Report No: NCO00007 INTERNATIONAL DEVELOPMENT ASSOCIATION NOTE ON CANCELLED OPERATION IDA-66310 ON A CREDIT IN THE AMOUNT OF SDR 254.9 MILLION (US$350 MILLION EQUIVALENT) TO THE REPUBLIC OF THE UNION OF MYANMAR FOR POWER SYSTEM EFFICIENCY AND RESILIENCE PROJECT November 22, 2024 Energy & Extractives East Asia And Pacific The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT CURRENCY EQUIVALENTS (Exchange Rate Effective {Nov 13, 2024}) Currency Unit = Myanmar Kyat MMK MMK 2100 = US$1 US$1.32 = SDR 1 FISCAL YEAR April 1 - March 31 Regional Vice President: Manuela V. Ferro Country Director: Melinda Good Regional Director: Sudeshna Ghosh Banerjee Practice Manager: Jie Tang Task Team Leaders: Joonkyung Seong, Myoe Myint The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT ABBREVIATIONS AND ACRONYMS CCGT Combined Cycle Gas Turbine CPF Country Partnership Framework DPTSC Department of Power Transmission and Systems Control DSI Design, Supply, and Installation EPGE Electric Power Generation Enterprise HEIS Hands-on Extended Implementation Support IFC International Finance Corporation LNG Liquefied Natural Gas MFD Maximizing Finance for Development MOEE Ministry of Energy and Electricity NEP National Electrification Program NPV Net Present Value OEM Original Equipment Manufacturer PDO Project Development Objective PMU Project Implementation Unit SEE State Economic Enterprise The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT TABLE OF CONTENTS DATA SHEET ............................................................................................................................................................... i I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ........................................................................................1 II. KEY FACTORS LEADING TO CANCELLATION .......................................................................................................3 III. BANK PERFORMANCE ......................................................................................................................................3 IV. LESSONS AND RECOMMENDATIONS ................................................................................................................4 ANNEX 1. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ................................................................5 ANNEX 2. SUPPORTING DOCUMENTS (IF ANY) ............................................................................................................7 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT DATA SHEET @#&OPS~Doctypes~OPS^dynamics@ncobasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P162151 Power System Efficiency and Resilience Project Product Operation Short Name Investment Project Financing (IPF) Power System Efficiency and Resilience Operation Status Approval Fiscal Year Closed 2020 Original EA Category Partial Assessment (B) (Approval package - 29-May-2020) CLIENTS Borrower/Recipient Implementing Agency Department of Power Transmission and System Control Republic of the Union of Myanmar (DPTSC), Electric Power Generation Enterprise, Ministry of Electricity and Energy DEVELOPMENT OBJECTIVE Original Development Objective (Approved as part of Approval Package on 28-May-2020) The project development objectives are to increase the output and efficiency of power generation and improve the resilience of the power network in support of the government’s program on universal electricity access. @#&OPS~Doctype~OPS^dynamics@ncofinancing#doctemplate FINANCING Financing Source Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 350,000,000.00 14,174,348.00 0.00 IDA-66310 350,000,000.00 14,174,348.00 0.00 i The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT Total 350,000,000.00 14,174,348.00 0.00 RESTRUCTURING AND/OR ADDITIONAL FINANCING Amount Disbursed Date(s) Type Key Revisions (US$M) @#&OPS~Doctype~OPS^dynamics@ncokeydates#doctemplate KEY DATES Key Events Planned Date Actual Date Concept Review 22-Sep-2017 22-Sep-2017 Decision Review 09-Dec-2019 09-Dec-2019 Authorize Negotiations 30-Mar-2020 11-Mar-2020 Approval 29-May-2020 29-May-2020 Signing 01-Jun-2020 03-Jul-2020 Effectiveness 01-Sep-2020 10-Sep-2020 ICR/NCO -- Operation Closing/Cancellation 30-Jun-2026 17-Jun-2024 @#&OPS~Doctype~OPS^dynamics@ncoratings#doctemplate RATINGS SUMMARY Bank Performance Satisfactory ISR RATINGS Actual Disbursements No. Date ISR Archived DO Rating IP Rating (US$M) 01 27-Aug-2020 Satisfactory Satisfactory 0.00 02 03-Mar-2024 Satisfactory Satisfactory 0.00 @#&OPS~Doctype~OPS^dynamics@ncosectortheme#doctemplate ii The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT SECTORS AND THEMES Sectors Adaptation Mitigation Major Sector Sector % Co-benefits Co-benefits (%) (%) FY17 - Energy Transmission and 17 59 9 FY17 - Energy and Distribution Extractives FY17 - Non-Renewable Energy 83 5 88 Generation Themes Major Theme Theme (Level 2) Theme (Level 3) % FY17 - Adaptation 14 FY17 - Climate change FY17 - Environment and FY17 - Mitigation 75 Natural Resource FY17 - Energy Efficiency 100 Management FY17 - Energy FY17 - Energy Policies & 83 Reform FY17 - Human Development and FY17 - Gender 83 Gender FY17 - Disaster 17 FY17 - Urban and Rural Preparedness FY17 - Disaster Risk Management Development FY17 - Disaster 17 Response and Recovery ADM STAFF Role At Approval At NCO Practice Manager Julia M. Fraser Jie Tang Regional Director Ranjit J. Lamech Sudeshna Ghosh Banerjee Global Director Demetrios Papathanasiou Practice Group Vice President Guangzhe Chen iii The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT Country Director Gevorg Sargsyan Melinda Good Regional Vice President Victoria Kwakwa Manuela V. Ferro ADM Responsible Team Leader Claudia Ines Vasquez Suarez Joonkyung Seong Co-Team Leader(s) Maria Ayuso Olmedo Myoe Myint The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES Context at Appraisal 1. Myanmar, a low-income, fragile, and conflict-affected state, began implementing significant political and economic reforms in 2011, transitioning from decades of military rule. The country experienced political, economic, and social shifts leading to increased openness and economic growth, but the transition remained incomplete with setbacks, particularly in peacebuilding, economic and political reforms. The military retained significant power, affecting governance and resource management, while conflicts persisted, particularly in the northeast and Rakhine State. Economic growth was strong, averaging 7 percent annually between 2011 and 2017, leading to poverty reduction. However, challenges remained, including high poverty vulnerability, spatial inequalities, and exclusion of minorities. Despite rich primary energy resources, Myanmar’s electrification rate was among the lowest in Southeast Asia, posing a major challenge to poverty reduction and economic progress. Reforms implemented maintained growth during the appraisal period, but the COVID-19 pandemic severely impacted the economy, particularly through reduced trade and tourism, supply chain disruptions, and weakened domestic investment and consumption. 2. The National Electrification Plan (NEP) was endorsed in 2015, with the overarching goal of achieving universal electricity access by 2030 and brought positive results. The electrification rate (access to the public grid) doubled between 2010–2011 (25 percent) and 2019–2020 (50 percent). This was made possible by the launch of a large investment program, which attracted substantial private sector financing in power generation and increased public investments in power generation and the development of the national grid. The program was led by the Ministry of Electricity and Energy (MOEE)1, the main body responsible for policy making, overseeing, and operating the state economic enterprises (SEEs). In turn, the SEEs played a major role in implementing infrastructure projects and service delivery. Despite these achievements, substantial challenges persisted in achieving the goal of universal electricity access primarily due to shortage of electricity. 3. Myanmar, faced with a growing electricity shortage, tried to narrow the power supply gap with short-term solutions, including through emergency rental plants. As of 2018, the installed capacity was 5,600 MW, primarily from hydropower and natural gas. Power shortages became critical in 2019, with load shedding reaching 300 MW. The government addressed this by tendering for emergency plants and planning projects such as large hydropower and expansive Liquified Natural Gas (LNG)-to-power plants. In parallel, Myanmar planned to develop renewable energy resources, improve efficiency in gas-fired plants, and import LNG to meet its climate commitments. Key strategies for sustainable solution included enhancing hydropower and renewable energy (solar and wind) and upgrading inefficient gas plants. Efficient combined-cycle gas turbines were proposed as a low-cost, low-carbon option. 4. At appraisal, the electrification rate reached about 50 percent of the population, but the poorest and ethnic minorities remained underserved. Significant gaps persisted in rural areas due to power supply constraints and overloaded infrastructure. Both grid extension and off-grid solutions were needed to provide modern electricity services to disadvantaged households. Policy and regulatory constraints, including the lack of a least-cost development plan and inadequate management of environmental and social risks, needed to be addressed to attract more investments. 1 The name of the Ministry of Electricity and Energy (MOEE) was changed to the Ministry of Electric Power (MOPE) in 2021. Page 1 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT 5. Myanmar power infrastructure also faced constraints and vulnerabilities, impacting reliability and climate resilience. Significant infrastructure development was needed to improve service quality and adapt to climate change. Since re-engagement in 2012, the World Bank Group, together with Development Partners active in the energy sector, prioritized supporting improvement of reliability and enhancement of resilience through technical assistance and investments in renewable energy and power infrastructure. The World Bank Group played a key role in expanding electricity access and supporting Myanmar’s electrification goals through projects and financing. This included backing the National Electrification Project, providing advisory services, and promoting private sector investment in renewable energy. The World Bank’s involvement aligned with Myanmar’s development priorities and climate commitments, contributing to improved access, infrastructure, and resilience. 6. Government Strategies. The Power System Efficiency and Resilience Project was aligned with Myanmar’s Sustainable Development Plan (2018 – 2030), focusing on infrastructure, climate resilience, and gender equity, and supports the World Bank’s goals of reducing poverty and boosting shared prosperity. The project was also aligned with the World Bank Group’s Country Partnership Framework (CPF) for FY20-23 and the ‘Maximizing Finance for Development' (MFD) approach. It aimed to promote responsible private sector-led growth to improve basic electricity access and community well-being and enhance the climate resilience of the transmission system, contributing to the CPF’s focus on climate and disaster resilience. The World Bank and IFC addressed barriers to private sector participation and supporting investments in renewable energy. The project supported the World Bank’s goals of reducing poverty and fostering shared prosperity while being designed to be conflict -sensitive and inclusive. Project Development Objective 7. The Project Development Objectives (PDO) were to increase the output and efficiency of power generation and improve the resilience of the power network in support of the government’s program on universal electricity access. Project Components 8. Component A: Upgrading Ywama Power Generation Units (US$290 million). This component aimed at upgrading of the existing Ywama power plant located in Yangon by replacing old gas and steam turbines with a new modern Combined Cycle Gas Turbine (CCGT) to enhance the plant’s efficiency from the current 19.9 percent to approximately 55 percent, thereby increasing its electricity output by 2.5 times using the same amount of gas. The project, situated on a brownfield site, was to replace obsolete power plant, ensuring maximum electricity output to address Yangon’s power shortages. Additionally, technical assistance was planned to be provided to the Electric Power Generation Enterprise (EPGE) for project implementation, including support from an owner’s engineer and an independent firm to monitor environmental and social safeguards. The component also included provisions for investments in noise and vibration mitigation and the establishment of a childcare pilot at MOEE. 9. Component B: Improving Resilience of the Power Network (US$60 million) . This component focused on enhancing the resilience and preparedness of Myanmar’s power network against climate change and disasters. It was to finance upgrades to existing substations, including transmission-related equipment, mobile substations, and adaptation measures to protect assets from climate impacts and emergencies. Additionally, technical assistance was planned to strengthen the capacity of the Department of Power Transmission and System Control (DPTSC), to support project implementation, and to develop strategies for increasing the power system's resilience to climate change and Page 2 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT disasters. II.KEY FACTORS LEADING TO CANCELLATION 10. COVID-19 pandemic and military coup. The project was approved on May 29, 2020, and became effective on September 10, 2020, during the peak of the COVID-19 pandemic in Myanmar. In March 2020, the government closed its borders, suspended visas on arrival, implemented screening at points of entry, and quarantined high-risk populations. Pandemic-related inter-township movement restrictions significantly delayed final project preparation and initial implementation activities. Nonetheless, the project’s Designated Accounts for both implementing agencies, EPGE and DPTSC, were established. Despite the World Bank being unable to conduct any in-person implementation support missions, the call for pre-qualification of contractors was publicly announced and 20 pre- qualification proposals were received by the deadline of August 20, 2020. Although the evaluation process was initiated, it was subsequently put on hold after the military coup on February 1, 2021. The coup had an immediate and negative impact on project commencement and implementation. Project disbursements were paused on all Bank financed operations Myanmar in accordance with OP 7.30. Less than four months had passed between project effectiveness and the military coup, so no funds had been disbursed to the project’s designated accounts. AS a results, no activities were undertaken by the EPGE and DPTSC. The original credit of SDR 254.9 million credit was cancelled on June 17, 2024 and the project closed. III.BANK PERFORMANCE Quality at entry: Rating “Substantial”” 11. Prior to project approval, Project Management Units (PMUs) for both components were established and focal points were assigned by the implementing agencies of EPGE and DPTSC. The PMU organizational charts were officially communicated to the Bank. The Bank provided hand on support for the preparation of the Project Financial Manual and establishment of the Designated Accounts for each PMU. The Bank also provided procurement hands- on expanded implementation support for the preparation of the procurement plan, technical specifications, market sounding, in order for the project to kick start implementation immediately upon approval. The preparation of environmental and social safeguards documents was slow because DPTSC was trying to get familiarized with Bank safeguards requirement as it was the first time for DPTSC to implement a Bank-financed project. Quality of supervision: Rating “Substantial” 12. The project was declared effective on September 10, 2020, following Borrower's compliance with the condition for obtaining the Legal Opinion. Amid the Covid-19 pandemic, the Bank organized a virtual mission in October 2020 to: launch project implementation with the implementing agencies; finalize the details of the transmission component with the DPTSC; and finalize the technical design and procurement plan of key packages. 13. Under Component A, the Bank received a pre-qualification report and shortlist of firms Owner’s Engineer in November 2020, but the reviewing process was paused due to the military coup. The pre-qualification for the design, supply and installation (DSI) contractor was publicly announced and 20 pre-qualification proposals were submitted by the closing date of August 20, 2020. The evaluation process was ongoing but was then put on hold. For the procurement of "Consultancy support on the Owner's Engineer (OE)", 24 proposals were received and six were shortlisted. The Bank supported EPGE in developing the Terms of References for an Environmental and Social Page 3 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT Management Consultant (ESMC) and a Gender/Childhood Consultant to prepare a rollout plan for the childcare pilot but did not proceed with procurement. 14. Under Component B, DPTSC’s annual work plan and budget allocation for the first implementation period was not completed. A list of proposed substations for rehabilitation was developed and needs an additional evaluation for compliance with the substation selection criteria agreed upon during project appraisal. The definition of technical specifications for 230kV power transformers has not been developed. Other activities under this component were not started. The Bank’s Hands-on Extended Implementation Support (HEIS) support helped EPGE to successfully implement advance procurement actions before project effectiveness, such as advertising the Request for Expression of Interest (REOI) of the OE consultancy package and inviting to submit applications for Pre-Qualification (PQ) of the Ywama Power Plant rehabilitation package. The evaluation report of the OE package was being finalized with HEIS and the Bank provided first round of the Bank’s comments shortly before the project was paused. The Bank advised the Project Management Units (PMU) on the finalization of TOR for the ESMC and advised EPGE to revise the safeguards specifications to be included in the bidding documents for Ywama Power Plant Rehabilitation contract. It was agreed that the Bank would support EPGE’s Environmental and Social focal point in reviewing ESMC and share comments on the existing draft document shared by EPGE. IV.LESSONS AND RECOMMENDATIONS 15. Given the very limited project implementation, no substantive lessons or recommendations are identified. Page 4 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT ANNEX 1. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Joonkyung Seong Team Leader Myoe Myint Team Leader Kyemon Soe Financial Management Specialist Ba Liu Nguyen Procurement Specialist Sirirat Sirijaratwong Procurement Specialist Son Van Nguyen Environmental Specialist Martin Fodor Environmental Specialist Khine Thwe Wynn Environmental Specialist David Jorge Baringo Ezquerra Social Specialist Marcel Robert Frederik Social Specialist Helene Bertaud Counsel Patrick John Barron Peer Reviewer Katsuyuki Fukui Procurement Team Wut Yi Win Procurement Team Slavena Lyubomirova Georgieva Team Member Ilka Deluque Curiel Team Member Noppakwan Inthapan Team Member Myint Kyaw Team Member Cristina Hernandez Team Member May Oo Mon Team Member Myo Sandar Aye Team Member Page 5 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT @#&OPS~Doctype~OPS^blank@ncoannexstafftime#doctemplate B. STAFF TIME AND COST Staff Time & Cost Stage of Project Cycle No. of Staff Weeks US$ (including travel and consultant costs) Preparation FY18 52.361 370,749.01 FY19 54.971 267,827.33 FY20 61.040 344,026.05 FY21 8.316 29,900.84 FY24 0.000 800.16 Total 176.69 1,013,303.39 Supervision/ICR FY21 40.170 243,256.16 FY22 21.397 124,846.15 FY23 4.300 8,955.16 FY24 11.500 33,612.70 FY25 2.000 5,272.80 Total 79.37 415,942.97 Page 6 The World Bank Power System Efficiency and Resilience Project (P162151) NCO DOCUMENT ANNEX 2. SUPPORTING DOCUMENTS (IF ANY) Page 7