy consumption expenditure reflected in the value of DISCOM sales. (Source: "The Performance of State Power Utilities for the years 2008-09 to 2010-11" by Power Finance Corporation and MPERC Tariff Orders) grossed up by electricity elasticity to GDP for India taken as 0.95 (Source: Integrated Energy Policy, Planning Commission of India). It was recognized that the additional GDP resulted from the performance of the state DISCOMS and MPTRANSCO, and thus the amount attributed to MPTRANSCO was limited to the MPTRANSCO charges allowed by MPERC in the ARR and Retail Supply Tariff Order for FY2013. Further attribution, within MPTRANSCO to this project was based on total capital expenditure made in this project as a proportion of the MPTRANSCO gross fixed assets for end of year 2012, as accepted by MPERC in its MYT Transmission Tariff Order. D. Economic Re-evaluation

5. Based on the estimates of economic costs and benefits, the economic internal rate of return was recalculated at 20.6%, which is higher than the appraisal evaluation of 14.9% and even higher than the ADB recommended discount rate of 12%. The detailed economic internal rate of return calculations for the project are in Table A11.

42 Appendix 10

Table A11: ECONOMIC REVALUATION OF THE PROJECT (Rs. million)

Fiscal Year

Total Capital Cost

Operating Cost

Total Cost

Benefits Total Benefits

Net Cash Flow

Incremental Output

System loss

reduction

Displaced Generation

2007 327.83 0.00 327.83 0.00 0.00 0.00 0.00 -327.83

2008 1300.39 5.57 1,305.96 0.00 0.00 0.00 0.00 (1,305.96)

2009 1877.23 27.68 1,904.91 0.00 0.00 54.80 54.80 (1,850.11)

2010 1174.83 148.98 1,323.81 171.00 74.19 189.00 434.19 (889.61)

2011 392.92 198.91 591.83 243.00 77.14 317.40 637.54 45.71

2012 282.32 215.61 497.93 435.00 79.44 615.60 1,130.04 632.11

2013 0.00 227.61 227.61 948.70 196.00 583.10 1,727.80 1,500.19

2014 0.00 227.61 227.61 948.70 196.00 648.80 1,793.50 1,565.89

2015 0.00 227.61 227.61 948.70 196.00 648.40 1,793.10 1,565.49

2016 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2017 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2018 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2019 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2020 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2021 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2022 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2023 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2024 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2025 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2026 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2027 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2028 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2029 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2030 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2031 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

2032 0.00 227.61 227.61 948.70 196.00 672.30 1,817.00 1,589.39

Remaining Value

987.56

EIRR

20.60%

( ) = negative, EIRR = economic internal rate of return Source: Calculation based on input from Madhya Pradesh Power Transmission Company Limited

Multitranche Financing Facility India: Madhya Pradesh Power ...

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