The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) REPORT NO.: RES46746 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF VISHNUGAD PIPALKOTI HYDRO ELECTRIC PROJECT APPROVED ON JUNE 30, 2011 TO THDC ENERGY & EXTRACTIVES SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: Guangzhe Chen Practice Manager/Manager: Simon J. Stolp Task Team Leader(s): Pyush Dogra & Dzenan Malovic The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) ABBREVIATIONS AND ACRONYMS BHEL – Bharat Heavy Electricals Limited CA – Compensatory Afforestation CATP – Catchment Area Treatment Plan DEA – Department of Economic Affairs DBM – Drill and Blast Method DRBP – Dispute Resolution Board Panel EC – Environmental Clearance E&M – Electromechanical HCC – Hindustan Construction Company HRT – Head Race Tunnel M&E – Monitoring and Evaluation MSW – Master of Social Work PRP – Project Review Panel SAT – Strategic Advisory Team TBM – Tunnel Boring Machine THDC – Tehri Hydro Development Corporation VPHEP – Vishnugad Pipalkoti Hydro Electric Project The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P096124 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 30-Jun-2011 30-Jun-2021 Organizations Borrower Responsible Agency THDC THDC (Tehri Hydro Development Corporation) Project Development Objective (PDO) Original PDO The Project Development Objectives are: (a) to increase the supply of electricity to India's national grid through the addition of renewable, low-carbon energy; and (b) strengthen the institutional capacity of THDC with respect to the preparation and implementation of economically, environmentally and socially sustainable hydropower projects. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-80780 30-Jun-2011 10-Aug-2011 07-Nov-2011 30-Jun-2021 548.00 151.21 396.79 TF-58016 24-Apr-2007 24-Apr-2007 24-Apr-2007 31-Mar-2010 .99 .99 0 The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Despite significant delays since the onset of the project, implementation progress has progressively improved over the past year and is currently rated Moderately Satisfactory. (a) Technical status: (i) Completed activities: upstream coffer dam, heading of all three desilting chambers, crown excavation of the machine hall. (ii) Ongoing activities: preparatory work for dam construction, upstream tunneling activities, dam excavation (30%), benching for desilting chambers (27%), heading excavation by drill and blast in the headrace tunnel (70%), crown excavation of the transformer hall (59%), strengthening of geologically weak sections of machine and transformer halls with steel rib support. (iii) Critical activity: The tunnel boring machine (TBM) has been commissioned and pushed inside the launching adit (excavated horizontal entrance to the tunnel) to start construction of the 12 km-long headrace tunnel. (b) Financial status: (i) THDC is has evolved an mitigation arrangement to address the civil contractor’s liquidity issues and now provides HCC with cash advances and pays subcontractors directly. (ii) Improved progress has resulted in an increase in disbursements and the cumulative disbursements till date is USD$ 151.84 million, 28% of the loan amount. (c) Social safeguards status: The six families still living in Hatsari continue to refuse THDC's offers to help them relocate, despite THDC providing them options to meet their demands. THDC continues to make efforts to engage with the community and persuade them to relocate either permanently or for the duration of project construction. The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) (d) Environmental safeguards status: To date, the project has performed satisfactorily on environmental management. The environmental clearance granted to the project requires an extension beyond August 21, 2021; the process has been initiated and is on track. While muck management practices for the project remain satisfactory, particular attention is given to the muck disposal site at TBM platform, which needs to be reassessed and the development plan should be finalized by September 30, 2021, when TBM activities are expected to ramp up. B. Rationale for Restructuring C. This proposed restructuring follows a formal request from the Department of Economic Affairs at the Ministry of Finance through a letter dated April 7, 2021, to cancel US$ 100 million from the IBRD loan on account of exchange rate variations, and a letter dated June 23, 2021, for extension of the closing date to June 30, 2022. DEA provided in principle extension of the project until June, 2023, to be confirmed after a special review in June, 2022. US$ 100 million had already been canceled from the initial IBRD loan in June 2019. Cumulative loan cancelations would therefore total US$ 200 million, resulting in a remaining IBRD loan amount of US$ 448 million, and are not expected to affect the successful completion of the project. D. The original closing date for this project was December 31, 2017. Despite significant delays (five years in total) due to issues beyond the Borrower’s control, and further lost time due to Covid-19, the project has seen some improvement in implementation progress over the past 18 months. The project closing date had already been extended to June 30, 2021 to pursue project activities and has now been readjusted to the new closing date of June 30, 2022. E. Despite the delays outlined above, implementation progress and disbursements have progressively improved over the past year, until the second Covid-19 wave hit India in April 2021, at which stage several months of progress were lost when implementation was halted, along with significant economic activity across the country. Nevertheless, the PDO still remains relevant and achievable. To achieve the PDO and enable accomplishment of the greater balance of planned works, the current forecasted project completion date is now June 30, 2022. DEA provided in principle extension of the project until June, 2023, to be confirmed after a special review on project progress and milestones in June, 2022. In case of closure as of June 30, 2021, the project implementation would result in a financing gap and consequent cash flow issues resulting in further implementation delays and increased project cost, jeopardizing the achievement of the PDO. In addition, the project is a significant source of local economic activity, which would be impacted as well. F. G. Action Plan, Risks and Risk Mitigation Plan 2. Going forward, ongoing Bank support will be contingent upon implementation of a series of agreed milestones against which project performance will be monitored. More specifically, the Bank will monitor progress towards the achievement of several critical milestones: operation of TBM, Environmental Clearance extension, and implementation of livelihood development Pilots: The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) (a) Commencement and completion of local economic development pilot programs to support local communities’ livelihoods, and hiring of an M&E agency (b) Completion of Environmental Clearance (EC) extension (c) Muck Management Plan (d) Physical Progress various fronts, provided that the actual geology is aligned with the assessments of the Geological Baseline Report and that the project does not encounter further geological difficulties beyond THDC’s control. (e) Adequate staffing of environmental, social, and communication teams at site (f) Constitution of a Dispute Resolution Board Panel (DRBP) for civil and E&M contracts (g) Initiation of regular meetings and site visits of the Project Review Panel (PRP; technical, environmental, and social) and Strategic Advisory Team (SAT) (h) Regulatory clearances/permissions and safeguards management: (i) Ring-fencing of payments to contractors (j) Implementation of Compensatory Afforestation (CA) and Catchment Area Treatment Plan (CATP) through forest department 3. Although project implementation progress has improved over recent months, the project remains at risk of timely completion for several reasons: (a) Physical progress of the TBM has been hampered by poor geological conditions, and the pandemic has delayed even further the works required to address this issue. THDC is addressing these risks in consultation with the Project Review Panel and Strategic Advisory Team. (b) Supervision without field visits remain a challenge, especially on monitoring environmental and social safeguards compliance of project activities, though THDC is starting to take action to increase the site-based workforce and return to the required levels. (c) Local communities’ demand to have a separate package has not yet been resolved and six families from Hatsari have still refused the sign the compensation and relocation agreement offered by THDC. (d) HCC’s cash flow situation needs to be closely monitored, even though mitigation measures have been put in place. 4. To mitigate the risks identified above, THDC has established a Project Review Panel (PRP) and a Strategic Advisory Team (SAT), and hired an expert in Local Economic Development in January 2020 to address outstanding concerns within local communities. Additionally, further risk mitigation actions have been agreed to address outstanding issues: (a) To ensure efficient monitoring of project implementation, the PRP and SAT will conduct regular site visits. The PRP will meet at least twice a year until project completion, while the SAT will monitor project implementation on an ongoing basis and provide monthly progress reports until completion. The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) (b) Since THDC has now implemented fund-flow arrangements which are supposed to ring-fence all payments to civil contractor and ensure that proceeds directly benefit the Project, audit reports for the escrow account will be provided on a quarterly basis. (c) A project review will be conducted within six months after approval of the restructuring request. II. DESCRIPTION OF PROPOSED CHANGES 5. The following changes are proposed: (a) Following cancellation of US$ 100 million from the already restructured IBRD loan of US$ 548 million, the revised financing allocation will amount to US$ 448 million. (b) The project closing date will be extended from June 30, 2021 to June 30, 2022, to make up for time lost from delays, and allow enough time for completion of several project activities. (c) Disbursement estimates will be revised to reflect actual and projected disbursements (FY2021-2022) based on the updated implementation schedule. (d) In the Results Framework, only the end target dates have been changed to reflect the extension of end date of the project. The rest of the content remains the same. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Capacity-building and Capacity-building and 10.00 No Change 10.00 Institutional Strengthening Institutional Strengthening Vishnugad Pipalkoti Hydro Vishnugad Pipalkoti Hydro 638.00 No Change 438.00 Electric Project Electric Project TOTAL 648.00 448.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2019, 31- Dec-2019, 31-Jan- IBRD-80780 Effective 31-Dec-2017 30-Jun-2022 30-Oct-2022 2020, 31-Dec-2020, 30-Jun-2021 30-Sep-2009, 31- TF-58016 Closed 17-Mar-2009 Mar-2010, 28-Oct- 2010 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN Disburs IBRD- 548,000,000.0 100,000,000.0 448,000,000.0 RESTRUCTUR ing&Re USD 07-Apr-2021 80780-001 0 0 0 ING, COST paying SAVINGS Fully TF-58016- Disburs USD 988,526.51 0.00 988,526.51 001 ed OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) Current Proposed IBRD-80780-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: CW & Hyd-mech equipmnts undr comp 1 335,220,000.00 111,185,385.18 280,037,142.90 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Electro mech equipmnt under comp 1 125,740,000.00 19,454,491.95 99,560,393.75 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: Consultants Services 13,100,000.00 2,541,267.79 10,499,236.68 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: Interest during construction 72,320,000.00 7,850,415.70 56,283,226.67 iLap Category Sequence No: 6 Current Expenditure Category: Premia for Int rate cap or collar 0.00 0.00 0.00 Total 546,380,000.00 141,031,560.62 446,380,000.00 . The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) . Results framework COUNTRY: India Vishnugad Pipalkoti Hydro Electric Project Project Development Objectives(s) The Project Development Objectives are: (a) to increase the supply of electricity to India's national grid through the addition of renewable, low-carbon energy; and (b) strengthen the institutional capacity of THDC with respect to the preparation and implementation of economically, environmentally and socially sustainable hydropower projects. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Generation capacity of renewable energy constructed under the project (MW) on the Alaknanda river Generation capacity of energy constructed or rehabilitated (CRI, 0.00 444.00 Megawatt) Action: This indicator has been Revised Hydropower generation capacity constructed under the 0.00 444.00 project (CRI, Megawatt) Action: This indicator has been Revised Generation Capacity of Hydropower constructed or rehabilitated 0.00 444.00 under the project (Megawatt) Action: This indicator has been Revised Generation Capacity of Hydropower constructed under the 0.00 444.00 project (Megawatt) Action: This indicator has been Revised PDO Table SPACE The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Capacity-building and Institutional Strengthening Development of Capacity Building and Institutional No Yes Strengthening (CBIS) plan (Yes/No) Initial skills gap analysis (resulting in preparation of CBIS Plan) RFP for skills gap analysis launched by project Contract completed and CBIS Plan under implementation. (Text) effectiveness. Review of THDC institutional arrangements and current capacity building plans in consultation with THDC None Completed management and staff. (Text) Development of framework institutional capacity plan (Text) None Completed. Development of detailed institutional capacity plan (Text) None Completed Implementation of Capacity Building and Institutional None Completed as planned. Strengthening Plan (Text) Social and Environmental Capacity Training (Yes/No) No Yes Action: This indicator has been Revised Recruitment/deployment of new environmental staff for 2+1 100.00 corporate and project (Text) Action: This indicator has been Revised Social staff in Corporate Social and Environment Cell (number 2.00 4.00 of staff) (Number) Vishnugad Pipalkoti Hydro Electric Project RAP and community development plan implementation 0.00 100.00 (Percentage) Action: This indicator has been Revised The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target All entitlements for property losses and restrictions on access 0.00 100.00 fully delivered (Percentage) Completion of scheduled resettlement including Haat village 0.00 100.00 as agreed with the PAPs (Percentage) Amount spent on small infrastructure under CSR and Rs. 5 million Rs. 90 million Peripheral Development in project affected villages (Text) Headrace tunnel completion (Percentage) 0.00 100.00 Action: This indicator has been Revised Power house civil excavation (Percentage) 0.00 100.00 Action: This indicator has been Revised Desilting chamber (Percentage) 0.00 100.00 Action: This indicator has been Revised Power House Electro-mechanical (equipment installation) (Text) No equipment delivered. Equipment for all four units ready Action: This indicator has been Revised Financial disbursement (% of projected cost to completion) 0.00 95.00 (Percentage) Action: This indicator has been Revised Cost overruns within physical contingency allowance (Text) No overrun Achieved Action: This indicator has been Revised Environmental Management Plan (EMP) implementation (Text) 0.00 Completed. Action: This indicator has been Revised Number of environmental staff posted at site (Number) 1.00 3.00 The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Funds utilization on CAT plan activities (excluding 0.00 90.00 maintenance) (Percentage) IO Table SPACE The World Bank Vishnugad Pipalkoti Hydro Electric Project (P096124)