Viet Nam: Power Transmission Investment Program (Tranche 2)

Horizontal Tabs

Lessons

Ensuring compliance to Asian Development Bank (ADB) policies on safeguards and public disclosure requires conscientiousness and strong coordination between ADB project teams and government counterparts.

Construction of the 500 kilovolt (kV) Pleiku–My Phuoc–Cau Bong transmission line, 1 of the 3 transmission lines included in project 2 of the ADB-financed Power Transmission Investment Program in Viet Nam, was already started by the executing agency, the National Power Transmission Corporation (NPT), even while the project was still being appraised. Due diligence on environmental and social safeguards should therefore have been addressed during appraisal and included in the main project document. An environmental compliance audit should have been conducted. The social safeguards due diligence reports (DDRs) prepared at appraisal and implemented by NPT during project outset should have been disclosed right away on the ADB website, and not only after they were updated in 2014. Civil works on the transmission lines should likewise not have been commenced before the resettlement plans were updated. While these breaches did not have significant negative effects, ADB project teams in future projects should be more conscientious and coordinate with government counterparts in ensuring that the ADB Safeguard Policy Statement (2009) and Public Communications Policy (2011) are complied with

Project Cycle Stage:

Preparation

Due Diligence

Implementation

Early engagement of resettlement consultants facilitates timely preparation of land acquisition and resettlement plans.

Resettlement consultants should be engaged at least six months before the scheduled start of civil works. This would enable timely completion of the updated land acquisition and resettlement plans and eliminate the need for starting construction without the updated plans, as was the case with all the subprojects under this tranche. Close coordination between the resettlement consultants and the contractors preparing the final design should also be required. Recruiting safeguard consultants through a firm, with contracts that cover the entire resettlement implementation period, might also be necessary to avoid problems associated with frequent consultant turnover and poor performance. Under this project, such problems included poor quality of reports and work delays.

Project Cycle Stage:

Implementation

ADB due diligence should build on completed prefeasibility studies of executing agencies (EAs) and refer to market rates to avoid or minimize cost underruns.

The project encountered a 43% cost underrun in ADB-financed components, causing the cancellation of $47.34 million of the total $110.19 million loan approved by ADB. The huge underrun was due to several factors, key of which were: the removal of two large compensators, estimated at $19 million, from the 500−kV line transmission subproject; poor estimation methodology; outdated price references; competitive bidding; and restrictions to revising cost estimates in the government’s official development assistance loan approval process. This experience highlights the need for ADB due diligence to build on EA-completed prefeasibility studies and refer to existing market rates in preparing the cost estimates for future similar investments in Viet Nam.

Project Cycle Stage:

Preparation

Background

Viet Nam’s rapid economic progress has been accompanied by continually growing electricity demand for industrial development and private consumption. During 2000−2009, this demand grew at an average of 14% per year and, in 2011, was projected to grow at the same rate until 2015 and by 11% in 2016−2020. To meet these projected demand increases, the government adopted the Power Sector Development Master Plan (PDMP) VII, which identified multiple power generation and transmission projects to be implemented during 2011−2020 and laid out a detailed sector roadmap and reform framework.

Against this backdrop, the Asian Development Bank (ADB) approved a $730 million multitranche financing facility (MFF) for Viet Nam’s Power Transmission Investment Program in December 2011. The program, to be delivered in four tranches, was to finance a portion of PDMP VII’s transmission and distribution investment requirements, estimated to cost a total of $7.78 billion. Drawing on the success and lessons from two earlier ADB-financed transmission projects, it was to enhance the country’s power transmission network through three outputs (i) expanded transmission infrastructure, (ii) improved operational effectiveness and efficiency of the National Power Transmission Network (NPT), and (iii) project implementation support.

This report covers tranche 2 project, approved by ADB in December 2012 for a loan of $110.19 million. The project focused on expanding the major 500 kilovolt (kV) transmission backbone line connecting central and south Viet Nam and two 220 kV transmission lines in Ho Chi Minh City, which were to contribute to achieving more balanced regional power loads, removing bottlenecks, facilitating power transfers, and reducing system losses and voltage fluctuations.

The transmission lines and associated facilities were completed as envisaged. However, as with the tranche 1 project, project 2 was unable to use the allocations for NPT operational and management capacity-building because of government regulation to restrict the use of official development assistance loans for nonphysical investments. Nevertheless, the NPT leveraged 2 ADB technical assistance projects and its own resources for capacity development especially in the areas of business development, planning and management, financial management, and transmission pricing calculation, enabling organizational and staff capacity buildup and progressive improvement in NPT financial performance. Project implementation support focused on safeguards compliance, identified under tranche 1 as an area where NPT was weak.

Completion of the planned outputs, notwithstanding significant delays in meeting social safeguard requirements, allowed the project to contribute to balancing the power loads in northern and southern Viet Nam. It also helped the growth in power supply to keep pace with the actual 10.8% annual increase in demand during 2011–2016, and power system losses to fall from 10.2% in 2010 to 7.7% in 2016.

NPT, a subsidiary of the state-owned Viet Nam Electricity, served as the project executing agency. The power project management boards established under the NPT for the central and southern regions acted as implementing agencies.

Project Information

Project Name:

Power Transmission Investment Program (Tranche 2)

Report Date:

September, 2018

Main Sector:

Energy

Country:

Viet Nam

Project Number:

42039-035

Report Type: