Public Disclosure Authorized
Document of
The World Bank,
International Development Association, and
International Finance Corporation
FOR OFFICIAL USE ONLY
Public Disclosure Authorized
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)
Public Disclosure Authorized
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$19.3 MILLION WITH INTERNATIONAL FINANCE CORPORATION
ACTING AS IMPLEMENTING ENTITY OF THE CCCP
TO
Public Disclosure Authorized
KABELI ENERGY LIMITED IN NEPAL
FOR THE
KABELI-A HYDROELECTRIC PROJECT
April 19, 2014
Sustainable Development Department
Nepal Country Management Unit
South Asia Region
Infrastructure & Natural Resources Department
Climate Business Department
International Finance Corporation
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
Exchange Rate Effective
Currency Unit
US$ 1
US$ 1
=
=
=
=
December, 2013
Nepalese Rupees (NPR)
99.0 NPR
0.65018 SDR
FISCAL YEAR
July 16 – July 15
ABBREVIATIONS AND ACRONYMS
BOOT
BPC
CCCP
CIA
CO2
DA
DDC
DfID
DOED
EA
EMP
EIA
EIRR
FIDIC
ISN
KAHEP
kcal
KEL
km
kW
kWh
LRMC
MJ
MOE
MOF
MW
MWh
NEA
IDA/IFC Interim Strategy Note
Kabeli-A Hydroelectric Project
Kilocalorie
Kabeli Energy Limited
Kilometer
Kilo Watt
kilo Watt-hour
Long-run Marginal Cost
Mega Joule
Ministry of Energy
Ministry of Finance
Mega Watt
Mega Watt-hour
Nepal Electricity Authority
NCB
PAP
PDA
PIC
POE
National Competitive Bidding
Project-affected Persons
Project Development Agreement
Public Information Center
Panel of Experts
IBN
Build, Own, Operate, Transfer
Butwal Power Company Limited
Canada Climate Change Program
Cumulative Impact Assessment
Carbon Dioxide
Designated Account
District Development Committee
Department for International Development
Department of Electricity Development
Environmental Assessment
Environmental Management Plan
Environmental Impact Assessment
Economic Internal Rate of Return
Federation Internationale des IngenieursConseils
Financial Internal Rate of Return
Governance and Accountability Action Plan
Gram per kilo Watt-hour
Gurans Energy Limited
Hydroelectricity Investment and Development
Company Limited
Investment Board of Nepal
PS
ICB
ICP
International Competitive Bidding
Informed Consultation and Participation
RCIA
RCLAP
IDA
IDC
IFC
InfraCo
Asia
IPVCDP
International Development Association
Interest During Construction
International Finance Corporation
InfraCo Asia Himalayan Hydro Pte. Ltd.
SA
SAP
TOR
VDC
IFC Performance Standards on
Environmental and Social Sustainability
Rapid Cumulative Impacts Assessment
Resettlement Compensation and Livelihood
Assistance Plan
Social Assessment
Social Action Plan
Terms of Reference
Village Development Committee
Indigenous People Vulnerable Community
Development Plan
VEC
FIRR
GAAP
g/kWh
Gurans
HIDCL
International Development Association (IDA)
Regional Vice President:
Philippe Le Houerou
Country Director:
Johannes C. M. Zutt
Sector Director:
John H. Stein
Sector Manager:
Julia Bucknall
Task Team Leader:
Jie Tang
Valued Environmental and Social
Component
International Finance Corporation (IFC)
Vice President:
Karin Finkelston
Regional Director:
Serge Devieux
Industry Director:
Anita M. George
Manager:
Sumeet Thakur
Team Leader:
Andre S. Van Hoeck
ii
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 iii
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 iv
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
[X]
Credit
[ ]
Guarantee
Total Project Cost:
108.6
Financing Gap:
0.00
[ ]
Other
Total Bank Financing:
46.00
.
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
v
.
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
%
Energy and mining
Other Renewable Energy 100
Total
Adaptation
Mitigation
Co-benefits % Co-benefits %
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]
.
vi
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
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
No
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.
vii
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
viii
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
ix
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 Location
Division
Nepal
Eastern Nepal
Planned
Panchathar
District
x
Actual
Comments
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).
1
Table 1: Total Installed Capacity by Resources, July 2013
Hydro
Solar
Thermal
Total
On-grid (MW)
704.4
-53.4
757.8
Off-grid (MW)
41.3
7.6
not available *
48.9
Total (MW)
745.7
7.6
53.4
806.7
Percentage (%)
92.4
1.0
6.6
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.
2
Table 2: Share of NEA and IPPs in Total Installed Capacity
Hydro (MW)
Solar (MW)
Thermal (MW)
Total (MW)
Percentage (%)
NEA
478.3
0.1
53.4
531.8
65.9
IPP
267.4
7.5
n.a.
274.8
34.1
Total
745.7
7.6
53.4
806.6
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.
3
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 offgrid 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-ofriver 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
4
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.
5
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.
6
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.
7
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
8
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 developmentoriented 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
9
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 25year 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 sitebased 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
10
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 benefitssharing mechanisms.
11
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
Stakeholder Risk
Implementing Agency Risk
Capacity
Governance
Project Risk
Design
Social and Environmental
Program and Donor
Delivery Monitoring and Sustainability
Financial Management
Other (Optional)
Overall Implementation Risk
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Rating
Substantial
High
Moderate
High
Substantial
Low
Substantial
High
Substantial
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
13
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
14
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
15
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.
16
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
17
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.
18
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.
Core
PDO Level
Results
Indicators
Indicator One:
X
Generation
capacity
commissioned
under the
Project
INTERMEDIATE
Unit of
Measure
Baseline
MW
Cumulative Target Values*
Frequency
YR 1
YR 2
YR3
YR 4
YR5
0
0
0
0
0
37.6
0
19
38
58
72
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
102
or as
needed
with
actual
cost
(a) 100
(b) 100
(c) 100
No
agreement
signed
Effective
effective
effective
effective
No
Under
preparation
Draft
completed
Adopted
by the
GON
One time
by project
completion
Data Source/
Methodology
Responsibility
for Data
Collection
KEL,
contractors
KEL
Description
(indicator
definition)
Actual
installed
capacity
commissioned
Intermediate Result (Component 1):
Intermediate
Result indicator
One: Public
private
financing
mobilized
USD
Million
Intermediate
%
Result indicator
complettwo: Progress in
ion of
construction of
work
(a) dam, (b)
volume
tunnels&(c)
powerhouse
Intermediate
N/A
Result indicator
Three: Signing
of HIDCL
consortium
agreement
Intermediate Result (Component 2):
Intermediate
Result indicator
One: Guidelines
for CIA
N/A
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19
Trimester
MOF, HIDCL,
KEL
MOF,
HIDCL,
KEL
Trimester
KEL,
contractors
KEL
Annually
Independent
consultant
KEL
Semiannually
DOED
MOE
Financing
as needed
to complete
the
KAHEP
Intermediate
N/A
No
Result indicator
Two: Guideline
for Resettlement
Intermediate Result (Component 3):
Under
preparation
Draft
completed
Adopted
by the
GON
Semiannually
DOED
MOE
Intermediate
N/A
0
0
1
2
3
3
Annual
IBN
IBN
Result indicator
One: Number of
PDA signed
with private
hydropower
developer(s)
(cumulative)
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.
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20
Environment
and Social
Performance
Economic Performance
Financial
Performance
Table 1.1: IFC Results Framework and Arrangements for Results Monitoring (DOTS)
Target & Year
To be tracked
in the DOTS
Detailed Impact
Description
Project completion on
time and budget
Impact Indicators
Project cost and
completion date
(not to exceed 5 years)
Project to be completed within +/10% of original budget by 2019
Returns to all Capital
Providers
Return on Invested Capital
(ROIC)
US$ Annual ROIC >
US$ Annual WACC
Maintained over Supervision
Yes
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
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
Estimated Annual GHG
reduction
Tonnes of CO2 equivalent
per year
114,400 t CO2 equivalent per year
by 2020
Yes
Yes
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)
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21
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
A)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
B)
20
21
22
23
C)
24
25
26
Cost Estimation
KAHEP Component
Land Acquisition
Infrastructure Development
Civil Construction Cost
Hydro-mechanical
Electro-mechanical
Owners Cost
Vehicle Cost
Environment and Social
Construction Power
Panel of Experts
US$ million
Financing Plan
0.16
2.40
43.40
6.70
7.27
3.60
0.16
0.75
0.70
0.50
Subordinated Debt
IDA Credit
Senior Debt
IFC A Loan
IFC-CCCP Loan
Local Bank Loan
BPC
Gurans Energy Ltd.
Asia Pacific PowerTech Co. Ltd
US$ million
40.00
19.30
19.30
1.00
5.98
15.87
Dispute Adjudicator Board
0.40
Insurance
Mobilization & Demobilization
Engineering and Management
VAT, Custom, Duties, Taxes
Price Indexation of Base Cost
Physical Contingencies
Senior Debt Service Reserve Account
Interest during Construction & Financing Fee
Sub-total
MOE Component
Environmental
Social
Technical capacity building
Incremental operating cost
Sub-total
IBN Component
Technical due diligence and PDA negotiations
Supervision of project implementation
Safeguards, procurement, financial, technical
capacity building
0.50
0.30
4.59
7.39
4.42
9.39
2.62
7.45
102.6
Sub-total
102.6
1.00
0.50
0.30
0.20
2.00
IDA Grant:
2.00
22
1.30
0.60
1.30
1.15
Item
27
28
Cost Estimation
Incremental operating cost
Sub-total
Total Financing Requirements
US$ million
0.80
4.00
108.6
Financing Plan
US$ million
IDA Grant:
Total Financing
4.00
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 abovementioned 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.
23
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.
24
Figure 2.2.
Layout of KAHEP
Figure 2.3: Locations of Key Project Structures in the Project Districts and VDCs
25
Table 2.2: Salient Features of the Kabeli-A Hydroelectric Project
S.N.
1.
2.
Project Name
Location
2.1
Project Boundaries
3.
4.
Type of development
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/s
Headworks
Type/ Length of weir
Barrage with 4 radial gates
Full supply level
577.3 m
Peaking reservoir net live
0.335 million m3
storage capacity
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 Height
Diversion during construction
Diversion flood (20 year dry
230 m3/s
season flow)
Coffer dams
200 m (earthfill dams and stone masonry walls)
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
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
Access tunnel
Length
474.1 m
Type
Inverted D shaped; shotcrete and rock bolt lined
5.
6
7
8.
9
Items
Description
Kabeli-A Hydroelectric Project
Amarpur and Panchami VDCs of Panchthar District and
Thechambu of Taplejung District
East
E
87 45’ 50’’
West
E
87 40’ 55’’
North
N
27 17’ 32’’
South
N
27 13’ 41’’
Peaking run-of-river
26
S.N.
10.
10.1
10.2
10.3
10.4
11.
12.
13.
14.
Items
Cross section
Waterways
Converging Pair Tunnels from
outlet of settling basin to start of
Headrace Tunnel
Length
Type
Cross section
Headrace Tunnel
Length after pair tunnels
Type
Cross section
Surge Shaft
Type
Internal diameter
Height
Vertical ventilation tunnel
Penstock
Material
Length before bifurcation
Length of each leg after
bifurcation
Internal Diameter
Shell Thickness
Powerhouse
Powerhouse type
Powerhouse size (L * B * H )
Tailrace
Design tailwater level
Length
Cross-section
Longitudinal slope
100 year flood (Q100) in Tamor
River
Probable maximum flood
(Q1000) in Tamor River
Turbine
Turbine type
Number of units
Rated speed
Turbine axis elevation
Power and energy output
Gross head
Rated net head
Design discharge
Installed capacity
Annual estimated saleable
energy output (contractual)
Description
Internal diameter 4 m
65.8 m
Inverted D shaped; Concrete lined
Internal Finished Diameter 3.2 m
4326.8 m
Inverted D shaped; Shotcrete lined and Concrete lined
Internal Finished Diameter 5.65 m
Underground and exposed to surface
10 m
68.2 m
3 m in diameter and 14 m in height
Mild steel
288 m
20 m
3.55 m
10-20 mm; partly ribbed
Semi underground
34.8 m X 18.6 m X 31.8 m
458.5 masl
93.1 m
4.9 m wide X 4.65 m high Rectangular RCC box culvert
1 in 1500
5799 m3/s
8259 m3/s
Vertical Axis Francis
2
428.6 rpm
457.64 masl
118.8 m
112.6 m
37.73 m3/s
37.6 MW
205.2 GWh
27
S.N.
15.
16.
17.
Items
Description
Point of connection to NEA Grid KAHEP switchyard at Pinase Ghat
Transmission line (a separate project under implementation financed by the Bank)
Voltage
132 kV
Length
85 km
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.
28
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.
29
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 25year 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-inCharge 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 1
2
3
Shareholder
Butwal Power Company
Gurans Energy Limited
Butwal Power Company (40%)
InfraCo Asia Himalayan Hydro Pte. Ltd. (60%)
Asia-Pacific Power-Tech Co. Ltd.
Total
Shareholding
26.0%
69.0%
5.00%
100.00%
Domicile
Nepal
Nepal
Nepal
Singapore
China
Table 2.2: Ownership Structure of BPC 1
2
3
4
5
6
7
8
Shareholder
Shangri-la Energy Limited
General public
Government of Nepal
IKN Nepal
United Mission to Nepal
Employees
Nepal Electricity Authority
Nepal Industrial Development Corporation
Total
Shareholding
68.95%
10.00%
9.09%
6.05%
2.79%
2.00%
1.06%
0.06%
100.00%
30
Domicile
Nepal
Nepal
Nepal
Norway
Nepal
Nepal
Nepal
Nepal
Figure 3.1: Organizational Chart of KEL
31
10.
MOE Component. The DOED under the MOE has experience in implementing IDAfunded technical assistance activities under the on-going Power Development Project. The dayto-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.
32
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 Bankfunded 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
33
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
1. Recruit one additional qualified Financial Management
Specialist dedicated for the project
2. Depute one dedicated staff for the project
3. Recruit one additional qualified Financial Management
Specialist
4. Procure appropriate software to track project
expenditures and produce timely financial statements
5. Enter an agreement with the consortium bank for
lending to KEL
6. Discuss and agree audit TOR with OAG
Responsibility
HIDCL
Completion Date
31 July 2014
DOED
IBN
31 July 2014
31 July 2014
HIDCL
30 September 2014
HIDCL, and
Consortium
partner Bank
HIDCL
31 May 2014
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
34
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
35
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 offthe-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;
36
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.
37
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
No
.
2
Contract
(Description)
3
Estima
-ted
Cost
($’m)
4
Procurement
Method
5
PQ
6
Domestic
Preferenc
e (yes/no)
7
Review
by IDA
(Prior/
Post)
8
Expecte
d BidOpening
Date
9
Comments
MOE Component
01 Computer, laptops
0.02
Shopping
No
No
Post
02
0.05
Shopping
No
Yes
Post
June
2014
June
2014
June
2014
Multiple
contracts
Multiple
contracts
Multiple
contracts
June
2014
June
2014
June
2014
Multiple
contracts
Multiple
contracts
Multiple
contracts
Office supplies,
training materials
03 Software, tools,
etc.
IBN Component
01 Computers, laptops
0.02
Shopping
No
No
Post
0.04
Shopping
No
No
Post
02
0.10
Shopping
No
Yes
Post
0.04
Shopping
No
No
Post
Office supplies,
training materials
Software, tools,
etc.
03
b) Packages for Procurement of Consulting Services under the MOE and IBN
Components
1) Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in
Appendix 1 to the Guidelines: Selection and Employment of Consultants:
Table 3.3: Prior Review Threshold for Service Contracts
Selection Method
1.
2.
3.
4.
Competitive Methods (Firms) – QCBS, QBS
Competitive Methods (Firms) – CQS
Single Source (Firms)
Individual Consultants
Contract Value
Threshold ($’000)
>=100
<100
-
Prior Review
Threshold ($’000)
$100
All contracts
$50
Comments
2) Short list comprising entirely national consultants: No short lists of consultants for
services are expected to comprise entirely national consultants in accordance with the
provisions of paragraph 2.7 of the Consultant Guidelines.
3) Any Other Special Selection Arrangements:[including advance procurement and
retroactive financing, if applicable] None.
38
Table 3.4:
1
Ref.
No.
Consultancy Assignments with Selection Methods and Time Schedule
2
Description of Assignment
MOE Component
01
Supervision, monitoring and
evaluation of project.
implementation
 Firm
 IC
02
Environment capacity building
– firm and ICs
 Watershed management
 CIA and management
 Training for capacity
building
03
Social capacity building – firm
and ICs
 development of guidelines
for resettlement
 development of guidelines
for benefiting sharing
 training for capacity
building
IBN Component
01
Technical due diligence &
PDA negotiations
 Firm
 IC
02
Supervision of hydropower
project implementation
 Firm
 IC
03
Capacity building
 Environmental and social
safeguards management
 procurement
 financial management
 technical, incl. studies
 training
3
Estimated
Cost
($’m)
4
Selection
Method
5
Review by
IDA
(Prior/
Post)
6
Expected
Proposals
Submission
Date
7
Comments
0. 35
QCBS/IND
Prior
June 2014
Multiple
contracts
1.00
QCBS
Prior
June 2014
Multiple
contracts
0.5
QCBS/IND
Prior
June 204
Multiple
contracts
1.30
QCBS/IND
Prior
June 2014
Multiple
contracts
0.60
QCBS/IND
Prior
June 2014
Multiple
contracts
1.30
QCBS/IND
Prior
June 2014
Multiple
contracts
Notes:
ICB:
NCB:
DC:
QCBS:
QBS:
CQS:
IC:
IND:
SSS:
International Competitive Bidding
National Competitive Bidding
Direct Contracting
Quality and Cost Based Selection
Quality Based Selection
Selection Based on Consultant’s Qualifications
Individual Consultants
Individual
Single Source Selection
39
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 thirdparty 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.
40
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
Risk Description:
Risk Management:
Stakeholder expectations from the project
will be high, requiring sensitive
management and a credible program of
benefits-sharing with people in the project
area.
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:
Substantial
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:
Risk Management:
KEL: successful implementation of
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.
41
hydropower projects calls for the capacity Resp:
Status:
Stage:
Recurrent:
Due
Frequency:
in a number of areas including: contracting
Date:
and financial management; construction
Risk Management:
management; and social and environmental
2. Intense engagement by IDA and IFC teams during project preparation period in all aspects of project
aspects of the project.
preparation.
HIDCL: a newly established agency for on- Resp:
Status:
Stage:
Recurrent:
Due
Frequency:
lending IDA funds; and weak financial
Date:
management capacity for a Bank-funded
Risk Management:
project.
3. Technical and social and environmental panels of experts have provided guidance on implementation
IBN: limited procurement and financial
capacity issues.
management capacity for a Bank-funded
Resp:
Status:
Stage:
Recurrent:
Due
Frequency:
project; and being a newly established
Date:
entity with no experience in implementation
of Bank-funded project.
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:
42
Recurrent:
Due Date:
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-andbalances.
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:
Fraud and Corruption
Rating
High
Risk Description:
Risk Management:
Stage:
Recurrent:
Due
Date:
Frequency:
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:
Risk Management:
Risk Management:
Hydropower projects face various technical
KEL has prepared a detailed Geological Baseline Report based on the original geotechnical and geological
design risks, including sediment
investigations of the project and updated with additional investigations related to drilling, mapping and rock
management; tunneling method; dam
mechanic tests. KEL prepared a Dam Safety Plan including an Operation and Maintenance Manual,
safety; geo-technical risks; seismic risks.
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:
43
Recurrent:
Due
Date:
Frequency:
3.2 Social and Environmental
Rating
Risk Description:
Risk Management:
Social and environmental aspects of
hydropower are among the most sensitive
aspects of hydropower development.
Substantial
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:
44
Recurrent:
Due
Date:
Frequency:
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
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:
3.4 Delivery Monitoring and Sustainability Rating
Low
Status:
Stage:
Recurrent:
Due
Date:
Frequency:
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:
4. Overall Risk
Overall Preparation Risk:
Overall Implementation Risk:
Risk Description:
Risk Description:
45
Substantial
Frequency:
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
46
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
First twelve
months
Focus
Project launch
12-60 months
Project
implementation
Skills Needed
Technical,
environmental, social,
communications
Technical,
environmental, social,
communications
Resource Estimate
$120,000/year
Partner Role
To be
identified
$120,000/year
To be
identified
Other
II.
Skills mix required
Skills Needed
Technical and contracting
(various specialties);
environmental and social
management;
communications
Number of Staff Weeks
Technical: 8 weeks
Environment: 6 weeks
Social: 6 weeks
Communications: 3 weeks
47
Number of Trips
Minimum 2 annually;
depending on circumstances,
a third supervision trip may
be advisable
Comments
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.
48
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.
49
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 ungauged 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 longterm 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.
50
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
51
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 realtime 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-
52
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.
53
Table 6.1: Contract Packaging for KAHEP
Lot
Description
Pre-construction activities
1
Access Road upgrading
2
Housing and infrastructure
development
Construction activities
3
Miscellaneous works
4
Civil construction of surface
structures
5
Civil construction of underground
structures
6
Hydro mechanical works
7
Electromechanical works
Nature of
Competition
Local contractors/
NCB for
upgrading
NCB
Nature of Contract
Prequalification?
No
Item rate
Item rate
No
NCB
ICB
Lump sum
Item rate
No
Yes
ICB
Item rate
Yes
ICB
Plant and DesignBuild
Plant and DesignBuild
Yes
ICB
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, twoenvelope 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.
54
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.
55
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.
56
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
57
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
58
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
59
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
mean flow
m3/s
Jan
10.31
Feb
8.63
Mar
8.88
Apr
13.30
May
31.63
Jun
86.28
Jul
168.95
Aug
181.71
Sep
127.42
Oct
58.11
Nov
25.25
Dec
16.18
Annual
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.
60
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.
61
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.
62
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
63
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
3
Sarki Khola, Andheri Khola and Khahare Kholsi.
64
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)
65
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 socioeconomic 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:
66
•
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.
67
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:
68
•
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
69
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.
70
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-ofthe 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
71
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.
72
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.
73
•
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
74
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
The SA concludes that the proposed project will also have some unavoidable social
65.
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
75
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
76
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 600800 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
77
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-àvis 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.
78
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 lifeskills improvement activities; and (iii) supplementary infrastructure facilities in the
Majhi settlements, including latrine construction and drinking water facilities.
79
•
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 projectaffected 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;
80
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
81
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.
82
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 leastcost 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)
83
Table 8.1: Characteristics of Thermal Power Plant
1
2
4
4
5
6
7
Capacity Cost
Life
Fixed operation and maintenance cost
Variable operation and maintenance cost
Heat rate
Fuel Price
Energy Content of furnace oil
US$ 1,000/kW
20 years
US$ 1.0/kW-month
US$ 2.6/MWh
2180 kcal/kWh
US$ 1.03/Liter
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.
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
7
84
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
EIRR based on LRMC (%)
NPV at 10 percent (US$ million)
EIRR based on import tariff (%)
NPV at 10 percent (US$ million)
Net Benefits
13.3
21.9
15.2
44.3
Net Benefits with Carbon Pricing
15.8
39.3
17.0
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
85
Table 8.3: Sensitivity Analysis
Scenarios
EIRR based on
LRMC (%)
13.3
11.4
10.8
12.1
Base Case
(a) Cost increased by 20 percent
(b) Benefit decreased by 20 percent
(c) One year delay in project commissioning
EIRR based on Import
Tariff (%)
15.2
13.4
12.8
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.
86
Table 8.4: The FIRR and NPV for the KAHEP
Case
FIRR (%)
NPV at10 percent(US$ million)
Net Benefits
10.5
3.64
Net Benefits with Carbon pricing
12.5
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
Base Case
(a) Cost increased by 20 percent
(b) Benefit decreased by 20 percent
(c) One year delay in project commissioning
FIRR (%)
10.5
8.8
8.0
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.
87
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
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
19.4
23.1
23.1
23.1
23.1
23.3
23.4
23.4
31.9
36.3
36.3
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
-
-
-
-
10.5
34.4
40.0
40.0
40.0
40.0
38.9
16.6
7.9
-
-
-
-
-
-
2.5
3.2
3.8
6.5
3.2
1.8
19.4
33.6
57.5
82.2
94.0
102.9
100.5
97.5
60.3
47.4
38.1
19.4
33.6
57.5
82.2
94.0
97.9
93.9
89.9
53.9
41.9
29.9
(0.0)
5.0
6.5
7.4
5.6
4.4
7.0
Summary Income Statement
Summary Balance Sheet
Equity and Liabilities
Shareholders Funds
Long- term Debt
Senior Debt
Subordinated Debt:
HIDCL
Current Liabilities Including CPLTD
Total Equity and Liabilities
Assets
Net Fixed Assets Including CWIP
Current Assets
-
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
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
Key Coverage Ratios
Table 8.7: Break-Even Analysis
(Minimum Total DSCR at 1.0)
Generation (GWh p.a.)
O&M (p.a.) % of Project Hard costs
Change (%)
-13.3
+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.
88
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
89
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.
90
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 projectrelated information on its website.
91
Governance and Accountability Action Plan (GAAP)
March 21, 2014
KAHEP Component
Issues Identified
For Monitoring
Construction and
contract
management
Proposed Mitigation
Measures
Engage Owner’s Engineer
Milestones
Indicative Timeline
Complete TOR
Finalize contracts with
international experts
i. Completed
ii. June 2014
Training in contract
management for project
launch
Environmental
and Social
Monitoring
1. Grievance redress
institutional arrangements
2. Third-party monitoring
of EMP
Communications
Consultations
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. Finalize TORs
ii. Third-party monitoring
mechanism in place
During Project
preparation/design phase
During implementation
phase
92
Just before awarding the
two civil works contracts,
before contractor
mobilization (June 2014)
i. June 2014
ii. Kabeli-A Concern Group
together with KEL to
finalize by June 2014
i. June 2014
ii. Immediately after award
of civil works contracts
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 projectaffected persons are
ongoing.
Consultations will continue
during implementation
phase
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 recordkeeping at PIC and local
awareness of
Launch communications
program of information
dissemination, including
on local FM networks
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.
i. Six-month
Communications Action
Plan to be prepared
ii. Commence
implementation of
dissemination through
local FM and other means
Website disclosure of all
relevant documents and
reports (including
translations) done and
other material uploaded.
Regular interaction with
VDCs and DDCs to
continue
93
i. Completed - PIC stocked
with all relevant projectrelated 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.
i. Completed
ii. May 2014
Completed
Ongoing
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.
94
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.
95
Annex 11: Statement of IFC’s Held and Disbursed Portfolio
(Millions of US Dollars)
96
IBRD 38796
84°
82°
80°
88°
86°
SELECTED TOWNS AND VILLAGES
30°
N E PA L
30°
KABELI “A” HYDRO ELECTRIC PROJECT
DISTRICT HEADQUARTERS (MECHI)
NATIONAL CAPITAL
FAR
WESTERN
DISTRICT BOUNDARIES (MECHI)
C
ZONE BOUNDARY (MECHI)
H
MID
WESTERN
PROJECT COMPONENTS
DEVELOPMENT REGION BOUNDARIES
I
INTERNATIONAL BOUNDARIES
N
A
WESTERN
Mt. Everest
28°
TAPLEJUNG
3500
SELECTED CITIES AND TOWNS
ZONE BOUNDARIES
DISTRICT HEADQUARTERS
INTERNATIONAL BOUNDARIES
2500
1500
1000
Taplejung
Taplejung
Area of map
I N D I A
80
20
40
120
60
Phidim
PA N
CH
THA
R
0
OTHER ROADS
INDIA
160 KILOMETERS
80
80°
Tribeni
868
100 MILES
86°
84°
82°
BAN.
- Khemakham
Titirbote
Kabe
Bahitar
88°00’
87°45’
800
li Riv
TAPLEJUNG
Khahare
er
Tumankhe
Phakse
Khalte
1417
894
60
-˜
Kharelgau
Thinglabu
Phurumbu
Khokling
Khewang
Khamlung
Pedang
Hangdeva
Santhakra
Surunkhim
Sikaicha Tellok
Mehele
Change
Taplejung
Dhungesaghu
Tiringe
Dokhu
Ambegudin
Hangpang
Sangu
Nankholyang
Dummrise Sinam
Thechambu
Ankhop
Phulbari
Sadewa
Thumbedin Sawalakhu
Chaksibote
Falaicha
Nidhuradin
Kabeli
Tharpu
Oyam
Nagi
Area of Amarpur
27°15’
main map
Khunga
Luwamfu
Bharpa
Salleri
Olane
Aarubote
Durdimba
Jitpur
Sangrumba
Jamuna
Pyang
Sakhejung Sumbek
Naya
Barbote
Bazar
Soyang
Soyak
27°00’
Ilam
Pashupatinagar
Panchakanya
Goduk
Laxmipura
Shantipur
Chisapani
˜ Hiudiya
120
Pallo Iwa-
Sri Antu
Kanyam Samalp
1400
-Golegau
Tam
0
TERHATHUM
Dorumba
Phedapa
1806
00
Apchok
Ambote
Ambote
Kho
875
˜
Kaijale
1189
Jogmai
Gorkhe
Namsaling
Ilam N.P.
ILAM
Siddhithumka
87°45’
Bhadaure
0
la
10
709
00 Simle
Dhodeni
1428
Tinsalle
Kolbote
Pinasi
or
Surge shaft
Powerhouse
Tunnel Portal
Penstock
Tailrace
im
Bajho
Sakfara
Ghuseni
Gajurmukhi
Emang
Mangalbare
Dhunge
to Phid
87°30’
Linba
Khandrung
Kurumba
Phuyatappa
Lumbe
˜
Kaijale
a
1400
Amarpur
12
er
D H ANKUTA
Rabi
Ektappa
1458
Riv
Amchok
Hangum
Bhanuchok
0
Mauwa
Aangna
Phakphok
hol
- Bhanbari
1525
800
27°00’
600
Mabu
Puwamajwa
Chameta
Sarangdanda
H
Maimajhuwa
aK
0
Dorumba-
600
iv
iud
- -˜
Raigau
Bhimsenthan
1365
0
Mangjabung
Embung
Pouwa
Sartap
Chilingdin
er
Madibun
60
Phaktep
r Riv
Phodarpati
- Rijalgau
800
Syangrumba
896
Hiudiyabesi
˜ -
INDIA
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Sidin
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Pro
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Rani Gaun
Yasok Nawamidanda
Tamo
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1238
27°15’
100
1070
Dubichaur
Jarayotar
Nangeen
Ranitar
smi
Chokmagu
Myanglung
PA N C H T H A R
- - Chisapani
Parangbung
Yangnam
Hembegau
Mahendrachok
1407
Headworks (upstream)
Underground settling basin
100
Phidim
n
Tra
TERHATHUM
Ekteen
˜Phalate
497
PA N C HHTT HA
HAR
Panchami Sumang
Dhuseni
- - -˜
Majhigau
Limbuni
Phakumba
10 Km.
Singapur
-̃
Dhade
Mamangkhe
Rock
Adit
Flushing tunnel
Access tunnel
Rajabesi
nnel
Liwang
Lingtep
Bhadaure
ace tu
Thukima
Yamfudin
Linkhim
Sawadin
Anbun
˜- Koldada
Headr
Khejenim
Tapethok
1000
500
1000
1500
2000 meters
le
Ekhabu
Sanwa
Nalbu
Kabeli-Phawa
confluence
600
Pip
5
27°30’
800
0
- Kabeli
Lelep
Kabe
li
Khola
27°30’
SANKHUWASABHA
TAPLEJUNG
Papung
- Chaksibote
Phaw
0
87°30’
88°
Kabeli-Tamor
confluence
a
40
EASTERN
500
DISTRICT ROADS
Kabeli Khola
River
NEPAL
4500 meters
DISTRICT BOUNDARIES
FEEDER ROADS
CENTRAL
0
ELEVATION:
HIGHWAYS
28°
KATHMANDU
0
VILLAGE DEVELOPMENT
COMMITTEE BOUNDARIES
TRANSMISSION LINES
UNDER CONSTRUCTION
Tilhar
Kodepa771
Sibuwa-
This map was produced by the
Map Design Unit of The World Bank.
The boundaries, colors,
denominations and any other
information shown on this map do not
imply, on the part of The World Bank
Group, any judgment on the legal
status of any territory, or any
endorsement or acceptance of such
boundaries.
OCTOBER 2011