TEMPLATE FOR PROJECT CONCEPT NOTE (PCN)documents.worldbank.org/.../672290v10REVIS0cturing0P…  · Web viewPAPER. SUMMARY. This restructuring Paper introduces changes in the Dokan

Document ofThe World Bank

Report No: 67229-IQ

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECT

IDA CREDIT NO. 4249 IQAPPROVED ON: DECEMBER 12, 2006

TO THE

REPUBLIC OF IRAQ

May 22, 2023

ABBREVIATIONS AND ACRONYMS

IQ IraqHP HydropowerKRG Kurdish Regional GovernorateLC Letter of CreditPDOPMT

Project Development ObjectiveProject Management Team

WB World Bank

Regional Vice President: Inger Anderson / Mourad Ezzine (Acting)Country Director: Hedi Larbi

Sector DirectorSector Manager:

Junaid Kamal AhmadPatricia Veevers-Carter

Task Team Leader: Ferhat Esen

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REPUBLIC OF IRAQ

DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECTP099059

CONTENTS

PageA. SUMMARYB. PROJECT STATUSC. PROPOSED CHANGESD. APPRAISAL SUMMARYANNEX 1: REVISED RESULTS FRAMEWORK AND MONITORINGANNEX 2: REVISED DISBURSMENT AND PROCUREMENT PLANSANNEX 3: ACTION PLAN

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DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECT

RESTRUCTURING PAPER

A. SUMMARY

1. This restructuring Paper introduces changes in the Dokan and Derbanikhan Emergency Hydro Power Project in Iraq (IDA Credit No. 4249 IQ), P099059. The changes include: (i) the extension of the project closing date, and (ii) revision of the results framework indicators.

2. First, the closing date for the project is requested to be extended from September 30, 2012 until December 31, 2013. The proposed 15-month extension to the Project Closing Date is necessary to complete a single contract under one of the project components: the repair of Derbandikhan switchyard.

3. The second change includes modifications to the results framework indicators. The Project’s Development Objectives (PDOs) remain unchanged, however the results framework indicators (PDO-level and intermediate) are proposed to be changed to better measure progress towards achieving the PDOs and the intermediate results necessary to meet these. The target dates for the related intermediate results indicators and PDO level indicators have also been extended to December 31, 2013 (see details in Annex 1).

4. A formal request for extension of the Project Closing Date was received from the Ministry of Finance of Iraq on March 7, 2012. This will be the second and last extension sought for this project, bringing the cumulative extension of the project to 36 months. The project became effective on October 30, 2007, and the original Closing Date was December 31, 2010. The project experienced early delays due to the prevailing security situation in Iraq and the impact this had on the ability of the Project Management Team (PMT) to attract international bidders for the contracts financed by the Credit. Therefore, an earlier extension of the Closing Date (of 21 months, from the original closing date of December 31, 2010 to September 30, 2012) was processed on August 24, 2010.

5. RVP’s approval of this restructuring is required because the cumulative extension of the project goes beyond 24 months.

B. PROJECT STATUS

6. Significant progress has been made in contracting the works and services for urgent repairs to Dokan and Derbandikhan power stations, with most of the repair works either completed or well underway: (i) six of 13 project contracts (construction and services) have already been completed and the remaining contracts’ physical completion varies between 65-95%; (ii) disbursement and commitments stand at 95%; and (iii) work has not commenced on only one contract, the rehabilitation of Derbandikhan switchyard. The contract was awarded in February 2012 and work is expected to begin in September 2012. For this reason, an extension of the Project Closing Date is required.

7. The Project involves emergency repair works to increase the available generation capacity in the Dokan and Derbandikhan hydro power plants (currently as low as 50% of

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the original capacity of 400MW and 249MW respectively). The Project also provides consulting services for planning, costing and design of a full rehabilitation program that can subsequently be undertaken by the Government, to restore full capacity of each hydropower plant and increase the life-cycle of the hydropower plants, and thereby ensure the sustainability of emergency repair works. Training is also being provided to improve the operational capacity of power station staff.

8. Achievement of the PDOs remains highly probable as shown by the progress below, although the implementation environment in Iraq remains very challenging.

PDO 1, help alleviate the current power supply shortfall in the Kurdish region through urgent repair work. Progress: all contracts have been awarded and most are close to completion.

PDO 2, strengthen the capacity of local operational staff. Progress: training needs have been identified and agreed with the Client and necessary training activities have been designed and are progressively being implemented.

PDO 3, prepare for the subsequent rehabilitation of the Dokan and Derbandikhan hydropower plants. Progress: assessments of rehabilitation needs, costing, designs and bidding documents have been completed.

9. The last supervision mission was carried out in April 2012, and included a review of the project’s financial situation and disbursement projections, which rated these as Moderately Satisfactory. The overall implementation progress for the project is rated at Moderately Satisfactory, however the Bank team will consider upgrading this rating once work commences on repair of Derbandikhan switchyard. The Borrower is in full compliance with audit requirements and there are no overdue or unsatisfactory audit reports, safeguards problems, or other pending issues related to this project.

10. As of August 1, 2012, US$27.5 million (69% of the original US$40 million approved amount) has been disbursed. Total commitments amounted to around US$38 million (95% of the IDA US$40 million). Significant repair works have already been completed, while ongoing and planned works under remaining contracts are well in progress. The team intends to formally revise the project disbursement schedule at the time the Project Closing Date is extended.

11. The PDOs remain unchanged1: (i) help alleviate the current power supply shortfall in the Kurdish region through urgent repair work; (ii) strengthen the capacity of local operational staff; and (iii) prepare for the subsequent rehabilitation of the Dokan and Derbandikhan hydropower plants.

1 During the restructuring of the project, the Team recognized that a discrepancy exists between the wording of the PDOs in the Financing Agreement and Technical Annex of the Project Paper. The PDOs presented above and in the rest of the documentation are the ones from the Technical Annex since these reflect well the intended objectives of the project. The PDOs in the Financing Agreement are to help alleviate the current power shortfall in the Recipient’s territory through urgent repair works and prepare for the subsequent rehabilitation of the Dokan and Derbandikhan hydropower plants. Given the advanced implementation level of the project, with 95% of the allocated funds committed, there is little to be gained from adjustments to the PDOs at this stage.

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C. PROPOSED CHANGES

Results/indicators:

12. The results framework indicators (PDO-level and intermediate) have been revised to better reflect the PDOs and the intermediate results required to achieve these. The target dates for the related PDO-level and intermediate results indicators have also been extended to December 31, 2013. Both sets of indicators are based on work defined under each project component that will have the overall outcome of increasing generation capacity and resolving operational problems in both plants – thus allowing the PDOs to be met (see details in Annex 1).

Financing:

13. Disbursement arrangements and Procurement: the Borrower has prepared new disbursement and procurement plans acceptable to the Bank, which will allow it to complete the project by December 2013, the proposed new Project Closing Date. Updated procurement and disbursement projections are enclosed in Annex 2.

Project Closing Date:

14. The proposed 15-month extension is necessary to complete a single contract under one of the project components: the repair of Derbandikhan switchyard. This is the only major work that has not yet been commenced under the Project, and which will start in September 2012.

15. In April 2011, a contract to undertake this work with an Iranian Company, Safa Nicu, was cancelled after significant delays due to a force majeure event. This event related to inability of the contractor to put in place acceptable commercial bank arrangements for project payments and guarantees. Therefore, a new round of bids was launched on September 15, 2011. The PMT signed a new contract for this work (for a value of US$7.9 million) in February 2012, with works estimated to be completed by no earlier than July 2013. The Government of Iraq has therefore requested an extension of the Project Closing Date up to December 31, 2013 to allow completion of this work.

16. The proposed extension does not result in any change to the Project activities nor require a modification to the Project Description in the Loan Agreement.

Implementation schedule:

17. The reason for this extension is outside the Borrower’s control. The Borrower has prepared an action plan acceptable to the Bank to ensure completion of the project within the new Project Closing Date – this action plan (Annex 3) consists of re-contracting repair works at Derbandikhan switchyard, which is now well underway, and extension of the contracts for on-going works.

18. No changes to Components, Safeguards, Institutional Arrangements, Financing Structure and Financial Management are envisaged and requested.

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D. APPRAISAL SUMMARY

19. The above changes do not result in a change of impact (from the original Appraisal Summary of the Project Appraisal Document/Technical Annex) in any of the Economic and Financial analyses, Technical, Social, Environment, Exceptions to Bank policy and Risks components of the Project.

20. Given that the project is highly likely to meet its development objectives if the Project Closing Date is extended, the team recommends approval of this request for the extension of the Project Closing Date, up to December 31, 2013 and the revision of the results framework indicators.

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ANNEX 1:Revised Results Framework and Monitoring

IRAQ: DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECT

Project Development Objective (PDO): are to: (i) help alleviate the current power supply shortfall in the Kurdish region through urgent repair work; (ii) strengthen the capacity of local operational staff; and (iii) prepare for the subsequent rehabilitation of the Dokan and Derbandikhan hydropower plants.

PDO Level Results IndicatorsC

ore

D=DroppedC=ContinueN= New

R=RevisedUnit of

MeasureBaseline(2006)

Cumulative Target ValuesFrequency

and ReportsData Source/Methodology

Responsibility for Data

Collection2010 2011 2012 End Target

2013

Indicator One:Dokan HP availability increased

C % of power generation capacity available

Dokan generation capacity available about 65%

No change (65%)

No change (65%)

No change (65%)

Dokan generation capacity availability increased to 80%

-Quarterly:- PMT reports.- Operational Statistics-Consultant reports

Physical progress evaluation, power station logs, consultant analyses

PMT

Indicator Two:Derbendikhan HP availability increased

C % power generation capacity available

Derbandikhan generation capacity available about 60%

No change (60%)

No change (60%)

No change (60%)

Derbandikhan generation capacity availability increase to 80%

-Quarterly:- PMT reports.- Operational Statistics-Consultant reports

Physical progress evaluation, power station logs, consultant analyses

PMT

Indicator Three: Solve the operational problems at Derbendikhan, in particular the cavitation problem

D

This is not an appropriate PDO level indicator and has been dropped. It is incorporated in Intermediate Indicator Two

Serious cavitation problem at Derbandikhan

Consultancy contract awarded

Satisfactory progress

Satisfactory progress

Solution to cavitation problem found

-Quarterly:- PMT reports.- Operational Statistics-Consultant reports

Physical progress evaluation, power station logs, consultant analyses

PMT

Indicator Three: Percentage of relevant staff trained in operation, maintenance and rehabilitation who pass the end program assessment

N

This new indicator relates to the second PDO

% of relevant staff in charge

0% of relevant staff trained and passed an assessment

20% 40% 60% %100 of relevant staff trained and passed the end program assessment

-Quarterly:- PMT reports.- Operational Statistics-Consultant reports

Progress on implementation of Training Plan, and in particular various training components of

PMT

of operation, maintenance and rehabilitation

repair contracts, as indicated in Consultant’s monthly reports (assessment in conjunction with Supervision Engineer).

Indicator Four:Design and costing for assessed subsequent rehabilitation completed along with bidding documents

N

This new indicator relates to the third PDO

% complete

No rehabilitation plans in place

Consultancy contract awarded

Draft works shared with Client for review

Submission of final documents and approval by Client

Rehabilitation design and costing 100% completed and bidding documents ready

-Quarterly:- PMT reports.- Operational Statistics-Consultant reports

Consultant’s monthly reports.

PMT

INTERMEDIATE RESULTS

2008 2009 2010 2011 2012 2013End Target

Intermediate Indicator One: Excitation and control systems replaced; switchgear, Derbendikhan slippage area, hydro-mechanical and substation equipment repaired

C Percentage 0% 50% 50% 50% 80% 100% - Consultant’s Monthly reports.- PMT reports. - Supervision Missions

PMT

Intermediate Indicator Two:Operational problems at Derbandikhan and Dokan identified and included in scope of full rehabilitation.(This includes re-design of the hydraulic system for Derbandikhan and the resolution of cavitation problems for Derbandikhan)

R

This indicator is revised to better reflect intermediate targets necessary for PDOs to be met.

Percentage 0% 50% 70% 80% 90% 100% - Consultant’s Monthly reports.- PMT reports. - Supervision Missions

PMT

Intermediate Indicator Three:Operational problems at

R

This

Percentage 0% 50% 50% 50% 80% 100% - Consultant’s Monthly reports.

PMT

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Derbandikhan and Dokan resolved (resulting in reliable unit availability)

indicator is revised to better reflect intermediate targets necessary for PDOs to be met.

- PMT reports. - Supervision Missions

Intermediate Indicator Four: Assessment of full rehabilitation needs

C Percentage %0 40% 70% 90% 100% 100% - Consultant’s Monthly reports.- PMT reports. - Supervision Missions

PMT

Intermediate Indicator Five: Percentage of relevant staff trained for operations, maintenance and rehabilitation (including various training programs implemented under repair contracts)

R

This indicator has been revised to ensure that progress is better able to be monitored.

Percentage 0% 10% 40% 60% 80% 100% - Consultant’s Monthly reports.- PMT reports. - Supervision Missions

PMT

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ANNEX 2:Revised Procurement and Disbursement Plans

IRAQ: DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECT

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12

13

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ANNEX 3: ACTION PLANIRAQ: DOKAN AND DERBANDIKHAN EMERGENCY HYDRO POWER PROJECT

A mid-term review supervision mission for the Dokan and Derbandikhan Emergency Hydropower Project (DDEHP) was held on April 23 & 24, 2012 in the World Bank’s Office in Beirut. One of main topics discussed at the meetings was the Action Plan i for the completion of remaining rehabilitation works and contracts by the requested new Closing Date of December 31, 2013 (currently September 30, 2012). The action plan below was discussed and agreed with the Project Management Team of the Ministry of Electricity of Kurdistan Regional Governorate of Iraq.

Work Name and Contract Code

Status Action/Next Steps

Derbandikhan Switchyard/Substation Refurbishment (W07/11)

Following the cancellation of previous contract due to force majeure events, a new round of bids was launched in September 2011 and J.V Luthardt GmbH & HEAG (Germany) has been recently awarded to execute rehabilitation works, for a value of US$7.9mln.

On April 4, 2102 (the effectiveness date of the contract) the engineering works have started. Final construction works are expected to begin in September 2012, to be completed by the end of July 2013.

Control Systems Upgrade (W04/09)

Commissioning of the major components was completed in February 2012.

Minor outstanding items of the contract remain. Contractor is working on completing and correcting these works. A change order is being prepared to be sent for the Bank’s no objection in July/August 2012.

Supervision of Construction (C02/09)

This contract stands at 92% completion and has been recently extended to supervise the erection works until June 2013.

Further extension, up to December 2013 will be done following WB’s approval for the request of extension of project closing date.

Diagnoses and treatment of high vibration and temperature in Dokan HPP (C05/11)

PMT has recently requested proposals from the 4 short-listed firms that had expressed interest.

PMT expects to award the contract and commence work by August/September 2012, for completion in 12 months.

Other urgent repairs (W08/12)

PMT is preparing new bidding documents. Bidding documents will be submitted to the Bank’s no objection in July/August 2012. Work is expected to begin in November/December 2012.

Capacity Building (C05/07) Ministry of Electricity of KRG has identified training needs for its engineers at the power station sites.

PMT plans to submit the training plan by August/September 2012 for the Bank’s review and no objection.

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i Based on the latest agreed Aide-memoire sent on May 31, 2012 to Iraqi Authorities.