Project Name South Asia Subregional Economic Cooperation Power System Expansion Project
Project Number 44219-014
Country Nepal
Project Status Active
Project Type / Modality of Assistance Grant
Loan
Technical Assistance
Source of Funding / Amount
Grant 0397-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project
Government of Norway US$ 60.00 million
Grant 0398-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project
Strategic Climate Fund US$ 11.20 million
Loan 3139-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project
Asian Development Fund US$ 180.00 million
Loan: South Asia Subregional Economic Cooperation Power System Expansion Project
European Investment Bank US$ 120.00 million
TA 8678-NEP: Supporting Rural Electrification Through Renewable Energy
Technical Assistance Special Fund US$ 500,000.00
Grant: South Asia Subregional Economic Cooperation Power System Expansion Project
Strategic Climate Fund US$ 20.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Regional integration
Drivers of Change Governance and capacity development
Partnerships
Sector / Subsector

Energy - Electricity transmission and distribution - Renewable energy generation - small hydro - Renewable energy generation - solar - Renewable energy generation - wind

Gender Equity and Mainstreaming Effective gender mainstreaming
Description ADB assisted the Government of Nepal in increasing capacity of national power grid and enhancing renewable energy development. The South Asia Subregional Economic Cooperation Power System Expansion Project is building more than 200 kilometers of power transmission lines, as well as substations, along Kali Gandaki corridor in the Himalayas and Marsyangdi-Kathmandu route. The project is also building or upgrading more than 1,000 kilometers of power distribution lines in the east, central, and west regions of the country. To bring affordable renewable energy to remote areas, the project is building small hydroelectric power plants, as well as mini-grid based solar and solar/wind hybrid energy systems.
Project Rationale and Linkage to Country/Regional Strategy Nepal is facing chronic power shortages. Only 65% of the country's households have access to electricity and per capita electricity consumption is 102 kilowatt-hours per year, one of the lowest in the world. The installed capacity is 762 megawatts, well below the peak demand of 1,095 megawatts. As a result, consumers connected to the national grid experience scheduled power cuts of 12 hours per day or more during the dry season. In addition, the limited power transmission and distribution network is a bottleneck both for meeting domestic power demand and for potentially trading power with neighboring countries.
Impact Increased electricity access in Nepal and improved power exchange across the border

Project Outcome

Description of Outcome Increased capacity of national grid and enhanced renewable energy development
Progress Toward Outcome Loan (3139) and grants (0397-0398) effectiveness declared on 15 January 2015.
Implementation Progress
Description of Project Outputs

1. Power transmission capacity increased

2. Power distribution network improved

3. Mini-grid-based renewable energy systems in off-grid areas increased

4. Capacity development support to NEA and AEPC provided.

Status of Implementation Progress (Outputs, Activities, and Issues)

NEA approved the establishment of Project Management Directorate (PMD) and appointed a Chief of PMD.

The second review mission was fielded from 28 October to 5 November 2015. Implementation is on-track. Next review mission is scheduled in the last week of April 2016.

Geographical Location

Safeguard Categories

Environment B
Involuntary Resettlement A
Indigenous Peoples B

Summary of Environmental and Social Aspects

Environmental Aspects

Initial environmental examinations and an environmental assessment and review framework for future unidentified off-grid subprojects have been prepared for both on- and off-grid components following ADB's Safeguard Policy Statement (2009) and the government's environmental regulatory framework. Potential impacts are mostly temporary and reversible, but some irreversible impacts on the natural habitat will occur because of the clearance of about 150 hectares of forested land. Available information on the habitat ranges and elevations of sensitive species indicates that critical habitat will not be directly impacted; potential impacts on natural habitat and potentially sensitive ecosystems have been identified and can be readily mitigated. Due diligence has determined that associated hydropower facilities comply with Nepal's regulatory requirements. Cumulative and induced impacts will have net positive benefits from easier access to energy and productive end uses of energy. Climate change risk screening was conducted and resulted to a medium climate change classification. Risks identified will be addressed through best practice engineering design.

The initial environmental examinations and environmental management plans (EMPs) for all components include mitigation measures, monitoring, and budgetary provisions that are adequate to address the environmental impacts of the project. The EMPs' requirements will be incorporated into bidding documents. The NEA and AEPC have sufficient capacity to supervise construction contracts and EMP implementation, including preparation of semiannual monitoring reports. The EMPs will be updated as necessary during implementation. Public consultation and information disclosure requirements have been met, including requirements for consultation with the management teams for protected areas. The environmental assessment for the project was disclosed on ADB's website on 28 February 2014.

Involuntary Resettlement

The project will require land acquisition and involuntary resettlement, which will primarily be economic displacements with limited impact from physical displacement. The transmission and distribution components will have permanent and temporary impacts. Permanent impacts are anticipated from land acquisition for the construction of new transmission substations, distribution substations, transmission towers, and distribution poles. The temporary impacts will be from the loss of trees and crops along the right-of-way. About 715 households will be affected by land acquisition and loss of crops and trees. An initial assessment shows that the project areas do not have any endangered indigenous peoples groups. The magnitude of the impacts on indigenous peoples is not significant. Impacts are limited to loss of portions of land which will be compensated at replacement cost. Where these groups are considered vulnerable, additional resettlement assistance will be provided, in addition to the compensation, and consultations will be carried out to make them aware of the project and to obtain their endorsement for land acquisition.

The off-grid component will not have any resettlement impacts for sample subprojects and no adverse impacts on indigenous peoples. The minimum private land requirements for the sample subprojects will be met through voluntary land donation. A due diligence report has been prepared for the sample subprojects. The off-grid component allows for future subprojects, which have not been identified and are subject to due diligence. Therefore, a resettlement framework and an indigenous peoples planning framework have been prepared as required by the Safeguard Policy Statement and related national policies and legislation. AEPC will monitor the implementation of the resettlement and indigenous people plan, and will submit semiannual reports to ADB.

Social safeguards measures will be achieved in line with the provisions stated in the PAM. A summary of the initial social safeguards assessment is presented in the summary poverty reduction and social strategy.

Indigenous Peoples Based on surveys, two draft combined resettlement and indigenous peoples plans have been prepared for the on-grid components, in line with ADB's Safeguard Policy Statement and the government's legal framework. These plans will be publicly disclosed to interested stakeholders on the ADB and NEA websites.
Stakeholder Communication, Participation, and Consultation
During Project Design Stakeholder participation and consultations were conducted during project design. The same will be conducted during project implementation.
During Project Implementation Stakeholder participation and consultations were conducted during project design. The same will be conducted during project implementation.

Business Opportunities

Consulting Services

The project will be executed over a period of six years from the date of loan effectiveness. Consultants (individuals and firm) to be financed by ADB funds and ADB administered funds will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time). All procurement to be financed by ADB fund and ADB administered funds will be carried out in accordance with ADB's Procurement Guidelines (2013, as amended from time to time). For the procurement to be financed by ADF loan, or jointly by ADF and Norwegian grant, a blanket waiver of member country procurement eligibility restrictions will be applied.

The government has requested ADB to approve advance contracting and retroactive financing for procurement of goods and turnkey works. If approved, retroactive financing may be allowed for up to 20% of the loan amount for expenditures incurred 12 months prior to loan signing. The government has been advised that ADB's approval of advance contracting and retroactive financing in principle does not commit ADB to finance the project.

Procurement

The project will be executed over a period of six years from the date of loan effectiveness. Consultants (individuals and firm) to be financed by ADB funds and ADB administered funds will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time). All procurement to be financed by ADB fund and ADB administered funds will be carried out in accordance with ADB's Procurement Guidelines (2013, as amended from time to time). For the procurement to be financed by ADF loan, or jointly by ADF and Norwegian grant, a blanket waiver of member country procurement eligibility restrictions will be applied.

The government has requested ADB to approve advance contracting and retroactive financing for procurement of goods and turnkey works. If approved, retroactive financing may be allowed for up to 20% of the loan amount for expenditures incurred 12 months prior to loan signing. The government has been advised that ADB's approval of advance contracting and retroactive financing in principle does not commit ADB to finance the project.

Responsible Staff

Responsible ADB Officer Hongwei Zhang
Responsible ADB Department South Asia Department
Responsible ADB Division Energy Division, SARD
Executing Agencies
Alternative Energy Promotion Center (AEPC)
INFO@AEPC.GOV.NP
Khumaltaar Heights
Lalitpur Sub Metropolitan City
Nepal
Nepal Electricity Authority
Sanepa, Lalitpur
Nepal

Timetable

Concept Clearance 31 Jul 2013
Fact Finding 16 Mar 2014 to 21 Mar 2014
MRM 22 Apr 2014
Approval 04 Jul 2014
Last Review Mission -
Last PDS Update 11 Mar 2016

Grant 0397-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Jul 2014 14 Nov 2014 15 Jan 2015 30 Jun 2022 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 60.00 Cumulative Contract Awards
ADB 0.00 04 Jul 2014 0.00 21.04 35%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 60.00 04 Jul 2014 0.00 0.00 0%

Grant 0398-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Jul 2014 11 Jul 2014 15 Jan 2015 30 Jun 2022 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 11.20 Cumulative Contract Awards
ADB 0.00 04 Jul 2014 0.00 0.67 6%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 11.20 04 Jul 2014 0.00 0.72 6%

Loan 3139-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Jul 2014 11 Jul 2014 15 Jan 2015 30 Jun 2022 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 368.80 Cumulative Contract Awards
ADB 180.00 04 Jul 2014 81.21 0.00 50%
Counterpart 68.80 Cumulative Disbursements
Cofinancing 120.00 04 Jul 2014 5.04 0.00 3%

TA 8678-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Jul 2014 05 Aug 2014 05 Aug 2014 30 Jun 2017 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
500,000.00 0.00 0.00 0.00 0.00 0.00 500,000.00 04 Jul 2014 181,426.17

 
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