Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD5513 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT IN THE AMOUNT OF SDR 8.4 MILLION (US$11 MILLION EQUIVALENT) TO THE REPUBLIC OF TAJIKISTAN FOR THE ADDITIONAL FINANCING FOR CENTRAL ASIA SOUTH ASIA ELECTRICITY TRANSMISSION AND TRADE (CASA-1000) PROJECT FOR THE REPUBLIC OF TAJIKISTAN NOVEMBER 1, 2023 Energy & Extractives Global Practice Europe And Central Asia Region 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 September 30, 2023) Currency Unit = Tajikistan Somoni (TJS) TJS10.97 = US$1 SDR 0.7605 = US$1 FISCAL YEAR January 1 - December 31 Regional Vice President: Antonella Bassani Country Director: Tatiana A. Proskuryakova Regional Director: Charles Joseph Cormier Practice Manager: Stephnie Gil Task Team Leader(s): Dmytro Glazkov, Jianping Zhao ABBREVIATIONS AND ACRONYMS AC Alternating current CASA-1000 Central Asia South Asia Electricity Transmission and Trade Project CPF Country Partnership Framework CSP Community support program DC Direct current EIRR Economic internal rate of return EPC Engineering, procurement, and construction ESPMU Energy Sector Project Management Unit FIRR Financial internal rate of return GHG Greenhouse gas HVAC High-voltage alternating current HVDC High-voltage direct current IDA International Development Association kV Kilovolt Kwh Kilowatt hour MDTF Multi-donor trust fund NPV Net present value NSIFT National Social Investment Fund of Tajikistan O&M Operations and maintenance PDO Project Development Objective PMU Project Management Unit PPA Power Purchase Agreement TL Transmission line US¢ United States Cent WACC Weighted average cost of capital The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ................................................ 7 II. DESCRIPTION OF ADDITIONAL FINANCING ........................................................................... 11 III. KEY RISKS ......................................................................................................................... 12 IV. APPRAISAL SUMMARY ...................................................................................................... 12 V. WORLD BANK GRIEVANCE REDRESS .................................................................................... 23 VI. SUMMARY TABLE OF CHANGES .......................................................................................... 25 VII. DETAILED CHANGE(S) ........................................................................................................ 25 VIII. RESULTS FRAMEWORK AND MONITORING........................................................................... 28 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) BASIC INFORMATION – PARENT (Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) - P145054) Country Product Line Team Leader(s) South Asia IBRD/IDA Sunil Kumar Khosla Project ID Financing Instrument Resp CC Req CC Practice Area (Lead) P145054 Investment Project ISAE1 (9260) SARVP (1544) Energy & Extractives Financing Implementing Agency: National Electric Grid of Kyrgyzstan, National Transmission and Despatch Company (NTDC), Barki Tajik, Da Afghanistan Breshna Sherkat ADD FIN TBL1 Is this a regionally tagged Country (ies) project? Yes Afghanistan, Kyrgyz Republic, Pakistan, Tajikistan Bank/IFC Collaboration Joint Level Complementary or Interdependent project Yes requiring active coordination Expected Original Environmental Approval Date Closing Date Guarantee Current EA Category Assessment Category Expiration Date 27-Mar-2014 31-Dec-2025 Full Assessment (A) Full Assessment (A) Financing & Implementation Modalities Parent [ ] Multiphase Programmatic Approach [MPA] [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [✓] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [✓] Small State(s) [ ] Financial Intermediaries (FI) [✓] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster Page 1 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) [ ] Alternate Procurement Arrangements (APA) [ ] Hands-on Expanded Implementation Support (HEIS) Development Objective(s) The objective of the project is to create the conditions for sustainable electricity trade between the Central Asian countries ofTajikistan and Kyrgyz Republic and the South Asian countries of Afghanistan and Pakistan. Ratings (from Parent ISR) RATING_DRAFT_ NO Implementation Latest ISR 26-Dec-2020 29-Jun-2021 03-Jan-2022 29-Jun-2022 12-Dec-2022 14-Jun-2023 Progress towards achievement of MS MS MU MU MU MU PDO Overall Implementation MS MS MU MU MU MU Progress (IP) Overall Safeguards MS MS MS MS MU MU Rating Overall Risk H H H H H H Financial Management S S S S S S Project Management MS MS MS MS MS MS Procurement S S MS MS MS MS Monitoring and Evaluation S S S S S S BASIC INFORMATION – ADDITIONAL FINANCING (Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for Republic of Tajikistan - P181219) ADDFIN_TABLE Project ID Project Name Additional Financing Type Urgent Need or Capacity Page 2 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) Constraints P181219 Additional Financing for Cost Overrun/Financing Gap No Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for Republic of Tajikistan Financing instrument Product line Approval Date Investment Project IBRD/IDA 22-Nov-2023 Financing Projected Date of Full Bank/IFC Collaboration Disbursement 06-Feb-2020 No Is this a regionally tagged project? Country (ies) Yes Afghanistan, Kyrgyz Republic, Pakistan, Tajikistan Financing & Implementation Modalities Child [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) [ ] Hands-on Expanded Implementation Support (HEIS) [ ] Contingent Emergency Response Component (CERC) Disbursement Summary (from Parent ISR) Net Source of Funds Total Disbursed Remaining Balance Disbursed Commitments IBRD % IDA 591.50 401.23 133.77 75 % Grants 36.18 33.78 2.40 93 % Page 3 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) PROJECT FINANCING DATA – ADDITIONAL FINANCING (Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for Republic of Tajikistan - P181219) PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 SUMMARY (Total Financing) Proposed Additional Total Proposed Current Financing Financing Financing Total Project Cost 1,126.50 11.00 1,137.50 Total Financing 1,126.50 11.00 1,137.50 of which IBRD/IDA 526.50 11.00 537.50 Financing Gap 0.00 0.00 0.00 DETAILS - Additional Financing NewFinEnh1 World Bank Group Financing International Development Association (IDA) 11.00 IDA Grant 11.00 IDA Resources (in US$, Millions) Credit Guarantee Grant Amount SML Amount Total Amount Amount Amount Tajikistan 0.00 11.00 0.00 0.00 11.00 National Performance-Based 0.00 3.70 0.00 0.00 3.70 Allocations (PBA) Regional 0.00 7.30 0.00 0.00 7.30 Total 0.00 11.00 0.00 0.00 11.00 Page 4 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [ ✔ ] No Does the project require any other Policy waiver(s)? [ ✔ ] Yes [ ] No Explanation Waiver of Section III, paragraph 28, of the Investment Project Financing (IPF) Policy in connection with the proposed Additional Financing (AF) of the Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000 or Project) in the amount of US$11 million to be financed by an IDA Grant for the Republic of Tajikistan, and US$18.3 million to be financed by an IDA Credit for the Kyrgyz Republic. This request is submitted pursuant to Bank Policy, “Operational Policy Waivers”, and Bank Procedure, “Operational Policy Waivers and Waivers of Operational Requirements” Has the waiver(s) been endorsed or approved by Bank Management? Approved by Management [ ] Endorsed by Management for Board Approval [✔] No [ ] Explanation Waiver of Provisions of Section III, paragraph 28 of the Investment Project Financing Policy has been enorsed by OPCSVP INSTITUTIONAL DATA Practice Area (Lead) Energy & Extractives Contributing Practice Areas Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Page 5 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader (ADM Dmytro Glazkov Project Management ISAE1 Responsible) Jianping Zhao Team Leader Power Engineering IECE1 Grace Nakuya Musoke Procurement Specialist (ADM Procurement EECRU Munanura Responsible) Dilshod Karimova Procurement Specialist Procurement EECRU Financial Management Galina S. Kuznetsova Financial Management EECG1 Specialist (ADM Responsible) Environmental Specialist (ADM Gaurav Dilipkumar Joshi Environment SCAEN Responsible) Social Specialist (ADM Harjot Kaur Social Development SCASO Responsible) Abdul Hamid Quraishi Team Member Coordination/Energy ISAE1 Burcu Polat Team Member Consultant ISAE1 Davor Smiciklas Team Member Disbursement WFACS Dilip Kumar Prusty Chinari Team Member Disbursement WFACS Dung Kim Le Team Member Program Assistant IECE1 Farida Mamadaslamova Team Member Energy IECE1 Lien Thi Bich Nguyen Team Member Program Assistant ISAE1 Martin Vojtko Counsel Legal LEGLE Financial Management in TJ Niso Bazidova Team Member EECG1 for Tajikistan Rong Cui Team Member Financial IECE1 Sunil Kumar Khosla Team Member TTL of Parent CASA ISAE1 Thuy Bich Nguyen Team Member Program Assistant IECE1 Extended Team Name Title Organization Location Page 6 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 1. Summary. This project paper seeks the approval of the Board of Executive Directors to provide an International Development Association (IDA) grant to the Republic of Tajikistan in the amount of US$11 million equivalent as additional financing for the Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) to help close the financing gap in the Republic of Tajikistan under the project. There is no change in the Project Development Objective (PDO), which is “to create the conditions for sustainable electricity trade between the Central Asian countries of Tajikistan and Kyrgyz and the South Asian countries of Afghanistan and Pakistan.” The additional financing will not require any changes in the results framework or implementation arrangements or in the fiduciary or environmental and social aspects of the project because it finances only existing scope of the parent project and does not involve any new activities. 2. CASA-1000 Project. The parent project is a regional power interconnection project to facilitate transfer of 1,300 MW of surplus renewable (hydro) power from Tajikistan and the Kyrgyz Republic to Afghanistan and Pakistan. The project was approved on March 27, 2014, and became effective on January 24, 2018. The original closing date, June 30, 2020, was extended to March 31, 2023, and recently extended to December 31, 2025, for the Republic of Tajikistan. 3. Overall Implementation Status. It took a significant length of time after Board approval for the project to become effective, as effectiveness was linked to several prior actions, including the signing of some key commercial agreements. In early 2020, the COVID-19 pandemic resulted in implementation challenges and delays in all four countries. The August 2021 political crisis in Afghanistan led to all construction activities across the Afghanistan section of the project being paused, and they have remained paused to give the Bank, donors, international financial institutions, and the other three countries time to consider the options for restarting construction in Afghanistan. Construction under the project has continued in the other three countries, with more than 90 percent of materials and supplies delivered to the respective sites in all four countries, including Afghanistan (before the pause in 2021). Installation completion rates for the required 4,264 transmission towers across the four countries as of May 1, 2023, are shown in Table 1. Table 1. Installation of Transmission Towers Country Needed, n Installed, n (%) Tajikistan 839 820 (98) Kyrgyzstan 1,243 1,086 (85) Pakistan 462 384 (83) Afghanistan 1,713 315 (18) Total 4,257 2,605 (61) 4. Overall PDO and Implementation Progress Achievement Ratings. Project implementation had progressed relatively well and was moving toward achievement of the PDO as of August 2021. Overall PDO and implementation progress ratings were Moderately Satisfactory, and the overall risk rating was High, given continued security risks in Afghanistan. After work was paused in Afghanistan in August 2021, PDO and implementation progress ratings were adjusted to reflect the impact of the pause and downgraded to Moderately Unsatisfactory. According to Bank Policy “Operational Policy Waivers” and Bank Procedure “Operational Policy Waivers and Waivers of Operational Requirements,” Board approval is sought for waiver of Section III, paragraph 28 of the investment project financing for this additional financing, which the Operations Policy and Country Services vice president has endorsed. Project Page 7 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) implementation, fiduciary requirements, and safeguards implementation in the other three countries are progressing well. There are no overdue audit reports or reported ineligible expenditures. The safeguards rating was assessed as Moderately Unsatisfactory because of land acquisition delays in Afghanistan even before work was paused and because of initial delays in payments to some project-affected persons and in the hiring of a social specialist for the Project Management Unit (PMU) in the Kyrgyz Republic. As of July 30, 2023, all pending compensation has been paid to project- affected persons in the Kyrgyz Republic, and a social specialist is being recruited and is expected to be on board in September 2023, but land acquisition and construction activity in Afghanistan have not progressed since August 2021. Because the political situation in Afghanistan is not expected to change any time soon, Pakistan, the Kyrgyz Republic, and Tajikistan have agreed, with the support of IDA, to explore other sources of financing, primarily commercial and private capital, to complete construction of Afghanistan’s section of the transmission line. High-level joint working group meetings of the three countries were held in January and April 2023, and a high-level committee comprising a deputy minister from each of the three countries was established to determine how to continue work in Afghanistan. 5. Implementation of CASA-1000 in Tajikistan. Barki Tojik is responsible for implementation of the project, which has two components: Component A (construction of high-voltage transmission infrastructure) and Component B (technical assistance and project implementation support). Component A is implemented through three separate engineering, procurement, and construction (EPC) contracts: (1) a design, supply, and installation contract for a high- voltage direct current (HVDC) converter station and electrode station in Tajikistan; (2) a design, supply, and installation contract for (a) a 10-km 220-kV HVDC–high-voltage alternate current (HVAC) transmission line from the Sangtuda HVDC converter station to the Sangtuda-1 hydropower plant, (b) a 117-km 500-kV HVDC transmission line from the Sangtuda HVDC converter station to the Afghanistan border, and (c) a 30-km 66-kV electrode line from the Sangtuda HVDC converter station to the electrode station; and (3) a design, supply, and installation contract for an HVAC transmission line and extension of the Sugd and Regar Substations for (a) a 28-km 500-kV HVAC overhead transmission line from the Sugd substation to the Kyrgyz border, (b) an extension of the Sugd substation 500-kV bay, and (c) a 115-km 500-kV HVAC line from the Regar substation to the Sangtuda converter station. The various subcomponents of the project in Tajikistan are shown in Map 1. The implementation status of each contract package is as follows. 6. HVDC Converter Station and Electrode Station: IDA, the European Bank for Development and Reconstruction, the European Investment Bank, and the Multi-donor Trust Fund (MDTF) are jointly funding this package. Overall progress with the civil works and site activities at the converter station had reached 95 percent of the planned target as of May 2023 and is expected to be completed by December 31, 2023. The converter station at Sangtuda was exposed to severe floods in 2021. The Energy Sector Project Management Unit (ESPMU), on behalf of Barki Tojik, and the owner’s engineer analyzed the risk to the converter station. The contractor proposed installation of an external drainage system around the converter station to divert flashfloods at a cost of US$2.345 million, for which it requested additional financing. For the electrode station, detailed design and soil investigations have been completed, but no progress has been made on construction. During the April 2023 meeting between the representatives of Shabakahoi Taqsimoti Barq, ESPMU, and the Ministry of Energy and Water Resources, the contractor agreed to finalize the amendments and proceed with construction. The provisional sum allocated in the contract for the electrode station is US$5 million plus 12 percent for administration, and the total amount of the price quotations received from the contractor (for supply of equipment) for works is US$8 million. Construction of the electrode station is expected to start in October 2023 and be completed by November 2024. Page 8 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Map 1. Sangtuda Converter and Electrode Station, Transmission Line, and Sugd and Regar 500-kV Substations 7. HVDC-HVAC Transmission Line. The Islamic Development Bank is funding this package. Overall implementation progress of the contract package is satisfactory. Tower erection and wire stringing for the 500-kV HVDC line from the Afghan border to the Sangtuda Substation (117 km) and for the 220-kV HVAC line from the Sangtuda converter station to Sangtuda Hydropower Plant-1 and for the 66-kV electrode line have been completed. 8. HVAC Transmission Line and Extension of Sugd and Regar Substations. The European Investment Bank is funding this package. Implementation is progressing well. Factory acceptance tests for the towers and other materials were completed in India. All equipment, including the two shunt reactors, has been delivered and installed. Extension of the Sugd and Regar substation 500-kV bays has been completed. Construction of the 500-kV HVAC line from the Kyrgyz border to the Sugd substation in the Sughd region and of the 500-kV HVAC line from the Regar substation to the Sangtuda converter station has reached 96 percent and is scheduled to be completed by October 30, 2023. 9. Overall implementation progress in the Republic of Tajikistan is satisfactory, although higher prices for goods and transportation because of the pandemic, exchange rate fluctuations between special drawing rights and the U.S. dollar, and the world economic crisis, as well as additional work, are affecting contract costs, creating a large budget deficit that, if not resolved, will delay implementation. 10. Component B: Technical Assistance and Project Implementation Support (financed by the CASA MDTF). This component supports the ESPMU with technical assistance and project implementation. Subcomponent B1 includes financing for HVDC and HVAC facilities’ s owner’s engineers. The contractor will continue to provide construction supervision services for design, supply, and installation of HVAC and HVDC transmission lines and associated substations in the Republic of Tajikistan and construction of the Sangtuda converter and electrode substations. Contracts with the HVAC and HVDC facilities’ owner’s engineers for the supervision of the overall engineering, design, manufacturing, testing, supply, installation, and commissioning of all facilities under the three EPC contracts are being properly Page 9 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) executed but require additional financing for the extension of the contracts to support continued supervision. Subcomponent B includes support for ESPMU. Currently allocated funds under the MDTF for the operational costs of the ESPMU include costs of implementation arrangements, technical specialists, audits, and other consulting services until December 31, 2024. Because ESPMU will continue to supervise the CASA-1000 until full construction of the CASA- 1000 transmission line and testing and commissioning of the entire infrastructure in all four countries, an additional US$3 million is required for the ESPMU to continue hands-on support and implementation for at least 2 more years, including the costs of two owner’s engineers. Because funds are unavailable under the MDTF, the above-mentioned additional costs that would be incurred as a result of delays in project completion cannot be covered through MDTF financing and will be covered from the proposed additional financing. 11. Estimated Cost and Financing Sources for the Republic of Tajikistan. For Component A, based on estimated costs from the EPC contractor and contingencies, the total updated cost to complete the project in Tajikistan is about US$48.7 million, which is needed from IDA. The current financing gap is US$8 million. Given that the project is in advanced stage of implementation, the changes in the volume of work and equipment are expected to be modest. For Component B, which was originally funded from the MDTF, total updated cost is US$33 million, with additional financing of US$3 million required for technical assistance and project implementation support. Table 2 summarizes total updated costs, IDA financing amounts, and financing gaps for both components. There is no funding gap for activities that other financial institutions are funding. Table 2. Cost and Financing Sources for Central Asia South Asia Electricity Transmission and Trade Project in Republic of Tajikistan (US$ Million) Project component Project International Development Financing cost Association and multi-donor trust gap fund financing A. Construction of high-voltage 48.7 40.7 8.0 transmission infrastructure B. Technical assistance and project 33.0 30.0 3.0 implementation support Total 81.7 70.7 11.0 12. Justification for Proposed Additional Financing. The proposed additional financing would help close the financing gap in the Republic of Tajikistan and consists of gap financing for the contract package for the HVDC converter station and electrode station under Component A and technical assistance and project implementation support under Component B to help complete the Tajik portion of the CASA-1000. 13. Alignment with the World Bank Country Partnership Framework for Fiscal Years 2019 to 2023. The proposed additional financing would contribute to Focus Area 1 (Human Capital and Resilience) of the World Bank Country Partnership Framework for the Republic of Tajikistan for fiscal years 2019 to 2023 (Report No. 135875-TJ) and help address risks associated with fragility, conflict, and violence that constrain development in Tajikistan. It will also contribute to Country Partnership Framework Focus Area 3 (Enabling Private Sector Growth and Creating Markets) from the sector-specific perspective. It is consistent with the World Bank COVID-19 Crisis Response Approach Paper (June 8, 2020), increases economic resilience and improves sector finances, promotes development of renewable hydropower with expanded markets, and supports local direct job creation during the construction stage and indirect job creation by providing economic opportunities by increasing the reliability of the supply of electricity. 14. Alignment with the World Bank Climate Change Action Plan 2021–25. The proposed additional financing is also well aligned with the World Bank Climate Change Action Plan, which anticipates a major expansion of renewable Page 10 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) energy, including hydropower, to enable countries to achieve their nationally determined contributions to combatting climate change. According to the plan, “the World Bank sees hydropower as a key clean energy source—and an important option to support the integration of wind and solar in power systems. The World Bank will support countries in developing sustainable and resilient hydropower, while not damaging the ecosystems, and the associated water storage needed, including through regional cooperation to advance complementary investments across countries.”. 15. Mitigation Climate Co-Benefits of CASA-1000 and Proposed Additional Financing. The original financing and the proposed additional financing will generate environmental benefits in the form of net reduction of carbon dioxide emissions. The environmental benefits of the overall project are computed as total avoided social cost of carbon due to reduction of greenhouse gas (GHG) emissions from displaced marginal generation sources in Afghanistan and Pakistan using the relevant emission factors. The avoided social cost of GHG emissions is estimated based on the conservative social cost of carbon (US$13 per ton of carbon dioxide equivalent), which is assumed to increase gradually throughout the evaluation period. The project would allow greater integration of solar photovoltaic and wind capacity, which, according to the generation expansion plan, would be part of the generation mix to meet forecast electricity demand in the four countries from 2020 to 2040. Hydropower projects with large storage reservoirs are well suited for regulation purposes if the power network relies on intermittent renewable power, such as solar photovoltaic and wind. The increase in penetration of solar photovoltaic would reduce reliance on thermal generation fueled by coal. An informal indicator will be adopted to monitor the parameters related to climate co-benefits. II. DESCRIPTION OF ADDITIONAL FINANCING 16. The proposed additional financing would help close the financing gap under CASA-1000 in the Republic of Just Tajikistan, which is estimated at US$11 million. There are no changes in the scope of existing activities of the project. The financing gap is expected to be filled with the following sources.  An additional US$3.7 million equivalent from national IDA would be delivered in the form of an IDA grant: US$0.7 million for Component A for construction of a converter and electrode substations under contract package 1 and US$3.0 million under Component B for technical assistance and project implementation support, covering the costs of Owner’s Engineers, environment and social management support, audits and financial and revenue management, project management support, coordination, project communications and capacity building.  An additional US$7.3 million equivalent from regional IDA would be delivered in the form of an IDA grant to be used for Component A, which will cover the costs for (1) High Voltage DC Transmission Line, (2) High Voltage DC Converter Stations and (3) High Voltage AC Transmission Interconnection between Kyrgyz Republic and Tajikistan; the foregoing includes construction of a converter and electrode substations, drainage system for the converter station, as well as the installation of the installation of the Emergency Control Devices for the HVDC/AC TL. Table 3. Sources for Proposed Additional Financing (US$ Million) Component National IDA Regional IDA Total A 0.7 7.3 8 B 3 - 3 Total 3.7 7.3 11 Note: IDA, International Development Association. Page 11 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) 17. Implementation arrangements remain unchanged. The Ministry of Finance provides the proceeds of the IDA grant to the implementing agency, Barki Tojik, through a subsidiary agreement. As in the parent project, the ESPMU of Barki Tojik will be responsible for all project implementation–related activities, including technical, operational, environmental and social, reporting, monitoring and evaluation, financial management, audits, procurement, studies, and capacity building. 18. Change in Disbursement Estimates. The disbursement estimate by year is updated to reflect the new project cost and align with the newly established closing date of December 31, 2025. 19. Other Changes. No other changes. III. KEY RISKS 20. The overall risk of the proposed additional financing operation is rated Moderate. Environmental risk is Substantial, and other risks are Moderate or Low. Risk ratings for the various parts of the project and overall risk are based on project and country context for implementation of the Tajik components of CASA-1000. The risks are different from the risks of the parent project, which are largely determined by the Afghanistan situation and are beyond the control of this additional financing operation. 21. Environmental Risk Is Substantial. The project involves large-scale construction of transmission lines in a new location. In addition to selection of the location, which has already been done, other risks are related to occupational health and safety during construction of the high-tension lines and related infrastructure; chemical management; loss of vegetation and attendant biodiversity; and operation phase impacts related to management of chemicals, fire, and risk of shocks. The key remaining tasks for environmental management include treating the slopes in the project area to minimize impacts related to erosion and landslides; checking the efficacy of measures introduced in ecologically important stretches near the lower Pyandj River, the Tigrovaya Balka Nature Reserve, and other locations identified in the environmental and social impact assessments of the north and central segments; and restoration of areas currently used for siting construction plants, camps, and storage as activities end. The ESPMU continues to manage and report on these risks in line with the environmental and social management plan for the project. The task team will continue to monitor this for the remaining activities under the project, including those supported through the proposed additional financing. IV. APPRAISAL SUMMARY A. Economic and Financial Analysis 22. The economic justification for the project remains sound with the additional financing. Economic analysis has revealed that the additional capital injection into Component A will generate economic benefits and significant social co-benefits. The ensuing economic and financial analysis is a revision of the analysis conducted in 2022 and is compared with the original analysis conducted at appraisal (summarized below). 23. Economic Analysis at Appraisal. An economic cost-benefit analysis was conducted for 2014 to 2047 based on the cost-benefit analysis with and without the project.1 Project economic costs include construction, 1 The analysis took into account the following assumptions: (a) Power export volumes are limited to surplus power available from existing generation capacity after meeting forecast summer power demand in these countries. No new capacity has been assumed to be added in the Kyrgyz Republic or Tajikistan for economic analysis. The capacity of the CASA-1000 transmission line caps the volume to be traded. (b) The Kyrgyz Republic continues to have the option of exporting to Kazakhstan in the absence of the project, and Tajikistan’s surplus to be exported via CASA- Page 12 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) environmental, land-acquisition, community support program (CSP), incremental operations and maintenance (O&M), and power costs. Construction costs are based on the expected design, supply, and installation (including physical contingencies) of HVAC and HVDC facilities and network reinforcement in the four countries. Associated costs include the community benefit program (part of the CSP), additional security arrangements, and implementation support during construction. The economic cost of power for the Kyrgyz Republic was assessed at the opportunity cost of existing exports to Kazakhstan. In the absence of competing export opportunities for Tajikistan for the available surplus, the economic cost of power for Tajikistan was estimated as the marginal cost of generation. The economic benefits of the project include reduction in the costs of meeting projected power demand in Pakistan and Afghanistan and reduction of GHG emissions from marginal fossil fuel plants. The economic analysis indicated that the project was economically viable, with a net present value (NPV) of US$1,208 million with a discount rate of 10 percent and an economic internal rate of return (EIRR) of 26 percent, even with the conservative base case assumptions. 24. Financial Analysis at Appraisal. The financial analysis was conducted for 2014 to 2047 and based on the financial benefits and costs that the project would generate, inclusive of applicable direct taxes. The financial benefits include incremental revenues from the sale of imported power in Afghanistan and Pakistan. The financial costs include the tax-inclusive investment costs, incremental O&M costs, incremental cost of power generation in the Kyrgyz Republic and Tajikistan, incremental transmission and distribution costs in the four countries, and the O&M fee of the HVDC facility operator. Investment costs include expected design, supply, and installation costs (including physical and price contingencies), transmission connection and network reinforcement costs, and land acquisition costs. The financial analysis indicated that the project was financially viable, with an NPV of US$3,861 million with a financial discount rate of 2.1 percent and a financial internal rate of return (FIRR) of 25 percent. The project would continue to be robust in the case of substantial variation of key variables that affect its financial viability. 25. Update of the Financial and Economic Analysis of the Entire Project. The focus of this section is on elements that have changed to provide an updated context within which to evaluate the EIRR and FIRR. This updated analysis uses electricity sale volumes and tariffs as negotiated under the master agreement and the power purchase agreements (PPAs) and incorporates revisions to project design made in 2016.2 The estimated commissioning date of the project has been postponed from 2019 as outlined in the original Project Appraisal Document / 2020 (PPA) to August 2024. For simplicity, it is assumed that Year 1 of the PPA is 2025. 26. Updated Economic Analysis. The economic analysis discusses the rationale for public financing of the project and the value added from Bank support and estimates the project’s development impact in terms of expected benefits and costs. Rationale for public sector provision and financing: The project warrants public intervention given its economic viability and the fact that private sector financing and provision is not plausible because of limited domestic capital markets (Domestic private capital markets in the participating countries lack 1000 is in addition to the maximum that can be exported to Afghanistan under the current power purchase agreement. (c) Pakistan and Afghanistan reduce their marginal generation costs by implementing their ambitious power sector expansion plan and build significant new generation capacity to meet forecast demand, and Pakistan replaces its existing expensive generation plants (diesel- and fuel oil–fired independent power producers. (d) The economic benefits that would be generated for the communities along the route of the transmission line through the CSP are excluded from the analysis. 2 The original design with three HVDC converter stations was restructured in April 2016 to two converter stations (Tajikistan, Pakistan). Afghanistan deferred development of the back-to-back station on the existing 220-kV line with Tajikistan. Page 13 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) the breadth and depth to mobilize the financing required for such a large infrastructure project) and prohibitively high private capital costs due to scarce capital and risks (Costs for private capital are significantly higher than for public debt in all of the involved countries given the macro and project-specific risks involved). Thus, in the case of private financing, end-users of electricity in importing countries would benefit less. Moreover, transmission line operators in all of the project countries are state-owned companies with limited ability to borrow on commercial terms. Given the risks involved and significant social benefits (development of local communities along the transmission line) and externalities associated with the project, public financing of the project is justified. Value added of the Bank’s support: The participating countries have limited capacity to prepare and implement the project given the complexity of overall project management and technical, fiduciary, and safeguards factors. The Bank’s value added arises from the technical inputs of its staff in helping the borrower countries identify and address in a timely manner all project implementation challenges related to technical factors, procurement, financial management, and environmental and social impact mitigation. Social discount rate: The analysis assumes a project life of 30 years and uses 2019 as the base year. It is therefore not a retrospective analysis that estimates the impact of procurement delays since appraisal on the EIRR. Since appraisal, the Bank has issued new guidance on the social discount rate that suggests a value of two times the real per capita gross domestic product growth rate. Table 4 shows historical and forecast (International Monetary Fund, World Economic Outlook) real per capita growth rates in each country. On the basis of these values, it is likely that, by assuming a 10 percent discount rate, as was done at appraisal and is continued here, the analysis places greater weight on costs and benefits in the short than the long run, as opposed to an analysis that uses the revised guidance. Project economic costs: Project economic costs are essentially project construction and associated costs and opportunity and generation costs of the Kyrgyz Republic and Tajikistan. Construction and associated costs are summarized in Table 4 and include EPC costs of and network reinforcements in the four countries, the owner’s engineer’s costs, and environmental and social costs. The economic costs of the project include community benefit program costs, additional security costs, and implementation support during construction, which are designed to ensure sustainability of the project and additional security during construction.3 3 The costs for CSP have been considered, but benefits have not because of the difficulty in quantification; benefits from the open-access regime have not been considered either (power flow during the period when CASA supplies are not taking place, which is about 7 months of non-supply period under the PPAs). When considered, CSP and open-access benefits would significantly enhance the economic benefit of the overall project and to individual countries. Page 14 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Table 4: Total Economic Investment Costs (US$ Million) 27. The economic cost of power in the exporting countries is assessed as the economic opportunity cost for the Kyrgyz Republic and incremental generation cost for Tajikistan. For the Kyrgyz Republic, it is assumed to be equal to the average export tariff to Kazakhstan (US¢2.12/kWh). For Tajikistan, it was computed to be equal to the variable cost of hydropower generation (US¢1.62/kWh), given that Tajikistan does not have export opportunities competing with CASA-1000. 28. Economic Benefits. Economic benefits are estimated as the economic value of the reduction in GHG emissions from marginal fossil fuel plants, and of power imported under the project, computed in terms of reduction in costs of meeting projected power demand in Pakistan and Afghanistan. The value of imported power is computed as the avoided cost of the marginal generator in summer months. In Afghanistan, the economic value of imported power is computed as the variable economic cost of grid-connected diesel-fired generation and thermal generation–based power imports, estimated at US¢10/kWh to US¢12/kWh. In Pakistan, the economic value of imported power is computed as the variable economic cost of open cycle gas turbine plants displaced. The variable economic cost of displaced generation is estimated at US¢8.6/kWh initially, dropping to US¢6.8/kWh in the long run. 29. The environmental benefits of the overall project are computed as total avoided social cost of carbon due to the reduction of GHG emissions from displaced marginal generation sources in Afghanistan and Pakistan using the relevant emission factors. Since appraisal, the Bank has issued new guidance on the social cost of carbon that is adopted here. Under the low scenario, this starts at US$39/ton in 2019 and increases to US$76/ton in 2049; under the high scenario it starts at US$78/ton in 2019 and increases to US$153/ton in 2049—much higher than the value of US$13/ton assumed in 2014. 30. Economic Internal Rate of Return. The EIRR has changed as a result of changes in project design, PPA terms, and context since appraisal. At the project level, higher infrastructure costs decrease returns, and higher costs of carbon emissions increase returns. At the country level, higher energy tariffs negotiated under the PPA increase revenues for exporters, and lower fossil fuel prices reduce incentives for importers to offtake power. The project EIRR is still high—17.4 percent with low carbon prices and 19.8 percent with high carbon prices— easily exceeding the assumed discount rate of 10 percent. At the country level, the EIRRs for Afghanistan, the Kyrgyz Republic, and Tajikistan are all greater than 10 percent, but Pakistan’s depends on how the value of reduced GHG emissions is allocated. Following the methodology at appraisal, with the benefits of avoided carbon Page 15 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) dioxide emissions allocated not to any country but to the whole project, the EIRR for Pakistan drops to less than 0. Table 5: Economic Internal Rate of Return (EIRR) (Percentage) 31. Sensitivity analysis. Total project EIRR is robust to significant deviations of the key parameter assumptions from their baseline values, as shown in Table 6 and plotted in Figure 1 for the low-price-of-carbon scenario. Only increases in project costs (beyond the already-included contingencies) and severe shortages of available power to export from Tajikistan (relative to the agreed-upon volumes in the PPAs) make a significant difference in the EIRR. Table 6: Sensitivity of Economic Internal Rate of Return (EIRR) to Changes in Key Parameters (Low-Price-of-Carbon Scenario) Parameter/EIRR baseline Parameter change/EIRR (%) Project construction cost -30 -20 -10 0 10 20 30 17.4% 21.6 20.0 18.6 17.4 16.3 15.3 14.4 Fuel oil cost -30 -20 -10 0 10 20 30 17.4% 17.0 17.1 17.3 17.4 17.5 17.7 17.8 Diesel cost -30 -20 -10 0 10 20 30 17.4% 17.4 17.4 17.4 17.4 17.4 17.4 17.4 Natural gas cost -30 -20 -10 0 10 20 30 17.4% 14.3 15.4 16.4 17.4 18.3 19.2 20.1 Surplus available Kyrgyz Republic -30 -20 -10 0 10 20 30 17.4% 17.8 17.7 17.5 17.4 17.2 17.1 17.0 Page 16 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Figure 1: Sensitivity of Economic Internal Rate of Return (EIRR) (Low-Price-of-Carbon Scenario) 25% 20% 15% Project construction cost EIRR Fuel oil cost 10% Diesel cost Natural gas cost Social discount rate 10% 5% 0% -30% -20% -10% 0% 10% 20% 30% 32. Updated Financial Analysis. The financial analysis, which is conducted at the country implementing agency level and aggregated for the overall project, shares the inputs of the economic analysis and excludes environmental benefits but includes taxes (value-added tax, import duties, sales tax, income tax). Costs that are incurred over time, such as O&M, are inflated. The financial analysis indicates that the project is financially viable, with an NPV of US$4,671 million and an FIRR of 21.9 percent. 33. Financial Discount Rate. The weighted average cost of capital (WACC) is used to assess the financial NPV for each country and is based on the after-tax on-lending rates applicable to on-lending arrangements between the implementing entities and their respective governments. The WACC for the overall project is estimated based on individual implementing agency average cost of capital weighted by share of project financial costs for that country (Table 7). Table 7: Financial Discount Rates (Percentage) Rate Kyrgyz Republic Tajikistan Afghanistan Pakistan Total (National (Barki (Da (National Electric Grid of Tojik) Afghanistan Transmission Kyrgyzstan) Breshna and Despatch Sherkat) Company) On-lending rate 1.5 3.0 0.5 8.2 - Income tax rate 10.0 25.0 25.0 35.0 - Financial discount rate 1.4 2.3 0.4 5.3 2.2 Share of project financial costs 19.4 27.4 29.7 23.4 100 34. Project Financial Costs. Financial costs include investment costs, marginal costs of power generation in the Kyrgyz Republic and Tajikistan, incremental transmission costs, incremental distribution costs (applicable only for Afghanistan), HVAC facility O&M costs, and the fee paid to the HVDC facility operator in charge of O&M of the HVDC portion of the project. Page 17 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) 35. Investment costs include EPC, network reinforcement, and environmental and social costs (primarily for land acquisition) and physical and price contingencies (Table 8). Total financial investment costs of US$1,071 million are slightly higher than the US$1,035 million estimated at appraisal. Table 8: Financial Investment Costs (US$ Million) Category Kyrgyz Republic Tajikistan Afghanistan Pakistan Total Engineering, procurement, and construction and network reinforcing 218 273 313 246 1,049 Environmental and social 0.4 2.2 12.0 7.4 22 Total 218 275 325 253 1,071 36. Project Financial Benefits. In Afghanistan, the financial benefits are the incremental revenues of Da Afghanistan Breshna Sherkat from the domestic sale of imported power, with an estimated end-user tariff of US¢17.6/kWh. In Pakistan, wholesale sale of imported power by the National Transmission and Dispatch Company and the Central Power Purchasing Agency to distribution companies brings in additional revenue at a weighted average tariff of US¢10/kWh. Financial benefits for NEGK and Barki Tajik are derived from the revenue they retain for each kWh delivered as agreed in the PPA terms. 37. FIRR and NPV. The project’s FIRR is 21.9 percent, exceeding the WACC of 2.2 percent (Table 9). The same is true at the entity level, although the distribution of net financial benefits has shifted. In Pakistan, higher eligible costs have increased capital expenditures and transmission tariffs on imported power. In Afghanistan, higher transit tariffs outweigh the impacts of higher eligible costs and their impact on transmission tariffs. Power- exporting countries benefit from higher transmission tariffs. The increase in the calculated NPV is higher in the Kyrgyz Republic because on-lending rates are lower than assumed at appraisal, whereas in Tajikistan, they are higher. Table 9: Financial Internal Rate of Return (FIRR) and Net Present Value (NPV) Country At appraisal At additional financing At midterm FIRR (%) NPV (US$ FIRR (%) NPV (US$ FIRR (%) NPV (US$ million) million) million) Kyrgyz Republic 2.9 11 6.4 95 3.4 95 Tajikistan 28.7 1,617 36.3 1,923 26.9 1,923 Afghanistan 18.5 1,082 27.9 2,070 21.4 2,070 Pakistan 31.5 710 9.6 88 5.9 88 Project 24.8 3,861 27.7 4,362 21.9 4,671 38. Sensitivity analysis. At the project level, significant deviations of key parameters from baseline values have limited impact on FIRR, which stays well above WACC (Table 10, Figure 2). Table 10: Sensitivity of Financial Internal Rate of Return (FIRR) to Changes in Key Parameters Parameter/FIRR baseline Parameter change/FIRR (%) Project construction cost -30 -20 -10 0 10 20 30 21.9% 27.2 25.2 23.4 21.9 20.5 19.3 18.2 Afghanistan tariff -30 -20 -10 0 10 20 30 21.9% 20.4 20.9 21.4 21.9 22.3 22.8 23.3 Pakistan wholesale tariff -30 -20 -10 0 10 20 30 21.9% 18.3 19.6 20.7 21.9 22.9 24.0 24.9 Page 18 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Figure 2: Sensitivity of Financial Internal Rate of Return (FIRR) 30% 25% 20% Project construction cost FIRR 15% AFG tariff PAK Wholesale tariff 10% 5% Weighted average cost of capital 2.2% 0% -30% -20% -10% 0% 10% 20% 30% 39. Examining the FIRR for the National Transmission and Despatch Company in Pakistan reveals that the largest risk to financial viability is a reduction of the wholesale tariff, which would reduce the margin between the cost of importing power through CASA-1000 and the price at which it is sold on the market. Figure 3: Sensitivity of National Transmission and Despatch Company Financial Internal Rate of Return (FIRR) 20% 18% 16% 14% 12% FIRR 10% Project construction cost 8% 6% Financial discount rate 5.33% 4% 2% 0% -30% -20% -10% 0% 10% 20% 30% Page 19 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) B. Technical 40. Technical Appraisal. The proposed additional financing will provide financing for completion of the CASA- 1000 Sangtuda converter and electrode station and transmission line in the Republic of Tajikistan. The technologies to be implemented are commercially proven, have been widely used by transmission operators in developed and developing countries, and will be implemented according to internationally accepted technical standards and practices. The proposed additional financing would support building a cross-border power trade facility comprising about 153 km of 500-kV HVAC transmission lines and 147 km of 500-kV HVDC transmission lines to carry power from the Kyrgyz Republic through Tajikistan; a 1,300-MW HVDC converter in Tajikistan (Sangtuda); and a 750-km ±500-kV HVDC transmission link through Afghanistan to a 1,300-MW terminal with HVDC converter facilities in Pakistan. The alternate current–to–direct current converter station is designed to help trade power in any direction and would offer significant emergency system support to the national grids of the countries connected through an HVDC system. 41. HVDC has significant financial, technical, and commercial advantages over HVAC, although HVAC systems are more appropriate for the import and export of surplus power over short distances between neighboring countries, especially when the transmission networks are well developed. HVDC and HVAC systems are increasingly being used together to increase system reliability and facilitate operation of large, regional systems. 42. Technical soundness of the selected investment packages was reassessed, and qualified companies with international experience have developed detailed designs and technical specifications for investments in HVAC transmission lines, as reflected in the agreed-upon terms of reference and bidding documents. To ensure that installation and civil projects are properly supervised, a qualified supervision company will be retained as the owner’s engineer to supervise construction of transmission lines, and training will be provided to NEGK staff on assembling, installing, and maintaining the transmission lines, with proper verification by the supplier and targeted site supervision by the design company. C. Financial Management 43. ESPMU will handle the financial management function of the proposed additional financing on the basis of the amendment to the project implementation agreement between Barki Tojik and ESPMU signed for the original CASA-1000 project. Based on that, the ESPMU will continue to be responsible for budgeting, internal controls, flow of funds, accounting, reporting, and external audit. Financial management arrangements agreed upon for the parent project will apply for the additional financing, with no changes. Financial management arrangements established for the parent project are rated Satisfactory and will be replicated for the proposed additional financing. 44. The financial management arrangements in place at ESPMU were reviewed during preparation of the additional financing, in parallel with the implementation support and supervision mission for the parent project that ESPMU implemented. Financial management capacity and arrangements at ESPMU, including budgeting, internal controls, accounting, financial reporting, and external audit, have been confirmed to be adequate and meet the minimum requirements of the Bank’s policy and directive on investment project financing. The project’s unaudited interim financial reports have been submitted to the Bank with some delays but were in general acceptable. The unmodified project audit reports were issued and submitted to the Bank by the due date. There are no overdue unaudited interim financial reports or audit reports under the parent project. 45. The project’s unaudited interim financial reports and annual financial statement audit reports will be combined for the original grants and additional financing. Disbursement procedures will be specified in detail in Page 20 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) the disbursement and financial information letter. The overall financial management residual risk for the project is Moderate. D. Procurement 46. The additional financing will largely finance existing contracts procured under the parent project. Any new procurement activities for the proposed additional financing will be conducted in accordance with the World Bank Procurement Regulations for Recipients under Investment Project Financing dated July 1, 2016, and revised in September 2023. The project will also be subject to the World Bank Anti-Corruption Guidelines dated July 1, 2016. The client will conduct procurement processing through Systematic Tracking of Exchanges in Procurement, the World Bank online procurement planning and tracking tool. 47. Ongoing contracts will be amended as needed. The implementing entities’ capacity to conduct procurement has been demonstrated to be adequate and acceptable to the Bank. Responsibility for implementation and procurement functions of the additional financing will rest with ESPMU, the project implementing agency. There are no planned changes to existing procurement arrangements for the project, and ESPMU will continue to appoint a project-specific procurement officer to oversee implementation of Component A. The procurement arrangements in place at ESPMU were reviewed during preparation of the additional financing, in parallel with the implementation support and supervision arrangements for active projects that ESPMU implemented in May 2022. Procurement arrangements at ESPMU have been assessed to be acceptable to the Bank. The overall procurement risk for the project is Moderate. 48. Disclosure of procurement information will follow the requirements of the procurement regulations, subject to the market approach and selection method. In addition, the project implementation entity will publish an action report quarterly on any complaints received. 49. Fiduciary Oversight by the World Bank (frequency of procurement supervision). The World Bank will prior review contracts based on the prior-review thresholds set in the procurement plan and conduct a post- procurement review at least once annually to assess consistency and compliance with the agreed-upon procedures, although the World Bank may conduct independent procurement reviews of any contract financed under the credit at any time. E. Environmental and Social Impacts (including Safeguards) 50. Environmental Impacts. The project’s environmental impacts are site specific and temporary, although because of the proximity of the construction sites and related activities to residential areas and trees, the risks could be substantial if not adequately managed. The risks and impacts associated with project activities are mainly attributed to construction of transmission towers, stringing work, and access roads. Potential impacts include noise; vibration; dust; pollution due to improper care, handling, storage, and disposal of construction material and waste; accidental release of wastewater to drainage systems; water and soil pollution; soil disturbance during excavation; tree cutting and loss of vegetation; traffic safety problems; and community and worker health and safety. These impacts are predictable and temporary and can be mitigated by adhering to construction and occupational health and safety management best practices. An environmental and social management framework has been prepared and disclosed for the parent project. The safeguards apply due to the AF only covering a financing gap/cost overrun and does not involve any new activities. All the safeguard instruments for the parent project will apply to the AF. 51. Social Impacts. The project will not have negative social impacts such as land acquisition and compensation because all these measures as listed in the resettlement action plan have been implemented, as ESPMU has reported. Page 21 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) 52. Substation and transmission line contracts have been signed with reputable international firms with dedicated environmental, health, and safety staff to implement contractual obligations. The contractors and subcontractors are already mobilized. Under the contractual obligations, the contractor prepared and submitted a construction environmental, health, and safety plan, which Barki Tojik and ESPMU approved. Work is already at an advanced stage of construction and project implementation, and no serious compliance problems have been reported. ESPMU has a two-member environmental team to assist with and oversee project environmental requirements. ESPMU, the contractor, and the owner’s engineer have an environmental and social specialist on the team. A local firm providing third-party monitoring has not found any significant deviations from the requirements of the environmental and social management framework. No problems were observed with compliance with social requirements under Component A. F. Climate and Disaster Risk Screening 53. It is projected that the water sector in Tajikistan will experience a regime shift over the long term. The loss of mountain glaciers may reduce the regularity of flows and result in the drying of some watersheds. Flooding and associated hazards such as landslides are expected to intensify.4 The operation’s location in Tajikistan is at risk of several climate hazards, including landslides, flooding, and water scarcity, that are projected to intensify because of climate change, as well as general hydrological variation. To reduce these climate hazards, an appropriate project design has been implemented, including several risk-reduction measures, in line with international best practices, including commercial agreements considering hydrological variations and the design of the transmission infrastructure, which contains protection against natural hazards, including sufficient clearance, foundations with adequate safety margins, and emergency restoration kits. A rapid climate and disaster risk screening conducted for the proposed additional financing concluded that, with implementation of these measures, the overall climate and disaster risk for the transmission line constructed in Tajikistan under the project is Low. G. Citizen Engagement 54. Engagement of the local population and other civil society stakeholders (civil society, media, community- based organizations, the general public) is essential to the success of the project by ensuring collaboration between project staff and local communities to enhance project outcomes. This will be done through the CASA- 1000 CSP, which the National Social Investment Fund of Tajikistan (NSIFT) has implemented with support from ESPMU and Barki Tojik. The CSP will expand its engagement with local communities to maintain an effective interface with target communities along the CASA-1000 transmission line. Citizen engagement activities have been and will continue to be implemented regularly throughout the project. NSIFT will implement the following activities to build on and expand the citizen engagement mechanisms established for the CASA-1000 CSP.  A series of digital (virtual, online) or traditional community consultations, blended to adapt to post- COVID-19 circumstances and prevailing regulations, will inform communities and be used to obtain feedback on the power plant and bridge rehabilitation design and implementation process. Consultations will be held at least twice per year to give all citizens an opportunity to provide feedback on the interventions and the effectiveness of the consultation process.  Using online complaint and response platforms, open information and feedback desks will provide a feedback mechanism and a GRM expanding the arrangements under the project. This would provide citizens with an immediately accessible place to obtain information on the project, provide feedback, 4 Climate Risk Country Profile Kyrgyz Republic Page 22 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) and raise concerns and to explain adapted processes due to the COVID-19 context. The GRM established at NSIFT, ESPMU, and Barki Tojik will be open to feedback on any project-related concerns and the appropriate responsibilities of community liaison officers, contractors, supervision consultants, and departments of NSIFT, ESPMU, and Barki Tojik assigned to record, process, and provide meaningful responses to feedback received and resolve complaints.  Capacity building for local NSIFT community engagement facilitators would include training for project field staff in organizing and facilitating online and blended solutions for community consultations. 55. The ESPMU has established a GRM under the parent project that has been functioning well and will continue to serve the additional financing. To facilitate timely, effective, efficient resolution of grievances and complaints to the satisfaction of all parties, a two-tier GRM has been established that provides a transparent, credible process for achieving fair, effective, lasting results. The GRM has increased trust in the project and cooperation as an integral component of broader community consultation that promotes corrective action. An institutional beneficiary feedback system is available to collect a wide range of feedback from key project stakeholders. An informal indicator will be adopted to monitor and report on how effectively NEGK responds to and resolves any complaints received. 56. The overall effectiveness of the citizen engagement activities would be measured through intermediate results indicators of the CSP. H. Gender 57. The proposed additional financing will build on parent project activities implemented to address gender gaps in employment within Barki Tojik and ESPMU. The social impact assessment detailed the range of gender challenges in the four countries within the limitations of (sparse) available data, especially for Tajikistan. In all four countries, there was a general level of traditional attitudes toward women manifested in a number of ways, including the practice of purdah in the proposed area in Pakistan; a history of wide gender gaps in women’s access to services, economic opportunities, and voice in Afghanistan; and limited access to education (including vocational training), limited economic activity, and unequal control over and access to assets and resources such as land and credit. In Tajikistan, for example, only 1 percent of privatized landowners are women, even though they account for more than 70 percent of the agricultural workforce. The environment for women in Tajikistan has implications for implementation measures for project-affected persons and CSPs. In the former case, specific measures are adopted to protect vulnerable groups (including female-headed households) from disproportionate impacts related to involuntary acquisition of land or assets. In the latter case, particular attention is paid to the inclusion of women’s voices in consultations and project implementation. In addition, initiatives that target poverty reduction—through economic activity, for example—will continue to provide specialized training for women, taking into account their lower educational levels. V. WORLD BANK GRIEVANCE REDRESS 58. Grievance Redress. Communities and individuals who believe that a project that the World Bank supports has adversely affected them may submit complaints to existing project-level grievance mechanisms or the Bank’s Grievance Redress Service, which ensures that complaints received are promptly reviewed to address project- related concerns. Project-affected communities and individuals may submit their complaints to the Bank’s independent accountability mechanism, which houses the Inspection Panel, which determines whether harm occurred, or could occur, as a result of Bank non-compliance with its policies and procedures, and the Dispute Resolution Service, which gives communities and borrowers an opportunity to address complaints through Page 23 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) dispute resolution. Complaints may be submitted through the accountability mechanism any time after concerns have been brought directly to the attention of Bank management and management has been given an opportunity to respond. For information on how to submit complaints to the Bank’s Grievance Redress Service, visit http://www.worldbank.org/GRS. For information on how to submit complaints to the Bank’s accountability mechanism, visit https://accountability.worldbank.org. Page 24 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) VI. SUMMARY TABLE OF CHANGES Changed Not Changed Components and Cost ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ VII. DETAILED CHANGE(S) COMPONENTS Current Component Name Current Cost Action Proposed Component Proposed Cost (US$, (US$, millions) Name millions) Construction of High 576.25 Revised Construction of High 584.25 Voltage Transmission Voltage Transmission Infrastructure 'revised' Infrastructure 'revised' Technical Assistance and 15.00 Revised Technical Assistance and 18.00 Page 25 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Project Implementation Project Implementation Support Support Community Support 0.00 Community Support 0.00 Programs Programs TOTAL 591.25 602.25 Expected Disbursements (in US$) DISBURSTBL Fiscal Year Annual Cumulative 2014 67,212.00 67,212.00 2015 1,059,318.00 1,126,530.00 2016 1,794,096.00 2,920,626.00 2017 3,325,698.00 6,246,324.00 2018 4,297,860.00 10,544,184.00 2019 4,396,248.00 14,940,432.00 2020 3,059,568.00 18,000,000.00 2021 0.00 18,000,000.00 2022 0.00 18,000,000.00 2023 0.00 18,000,000.00 2024 0.00 18,000,000.00 SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Latest ISR Rating Current Rating Political and Governance  High  Low Macroeconomic  Substantial  Low Sector Strategies and Policies  Substantial  Low Technical Design of Project or Program  Moderate  Low Institutional Capacity for Implementation and  Substantial  Low Sustainability Fiduciary  Moderate  Moderate Environment and Social  High  Substantial Page 26 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) Stakeholders  High  Low Other  Moderate Overall  High  Moderate LEGAL COVENANTS2 LEGAL COVENANTS – Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA- 1000) Project for Republic of Tajikistan (P181219) Sections and Description Schedule 2 Section B. 1: The Recipient shall not amend, suspend, abrogate or waive any of the Core Construction Agreements or Core Commercial Agreements to which it is a party in a manner that would affect materially and adversely the carrying out of the Project. Schedule 2 Section B. 2: The Recipient shall implement the Revenue Management Program. Except as the Association shall otherwise agree, the Recipient shall not amend, suspend, abrogate or waive the Revenue Management Program or any of its provisions. Conditions Type Financing source Description Effectiveness IBRD/IDA The Additional Conditions of Effectiveness consist of the following, namely that the Subsidiary Agreement has been amended on behalf of the Recipient and the Project Implementing Entity and all conditions precedent to its effectiveness (other than the effectiveness of this Agreement) have been fulfilled. Page 27 of 35 The World Bank Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for the Republic of Tajikistan (P181219) VIII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Central Asia Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for Republic of Tajikistan Project Development Objective(s) The objective of the project is to create the conditions for sustainable electricity trade between the Central Asian countries ofTajikistan and Kyrgyz Republic and the South Asian countries of Afghanistan and Pakistan. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 Trade initiated between the participating countries Trade initiated between the No No No No No Yes Yes Yes Yes participating countries (Yes/No) All Core Project All Core Project All Core Project Account Bank All Core Project Commercial framework agreements agreements agreements Master Master Master Agreements agreements between the countries including including including Not established Agreement and Agreement and Agreement and signed and including Account is established and Account Bank, Account Bank, Account Bank, operational (Text) PPAs signed PPAs effective PPAs effective Technical Code Bank, Technical Technical Code Technical Code Technical Code Finalized Code finalized finalized finalized finalized Institutional IGC Secretariat IGC and JWG IGC Secretariat IGC and JWG IGC and JWG IGC and JWG IGC and JWG IGC and JWG IGC and JWG mechanism for project and JWG established and JWG meetings held meetings held meetings held meetings held meetings held meetings held Page 28 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 sustainability is in place established strengthened (Text) Transmission lines constructed or 0.00 0.00 0.00 0.00 700.00 1,300.00 1,300.00 1,300.00 1,300.00 rehabilitated under the project (Kilometers) Transmission lines constructed under 0.00 0.00 0.00 0.00 700.00 1,300.00 1,300.00 1,300.00 1,300.00 the project (Kilometers) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 Construction of a High Voltage Transmission Infrastructure Construction contracts signed for HVDC No No No Yes Yes Yes Yes Yes Yes converter stations (Yes/No) Construction contracts signed for HVDC line No No No No Yes Yes Yes Yes Yes (Yes/No) Converter stations constructed under the 0.00 0.00 0.00 0.00 2.00 2.00 3.00 2.00 2.00 Project (Number) HVDC line constructed 0.00 0.00 0.00 0.00 0.00 750.00 750.00 750.00 750.00 under the Project Page 29 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 (Kilometers) HVAC line between the Kyrgyz Republic and Tajikistan constructed 0.00 0.00 0.00 0.00 0.00 0.00 455.00 455.00 455.00 under the Project (Kilometers) Indirect Project 0.00 0.00 0.00 0.00 0.00 27,500,000.00 28,500,000.00 30,000,000.00 30,000,000.00 Beneficiaries (Number) Technical Assistance and Project Implementation Support Owner's Engineer hired No No Yes Yes Yes Yes Yes Yes Yes and in place (Yes/No) Timely Audits carried out of Entity Financial Statements within 9 months of the closure No No Yes Yes Yes Yes Yes Yes Yes of financial year - Tajikistan and Kyrgyz Republic (Yes/No) Timely Audits carried out of Entity Financial Statements within 9 months of the closure No No No No Yes Yes Yes Yes Yes of the financial year - Pakistan and Afghanistan (Text) Number of staff receiving knowledge transfer on HVDC 0.00 0.00 0.00 10.00 10.00 40.00 40.00 40.00 40.00 technology/ Transmission Dispatch Page 30 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 7 (Number) Community Support Programs Development of operations manual for the Community No No No No Yes Yes Yes Yes Yes Support Programs (Yes/No) Agreement on financing of Community Support No No No Yes Yes Yes Yes Yes Yes Programs for operations phase (Yes/No) IO Table SPACE Monitoring & Evaluation Plan: PDO Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Commercial flows of electricity traded under at Trade initiated between the participating least one of the PPA Annual NTCs/utility Utility database NTCs countries between at least one of the database sellers and one of the buyers. Number of commercial Commercial framework between the Annual NTCs/utility Utility database NTCs/IGC Secretariat framework agreements countries is established and operational database signed and implemented. Page 31 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) Ensure coordination and Institutional mechanism for project decision-making processed Annual IGC/JWG IGC/JWG Meetings IGC Secretariat sustainability is in place and capacity are Meetings established. Total extension of new NTCs/utility Transmission lines constructed or transmission lines Cumulative Utility database NTCs/IGC Secretariat database rehabilitated under the project constructed under the Project Total extension of new NTCs/utility Transmission lines constructed under transmission lines Cumulative Utility database NTCs/IGC Secretariat database the project constructed under the Project. ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Contracts signed for HVDC Construction contracts signed for HVDC converter stations prior to Cumulative NTCs/utility Utility database NTCs/IGC Secretariat converter stations construction database NTCs/utility Construction contracts signed for HVDC Signing of construction Cumulative Utility database NTCs/IGC Secretariat database line contracts for HVDC line Converter stations constructed under the Construction of converter Cumulative NTCs / utility Utility database NTCs/IGC Secretariat Project stations database Cumulative NTCs/utility Utility database NTCs/IGC Secretariat HVDC line constructed under the Project Construction of HVDC line database HVAC line between the Kyrgyz Republic Construction of HVAC line Cumulative NTCs/utility Utility database NTCs/IGC Secretariat and Tajikistan constructed under the between Kyrgyz Republic database Project and Tajikistan Page 32 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) Electricity consumers in Pakistan and Afghanistan Annual NTCs/utility Utility database NTDC, DABS Indirect Project Beneficiaries benefiting from increased database electricity supply. NTCs / IGC Reporting to NTCs / IGC Hiring and placement of Once NTCs / IGC Secretariat Owner's Engineer hired and in place Secretariat Secretariat OEs Timely Audits carried out of Entity Financial Statements within 9 months of Periodic audits carried out N/A NTCs / IGC NTCs / IGC Secretariat NTCs / IGC Secretariat the closure of financial year - Tajikistan within agreed timeframe Secretariat and Kyrgyz Republic Timely Audits carried out of Entity NTCs/IGC Reporting to NTCs/IGC Financial Statements within 9 months of Periodic audits are carried N/A NTCs / IGC Secretariat Secretariat Secretariat the closure of the financial year - Pakistan out in a timely manner and Afghanistan Number of NTCs/ national consultants / contractor Number of staff receiving knowledge NTCs / IGC staff involved in HVDC Annual NTCs / IGC Secretariat transfer on HVDC technology/ Secretariat NTCs / IGC Secretariat activities and Transmission Transmission Dispatch dispatch during design and construction phases. Operations Manual for Afghanistan CSP Project is in place Operations Manual for Kyrgyz Republic is in place. Development of operations manual for N/A NTCs / IGC NTCs / IGC Secretariat NTCs / IGC Secretariat Operations Manual for the Community Support Programs Secretariat Tajikistan CSP is now in place. Operations Manual for Pakistan CSP project is not yet in place. Page 33 of 35 The World Bank Additioinal Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) Agreement reached on Agreement on financing of Community N/A NTCs / IGC NTCs / IGC Secretariat NTCs / IGC Secretariat financing of operations Support Programs for operations phase Secretariat phase ME IO Table SPACE Page 34 of 35 The World Bank Additional Financing for Central Asia South Asia Electricity Transmission and Trade (CASA-1000) Project for the Republic of Tajikistan (P181219) MAP 2 Page 35 of 35