for official use only - world bank · the world bank, international development association, and ....
TRANSCRIPT
Document of The World Bank,
International Development Association, and International Finance Corporation
FOR OFFICIAL USE ONLY
Report No: 64299-NP
PROJECT APPRAISAL DOCUMENT
ON A PROPOSED INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT
IN THE AMOUNT OF SDR 26.1 MILLION (US$40.0 MILLION EQUIVALENT) AND
A PROPOSED GRANT
IN THE AMOUNT OF SDR 4.0 MILLION (US$6.0 MILLION EQUIVALENT)
TO
NEPAL
AND ON A PROPOSED
INTERNATIONAL FINANCE CORPORATION FINANCING CONSISTING OF: AN “A” LOAN IN THE AMOUNT OF UP TO US$19.3MILLION
AND A CANADA CLIMATE CHANGE PROGRAM (CCCP) SENIOR LOAN IN THE AMOUNT
OF UP TO US$19.3 MILLION WITH INTERNATIONAL FINANCE CORPORATION ACTING AS IMPLEMENTING ENTITY OF THE CCCP
TO
KABELI ENERGY LIMITED IN NEPAL
FOR THE KABELI-A HYDROELECTRIC PROJECT
April 19, 2014 Sustainable Development Department Infrastructure & Natural Resources Department Nepal Country Management Unit Climate Business Department South Asia Region International Finance Corporation
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
ii
CURRENCY EQUIVALENTS
Exchange Rate Effective = December, 2013 Currency Unit = Nepalese Rupees (NPR)
US$ 1 = 99.0 NPR US$ 1 = 0.65018 SDR
FISCAL YEAR July 16 – July 15
ABBREVIATIONS AND ACRONYMS
BOOT Build, Own, Operate, Transfer ISN IDA/IFC Interim Strategy Note BPC Butwal Power Company Limited KAHEP Kabeli-A Hydroelectric Project CCCP Canada Climate Change Program kcal Kilocalorie CIA Cumulative Impact Assessment KEL Kabeli Energy Limited CO2 Carbon Dioxide km Kilometer DA Designated Account kW Kilo Watt DDC District Development Committee kWh kilo Watt-hour DfID Department for International Development LRMC Long-run Marginal Cost DOED Department of Electricity Development MJ Mega Joule EA Environmental Assessment MOE Ministry of Energy EMP Environmental Management Plan MOF Ministry of Finance EIA Environmental Impact Assessment MW Mega Watt EIRR Economic Internal Rate of Return MWh Mega Watt-hour FIDIC Federation Internationale des Ingenieurs-
Conseils NEA Nepal Electricity Authority
FIRR Financial Internal Rate of Return NCB National Competitive Bidding GAAP Governance and Accountability Action Plan PAP Project-affected Persons g/kWh Gram per kilo Watt-hour PDA Project Development Agreement Gurans Gurans Energy Limited PIC Public Information Center HIDCL Hydroelectricity Investment and Development
Company Limited POE Panel of Experts
IBN Investment Board of Nepal PS IFC Performance Standards on Environmental and Social Sustainability
ICB International Competitive Bidding RCIA Rapid Cumulative Impacts Assessment ICP Informed Consultation and Participation RCLAP Resettlement Compensation and Livelihood
Assistance Plan IDA International Development Association SA Social Assessment IDC Interest During Construction SAP Social Action Plan IFC International Finance Corporation TOR Terms of Reference InfraCo Asia
InfraCo Asia Himalayan Hydro Pte. Ltd. VDC Village Development Committee
IPVCDP Indigenous People Vulnerable Community Development Plan
VEC Valued Environmental and Social Component
International Development Association (IDA) International Finance Corporation (IFC) Regional Vice President: Philippe Le Houerou Vice President: Karin Finkelston Country Director: Johannes C. M. Zutt Regional Director: Serge Devieux Sector Director: John H. Stein Industry Director: Anita M. George Sector Manager: Julia Bucknall Manager: Sumeet Thakur Task Team Leader: Jie Tang Team Leader: Andre S. Van Hoeck
iii
NEPAL KABELI-A HYDROELECTRIC PROJECT
TABLE OF CONTENTS
Page
I. STRATEGIC CONTEXT .............................................................................................................. 1
A. Country Context ........................................................................................................................... 1
B. Sectoral and Institutional Context ................................................................................................ 1
C. Higher Level Objectives to which the Project Contributes .......................................................... 6
II. PROJECT DEVELOPMENT OBJECTIVE(S)/GLOBAL ENVIRONMENT OBJECTIVE(S) ........................................................................................................................................... 7
A. Project Development Objective(s) ............................................................................................... 7
B. Project Beneficiaries .................................................................................................................... 7
C. PDO Level Results Indicators ...................................................................................................... 7
III. PROJECT DESCRIPTION ........................................................................................................... 7
A. Project Components ..................................................................................................................... 7
B. Project Cost and Financing .......................................................................................................... 8
C. Lessons Learned and Reflected in the Project Design ................................................................. 8
IV. IMPLEMENTATION .................................................................................................................... 9
A. Institutional and Implementation Arrangements .......................................................................... 9
B. Results Monitoring and Evaluation ............................................................................................ 11
C. Sustainability .............................................................................................................................. 11
V. KEY RISKS AND MITIGATION MEASURES ....................................................................... 12
A. Risk Ratings Summary Table .................................................................................................... 12
B. Overall Risk Rating Explanation ............................................................................................... 13
VI. APPRAISAL SUMMARY ........................................................................................................... 13
A. Economic and Financial Analysis .............................................................................................. 13
B. Technical .................................................................................................................................... 13
C. Financial Management ............................................................................................................... 13
D. Procurement ............................................................................................................................... 14
E. Social (including safeguards and performance standards) ......................................................... 15
F. Environment (including safeguards and performance standards) .............................................. 17
G. Other Safeguards Issues ............................................................................................................. 18
iv
Annex 1: IDA’s Results Framework and Monitoring ........................................................................... 19
Annex 2: Detailed Project Description .................................................................................................... 22
Annex 3: Implementation Arrangements ............................................................................................... 29
Annex 4: Operational Risk Assessment Framework (ORAF)- IDA funding ...................................... 41
Annex 5: Implementation Support Plan ................................................................................................. 46
Annex 6: Technical and Contracting Aspects of the Project ................................................................ 48
Annex 7: Environmental and Social Aspects of the Project .................................................................. 57
Annex 8: Economic and Financial Analysis ........................................................................................... 83
Annex 9: Governance and Accountability Action Plan (GAAP) .......................................................... 89
Annex 10: Strengths, Risks and Issues .................................................................................................... 94
Annex 11: Statement of IFC’s Held and Disbursed Portfolio ............................................................... 96
Map ......................................................................................................................................................... 97
v
PAD DATA SHEET
Nepal
Kabeli-A Hydroelectric Project (P122406)
PROJECT APPRAISAL DOCUMENT
SOUTH ASIA SASDE
Report No.: PAD761.
Basic Information
Project ID Lending Instrument EA Category Team Leader
P122406 Specific Investment Loan
A - Full Assessment Jie Tang
Project Implementation Start Date Project Implementation End Date
31-July-2014 30-Dec-2019
Expected Effectiveness Date Expected Closing Date
30-Sep-2014 30-Dec-2019
Joint IFC Joint Level
Yes Joint Project - involving co-financing with IFC (loan, equity, budget, other) or staffing
Sector Manager Sector Director Country Director Regional Vice President
Julia Bucknall John Henry Stein Johannes C.M. Zutt Philippe H. Le Houerou .
IDA Borrower: Government of Nepal; IFC Loan borrower: Kabeli Energy Limited .
Project Financing Data(in USD Million)
[ ] Loan [ X ] Grant [ ] Other
[ X ] Credit [ ] Guarantee
Total Project Cost: 108.6 Total Bank Financing: 46.00
Financing Gap: 0.00 .
Financing Source Amount
BORROWER/RECIPIENT 23.0
International Development Association (IDA) Credit 40.00
IDA Grant 6.00
International Finance Corporation (IFC) 19.3
IFC – Canada Climate Change Program 19.3
Local Sources of Borrowing Country 1.00
Total 108.6
vi
.
Expected Disbursements (in USD Million) IDA only
Fiscal Year 2014 2015 2016 2017 2018 2019 2020
Annual 15.00 20.00 9.00 1.00 0.60 0.40
Cumulative 15.00 35.00 44.00 45.00 45.60 46.00 .
Proposed Development Objective(s)
The project development objective is to add hydropower generation capacity to supply the NEA grid through public private investments. .
Components
Component Name Cost (USD Millions)
Kabeli-A Hydroelectric Project Component 102.6
Ministry of Energy Component 2.00
Investment Board of Nepal Component 4.00 .
Institutional Data
Sector Board
Energy and Mining .
Sectors / Climate Change
Sector (Maximum 5 and total % must equal 100)
Major Sector Sector % Adaptation Co-benefits %
Mitigation Co-benefits %
Energy and mining Other Renewable Energy 100
Total 100
I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. .
Themes
Theme (Maximum 5 and total % must equal 100)
Major theme Theme %
Financial and private sector development Infrastructure services for private sector development
100
Total 100 .
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects?
Yes [ ] No [ X ]
.
Does the project require any waivers of Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ X ]
vii
Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation?
Yes [ X ] No [ ]
.
Safeguard Policies and Performance Standards Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts.
X
Performance Standard 2: Labor and Working Conditions X
Performance Standard 3: Resource efficiency and Pollution Prevention (PS3) X
Performance Standard 4: Community Health, Safety and Security (PS4) X
Natural Habitats OP/BP 4.04 Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 Performance Standard 8: Cultural Heritage
X
Indigenous Peoples OP/BP 4.10 Performance Standard 7: Indigenous Peoples
X
Involuntary Resettlement OP/BP 4.12 Performance Standard 5: Land Acquisition and Involuntary Resettlement
X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X.
Legal Covenants
Name Recurrent Due Date Frequency
Description of Covenants
IDA Financing Agreement:
1. The Recipient: (a) through the Secretary of the Ministry of Energy shall oversee the implementation of Part 2 of the Project; and (b) through Investment Board of Nepal shall be responsible for implementing Part 3 of the Project.
2. To facilitate the carrying out of Part 1 of the Project, the Recipient shall make the proceeds of the financing allocated to Category 1 to Hydroelectricity Investment and Development Company Limited (HIDCL) under a subsidiary agreement between the Recipient and HIDCL.
3. To facilitate the carrying out of Part 1 of the Project, the Recipient shall cause HIDCL to further on-lend proceeds referred to in paragraph 2 above to Kabeli Energy Limited (KEL) under a subsidiary agreement between HIDCL and KEL as a subordinated loan agreement.
viii
4. The Recipient shall, and shall cause the Project Implementing Entity (KEL) to carry out the Project in accordance with the provisions of the Safeguards Instruments and those of the Governance and Accountability Action Plan (GAAP).
5. The Recipient shall ensure or cause to be ensured that terms of references of any consultants’ services shall duly incorporate applicable international standards equivalent to the World Bank Safeguards Policies.
IDA Project Agreement:
1. KEL shall maintain units and departments with functions, powers, staff and resources necessary and appropriate to fulfill its responsibilities under Part 1 of the Project.
2. KEL shall ensure that Part 1 of the Project is carried out in accordance with the provisions of the GAAP.
3. KEL shall carry out Part 1 of the Project in accordance with the provisions of the Environmental Impact Assessment, the Social Action Plan and the Dam Safety Plan.
4. KEL shall, prior to commencing civil works under Part 1 of the Project, obtain a power generation license from the Recipient.
5. KEL shall, by no later than May 31, 2014, enter into a power purchase agreement with Nepal Electricity Authority in form and substance satisfactory to the Association.
6. KEL shall, by no later than April 30, 2014, engage consultants having qualifications and terms of reference acceptable to the Association to work in the capacity of Owner’s Engineer to assist it in the implementation of Part 1 of the Project.
.
Conditions
Name Type
Effectiveness
Description of IDA Conditions (a) the HIDCL Subsidiary Agreement has been executed on behalf of the Recipient and HIDCL; and
(b) the KEL Subsidiary Agreement has been executed on behalf of HIDCL and KEL.
Team Composition
Bank Staff
Name Title Specialization Unit
Jie Tang Lead Energy Specialist Task Team Leader (IDA) SASDE
Pravin Karki Senior Hydropower Specialist Co-Task Team Leader SASDE
Rabin Shrestha Senior Energy Specialist Energy Economics SASDE
Michael Haney Operations Adviser Energy SACIN
Barsha Pandey Consultant Energy SASDE
Chaohua Zhang Lead Social Development Specialist
Social SASDS
L. Panneer Selvam Lead Environmental Specialist Environmental SASDI
ix
Drona Raj Ghimire Environmental Specialist Environmental SASDI
Annu Rajbhandari Consultant Environmental SASDI
Leanne Farrell Consultant Environmental SASDI
Shambhu Prasad Uprety Procurement Specialist Procurement SARPS
Bigyan B. Pradhan Senior Operations Officer Operations SACNP
Junxue Chu Senior Finance Officer Finance CTRLN
Sabin Raj Shrestha Senior Financial Sector Specialist Finance SASFP
Timila Shrestha Financial Management Specialist Financial SARFM
Pradeep Shrestha Consultant Financial SARFM
Jorge Luis Alva-Luperdi Counsel Legal LEGES
Minneh Mary Kane Lead Counsel Legal LEGES
Mei Wang Senior Counsel Legal LEGAM
Hiramani Ghimire Senior Governance Specialist Governance SASGP
Sunita Gurung Program Assistant Program Assistance SASDO
Shaukat Javed Program Assistant Program Assistance SASDO
Andre S. Van Hoeck Principal Investment Officer Team Leader (IFC) CNGTR
Soumya Banerjee Principal Investment Officer Sector Lead CSAR1
Kyle F. Kelhofer Country Manager, Nepal Country CSAR3
Valentino S. Bagatsing Resident Representative, Nepal Country CSAR3
Pablo Cardinale Principal Environmental Specialist Environmental CESI2
Sameer Kumar Singh Senior Environmental Specialist Environmental CESI1
Richard English Principal Environmental Specialist Environmental CESI2
Rajesh Kumar Miglani Regional Climate Specialist Climate Change CSAR1
Raghuveer Y. Sharma Chief Investment Officer Investment CN1S5
Harmish Rokadia Investment Officer Investment CN1S5
Paridhi Agrawal Investment Analyst Investment CNIS5
Kruskaia Sierra-Escalante Head Investment CBDBF
Pranab Ghosh Senior Investment Officer Investment CBDBF
Haruhisa Ohtsuka Investment Officer Investment CBDBF
Irina Bushueva Investment Analyst Investment CBDBF
Veronique Gubser Chief Counsel Legal CLENG
Kwabena Koro Nuri Counsel Legal CLENG
Catherine M. Richards Counsel Legal CLVCI
Uday Jhabvala Khare Counsel Legal CLEA1
S. Balasubramaniam Chief Credit Officer Credit Review CRVDR
Shalabh Tandon Portfolio Manager Portfolio Management CN1P5
Julio Lemaitre Solares Chief Engineer Hydropower CNGPW
x
Jan P Mumenthaler Principal Insurance Officer Insurance CPMIS
Gunjan Gulati Economist Economist CSASC
Kanak Thankavelu Program Assistant Program Assistance CN1S4
Non Bank Staff
Name Title Office Phone City
.
Locations
Country First Administrative Division
Location Planned Actual Comments
Nepal Eastern Nepal Panchathar District
1
I. STRATEGIC CONTEXT
A. Country Context
1. Nepal is a land-locked country, with a population of 27.5 million and a per capita income of US$ 717. About 24.8 percent of the Nepali population lives on less than US$ 1.25 per day, and 82 percent live in rural areas. Poverty is much more severe in rural areas (27 percent) compared to urban areas (15 percent) and particularly severe in mountainous areas (42 percent). Despite a decade-long armed insurgency and protracted political transition, Nepal has made exemplary progress in poverty reduction and human development. Nepal has halved extreme poverty, and thus attained the first Millennium Development Goal ahead of time. In addition, Nepal has achieved gender parity in education and sharp reductions in infant and maternal mortality. To maintain the momentum, Nepal will need to exploit its demographic opportunity, helping its reasonably-educated youth to raise agriculture productivity and incomes and transit to non-farm employment in the urban areas.
2. In the process of transition from conflict to peace, a Constituent Assembly (CA) was established to formulate a new constitution by May 2012 but reached the end of its mandate without coming to an agreement on a constitution. In March 2013, after almost a year of political turbulence, marked by policy instability and significant delays in public spending, the four largest political parties agreed to a technocratic interim administration mandated to undertake elections for a new CA. Elections were held on November 19, 2013 and, effectively the de facto Parliament, a Nepali Congress led government has been established in February 2014. The topmost priority of the CA is to draft and approve a new constitution.
3. Economic growth was at 3.7 percent in FY13, significantly below the 4.7 percent achieved on average during 2008-12. This moderation in growth can be attributed to reduced public spending, particularly for infrastructure; low levels of private investment, due to power outages, labor issues, policy inconsistency, and political uncertainty; strong linkages to and slow growth in the Indian economy; as well as an unfavorable monsoon season and depressed agricultural growth. Developments in India affect the Nepalese economy via (a) exports (India accounts for 60 percent of Nepal’s exports); (b) tourism (50 percent of foreign direct investment originates in India); (c) remittances (transfers from India amount to 5 percent of gross domestic product); and (d) monetary policy (the Nepali rupee is pegged to the Indian rupee).
B. Sectoral and Institutional Context
4. Access to Electricity. While 75 percent of the population of Nepal is estimated to have access to electricity (grid and off-grid) according to the 2013 Census, service is not necessarily available due to shortage of supply, with load shedding of up to 18 hours per day in grid-covered areas in the dry season. A significant disparity in access to electricity exists between urban (90 percent) and rural areas (30 percent). Average annual consumption remains very low at about 70 kWh per capita.
5. Electricity Supply and Demand. While the country is endowed with a huge theoretical hydropower potential of about 84,000 MW and economically viable potential of 43,000 MW, the installed hydropower generation capacity as of July 2013 was merely 746 MW (see Table 1).
2
Table 1: Total Installed Capacity by Resources, July 2013
On-grid (MW) Off-grid (MW) Total (MW) Percentage (%) Hydro 704.4 41.3 745.7 92.4 Solar -- 7.6 7.6 1.0 Thermal 53.4 not available * 53.4 6.6 Total 757.8 48.9 806.7 100.0
* Captive diesel gen-sets are estimated to be about 400 MW. Sources: NEA Annual Report 2013, Alternative energy Promotion Center Data Book 2012
6. Most hydropower plants in the country are run-of-river ones and thus the available generation capacity is low in dry seasons when the demand is high. In November 2012 the peak demand reached 1,095 MW while the system was only able to supply 625 MW since hydropower capacity available drew down to 472 MW. This gap between demand and supply is typical and has resulted in load shedding of up to 18 hours a day in 2013. It is also a binding constraint to economic and human development in Nepal.
7. Institutions. The Ministry of Energy (MOE) is responsible for sector policy formulation, regulation and overseeing planning, investment, and development of the power sector, as well as issuing licenses to the private sector for electricity generation, transmission, and distribution. In addition, the Investment Board of Nepal (IBN) was established in November 2011 with the responsibility of facilitating the development of large infrastructure projects, including hydropower projects above 500 MW. The Nepal Electricity Authority (NEA) was formed in August 1985, under the Nepal Electricity Authority Act of 1984, as a vertically integrated government-owned utility responsible for generation, transmission and distribution of electricity in Nepal. Independent power producers (IPPs) also invest, own, and operate power generation facilities, mostly based on hydro resources. For domestic grid-based electricity supply, the NEA serves as single buyer for the hydropower generated by the IPPs.
8. Financial Performance of the Power Sector. NEA is loss making and heavily indebted. NEA’s financial position has been deteriorating sharply in recent years, as the result of high system losses (26.4 percent), high costs of supply and insufficient increases in retail tariffs, among other factors. Under the prevailing conditions, NEA is neither able to generate the financing required to invest in generation, transmission and distribution infrastructures nor to service its debts. It is important to observe that NEA is supported by the Government of Nepal (GON) and therefore has not had a single default to IPPs.
9. Lack of Public and Private Investment. The power sector suffers from chronic underinvestment. Since 2002, almost no transmission lines have been built and only 92 MW of generation capacity has been added to the system. Given the poor financial performance of the public sector, large scale private investments in hydropower development are necessary. The MOE has issued about 90 percent of survey licenses for new hydropower projects (totaling about 13,000 MW) to IPPs. However, most of the IPPs are struggling to raise financing. In addition, five large-sized hydropower projects (about 3,800 MW) are under negotiations between the IBN and the IPPs, and the Bank has provided technical assistance to the IBN to review the five projects. Table 2 shows the share of installed generation capacity between NEA and IPPs.
3
Table 2: Share of NEA and IPPs in Total Installed Capacity
NEA IPP Total Hydro (MW) 478.3 267.4 745.7 Solar (MW) 0.1 7.5 7.6 Thermal (MW) 53.4 n.a. 53.4 Total (MW) 531.8 274.8 806.6 Percentage (%) 65.9 34.1 100.0
Sources: NEA Annual Report 2013, Alternative Energy Promotion Center 2012.
10. While the GON has expressed firm commitment in attracting private sector investments in hydropower, the actual progress has been severely limited by its inability to provide common infrastructure such as roads and transmission corridors needed to foster hydropower development. The high economic returns of such infrastructure make a compelling case for their development, but their costs are too high for individual projects to bear. In addition, slow progress was made in policy and procedures development for a risk-sharing mechanism, procedural streamlining, regulatory improvements, and structural reforms. In some cases, land disputes and law-and-order problems also disrupt and discourage investments.
11. Key Barriers to Hydropower Development. In addition to the overarching factors of conflict and transition that have characterized the last 15 years in Nepal, hydropower development is severely hindered by a number of barriers, including (a) the financial weakness of NEA; (b) a lack of sufficient transmission capacity and prolonged delays in on-going transmission line construction because of land issues and law-and-order challenges; (c) scarcity of domestic capital and high financing costs; (d) deficiencies in the coordination of generation planning with transmission planning; (e) risks regarding market, currency, pricing, payments from developers’ perspective and contractual risk allocation; (f) the perceived absence of a regional agreement and regulatory framework for cross-border power trade, and the inadequacy of cross-border transmission capacity to secure a market for surplus hydropower in wet seasons; and (g) the potential for politicization of hydropower projects that is sometimes fanned by local and regional political interests. However, the efforts of the GON, private developers, and other sector stakeholders to address these obstacles are slowly bringing about results, and with the new Government in place with a strong mandate, the development of large-scale projects in Nepal’s hydropower are getting a renewed push.
12. Government’s Power Sector Strategy. To deal with the energy crises and eventually achieve reliable, affordable and sustainable electricity supply in Nepal, the strategy of the GON is to (a) reduce NEA’s system losses and adding generation capacity that can be quickly installed in the short term; (b) reach supply-demand balance in the medium term through the commissioning of hydropower under construction and power imports from India; and (c) develop its huge hydropower resources to sustain domestic growth and earn export revenues in the long term. In line with the strategy are actions, including: (a) investing in system loss reduction and pilot of grid-connected solar power generation; (b) enhancing planning, feasibility studies and construction of a transmission system, including construction of a high-voltage cross-border line for up to 1,000 MW of power import from India; and (c) facilitating private investment in large hydropower projects, with several projects (about 4,000 MW) under negotiations for Project Development Agreements (PDAs), most of them with large export components to India.
4
13. World Bank Group Support. The World Bank Group (WBG) has made its program in hydropower sector a high priority transformational engagement with a joint business plan developed and opportunities identified for World Bank/IDA, IFC as well as MIGA (Nepal Hydropower Transformation Engagement). The objective of this transformational engagement is to enable the rapid exploitation of Nepal’s hydropower potential to eliminate electricity deficits in the country while making hydroelectricity exports the engine of Nepal’s economic growth. Roughly 4,000 MW of projects – almost all of which are private sector sponsored – are under various stages of development. The first priority is to provide electricity to the people of Nepal through development of around 1,000 MW of new power supply, including import of power from India. About 3,000 MW of the planned new capacity is oriented towards exports to India and Bangladesh. Roughly US$ 7.7 billion will be needed to finance the identified projects, and the WBG expects to support this effort using a wide range of financing instruments of IFC, IBRD/IDA as well as MIGA. The paragraphs below summarize the ongoing projects of IDA and IFC, and the newer opportunities that the WBG is working on under this transformational engagement.
14. On-going IDA-funded projects include: (i) construction of domestic and cross-border high voltage transmission lines and substations; (ii) expansion and strengthening of NEA’s distribution system; (ii) rehabilitation of an existing hydropower plant; (iii) development of off-grid renewable energy; and (iv) technical assistance and capacity building, such as transmission system master planning, and technical due diligence of large hydropower projects to support PDA negotiations. Projects for NEA’s system loss reduction, and grid-connected solar (20 MW) and biogas (e.g., from poultry farms) power generation facilities proposed by GON for the Bank’s support, are also under preparation.
15. IFC’s hydropower portfolio in Nepal, at present, consists of two loans to Butwal Power Company (BPC) for the expansion of the Andhi Khola Hydropower Plant (4.3 MW). IFC through its advisory business is also assisting GON in enhancing its regulatory framework for private sector investment in micro and mini hydropower development.
16. Nepal Hydro Power Transformational Engagement. WBG, Asian Development Bank, Department for International Development (DfID) and other development partners are jointly working on a transformational engagement for Nepal to meet its immediate power needs and develop its hydro assets to become the engine of growth for this country which is currently in a political transition and to enhance regional integration.
17. This program comprises short term strategy to develop power for domestic use – Kabeli A Hydroelectric Project (KAHEP), 37.6 MW, with a local sponsor group; Upper Trishuli, 216 MW, with Foreign Direct Investment from South Korea; and the Nepal India Electricity Transmission and Trade Project, with IDA financing for power import from India. The medium term projects under review of the WBG, apart from a couple of large hydro projects for domestic use, are oriented towards export to India and Bangladesh and are 500 MW and above run-of-river hydro projects with Indian, Brazilian, Norwegian and other sponsors, which have experience in hydro and the risk appetite to make capital commitments to well-structured and bankable projects in Nepal.
18. To support this program, the WBG is providing support to the GON and the IBN to develop bankable power purchase agreement (PPA) and PDA. The Bank will also provide support through a Development Policy Credit operation to key policy efforts including tariff
5
policy, power sector regulation, and institutional restructuring and strengthening for the NEA and other related Government agencies. The outcome of this five year transformational engagement is to make Nepal self-sufficient in its domestic power needs and simultaneously, develop the huge hydro potential of Nepal and required transmission infrastructure to create a regional electricity market.
Rationale for Bank/IFC-CCCP involvement
19. The proposed Project is consistent with the joint IDA/IFC Country Partnership Strategy for Nepal (FY14-16), which stresses the importance of increased supply of electricity and improved access to reliable and affordable electricity to increasing economic growth and competitiveness (Pillar 1 and Outcome 1.1).
20. The KAHEP is consistent with the GON’s strategy to deal with the current energy crisis and to attract private investments in hydropower in Nepal. It is a part of the Nepal Hydro Transformational Engagement of WBG, and has been proposed for financing by IDA and IFC, including IFC–Canada Climate Change Program (CCCP). The CCCP is financed by a CN$ 291.55 million contribution from the Government of Canada. The CCCP funds are part of Canada’s FY2010 CN$ 400 million commitment under the Copenhagen Accord. IFC acts as an implementing entity of the CCCP to support climate-friendly projects.
21. Without IDA financing and the CCCP loan at concessional terms, the return of the proposed KAHEP will not be able to attract the necessary private investment. The project was bid out in 2008 and is the first hydropower project bid out to private developers based on the lowest tariff proposal. The project return on equity has become marginal, given the project cost escalation over the past five years. If successful, the project will demonstrate the viability of future hydro power projects through proper public-private financing arrangements and attract investors and financiers to the country and the sector. Though the proposed Project will use IDA17 allocation, an early conditional Board approval for IDA and IFC financing to the Project in May 2014 is requested to enable: (a) IFC to sign its investment agreements by June 2014; and (b) KEL to sign the construction contracts by June 2014, in time for the Project to meet its construction timelines, once IDA17 becomes available. Delays in contract execution would result in project construction delays exposing KEL to penalties/ liquidated damages. Full disbursement of IDA funds will be a condition precedent to IFC disbursement. Therefore, if IDA17 does not become available for any reason the IFC financing would not be disbursed and will get cancelled.
22. The proposed technical assistance to IBN and MOE will build on the current support by the DfID and WBG in the development of the PDAs for and technical due diligence of large hydropower projects. Recognizing that these future potential large hydropower projects are key components to GON’s energy strategy and may require financing from the WBG and/or other international agencies, the proposed support to IBN and MOE will assist in further ensuring incorporation of international best practices in their underpinning analyses and studies in line with the WBG’s policies and standards. The PDA and consequently the PPA as they currently stand, and as applicable to KEL, have certain gaps (e.g. no termination compensation for certain risks such as prolonged political force majeure or various events of default; limited protection against other force majeure events etc.) that somewhat weaken its bankability when it comes to private sector investment. These gaps reinforce the need for IDA support; and the GON has recognized these gaps and has undertaken to remedy these in subsequent hydropower projects.
6
23. IFC Additionality and Strategic Fit. The proposed KAHEP is aligned with IFC’s strategic priority on climate change. IFC additionality encompasses: (i) filling financing gap at appropriate tenor and fixed interest rates for the hydropower sector in Nepal, where commercial banks are too small to fund projects of more than 5-10 MW; (ii) providing a positive signal to potential investors in Nepal, which has had a fluid political environment and continues to be in a prolonged transition that began in 2006; (iii) stamp of approval for environmental and social, governance and operating standards which will help BPC attract other lenders and investors.
24. IFC CCCP Rationale. The proposed KAHEP also meets the core principles that guide IFC’s approach to deploying concessional finance as articulated in the Board Paper, “IFC’s Approach to Blending Concessional Funds” (IFC/SecM2012-0009). In particular, it
(a) Moves Beyond IFC’s Additionality: Without the CCCP loan, the KAHEP may not proceed to financial closure at this time because of the low equity returns and inability to service project debt on fully commercial terms (KAHEP has been in discussion for more than a decade: the feasibility study and environmental impact assessment (EIA) were first completed in 1998);
(b) Minimizes Market Distortion: The proposed CCCP loan would provide needed long-term financing with lower interest rates than IFC’s senior loan, to strengthen the ability to service the debt and improve the return for sponsors. The CCCP loan will be structured in such a way as to enable the development of sustainable renewable energy financing in Nepal at a minimum subsidy level;
(c) Leads to Sustainability: The KAHEP would be the first of its kind in Nepal, underlying the importance of supporting sustainable renewable energy projects for private sector growth. KAHEP would provide an important model of financing hydropower projects in the country. Similar projects proposed in the coming years in Nepal would need lower subsidies; and
(d) Promotes Transparency: The KAHEP was approved by the separate and independent IFC Blended Finance Committee. The GON and BPC are aware that the financing package includes a separate CCCP loan. Approval to use CCCP funds for KAHEP was received from IFC’s Blended Finance Committee on November18, 2013.
C. Higher Level Objectives to which the Project Contributes
25. Electricity is a core component of modern economic infrastructure. In the experience of countries worldwide, economic growth has correlated highly with growth in electricity consumption. Inadequate electricity supply is a major constraint on economic and human development in Nepal. By augmenting Nepal’s power sector infrastructure, the KAHEP contributes to enhancing connectivity and productivity for growth in Nepal, and to developing the project area.
7
II. PROJECT DEVELOPMENT OBJECTIVE(S)/GLOBAL ENVIRONMENT OBJECTIVE(S)
A. Project Development Objective(s)
26. The project development objective (PDO) is to add hydropower generation capacity to supply the NEA grid through public private investments.
B. Project Beneficiaries
27. People living in the project area will benefit from the Project, and grid-connected electricity consumers throughout the country will benefit from increased energy supply. The shareholders of the project company, Kabeli Energy Limited (KEL), MOE and IBN will also benefit from the capacity building in hydropower development. The NEA will benefit from the Project mainly with reduced utility’s average power purchase cost and increased power supply.
C. PDO Level Results Indicators
28. The results indicators cover technical, social, and environmental aspects of the project implementation and are detailed in Annex 1, and the key ones are summarized as follows:
(i) To measure achievement of the objectives:
• Hydropower generation capacity commissioned to supply the NEA grid (MW)
(ii) To measure intermediate results:
• Public and private financing mobilized for hydropower development (US$ million) • Progress of the dam, tunnels and powerhouse construction • Signing of consortium agreement between Hydroelectricity Investment and
Development Company Limited (HIDCL) and a commercial bank(s) for on-lending public funds to the private hydropower developer
• Development and adoption of guidelines for environmental and social cumulative impacts assessment (CIA) for hydroelectric projects, commencing with the KAHEP
• Development and adoption of guidelines for the involuntary resettlement and livelihood restoration process for hydroelectric projects, starting with the KAHEP
• Number of PDAs signed with private hydropower developer(s)
III. PROJECT DESCRIPTION
29. The KAHEP is a peaking run-of-river hydropower project with an installed capacity of 37.6 MW and average annual saleable energy output of 205.2 GWh after considering four percent scheduled and forced outages. It will be built in Panchthar District in the Eastern Development Region of Nepal, a relatively sparsely populated area of the country. The energy output will be evacuated from the Kabeli 132 kV Transmission Line, a separate project under construction by NEA with IDA financing.
A. Project Components
30. The proposed Project has three components: (a) the KAHEP Component, with IDA, IFC and CCCP funding in credit terms; (b) the MOE Component, with IDA funding in grant terms; and (c) the IBN Component, with IDA funding in grant terms.
8
31. The KAHEP Component (US$ 102.6 million) will support construction of the KAHEP, including a diversion dam, intake, settling basins, a headrace tunnel, a semi-underground powerhouse, and a tailrace canal. This component will be implemented by the project company, KEL.
32. The MOE Component (US$ 2.0 million) will support the MOE in: (a) supervising the implementation of KAHEP to ensure compliance with the PDA, Environment Management Plan (EMP) and Social Action Plan (SAP); (b) building technical, environmental and social safeguards capacity on integrated river basin management and cumulative impact management for sustainable hydropower development, including development and adoption of guidelines for CIA and involuntary resettlement and livelihood restoration; and (c) covering incremental operating cost for the project implementation.
33. The IBN Component (US$ 4.0 million) will provide technical assistance to IBN in improving its ability to carry out its responsibilities of facilitating the development of large hydropower projects across the country in line with applicable international performance, technical, environmental and social standards equivalent to relevant WBG’s Safeguards Policies and Performance Standards. It will support IBN in: (a) conducting additional due diligence and PDA negotiations of large hydropower projects (four projects, totaling 3050 MW) proposed by private investors; (b) supervising the construction of the above-mentioned projects to ensure compliance with the terms and conditions of the PDAs and sustainability of such projects; (c) building up its procurement, financial management, environmental and social safeguards and technical capacities; and (d) covering incremental operating costs for the project implementation.
B. Project Cost and Financing
34. The cost of the proposed KAHEP, including funding for a senior debt service reserve account of US$ 2.63 million, is estimated at US$ 102.6 million. The proposed financing plan includes (a) a KEL equity of US$ 23.1 million (22.5 percent); (b) an IDA Credit of US$ 40.0 million (38.9 percent), for on-lending to KEL through HIDCL as a subordinated loan; (c) an IFC senior loan of up to US$ 38.6 million to KEL (37.6 percent, including an A Loan of up to US$ 19.3 million and a senior CCCP Loan of up to US$ 19.3million); and (d) a senior local commercial bank loan of US$ 1.0 million to KEL (1.0 percent). Annex 2 provides detailed cost estimation and financing plan for the KAHEP. The proposed MOE and IBN Components will be fully funded by an IDA grant in aggregate of US$ 6.0 million.
C. Lessons Learned and Reflected in the Project Design
35. The project design reflects the lessons learned from hydropower projects worldwide, including those funded by the Bank in the Himalayas where similar conditions exist. The lessons suggest avoiding delays in project preparation and implementation, improving social and environmental management, enhancing sediment handling capacity, and enhancing the long-term sustainability of the projects.
36. Contract Structuring and Management. Good contract packaging and properly defined commercial, technical and safeguards conditions are critical to managing project implementation and avoiding time-consuming and costly delays. The contracts were packaged to have limited lots and allow a single bidder to bid for multiple lots, so as to achieve potential scale of economy and reduce interfacing among the different lots. The bidding documents were prepared following
9
standard Federation Internationale des Ingenieurs-Conseils (FIDIC) conditions. In addition, a Geotechnical Baseline Report and a Risk Register have been prepared and incorporated as part of the bid documents, and they contribute greatly to establishing a framework for addressing disputes with contractors that may arise in the course of project implementation. KEL has engaged a well-known international engineering consulting firm, and has drawn heavily on advice from the project’s international Panel of Experts (POE), to improve and finalize its draft bidding documents. For the project implementation, KEL will hire an international firm as its Owner’s Engineer to assist in contract management and cost, quality and schedule controls, and to provide training to KEL staff members in aspects of hydropower construction management.
37. Sediment Handling. High sediment load is one of the most intractable operational problems of hydropower plants on Himalayan rivers. The sediment erodes the turbine runners and other mechanical parts, greatly reducing generation efficiency and increasing safety risks. Although KAHEP is a small project, KEL has put a considerable effort into designing appropriate sediment handling arrangements for the Project. A physical hydraulic model of the Kabeli River was prepared for simulation of sediment flows and conceptual verification of the head works arrangements and to determine the optimal hydraulic design of the headworks structures. Among other things, the physical model allowed for more precise investigations that will determine the operational guidelines for handling the sediments.
38. Local Support, Particularly by the Indigenous Groups. Nepal is a country with vast cultural, religious and ethnic diversity. Fifty-nine indigenous groups (Adivasi Janajati in Nepali) are estimated to account for about 37 percent of the total population. During the past decade, Nepal has witnessed a growing sense of ethnic identity among the indigenous groups and strong advocacy for their advancement. In line with these development trends, Nepal has formulated a framework of policies to advance the socioeconomic development of indigenous groups, including ratification of International Labor Organization Convention No. 169 and endorsement of the United Nations Declaration on the Rights of Indigenous People in 2007. KEL commenced community-level consultations early in the project preparation and has strengthened its communications infrastructure as the project preparation advanced. This early consultation and engagement process has included all project affected persons (PAPs), and incorporated specific activities targeting vulnerable groups including women headed households, Dalits and Indigenous Groups. Under these conditions, the SAP was developed to mitigate adverse social impacts and to support and promote local area development. This inclusive and development-oriented approach has allowed KEL to win broad support to the Project from local communities, including vulnerable groups.
IV. IMPLEMENTATION
39. As the owner and operator of the proposed KAHEP, KEL is responsible for implementation of the KAHEP Component. The HIDCL will facilitate the on-lending of the IDA funds to KEL. The Department of Electricity Development (DOED) of MOE and IBN will be responsible for executing the MOE Component and IBN Component, respectively.
A. Institutional and Implementation Arrangements
40. KAHEP Component. KEL’s shareholding consists of BPC (Nepal), holding 26 percent, together with Gurans Energy Limited holding 69 percent and Asia-Pacific Power-Tech. Co. Ltd. (China) holding 5 percent. Gurans Energy Limited is a Nepalese joint venture between InfraCo
10
Asia Himalayan Hydro Pte. Ltd. (InfraCo Asia), holding 60 percent and BPC holding 40 percent. BPC is indirectly the majority shareholder of KEL. BPC is a Kathmandu stock exchange listed hydropower company that owns and operates three hydropower plants totaling 21.4 MW. BPC’s majority shareholder, Shangri-La Energy, is owned by six prominent Nepalese business groups with an equal stake (16.7%) each. BPC is an existing IFC client (project number 28083 and 31807). InfraCo Asia is part of the InfraCo group, funded by the Private Infrastructure Development Group, members of which include the development agencies of Austria, Ireland, Netherlands, Sweden, Switzerland, UK, KfW and the WBG. InfraCo Asia is managed as a private sector infrastructure development company by Nexif (InfraCo) Management Pte. Ltd. KEL’s sole purpose is developing, building and operating the KAHEP, which was awarded by the GON to KEL under a 35-year concession through a PDA signed on January 31, 2010. A 25-year PPA is expected to be signed between KEL and NEA by May 31, 2014. IFC’s integrity due diligence did not identify any material reputational concerns with the shareholders of KEL. See Annex 3 for ownerships of KEL and BPC.
41. Legal Arrangements for IDA Financing. The GON and IDA will enter into a Financing Agreement based on standard IDA credit terms. The Financing Agreement will define the obligations of the DOED and IBN in implementing the MOE Component and IBN Component respectively. The GON will enter into a HIDCL Subsidiary Agreement with HIDCL that will detail the arrangements for flow of funds and relevant terms and conditions under which the GON will provide funds to HIDCL for on-lending to KEL. HIDCL and KEL will enter into a KEL Subsidiary Agreement structured as a subordinated loan agreement. The important terms and conditions for the KEL Subsidiary Loan Agreement have already been agreed and approved by the Cabinet. Under the agreed terms, KEL will borrow IDA fund from HIDCL for the tenure of 23 years including a grace period of 8 years, at the applicable interest rate of six-month LIBOR as of the date of the signing of the KEL Subsidiary Loan Agreement plus 200 basis points. The terms and conditions of the HIDCL Subsidiary Agreement will be the same as the KEL Subsidiary Agreement. HIDCL would not assume any kind of risk while lending the IDA funds to KEL and will charge service cost to the GON for managing the funds as agreed with the Ministry of Finance (MOF). The service charge will be based on the costs for HIDCL to manage such funds. IDA and KEL will conclude a Project Agreement to define the key obligations of KEL in implementing the KAHEP Component.
42. Proposed IFC Investment. The proposed IFC financing to KEL is (i) a senior A loan of up to US$ 19.3 million from IFC on its own account; and (ii) a senior CCCP loan of up to US$ 19.3 million with IFC acting as the implementing entity of the CCCP.
43. Proposed Terms of IFC Investment. The proposed senior A loan will have a maturity of 19 years and the senior CCCP loan will have a maturity of around 16.5 years, but not to exceed December 31, 2030. The grace period is six years and repayment profile is sculpted to suit the project cash flows.
44. KEL is responsible for the project implementation, including design, procurement, and contract execution; implementation of the EMP and SAP; communications with PAPs and civil society; financial management; and monitoring, reporting and evaluation. KEL will hire a site-based project team responsible for day-to-day management of the project construction, with support by staff at KEL headquarters in Kathmandu. The site team will include a project manager, senior engineers, a public relations officer, a corporate social responsibility officer, a
11
social and environment manager, environmental officer(s), and livelihoods officer(s). The support staff at KEL headquarters will include contract and procurement officer(s), a financial controller and assistants. Major contractors for civil works and supply and installation of equipment will be selected by KEL through international competitive bidding (ICB). KEL will hire an Owner’s Engineer (an international firm) in managing the project implementation, and a POE in reviewing and providing support to decision making on critical technical, safety, environmental and social issues.
45. MOE Component. The DOED under the MOE will implement this component. The Secretary of Energy will have general oversight over the implementation of the component on behalf of the ministry.
46. IBN Component. The IBN under the Prime Minister’s Office of the GON will implement this component. The Board of IBN, chaired by the Prime Minister and consisting of representatives from different ministries, will have general oversight over the implementation of the component. For implementation of this component, the terms of references (TORs) for consulting services to assist IBN will be reviewed by the Bank, following the Bank’s operational standards and policies. The TORs and Request for Proposals for the first batch of consulting services are expected to be ready by June 2014.
B. Results Monitoring and Evaluation
47. KEL is responsible for regular monitoring and reporting of the implementation of KAHEP. An environment and social monitoring plan has been prepared for the life of the KAHEP, which includes measures to enable adaptive management of impacts. The DOED will also monitor the KAHEP implementation and is responsible for monitoring and reporting of the technical assistance activities under the MOE Component. The IBN is responsible for regular monitoring and reporting of the technical assistance activities under the IBN Component.
48. During the construction period, the monitoring and reporting will focus on (a) the construction progress, quality, and cost control; (b) the implementation of the SAP and EMP, including evaluation of adequacy of downstream flow releases and additional mitigation measures needed to redress the cumulative impacts. The contractors will be responsible for providing data inputs to KEL.
During the operation phase, KEL will continue to monitor and assess the downstream flow requirement, aquatic ecology and related environmental indicators in the stretch of the Kabeli River between the dam and the confluence with the Tamor River, as well as those relevant for the Tamor River downstream of the tailrace. The DOED will be responsible for monitoring the payment of the royalty by KEL to the GON and subsequently monitoring the use of the royalty funds on the local level.
C. Sustainability
49. The technical sustainability of the proposed project is expected to be high. The project design and arrangement for implementation have followed international practices and standards, incorporating both local and international experiences. In addition, it has a strong focus on mitigation of the negative social and environmental impacts of the project in addition to benefits-sharing mechanisms.
12
50. The likelihood of relying on the project output for supplying the demand in Nepal is high. The power generated by KAHEP is likely to be fully dispatched, given the acute shortage of energy supply in the short and medium terms and the very competitive tariff of KAHEP. Legal agreements through PDA and PPA provide additional protection for the continued operation and dispatch of KAHEP.
51. The financial sustainability of KAHEP is considered to be acceptable provided that the cost escalation is within the contingencies provided and project completion is on schedule. Adequate contingencies are provided and one year of additional construction time beyond contractual schedule has been planned. Experienced international contractors will be hired and an Owner’s Engineer and a POE will be engaged to closely supervise the project construction to ensure the completion of the project on schedule and within the budget. While NEA’s financial condition is poor, it has a good track record of paying IPPs for power purchases, and the tariff for KAHEP set through a competitive process remains the most attractive to the NEA. For these reasons, KAHEP's financial vulnerability is considered to be moderate.
52. The benefits of adaptation and mitigation to climate change were considered in the KAHEP design. The KAHEP is designed to ensure its safety even under extreme climate conditions, such as flash floods and glacial lake outburst floods. Meanwhile, KEL’s commitment to robust aquatic monitoring and an adaptive management approach will ensure that environmental impact mitigation and management objectives can be achieved even under the potential future range of increased or decreased river flow rates resulting from climate change effects. It is also expected to reduce carbon dioxide (CO2) emissions up to approximately 114,400 tons per year over the plant operation period considering avoiding construction of an alternative diesel power plant of the same capacity. In addition, the KAHEP is considering real time sediment monitoring and coating of turbines to resist increased sediment wear and tear of turbines that may result from exposure to increased sediment load associated with climate change.
V. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary Table
Table 3: Risk Rating Summary
Risk Category Rating Stakeholder Risk Substantial Implementing Agency Risk Capacity High Governance Moderate Project Risk Design High Social and Environmental Substantial Program and Donor Low Delivery Monitoring and Sustainability Substantial Financial Management High Other (Optional) Overall Implementation Risk Substantial
13
B. Overall Risk Rating Explanation
53. The overall implementation risk is “Substantial”. Project risks were identified based on the nature of hydropower engineering and specifics of KAHEP, the country and sector context and conditions in Nepal. Risk mitigation measures were identified based on extensive consultations with local, regional and national concerned groups and experts. See Annex 4 for the Operational Risk Assessment Framework.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analysis
54. Economic analysis. Compared to an alternative diesel generator of equivalent capacity, the investment in KAHEP shows an economic internal rate of return (EIRR) of 42.3 percent; this represents the incremental value of additional electricity today in Nepal. However, for purposes of this economic analysis the assumption was made that over the life of the proposed KAHEP, Nepal would close the persistent supply-side deficit of recent years. Valuation of the project’s net benefits based on an estimate of the long-run marginal cost (LRMC) of electricity shows an EIRR of 13.3 percent, while based on electricity import substitution the EIRR is 15.2 percent. Sensitivity analysis considered capital cost overrun, a decrease in project revenues and a delay in project commissioning by one year. The EIRR remains healthy in these scenarios, confirming the economic viability of the project.
55. Financial Analysis. The project financial internal rate of return (FIRR) is about 10.5 percent excluding any cost of financing. The FIRR is low because of (a) the low tariff that was fixed in 2008 between the GON and the developers through a competitive bidding process; and (b) the cost increases over the past five years. Since the average cost of borrowing from commercial banks in Nepal is from 10 to12 percent, the project could not afford to borrow money from the local commercial banks. To make this project financially – viable, it is critical to have the IDA loan and CCCP loan at concessionary terms.
B. Technical
56. The project’s technical design and associated bidding documents prepared have been reviewed and confirmed by an international consulting firm and an independent POE, and further reviewed and confirmed by the Lender’s Engineer of IFC and the Bank team. Over the course of project preparation, the developer has carried out several innovative studies, including construction of a physical hydraulic model, which provided data that supported the final project design. The project complies with the requirements of the Bank’s OP 4.37 Safety of Dams. See Annex 7 for details.
C. Financial Management
57. IDA Funding. HIDCL will be responsible for ensuring the overall financial management under the KAHEP Component, and the DOED and IBN will be responsible for managing the MOE Component and IBN Component respectively. As the Finance Officer of HIDCL does not have experience of Bank-funded project, one qualified financial management staff member capable of handling the financial management of Bank-funded projects commensurate with the financial operation of the company should be hired. HIDCL will join a consortium with a local commercial bank to on-lend IDA funding to KEL. Three local commercial banks have been
14
identified as candidates based on assessment of financial management capacity by the Bank. The DOED and IBN will designate an Accounts Officer to maintain the accounts of the technical assistance components respectively. Annual budgets will be prepared by KEL and endorsed by HIDCL for the KAHEP Component. The DOED and IBN will prepare annual budgets for the MOE Component and IBN Component, respectively, prior to the beginning of each new fiscal year, in line with GON’s annual budgeting program, and submit the budgets to the GON for approval. A separate identifiable budget head will be defined for HIDCL, DOED, and IBN for their respective components in the “Red Book”. The overall financial management risk is “High”.
58. HIDCL (with inputs from KEL), DOED and IBN will prepare an Interim Unaudited Financial Report (IUFR) separately for their respective components on a trimester basis and submit it to the Bank, in the format and content agreed with the Bank. HIDCL and KEL will appoint a qualified accounting firm for the purpose of an internal audit following the approval of their respective boards. The two companies will prepare their respective TOR for the internal auditor and share with IDA for review. The internal audit of DOED and IBN will be conducted by District Treasury Controller’s Office. The Annual General Meeting appoints the external auditor for HIDCL with the concurrence of the Office of the Auditor General whereas for KEL, the Board appoints the external auditor from a list of qualified auditing firm. The Office of the Auditor General will conduct an audit of the DOED and IBN project accounts. KEL will submit its audited entity financial statements. HIDCL, DOED and IBN will separately submit the audited project financial statements for the three components respectively.
59. The disbursement methods applicable to IDA funding for this project include Direct Payment, Advance, Reimbursement, and Special Commitment. Disbursements from the Bank will be based on a Statement of Expenditures. A Designated Account (DA) will be established at the Nepal Rastra Bank or a commercial bank approved by the government, acceptable to the Association, for the IDA portion of the KAHEP Component, which is to be managed by HIDCL, and at the Nepal Rastra Bank for the MOE Component and IBN Component to be managed by the DOED and IBN, respectively. The IDA funds will be advanced into the DAs. The expenditures will be pre-financed through the GON’s consolidated fund, and then the IDA funds will be reimbursed from the DA or directly by IDA to the GON’s consolidated funds on the basis of the eligible expenditures reported in the Statement of Expenditures.
60. IFC Funding. IFC’s disbursement will be based on the satisfactory completion of IFC’s conditions of disbursement. IFC's conditions of disbursement will include that IDA financing is in place and eligible for disbursement.
D. Procurement
61. KAHEP Component (IDA funding). The GON awarded KAHEP to KEL through an ICB process for build, own, operate and transfer (BOOT) terms reviewed by the Bank and found to be executed in accordance with good practice. Accordingly, in 2007, the Bank provided its “no objection” to the GON’s proposal to award the project to KEL. According to relevant Bank Procurement Guidelines for all contracts involving IDA funding, KEL will follow good commercial practice ensuring economy and efficiency in the procurement of goods, works and services for the KAHEP. The Bank’s review of BPC’s procurement guidelines concluded that they conform to good commercial practices and are acceptable for the implementation of the KAHEP. Detailed design and bidding documents for the civil works, gates and hoists, and
15
mechanical and electrical equipment were prepared by KEL, with the assistance of a local consulting firm, reviewed by an international consulting firm, and verified by the Lender’s Engineer of IFC and the POE. Bids for all major contract packages were received and bid evaluations were reviewed by the IDA/IFC project teams. Contracts are expected to be signed by June 2014. With implementation of actions agreed after the Bank’s initial procurement capacity assessment, including establishment of the procurement unit for KAHEP, the residual procurement risk of the project is considered to be “Moderate”.
62. MOE Component. The DOED has gained experience in Bank-funded procurement under the ongoing Power Development Project, for which the MOE is an implementing agency. MOE’s capacity for procurement needs strengthening, which is to be done during the project implementation. IDA funds will be used to procure consultant services, primarily under the quality-and-cost-based method; and to cover the MOE’s incremental operating costs associated with the implementation of the Project. The overall financial management risk is “Moderate”.
63. IBN Component. The IBN has been doing substantial procurement, especially for the selection of national and international consultants (firms and individuals), with the funding from an international donor. A consulting firm is providing technical support to IBN, including procurement support to manage the consultant selection process and other procurements. This support needs to be continued for managing all procurement under the Project. International and national consulting firms and individual consultants, including a procurement consultant, will be hired for the implementation of the Project.
E. Social (including safeguards and performance standards)
64. A social assessment (SA) was conducted by Hydro-Consult Engineering Ltd. during 2010 and 2011, and updated in 2013 to inform the project preparation. The SA provided a broad socio-economic baseline of the project areas screened and surveyed in detail, and analyzed the adverse impacts as well as the impacted population, including vulnerable groups. It also reviewed relevant GON and IDA-IFC policies related to the project, examined project potentials to extend benefits to local communities, disclosed project information locally, conducted extensive consultations with local communities, and proposed development interventions to mitigate adverse impacts and promote local socioeconomic development.
65. Four village development committees (VDCs) will be directly impacted by the KAHEP. The SA shows that various cultural /ethnic groups live in the project area, and consistent with the pattern in Nepal and established government practice, three groups have been identified through the SA as vulnerable in the project area. They are the Indigenous groups (adivasi janajati in Nepali), Dalits (the untouchable caste, most oppressed and deprived) and women-headed households. Indigenous groups, Dalits and women-headed households reside together in a mixed fashion with the rest of the community. The SA also shows a common livelihood and economic patterns across the ethnic and cultural groups. Although subsistence agriculture is the primary occupation of all groups in the project area, the major source of income is remittances, providing 50 percent of average household income and agriculture, about 10 percent.
66. Key Social Impacts. Key impacts include permanent land acquisition and temporary land leasing for various project activities scattered in small lots in the project area. A total of 13 households will lose 7.6 hectares of private land because of permanent land acquisition. In addition, some public land will be acquired for permanent use and some land will be acquired for
16
temporary use during the construction period. No physical relocation is envisaged under the KAHEP. There will be some social impacts associated with reduced river flows, particularly during the dry season, in the 5.6 km stretch of the Kabeli River downstream of the diversion dam before the confluence with the Tamor River, and the stretch of the Tamor River between the confluence with the Kabeli and the tailrace discharge point. These include possible impacts on fishing, cultural and religious practices (bathing and cremation) for which the river is used. The anticipated influx of construction workers and service providers into the project area may lead to social conflicts and an increase in noise and other forms of pollution and may expose the local communities to public health hazards, such as HIV/AIDS and other sexually transmitted diseases.
67. As the KAHEP would have positive impacts and create opportunities to benefit local communities and contribute to socio-economic development in the project area, majority of the surveyed households expressed their support to and expectations of benefits from the project. Therefore, KEL is committed to supporting income-generating programs, vocational skills training, and facilitate improvement of basic infrastructure, such as electrification, drinking water, health services, schools and roads in project VDCs.
68. Consultation and Engagement with PAPs. In the SA and project planning, the IDA/IFC project teams have paid particular attention to reaching out to all PAPs, including the vulnerable communities, namely the Indigenous groups, Dalits and women-headed households. To ensure Free, Prior and Informed Consultation on (or Informed Consultation and Participation) with PAP, the SA and development of the SAP followed a highly participatory planning process. Local stakeholders, affected population, and various cultural and ethnic groups in the project area, including indigenous and vulnerable groups, were identified and engaged in a culturally sensitive and appropriate fashion throughout the planning process. The SA team organized community consultations and focus group consultations with the indigenous groups, Dalits, and women-headed households. These consultations managed to reach all different cultural and ethnic groups, enabled a free and transparent environment for meaningful consultations and brought forward rich feedback from various groups of local communities, particularly the indigenous and other disadvantaged groups. This consultation and engagement process has resulted in Broad Community Support (BCS) for the project and agreement from PAP on proposed mitigation measures, compensation programs and benefit sharing opportunities described in the SAP.
69. Proposed Social Mitigation Measures. Development interventions and action plans were designed in line with relevant GON and IDA/IFC Policies and Performance Standards. They are packaged into one project SAP for the ease of implementation. It must be highlighted that the different vulnerable groups share a common approach in livelihood patterns and economic activities; therefore, the common set of package of economic assistance will be applicable to all PAPs. These include: (a) a Policy Framework; (b) a Resettlement Compensation and Livelihood Assistance Plan (RCLAP); (c) an Indigenous People and Vulnerable Community Development Plan (IPVCDP); (d) Health and Safety Measures; (e) Benefits-sharing Measures; (f) a Public Consultation and Communications Strategy; and (g) Grievance Redress Mechanisms. The SA and SAP are summarized in Annex 7.
17
F. Environment (including safeguards and performance standards)
70. Environmental Assessment (EA).The KAHEP was identified as one of the most promising projects in the range of 10-300 MW based on technical, economic, environmental, and social screening and ranking exercises for 138 potential hydropower projects carried out in 1997. Project-specific EAs were carried out from April 2010 through August 2011, which were subsequently updated in February 2012, April 2013, and July 2013 to meet the requirements of the WBG. The project area lies outside official biodiversity conservation sites or protected natural areas as declared by the GoN. Most of the lands in and around the project are degraded and cleared, or are under the heavy influence of human activities including agriculture and the grazing of animals. All the plant and animal species in the project influence area are commonly available in the region. The forest areas in and around the project sites are not considered unique or critical habitat for any identified species present in the area. The project area does not lie on the migratory route of mammals that are significant from an economic or conservation perspective. A total of 31 species of fish were reported in the Kabeli River, of which five are on the International Union for Conservation of Nature Red List. All fish species identified in the Kabeli River, however, are also present in the Tamor River and its other tributaries, and are reportedly common throughout Nepal.
71. Key Environmental Impacts. The critical environmental impacts of the KAHEP identified by the EIA (September 2011; updated in 2013) were the (a) consequences of reduced water flows in the 5.6 km section of the river below the diversion dam (disturbance to fish and aquatic species, and an adverse effect on the ritual practices during cremations), (b) daily flow fluctuation in the Tamor River downstream of the powerhouse as a result of peak-generation, (c) aquatic habitat fragmentation and barrier effect created by the dam; and (d) construction period disturbances and nuisances of various sorts arising from various construction activities, facilities, and the influx of people.
72. Proposed Mitigation Measures. Annex 7 provides details of the proposed measures to avoid and/or mitigate adverse impacts during construction and operation. These include, but are not limited to, such measures as compensatory plantation, workforce camp management, slope protection measures, the downstream environmental flow release scheme adequate to meet social and ecological needs, introduction of a fish ladder, river bank protection measures, gradual start up and closing down of the plant operation, and a siren warning system for the tailrace downstream.
73. Cumulative Impacts. The KAHEP is the first of a series of cascading hydropower projects planned for the Kabeli watershed. As the watershed develops, cumulative impacts as a result of multiple cascading hydropower and their supporting transmission lines and roads and other related urban and agricultural developments could be significant. As part of the EIA process, a Rapid CIA (RCIA) determined that the main cumulative impacts that are likely to occur include land use change, increased risks of erosion and sedimentation, increased pollution, adverse effects on aquatic ecology and fish diversity, degradation of terrestrial flora and fauna and a change in the forest ecology. The project EMP includes mitigation measures to manage any KAHEP’s significant contribution to cumulative impacts. In addition, KEL is committed to work with the WBG, the GON and other stakeholders to manage the Basin-wide cumulative impacts. The proposed US$ 2.0 million Technical Assistance to the MOE aims to increase the GON’s capacity to carry out additional basin-wide studies to design and implement specific measures to
18
manage cumulative impacts at the Tamor-Kabeli watershed level. See Annex 7 for further details.
G. Other Safeguards Issues
74. The proposed KAHEP triggers International Waterways Policy because it is located on the Kabeli River, which is part of the international Ganges River system, which extends to Nepal, Bangladesh, China, and India. Riparian notification was sent in a letter from the Bank, on behalf of GON, to Bangladesh, China, and India on June 27, 2002. A revised and updated notification was sent again on August 15, 2013. Comments were received from India in November 2013 after the deadline and were responded in April 2014. In the assessment of Bank staff, the KAHEP will not cause appreciable harm to other riparian countries, and will not be appreciably harmed by the possible water use in other riparian countries.
75. Dam Safety. The POE has confirmed the safety of the dam even under extreme conditions (such as flash floods and earthquakes) and meets the requirements of the Dam Safety Policy.
76. Labor and Working Conditions. BPC’s human resources policy and procedures are consistent with the requirements of Nepal’s Labor Act and IFC’s PS2 on Labor and Working Conditions. Employees will be able to elevate grievances to the project’s management directly, or through the union representative, if applicable, and, in the case of irreconcilable grievances, the Government Labor Office may be engaged at the request of either the union representative or Company management to mediate. Specifications regarding working and living conditions and Occupational Health & Safety requirements will be included in relevant construction contracts. The EMP also includes a Road and Traffic Safety Management Plan and other interventions based on good international industry practices and IFC’s PS 4 Community Health and Safety.
77. Monitoring and Supervision. Regular monitoring of SAP and EMP implementation will be conducted by KEL (quarterly) and by an independent external monitor (biannually).
78. Disclosure. KEL has disclosed the EA Summary, EIA, EMP, SA, and SAP through its public website (http://www.kel.com.np) and in the project locations. The EA Summary and the SAP documents have been translated into Nepali and the local ethnic languages of the major indigenous groups in the project area, including Limbu, Tamang, and Rai (Khaling and Bantawa). These documents have also been disclosed in the Bank’s InfoShop in Washington D.C., the Project Information Center (PIC) at the project site, and IFC’s external website. IFC’s Environmental and Social Review Summary has also been disclosed through IFC’s external website and at the PIC in the project area (Amarpur, Panchthar district). KEL maintains a Public Relations Office in the project area, opened and fully staffed since early 2012. A Public Relation Officer with locally recruited Public Relations Assistants including a female Public Relations Assistant maintains regular communication with people in the project area.
79. The IBN Component. Under this component, the Bank will support IBN to strengthen its capacity, including safeguard capacity, in carrying out its responsibilities related to assessment, due diligence, PDA negotiation, and supervision of the four large hydropower projects that have been supported with Bank-funded technical due diligence and may subsequently succeed in signing the PDA and moving into the construction stage, in line with applicable international performance, technical, environmental and social standards equivalent to relevant WBG’s policies and standards.
{Private Files LAN L Drive/00303564.DOCX;1 3/20/2014 04:35 PM }19
Annex 1: IDA’s Results Framework and Monitoring
Nepal: Kabeli-A Hydroelectric Project
Project Development Objective (PDO): to add hydropower generation capacity to supply the NEA grid through public private investments.
PDO Level Results Indicators C
ore
Unit of Measure
Baseline Cumulative Target Values* Frequency Data Source/ Methodology
Responsibility for Data Collection
Description (indicator definition)
YR 1 YR 2 YR3 YR 4 YR5
Indicator One: Generation capacity commissioned under the Project
X
MW
0
0
0
0
0
37.6
One time by project comple-tion
KEL, contractors
KEL
Actual installed capacity commiss-ioned
INTERMEDIATE
Intermediate Result (Component 1):
Intermediate Result indicator One: Public private financing mobilized
USD Million
0
19
38
58
72
102 or as needed with actual cost
Trimester MOF, HIDCL, KEL
MOF, HIDCL, KEL
Financing as needed to complete the KAHEP
Intermediate Result indicator two: Progress in construction of (a) dam, (b) tunnels&(c) powerhouse
% complet-ion of work volume
0 (a) 0 (b) 0 (c) 0
(a) 10 (b) 10 (c) 0
(a) 40 (b) 40 (c) 20
(a) 80 (b) 80 (c) 70
(a) 100 (b) 100 (c) 100
Trimester KEL, contractors
KEL
Intermediate Result indicator Three: Signing of HIDCL consortium agreement
N/A No agree-ment
signed Effective effective effective effective Annually Independent consultant
KEL
Intermediate Result (Component 2):
Intermediate Result indicator One: Guidelines for CIA
N/A No Under prepar-ation
Draft completed
Adopted by the GON
Semi-annually
DOED MOE
{Private Files LAN L Drive/00303564.DOCX;1 3/20/2014 04:35 PM }20
Intermediate Result indicator Two: Guideline for Resettlement
N/A No Under prepar-ation
Draft completed
Adopted by the GON
Semi-annually
DOED MOE
Intermediate Result (Component 3):
Intermediate Result indicator One: Number of PDA signed with private hydropower developer(s) (cumulative)
N/A 0 0 1
2 3 3 Annual IBN IBN
Note: Given the physical properties of electricity, attribution to a specific project, such as KAHEP, of developmental outcomes associated with electricity is not possible *Target values should be entered for the years data will be available, not necessarily annually.
{Private Files LAN L Drive/00303564.DOCX;1 3/20/2014 04:35 PM }21
Table 1.1: IFC Results Framework and Arrangements for Results Monitoring (DOTS)
Detailed Impact Description Impact Indicators
Target & Year To be tracked in the DOTS
(not to exceed 5 years)
Fin
anci
al
Per
form
ance
Project completion on time and budget
Project cost and completion date
Project to be completed within +/- 10% of original budget by 2019
Yes
Returns to all Capital Providers
Return on Invested Capital (ROIC)
US$ Annual ROIC > US$ Annual WACC Maintained over Supervision
Yes
Eco
nom
ic P
erfo
rman
ce
Returns to Society Economic Return on Invested Capital (EROIC)
US$ Annual EROIC> US$ Annual WACC Maintained over Supervision
Yes
Increased firm electricity supply to Nepal
Electricity generated by the plant
205.2 GWh annually by 2020 Yes
Increased firm electricity supply per customers
Number of customers equivalent
163,000 customers equivalent by 2019
Yes
Employment Generation Number of full-time positions created
600 (construction) and 20 (operations) by 2020
Yes
Transfers to GON Taxes and royalties US$ 22.4 million over the life of the project
Yes
En
viro
nm
ent
and
Soci
al
Per
form
ance
Estimated Annual GHG reduction
Tonnes of CO2 equivalent per year
114,400 t CO2 equivalent per year by 2020
Yes
IFC Development Impact: KAHEP is expected to have strong development impact by way of (i) increasing energy generation to address the power shortage in Nepal particularly in the energy deficit far east and west regions; (ii) generating global benefits in the form of greenhouse gas emissions reduction; (iii) signaling effect in Nepal which could encourage several other developers, investors and lenders to invest in Nepal's hydro power sector; and (iv) providing employment to local people during construction and during operation. The financial rate of return and economic rate of return can be found under Section VI (APPRAISAL SUMMARY)
22
Annex 2: Detailed Project Description
Nepal: Kabeli-A Hydroelectric Project
1. The proposed project has three components: (a) the KAHEP Component, with IDA, IFC and CCCP funding in credit terms; (b) the MOE Component, with IDA funding in grant terms; and (c) the IBN Component, with IDA funding in grant terms. 2. The KAHEP Component (US$ 102.6 million) will support construction of the KAHEP, including a diversion dam, a settling basin, a headrace tunnel, a semi-underground powerhouse, and a tailrace tunnel. This component will be implemented by the project company KEL. Table 2.1 below shows the detailed cost estimation and financing plan for the KAHEP.
Table 2.1: Project Cost and Financing Plan
Item Cost Estimation US$ million Financing Plan US$ million A) KAHEP Component 1 Land Acquisition 0.16 Subordinated Debt 2 Infrastructure Development 2.40 IDA Credit 40.00 3 Civil Construction Cost 43.40 Senior Debt 4 Hydro-mechanical 6.70 IFC A Loan 19.30 5 Electro-mechanical 7.27 IFC-CCCP Loan 19.30 6 Owners Cost 3.60 Local Bank Loan 1.00 7 Vehicle Cost 0.16 8 Environment and Social 0.75 9 Construction Power 0.70 BPC 5.98
10 Panel of Experts 0.50 Gurans Energy Ltd. 15.87 11
Dispute Adjudicator Board 0.40 Asia Pacific Power-Tech Co. Ltd 1.15
12 Insurance 0.50 13 Mobilization & Demobilization 0.30 14 Engineering and Management 4.59 15 VAT, Custom, Duties, Taxes 7.39 16 Price Indexation of Base Cost 4.42 17 Physical Contingencies 9.39 18 Senior Debt Service Reserve Account 2.62 19 Interest during Construction & Financing Fee 7.45
Sub-total 102.6 Sub-total 102.6 B) MOE Component 20 Environmental 1.00 21 Social 0.50 22 Technical capacity building 0.30 23 Incremental operating cost 0.20
Sub-total 2.00 IDA Grant: 2.00 C) IBN Component 24 Technical due diligence and PDA negotiations 1.30 25 Supervision of project implementation 0.60 26 Safeguards, procurement, financial, technical
capacity building 1.30
23
Item Cost Estimation US$ million Financing Plan US$ million 27 Incremental operating cost 0.80
Sub-total 4.00 IDA Grant: 4.00 28 Total Financing Requirements 108.6 Total Financing 108.60 3. The MOE Component (US$ 2.0 million) will support the MOE to (a) supervise the implementation of KAHEP to ensure compliance with the PDA, EMP, and SAP and sustainability of the project; (b) technical, environmental, and social safeguards capacity building on integrated river basin management and cumulative impacts management for sustainable hydropower development, including development and adoption of guidelines for CIA and involuntary resettlement; and (c) cover incremental operating cost for the project implementation.
4. The IBN Component (US$ 4.0 million) will provide technical assistance and support to the IBN in improving its ability to carry out its responsibilities of facilitating the development of large hydropower projects across the country in line with applicable international performance, technical, environmental and social standards equivalent to relevant WBG’s Safeguards Policies and Performance Standards. Specifically, the component will support IBN in (a) conducting additional due diligence to assess readiness of large hydropower projects (four projects, totaling 3050 MW) proposed by private investors, and thereafter, carry out negotiations with the private developers of these projects for signing PDAs; (b) supervising the construction of the above-mentioned projects to ensure compliance with the terms and conditions of the PDAs and sustainability of such projects; (c) building up its procurement, financial management, environmental and social safeguards and technical capacities; and (d) covering incremental operating costs for the project implementation. This component will not provide any direct financing to construct any hydropower projects. Rather, the technical assistance provided to IBN under this component will enhance its capacity to uphold international standards on technical, fiduciary, social and environmental management and also fund technical studies in line with relevant Bank policies and standards for the four hydropower projects currently in its pipeline.
KAHEP
5. The KAHEP has been designed as a peaking run-of-river type project with a small peaking reservoir. The project will generate electricity to serve the peak demand of the national grid for two hours in the morning peak and four hours in the evening peak. The KAHEP is located primarily in Panchthar District on the Kabeli River, which is a natural border between the Panchthar and Taplejung districts. This is a remote area in the Middle Mountains of the Eastern Development Region of Nepal, which is 800 km east of Kathmandu. Figure 2.1 shows the location of KAHEP on the national map of Nepal.
24
Figure 2.1.Location of KAHEP on the Map of Nepal
6. The project will utilize a more than 15 km long loop formed by the Kabeli River and the Tamor River, of which the Kabeli River is a tributary. The headworks will be located in the Dhuseni area of Amarpur VDC of Panchthar district on the left bank, and, Thechambu VDC of Taplejung on the right bank, about 2.5 km upstream of Kabeli Bazar, a small market village. A diversion barrage with a provision for ponding will be constructed. Two intakes on the left bank will feed two underground settling basins. Water will then be passed through a 4,326 m long headrace tunnel to Tamor River at the Pinase area of Amarpur VDC. A semi-underground powerhouse will be constructed on the left bank of Tamor River. The gross head and design discharge of the project are estimated to be 118.80 m and 37.73 m3/s, respectively. Figure 2.2 shows the project layout, Figure 2.3 shows the locations of key project structures in the project districts and VDCs, and Table 2.2shows the salient features of the KAHEP.
25
Figure 2.2. Layout of KAHEP
Figure 2.3: Locations of Key Project Structures in the Project Districts and VDCs
26
Table 2.2: Salient Features of the Kabeli-A Hydroelectric Project
S.N. Items Description1. Project Name Kabeli-A Hydroelectric Project2. Location Amarpur and Panchami VDCs of Panchthar District and
Thechambu of Taplejung District2.1 Project Boundaries East 87 45’ 50’’ E
West 87 40’ 55’’ E North 27 17’ 32’’ N South 27 13’ 41’’ N
3. Type of development Peaking run-of-river 4. Hydrology at intake Catchment area 862 km2
100 year flood (Q100) 1860 m3/s 1000 year flood (Q1000) 2650 m3/s Mean monthly flow 61.40 m3/s
40 percentile flow 37.73 m3/s5. Headworks Type/ Length of weir Barrage with 4 radial gates
Full supply level 577.3 m Peaking reservoir net live
storage capacity0.335 million m3
Crest elevation El. 561.0 Gate Size 10.0 m Width X 9.0 m Height each
Intake type Tunnel intake on left bank Intake size at trash rack 2 nos. 12 Width X 4.3 m Height6 Diversion during construction Diversion flood (20 year dry
season flow) 230 m3/s
Coffer dams 200 m (earthfill dams and stone masonry walls) 7 Approach Tunnel from Intake to Settling Basin Number 2 (1 each starting from each intake) Length 72.8 m
Type Inverted D shaped; Concrete lined Cross section Internal Finished Diameter 3.2 m 8. Settling basin Type Underground settling basin Number 2 basins with 2 hoppers in each Length of uniform section 82 m Total length including transition 123 m Width 15.8 m each Height 17 m Flushing system S4 system Flushing tunnel length and size 150 m long; 2.25 m D-shaped tunnel with Φ1.75 m. MS pipe 9 Access tunnel Length 474.1 m Type Inverted D shaped; shotcrete and rock bolt lined
27
S.N. Items Description Cross section Internal diameter 4 m 10. Waterways 10.1 Converging Pair Tunnels from
outlet of settling basin to start of Headrace Tunnel
Length 65.8 m Type Inverted D shaped; Concrete lined Cross section Internal Finished Diameter 3.2 m 10.2 Headrace Tunnel Length after pair tunnels 4326.8 m Type Inverted D shaped; Shotcrete lined and Concrete lined Cross section Internal Finished Diameter 5.65 m 10.3 Surge Shaft Type Underground and exposed to surface Internal diameter 10 m Height 68.2 m Vertical ventilation tunnel 3 m in diameter and 14 m in height 10.4 Penstock Material Mild steel Length before bifurcation 288 m Length of each leg after
bifurcation 20 m
Internal Diameter 3.55 m Shell Thickness 10-20 mm; partly ribbed 11. Powerhouse Powerhouse type Semi underground Powerhouse size (L * B * H ) 34.8 m X 18.6 m X 31.8 m 12. Tailrace Design tailwater level 458.5 masl Length 93.1 m Cross-section 4.9 m wide X 4.65 m high Rectangular RCC box culvert Longitudinal slope 1 in 1500 100 year flood (Q100) in Tamor
River 5799 m3/s
Probable maximum flood (Q1000) in Tamor River
8259 m3/s
13. Turbine Turbine type Vertical Axis Francis Number of units 2 Rated speed 428.6 rpm Turbine axis elevation 457.64 masl 14. Power and energy output Gross head 118.8 m Rated net head 112.6 m Design discharge 37.73 m3/s Installed capacity 37.6 MW Annual estimated saleable
energy output (contractual) 205.2 GWh
28
S.N. Items Description15. Point of connection to NEA Grid KAHEP switchyard at Pinase Ghat 16. Transmission line (a separate project under implementation financed by the Bank) Voltage 132 kV Length 85 km 17. Access road To headworks 7.5 km from Dubichaur at Mechi Highway to headworks To powerhouse 15 km from Bhanu Chowk at Mechi Highway to Powerhouse 7. The generated power will be evacuated to the national grid by the on-going Kabeli Corridor 132 kV Transmission Line, which is under implementation with funding from IDA. 8. MOE Component (US$ 2.0 million) will provide technical assistance funds to the MOE to allow it to (a) perform technical oversight of the KAHEP construction process;(b) carry out capacity-building activities at the Ministry, and (c) carry out technical assistance activities related to Kabeli River basin studies (such as strategic basin-level planning studies and CIA), and develop and adopt guidelines for the CIA and involuntary resettlement associated with hydropower development. With these funds the MOE will engage a Supervising Engineer who will carry out site reviews of construction progress from time to time, and consultants who will carry out survey and consultations to develop the guidelines. The DOED and MOE may also use these funds to defray their incremental operating costs associated with the implementation of these activities.
9. IBN Component (US$ 4.0 million). The IBN is a newly established agency, but it has been doing substantial procurement, especially selection of national and international consultants (firms and individuals), with the funding from an international donor. A consulting firm, as technical support group, is providing procurement support to manage the consultant selection process and other procurements. This support needs to be continued for managing all procurement under the Project. International and national consulting firms and individual consultants including a procurement consultant will be hired for the implementation of the Project.
29
Annex 3: Implementation Arrangements
Nepal: Kabeli-A Hydroelectric Project Project Institutional and Implementation Arrangements
1. Overview. As the developer of the KAHEP, KEL is responsible for all aspects of implementation of the KAHEP Component, including: financing, design, procurement and contract management; implementation of the EMP and the SAP; communications with PAPs and civil society; financial management; and monitoring, reporting and evaluation. The MOE will be responsible for implementing the MOE Component. HIDCL will on-lend the IDA funds from the GON to KEL. The IBN will be responsible for implementing the IBN Component. 2. Legal Arrangements for IDA Financing. The MOF and IDA will enter into a Financing Agreement. The MOF will enter into a HIDCL Subsidiary Agreement with HIDCL which will detail the flow of funds arrangements and relevant terms and conditions, under which the MOF will provide IDA funds to HIDCL for on-lending to KEL. HIDCL and KEL will enter into a KEL Subordinated Loan Agreement, and IDA and KEL will conclude a Project Agreement. 3. KAHEP Component. KEL will carry out the implementation of this component in three ways: (a) directly, through its own project management and staff; (b) with the assistance of consultants engaged to bolster KEL’s capacity for construction management (such as the Owner’s Engineers) and for specialized assistance (such as the third-party environmental monitor); and (c) through the contractors that will be engaged to construct the project, with contractual obligations to implement safety, health, and social and environmental measures for the project. KEL will draw on the resources of BPC, KEL’s parent company, and Gurans Energy Limited, as required, to implement the project. KEL will interact, as necessary, with government agencies for specific aspects of project implementation (for example, management of the explosives to be used for the tunneling). 4. Proposed IFC Investment. The proposed IFC investment to KEL is (i) a senior A loan of up to US$ 19.3 million from IFC on its own account; and (ii) a senior CCCP loan of up to US$19.3 million from IFC acting as the implementing entity of the CCCP.
5. Proposed IFC Investment Terms. The proposed IFC investment of the senior A loan will be with a maturity of 19 years from IFC on its own account and the senior CCCP loan will be with a maturity of around 16.5 years (not to exceed December 31, 2030) from IFC acting as the implementing entity of the CCCP. The grace period is six years and the repayment profile is sculpted. The above terms will be captured into the IFC loan agreement and IFC CCCP loan agreement, to be signed with KEL.
6. With the broader objective of tapping the immense hydropower potentials of Nepal, the HIDCL was established in July 2011 by GON as a public limited company with a focused mandate to generate financial resources for investments in hydropower generation, transmission and distribution projects in Nepal. The HIDCL will on-lend the IDA financing for KAHEP to KEL. Currently, HIDCL have four small and medium-sized hydropower projects, from 23 to 42 MW, in its portfolio, in addition to the KAHEP.
30
7. The KEL was established with the sole purpose of developing, building and operating the proposed KAHEP, which was awarded to KEL by the GON under a 35-year concession. A 25-year PPA is expected to be signed between KEL and NEA by May 31, 2014. 8. The project implementation will be overseen by a project director of the KEL and managed by a dedicated project manager, who will be responsible for day-to-day management of the implementation as well as staffing and development of the KEL project team. A Site-in-Charge will be permanently based at site and manage KEL’s team at site. Staff at company headquarters in Kathmandu will support the project. Figure 3.1 provides an organizational chart for the implementation of the KAHEP.
9. IDA and IFC will supervise the KAHEP Component jointly through at least two supervision missions per year throughout the construction and start-up period. The supervision teams will include environmental and social safeguards specialists and technical and financial experts. For the life of the IFC loan, KEL is required to provide IFC with an Annual Monitoring Report outlining environmental and social performance data. As this is a category ‘A’ project, the data in this report will be verified by an independent consultant.
Table 2.1: Ownership Structure of KEL
Shareholder Shareholding Domicile 1 Butwal Power Company 26.0% Nepal 2 Gurans Energy Limited 69.0% Nepal - Butwal Power Company (40%) Nepal - InfraCo Asia Himalayan Hydro Pte. Ltd. (60%) Singapore
3 Asia-Pacific Power-Tech Co. Ltd. 5.00% China Total 100.00%
Table 2.2: Ownership Structure of BPC
Shareholder Shareholding Domicile 1 Shangri-la Energy Limited 68.95% Nepal 2 General public 10.00% Nepal 3 Government of Nepal 9.09% Nepal 4 IKN Nepal 6.05% Norway 5 United Mission to Nepal 2.79% Nepal 6 Employees 2.00% Nepal 7 Nepal Electricity Authority 1.06% Nepal 8 Nepal Industrial Development Corporation 0.06% Nepal Total 100.00%
31
Figure 3.1: Organizational Chart of KEL
32
10. MOE Component. The DOED under the MOE has experience in implementing IDA-funded technical assistance activities under the on-going Power Development Project. The day-to-day management of the component will be the responsibility of a senior engineer. The Secretary of Energy will have general oversight over the implementation of the component on behalf of the ministry. 11. IBN Component. The IBN under the Prime Minister’s Office of GON will implement this component related to the capacity building and associated operating cost. The Board of IBN, chaired by the Prime Minister and consisting of representatives from different ministries, will have general oversight over the implementation of the component on behalf of the GON. The day-to-day management of the component will be the responsibility of officials designated by the CEO acceptable to the Association. The IBN was established in November 2011 and entrusted with the responsibility of facilitating the development of large infrastructure projects including hydropower projects above 500 MW. The IBN is a newly established agency, but has been doing substantial procurement, especially the selection of national and international consultants (firms and individuals), with the funding from an international donor. A consulting firm, as technical support group, is providing procurement support to manage the consultant selection process and other procurements. This support needs to be continued for managing all procurement under the Project. The IBN has already been receiving support from the international donor for the development of the PDA template for large hydro projects, including funding for lawyers and other technical specialists; however their capacity on social, environmental, and technical review and analysis in line with World Bank Group policies and standards is still limited. Recognition of the IBN’s limitations in these and other critical areas of relevance to economically, socially and environmentally sustainable large hydropower is the underpinning rationale for the technical assistance to be provided through this project component. International/national consulting firms and individual consultants covering all technical, environmental, social, financial management and procurement issues applicable to the large hydropower projects are the target of technical assistance under this component. The TORs for the specialists will be reviewed by the Bank, as per the Bank’s procurement guidelines. Financial Management and Disbursements of IDA funding
12. Financial Management. HIDCL (with inputs from KEL), DOED and IBN will ensure that separate books of accounts are maintained for the project. The accounts of KEL are maintained on the accrual basis of accounting and are computerized. HIDCL also uses the accrual basis of accounting, and the financial statements are prepared based on Nepal Rastra Bank guidelines. The necessary documents prepared by the Finance Officer’s assistant will be reviewed by the Finance Officer and authorized by the CEO of HIDCL or his/her designee. The Accounting Manual, the Chart of Accounts of HIDCL, and the accounting system of HIDCL have recently been formalized through board approval. On the other hand, DOED and IBN use the government cash based accounting system. HIDCL, DOED and IBN will maintain required ledgers including the DA’s Ledgers, respectively. The internal control process of the HIDCL, KEL, and GON will be applied to monitor the progress of the project in accordance with sound accounting practices.
33
13. As part of progress reports, HIDCL with support from KEL, the DOED and IBN will, respectively, submit the IUFR on a trimester basis, in the format and content agreed with the Bank. The IUFR will report total investments to be separated by specific category and/or component so that total investments as envisaged can be tracked and monitored. To match the government planning and reporting cycle, the IUFR will be produced on a trimester basis and submitted within 45 days from the end of the preceding trimester. The IUFR will include (a) sources & uses of funds, (b) DA reconciliations, (c) expenditure statements against component, category, and budget head according to the chart of accounts and as agreed with the Bank, and (d) any other report as required.
14. The Bank team has carried out the financial management capacity assessment of HIDCL. At present, HIDCL does not have adequate capacity for the financial management requirements of the Project. HIDCL has to recruit the finance management expert/staff capable to handle the financial management commensurate with the financial operation of the company. HIDCL, with the assistance of financial management expert/staff will fulfill the responsibility of the financial management requirements of the Project. HIDCL will be responsible for reporting the expenditures under the IDA funding of the KAHEP Component. For the MOE Component, the DOED has acquired experience in managing funds through the implementation of the Bank-funded Power Development Fund Project. Although the IBN has no prior experience with a Bank financed project, the IBN is operating with a fully computerized Financial Management Information System, and there is a provision of hiring one additional Financial Management Specialist from Bank funds. In addition, the staffing structure seems adequate to support the financial management requirement of the IDA funding of Component 3. The overall financial management risk is “High”.
15. For the KAHEP Component, KEL will engage an Owner’s Engineer to bolster its capacity for construction management. The Owner’s Engineer will supervise construction works and will review and certify invoices or bills received from the contractors. HIDCL will authorize payments from IDA funds based on KEL’s recommendations with necessary supporting documents.
16. Three sets of IUFRs will be submitted under the KAHEP, DOED and IBN Components. Similarly, three sets of project account financial statements will be required for these three components.
17. Disbursement Arrangements. The disbursement methods applicable to the IDA funds for this project include: Direct Payment, Advance, Reimbursement, and Special Commitment. To facilitate such disbursements, three DAs will be established at the Nepal Rastra Bank or a commercial bank approved by the government and acceptable to the Bank for the KAHEP Component, which is to be managed by HIDCL, and at the Nepal Rastra Bank for the MOE and IBN Components, to be managed by DOED and IBN, respectively. The ceiling for the DA will be fixed at US$ 4.0 million for HIDCL, at US$ 200,000 for the MOE and at US$ 400,000 for the IBN. The IDA funds will be advanced into the DAs. Reimbursement and Direct Payment are allowed for the expenditure amount more than minimum application sizes established in the Disbursement Letter. The withdrawal applications submitted to the Bank shall be supported by the Statement of Expenditures, and a list of payments against contracts in the form attached
34
together with records evidencing eligible expenditures (such as copies of receipts, and supplier invoices) for the contracts, subject to the Bank’s prior review. The project expenditures to be paid for by the IDA funds for the KAHEP Component will be authorized by the HIDCL through Direct Payment request or use of funds available in the DA. The expenditures for the other two components will be paid by the DOED and IBN, respectively, using the funds available at their respective DA. For training and operating costs, the expenditures will be pre-financed through GON’s consolidated fund, and then the IDA funds will be reimbursed from the DA or directly by the IDA to the GON’s consolidated funds on the basis of the eligible expenditures reported in the Statement of Expenditures. 18. The DA for the IDA funding of the KAHEP Component will be operated under joint signatures of the Chief Executive Officer and the designated Finance Officer of HIDCL, while the DA of the MOE Component will be operated under joint signatures of the Director General and the designated Finance Officer of the DOED. Similarly, the DA for the IBN Component will be operated under the joint signatures of the CEO and the designated Finance Officer of the IBN.HIDCL, DOED and IBN will ensure that the bank/cash books are reconciled with bank statements every month. Supporting documentation will be maintained by HIDCL and KEL, DOED, and IBN for at least one fiscal year after the year, in which the last disbursement from the Credit or Grant took place, and will be made available for review by the Bank and independent auditors.
Financial Management Action Plan for the IDA funding
Action Responsibility Completion Date
1. Recruit one additional qualified Financial Management Specialist dedicated for the project
HIDCL 31 July 2014
2. Depute one dedicated staff for the project DOED 31 July 2014 3. Recruit one additional qualified Financial Management
Specialist IBN 31 July 2014
4. Procure appropriate software to track project expenditures and produce timely financial statements
HIDCL
30 September 2014
5. Enter an agreement with the consortium bank for lending to KEL
HIDCL, and Consortium partner Bank
31 May 2014
6. Discuss and agree audit TOR with OAG HIDCL
30 April 2015
Procurement 19. KAHEP Component (IDA Funding). The GON awarded the KAHEP to KEL through an ICB process on BOOT terms that was reviewed by the Bank and found to be executed in accordance with good practice. Accordingly, in 2007, the Bank provided its “no objection” to the GON’s proposal to award the project to KEL. KEL, as the concessionaire selected competitively as per the Section III, Para-3.14 of the Procurement Guidelines, will be responsible for carrying out all procurement for goods, works, and consulting and non-consulting services required for the project from eligible sources, using its own procedure. In line with relevant Bank’s Procurement Guidelines for all contracts involving IDA funding, KEL will follow established
35
good commercial practice for the procurement of goods, works, and services required to implement the KAHEP. The Bank’s review of BPC’s procurement guidelines concluded that there was conformity to good commercial practices and acceptability for purposes of implementing the proposed project. Detailed project design and bidding documents for the civil works, gates and hoists, and mechanical and electrical equipment were prepared by KEL with the assistance of a local consulting firm, reviewed by an international consulting firm, verified by the Lender’s Engineer of the IFC and the POE. Bids for all major contract packages were under evaluation and were reviewed by the IDA/IFC team. Contracts are expected to be signed by June 2014. The procurement unit of KEL will be managed by a senior procurement manager with extensive procurement experience. See Annex 6, Table 6.1 for details on contract packaging and procurement plan for the KAHEP. 20. MOE and IBN Components. Procurement for the proposed operation under the Project for the MOE, and IBN Component will be carried out in accordance with the World Bank’s “Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” published by the World Bank in January 2011 (“Procurement Guidelines”), in the case of goods, works and non-consulting services; and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” published by the World Bank in January 2011 (“Consultant Guidelines”) in the case of consultants’ services, and the provisions stipulated in the Legal Agreement. For each contract to be financed under the Credit or Grant, procurement methods or consultant selection methods, the estimated costs, prior review requirements, and time frame will be agreed between the Borrower and the Bank in the Procurement Plan (which is under preparation by the borrower and will be reviewed by the Bank prior to the negotiations of the Project). The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 21. All expected procurement of goods, works and consultants’ services will be listed in the Project’s General Procurement Notice. Table 3.2, 3.3 and 3.4 show the overall procurement arrangements with tentative amounts.
22. Assessment of DOED’s Capacity to Implement Procurement. Procurement under the MOE Component will be carried out in line with the Bank’s Guidelines for the Selection of Consultants. The DOED is presently an implementing agency for the IDA-funded Power Development Project under which it has gained some experience with procurement of consultants. DOED’s capacity for procurement is weak and will be strengthened through procurement training and intensive supervision by the Bank. Based on the assessment of procurement capacity, the DOED’s risk rating is “Moderate”. 23. Assessment of IBN’s Capacity to Implement Procurement: Procurement under the IBN Component will also be carried out in line with Bank’s Guidelines for the Selection of Consultants. The IBN is currently carrying out selection of national and international consultants with support from a consulting firm. There is no such procurement experience of its own as an institution and its procurement capacity is very weak. Therefore, an individual consultant and a technical support group as per need will be engaged for effective procurement management. Similarly, there will be a regular capacity building program including procurement training for
36
project staff involved in procurement processing, reviewing and decision making. Based on the assessment of procurement capacity, IBN’s risk rating is “High” and can be lowered down to “Substantial” when there is a technical support group for providing procurement support to the agency.
24. Procurement of Goods related to IDA Funding. Goods to be procured under this Project include vehicles and simple office logistics with low value contracts and, therefore, no ICB procedure is envisaged for this. Goods estimated to cost up to US$ 400,000 per contract may be procured through NCB procedures as per the Public Procurement Act and Regulations made thereunder and model bidding document acceptable to the Bank. Vehicles and small value off-the-shelf goods, etc. estimated to cost up to US$ 50,000 equivalent per contract may be procured following Shopping procedures in accordance with the Bank’s procurement guidelines. Direct Contracting for procurement of items which satisfy the provisions of the Procurement Guidelines may be carried out with the concurrence of Bank on an exceptional basis.
25. Procurement of Consulting Services related to IDA Funding. Contracts with consulting firms will be procured in accordance with Quality and Cost Based Selection procedures or other methods given in Section II of the Consultants’ Guidelines. For contracts with consulting firms estimated to cost less than US$ 300,000 equivalent per contract, the shortlist of consultants may comprise entirely of national consultants in accordance with the provisions of paragraphs 2.7 of the Consultant Guidelines. Other selection methods like Quality Based selection, Fixed Budget Selection, Selection based on Consultant Qualification, Least Cost Selection, Selection of Individual Consultants, and Selection through Sole Source can be considered with the concurrence of the Bank.
26. Incremental Operating Costs. The Project will support incremental operational costs such as for operation and maintenance of vehicles, vehicle and office rentals, rentals for information technology services such as internet connection, utilities, and office consumables required for the day-to-day running of the Project Implementation Unit.
27. In order to ensure economy, efficiency, transparency and broad consistency with the provisions of Section 1 of the Procurement Guidelines, the following exceptions to procedures shall apply in the case of NCB:
a) bid documents shall be made available, by mail or in person, to all who are willing to pay the required fee;
b) foreign bidders shall not be precluded from bidding and no preference of any kind shall be given to national bidders;
c) bids shall be opened in public in one place, immediately after the deadline for submission of bids;
d) qualification criteria (in case pre-qualifications were not carried out) shall be stated in the bidding documents, and if a registration process is required, a foreign firm declared as the lowest evaluated bidder shall be given a reasonable opportunity of registering, without let or hindrance;
e) evaluation of bids shall be made in strict adherence to the criteria disclosed in the bidding documents, in a format and specified period agreed with the Association and contracts shall be awarded to the lowest evaluated bidders;
37
f) re-bidding shall not be carried out without the prior concurrence of the Association; Extension of bid validity shall not be allowed without the prior concurrence of the Association (A) for the first request for extension if it is longer than four weeks and (B) for all subsequent requests for extension irrespective of the period;
g) There shall not be any restrictions on the means of delivery of the bids.
28. Procurement Planning. The Procurement Plan for the key contracts for goods, works and consultants’ services expected for the first 18 months under the MOE and IBN Components is prepared and reviewed by the Bank. Procurement under the project will be carried out by the DOED and IBN in accordance with the Procurement Plan. The Procurement Plan will be closely monitored and updated as required. No procurement, regardless of the value, will be done by the implementing agency unless it has been included in the procurement plan cleared by the Bank. Any change in the estimated cost of any contract will promptly be conveyed to the Bank for its clearance. No changes will be accepted after bidding documents have been made available to bidders. The Procurement Plan will also be available on the websites of DOED and IBN and in the Bank’s external website. 29. Prior Review. The Procurement Plan has set forth those contracts which shall be subject to the Association’s prior review. All other contracts shall be subject to Post Review by the Association.
30. Post Review. All other contracts to be entered into by the DOED and IBN not for Prior Review will be subject to Post Review by the Bank. The Project Implementation Unit will send to the Bank a list of all such contracts for Post Review annually or as required. Post Reviews will be done at least annually as well as implementation reviews would be done quarterly for the first 18 months or until the Credit disbursements reach US$ 5 million and there after bi-annually. Such review of such contracts below threshold will constitute a sample of about 5-20 percent of the contracts based on the procurement capacity risk rating of the implementing agencies.
31. Frequency of Procurement Supervision. Bank supervision would be carried out every six months and more frequently in the early stages of Project implementation.
38
a) Package for Procurement of Goods under the MOE and IBN Components
Table 3.2: Procurement Packages for Goods with Methods and Time Schedule
1 2 3 4 5 6 7 8 9 No.
Contract (Description)
Estima-ted Cost ($’m)
Procure-ment
Method
P-Q
Domestic Preference (yes/no)
Review by IDA (Prior/ Post)
Expected Bid-
Opening Date
Comments
MOE Component 01 Computer, laptops 0.02 Shopping No No Post June
2014 Multiple contracts
02 Office supplies, training materials
0.05 Shopping No Yes Post June 2014
Multiple contracts
03 Software, tools, etc.
0.02 Shopping No No Post June 2014
Multiple contracts
IBN Component 01 Computers, laptops 0.04 Shopping No No Post June
2014 Multiple contracts
02 Office supplies, training materials
0.10 Shopping No Yes Post June 2014
Multiple contracts
03 Software, tools, etc.
0.04 Shopping No No Post June 2014
Multiple contracts
b) Packages for Procurement of Consulting Services under the MOE and IBN
Components
1) Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines: Selection and Employment of Consultants:
Table 3.3: Prior Review Threshold for Service Contracts
Selection Method Contract Value
Threshold ($’000) Prior Review
Threshold ($’000) Comments
1. Competitive Methods (Firms) – QCBS, QBS >=100 $100 2. Competitive Methods (Firms) – CQS <100 - 3. Single Source (Firms) - All contracts 4. Individual Consultants - $50
2) Short list comprising entirely national consultants: No short lists of consultants for
services are expected to comprise entirely national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
3) Any Other Special Selection Arrangements:[including advance procurement and retroactive financing, if applicable] None.
39
Table 3.4: Consultancy Assignments with Selection Methods and Time Schedule
1 2 3 4 5 6 7 Ref. No.
Description of Assignment
Estimated Cost ($’m)
Selection Method
Review by IDA
(Prior/ Post)
Expected Proposals
Submission Date
Comments
MOE Component 01 Supervision, monitoring and
evaluation of project. implementation Firm IC
0. 35 QCBS/IND Prior June 2014 Multiple contracts
02 Environment capacity building – firm and ICs Watershed management CIA and management Training for capacity
building
1.00 QCBS Prior
June 2014 Multiple contracts
03 Social capacity building – firm and ICs development of guidelines
for resettlement development of guidelines
for benefiting sharing training for capacity
building
0.5 QCBS/IND Prior June 204 Multiple contracts
IBN Component 01 Technical due diligence &
PDA negotiations Firm IC
1.30 QCBS/IND Prior June 2014 Multiple contracts
02 Supervision of hydropower project implementation Firm IC
0.60 QCBS/IND Prior
June 2014 Multiple contracts
03 Capacity building Environmental and social
safeguards management procurement financial management technical, incl. studies training
1.30 QCBS/IND Prior June 2014 Multiple contracts
Notes: ICB: International Competitive Bidding NCB: National Competitive Bidding DC: Direct Contracting QCBS: Quality and Cost Based Selection QBS: Quality Based Selection CQS: Selection Based on Consultant’s Qualifications IC: Individual Consultants IND: Individual SSS: Single Source Selection
40
Environmental and Social (including safeguards and performance standards) 32. Putting into place the agreed safeguards arrangements and implementing the EMP and SAP in compliance with relevant GON and WBG Policies and Performance Standards are the sole responsibility of KEL as the developer and owner of the KAHEP. KEL will further strengthen its capacity for environmental and social safeguard management of the project, and an Action Plan has been agreed upon with the WBG. The Project Management Team has experience in environmental management from implementation of a major hydropower project in Nepal. KEL will appoint a team led by a Social and Environmental Manager, to carry out the provisions of the EMP, the SAP and other social measures agreed with project-affected communities. Some measures will be implemented by contractors on behalf of KEL, as specified in the contract documents. Implementation of the safeguards measures will be monitored by KEL and by independent third-party social and environmental monitors, which will be engaged for this purpose. The POE, including environmental and social experts, who have guided the project preparation, will be reconstituted to provide overall guidance during construction. Monitoring and Evaluation 33. KEL will be responsible for monitoring and evaluation of the progress of the KAHEP Component using data provided by contractors engaged for the construction of the project as well as data produced by its own staff (for safeguards management) and consultants and third-party monitors to be engaged. Monitoring and evaluation of the MOE and IBN Components will be the responsibility of the DOED and IBN respectively. Capacity Strengthening 34. KEL and its majority shareholder, BPC, are keen to build the company’s capacity to design, implement and operate hydropower projects efficiently and responsibly. To this end, KEL is committed to helping its staff improve their qualifications through specialized training, as appropriate. This commitment is reflected in the Governance and Accountability Action Plan (GAAP) that has been agreed for the project. (See Annex 9).
35. Capacity of the IBN, especially safeguard management capacity for development of the four large hydropower projects currently in its pipeline and supported by the Bank, will be enhanced through the various capacity building activities under the IBN Component, in line with WBG’s safeguard policies and standards. All TORs for consultant services and possible studies supported by this component will require prior Bank approval.
41
Annex 4: Operational Risk Assessment Framework (ORAF)- IDA funding
Nepal: Kabeli-A Hydro Electric Project
Stage: Appraisal
Risks
1. Project Stakeholder Risks
1.1 Stakeholder Risk Rating Substantial
Risk Description: Stakeholder expectations from the project will be high, requiring sensitive management and a credible program of benefits-sharing with people in the project area.
Risk Management:
1. The developer and the Bank team have paid careful attention to technical, social, and environmental aspects during preparation. The developer has a strong team at site including social and communications specialists, which will be further strengthened during implementation. Beyond compensating for negative impacts, through its Corporate Social Responsibility program the developer will provide project-affected communities with infrastructure, as requested during consultations. KEL will facilitate electrification of project-affected villages through coordination with NEA and Alternative Energy Promotion Center and utilizing support provided by the Kabeli Transmission Project.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
2. A stakeholder assessment commissioned by the Bank showed that any lingering negative perceptions were outweighed by a demand for the Bank to help Nepal address the crippling energy crisis that currently besets the country. Bank-supported micro hydro and other initiatives in energy and other areas are welcomed and show successes.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
2. Implementing Agency (IA) Risks (including Fiduciary Risks)
2.1 Capacity Rating High
Risk Description: KEL: successful implementation of
Risk Management:
1. KEL has engaged internationally known consultants to prepare bid documents and will engage an Owner’s Engineer to bolster its capacity during implementation period.
42
hydropower projects calls for the capacity in a number of areas including: contracting and financial management; construction management; and social and environmental aspects of the project. HIDCL: a newly established agency for on-lending IDA funds; and weak financial management capacity for a Bank-funded project. IBN: limited procurement and financial management capacity for a Bank-funded project; and being a newly established entity with no experience in implementation of Bank-funded project.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
2. Intense engagement by IDA and IFC teams during project preparation period in all aspects of project preparation.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
3. Technical and social and environmental panels of experts have provided guidance on implementation capacity issues.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
4. KEL is also bolstering its project and contract management skills through engaging international experts and participating training in contract management (one training completed September 21-23, 2011). This will help reduce the likelihood of time and cost overruns.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
5. Inclusion in project design of the MOE Component to help build capacity at the ministry.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management: 6. HIDCL to hire a qualified financial management staff to handle the financial management requirements of the KAHEP.
Resp: Status: Stage: Recurrent: Due Date:
Frequency:
Risk Management: 7. IBN to hire a local procurement specialist and a financial management specialist, with experience in Bank-funded projects, to work on the procurement and financial management and provide timely training on procurement and financial management.
Resp: Status: Stage: Recurrent: Due Date:
43
2.2 Governance Rating Moderate
Risk Description: Risk Management:
Once the project is operational, it will pay royalties to the central government, half of which are to be returned to project-affected District Development committees (DDCs) and VDCs under the existing guidelines for royalty payments in Nepal.
Procurement and financial management risks assessment by Bank team and capacity-strengthening measures proposed to reduce risks to “moderate”. KEL is a private company that is accountable to its owners and that provides a system of checks-and-balances. The MOE will help project-affected DDCs and VDCs to receive royalty funds on a timely basis. This will benefit the affected VDCs and DDCs and also help bring greater transparency to the use of these funds.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Fraud and Corruption Rating High
Risk Description: Risk Management:
Project management arrangements include an Owner’s Engineer (independent consulting firm); a Lender’s Engineer (a different independent consulting firm) and supervision by IDA and IFC teams, which will help reduce this risk. The project includes funds for technical assistance to the MOE, which will help ensure adequate capacity for technical oversight by the ministry and reduce delays.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
3. Project Risks
3.1 Design Rating High
Risk Description: Hydropower projects face various technical design risks, including sediment management; tunneling method; dam safety; geo-technical risks; seismic risks.
Risk Management:
Risk Management:
KEL has prepared a detailed Geological Baseline Report based on the original geotechnical and geological investigations of the project and updated with additional investigations related to drilling, mapping and rock mechanic tests. KEL prepared a Dam Safety Plan including an Operation and Maintenance Manual, Emergency Preparedness Plan and an Instrumentation Plan. A Risk Register has been prepared and incorporated into the bid documents and a Geological Baseline Report prepared. A physical model was constructed in order to study the headworks design
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
44
3.2 Social and Environmental Rating Substantial
Risk Description: Social and environmental aspects of hydropower are among the most sensitive aspects of hydropower development.
Risk Management:
1. Project initially identified in screening and ranking exercise as attractive from technical, environmental and social perspectives.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
2. Comprehensive environmental and social impact assessments carried out over 2010/11 and updated 2012/13, including wide-ranging consultations
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
3. Social and Environmental Experts included as part of the POE convened to advise on these areas.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
4. Agreement on an extensive Action Plan that includes, but is not limited to (i) collection of additional baseline and adaptive management approach to assure a socially and ecologically adequate downstream flow regime, and (ii) strengthening the CIA and management strategies at the Tamor River Basin Level.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
5. Posting at site of project officers to manage social and environmental aspects of project.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
6. KEL supporting a wide range of initiatives to address social and environmental concerns, such as (i) facilitating rural electrification in project area; (ii) culturally sensitive management of water in dewatered zone; (iii) vocational training; and (iv) implementation of Corporate Social Responsibility program during project construction period.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
45
Risk Management:
7. Adoption of third-party monitoring of implementation of EMP and SAP, and an ex post third party audit of the RCLAP and IPVCDP.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
Risk Management:
8. The IDA-funded Kabeli Transmission Project includes funds for rural electrification, which will be used in the KAHEP area (in addition to other locations).
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
3.3 Program and Donor Rating Low
Risk Description: Risk Management:
Coordination with Government of Canada on the CCCP Loan
The established coordination between IFC and the Government of Canada will continue with respect to the overall management of the CCCP; the CCCP team has participated throughout the process of project preparation and appraisal; IDA and IFC will continue to involve the CCCP team throughout the implementation and operation process as needed.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
3.4 Delivery Monitoring and Sustainability Rating Substantial
Risk Description: Risk Management:
Factors external to the project challenge the sustainability of the project and include: variable hydrological conditions, which may be exacerbated by climate change that can deteriorate the operating conditions.
Some element of uncertainty will remain with respect to the future effects of climate change and their impacts on the Project. Robust ongoing monitoring of climatological conditions and flows, and adaptive management approaches including potential adjustment of project operations and real time sediment monitoring, will help mitigate the risk.
Resp: Status: Stage: Recurrent:
Due Date:
Frequency:
4. Overall Risk
Overall Preparation Risk: Overall Implementation Risk: Substantial
Risk Description: Risk Description:
46
Annex 5: Implementation Support Plan
Nepal: Kabeli-A Hydroelectric Project
Strategy and Approach for Implementation Support
1. The implementation support requirements of the proposed project are straightforward in the sense that the project is defined in a geographically limited space and the overall responsibility for an interest in project implementation lies with the owner and developer of the project, KEL. At the same time, like all hydropower projects, the project has complex implementation support requirements that are highly technical (construction management) and sensitive (social and environmental management). In addition, in view of the unique nature of the collaboration between government and the private sector on which this project is based, during the implementation phase the Bank team will give attention to facilitating the interactions between the project developer and the various concerned government agencies. 2. Technical. The KAHEP is a technically complex project. Its construction will require expertise in a number of technical fields, including civil works with complex geo-technical dimensions; electro-mechanical design and operation; road construction in the hills; and in general, construction management. Adequate technical oversight will be provided by KEL’s own on-site project team and the Owner’s Engineer. The Lender’s Engineer will safeguard the interests of the lenders (IFC and others) to ensure that the risk of the lenders is minimized. The above is achieved by project supervision and monitoring to ensure its timely completion, within cost & of requisite quality. While doing regular factual reporting from site, the Lender’s Engineer also monitors the proper utilization of funds. The Lender’s Engineer will also provide inputs to the technical oversight from the MOE. The WBG’s own technical staff will be involved in supervising the Project. Depending on the circumstances of implementation and available resources, the Bank team may wish to supplement its technical resources with outside experts. In addition, the POE will continue to meet during the Project construction period.
3. Social and Environmental Management. While the anticipated negative social and environmental impacts of the project are considered to be manageable (the project was initially identified in a screening and ranking exercise as a low negative impact project), management of these issues nonetheless requires sensitivity and awareness. KEL is well-placed to manage safeguards issues on the basis of the comprehensive impact assessments including extensive consultations that were carried out during project preparation. A social and environment manager will be engaged and will be posted at site to lead a team of consisting of environmental, safety and health, social and public relations specialists. In addition, KEL will engage independent monitors of the implementation of safeguards aspects of the project and will consult as required with the project POE which includes experts in social and environmental issues. The WBG’s social and environmental specialist teams are based in Kathmandu, New Delhi and Washington D.C. and it is anticipated that they will undertake two supervision missions annually. 4. Communications. The extensive consultations carried out during Project preparation indicated widespread support for the project across the various groups represented in the Project area. In such a situation, effective and constant communications are critical to managing
47
expectations of the project. KEL has established the basic implementation infrastructure for good communications management by opening a Project Information Center at site; translating and disseminating information on the Project, its expected impacts and the agreed mitigation measures in Nepali, Limbu, Tamang and Rai (Bantawa and Khaling dialects); engaging public relations and corporate social responsibility officers to facilitate communications with PAPs and other stakeholders. Given the current energy crisis in the country and the relatively small scale of this Project, the proposed Project is not likely to see any opposition from stakeholders at the national level.
Implementation Support Plan (IDA Funding)
I. What would be the main focus in terms of support to implementation during?
Time Focus Skills Needed Resource Estimate Partner Role First twelve months
Project launch Technical, environmental, social, communications
$120,000/year To be identified
12-60 months Project implementation
Technical, environmental, social, communications
$120,000/year To be identified
Other II. Skills mix required
Skills Needed Number of Staff Weeks Number of Trips Comments Technical and contracting (various specialties); environmental and social management; communications
Technical: 8 weeks Environment: 6 weeks Social: 6 weeks Communications: 3 weeks
Minimum 2 annually; depending on circumstances, a third supervision trip may be advisable
48
Annex 6: Technical and Contracting Aspects of the Project
Nepal: Kabeli-A Hydroelectric Project
Project Genesis 1. The KAHEP was one of the first projects prepared for offering through the Power Development Fund, which the GON established to promote private sector participation in the hydropower sector. The project was one of the short listed projects selected on the basis of a screening and ranking exercise carried out in the late 1990s to identify technically attractive projects with minimal adverse social and environmental impacts. The GON offered a contract on BOOT terms to KEL to develop the project through an ICB process in 2007. The Developer 2. KEL’s shareholding consists of BPC (Nepal), holding 26 percent, together with Gurans Energy Limited holding 69 percent and Asia Pacific Tech. Co. Ltd. (China) 5 percent. Gurans Energy Limited is a Nepalese joint venture between InfraCo Asia, holding 60 percent and BPC (Nepal) holding 40 percent. KEL is majority-owned by BPC. After a protracted period, the PDA was signed by the DOED and KEL in January 2010 and amended in July 2013. BPC Nepal has majority ownership of KEL and, hence, will take a significant role in BOOT for the project during the concession period. Upon the expiration of the concession period (defined as 35 years after the issuance of the generation license), KEL will transfer ownership of the project and all project facilities to the GON in good running conditions, in keeping with the requirements of the PDA, the generation license, and all applicable laws and regulations. 3. Established by a Christian missionary organization called the United Mission to Nepal (UMN) in 1966 to electrify the then emerging town of Butwal in central Nepal, BPC is a pioneer in the field of hydropower development in Nepal. Since the construction of its first hydropower project, the 1 MW Tinau HEP, UMN/BPC have been instrumental in helping create a number of indigenous companies to cater to the needs of the hydropower sector in Nepal. These include an engineering consultancy (the HCE), a construction firm (the Himal Hydro), a manufacturing unit (the NHE), a technical institute (the BTI) and a hydraulic research institute (the Hydrolab). In 2003, the GON divested most of its majority ownership and management control of BPC to private investors in a public-private partnership model with the GON retaining a little less than 10 percent ownership. BPC is registered with the Securities Board of Nepal and listed in the Nepal Stock Exchange Limited. Project Description and Salient Features 4. The KAHEP is located primarily in Panchthar district in Eastern Nepal, with a small part of the infrastructure in neighboring Taplejung district (north of the Kabeli River). The headworks are located in the Dhuseni area of Amarpur VDC approximately 2.5 km upstream of the Kabeli Bridge along the Mechi Highway. The dam consists of a barrage, with four radial gates and an underground desilting basin.
49
5. The headrace tunnel is 4,326 m long and the penstock is 268.3 m in length. The reservoir will have a live storage capacity of 335million m3. A semi-underground powerhouse is planned on the banks of the Tamor River in the Pinase area of Amarpur VDC. The powerhouse site is 15 km from the nearest point on the Mechi Highway which is about 187 km away from East-West Highway (Charali). The installed capacity is 37.6 MW. Peaking is planned twice a day, with two hours of morning and four hours of evening peak. The annual average saleable energy is estimated at 205.2 GWh excluding outages. Power evacuation will be provided by the Kabeli Transmission Line, which is presently under implementation with financing from IDA. 6. The original feasibility study of the project was commissioned by the GON and carried out in 1998 as part of the Medium Hydropower Study Project, which sought to identify viable projects with minimal negative impacts. The updated feasibility study and EIA were carried out by KEL over 2010/11 and updated in 2013. Key Technical Challenges 7. KAHEP is a typical middle mountain hydropower project on a relatively steep river requiring cost-effective engineering solutions for water diversion through a tunnel to a powerhouse. Four major broad engineering challenges are identified with the project: (a) dam safety, (b) headworks arrangement and sediment management, (c) geotechnical and tunneling, and (d) project construction management. OP 4.37 Safety of Dams 8. The dam height is approximately 15 meters, and the project is located in a zone of high seismicity1. The project triggers OP 4.37 Safety of Dams, and the measures undertaken by the developer meet the appraisal-stage requirements of OP 4.37. KEL has constituted an independent POE in the following fields: dam engineering and safety, engineering geology and tunneling, headworks, and sediment management. In compliance with Performance Standard 4 on Community Health, Safety and Security and as per the Bank’s requirements, the following reports were prepared by the client: (a) draft plans for construction supervision and quality assurance, and (b) a Dam Safety Plan which includes an Operation and Maintenance Manual, Emergency Preparedness Plan and an Instrumentation Plan. The dam was furthermore designed to pass a 1,000-year flood. 9. Inundation maps were prepared to identify the areas that could be inundated at different flood levels in order to help identify people and property at risk from flooding. As part of the Emergency Preparedness Plan, an inundation map was developed for a dam breach discharge of 1,082 m3/s. The study shows that there is very little risk of flooding to the households and 1 Nepal is divided into three seismicity zones based on the seismic characteristics and tectonic features of the respective regions. Zone 2 passes through the Siwalik Hills and the Lesser Himalayan Region and exhibits a high concentration of seismicity and moderate depth of seismic zone characterized by great earthquakes and high stress. Zone 3 occupies the northernmost part, which is the Higher and Tethyan Himalayan Region of the country. This region is characterized by the relatively low distribution of the seismicity where the seismic zone lies at the deeper portion. Kabeli-A Hydroelectric Project lies in Zone 3 and is close to its border with Zone 2.
50
settlements in the project area, except for a small area of agricultural land. Kabeli Bazar, a small settlement downstream of the diversion dam, would be most vulnerable to flooding. However, the inundation study showed that Kabeli Bazar is not at risk from flooding, even in an extreme event, such as a dam break at the headworks of KAHEP. Headworks and Sediment Management 10. The Kabeli River is a tributary of Tamor River, one of the major rivers of the SaptaKoshi Basin. The Kabeli basin is located in between latitudes 27° 16' and 27° 17' N and longitudes 87°42' and 87°43' E. The SaptaKoshi Basin drains the Eastern Development Region of Nepal. The catchment area of the Kabeli River is 862 km2 at the proposed intake site. The catchment area above the permanent snow line (El. 5,000m) is about 0.5 km2, with elevation ranging from 560 m to 5,600 m. The catchment of Kabeli River at the proposed project site has characteristics of a middle mountain catchment with 80 percent of annual flows occurring during the monsoon season from the end of May to the end of October. The mean monthly hydrograph is presented in Figure 6.1.
Figure 6.1: Mean Monthly Hydrograph of Kabeli River
11. Until KEL installed a gauge in the river near the intake in 2009, the Kabeli was an un-gauged river. For this reason, historical flow data are not available. Therefore, the hydrological analysis was based on indirect methods, such as catchment correlation and regression. The long-term flow series available for the Tamor River at gauging station number 690 at Mulghat was transposed to Kabeli for purposes of the project hydrological analysis. This station has daily flow records for about 42 years since 1965. After KEL installed a gauge in the river near the intake, stage measurements have been taken twice a day and this practice will be continued during the study, design, construction and operation phases. The data from this newly established station were used to update the hydrograph and the flow duration curve.
51
12. Headworks design and model studies. The gross head of KAHEP is 118.8 meters and the design flow is 37.73 m3/s. Head is one of the variables that affect turbine abrasion. The others are mineralogical composition and sediment concentration. On average, in similar rivers of the Himalayas, more than 60 percent of sediments are finer than 0.075 mm (silt). Generally, the finer the sediments, the larger the facilities required for settling sediments before the water enters the turbine. Data from Kabeli River shows a 40 percent quartz content in the mineralogical composition of the sediments, requiring effective sediment exclusion in the water abstracted for power generation. 13. The existence of Hydrolab, a hydraulic laboratory in Kathmandu, has made it possible for the engineers to test out the design in a physical model study. A physical hydraulic model of the Kabeli River at the proposed headworks location of the project was prepared for conceptual verification of the headworks arrangements and to arrive at a favorable hydraulic design of the headworks structures. A fixed bed model capable of testing the proposed headworks arrangements of the project was built in a scale according to Froude’s model law at a length scale ratio of 1:50. The model is about 35 meters long and about 3 meters wide. Among other things, the operational guidelines for handling the reservoir sediment including trash handling at the intake, were studied in the model. 14. The model was used to study how the headworks concept would satisfy the following performance standards:
• Safe passage of the design flood
• Safe passage of the bed load
• Safe passage of the floating debris
• Bed control at the intake
• Abstraction of design flow through the intake
• Flushing and longevity of the peaking reservoir 15. After satisfactory performance of the conceptualized headworks, optimization of headworks structures proceeded. The optimization phase focused on the following:
• The flow pattern at the approach to and through the intake and the settling basins
• Flow pattern through the gates
• The energy dissipation downstream of the weir
• The performance of the sluice gates
• River bed stability at the downstream of the stilling basin
• Sediment deposition and transportation pattern in the vicinity of the dam
• Flap gate’s performance and removal of floating debris
• Levels of various components of the headworks structures
52
16. In view of the space limitations and concerns about slope stability at the site, in the course of project preparation, with the advice of the POE, the developer considered the option of foregoing the traditional underground settling basin (a standard part of project design in rivers with high silt loads) in favor of using the reservoir itself for flushing sediments. The idea was tested in hydraulic laboratory, but was abandoned after test runs demonstrated that the concept did not work properly in the KAHEP. 17. After completion of successful model tests, Hydrolab presented the Company with the results of the physical hydraulic models study of the headworks of KAHEP. Hydrolab studied the existing situation in Kabeli River model and carried out studies to ascertain the characteristics of the river especially during floods and record key parameters such as levels of the individual components of the headworks, flow patterns and water levels, bed load transport patterns and the transport capacity. For selected flow situations a series of tests were carried out. 18. Sediment Management. The experience of many hydropower projects operating in the Himalayas shows that the practice of operating a hydropower plant at maximum generation capacity is not optimal, given the cavitation and wear and tear on turbine parts by sediments. On the other hand, sediment-guided operations tend to be more sustainable and require monitoring of sediment concentrations in real time. In accordance with the advice from the design consultants, KEL has incorporated in the design and contract documents the installation of real-time sediment and flood monitoring system downstream of Phawa confluence, allowing communication and warning the operators at headworks during times of extreme floods and excessive sediment entry into the reservoir. Sediment settling basins will be flushed as needed, ensuring continued storage capacity for incoming sediments and minimization of changes to stream sediment concentrations below the powerhouse over baseline conditions. Geotechnical, Tunneling & Risk Management 19. The project area lies in the Lesser Himalayan crystalline to meta-sedimentary rock, consisting mostly of granite with its subgroup of phyllite, quartzite, gneiss, and feldspathic schist of the Taplejung window. The headworks area consists of granite, whereas the surge shaft and powerhouse areas consist of phyllite, schist, and quartzite. In general, the orientation of the foliation is 30-40º towards the north. Approximately 17 percent of the tunnel alignment passes through poor rock. 20. A detailed Geological Baseline Report was prepared based on the geotechnical and geological investigations of the project area that were carried out for the 1998 feasibility study, and updated recently with additional investigations related to drilling, mapping and rock mechanic tests. The Geo-technical baseline Report provides a description of anticipated ground conditions in Kabeli for design and construction of surface and subsurface facilities in terms of geotechnical baseline values and conditions. The interpretations and baselines statements contained in the Geo-technical baseline Report provide a contractual definition of ground conditions that the contractor is expected to encounter during construction. In all, 185 m of additional core drillings were completed, including test pits and trenches. The design of the project is based on these available geotechnical data of the project. Even though the best-
53
available information has been incorporated in the design, the project will still face geological and geotechnical risks. 21. In view of the importance of identifying the best possible location for the headworks and the pertinent structures (such as the settling basin and intake portal), KEL engaged an international tunneling expert on the panel of experts. This expert has also assisted KEL in identifying potential risk areas in the powerhouse area and along the surface penstock alignment (which is assumed to traverse unstable grounds) and to provide inputs to the design of the surge shaft and outlet portal area. The headrace tunnel in the KAHEP is only 4.3 km long but it includes no intermediate adits along its alignment. KEL carried out a Risk Management Plan to explore various excavation options: a) drill and blast; b) mechanized excavation; and c) conjunctive use of the techniques in carefully selected tunnel stretches. The study considered options for achieving acceptable safety and production standards. 22. Risk management strategy in Kabeli. The Risk Management Plan helps to identify hazards and associated risks, as well as pro-active actions to eliminate or mitigate these risks, and to allocate risks to the various parties to the contract. Together with the Geo-technical Baseline Report and the Bill of Quantities, the Risk Management Plan forms the backbone of the risk management process in Kabeli. They address risk allocation, mitigation with regulation of preventive measures and respective responsibilities. These instruments contribute to efforts to ensure the overall project success by addressing issues of safety, quality, budget, and schedule. KEL prepared the Risk Management Plan using the Code of Practice for Risk Management of Tunnel works prepared by the International Tunneling Insurance Group, under the guidance of the POE. As far as is known, this is the first time that this type of innovative approach in risk management strategy is being introduced in Nepal. The strategy provides an opportunity to the bidders to raise any queries on KEL’s Risk Management Plan during the pre-bid conference. As per KEL’s risk management strategy, the bidders are required to prepare and submit their own risk management plan (in the form of a Risk Action Plan), which will form part of the bidding documents that they will submit to KEL. The bidder’s Risk Action Plan will be based on their own specific risk assessments appropriate to the methods of working allowed for (described in Construction Methodology) with descriptions of risk mitigation, control, and contingency measures. The risk management is a continuous process and will be updated regularly during project execution as per mutual agreement between the Owner and the Contractors. Contracts and Procurement Plan 23. KEL has estimated the construction time at about 60 months, including a provision of 12 months delay to the contracted construction period. While this construction period is technically feasible, it must be stressed that in hydropower projects in Nepal, delays are common because of (i) financing constraints, and (ii) conditions encountered during construction, including those that cannot be foreseen at the time of project preparation. The construction of the project will involve work at four sites in parallel: (i) at the headworks, (ii) along the tunnel alignment including the surge shaft, (iii) along the penstock alignment, and (iv) in the powerhouse area. Construction of the headrace tunnel and of the headworks structure is the most critical and time-consuming aspect of the project. To achieve its construction goals, KEL has adopted a procurement strategy based on dividing the project into seven lots as shown in Table 6.1.
54
Table 6.1: Contract Packaging for KAHEP
Lot Description Nature of
Competition Nature of Contract Pre-
qualification? Pre-construction activities 1 Access Road upgrading Local contractors/
NCB for upgrading
Item rate
No
2 Housing and infrastructure development
NCB Item rate No
Construction activities 3 Miscellaneous works NCB Lump sum No 4 Civil construction of surface
structures ICB Item rate Yes
5 Civil construction of underground structures
ICB Item rate Yes
6 Hydro mechanical works ICB Plant and Design-Build
Yes
7 Electromechanical works ICB Plant and Design-Build
Yes
24. Pre-construction activities will be carried out by the national contractors selected through NCB. The construction phase activities that require a high level of precision and include major components of the project will be carried out by contractors selected through ICB.
a) Contracting Strategy for Pre-construction Phase Activities 25. Access Road (Lot 1). An item rate contract will be used to select the contractor to upgrade the existing track opened by community. As far as possible, preference will be given to a local contractor for upgrading the track. 26. Housing (Lot 2). Work under these lots will be executed on item rate contracts, of which negotiation between the bidders and KEL is underway. The contractors will execute the work according to the design drawings and other requirements as specified in the technical specifications. The contractors will be paid for the actual quantity of works executed. The quantity of work performed will be measured using the pre-defined mode of measurement. Performed quantity of works will be multiplied by the respective rates specified in the contracts to determine the actual payments. 27. Pre-qualification will not be conducted for lots 1, 2, and 3; contractors shall be selected through direct NCB process. The bid documents have been prepared as a single-stage, two-envelope method, in which the bidders shall submit two sealed envelopes, one containing the technical proposal and the other containing the financial proposal enclosed together in an outer single envelope. Initially, the technical proposal is evaluated and the financial proposal shall be evaluated only of technically qualified bidders.
55
b) Contract Strategies for Construction Phase Activities
28. Civil Construction of Surface Structures (Lot 4) and Civil Construction of Underground Structures (Lot5).The works under these lots will be executed on item rate. The contractors for these lots will be selected through ICB process. Eligible contractors were shortlisted through a pre-qualification process. Contracts are under negotiations between KEL and the bidders according to the design drawings and technical specifications, including pollution prevention and control measures as well as labour and occupational health and safety requirements, and bill of quantities specified in the bidding documents. The contractors will execute the works according to the design drawings and other requirements specified in the technical specifications. The contractors will be paid for the actual quantity of works executed. The quantity of works performed will be measured using the pre-defined mode of measurement. Performed quantity of works will be multiplied by the respective rates specified in the contracts to determine the final payments. 29. Hydro-mechanical Works (Lot 6) and Electro-mechanical Works (Lot 7).The works under these lots will be executed on the basis of a Plant and Design Build Contract. The bill of quantity, related drawings, and technical specifications are specified in the bidding documents. ICB is used to select the contractors for these lots. Eligible contractors were shortlisted through a process of pre-qualification. Currently contracts are under negotiations between KEL and the bidders. The contractors will be responsible for the design in line with requirements detailed in the contracts, and the design and all drawings will be reviewed in details with the employer to get the approval of the employer and its representatives. 30. Both the general and particular conditions of contracts follow the FIDIC standards. The General Conditions of Contract for Construction (1999) prescribed by FIDIC were taken as the general conditions of the contracts and the amendments and supplements to the general conditions of contract were included in the particular conditions of contract. The contracts for the electro-mechanical and hydro-mechanical equipment will be signed at about the same time as the signing of contracts for the main civil works, by end June2014. The supplier will be contracted under supply and installation of plant arrangements. KEL will engage an Owner’s Engineer, by April 2014, to bolster its capacity for contract management. The Owner’s Engineer will consist of a team drawn from an experienced international consulting firm. Construction Management Plan 31. Responsibility for overseeing the project implementation within KEL rests with the KEL Project Director, representing the Owner. KEL has established a project office headed by the Director. The project director will serve as the Employer’s representative. The Project has a Project Manager and a Deputy Project Manager assisted by a team of the following senior international advisors: (i) Team Leader, (ii) Civil/Structural Engineer, (iii) Geotechnical Engineer, (iv) Engineering Geologist, (v) Electrical Engineer, (vi) Mechanical Engineer, (vii) Contracts Engineer, and (viii) Planning Engineer, (ix) Environmental Officer/Engineer, and (x) Safety and Security Engineer. The overall project implementation arrangements are described in Annex 3. The specific arrangements for construction management are described here.
56
32. The Engineering Unit of the KAHEP project management team will be responsible for design, planning, and contracts administration. The unit will also be responsible for the overall management of project construction, environmental and OHS performance and quality control of all the lots. The Engineering Unit will monitor and evaluate project progress and performance, prepare annual programs and implementation reporting. The construction activities will be supervised by a Resident Engineer and a Deputy Resident Engineer with a dedicated team for Lots 4, 5, 6, and 7. Each team shall consist of the required numbers of civil, electrical, and mechanical engineers. There will be a Support Team comprising materials testing, surveyors, and CAD/CAM specialists. Assessment of client’s capacity for project implementation and risk mitigation 33. KEL is a joint venture company with its majority owned by BPC. An international consulting firm will be recruited as the Owner’s Engineer as per FIDIC for construction supervision. The resources made available to KAHEP through the Owner’s Engineer will be supplemented by other experts and international advisors, including the POE. In addition, the KAHEP team will receive training in construction management prior to the launch of construction and, periodically throughout the implementation period, in specific technical aspects of relevance to the project. 34. Measures have been taken to address the risk inherent in KEL’s limited construction management experience. Specific measures include the following:
• design review carried out by a reputed international consulting firm;
• verification of key design concepts of the headworks through a physical model study;
• guidance from POE members. Together with design verifications in the hydraulic laboratory and guidance from the members of the POE, the detailed design has undergone final fine-tuning. The design has reached a satisfactory quality and the project can be implemented based on the present design;
• review of the bidding documents by a reputed international consulting firm;
• POE guidance to KEL on incorporating the Geo-technical baseline Report, Risk Management Plan and the Bill of Quantity in the bidding documents; and
• Owner’s Engineer recruited for construction supervision and construction management.
35. Dam Safety Plan which includes an Operation and Maintenance Manual, Emergency Preparedness Plan and an Instrumentation Plan.
57
Annex 7: Environmental and Social Aspects of the Project
Nepal: Kabeli-A Hydroelectric Project
A) Environment 1. Project location. The KAHEP is located in Panchthar district in the border areas of Panchthar and Taplejung districts in the Eastern Development Region of Nepal. The Kabeli River is a natural border between the Panchtahar and Taplejung districts. The project utilizes a more than 15-km loop river stretch formed by the Kabeli with Tamor Rivers. 2. The KAHEP. It is a peaking run-of-river project with a reservoir capable of holding a few hours’ of average flow. The generation of energy to meet peak demand will take place during two hours in the morning and four hours in the evening. The Kabeli River water will be diverted through a 4.3 km headrace tunnel and discharged into the Tamor River after power generation. 3. The main components of the project include: a dam (24.1m high from the foundation level and and 60 m long barrage with intake and settling basin), tunnel (4.3 km long, 5.65 m diameter), a semi-underground powerhouse, and a switch yard. The access road to the headwork site is about 7.5 km long (a track opened by the community already exists for a significant part of this), and the access road to powerhouse is about 15 km. The project plans to upgrade and maintain these roads. There will be a camp for the project staff and two camps for the contractors’ personnel and workers, one near the headworks and the other near the powerhouse. 4. The construction activities will include excavation, blasting, drilling, quarrying and burrowing, aggregate crushing, concrete batching, and muck disposal. Five potential sites for quarrying sand, aggregates and boulders have been identified (at the flood plains of or along the Tamor and Kabeli rivers). The facilities for aggregate crushing, storage of construction materials, and batching plants will be located at the headworks and powerhouse sites, close to the active construction sites. Three potential sites have been identified for spoils and muck disposal (two sites near the headworks and one near the powerhouse). KEL estimates that about 60 percent of the excavated material may be suitable for use as aggregates. Besides the local construction materials, the project will bring in construction materials such as blasting materials, cement, brick or concrete blocks, steel, gabion wire, geo-textiles, timber, fuels, cohesive materials and admixtures, and mechanical and electrical items such as conductor wires. Five sets of diesel generators will supply construction power at the headworks, adit 1 at the tunnel intake, surge shaft, adit 2 at the powerhouse, and the powerhouse area. 5. The greatest number of people expected during the peak construction period is around 600 to 800, including skilled, semi-skilled and unskilled human resources. The project estimates that around 30 to 35 heavy vehicles in a day will use the Mechi Highway (Rajmarga) to bring in construction materials, and around 100 light and heavy vehicles will be moving in the active construction sites during the peak construction period. 6. Environment of the Project Area. The project area is mountainous, but the low land and the more gentle slopes are used for terrace cultivation. The project will require about 47.7ha of
58
land (of which about 22.5ha is required permanently, while about 25.2 ha will be acquired temporarily during the construction period). Out of the permanently required land, about 7.68 ha is agricultural land, 1.57 ha is forest land, and 13.26 ha is the riverine area, including river bed, river flood plains and elevated banks. 7. The major part of the project area is located in the mid-mountain physiographic zone of Nepal. These mountains are young and fragile in general and the catchment area of the Kabeli river is susceptible to instabilities such as landslides, debris flow, gully and rill erosions, particularly during the monsoon. The higher risk zones for landslides are 25 to 30 km upstream from the headwork sites. The project area is thus relatively stable with no recent active landslide features visible. Most of the project structures and facilities are located on active alluvial flood plains or alluvial tars or gentle slopes in the valley. 8. Nepal in general is in a high seismicity zone. Within Nepal, the KAHEP area falls in Seismicity Area 3, which is characterized by a relatively low distribution of seismicity. Based on recorded seismicity characteristics and the historical record of earthquakes in the region, the area of KAHEP seems to fall in the area of moderate seismicity. 9. The Kabeli River is reported to change its geomorphic forms, such as water course and the sand/boulder island bars, depending upon the river floods and sediment deposition. These changes are confined to the active flood plain and alluvial plain. The high standing alluvial terraces (above 5m from the river bed) and the geomorphic forms of the sloping valley flanks are, however, stable. The alluvial fans, such as Piple Khola alluvial fan at the powerhouse site, are reported to have changed their geomorphic forms frequently because of floods and debris slides in the catchment. 10. The Kabeli basin covers a wide range of climates resulting from high altitudinal variations. The altitude of the area around the project varies from between 500 m to more than 2,000 m above mean sea level, and hence has two distinct climatic zones: subtropical in the valley sections that are less than 1,000 m altitude, and warm temperate to cool temperate above 1,000m. The headwork and powerhouse sites are hotter and more humid than the nearby areas of higher altitudes. Nearly 90 percent of the rainfall occurs during the monsoon season between June and September. In general, the amount of precipitation is highest in the south at the lower elevation and gradually decreases to the north with the increase in elevation. The mean annual precipitation over the project area is estimated to be 2135 mm. Climate change 11. In 2011, Nepal was ranked the fourth most climate vulnerable country in the world. Several of Nepal’s most important development opportunities (hydropower and agriculture) are highly susceptible to climate change, and its most extreme development risks (i.e., drought, flood, Glacial Lake Outburst Floods, and waterborne diseases), may be heightened by it. The 4th Assessment Report of the IPCC estimates that Nepal will experience the impacts of climate change through an increase in temperature, more frequent heat waves, and shorter frost durations in the future. Winters are expected to be drier and monsoon summers wetter, which could result in more frequent and intense summer floods and winter droughts. Even if total rainfall is not
59
expected to decline, the increasingly rapid decline in glacial cover from temperature increases will increase runoff, which in turn will increase floods, Glacial Lake Outburst Floods, and landslide events. 12. The most critical impacts of climate change in Nepal are related to its water resources and hydropower generation, stemming from i) glacier retreat, expansion of glacial lakes, and ii) changes in seasonality and intensity of precipitation. These impacts include increased risk of a Glacial Lake Outburst Flood, increased sediment loading (and landslides) as a result of Glacial Lake Outburst Floods, as well as intense rainfall events, and increased evaporation losses from reservoirs as a result of rising temperatures. Increased sedimentation is in part linked to Glacial Lake Outburst Floods and part linked to changing land use patterns.
13. There are five glacier lakes identified in the Kabeli basin. Most of the glacial lakes in the catchment are small. None of these lakes are identified as potentially dangerous lakes and there is no evidence of Glacial Lake Outburst Floods in the Kabeli basin in the past. The Tamor River catchment, however, has a history of Glacial Lake Outburst Floods. However, the flood risk to the powerhouse located close to the Tamor flood plain is considered to be minimal in view of the distance of the powerhouse site from the glacial lakes in the Tamor catchment. 14. Two climate change factors will contribute to increased variability of river runoff: glacier retreat; and changes in timing and intensity of precipitation. Runoff will initially increase as glaciers melt, and then later decrease as de-glaciation progresses. In addition, decreased winter snowfall means less precipitation would be stored on the glaciers, so this would in turn decrease the spring and summer runoff. Winter runoff, on the other hand, would increase due to earlier snowmelt and a greater proportion of precipitation falling as rain. 15. Precipitation projections show wetter monsoons (with moderate certainty) and drier low flow seasons (with lower certainty). Many of Nepal’s rivers are fed by runoff from more than 3,000 glaciers scattered throughout the country. The most severe projections for Nepal show that runoff could reduce by 14 percent and that this would reduce the electricity generation of existing plants. However, measured data from several hydropower plants do not show uniform results. This runoff decrease will affect Nepal’s economically feasible hydropower potential; however, with only 1-2 percent of that potential currently developed, it will be quite some time before opportunities to expand the hydropower supply are constrained by climate change. 16. Nepal’s existing hydropower facilities are of the “run of river” type, with no associated dams, which makes them more vulnerable to stream flow variability. Kabeli has a small peaking reservoir, thus reducing its vulnerability compared to project designs with no dam. Regional hydrology 17. The Kabeli River is one of the tributaries of the Tamor River and the Tamor is one of the major rivers of the SaptaKoshi Basin. The catchment area of the Kabeli is 862 square km at the barrage site, of which only about 1.1 square km is above the permanent snowline (5,000 m). TawaKhola, PhawaKhola and InwaKhola are the major tributaries of the Kabeli River. Table 7.1
60
below shows the mean monthly flow of KabeliRiver at the proposed KAHEP dam site: the lowest flow is 8.6m3/s, in February.
Table 7.1: Mean Monthly Flow of Kabeli River at the Proposed KAHEP Dam Site
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
mean flow m3/s
10.31
8.63
8.88 13.30 31.63 86.28 168.95 181.71 127.42 58.11 25.25 16.18 61.4
18. The observed maximum flood in Kabeli was in 1987 with an estimated flood discharge of 703 m3/s at the proposed headworks. The observed lowest flow in the Kabeli occurred in 1970 with an estimated flow of 1.7 m3/s. The 100-year and 200-year return period floods at the intake have been estimated to be 1,859 m3/s and 2,083 m3/s, respectively. 19. Three springs (namely Jor Dhara, Jarayotar, and Faudar Pati Dhara) have been noted close to the tunnel alignment. Three sub-tributaries or rivulets (Sarki Khola, Andheri Khola, and Khahare Kholsi) join the Kabeli River downstream of the dam site. The local communities use these springs and streams for drinking water and irrigation purposes. The water from the Kabeli river downstream of the diversion dam site is thus not used for irrigation, drinking or for operating water-mills. However, the Kabeli river is used for occasional bathing and swimming, and for rituals during religious days (such as Kuse Aushi, and Matatirtha) and associated with cremation. There are three cremation sites downstream of the dam site: one below Kabeli Bazar at KholaKharka; the second 2.5 km downstream of the dam near Kabeli Bazar, and; the third 3.5 km downstream in the Sirupa area. 20. As the project is located in a remote rural area with no modern industries, the quality of air and water in the project area is considered generally good. Although the air is dusty (high TSP and PM 10) along the road because of the movement of vehicles. Indoor air quality is considered poor because of the use of fuel-wood for cooking. The water quality in the rivers and streams is affected by activities like open defecation and bathing and washing, as well as by erosion and landslides in the catchment. The recent use of chemical fertilizers and pesticide for agriculture in some areas of the catchment may also be polluting the river waters. Noise levels in the area are also generally low: at the dam site noise is registered at between 40 to 45 dBA, and at the powerhouse between 40 to 50 dBA. As expected, noise levels in the Bazar areas and along the highway are higher: day time noise levels at the Kabeli Bazar vary between 45 to 60 dBA. 21. The project area does not fall within any critical natural habitat or protected area or biodiversity conservation sites. The nearest conservation area is the Kanchanjunga Conservation Area (KCAP), which is about 25 km north (aerial distance) of the project site, and the nearest boundary of the Tinjure Milke Jaljale forest, which is proposed for protected forest status, is about 10 km (aerial distance) from the project. These both are a few days’ trekking by steep mountainous terrain from the project site.
61
22. The project region2 has forests that are either managed directly by the state, or that have been handed over to the community, or leased to users groups, or forests on private lands. Local people use the forests to gather fuel wood, fodder, wild fruits and vegetables, medicines, and timber. In general, the forests in the project region are mostly patchy and are found in the steeper sections of the valley where human settlements and agricultural practices are impossible, or along the ridges of the mountains. Most of the forested areas are degraded, open, or are under the heavy influence of human and grazing animals. According to local people, forests are in better condition now than few decades back because of community forestry and leasehold forestry intervention. 23. The dominant forest tree species in the project region is hill sal forests (Shorearobusta) in the lower valley areas and the Pinusroxborghii or Pinuswallichiana in the upper reaches. Regarding herbs species, Imperata cylindrical, Phramiteskarka, and Arundodonax grow densely in the lower valley while Ageratum conyzoides, Bidenspilosa, Cheilanthes bicolor, Cissampelospareira, and Sidacordata. are major herb species in the upper slopes. The government managed and private forests are in a degraded condition from the regular collection of fuel wood and timber from these forests. The ground vegetation is very poor in the Pinusroxburghii dominant forest in comparison to Shorearobusta dominated forest. The endangered/threatened or protected plant species found in the forest of the region include Shorearobusta (Sakhuwa or sal), Bombaxceiba (Simal or silk cotton), Dioscorea deltoid (Ban tarul or Deltier yam), different lichens species (Jhyau), and different species of Orchids (Sungava). All of these species are commonly found in the project region. One large Simal tree in Pinase is revered by the local Majhi people for ancestor worship. 24. The following forests are likely to be affected by the project: in the headworks area, the private forest of Thechambu VDC (Terhathum) on the right bank of the Kabeli River, and two community forests on the left bank (Kabeli Garjite and Thulo Dhunesi Community forests). The access road to the headwork passes next to the community forests of Thulo Dhuseni. The access road to the powerhouse passes through the Bijuli bhanjyang and Madibung Salleri community forests. Some facilities of the powerhouse are located in the Pinase leasehold forest and the private forests at the Pinase. 25. Villagers in the project region report the occasional presence of solitary large animals in local forests. Barking deer and ghoral have been spotted by villagers feeding and foraging, while the Himalayan black bear, porcupine, jackal, civet, and monkey are seasonal crop raiders, and the leopard and wild cat sometimes lift the young of cattle. Some seasonal bird species also visit the area. However, all of these animals occupy large regional habitats extending far beyond the project area. As the forests in the project area are in a degraded condition, they do not constitute critical habitat for medium and large animals, or for valued biodiversity. 26. The Kabeli River is home to 31 species of fish, of which five species are long-distance migratory species (Tor putitora, Tor tor, Bagariusyarrellii, Clupisomagarua, and Anguilla bengalensis), four are medium-distance migratory species (Labeodero, Neolissochilus
2“Project region” refers to an area bigger than the project development area and includes the project influence area as well as surrounding areas.
62
hexagonolepis, Schizothorax progastus, and Schizothorax richardsoni), and the rest are resident species. These fishes are all also reported in the Tamor River and other tributaries of the Tamor. Of the 31 reported species, only 12 species were actually collected during the 2011 and 2013 fish sampling surveys carried out in Kabeli. The Kabre fish (Pseudecheneis sp), which is a resident fish, is one of the valued fish species by local resident in the Kabeli River. The snow trouts (Schizothorax sp,) are the commercially important mid-range migrant and comparatively large fish found in the Kabeli. Tor putitora (mahaseer) migrates from the lower reaches of the Tamor River to the upstream tributaries such as the Kabeli for spawning. Schizothorax richardsonii (blunt-nosed asala), Schizothoraichthys progastus (pointed-nose asala), Neolissocheilus hexaGONolepis (katle), and Labeodero (gardi) are the short- to mid-distance migratory fishes found in the river here. The major resident fish species found are Crossocheilus latius (lohari), Garra annandalei (buduna), Garragotyla (nakata), Glyptosternum blythi (tilkabre), Psilorhynchus pseudecheneis (tite), and Barilius bendelisis (faketa). All of the mentioned fish species are also available in the other rivers and streams in the region, including in the Tamor River and its other tributaries. 27. Environmental Impact. The EIA of KAHEP was completed in September 2011 (and updated in July 2013). It identifies potential environmental impacts of the project and suggests mitigation measures. The main environmental impacts identified are as follows:
• Loss and/degradation of the local forest and pressure on forest resources including trees, non-timber forest products, and wildlife. The project will occupy a total of 1.57 ha of forest land at nine different places (the biggest single forest plot that is likely to be occupied is 0.50 ha). It is estimated that about 200 trees and 153 pole-sized bushes and shrubs will be cleared from the forest, and their area occupied by project permanent structures and facilities. Some of these trees, such as Shorearobusta and Bombaxceiba, are protected species and require government permits for felling. In addition, some amount of forest degradation and loss of trees and vegetation is possible due to indirect and induced effects (such as increased demand of fuel wood, and non-timber forest products);
• Disturbance to fish and aquatic species from the obstruction created by the dam and the reduced flow of water in the 5.6 km stretch between the dam and the confluence with the Tamor River and flow variability in the Tamor River downstream from the tailrace, especially in dry season during peaking operations. The reduced flow will also adversely affect the water quantity and depth needed for cremation practices of the local communities. The impact of reduced flows in the dewatered section of the Kabeli will occur for nearly seven months every year during the low-flow period (November to May). The impacts of this will be long-term in nature.
• Disturbances arising from various construction activities, and the influx of labor. These impacts include: soil erosion and landslides; increased land instability; obstruction to movement of people and animals; loss of top soil; noise and vibrations impacts; deterioration in water and air quality; depletion or degradation of local springs or other water sources; construction-induced damage to houses or other structures; and possible encroachment to the forests and poaching of animals.
63
28. Impact mitigation measures. The mitigation measures identified in the EIA for the construction and operation periods include the following:
(i) Construction period mitigation measures: compensatory afforestation (25 trees to be planted for every tree felled); lease compensation for the forest land; compensation to the community and leasehold forest user groups equivalent to five years’ production potential (according to Nepalese law and the negotiated agreement with the affected parties); assistance to forestry enhancement programs; only required tree and vegetation to be cleared and only after proper demarcation and tree marking; provision of technical and financial assistance to the affected community forests and leasehold forest user groups; provision of kerosene to the workforce for cooking; provision for camp lodging with liquefied petroleum gas (LPG) cooking facility; prohibition on the sale and purchase of the NTFP and fish in the camps; ban on construction workers entering the forests; limiting construction activities to between 6 am and 6 pm; ban on trade of the meat or other products of wild animals in the construction camps and by/to the workforce; collecting and re-using top soil; providing alternative access for people and livestock in lieu of obstructed access; providing suitable slope retaining structures and flood protection structures; controlled blasting; benching all excavation of more than 3 m height; protecting excavated surface against water erosion by suitable drainage and collection; protecting cut slopes (retaining walls and grass plantation); water sprinkling to reduce dust; provision of personal protection equipment; ventilation in the tunnel; noise control measures; properly planned and designed muck disposal operation at designated muck disposal sites; wastewater to be collected in settling tanks and ponds; collection and safe disposal of used lubricants, grease, and toxic chemicals; separate collection of wastewater from mechanical yard; provision of toilets in the camps and active construction sites; a system for collection and storage of solid waste from camps and construction sites; and compensation for houses and structures damaged by vibration/blasting.
(ii) operation period mitigation measures: continuous release of at least 0.86 m3/s (10 percent of the minimum monthly average flow) of water through the dam; fish ladder in the dam; support for communities for nurturing plantations for five years; assistance to forestry and wildlife enhancement and conservation programs in and around project areas; assistance for local communities in the Kabeli catchment for improving on-site sanitation and agricultural practices; developing the muck disposal sites for public use (in consultation with the community); providing river bank protection measures as needed; and arranging water supply from alternate sources if existing community water sources and springs within a 200m strip along the tunnel alignment) are affected, gradual start up and closing down of the hydropower plant operation, and siren warning system for tailrace downstream communities.
29. Minimum Water Release and Environmental Flow. The EIA recommended a continuous release of at least 10 percent of the minimum monthly flow (that is 0.86 m3/s) from the dam at all times to maintain the minimum flow required by selected aquatic species. In the stretch of the Kabeli river below the diversion dam and before the confluence with the Tamor river, the Kabeli river water is required for: (i) cultural use, and (ii) for sustaining aquatic life (fishes, particularly Kabre fish), but the river water is not used for irrigation, drinking, or water
64
mills. In addition to the minimum release through the dam, three3small perennial local streams join the Kabeli river between the proposed dam and the confluence with Tamor River and thus contribute to flows in this section of the river. There will also be a contribution from groundwater flows. 30. It is estimated that the minimum flow at Kabeli near Kabeli Bazar, combining the minimum release and the contributions from the local perennial rivulets and from groundwater would be 1.3m3/s in the month of April (the minimum flow released from the dam is 0.86 m3/s, plus minimum groundwater contribution up to Kabeli bazar is estimated to be 0.3 m3/s, and plus the minimum contribution by sub-tributaries is 0.18 m3/s). Also there are even smaller rivulets joining the Kabeli river downstream of the diversion dam but they are almost dry during the low flow period (November – May, particularly in the months of February, March and April). From June through October, the river flows will be greater than the designed flow of the project, and hence it is expected that there will be sufficient water in this section of the river. 31. KEL engaged an independent team of fish experts to review the environmental flow recommendations and, as needed, to revise or augment these recommendations. The team interpreted the findings of different assessment methods in the context of Nepalese conditions and show that the proposed 10 percent minimum flow and the depth and velocity created by such release will fulfill the habitat requirements of most of the fish found in the Kabeli river, the exceptions being Bariliussp and Labeo sp. Finally, the findings from simulation models and of the CRAB model for the brown trout have been compared with the snow trout, since this is an important mid-range migratory fish with a high food value. The data show that the required discharge, depth, and velocity can be maintained in most of the river sections after release of the 10 percent minimum flow, and the minimum requirement for the survival of fish can be created after such release. Considering the findings of these three models, diversity, composition, and size of the captured fish, the independent review found the proposed 10 percent minimum release to be appropriate to maintain the downstream aquatic flora and fauna. The independent assessment supported the mitigation measures recommended in the EIA, and proposed the following additional measures: construction of fish passages at the dam to assure that river connectivity is maintained; in addition to the minimum downstream flow release, consider formative and flushing discrete downstream releases to meet specific seasonal habitat (such as migration cues) or social (such as burial ceremonies) needs; carry out a habitat management program (minimize removal of boulders from the river bed, construction of six pools at specified locations); undertake plantation work to the extent possible in the areas upstream of the reservoir; prohibit fishing in the stretch of reduced water flow in the dry seven months and patrol to enforce prohibition; carry out an aquatic habitat and fish conservation awareness program; trash rack to minimize fish entrainment; and enhanced monitoring. If the monitoring results indicate severe impacts on fish, additional mitigation measures, such as open water stocking, may be implemented. The initial monitoring program is proposed for two years with subsequent adjustments to be made based on the findings of the initial monitoring. In addition, to avoid impacts related to drastic flow fluctuation below the tailrace in the Tamor river during peak generation, gradual start up and closing of the hydropower plant to avoid abrupt increases or
3Sarki Khola, Andheri Khola and Khahare Kholsi.
65
decreases in flow from the tail water discharge at the Tamor will be considered during the dry season. 32. These proposed environmental management and dam safety and emergency management measures are expected to be adequate to manage potential impacts regardless of the climate future of the region during the life of the KAHEP. The dam design is engineered to pass the 1,000-year flood, which provides a sufficient buffer to ensure physical integrity during the project’s lifespan, even with climate change. Meanwhile, the project's commitment to robust aquatic monitoring and an adaptive management approach will allow for additional measures, including, for example, discrete flow releases, if necessary to ensure river continuity for aquatic wildlife (for example during critical upstream migration periods for migratory fish) and cultural activities. 33. Analysis of Alternatives. On the basis of a holistic assessment incorporating technical, environmental and social considerations, KAHEP has been identified as one of the top-ranking hydropower projects in Nepal. The project was first identified by the Koshi river Basin Master Plan Study (1983-85), and further investigated by successive studies such as the Medium Hydropower Study Project in 1997-98. The Study assessed 138 proposed hydropower projects throughout Nepal in the range of 10-300 MW. A three-stage process of screening, coarse ranking, and fine ranking was used to identify the most attractive projects. The screening and ranking process combined technical, economic, environmental and social criteria and included site visits and consultations. Environmental criteria used were related to physical, biological, and socio-cultural aspects such as land take, watershed condition, downstream impacts, bio-diversity, aquatic system (length of river and aquatic habitat adversely affected), number of affected people and cultural sensitivities. This process recommended seven hydropower projects for full feasibility and EIA study: Kabeli-A is one of the selected seven projects. During detailed planning and design, alternative locations of project components, such as dam site, powerhouse site, access roads, tunnels, construction camps, quarry sites and muck disposal sites. were looked at with a view to avoid or minimize environmental, social and technical risks. 34. Cumulative Impact Assessment. There are in total 24 hydroelectric power projects at different stages of development and licensing in the Kabeli-Tamor watershed. The KAHEP is not only the first hydropower project to be developed in Kabeli River, but also the first one in the entire Kabeli-Tamor watershed. As part of this EIA process, the Company performed a RCIA. In 2011, a preliminary RCIA covering only the Kabeli river watershed was performed, but as a result of this initial effort, the final RCIA geographical boundaries were expanded to cover the whole Tamor-Kabeli watershed. 35. Preparation of this RCIA involved consultation with local experts, government officials, international CIA practitioners, and advice from an international freshwater fish ecology expert who has worked in Nepal for several years, collection of additional fish and water quality data, and an extensive literature review. 36. KAHEP is committed to manage the significant potential cumulative impacts to the watershed identified by the RCIA by: (i) including in its EMP the mitigation measures to appropriately manage its contribution to any potentially significant cumulative impacts; and (ii)
66
work with the WBG, GON and other stakeholders to design a governance mechanism that would allow for the appropriate development, implementation, enforcement, supervision and monitoring of a basin-wide approach to the environmental and social management of the cumulative impacts. 37. To implement the second part, the proposed project includes a separate US$ 2.0 million technical assistance component for the MOE. This technical assistance is to increase the GON’s capacity to manage the potential cumulative impacts and risks, and carry out any additional basin-wide studies that are necessary to design additional measures to manage potential cumulative impacts at the Tamor-Kabeli watershed level. 38. The RCIA addresses the set of potential concerns posed in three different proposed development scenarios, and focused on cumulative impacts over those elements considered to be key Valued Environmental and Social Components (VECs). 39. KEL undertook a rigorous and extensive consultation process to define, together with the relevant stakeholders, which VECs are most likely to be significantly affected or to be the most sensitive receptors to the potential cumulative impacts of the project plus other future projects. VECs were divided under three major categories, namely physical, biological, and socio-economic and cultural environment. Among the residents of the Tamor-Kabeli basin, the most valued VECs were fishing resources. Another important concern associated with the Kabeli river is its cultural and spritual value to local communities. Culturally and spritually, the Kabeli river has its own significance to the local communities and is regarded as the most holy river by the people of the region. In that context, water quantity and quality of Kabeli River are extremely important to local people, since it is a source of spiritual cleansing in religious rituals, including burial ceremonies. 40. As a result of the consultation process, and based on an advice of international and local experts, KEL focused the RCIA on five selected VECs. The VECs, considered by stakeholders to be the most likely significantly affected by the cumulative impacts from the multiple hydropower developments in the Kabeli-Tamor basin, are as follows:
• Physical environment: (i) Surface and water quality and quantity, and (ii) Landslide and
erosion and sedimentation.
• Biological environment: (i) Resident and migratory fish populations.
• Socio-economic and cultural environment: (i) Spiritual and religious practices and (ii) Landscape integrity
41. Since the KAHEP is the first hydropower project to be constructed and operated in the Tamor-Kabeli basin, it has the opportunity to establish a good practice in the design and implementation of appropriate mitigation measures and to incorporate continuous management of the potential cumulative effects in the EMP. 42. KAHEP will include in its operational EMP the following measures to curb the cumulative impacts at the basin level:
67
• Design and construction of a fish ladder to assure that upstream-downstream fish migration is not impaired.
• Design and construction of structures, check dams along cremation sites to create waist depth pools. In addition, downstream flow release will be increased during religious festivals to meet riparian communities’ ritual requirements and maintain adequate sanitation.
• Design and construction of fish diversion structures to minimize fish entrapment in the headrace tunnel.
• Release of a downstream environmental flow regime that will: (i) maintain the ecological river corridor open, (ii) secure survival of substantial amounts of fry and fingerlings of target species in the dewatered segments, and (iii) ensure local populations can continue performing their traditional burial rituals and other religious ceremonies undisturbed.
• Development and implementation of a robust monitoring program during the construction and operation phases to allow for improved understanding of the potential effects of the proposed minimum downstream release to riparian connectivity and migration challenges of the key fish species.
• Adaptive management to allow for adjustments of the downstream environmental flow regime releases as a response to the monitoring program results.
43. In addition, in the area of terrestrial influence KAHEP will apply:
• Soil conservation through biological and engineering solutions at the catchment areas to
reduce the upland erosion and sediment load in Kabeli River; monitor closely the grain size distribution and sediment concentrations in the river in real time,
• Awareness programs at catchment level for ecosystems conservation through improvements in the water retaining properties of soil,
• Afforestation and bio-engineering works for degraded area to enhance basin vegetative cover, and
• Promotion of rural electrification according to the hydropower policy (2001) at the project influenced VDCs to reduce reliance on fuel wood for energy.
44. It is expected that once KAHEP makes the investments required to develop and to implement these mitigation measures, all other projects in the basin will follow the trend. However, if the future projects upstream and downstream from the KAHEP do not implement similar and coordinated measures, KAHEP’s efforts alone will not be sufficient to maintain the ecological and social-economic integrity of Tamor River watershed.
45. With the support of the WBG, KEL will use the best effort to leverage and engage the GON and other developers in the application of good practices. Therefore,
• All hydropower developments should provide downstream flow regimes that will
adequately meet ecological and social requirements, especially during the dry season.
68
Establishing the required flow release is often a challenge and needs multi-stakeholder long-term coordinated monitoring efforts,
• To assure ecological corridors are kept open, all projects should include fish ladders and entrapment prevention measures into their design,
• Native fish hatcheries should be supported by all developers in the basin, and open water fish-restocking should take place on an annual basis and in a coordinated fashion,
• It is envisaged that all developers with stakes at the Tamor-Kabeli basin shall work jointly for the overall development of the Tamor-Kabeli basin. For this purpose, a joint Catchment Area Treatment plan should be developed, with implementation coordinated by the GON. The plan will highlight erosion control techniques, and will involve understanding of the erosion characteristics of the terrain and suggest preventive, stabilization and remedial measures to reduce the erosion rate. These shall give attention to the proper construction of rural roads and facilitate rural electrification to avoid and minimize the potential adverse environmental impacts.
• Share infrastructure to avoid unnecessary land acquisition and additional habitats and landscape fragmentation as a result of overlapping access roads and transmission lines.
• Develop joint operation and maintenance activities (such as agreeing on common operation and maintenance manuals and guidelines). Coordinated downstream environmental flow and extra-ordinary flow release, flushing, and other operational, maintenance and emergency prevention and response activities are crucial for the increased efficiency and reduction of maintenance costs.
46. As part of the implementation phase, the IDA has allocated a total of US$ 2.0 million to help the MOE to carry out the following activities. 47. International Workshop on “Integrated River Basin Management for Sustainable Hydropower Development in Nepal”. The WBG, in collaboration with other development partners active in Nepal, will assist the GON in organizing an international workshop on “Sustainable hydroelectric project development in Nepal”. This proposed workshop will focus on sharing international experiences and case studies on sustainable hydropower development and bring together key stakeholders to discuss technical assistance needs to promote sustainable hydropower development in Nepal. Some of the specific topics that will be discussed include (a) CIA methodologies and their application to hydroelectric development at the watershed level; (b) maintenance of minimum ecological flows and regimes; (c) ecological compensation and offsets; (d) design of EMPs for construction and operation; (e) community engagement and consultation with project affected people; (f) resettlement and land acquisition aspects; (g) consent from affected indigenous people; and (h) good practices on benefit sharing. Target groups may include: policy makers, regulators, civil society, project developers, private sector, government departments connected to hydropower development in Nepal, academia, and consultants. 48. Additional Basin-wide Studies to Manage Cumulative Impacts in Kabeli-Tamor Watershed. This task will provide resources for the DOED to engage national and international consultants to consolidate good baseline data and develop thematic maps of the Tamor-Kabeli watershed, including, but not limited to:
69
• present and reasonably-predictable future consumptive and non-consumptive water users, including all religious sites requirements;
• water flow and water quality, including gauging stations and physicochemical and biological indicators;
• fish and aquatic invertebrates robust baseline, including several seasonal cycles;
• sediment load dynamics;
• inventory of rivers and streams and their characteristics considering the river morphology;
• inventory of potential Glacial lake Burst Floods in the watershed;
• inventory of the existing populated centres and villages, land-use and forest cover in the catchment area, including the existing landslide prone zones (development of thematic geographic information system maps);
• basin wide inventory of valued natural resources and key ecosystem services; and
49. Under this component, the DOED will design measures to manage the potential cumulative impacts and risks under different development scenarios, including, but not limited to:
• joint Operation Rules: simulation of the base-case and optimal-case of cascading
hydropower;
• short-term Hydro Operation Planning and similar modeling/optimization tools;
• robust and efficient cascading hydropower plant design;
• soil conservation and erosion control;
• implementation of a functional intact river strategies and terrestrial ecological corridors;
• downstream environmental flow regime simulation / optimization models;
• joint maintenance rules, including sediment load handling;
• efficient planning of supporting linear ancillary infrastructure (such as transmission lines, access roads);
• coordination between different line agencies and other national and international development entities;
• social management, planning and benefit sharing options;
• development of stringent policies for addressing the cumulative impacts; and
• development of operation manuals and standards (environment and social) for operating the hydropower plants
70
Capacity Building 50. This task will focus on two aspects of environmental capacity building for regulators, consultants, private developers, construction engineers, and academia: (a) preparation and issuance of guidelines on specific topics such as Cumulative Impacts, Minimum Ecological Flows, Watershed Management, Sediment Management; and (b) offer specialized short- and medium-term training programs on Sustainable Hydropower Development in Nepal. 51. With resources provided under the MOE Component the DOED will hire national and international experts to prepare the above stated specific guidelines. The DOED will also hire reputed national institutions, such as the Institute of Engineering, Kathmandu University, New Era, Winrock International, Nepal, and Himalayan Resources etc. to offer regular training programs for various stakeholders (policy makers, regulators, civil society, project developers, private sector, relevant Government departments, Academia, and Consultants) connected to hydropower development in Nepal. 52. Consultations. The EIA team and the developer’s staff have carried out wide-ranging consultations with stakeholders at the project site, at the district headquarters and in the national capital, Kathmandu. During the scoping exercise for the EIA, consultations were carried out in April-May 2010. During the preparation of the EIA and the SIA, some 14 focus group discussion were held during October-November 2010 with a range of stakeholders (community forest groups, women, Dalits, Indigenous people); a public consultation and hearing was organized on 24 July 2011 at the project site to share the findings of these assessments, explain how the communities’ concerns have been incorporated in project design, and to obtain further feedback. The EIA and SIA findings were also presented in two district-level consultations organized on July 25, 2011 at Phugling Bazar, district headquarters of Taplejung District, and on July 26,2011 at Phidim, district headquarters of Panchthar District, which were attended by government officers, representatives of political parties, NGOs and members of the media. A national-level consultation was organized in Kathmandu on 1 August 2011. 53. KEL has also disclosed the EIA, SA and SAP on its website, http://www.kel.com.np since August, 2011, and has continued to upload the updated version, including the latest updated version dated July 2013. The executive summaries of the EIA and SAP have been translated into Nepali, Limbu, Bantawa Rai, Khaling Rai and Tamang and are also disclosed on the KEL website. Project information is also available at the Project Information Center in Amarpur VDC, Panchthar District. These documents were originally disclosed on the Bank’s InfoShop and IFC’s website on April 8, and December 8, 2011, respectively. The IDA and IFC have also disclosed the updated versions of these documents and studies as they have become available. 54. KEL has also engaged a five-member POE comprising national and international experts in environmental and social aspects, dam safety, underground structures and geo-technology, and hydraulics and sediments. The POE visited the project site twice over 2010 and 2011 and provided expert inputs and advice on project design.
71
55. Capacity, Institutional Arrangements, and Monitoring. KEL, the owner and developer of KAHEP, is majority-owned by BPC. The Jhimruk, Andhi Khola, Khimti, and Khudi HEPs are some of the projects that have been implemented by BPC and its subsidiary companies. The environmental and social safeguard aspects of these projects have been executed to the satisfaction of funding agencies from various countries, and the projects are often cited as examples of good practice. 56. For the design and preparation of KAHEP, KEL drew on the resources of another BPC subsidiary, the HCE for the environmental and social aspects of the projects. The HCE maintains a strong team of environmental and social professionals, including experts in the field of environmental management, fishery, socio-economy, and anthropology. The Environment Unit of HCE has reasonable experience and capacity for preparing EIAs, IEEs and EMPs of run-of-the river hydropower projects as required under the laws and regulations of Nepal.
57. KEL has established a Kabeli-A Environment and Community Development Unit (KAECDU) to undertake social and environmental monitoring and management for the KAHEP. KEL mobilized a full team of the KAECDU at site in 2011. However, the KAECDU was down sized, since there has been delay in the KAHEP implementation. At present, KEL maintains a team of professionals in the KAECDU, namely an anthropologist/ CSR & Mitigation Officer, and, a livelihood officer, in addition to the three public relation assistants. The public relation assistants are for timely communication, information dissemination, identification and documentation of issues and grievances, and resolving them on time at local level. KEL plans to fill the remaining vacancies in the KAECDU when the project construction work starts. A PIC has been established since August 2011 and is still functional. In addition, the HCE, as and when needed, will continue providing support in the environmental and social matters. If these arrangements still have some gaps, required expertise will be hired and will be trained on the issues and management during the implementation stage. EIA has identified training and orientations to make aware and educate the project management team, engineers, supervisors, contractors and the workforce on the environmental issues and management in the project. These trainings and orientations will start during pre-construction stage and will be a continuous process. 58. The KAECDU will carry out regular monitoring of the environmental and social performance of the construction contractors. The KAECDU will coordinate monthly meetings with the contractors, chaired by the Owner’s Engineer, on environmental management, health and safety. The KAECDU Environmental Manager will brief the participants on the project performance related to the environment and social issues and flag issues to be resolved with recommendations on corrective actions. The meetings’ deliberation and agreements will be recorded and signed for future actions. The KAECDU will produce reports on environmental and social aspects every two-month (and as required in special circumstances). The KAECDU will also prepare the environmental monitoring and auditing report of the construction phase within three months of the construction completion. An independent external agency or individual will be engaged for carrying out six-monthly review of the implementation of environmental and social measures to ensure that the project activity complies with the environmental standards and
72
to check the proper implementation of EMP and that grievances are addressed in a prompt manner to resolve the cases. In addition, an independent POE4 will, among other things, review, comment, provide suggestions or recommendations as it deems necessary and appropriate, or as requested by KEL, on any subject including environmental and social activities.
59. The EIA estimates that environmental mitigation activities during construction will cost about NPR10.8 million, in addition to costs already included in the civil works contracts, and environmental monitoring activities in the pre-construction phase will require about NPR1.8 million. The environmental management costs, which will include the operation of the Environmental and Social Management Unit and costs for third-party monitoring, training and awareness generation, etc. are included separately in the overall project management cost. The budget for environmental measures, including mitigation and monitoring during the construction and operation phases as well as the environmental measures included in the estimates for the works contracts, is NPR 238.28 million (approximately US$ 3.0 million). IBN Component 60. The IBN is currently negotiating PDAs with private developers of four large hydropower projects with support from an international law firm and individual consultants funded by an international donor and from a Bank-funded international engineering firm on technical due diligence, including environmental and social aspects, of the four large scale hydropower projects(about 3,050 MW). This component will not provide direct financing to any of the hydropower projects under consideration by IBN. Instead, it will provide technical assistance such that social, environmental and technical outcomes of the four large-scale hydropower projects, which are currently supported with Bank-funded technical due diligence, under the purview of IBN, are in line with WBG’s standards and policies including safeguard policies. Through execution of this component, the Bank will support IBN to strengthen its capacity (including by hiring environmental and social consultants as in-house capacity, among other activities) in carrying out their responsibilities related to assessment, due diligence, PDA negotiation with project developers, and supervision of the large hydropower projects that may succeed in signing the PDAs, reaching financial closure and moving into the construction phase. Specifically, all TORs for consultant services and possible studies supported by this component will require prior Bank approval, subject to adherence to the applicable international performance, technical, environmental and social standards equivalent to the relevant WBG’s policies and standards; and (ii) the Bank will ensure that its technical assistance in support of IBN’s activities to assess, appraise and supervise hydropower projects furthermore aligns with WBG’s safeguard policies and standards. B) Social 61. Summary of the social assessment. An interdisciplinary team of experts carried out the SA during 2010-11 (primary field work carried out in April and May 2010) with the objective of developing the socioeconomic baseline of the project area; screening the possible social impacts of the project; screening for indigenous peoples in the project area and assessing their social, 4 POE includes one environmental and one social specialist besides other expert members.
73
economic, cultural and institutional characteristics; identifying the key stakeholders and analyzing their interests, attitudes, and expectations from the project; and proposing measures to address the identified impacts. A combination of sociological tools was employed including desk study, household survey, focus group discussions and interviews of key informants. Several meetings were conducted at different project sites and with different groups, including women, Dalits, indigenous groups, community forest user groups, political parties and various levels of government organizations. Because of the gap period in the project preparation in 2012 and early 2013, further consultations were carried out in the project area to check and confirm on the findings and conclusions of the SA, particularly expectations and broad support from local communities, including the indigenous and disadvantaged groups. The SA is updated based on these consultations. 62. Key findings on the socioeconomics of the project areas were as follows:
• There are various ethnic groups in the project area, with adivasijanajati constituting the majority at 53.38 percent. These include Limbu, Rai, Tamang, Newar, Gurung, and Majhi who live in a scattered and mixed fashion. Within indigenous groups of the project-affected VDCs, the most prominent are Limbu (56 percent), Rai (14 percent), and Tamang (10 percent).
• Literacy rate in the project area stands 55.3 percent and 44.7 percent for males and females above six years of age, lower than national average for males, but slightly higher for females.
• The three major religions of the population of the project VDCs are Hindu (53.06 percent), Kirat (37.05 percent), and Buddhism (9.52 percent).
• Women, disadvantaged Janajatisand Dalits are among the most excluded and economically backward in the project area, as is the case nation-wide. There are about 110Dalit households distributed in Wards 3, 4, 6 and 8 of Amarpur VDC.
• Thirteen households with 112 people will be directly affected by the project.
• Agriculture, which includes farming, livestock keeping and forestry, is the primary occupation for the surveyed household population. Subsistence agriculture plays a dominant role in local economic activities and livelihoods (but is not the important source of household income; see below).
• The average landholding of the surveyed households is calculated as 29.02 ropani (a ropani is approximately 1/20 hectare). The average land-holding size is highest among Limbu (34.21 ropani/HH) and the lowest among Tamang (21 ropani/HH).
• The major income sources of the affected households include farm and non-farm activities. The non-farm income sources include foreign employment, remittances (accounting for 50.0 percent of household income), services, pension, trade, wage labor and cottage industries. Agriculture and livestock contributed 8.9 percent; service, job, pension 21.8 percent; remittances 50.0 percent; wages 7.4 percent; trade, business, and industry 4.6 percent; and others 7.3 percent to the average annual household incomes.
74
• Migration population constituted 10.15 percent of the total population of the surveyed households which is nearly double the national average (6.6 percent)of out-migration of the total population.
63. The key findings on the perceptions and expectations from the local population were as follows:
• The overwhelming majority of the surveyed households (95 percent) expressed their support for the project.
• Respondents believe the project will help increase their access to civic amenities, economic activities and income-generating program, and development initiatives;
• The strongest request from project-affected communities was for electrification (many households use solar panels, but would like to be connected to the grid);
• The project planning and implementation respects indigenous peoples’ rights to lands and natural resources;
• The project will arrange for skill development training for adivasijanajati and other vulnerable communities; they wish to acquire training as electricians, in plumbing, carpentry, and other trades that may be in demand during the implementation of KAHEP.
• There was some apprehension about possible environmental pollution and the spread of communicable diseases.
• The project will support the conservation of local culture and lifestyle through the promotion of festivals, festivities, and celebrations, conservation and protection of historical and religious and sacred sites, and buildings; and through support to indigenous communities’ organizations;
• Adivasijanajati expected support with healthcare supplies and facilities in the area. 64. Project impacts. The implementation of KAHEP will have an impact on four VDCs: the Amarpur and Panchami VDCs of Panchthar District, and the Thechambu and Nangkholyang VDCs of Taplejung District.
• The project is expected to acquire land on a permanent and temporary basis, but no physical displacement is anticipated.
• The total area of land requirement is about 47 ha including 23 ha for permanent land acquisition and 24 ha for temporary leasing. Of the acquired land, about 7.6 ha is agricultural land and 1.57 ha forest land. The rest is the riverine area. The land acquisition will affect 13 households (112 people) as detailed in Table 8.1.
• Among the 13 households directly affected, 8 households will lose less than 25 percent of their land and two households will lose more than 50 percent of their land. Most of the affected land is low-quality land from the agricultural point of view. The average landholding size of the project-affected families is 3.02 ha, which is higher than the national average and district average. Out of the total of 13 families, 19 members are employed permanently in the non-farm sector. The household income, as revealed through the social economic survey, is multi-structured, with agriculture accounting for
75
less than 10 percent of the average household income. Considering these various factors, it can be concluded that the impact of the loss of private land on the household incomes of those losing land is relatively small.
• Forest land in the amount of 1.57 hectares will be required, in various small lots. These are community forests and community members collect firewood and non-timber forest products from these forests. Since forest loss occurs only along the boundary areas of the existing forest and does not involve large-scale fragmentation across the core forested area, the impact is expected to be marginal.
• The diversion of the Kabeli river will impact riverine fish resources of the Kabeli during the dry season in the 5.6 kilometers downstream of the dam before the confluence of the Kabeli with the Tamor river. The communities living close to the river fish for recreation and for family consumption in the Kabeli river and the Tamor river. The impact on these households is not expected to be severe.
• The Panchayan Shivalaya temple located about 2.5 km downstream of the dam near the Kabelibazar is likely to be affected by the project. Dedicated to Shiva and Parbati, the temple hosts various religious celebrations and rituals that require water from the nearby Kabeli river. Hindu pilgrims from the surrounding districts and VDCs also come to the temple precincts for ritual religious baths in the river in January and February every year. These activities normally take place at the confluence of Kabeli and Tamor rivers. The low flow of water in the dry season will thus affect these religious activities.
• The reduced Kabeli river flows will also affect cremation practices in the downstream villages near the Kabeli river. There are three locations along the river where cremations are conducted. The project will have a direct impact on these sites, including direct physical impacts on some of the sites and structures, such as a rest house near the powerhouse location.
• The influx of construction workers and service providers may stress the local water supply, health and sanitation facilities. This may lead to conflict with the local population. The influx of workers and others and increased interactions with the local population can also have public health implications, such as the spread of communicable diseases.
• Implementation of the project will introduce several opportunities for economic development in the region, such as employment opportunities for locals, vocational skills improvement, and infrastructure improvement under the project.
• The project will contribute to the establishment of new water schemes in the areas where people fetch drinking water from waterholes and small streams (not the Kabeli River) and will help to strengthen existing community-level water supply facilities in the settlements of the project-affected VDCs.
Conclusion 65. The SA concludes that the proposed project will also have some unavoidable social impacts. These include land acquisition for the construction of the project; impacts on fishery and cultural practices downstream resulting from the reduction of river flows; and public health
76
impacts with the influx of construction workers. However, these impacts are relatively small in scale and can be mitigated with appropriate measures. This assessment has made recommendations based on feedback from the public consultations. 66. Local people, including indigenous and disadvantaged groups, are overall positively inclined towards and supportive of the implementation of the project. They have clear expectations that they will benefit from the project in a variety of ways.
67. The indigenous groups of the project area, although they are of different ethnicity, share common approach to their economic and livelihood activities. A common package to address the project impacts will be applicable to all the affected population. However, extra attention will be given to indigenous and disadvantaged groups to minimize impacts, encourage participations, and share the benefits of the project. Summary of Key Interventions under the SAP 68. SAP Planning Approach. The SAP was developed on the basis of several surveys, including the SA household survey, a cadastral survey, and an impact inventory survey. The survey was conducted among all directly affected households. This covered household demographic and socioeconomic data, livelihood practices, related physical properties and assets acquired by the project, preferred mode of compensation and rehabilitation, and perceptions of the project. The cadastral survey was conducted with the District Land Survey Office. The asset inventory survey was conducted and provided a complete household-wise inventory of affected persons and households and their assets affected by the project construction. Local communities, including the affected households, and local government agencies participated fully in these field surveys and contributed to the development of the SAP. 69. Project Impacts and Affected Population. The major anticipated social impacts under the project relate to the project’s land requirements. The project is expected to acquire 22.5 ha land (about 7.68 ha is private agricultural land, 1.57 ha is forest land, and 13.26 ha is riverine area, including river bed, river flood plains, and elevated banks) and lease 25.2 ha during construction. The land that will be acquired is scattered in small lots at various locations. 70. The acquisition of land will take on a willing-buyer-willing seller basis and will affect 112 people in 13 households. Three households are losing more than 10 percent of their total land holding. As shown in the SA, although these households are primarily engaged in agriculture-related activities, their main income source is non-farm economic activities; agriculture contributes less than 10 percent to their total annual household income. Therefore, the land acquisition impact on the income of these households is expected to be small. 71. The project will reduce the flow of water in the 5.6-km-long stretch of the Kabeli River downstream of the dam before it joins the Tamor River. Some households use the river for occasional fishing. The SA shows that fishing is only occasional and no household is dependent on fishing for its livelihood. Therefore, the impact of the reduced flows on these households’ livelihood is expected to be insignificant. Along the same stretch downstream of the proposed
77
dam, local communities perform cremations on the riverbanks and use the river for related rituals. The flow reduction will impact this cultural practice. 72. The project is expected to have public health impacts. A peak construction force of 600-800 workers is expected at the site during the construction phase. Some service providers are expected to move in as well. This influx of population could expose local communities to public health hazards, such as communicable diseases, including sexually transmitted diseases and HIV/AIDS. Construction activities will also bring the attendant issues of road safety and noise and dust pollution. 73. SAP Policy Framework. The resettlement framework is based on the principle that affected persons should be able to maintain at least the same level of living standard as they had prior to the project implementation. Key principles of the framework are as follows:
• Adverse impacts on PAPs will be avoided wherever possible or minimized.
• Where the negative impacts are unavoidable, the PAPs, irrespective of their legal title to assets, will be provided assistance to regain their standard of living. Vulnerable groups will be identified and assisted to improve their standards of living.
• All information pertaining to the expected social impacts, compensation due, resettlement plans (if required) and implementation will be disclosed to all concerned, and people’s participation in the planning and implementation of these initiatives will be ensured.
• The PAPs will receive compensation for lost assets at replacement cost and the compensation will be available prior to the taking over of assets.
• All consultation with PAPs shall be documented. Consultations will continue during the implementation of the resettlement and rehabilitation program and project construction.
• Physical works will not commence on any portion of land before compensation and assistance to the affected population have been provided in accordance with the Policy Framework.
74. Resettlement Compensation and Livelihood Assistance Plan. The RCLAP program was developed following the above principles, taking into consideration the feedback from local communities. The RCLAP aims to mitigate the direct project impacts and to support local development for the long term through the following activities:
• Land compensation. A cash compensation package will be delivered to the affected land owners. This package includes cash compensation at market rates for the permanently acquired lands, leasing fees for lands to be leased for the construction period, public lands to be leased in and along the river, and government-owned forest lands. Land compensation is negotiated and agreed on a transaction basis.
• Agricultural support program. An agricultural extension program will be implemented in the project area to assist local communities, particularly vulnerable households, to improve their incomes. The program will focus on agricultural and animal husbandry support services, and will provide training in animal husbandry, and agricultural and
78
fresh vegetable farming. The program will be undertaken in coordination with the Nepal Agricultural Research Council, and the District Agricultural Office.
• Occupational skills training. Specific training programs will be conducted in construction-related skills such as electrical wiring, plumbing, automobile maintenance, masonry, and welding to enhance the employment opportunities of affected people during the project construction.
• Preferential employment policy in construction. This policy will be developed in consultation with the contractors and local government to promote employment for project-affected and other local people during project construction activities. This policy will specify the procedures and mechanisms to be incorporated into bidding and contractor documents. Available job positions and recruitment procedures will be publicized effectively in the project area.
• Approach to addressing fishing impacts. The project will establish a monitoring mechanism to assess the possible impacts on fishing in the Kabeli River. If a decline in fishing is confirmed, hatcheries will be developed. A fish ladder will be included in the design of the dam. For PAPs who fish in the river, skills development training will be conducted to ensure that the small loss of livelihood from the loss of fishing is compensated. In addition, they will also be entitled to the general livelihood support programs under the project.
• Public health measures. These measures will target both local communities and the construction workforce. The KAHEP will support each affected VDC to improve health facilities to benefit local communities. A health center will be operated to cater to the needs of workers and the local population during the construction phase. Two health clinics will be run throughout the construction phase, and one clinic will continue to function permanently. The contractors will be required to develop a health plan for their construction workers. This plan will require the review and approval of KEL. Each labor camp shall be provided with adequate facilities to treat basic illnesses and injuries. Contractors will be required to monitor and report on their compliance with these contractual clauses. All workforce camp health and safety issues shall be reported by the contractors’ health and safety officers to KEL.
75. Health awareness programs will be organized on a regular basis to provide information or instructions to construction workers and the local population on public health matters, including the dangers and consequences of sexually transmitted disease and HIV/AIDS, and to increase awareness of the problem of human trafficking. Construction contracts will require contractors to implement a code of conduct for all workers, including expectations for worker behaviour vis-à-vis local communities. Awareness camps will be regularly organized in each of the workforce camps.
• Drinking water, health and sanitation program. In addition to drinking water and sanitation facilities to be provided for the construction workers, the project will help local communities build new drinking water and sanitation schemes and repair existing ones. Health and sanitation training will also be provided to the local communities. The project will provide material support for construction of household toilets for selected vulnerable communities.
79
• Measures to address impacts on ritual practices. Consultations were held with communities on the expected impacts of the low flows downstream of the dam, and recommendations for feasible approaches to addressing impacts were solicited. A minimum of 10 percent of the average recorded low flow during the dry season will be maintained for ecological, cultural, and religious purposes. The environmental flows released will be channelized in the stretch of the cremation ghat in the Kabeli River and the Panchayan Shivalaya temple area to ensure sufficient water for cremation and other religious rituals. Villagers will be further consulted over the relocation of the affected structures.
76. Indigenous People and Vulnerable Community Development Plan. There is a rich literature on the vulnerability of groups in Nepal. Three major groups have been defined as most vulnerable: women, Dalits, and adivasi/janajati. These groups are considered disadvantaged in terms of (i) access to livelihood, assets, and services; (ii) social inclusion and empowerment; (iii) legal inclusion and representation in Government; and (iv) economic marginalization. The SA confirmed their presence in the project area. 77. The IPVCDP was developed in compliance with the relevant policies in Nepal, as well as the World Bank’s Operational Policy 4.10 and IFC’s Performance Standard 7 on Indigenous Peoples. To ensure Free, Prior and Informed Consultation (or Informed Consultation and Participation) with PAP, the SA and development of the SAP followed a highly participatory planning process. Various cultural and ethnic groups in the project area, including indigenous and vulnerable groups, were identified and engaged in a culturally sensitive and appropriate fashion throughout the planning process. In additional to the RCLAP measures and general support programs, the IPVCDP commits to the following interventions that specifically target vulnerable households:
• Women-focused programs. These include micro-credit, village banking and savings, and small business operation.
• Capacity-building programs. A local NGO, along with government service providers will be involved in mobilizing vulnerable communities for group formation and strengthening. Similarly, qualified members of local ethnic groups, including women, will be engaged by the KAHEP management to undertake information dissemination works, and prepare the beneficiary groups for project activities and contributory works. The NGO will be engaged at the start of the project and will design a series of capacity-building activities.
• Specific provisions for adivasi/janajati households. These include (i) guaranteed employment of at least one member from each affected household in project construction and maintenance work; (ii) at least one member from each affected household will be invited to participate in livelihood empowerment activities, including skills training for income generation, traditional skills development and linkages with the modern market, and awareness training in health, sanitation, gender and other life-skills improvement activities; and (iii) supplementary infrastructure facilities in the Majhi settlements, including latrine construction and drinking water facilities.
80
• Loan assistance. The project will establish a small loan assistance program for the women-headed and Dalit households. To provide loans for small income-generating projects, an agreed amount of money will be allocated to a revolving fund. To facilitate the distribution of loans, co-ordination will be established with the local credit groups, cooperatives, or field offices of the Agricultural Development Bank. The details will be developed as part of the project implementation plan, in consultation with local communities.
• Measures to increase vulnerable groups’ participation. Specific provisions to guarantee and increase participation by vulnerable groups include: (i) proportionate representation of vulnerable communities in various user groups and committees for the social development activities sponsored by the project; (ii) targeted livelihood enhancement and skills training activities to enable vulnerable groups to take full advantage of project opportunities and benefits, including promotion and upgrading of traditional skills; and (iii) additional health and hygiene training programs targeting vulnerable community members. Appropriate decision-making processes and mechanisms will be used to enable informed participation by adivasi/janajati.
78. Benefits-sharing Mechanisms. KEL has adopted plans to share benefits with project-affected communities including a Corporate Social Responsibility program. Consultations with communities indicated their strong preference for receiving assistance in upgrading their access to electricity. Many households in the area already use solar home systems and have expressed an interest in gaining access to grid-supplied electricity. The ongoing IDA-funded Kabeli Transmission Project includes funds for extending access to electricity in the Kabeli Corridor. In addition, the hydropower royalty that KEL will pay once the project is operational will also facilitate rural electrification, in keeping with the established royalty procedures by the GON for the use of these funds. KEL will be facilitating interactions with the NEA and Alternative Energy Promotion Center, the two implementing agencies of the rural electrification components of the Kabeli Transmission Project on behalf of affected communities. 79. Project assistance in local development. In addition to the resettlement and compensation package that each directly affected household will receive, the project will help the affected VDCs implement local infrastructure and development schemes in the immediate project operation areas, along with new and improved health facilities, and drinking water schemes. These will be developed in detail in consultation with local communities and governments. 80. Strategy for Public Consultations, Participation, and Communication. KEL has carried out extensive consultations at the planning and preparation stages. Public consultations have been held at the community, local, and national levels. Various tools were used including interviews, questionnaire surveys, focus group discussions, community meetings, and public hearings. Project information has been disseminated among local stakeholders. These consultations provided rich feedback for the design of the SAP program.
81. In accordance with its Policy on Environmental and Social Sustainability, IFC undertook a detailed review of these consultations to assess Broad Community Support (BCS) for the project among the stakeholders. In summary, the BCS review indicates that there is ample evidence of: 1) informed consultation undertaken by KEL among project-affected communities;
81
2) KEL active support to enabled wide participation of affected communities in these consultations; 3) ongoing consultation between KEL and affected communities; and 4) broad community support among the affected communities and the wider community of stakeholders in the Project region. 82. A Project Information Center has been established at site and KEL has a communications team at site. A Public Relations Officer and a Corporate Social Responsibility Officer will lead a team of several staff members in ensuring the constant availability of information on the project. 83. The SA identified a broad range of stakeholders, including local communities, government agencies at the district, regional, and national levels, political parties, civil society organizations in the project area, international organizations and NGOs, as well as local, regional and international media. KEL will inform all relevant stakeholders of the project progress. KAHEP’s project management is responsible for informing all the relevant stakeholders well in advance about the project scope and impacts, implementation steps, and progress. 84. KEL will use various communication tools such as print media (brochure, leaflet, flyers, and local and national newspapers), electronic media (FM radio) and personal interactions with PAPs to disseminate project-related information. The draft and final SA and SAP have been disclosed through KEL’s website, the World Bank’s InfoShop and IFC’s external website and have been made available to the wider audience of national and international stakeholders. At the local level, information dissemination and consultation will continue throughout project implementation. Project brochures with details of the project-specific information have been prepared in Nepali, Limbu, Tamang and Rai(Khaling and Bantawa dialects) languages. 85. The KAHEP Public Relations Officer will regularly provide information on SAP implementation progress to VDCs and the KAHEP Support Committee of Concerned Parties. The Public Relations Officer will also regularly release project progress to the general public, including identified stakeholders at regional, national, and international levels. 86. Implementation Arrangements. The SAP has detailed a multi-tiered implementation arrangement for the SAP. KEL will assume the overall responsibility for the overall project coordination and management of the SAP implementation, with the KAHEP project manager leading the overall management of social issues, review and approval of SAP and monitoring of timely and successful implementation of SAP.At the project level, the KAHEP will set up offices for Kabeli-A Environment and Community Development Unit with the required number of experienced staff to implement the planned activities and also monitor them routinely. A Community Guidance Committee will be formulated with the representatives (elected or accepted personals from villages) from each VDC within the direct project impact area. This organization will work in close co-operation with the DDCs, VDCs, DFOs, CFUGs, and NGOs during the implementation phase. The responsibilities of each office are described in detail in the SAP. 87. Grievance Redress Mechanism.A grievance redress mechanism has been established under the project. All grievances, whether oral or written, will be recorded at the Project Information Centre at site. The grievance redress mechanism consists of three tiers. A Grievance
82
Redress Cell, with a Grievance Redress Officer, will be posted at the site to assist concerned parties with grievance registration and resolution. The second tier is a local Grievance Redress Committee, which will consist of the Grievance Redress Officer, a representative from the KAHEP Support Committee of Concerned Parties, and one representative of the contractors (once mobilized). The Grievance Redress Committee will meet as required to review cases referred to it by the field cell. The third tier is a project-level grievance committee consisting of the Project Manager, Chief District Officer, and the Chairman of the Kabeli Concerned Stakeholders Committee. The committee will review all cases referred to it by the Grievance Redress Committee. A procedure and timetable for grievance resolution has been developed and is detailed in the SAP. This mechanism is in the process of being established under the project to handle all project-related grievances and has been partially operational during the planning stage. 88. Monitoring and Evaluation. The monitoring setup includes both internal and independent monitoring, as well as regular POE evaluating visits. Regular monitoring of SAP implementation will be conducted by the implementing agency. An independent external monitor will be appointed to conduct semi-annual monitoring and evaluation of the SAP implementation. The POE to be established will include social expert to monitor and evaluate the implementation performance of the SAP. The scope of work, monitoring methodology, output, and reporting requirements are detailed in their respective TOR. 89. Budget. KEL has allocated a budget of NPR 43.0 million to implement the RCLAP, IPVCDP and other social aspects of the project.
83
Annex 8: Economic and Financial Analysis
Nepal: Kabeli-A Hydroelectric Project
Scope of Analysis 1. The economic and financial feasibility of the KAHEP is evaluated on the basis of the following analyses:
• comparison of KAHEP with alternatives,
• economic analysis of the project, and
• financial analysis without loan financing. Overview of Project 2. Energy and Capacity. KAHEP has been designed as a 37.6 MW peaking run-of-river hydroelectric scheme on the Kabeli River in the eastern part of Nepal. The contractual average annual saleable electricity is 205.2 GWh (to be on the conservative side, 202.6 GWh as assessed by an independent international hydrology expert was used for base case economic and financial analysis) after station losses and outages, at a plant capacity factor5of 60.5 percent. The project will supply electricity to NEA grid through the Kabeli Corridor Transmission Line which is under construction funded by IDA.
3. Capital Cost. Financial cost of the KAHEP was estimated based on July 2013 US Dollars. It includes physical and price contingencies and interest during construction (IDC). Since the Kabeli Transmission Line will pass near the KAHEP, the cost of transmission is not included. Economic cost was derived by removing price contingencies, custom duties and taxes (at 1.5 percent of foreign cost), and VAT, as well as IDC from the financial cost. It includes only the base cost and physical contingencies. The costs of local currency component of the project were multiplied by the standard conversion factor of 0.85 to adjust for the price distortions of the items like unskilled and skilled labor and exchange rate. 4. Comparison of KAHEP with Alternatives. An alternative approach to establish the least-cost concept is to examine the economics with and without the proposed project. Without the proposed project, it is assumed that a diesel plant of equivalent capacity, sufficient to generate the same amount of energy to that of the KAHEP, would be installed. The technical and cost characteristics of this diesel plant are given in Table 8.1. As the economic life of the diesel plant is assumed to be 20 years, an additional diesel generator would need to be installed after the first set diesel generator is retired in 20 years.
5 Plant capacity factor=annual energy generation/(installed capacity x 8760)
84
Table 8.1: Characteristics of Thermal Power Plant
1 Capacity Cost US$ 1,000/kW 2 Life 20 years 4 Fixed operation and maintenance cost US$ 1.0/kW-month 4 Variable operation and maintenance cost US$ 2.6/MWh 5 Heat rate 2180 kcal/kWh 6 Fuel Price US$ 1.03/Liter 7 Energy Content of furnace oil 38.5 MJ/Lit
5. The comparison of KAHEP to the equivalent diesel plant shows that KAHEP is economically more attractive than the diesel plant. The incremental NPV of KAHEP over the diesel plant is found to be US$ 268.8 million at the discount rate of 10 percent and the equalizing discount rate of 42.3 percent. This suggests that KAHEP is highly attractive for electricity generation compared to equivalent diesel plant. World Bank’s Economic Analysis 6. Identification and Valuation of Economic Benefits. The principal benefit of the project is the electric energy generated by the project. In the case of KAHEP, there are two approaches to valuing the economic benefit of the electric energy. The first approach for valuation is based on the LRMC of electricity generation, which indicates the average incremental cost of electricity generation in Nepal with a predominantly hydro-based system. The LRMC of generation for Nepal, as estimated by NEA in 2005, is 5.5 US cents/kWh6. This figure is escalated by 3 percent annually to bring it to the July 2013 price level, which would be 6.97 US cents/kWh. The second approach is to use the electricity import substitution cost, meaning that KAHEP electricity generation would be able to substitute the import of electricity from India. In the past, NEA has been importing electricity from India on an ad hoc basis, based on a government-to-government power exchange agreement. Recently, NEA has signed contract to import 150 MW of electricity on a long-term (25 years) contract with the Power Trading Corporation of India7. The tariff for imported electricity is based on the price at the delivery point in India plus wheeling charges and losses up to Dhalkebar substation. These values are used in the economic analysis to establish the range of the likely economic return of the project. 7. Environmental Benefits. Assuming diesel plant generation, with the CO2 emission factor of 800 g/kWh, the project could reduce up to 114,400 tons of CO2 emission annually. However, in the case of import substitution, total CO2 emission reduction could be up to 166,132 tons per year, based on the average emission factor (820 g/kWh) of Northern, Eastern, Western and North-Eastern regional grids of India8. The carbon mitigation benefit was calculated using a baseline carbon price of US$ 16/ton CO2 equivalent.
6 NEA LRMC Study 2005. 7 Power Sales Agreement between NEA and PTC, December 2011. 8 CO2 Baseline Database for the Indian Power Sector: User Guide, Central Electricity Authority, New Delhi 2011. 9 Average exchange rate for FY 2012/13, based on Nepal Rastra Bank, Current Macro Economic Situation at www.nrb.org.np
85
8. Other assumptions used for the analysis are as follows:
(i) Exchange rate US$ 1 = NPR 87.96 9,
(ii) Operation and maintenance costs(such as salaries, spare parts) have been assumed to be 2 percent of the investment costs,
(iii) Power station losses are assumed to be 1.5 percent,
(iv) Useful economic life of the project has been considered as 40 years, while the financial life is assumed to be 25 years based on the license period of the project,
(v) The project construction period is assumed to be 5 years and electricity generation would start from the beginning of the year 2019,and
(vi) All costs and benefits are based on July 2013 prices level expressed in U.S. dollars and no price inflation is assumed, either in benefits or costs, over the period of analysis.
9. Base Case Project Net Present Value Economic Internal Rate of Return. The EIRR and net present value (NPV) of KAHEP are calculated with and without carbon benefit at electricity generation valued at LRMC and long term electricity import tariff. The results are summarized in Table 8.2. The project is found to be economically attractive, since the economic internal rate of return (13.3 percent) is higher than the opportunity cost of capital (which is about 12.0 percent) under all scenarios. The project would yield a higher return on an import tariff-based valuation of benefit.
Table 8.2: The EIRR and NPV of the KAHEP
Case Net Benefits Net Benefits with Carbon Pricing EIRR based on LRMC (%) 13.3 15.8 NPV at 10 percent (US$ million) 21.9 39.3 EIRR based on import tariff (%) 15.2 17.0 NPV at 10 percent (US$ million) 44.3 60.4
10. Sensitivity Analysis. Sensitivity analysis is carried out for capital cost overrun, decrease in project revenues resulting from hydrology or plant outages, and delay in project commissioning by one year. The results are summarized in Table 8.3. The sensitivity analysis shows that the most critical variable is the project revenue. If the project revenue falls by 20 percent, the project EIRR would decrease to 10.8 percent under the LRMC scenario. When the project benefits are based on the import tariff, the project EIRR is always higher than the cost of capital. This clearly indicated that the project returns are robust to changes in key project parameters.
9 Average exchange rate for FY 2012/13, based on Nepal Rastra Bank, Current Macro Economic Situation at www.nrb.org.np
86
Table 8.3: Sensitivity Analysis
Scenarios EIRR based on LRMC (%)
EIRR based on Import Tariff (%)
Base Case 13.3 15.2 (a) Cost increased by 20 percent 11.4 13.4 (b) Benefit decreased by 20 percent 10.8 12.8 (c) One year delay in project commissioning 12.1 14.1
World Bank’s Financial Analysis 11. The financial analysis is carried out to assess the financial viability of the KAHEP considering all cost and benefits of the project at market price including custom duties and taxes and VAT. Financial analysis without loan financing and before corporate income tax is carried out to understand the financial viability of the KAHEP without the effect of financing conditions of the lenders. It should be noted here that financial conditions of the loan could leverage the project return. In order to nullify the effect of loan financing, analysis assumes 100 percent equity investment and thus, IDC and other financing charges are excluded. The analysis is based on constant US Dollars at the 2013 price level, so price contingency is excluded. The result of this analysis will show the project level FIRR. 12. The financial benefit of the KAHEP is based on the power purchase agreement tariff that NEA has agreed with the project developer as per the draft power purchase agreement included as annex to the PDA signed between GON and KEL. Under the agreement, NEA would pay 6.299 US cents/kWh for 25 years. This tariff has two components: (i) 60 percent of this price would be paid in US Dollars which would escalate by 3 percent annually, and (ii) 40 percent would be paid in NPR which would escalate by 6 percent annually, applicable for 10 years only. 13. Royalty payment is also considered in the financial analysis. The current royalty rate has two components; capacity and energy. The capacity royalty is 100 NPR/kW for first 15 years of operation and 1000 NPR thereafter, while the energy royalty is 2 percent of total revenue for first 15 years and 10 percent thereafter. 14. Base Case Financial Internal Rate of Return and Net Present Value. Using the above assumptions, the project level FIRR and NPV are calculated with and without the carbon benefits. The results are summarized in Table 8.4. The project FIRR is found to be 10.5 percent which is below the average cost of borrowing from commercial banks in Nepal, which ranges from 12 to15 percent. This clearly indicates that the KAHEP is not financially viable at the commercial borrowing rate in the country. The FIRR would marginally improve with carbon pricing. The key reason for low FIRR is mainly due to low tariff that was fixed between GON and the developers under the competitive bidding process. In order to make this project financially attractive, for investor to earn an expected return on equity, the interest rate on loan should sufficiently low. As the KAHEP is economically attractive, and considering the fact that the KAHEP will immensely support the growing power deficit in the country, it is justifiable to on-lend the IDA funds to KEL on concessional terms.
87
Table 8.4: The FIRR and NPV for the KAHEP
Case Net Benefits Net Benefits with Carbon pricing FIRR (%) 10.5 12.5 NPV at10 percent(US$ million) 3.64 18.25
15. Sensitivity analysis is carried out for capital cost overrun, decrease in project outputs thus revenues, and delay in project commissioning. The results are summarized below in Table 8.5. Again the decrease in project revenue is very critical, compared to other parameters. If the project revenue decreases by 20percent, then the project FIRR would be only 8.0 percent.
Table 8.5: Sensitivity Analysis
Scenarios FIRR (%) Base Case 10.5 (a) Cost increased by 20 percent 8.8 (b) Benefit decreased by 20 percent 8.0 (c) One year delay in project commissioning 9.7
IFC’s Financial Analysis 16. The proposed IFC financing to KEL is (i) a senior A loan of up to US$ 19.3 million; and (ii) a senior CCCP loan of up to US$ 19.3 million. 17. A summary of KEL’s financial projections (including the debt financing) as per IFC’s financial model is provided in Table 8.6.
88
Table 8.6: Summary of KEL Financial Projections (in US$ million, nominal)
Year Ending 15 July 2014 2015 2016 2017 2018 2019 2020 2021 2030 2033 2036
Summary Income Statement
Revenue - - - - - 5.7 10.9 11.2 14.3 13.9 10.9
EBITDA - - - - - 4.2 7.9 8.2 10.5 9.9 4.9
PAT - - - - - 0.2 0.5 0.9 4.1 4.3 0.6
Summary Balance Sheet
Equity and Liabilities
Shareholders Funds 19.4 23.1 23.1 23.1 23.1 23.3 23.4 23.4 31.9 36.3 36.3
Long- term Debt
Senior Debt
IFC A Loan - - - 9.3 15.1 18.1 16.7 15.4 5.3 - -
IFC CCCP-Loan - - - 9.3 15.1 18.0 16.5 15.2 - - -
Local - - - 0.5 0.8 0.9 0.8 0.7 - - -
Subordinated Debt:
HIDCL - 10.5 34.4 40.0 40.0 40.0 40.0 38.9 16.6 7.9 -
Current Liabilities Including CPLTD - - - - - 2.5 3.2 3.8 6.5 3.2 1.8
Total Equity and Liabilities 19.4 33.6 57.5 82.2 94.0 102.9 100.5 97.5 60.3 47.4 38.1
Assets
Net Fixed Assets Including CWIP 19.4 33.6 57.5 82.2 94.0 97.9 93.9 89.9 53.9 41.9 29.9
Current Assets - (0.0) 5.0 6.5 7.4 5.6 4.4 7.0
Other Assets - - - - - 0.1 0.1 0.2 0.9 1.1 1.3
Total Assets 19.4 33.6 57.5 82.2 94.0 102.9 100.5 97.5 60.3 47.4 38.1
Key Coverage Ratios
Total Debt Service Coverage Ratio 1.83 1.25 1.28 1.23 1.57 1.46
Senior Debt Service Coverage Ratio 2.69 1.54 1.55 2.16 1.89
Table 8.7: Break-Even Analysis
(Minimum Total DSCR at 1.0)
Change (%) Generation (GWh p.a.) -13.3 O&M (p.a.) % of Project Hard costs +37.5
18. Cost Overruns. Any delays/cost overruns beyond the budgeted contingencies (US$ 9.19 million, equivalent of 10% of cost surface works, 25% of cost of underground works, 7% of cost of electromechanical and hydro-mechanical works, and, 10% of other costs), would be partially mitigated through a capped project funds agreement from BPC and Gurans Energy Limited.
89
Annex 9: Governance and Accountability Action Plan (GAAP)
Nepal: Kabeli-A Hydroelectric Project
1. The governance framework for the KAHEP was evaluated in keeping with the nature of the project and the existing experience and capabilities of KEL, and its parent company, BPC. This assessment was based on an extensive review of: BPC’s and KEL’s organizational governance structures, including financial management and procurement capacity; the expected implementation challenges based on detailed knowledge of conditions in the project area; the need for social oversight and participation; the role of monitoring and evaluation in the project; and KEL’s experience with disclosure and communications. 2. The private ownership of the project and the project’s ability to draw on BPC’s corporate resources and good experience in managing and operating hydropower projects, as well as demonstrated strong local support for the project across all population groups were identified as highly positive factors in the assessment of the project governance framework. Moreover, actual progress on the ground at the project site attests to KEL’s good handling of social relations and the types of implementation challenges that can contribute to governance challenges. 3. A potential point of vulnerability from the broad governance perspective is the fact that, while BPC has good experience operating its existing assets, it has not constructed new assets in over a decade with the exception of one small (4 MW) project. Project management capacity is, thus, a concern for the project and a major focus of the GAAP, along with other related aspects of capacity-building. “Project management” encompasses the wide range of activities essential to the successful completion of the project, including construction management and interactions with the contractors as well as the implementation of the social and environmental management plans and the associated monitoring and grievance redress mechanisms. Communications is a cross-cutting area which is a constant requirement through project implementation. 4. Key project-specific governance issues are described below together with measures that KEL has taken thus far to address the issues and will undertake in the course of project implementation. 5. Construction and Contract Management. There is always uncertainty in the implementation of infrastructure projects that emanates from a wide range of risks; this is particularly true of hydropower projects in the Himalayas where “geological surprises” are common. Good construction and contract management is critical to managing these risks and avoiding costly delays. The design of the bid documents and the contract between the owner and the contractor, in turn, greatly influence all aspects of the implementation experience. Suboptimal allocation of risks between owners and contractors has been at the core of contract disputes that have plagued hydropower projects in the past, leading to significant cost and time overruns and sometimes other problems, such as inadequate social and environmental management. For KAHEP, KEL engaged international and national experts to advise on the preparation of the bid documents and associated technical documents that will be part of contract, with a focused effort on addressing weaknesses identified in the implementation of other hydropower projects in Nepal and elsewhere. IFC has engaged an international consulting firm as a Lender’s Engineer to give inputs on the project management and construction
90
supervision. A risk register was prepared that allocates risk to the parties to the contract who will be best able to assess, cost and manage that risk. An essential component in this has been the preparation of a Geo-technical Baseline Report which provides a baseline of information, as distinct from the past practice of forcing bidders to make their own interpretations of the data provided, thus reducing the potential for disputes. A Risk Management Plan has also been prepared. 6. Several officers of KEL participated in FIDIC training in September 2011, to gain a better understanding of the FIDIC standard conditions of contract which form the basis for the bid documents that have been prepared for the main contracts under which the project will be built. In anticipation of the project launch, KEL will organize additional training in contract management for the project team and will participate in other specialized training related to the project, as possible. 7. KEL is in the process of engaging an Owner’s Engineer to help it with the construction and contract management. The team that comprises the Owner’s Engineer will include experts from Nepal as well as international experts. 8. Environmental and Social Monitoring. One of the most important challenges of implementation is to ensure that the measures agreed upon in the course of project preparation are actually carried out as agreed. Monitoring is essential during implementation both to ensure that activities are actually taking place, and to collect feedback on the impact of those activities as well as suggestions for improving the given intervention. In recognition of this, KEL has included provisions for monitoring of the environmental and social management plans for KAHEP and for strengthening of the project team’s capacity for the implementation of the environmental and social management plans. 9. In addition, KEL will engage a consulting firm to conduct independent reviews and monitoring of the implementation of the environmental and social management plans and safeguard measures; these consultants will also carry out the mid-term and end-of-project reviews. 10. Communications, Consultations and Disclosure. KEL has established a robust system for handling communications with project-affected communities and generally with the broad public at the local as well as national levels. A Project Information Center is operating at site, in the Amarpur VDC, and includes copies of safeguards and other project-related documents in English, Nepali, Limbu, Tamang and Rai (Bantawa and Khaling). The Site-in-Charge will have experience in rural energy development. KEL has formed the Kabeli-A Environment and Community Development Unit, which includes the Environment Manager, Environment Officer, Livelihood Officer, Corporate Social Responsibility/Mitigation Officer and Public Relations Officer who will be posted at site. The Public Relations Officer will oversee a team of public relations assistants who will be recruited from local communities. The public relations team will include a female public relations assistant to address the communications needs of women in the project area.
91
11. KEL has conducted a series of consultations with project-affected communities, their elected and community representatives as well as other important stakeholders at the local and district level. KEL has facilitated the setting up of a community interface organization, the Kabeli-A Jal Vidyut Ayojana Sahayog Tatha Sarokar Samiti, covering the four project-affected VDCs. It has set up a Project Information Center at site to facilitate ongoing interaction with local communities and has posted a Public Relations/Community Relations officer at site to oversee information-sharing activities with key stakeholders. KEL also regularly posts project-related information on its website.
92
Governance and Accountability Action Plan (GAAP) March 21, 2014
KAHEP Component
Issues Identified For Monitoring
Proposed Mitigation Measures
Milestones Indicative Timeline
Construction and contract management
Engage Owner’s Engineer
Complete TOR Finalize contracts with international experts
i. Completed ii. June 2014
Training in contract management for project launch
Just before awarding the two civil works contracts, before contractor mobilization (June 2014)
Environmental and Social Monitoring
1. Grievance redress institutional arrangements
i. Finalize TOR for Local Grievance Redress Committee and Project Grievance Committee (including environmental grievances in scope of these bodies). ii. Constitute Local Grievance Redress Committee and Project Grievance Committee
i. June 2014 ii. Kabeli-A Concern Group together with KEL to finalize by June 2014
2. Third-party monitoring of EMP
i. Finalize TORs ii. Third-party monitoring mechanism in place
i. June 2014 ii. Immediately after award of civil works contracts
Communications Consultations
During Project preparation/design phase
More than 10 VDC-level public meetings, 14 Focus Group Discussions, one project-wide public hearing on the EIA, as well as district-level stakeholder meetings in Panchthar and Taplejung and one national consultative meeting have been held. Individual interactions with project-affected persons are ongoing.
During implementation phase
Consultations will continue during implementation phase
93
Create and maintain Project Information Center at site.
i. Establishment of PIC ii. Ensure regular updating of project information provided iii. Carry out occasional auditing of record-keeping at PIC and local awareness of
i. Completed - PIC stocked with all relevant project-related documents and reports, including translations of the executive summaries of the EMP/SAP in Nepali and the local indigenous languages of Limbu, Tamang, RaiKhaling and RaiBantawa. ii. On quarterly basis. iii. As required.
Launch communications program of information dissemination, including on local FM networks
i. Six-month Communications Action Plan to be prepared ii. Commence implementation of dissemination through local FM and other means
i. Completed ii. May 2014
Ongoing disclosure through: PIC at project site All relevant
documents to be posted on KEL website
Disclosure walls at village-level for information about project, implementation schedules, contact details for project manager etc.
Formal disclosure of relevant documents and progress reports to DDCs and VDCs.
Website disclosure of all relevant documents and reports (including translations) done and other material uploaded.
Completed
Regular interaction with VDCs and DDCs to continue
Ongoing
94
Annex 10: Strengths, Risks and Issues
Nepal: Kabeli-A Hydroelectric Project
A. Strengths
1. Very attractive hydroelectric power project with an expected tariff at commissioning that is substantially below NEA’s current average power purchase price and retail tariff of NEA;
2. Significant financing commitment from GON through HIDCL in the form of subordinated loan to the project; 3. Low transmission losses, as the project is located close to the load. B. Risks and Issues
4. Sector/Off-taker. The poor financial condition of NEA due to, inter alia, low retail tariffs and high system losses could affect payments by NEA to KEL under the PPA. The dispatch risk and payment risk are partially mitigated through the long term take-or-pay PPA. In addition, GON has undertaken in the IDA Financing Agreement, to provide NEA with all necessary funds to cover any amount due to KEL for electricity supplied to NEA under the project.
5. Construction. Construction risk is an important risk in green-field hydroelectric power projects. There will be no fixed price fixed date turnkey arrangement with a single contractor responsibility. Instead KEL will need to manage multiple contractors for the various components of the project (civil, electro-mechanical, hydro-mechanical etc.). This can expose KEL to interface risk as well as cost overrun and delay risk. Those risks are partially mitigated through the inclusion of contingencies in the financial plan, capped project funds agreement from BPC and Asia InfraCo, as well as the requirement for KEL to hire an experienced international owner’s engineer during the construction period.
6. Contractual. Contractual risk allocation including termination arrangements under the Project Development Agreement and the Power Purchase Agreement are relatively weak. There are no buyout obligations in case of termination, which exposes the lenders to stranded asset risk. Those risks are partially mitigated through the strong financial commitment of GON to the project as well as the support from IDA to GON. KEL is following up with the GON for a comfort letter providing for step in and cure rights provided to the lenders by GON.
7. Sponsor. BPC has limited financial capacity to provide completion support and limited experience in managing multiple contractors for a project of this size. Those risks are partially mitigated through the inclusion of contingencies in the financial plan as well as the requirement that KEL obtains technical support in the form of an experienced international owner’s engineer during the construction period.
8. Foreign Exchange. The tariff under the Power Purchase Agreement is partially indexed to the US$. This exposes KEL to foreign exchange risks in case of a material devaluation of the Nepalese Rupee against the US$ after 15 years of operation when US$ revenue stream gets converted to NPR.
95
9. Hydrology. Lower than expected hydrology would negatively affect the financial performance of KEL. This risk is partially mitigated due to the long term hydrological data available for the project, which provides evidence of limited inter annual variability in the expected energy yield of the project.
96
Annex 11: Statement of IFC’s Held and Disbursed Portfolio
(Millions of US Dollars)
T A P L E J U N GT A P L E J U N G
I L A MI L A M
Kabe
liKa
beli
Khola
Khola
PANCHTHAR PANCHTHAR
Transmission line from Kabeli ransmission Project
Transmission line from Kabeli ransmission Project
(under construction)
(under construction)
AmarpurAmarpur
Khokling
Liwang
Hangdeva
Taplejung
Myanglung Phidim
Ilam
Tiringe
Sikaicha
DokhuNankholyang
Phulbari
Nidhuradin
Hangpang
Change
Sangu
Dhungesaghu
SanthakraKhamlung
Thinglabu
Phakumba
Lingtep
Thukima
NalbuSanwa
Papung
KhejenimLinkhim
Sawadin
Ekhabu Tapethok
Lelep
Yamfudin
Mamangkhe
KhewangPedang
SurunkhimTellokMehele
Ambegudin
SinamDummriseThechambuChaksibote Thumbedin Sawalakhu
Oyam
Ankhop Sadewa
Phurumbu
TharpuNagi
Amarpur
Kabeli
Panchami Sumang
Khunga Ekteen Memeng
Falaicha
Parangbung
Sidin
Luwamfu
Yangnam
Nangeen
Lungrupa
Ranitar
BharpaSalleri
Phidim
Chokmagu
NawamidandaEmbung
PouwaSartap
Chilingdin
Phakphok
Amchok
Chameta
Phaktep
Rani GaunYasokSyangrumba
Mangjabung
Sarangdanda
OlaneAangnaMauwa
Hangum
AaruboteRabi
Kurumba
KhandrungLinba
Durdimba
PhuyatappaEktappa Mangalbare
Puwamajwa
Maimajhuwa
Mabu
Jamuna
PyangSumbekSakhejung
Barbote
Soyang
NamsalingIlam N.P.
SangrumbaGhuseni
Jitpur
SiddhithumkaSoyak
Chisapani
Emang
Lumbe
Gajurmukhi
BajhoSakfara
ShantipurLaxmipura
GodukPanchakanya
Sri AntuKanyam Samalp
Pashupatinagar
Gorkhe
JogmaiNayaBazar
T A P L E J U N G
T E R H A T H U M
SAN
KH
UW
ASA
BH
A
PANCHTHAR
I L A MDHANKUTA
I N D I A
27°00’
87°30’
87°30’
87°45’
87°45’ 88°00’
27°15’
27°15’
27°00’
27°30’
27°30’
Kabe
liKh
ola
Transmission line from Kabeli ransmission Project
(under construction)
10001000
10001000
600600
600
600
800800
800800
14001400
600600
600600
600600
800800
800800
10001000
12001200
10001000
12001200
14001400 to Phidimto Phidim
PowerhousePowerhouse TailraceTailracePenstockPenstock
Head
race
tunn
elHe
adra
ce tu
nnel
Underground settling basinUnderground settling basin
Headworks (upstream)Headworks (upstream)Flushing tunnelFlushing tunnel
AditAditRockRock
Access tunnelAccess tunnel
Tunnel PortalTunnel PortalSurge shaftSurge shaft
14071407
12381238
896896
497497
868868
14171417894894
10701070
15251525
18061806
1458145813651365
11891189
14281428
709709
875875
771771
BahitarBahitar
KoldadaKoldada
MajhigauMajhigau
PhalatePhalate
KabeliKabeli
BhimsenthanBhimsenthan
KhahareKhahare
TitirboteTitirbote KhemakhamKhemakham
KhalteKhalteTumankheTumankhe
PhaksePhakse
ChaksiboteChaksibote
RaigauRaigau
BhanbariBhanbari
BhanuchokBhanuchok
PhedapaPhedapa
ApchokApchok
DorumbaDorumba
AmarpurAmarpur
AmboteAmbote
DorumbaDorumba
DubichaurDubichaur
DhuseniDhuseni
PhodarpatiPhodarpatiRijalgauRijalgau
MadibunMadibun
JarayotarJarayotar
DhungeDhunge
KaijaleKaijale
KaijaleKaijale
BhadaureBhadaure
HiudiyaHiudiya
Pallo IwaPallo Iwa
SimleSimle
TinsalleTinsalle
DhodeniDhodeni
PinasiPinasiKolboteKolbote
AmboteAmbote-
-
--
--
-
-
--
--
-
-
-
-
-
-
-
-
˜˜
˜
-- -
-
-
-
-
-
- -
- ˜
---
-
TilharTilhar
KodepaKodepa
SibuwaSibuwa
GolegauGolegau
HiudiyabesiHiudiyabesi
ThatiThati
ChisapaniChisapani
SingapurSingapur
AnbunAnbun BhadaureBhadaure
KharelgauKharelgau
TribeniTribeni
DhadeDhade
LimbuniLimbuni
MahendrachokMahendrachokHembegauHembegau
RajabesiRajabesi
-̃
˜
-
˜
˜ -
-
---
-
-̃
˜ ˜-
-
--
-
--
-
-
Kabeli-PhawaKabeli-Phawaconfluenceconfluence
Phaw
aPh
awa
Kabeli-TamorKabeli-Tamorconfluenceconfluence Kabeli River
Kabeli River
Tamor RiverTamor River
RiverRiver
Piple
Piple
KholaKhola
TamorTamor
Hiudiva Khola
Hiudiva Khola
T E R H A T H U MT E R H A T H U M
PANCHTHAR PANCHTHAR
T A P L E J U N GT A P L E J U N G
Kabeli-Phawaconfluence
Phaw
a
Kabeli-Tamorconfluence Kabeli River
Tamor River
River
Piple
Khola
Tamor
Hiudiva Khola
to Phidim
Powerhouse TailracePenstock
Head
race
tunn
el
Underground settling basin
Headworks (upstream)Flushing tunnel
AditRock
Access tunnel
Tunnel PortalSurge shaft
Bahitar
Koldada
Majhigau
Phalate
Kabeli
Bhimsenthan
Khahare
Titirbote Khemakham
KhalteTumankhe
Phakse
Chaksibote
Raigau
Bhanbari
Bhanuchok
Phedapa
Apchok
Dorumba
Amarpur
Ambote
Dorumba
Dubichaur
Dhuseni
PhodarpatiRijalgau
Madibun
Jarayotar
Dhunge
Kaijale
Kaijale
Bhadaure
Hiudiya
Pallo Iwa
Simle
Tinsalle
Dhodeni
PinasiKolbote
Ambote-
-
--
--
-
-
--
--
-
-
-
-
-
-
-
-
˜˜
˜
-- -
-
-
-
-
-
- -
- ˜
---
-
Tilhar
Kodepa
Sibuwa
Golegau
Hiudiyabesi
Thati
Chisapani
Singapur
Anbun Bhadaure
Kharelgau
Tribeni
Dhade
Limbuni
MahendrachokHembegau
Rajabesi
-̃
˜
-
˜
˜ -
-
---
-
-̃
˜ ˜-
-
--
-
--
-
-T E R H A T H U M
PANCHTHAR
T A P L E J U N G
1407
1238
896
497
868
1417894
1070
1525
1806
14581365
1189
1428
709
875
771
1000
1000
600
600
800
800
1400
600
600
600
800
800
1000
1200
1000
1200
1400
NEPAL
TTaplejungaplejung
PhidimPhidimArea of mapArea of map
Kabeli KholaRiver
TAPLEJUNG
PANCHTHAR
Taplejung
Phidim
KATHMANDU
FARWESTERN
MIDWESTERN
WESTERN
CENTRAL
EASTERN
Mt. Everest
INDIAI N D I A
CH
IN
A
BAN.
80° 82° 84° 86° 88°
80° 82° 84° 86° 88°
30°
28°
30°
28°
Area of map
Area ofmain map
0 40 80
0 20 40 60 80 100 MILES
120 160 KILOMETERS
SELECTED TOWNS AND VILLAGES
DISTRICT HEADQUARTERS (MECHI)
NATIONAL CAPITAL
DISTRICT BOUNDARIES (MECHI)
ZONE BOUNDARY (MECHI)
DEVELOPMENT REGION BOUNDARIES
INTERNATIONAL BOUNDARIES
0 5 10 Km.
0 500 1000 1500 2000 meters
N E P A L
KABELI “A” HYDRO ELECTRIC PROJECTPROJECT COMPONENTS
TRANSMISSION LINES UNDER CONSTRUCTION
SELECTED CITIES AND TOWNS
DISTRICT HEADQUARTERS
HIGHWAYS
FEEDER ROADS
DISTRICT ROADS
OTHER ROADS
VILLAGE DEVELOPMENT COMMITTEE BOUNDARIES
DISTRICT BOUNDARIES
ZONE BOUNDARIES
INTERNATIONAL BOUNDARIES
ELEVATION:
4500 meters
3500
2500
1500
1000
500
0
IBRD 38796
This map was produced by theMap Design Unit of The World Bank.The boundaries, colors,denominations and any otherinformation shown on this map do notimply, on the part of The World BankGroup, any judgment on the legalstatus of any territory, or anyendorsement or acceptance of suchboundaries.
OCTOBER 2011