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FOR OFFICIAL USE ONLY
Report No: PAD2773
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 254.9 MILLION (US$350 MILLION EQUIVALENT)
TO THE
REPUBLIC OF THE UNION OF MYANMAR
FOR A
POWER SYSTEM EFFICIENCY AND RESILIENCE PROJECT
May 7, 2020
Energy and Extractives Global Practice East Asia and Pacific 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.
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CURRENCY EQUIVALENTS (Exchange Rate Effective February 29, 2020)
Currency Unit = Myanmar Kyat (MMK)
MMK 1,431.50 = US$1
US$0.7282 = SDR 1
FISCAL YEAR
October 1 – September 30
Regional Vice President: Victoria Kwakwa
Country Director: Mariam J. Sherman
Regional Director: Ranjit Lamech
Practice Manager: Jie Tang
Task Team Leaders: Claudia Ines Vasquez Suarez; Maria Ayuso Olmedo
ABBREVIATIONS AND ACRONYMS
CAPEX Capital Expenditure(s)
CCGT Combined Cycle Gas Turbine
CPF Country Partnership Framework
CPPF Community Participation Planning Framework
CQS Consultant’s Qualification‐based Selection
CSO Civil Society Organization
DA Designated Account
DPTSC Department of Power Transmission and Systems Control
DSI Design, Supply, and Installation
EAO Ethnic Armed Organization
EIRR Economic Internal Rate of Return
ENPV Economic Net Present Value
EPGE Electric Power Generation Enterprise
EPM Electricity Planning Model
EPP Electric Power Project
ESIA Environmental and Social Impact Assessment
ESMF Environmental and Social Management Framework
ESMP Environmental and Social Management Plan
FCV Fragility, Conflict, and Violence
FIRR Financial Internal Rate of Return
FNPV Financial Net Present Value
GBV Gender‐based Violence
GHG Greenhouse Gas
GOM Government of Myanmar
GRiF Global Risk Financing Facility
GRM Grievance Redress Mechanism
GRS Grievance Redress Service
HEIS Hands‐on Extended Implementation Support
HFO Heavy Fuel Oil
HRSG Heat Recovery Steam Generator
IA Implementing Agency
IFC International Finance Corporation
INDC Intended National Determined Contribution
InfraSAP Energy Infrastructure Sector Assessment Program
IPF Investment Project Financing
IPL Inclusion and Peace Lens
JICA Japan International Cooperation Agency
KfW Kreditanstalt Fuer Wiederaufbau
KPI Key Performance Indicator
LCOE Levelized Cost of Energy
LNG Liquefied Natural Gas
LTSA Long‐term Service Agreement
M&E Monitoring and Evaluation
MDI Multidimensional Disadvantage Index
MFD Maximizing Finance for Development
MLCS Myanmar Living Conditions Survey
MOEE Ministry of Energy and Electricity
MOGE Myanmar Oil and Gas Enterprise
MOSW Ministry of Social Welfare
MSDP Myanmar Sustainable Development Plan
NEP National Electrification Program
NPV Net Present Value
O&M Operation and Maintenance
OAGM Office of the Auditor General of Myanmar
OEM Original Equipment Manufacturer
OPEX Operational Expenditure(s)
PCRA Procurement Capacity and Risk Assessment
PDO Project Development Objective
PIU Project Implementation Unit
PPP Public‐Private Partnership
PPSD Project Procurement Strategy for Development
PQ Prequalification
PV Photovoltaic
QCBS Quality‐ and Cost‐based Selection
RFB Request for Bids
RFQ Request for Quotations
RPF Resettlement Policy Framework
SEE State Economic Enterprise
SEA Sexual Exploitation and Abuse
SMEs Small and Medium Enterprises
STEP Systematic Tracking of Exchanges in Procurement
WACC Weighted Average Cost of Capital
YESC Yangon Electricity Supply Corporation
The World Bank Power System Efficiency and Resilience Project (P162151)
TABLE OF CONTENTS
I. STRATEGIC CONTEXT ........................................................................................................ 6
A. Country Context ................................................................................................................................ 6
B. Sectoral and Institutional Context .................................................................................................... 7
C. Relevance to Higher Level Objectives ............................................................................................. 15
II. PROJECT DESCRIPTION ................................................................................................... 16
A. Project Development Objective ..................................................................................................... 16
B. Project Components ....................................................................................................................... 17
C. Project Beneficiaries ....................................................................................................................... 19
D. Results Chain .................................................................................................................................. 20
E. Rationale for Bank Involvement and Role of Partners ................................................................... 21
F. Lessons Learned and Reflected in the Project Design .................................................................... 22
III. IMPLEMENTATION ARRANGEMENTS .............................................................................. 23
A. Institutional and Implementation Arrangements .......................................................................... 23
B. Results Monitoring and Evaluation (M&E) Arrangements ............................................................. 23
C. Sustainability ................................................................................................................................... 24
IV. PROJECT APPRAISAL SUMMARY ..................................................................................... 25
A. Technical, Economic and Financial Analysis ................................................................................... 25
B. Fiduciary .......................................................................................................................................... 27
C. Safeguards ...................................................................................................................................... 29
D. Grievance Redress Mechanism ...................................................................................................... 33
V. KEY RISKS ....................................................................................................................... 34
VI. RESULTS FRAMEWORK AND MONITORING ..................................................................... 37
ANNEX 1: Implementation Arrangements and Support Plan .................................................. 45
ANNEX 2: Economic and Financial Analysis ............................................................................ 49
ANNEX 3: Inclusion and Peace Lens Note ............................................................................... 55
ANNEX 4: Procurement Implementation Arrangements ........................................................ 61
ANNEX 5: Financial Management Arrangements ................................................................... 70
ANNEX 6: Maps ..................................................................................................................... 72
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DATASHEET
BASIC INFORMATION BASIC INFO TABLE
Country(ies) Project Name
Myanmar Power System Efficiency and Resilience Project
Project ID Financing Instrument Environmental Assessment Category
P162151 Investment Project Financing
B‐Partial Assessment
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Disbursement‐linked Indicators (DLIs) [ ] 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)
Expected Approval Date Expected Closing Date
29‐May‐2020 30‐Jun‐2026
Bank/IFC Collaboration
No
Proposed Development Objective(s) 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. Components Component Name Cost (US$, millions)
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Upgrading Ywama Power Generation Units 290.00
Improving Resilience of the Power Network 60.00
Organizations Borrower: Republic of the Union of Myanmar
Implementing Agency: Electric Power Generation Enterprise Ministry of Electricity and Energy
PROJECT FINANCING DATA (US$, Millions)
SUMMARY‐NewFin1
Total Project Cost 350.00
Total Financing 350.00
of which IBRD/IDA 350.00
Financing Gap 0.00
DETAILS‐NewFinEnh1
World Bank Group Financing
International Development Association (IDA) 350.00
IDA Credit 350.00
IDA Resources (in US$, Millions)
Credit Amount Grant Amount Guarantee Amount Total Amount
Myanmar 350.00 0.00 0.00 350.00
National PBA 350.00 0.00 0.00 350.00
Total 350.00 0.00 0.00 350.00
Expected Disbursements (in US$, Millions)
WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026
Annual 0.00 10.00 60.00 140.00 100.00 20.00 20.00
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Cumulative 0.00 10.00 70.00 210.00 310.00 330.00 350.00
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas
Energy & Extractives
Climate Change and Disaster Screening
This operation has been screened for short and long‐term climate change and disaster risks
SYSTEMATIC OPERATIONS RISK‐RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance Substantial
2. Macroeconomic Substantial
3. Sector Strategies and Policies Substantial
4. Technical Design of Project or Program Substantial
5. Institutional Capacity for Implementation and Sustainability Substantial
6. Fiduciary High
7. Environment and Social Substantial
8. Stakeholders Substantial
9. Other Moderate
10. Overall Substantial
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects?
[ ] Yes [✓] No
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Does the project require any waivers of Bank policies?
[ ] Yes [✓] No
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 ✔ Performance Standards for Private Sector Activities OP/BP 4.03 ✔
Natural Habitats OP/BP 4.04 ✔
Forests OP/BP 4.36 ✔
Pest Management OP 4.09 ✔
Physical Cultural Resources OP/BP 4.11 ✔
Indigenous Peoples OP/BP 4.10 ✔ Involuntary Resettlement OP/BP 4.12 ✔ Safety of Dams OP/BP 4.37 ✔
Projects on International Waterways OP/BP 7.50 ✔
Projects in Disputed Areas OP/BP 7.60 ✔
Legal Covenants
Sections and Description The Recipient shall take all actions under its control to maintain EPGE and DPTSC, and their respective operation, and to refrain from any restructuring which, in the views of the Association, would materially and adversely affect the ability of the Recipient, DPTSC or EPGE to perform any of their respective obligations arising under or entered into pursuant to this Agreement, or to achieve the objectives of the Project (FA, Schedule 2, Section I.A.1 and 2). Sections and Description The Recipient shall cause EPGE to: (a) enter into a turnkey contract covering the demolition, design, supply, installation, testing, and commissioning of the new combined cycle gas turbine; and (b) contract an owner’s engineer and independent consultants for environmental and social matter’s implementation and monitoring, and for the implementation of a roll out set up and operationalization of child care (FA, Schedule 2, Section I.A.3). Sections and Description For the implementation of Part B.1 of the Project, the Recipient shall cause DPTSC to: (a) exclude: (i) the construction of new substations and new transmission lines; and (ii) activities in areas where there is an active conflict; (b) carry out an initial technical screening of proposed activities on the basis of eligibility criteria acceptable to the Association, which shall include the following: (i) substations which do not have adequate capacity and/or redundancy to support grid extension for electrification purposes; (ii) assets that are the most vulnerable to climate events; and (iii) substations which serve households that suffer from low quality of electricity supply; and (c) among
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the activities screened under Section I.A.4(b) of this Schedule, give priority to substations which serve a substantial share of disadvantaged or vulnerable households. Sections and Description The Recipient shall prepare, or cause to be prepared: a draft annual work plan and budget for the Project (listing all Project activities to be financed during the year covered by said plan including, without limitation, Subprojects, Training and Incremental Operating Costs) and a sequenced forecast of cash flow and disbursement needs showing all Project financing irrespective of its source for each year of Project implementation (FA, Schedule 2, Section II.B). Sections and Description The Recipient shall ensure, and cause EPGE to ensure, that the Project is carried out: (a) with due regard to appropriate health, safety, social and environmental standards and practices and the Safeguard Instruments; (b) ensure RAP funding and implementation prior to starting activity which involves a resettlement; ensure that contractors’/subcontractor’s obligations, including undertaking a hazard and operability study to identify risks to communities, impact of labor influx and mitigation are included in the relevant bidding documents and contracts; (c) all consultancy services related to Technical Assistance and capacity building activities pay due attention to the policies of the Association; (d) take all measures necessary to regularly collect, compile, and submit the status of compliance with the Safeguards Instruments; and (c) publicize the availability of a grievance redress mechanism, hear and determine fairly and in good faith all complaints raised in relation to the Project, and take all measures necessary to implement the determinations made by such mechanism in a satisfactory manner (FA, Schedule 2, Section I.B). Sections and Description The Recipient shall apply (and shall cause EPGE to apply) throughout the period of implementation of the Project, the financial management manual setting forth, the Project's administrative, financial, accounting, internal control, asset management, auditing, disbursement/withdrawal and reporting procedures required for the defrayment and proper accounting of the funds of the Financing (FA, Schedule 2, Section I.C). Sections and Description The Recipient shall: not later than thirty (30) months after the Effective Date, or such other date as may be agreed with the Association, carry out jointly with and EPGE (as relevant for each Project Part) and the Association, a midterm review of the Project (the “Midterm Review”), to assess the status of Project implementation, as measured against the indicators agreed between the Association and the Recipient and the legal covenants included in this Agreement. Such review shall include an assessment of the following: (a) overall progress in implementation; (b) results of monitoring and evaluation activities; (c) progress on procurement and disbursement; (d) progress on implementation of safeguards measures; (e) implementation arrangements and Project staffing; and (f) the need to make any adjustments to the Project and reallocate funds to improve performance, if any (FA, Schedule 2, Section II.C). Conditions
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I. STRATEGIC CONTEXT
A. Country Context
1. Myanmar is a low‐income and fragile, conflict‐affected state undergoing a profound transition from decades of isolationist military rule. The country’s opening in 2011—both inward through democratic reforms and outward through trade, investment, and migration—marked the beginning of a complex transition on the political, peace, and economic fronts. Despite immediate gains and high expectations of continued progress, these transitions remain incomplete and continue to face setbacks as the reform momentum has slowed down. On the political front, multiparty democratic elections in late 2015 gave substantial, but not absolute, powers to a civilian government. The military has retained its independence from civilian oversight, with spillover effects into economic development issues and natural resource management. The transition toward durable peace has been one of the most challenging. Myanmar has been more deeply affected by subnational conflict than any other country in Southeast Asia. In 2016, almost a third of the country’s townships hosted ethnic armed organizations (EAOs) that challenged the authority of the Government.1 More recently, violence has flared in the northeast of the country and in Rakhine State.
2. Although most progress has been made on the economic front, challenges remain to make it more inclusive. Between 2011 and 2017, the economy grew at the extraordinary rate of 7 percent a year on average, putting Myanmar among the five fastest‐growing countries in the world. The growth was spurred by capital accumulation supported by foreign direct investment and, to a lesser extent, increased productivity. Strong growth performance translated into substantial poverty reduction and improvements in non‐monetary welfare. The poverty headcount almost halved between 2005 and 2017, from 48 to 25 percent according to the latest national estimates.2 However, vulnerability to poverty remains high. About 12 million people were still living in poverty in 2017. Many near‐poor are also susceptible to falling back into poverty following weather, health, or economic shocks. In addition, spatial inequalities and exclusion along geography and identity lines persist. People living in rural areas and conflict‐affected states, and ethnic and religious minorities, lag on most dimensions of welfare—from stunting to educational attainment and access to basic sanitation and electricity services.
3. Recently implemented structural reforms have helped maintain the growth momentum but the direct and indirect impacts of the COVID‐19 pandemic are rising. The recently implemented reforms—including the opening of the banking sector to foreign banks, the liberalization of the wholesale and retail trades, and the loosening of export licensing requirements—helped to revive growth momentum.3 However, global and regional growth prospects have been battered by the COVID‐19 pandemic. Indirect factors contributing to the lower economic growth expected in Myanmar in FY2019–2020 include trade and tourism reduction, and supply chain disruptions. Direct factors include weakened domestic investment and consumption (of goods and retail and transport services) stemming from early social distancing, unemployment, and low foreign remittances. The economy is expected to recover next year in line with regional peers. However, compared with the baseline case, a more severe domestic outbreak poses a major downside risk with greater effects on domestic demand. Deep
1 Asia Foundation. 2017. The Contested Areas of Myanmar: Subnational Conflict, Aid, and Development. https://asiafoundation.org/publication/contested‐areas‐myanmar‐subnational‐conflict‐aid‐development/ 2 Estimates based on: Integrated Household Living Conditions Assessment (2005) and Myanmar Living Conditions Survey (2017). 3 According to the Doing Business ranking, Myanmar is among the ‘top 20 improvers’ owing to initiatives that improved the conditions for starting business, protecting minority investors, and dealing with construction permits. World Bank Group. Doing Business 2020. https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf.
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local impacts in rural and urban areas are also expected—particularly in the tourism, manufacturing, and agriculture sectors and among already vulnerable groups. Policy priorities going forward include (a) adjusting health policies to boost health care capacity and meet a potentially overwhelming demand over a sustained period and (b) adjusting macroeconomic policies to mitigate impacts on affected firms and households with buffers to shore up economic stability and demand.
4. The provision of energy services remains a priority to support the implementation of health policies during the COVID‐19 outbreak and support the overall economic recovery over the medium term. Myanmar has abundant energy resources, particularly natural gas, hydropower and other renewable energy resources. However, electricity infrastructure development has not matched the pace of economic development and is increasingly becoming a constraint on poverty reduction and shared prosperity. Although improving in recent years, electricity access to the public grid reached only 50 percent by end of 2019—the lowest electrification rate in the Southeast region. Improving access to reliable electricity services will be critical to ensuring the functioning of healthcare facilities during the disease outbreak and support economic recovery in the medium term. Before the pandemic, lack of access to electricity supply already ranked among the top constraints to doing business according to the latest Enterprise Survey available for Myanmar.4 Therefore, improving electricity access and the quality of services delivered remains a key development challenge.
B. Sectoral and Institutional Context
5. A large investment program launched at the beginning of the transition, with the overarching goal of achieving universal electricity access by 2030, has had positive results. The electrification rate (access to the public grid) doubled between 2010–2011 (25 percent) and 2019–2020 (50 percent) through the implementation of the Government’s National Electrification Program (NEP). This was made possible by the launch of a large investment program, which attracted substantial private sector financing in power generation5 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), which is the main body responsible for policy making, overseeing, and operating the state economic enterprises (SEEs). In turn, the SEEs play a major role in implementing infrastructure projects and service delivery. However, despite these solid achievements, substantial challenges persist to achieving the universal electricity access goal. These challenges and the Government’s strategy to address them are presented in the following paragraphs.
(i) Reduce the Widening Power Supply Gap in an Environmentally Sustainable Way and at Least Cost
6. There is a growing power supply gap which the country seeks to close by procuring emergency rental plants in the short term and by developing its renewable resources in the medium‐to‐long term. In 2018, Myanmar’s installed generation capacity was 5,600MW6 dominated by hydropower, which accounted for 58 percent, and followed by natural gas (33 percent), and other thermal generation (10 percent). In 2019, a widening supply gap became evident when the country faced widespread power shortages with load shedding reaching
4 Myanmar 2016 Enterprise Survey. See https://www.enterprisesurveys.org/en/data/exploreeconomies/2016/myanmar. 5 During 2011–12 and 2018–19, the share of private sector‐owned and ‐operated generation increased from around 25 percent to 45 percent. 6 It is estimated that only 3,600 MW is available for domestic power generation. The remaining capacity is not available due to technical issues in outdated plants and because the output from some of the larger hydropower plants is committed for exports.
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approximately 300 MW during the summer months (March to June)7. Assuming that electricity demand will continue to expand at an estimated average annual rate of 11.1 percent and with a limited pipeline of projects under construction, the supply gap is expected to increase substantially in the short‐to‐medium term (see figure 1). Although the economic impact of the COVID‐19 pandemic may reduce the pace of demand growth over the next months, it is expected that demand will resume as the country and region recover from the crisis. To reduce the supply gap in the short term, the Government issued a tender for five emergency rental plants totaling 1,040 MW8 in late June 2019. If implemented within the aggressive timelines announced, these could help increase available supply, albeit at high costs. Several other projects are being discussed to reduce the supply gap in the medium‐to‐long term, including large hydropower projects that would allow Myanmar to harness its vast hydro potential, liquified natural gas (LNG)‐to‐power projects (which received Notice to Proceed in early 2018), power import projects with China and Lao PDR, and new coal‐fired power plants which have been recently announced.9
7. To provide affordable and sustainable electricity, in line with Myanmar’s climate commitments under the Paris Agreement, the country will have to develop its indigenous renewable energy resources, rely on electricity imports, and improve the efficiency of its gas‐fired thermal power assets. In the medium‐to‐long term, the country must develop its hydropower and renewable energy (solar photovoltaic [PV] and wind) potential according to an indicative least‐cost generation plan prepared by the World Bank (figure 2). LNG imports for new power generation assets will also be needed due to the declining output from maturing gas fields. According to estimates from the Myanmar Oil and Gas Enterprise (MOGE), available domestic supply could decrease by two‐thirds by 2030 if the country cannot develop its domestic gas resources on time. Among the generation options, improving energy efficiency in generation stands out as a priority. Existing gas‐fired power plants, particularly state‐owned ones, have low thermal conversion efficiencies (15–27 percent) compared with modern gas‐fired plants (52–55 percent). Such inefficiencies result in high system costs, wasteful natural gas consumption, and an increase in the energy sector’s environmental impact. Together with the development of renewable energy resources, efficiency improvements have been identified as key mitigation measures in the country’s Intended National Determined Contribution (INDC).10
8. In the medium term, combined‐cycle gas turbines (CCGTs) are among the least‐cost options and compatible with a low‐carbon development path for the power sector. Advantages of the technology include: (a) maximum power output per unit of fuel without increasing the existing domestic gas supply requirements; (b) rapid construction timelines of approximately 30–36 months that enable the development of large‐scale hydropower projects, which have longer development timelines; (c) ability to be located close to a major load center to reduce the demand on the transmission system; and (d) firm capacity to help manage the seasonality of hydropower generation and the intermittency of renewable energy that should be introduced in the generation mix. According to the indicative least‐cost plan analysis, efficiency upgrades of existing assets will help defer
7 The supply gap is acute in Myanmar’s largest city, Yangon, which accounts for over 40 percent of the total electricity demand while holding only 20 percent of the generation capacity. Limited transmission capacity prevents electricity supplies from being brought from the rest of the country to the city. 8 The tender included two smaller plants using domestic gas and three larger projects that would use imported liquefied natural gas (LNG). Implementation timelines were short and came with steep penalties in case the deadline was missed. 9 Although coal only accounts for 2 percent of the current power generation, the Government has been planning to develop additional coal‐fired generation to address the power shortage. In August 16, 2019, MOEE publicly announced to Parliament that the Government is working with private sector firms to develop coal‐fired power plants, which would represent up to 30 percent of the power generation mix by 2030 in line with the Myanmar Energy Master Plan. https://www.burmalibrary.org/docs22/2015‐12‐Myanmar_Energy_Master_Plan.pdf 10 The Republic of the Union of Myanmar. 2015. Myanmar' s Intended Nationally Determined Contribution–INDC. https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Myanmar%20First/Myanmar%27s%20INDC.pdf
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investments in more carbon‐intensive coal generation, high‐cost emergency power, and LNG‐fueled generation. The net benefits of increasing high‐efficiency thermal generation capacity by 300 MW in Yangon have been estimated at US$408 million (between 2019 and 2030) in net present value (NPV) terms, after accounting for investment costs.
Figure 1. Forecasted Supply/Demand Gap Figure 2. Indicative Least‐Cost Generation Expansion Plan11
Source: World Bank estimates based on data from MOEE.
Source: World Bank staff.
(ii) Remove Bottlenecks to Provide Access to Modern Electricity Services to the Poorest
9. Access to electricity from the public electric grid is unequal, with the poorest and ethnic minorities less likely to be connected. As noted earlier, the successful implementation of electrification efforts through the NEP has increased the rate of access to the public grid to around half of Myanmar’s population. However, the poorest households are yet to benefit from access to modern electricity services. According to the latest Myanmar Living Conditions Survey (MLCS 2017),12 80 percent of the bottom 20 percent of households were not connected to the public grid. According to the World Bank Myanmar Systematic Country Diagnostic,13 ethnic minority households living predominantly in areas away from the public grid were about 20 percentage points less likely to have access to electricity compared to households living in the central zone. To reach those who continue to lack access to modern electricity services, the NEP is extending the public grid and deploying decentralized electricity solutions.
10. In rural areas, limited availability of power supplies and limited capacity in power substations are major constraints to on‐grid electrification. As demonstrated by international experience, not only do power supply
11 The analysis was conducted using the World Bank Electricity Planning Model for 2019–2030, which optimizes system‐wide costs—including (annualized) capital cost of new plants, operating costs of new and existing plants, and cost of unserved energy and capacity reserve. The Electricity Planning Model considers the physical constraints on transmission between north and south Myanmar, hydro energy limits on a monthly basis, reserve margin requirement, annual limit on domestic gas, spinning reserve requirement, minimum variable renewable energy limit, and hourly profile of demand and solar/wind generation. 12 Central Statistical Organization (Ministry of Planning and Finance of the Republic of the Union of Myanmar), UNDP, and World Bank. 2018. Myanmar Living Conditions Survey 2017: Key Indicators Report. https://www.undp.org/content/dam/myanmar/docs/Publications/PovRedu/MLCS‐2017.pdf. 13 World Bank. 2019. Myanmar Systematic Country Diagnostic. http://documents.worldbank.org/curated/en/507421574785059413/pdf/Myanmar‐Economic‐Transition‐amid‐Conflict.pdf
‐
10
20
30
40
50
2019 2020 2021 2022 2023 2024
TWh
Supply deficit Generation under construction
Existing supply Consumption
‐
10
20
30
40
50
2020 2021 2022 2023 2024 2025 2026
TWh
Gen Exist+Cons Cap. New Hydro New GasNew LNG New VRE (incl. solar) ImportsNew Gen Rentals Consumption
+ RE -Solar
+ EfficientCCGTs
+ Imports
+ Hydro
Rentals
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shortages discourage the Government and utilities from continuing electrification efforts, but persistent interruptions and voltage fluctuations also prevent households from adopting electricity, even when the public grid reaches their villages.14 In addition, power transformers, transmission, and distribution lines in Myanmar are often overloaded due to the rapid growth in demand; substations are also not well equipped with reactive power facilities. As a result, additional connections are denied or if connected, households in rural areas often suffer from low quality of services.
12. Continued efforts to deploy decentralized electricity solutions are needed to reach all the most disadvantaged households. A recent analysis based on geospatial tagging of the World Bank‐financed National Electrification Project beneficiaries (both grid and off‐grid) is presented in annex 6 (figure 6.2). It shows that the public grid is progressively reaching rural areas primarily in the central zones of Myanmar due to their proximity to the existing power network. At the same time, off‐grid solutions such as mini‐grids and solar home systems are being deployed in more remote villages, including conflict‐affected areas. The map (figure 6.1) in annex 6 shows that off‐grid beneficiary households of the National Electrification Project live in townships which are considered the most disadvantaged based on the Multidimensional Disadvantage Index (MDI)15 score. Going forward, the continued implementation of off‐grid solutions together with the phased rollout of the public grid will be needed to bring basic electricity services to all Myanmar households.
14 World Bank. 2018. In the Dark: How Much Do Power Sector Distortions Cost South Asia? https://openknowledge.worldbank.org/bitstream/handle/10986/30923/9781464811548.pdf. 15 World Bank. 2018. Multidimensional Welfare in Myanmar. The Multidimensional Disadvantage Index (MDI) uses data from the 2014 census to compare relative levels of nonmonetary development across all townships in the country. The index uses indicators relating to household education, health, water and sanitation, housing, employment and assets. A second form of the index, MDI‐2, places more weight on households with multiple disadvantages.
Table 1. Electrification Rates and Welfare in the Yangon Region
Districts Electrification (percentage of households)
MDI at the Township Levela
North 76 1.9–9.4
South 61 4.6–11.0
West 100 0.9–5.17
East 100 0.9–3.7
Source: World Bank staff based on data provided by the Yangon Electricity Supply Corporation (YESC) and MDI‐2. Note: a. Provides the range of minimum and maximum MDI values at the township level within each district. The higher the index, the more disadvantaged the households living in the townships.
11. In urban areas, the priority is to provide electricity access to the poorest households, who have often been left behind. The rate of access to the electricity grid in Yangon is high (87.7 percent) when compared to the national average (50 percent). However, more disaggregated access data shows, as illustrated in table 1, a stark difference in electricity access across different districts and townships. The most disadvantaged townships have substantially lower electrification rates, suggesting that many of the poorest have been left behind. For example, in the southern district, households living in townships with low electrification rates have some of the most disadvantaged population in the Yangon region, with welfare indicators comparable to those living in the Ayeyarwady Delta region. This can be explained by the growing demand‐supply deficit (which has discouraged utilities from connecting additional consumers) and the lack of funding to finance the extension of the national grid.
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(iii) Improve the Environment for Investments
13. Recognizing the large investment needs to reduce the growing power supply gap, the Government recently implemented two key policy reforms to improve the sector’s enabling environment for investments. First, building on analytical work carried out by the World Bank under the Energy Infrastructure Sector Assessment Program (InfraSAP)16, in July 2019 the Government increased electricity tariffs significantly for residential, commercial, and industrial consumers, after a five‐year gap of no tariff adjustments. The most affected were residential consumers with the highest consumption levels (above 200 kWh per month), whose tariff increased by 2.5 times, albeit from low levels. In addition, a lifeline tariff was established to reduce the impact of the increase on the poorest. The electricity tariff increase is expected to increase the system’s revenues by 80 percent, bringing tariffs close to current operational cost recovery levels.17 This measure has supported a substantial reduction in fossil fuels subsidies since thermal power generation accounts for the largest share of the system’s costs. Natural gas prices for domestic generation are not subsidized because they are close to export‐parity levels. Second, in January 2019 a ‘Project Bank’ and a Public‐Private Partnership (PPP) Center were launched to encourage private sector participation in strategic sectors such as power generation. If properly implemented, this initiative can improve inter‐ministerial coordination and help the Government prioritize and implement infrastructure projects that have the potential to attract private sector investment more effectively.
14. Going forward, the remaining policy, regulatory, and institutional constraints will need to be addressed to facilitate faster and more efficient investments. On the policy front, the lack of a least‐cost development plan for the power sector limits selection and prioritization of projects based on objective criteria for both public‐ and private‐funded projects. In terms of regulatory constraints, the absence of an incentive framework for renewable energy projects and inadequate management of environmental and social risks limit the development of investments in renewable and hydropower, respectively. To consolidate the gains with recent tariff increases, a methodology and process for regular tariff adjustments is also needed. Finally, the capacity of SEE staff needs to be strengthened to accelerate project implementation and reduce frequent delays and costs overruns in project implementation. For private sector‐led projects, government capacity also needs to improve to support bidding, negotiation, contract compliance, and monitoring. These and other key constraints identified in the World Bank’s Energy InfraSAP and recommendations to address them are presented in box 1.
Box 1. Key Constraints on, and Recommendations to Improve, the Efficiency and Sustainability of Investments
Constraints
(a) The lack of a least‐cost development plan and competitive tendering processes limits the selection and prioritization of projects based on objective least‐cost criteria. The use of unsolicited proposals and direct negotiations has not resulted in reduced timelines for the negotiation and procurement of power projects.
(b) The increase in generation costs (for example, through emergency power purchases) threatens the financial viability of the power sector despite recent tariff increases.
(c) Lack of government guarantees and foreign exchange convertibility in the Power Purchase Agreements increases investor risks.
(d) Inadequate management of environmental and social risks, including issues around land acquisition, slows down projects significantly, particularly in the hydropower sector.
16 World Bank. 2019. Myanmar: Energy Infrastructure Sector Assessment. 17 On April 3, 2020, the Government announced that all residential consumers will receive 150 kWh of free electricity during one month as an emergency measure to ease the economic impact of the COVID‐19 pandemic for households. This payment waiver could adversely impact the financial position of the power sector, particularly if the measure is continued for an extended period.
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Recommendations
(a) Approve a least‐cost power development plan including a priority list of projects to be developed over the next 5‐7 years and implement competitive and transparent tendering processes for these projects.
(b) Consolidate improvements in the sector’s financial viability resulting from the recent tariff increase by approving a transparent methodology and process for regular tariff adjustments to progressively cover investment costs.
(c) Standardize approval processes and documentation for the privately financed power projects, including the adoption of standard format for Implementation Agreements and Power Purchase Agreements.
(d) Identify environmental and social risks and integrate these into the project’s development process. To the extent possible, make unencumbered land available for projects.
15. With substantial capacity challenges, the Government needs to create a more inclusive environment that provides opportunities for professional growth for women. According to information provided by MOEE, women represent more than half of its workforce but less than 6 percent occupy technical and managerial positions. Key findings of research18 conducted with MOEE staff suggest that women are unable to reach their full potential for professional growth and face a productivity gap. According to the survey, women indicate that due to childcare responsibilities, (a) they are more likely to be distracted (productivity) than men (49 versus 36 percent), (b) mothers are more likely to have to take time off work (absenteeism) than fathers (84 versus 68 percent), (c) they are also substantially more likely than men to have been unable to accept a job promotion (26 versus 0 percent), and (d) they are more likely to have been unable to attend training or studies (47 versus 32 percent). Childcare responsibilities prevent women from harnessing career opportunities (promotions and training) and negatively affect their potential for professional growth (productivity and absenteeism) as compared to men. In addition, the surveys reveal that about 14 percent of the employees interviewed, mostly mothers, bring their children below the age of 5 to work. Civil servants migrate from different points of the country to Naypyidaw, Myanmar’s capital, far from their family support networks. The city has been established to host government offices and offers limited childcare options.
(iv) Strengthen the Power Network Infrastructure for Increased Quality of Supply and Climate Resilience
16. Network constraints and infrastructure vulnerabilities result in unreliable supply affecting households and small and medium enterprises (SMEs). Significant constraints in the transmission system prevent the evacuation of low‐cost hydropower from the north to the main consumption centers of Yangon in the south and Mandalay in the center, aggravating the supply‐demand imbalance. The power network lacks adequate redundancy and a single fault can lead to cascade tripping of facilities, as demonstrated in 2016 when 16 countrywide blackouts were reported. As a result, Myanmar lags significantly behind its East Asian peers in all dimensions related to quality of electricity infrastructure.
18 Surveys were undertaken to understand how childcare responsibilities affect employees working in MOEE in Naypyidaw, Myanmar. The survey covered 197 respondents out of a total population of 832 employees at the Electricity Power Generation Enterprise (EPGE) and at the Department of Power System and Control (DTPSC). It explored how childcare responsibilities affect employees and the ability of those with preschool children to work to their full potential while in the workplace. The survey used a similar approach to a recent study conducted by the International Finance Corporation (IFC) to explore the business case for employer‐supported childcare in the private sector of Myanmar. Survey questions from that study were adapted for this public‐sector survey.
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Figure 3. Impact of Unreliable Electricity Supply to Firms
Source: World Bank staff based on the Myanmar 2016 Enterprise Survey.
As shown in figure 3, according to the latest available Enterprise Survey for Myanmar (2016), the share of small enterprises reporting electricity supply as being the biggest obstacle (15 percent) to doing business is double that of large firms (8 percent) and over three times the average in East Asia and Pacific region (6 percent). Low‐quality services also disproportionately affect low‐income households. According to the MLCS 2017, 40 percent of Yangon residents reported voltage fluctuations as their main concern, compared to just 20 percent at the national level. Unable to afford backup power generators and voltage regulators, lower‐income households bear the costs of long outages and damages to electrical equipment.
17. The required development of power infrastructure represents an opportunity to improve the resilience of electricity services to natural hazards and climate change. Due to its location, Myanmar is among the world's most hazard‐prone countries.19 Climate change is exacerbating the country's vulnerability to periodic floods, earthquakes, fires, storms, cyclones, and droughts. However, climate hazards are not considered at the planning stage and there is no emergency preparedness to enable quick and effective recovery of electricity supply to affected areas. For example, a rapid assessment of climate hazards revealed that 80 percent of the country’s high‐voltage substations are in areas highly prone to earthquakes. Yet, high‐voltage equipment is often not adequately anchored, exposing substations to fire and explosion risks due to oil leakages ignited by electric faults. Common barriers to the adoption of resilience measures include: (a) lack of sufficient data on the spatial distribution of natural hazards, (b) low understanding of the vulnerability of assets and the overall power system to natural hazards and climate change, and (c) lack of resources and high perceived costs for the implementation of resilience measures.
World Bank Group Support
18. Making available electricity access for the whole population through grid extension and off‐grid renewable energy solutions is at the core of World Bank Group engagement in Myanmar. The World Bank Group is one of the leading developing partners in the energy sector. The World Bank supports the implementation of the Government’s NEP through the National Electrification Project (P152936; IDA credit of US$400 million equivalent). As of November 2019, more than 1.5 million people had benefited from access to modern electricity services from solar home systems, renewable energy based mini‐grids, and grid extension under the World Bank‐financed National Electrification Project. The World Bank’s contribution in developing the electrification plan helped leverage substantial financing from development partners, including EUR 30 million of soft loans in Italian assistance and EUR 40 million of loan and grants from KfW, the German development bank. The IFC Lighting Global Program assists companies in creating a sustainable market for high‐quality off‐grid renewable energy solutions. IFC also provides equity and debt financing to Yoma Micro Power to generate and distribute electricity to power
19 Eckstein, D., M. L. Hutfils, and M. Winges. 2019. Global Climate Risk Index 2019. Germanwatch. https://germanwatch.org/sites/germanwatch.org/files/Global%20Climate%20Risk%20Index%202019_2.pdf
15.18.4
68.1
96
0
20
40
60
80
100
Small firms Large firms Small firms Large firms
Bigeest obstacle to doing business Percentage of firms owning agenerator
Unit based
on the indicator
EAP average Myanmar Lower‐middle income average
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telecom towers in rural Myanmar and off‐grid communities using solar‐based micro power plants and mini‐grids. Complementing the Government’s efforts, the World Bank and IFC also support results‐based financing for off‐grid solar to accelerate the development of a sustainable, private sector‐led market for quality solar products and increase the penetration of solar PV through solar home systems and mini‐grids.
19. To support the electricity access agenda, the World Bank and IFC contribute to the development of private‐led power generation, with a focus on low‐carbon energy technologies. The World Bank Group’s support is focused on helping Myanmar attract private investments to realize its large renewable energy potential. The Bank and the IFC have joined forces to provide advisory services for the planning, preparation and implementation of large‐scale grid‐connected solar and other renewable energy projects through public‐private partnership approaches. The government recently identified these projects as a high priority to promote investments in its COVID‐19 Emergency Relief Plan.20 In 2016, IFC and the Multilateral Investment Guarantee Agency supported the first competitive bidding for an independent power producer in the country, a 225 MW gas‐fired plant in Myingyan, which stands out as a successful example of private sector participation. The World Bank also supported the rehabilitation of existing inefficient gas‐fired power plants by extending financing for the Electric Power Project (EPP, P143988, IDA financing US$140 million), for the rehabilitation of the Thaton CCGT power plant located in Mon State to add 110 MW of additional capacity and increase efficiency in power generation. The power plant can generate four times the amount of electricity using the same amount of natural gas, thereby allowing the delivery of improved electricity services to 830,000 people.21
20. A comprehensive program of advisory services and technical assistance underpins the World Bank Group’s substantial dialogue in the sector. The World Bank’s technical assistance and capacity building under the Myanmar Energy Programmatic Advisory Services and Analytics project (P158303) informed the design and implementation of some of the key policies in the sector, including the design of the Government’s NEP and the assessment of the electricity sector’s financial viability and tariff reform. The World Bank has also provided just‐in‐time policy advice on key sector topics to the National Economic Committee, which is the highest policy‐making body in the country. The World Bank is also working with MOEE in developing an electricity tariff‐setting methodology, which is critical to supporting the expansion of access to electricity, renewable energy development, and the financial viability of the sector. Advisory work is helping power utilities move toward more efficient gas‐to‐power conversion and improve dispatch practices. Finally, to further support the private‐led investments, support for institutional capacity‐strengthening for prioritizing and coordinating investments will continue to be provided to the Project Bank and the PPP Center.
21. More recently, the World Bank is providing technical assistance to MOEE to inform the power sector’s climate adaption and resilience strategy. Financed by the Global Risk Financing Facility (GRiF), analytical work is being carried out by the World Bank under the Protecting Power Infrastructure and Energy Systems project. This ongoing work focuses on the following aspects: (a) identifying the risk exposure of power assets to climate change and disasters; (b) designing risk mitigation strategies, including at the planning stage, and identifying relevant policies and other types of interventions from national and central to local and community‐based measures; and (c) identifying specific investments and activities that would support the implementation of the identified risk mitigation strategies. Once completed, this analytical work will inform the identification of specific investments and measures to be implemented by MOEE.
20 The Government of Myanmar. 2020. Overcoming as One: COVID‐19 Economic Relief Plan. 21 Estimate based on an annual output of 770,000 MWh, average annual household consumption of 3,977 MWh, and 4.3 people living in each household.
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C. Relevance to Higher Level Objectives
22. As part of its effort to bring electricity access to all of Myanmar’s people, the Government has sought the World Bank’s support for efforts to improve the availability and reliability of power supply through the proposed Power System Efficiency and Resilience Project. The Government considers the provision of universal electricity access and the improvement of service delivery among its highest priorities to improve living conditions and economic opportunities across the whole population. The proposed project would complement ongoing government efforts by ensuring that adequate and better‐quality electricity supply is available to support the universal access goal.
23. The proposed project will help address Myanmar’s key energy challenges by: (a) ensuring adequate supply; (b) increasing the capacity and climate resilience of critical infrastructure; and (c) improving the capacity of key sector entities in the planning, design, and implementation of projects. Additional power supply is a necessary condition for consolidating progress and continuing the implementation of the country’s universal electrification program. The investment in upgrading the existing power plant will allow to help address acute power shortages in the country’s main economic center through energy efficiency improvements in gas‐fired generation. By improving the supply‐demand balance in Yangon, the project will enable the implementation of the electrification program in the Yangon region, benefiting the most disadvantaged households, and it will free up substantial resources to supply the rest of the country. The investment in the reinforcement and rehabilitation of the existing power infrastructure will help improve its resilience to climate events and increase its capacity to reduce system constraints, thus enabling future extension of the distribution network to reach unserved or underserved households. Finally, the technical assistance and Hands‐on Extended Implementation Support (HEIS) that will be provided under the project are expected to help build the capacity of the two main sector entities in charge of power infrastructure development: the Electric Power Generation Enterprise (EPGE) and the Department of Power Transmission and Systems Control (DPTSC).
24. The project will support the national development priorities laid out in the Myanmar Sustainable Development Plan (MSDP)22 for 2018–2030 and is consistent with the country’s commitment to a low‐carbon development path. The MSDP is the first comprehensive government vision for a democratic, peaceful, and prosperous country. Pillar 2 (goal 3, strategy 3.6) of the MSDP aims at building priority infrastructure to facilitate sustainable growth and economic diversification. Pillar 3 (goal 5, strategy 5.4), providing affordable and reliable energy to populations and industries, recognizes the importance of (and the direct link between) improved access to electricity and greater economic opportunities for households and firms, including SMEs in both urban and rural areas. Pillar 3 (goal 5, strategy 5.2), which seeks to increase climate change resilience and reduce exposure to disasters and shocks, identifies the development of resilient infrastructure as an opportunity to reduce the country’s exposure to climate change and embark on a low‐carbon development path. Finally, the MSDP recognizes gender empowerment, equity, and inclusion as a cross‐cutting priority to be mainstreamed into all its pillars. The project will support Myanmar’s INDC for climate mitigation and adaptation by: (i) reducing the power sector’s overall greenhouse gas (GHG) emissions through fuel savings and deferred investments in more carbon‐intensive fuels, such as coal; (ii) increasing the overall efficiency of the power system; and (iii) increasing the resilience of the power network against climate events. Recognizing a limited ability to achieve its vision for sustainable development, Myanmar INDC calls for support from the international community for financial
22 The Government of the Republic of the Union of Myanmar. 2018. Myanmar Sustainable Development Plan, 2018–2030.
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resources and capacity building. In responding to this call for assistance, this project also represents an opportunity to provide advisory services to steer the transition towards a more sustainable future.
25. The project also supports the new World Bank Group's Country Partnership Framework (CPF) FY20‐23 (Report No. 147607‐MM) and complies with the World Bank’s ‘Maximizing Finance for Development’ (MFD) approach.23 Specifically, the project will foster responsible private sector‐led growth for inclusive economic opportunities, the second focus area in the new CPF (Objective 2.3, Narrow the infrastructure and technology gap). The project seeks to create basic infrastructure to facilitate increased and improved access to basic electricity services, improving individuals’ well‐being and economic opportunities at the community level. In addition, investments aimed at improving the transmission system’s climate resilience will contribute to the fourth focus area of the new CPF, enhancing climate and disaster resilience. The proposed project lays the groundwork for adopting the MFD approach. The Ywama power plant site is not well suited to private financing. A pre‐feasibility study completed for all state‐owned power plants in the Yangon area identified the Ywama site as the least viable for private sector financing due to: (a) the limited space available, which requires the new plant to share common auxiliary facilities with the remaining state‐owned units; and (b) substantial coordination challenges during construction to ensure continued supply from the remaining units to the Yangon region. The World Bank and IFC have worked closely with the Government to remove barriers to private participation in the power sector (see section II.E, Rationale for Bank Involvement and Role of Partners). Throughout project implementation, this work would continue through the World Bank’s extensive policy dialogue and technical assistance in collaboration with IFC efforts to cascade private investments in the energy sector, focusing on renewable energy. The project supports the World Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity and it was also designed using the Inclusion and Peace Lens (IPL, see annex 3) to ensure that it is conflict sensitive and inclusion focused.
II. PROJECT DESCRIPTION
A. Project Development Objective
26. The Project Development Objectives (PDO) 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.
PDO‐Level Indicators
27. The achievement of the PDO will be measured by the following indicators:
(a) Projected energy or fuel savings (in megajoules, or MJ) – core indicator (b) Generation capacity of energy constructed or rehabilitated (MW) – core indicator (c) Annual outages in targeted substations (hours) (d) Disadvantaged/vulnerable people benefiting from access to electricity or improved quality of
service (number, thousand)
23 MFD is the World Bank Group’s approach to systematically leveraging all sources of finance, expertise, and solutions to support developing countries’ sustainable growth (https://www.worldbank.org/en/about/partners/maximizing‐finance‐for‐development).
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28. Intermediate indicators are as follows:
(a) Plant construction progress (percentage) (b) Thermal efficiency of energy conversion in the Ywama gas power plant (percentage) (c) Gap in annual time spent on childcare during working hours between male and female MOEE staff
benefiting from the childcare pilot (days) (d) Implementation support received up to satisfaction to meet technical specifications, contract
oversight, and safeguards monitoring contractual requirements (yes/no) (e) Mobile substations deployed for fast response and recovery to climate events (number) (f) Grievances responded to and/or addressed through the functional Grievance Redress Mechanism
(GRM) available to citizens and within the stipulated response time (percentage)
B. Project Components
29. The proposed project comprises two components financed through an IDA credit. The main investment component, which supports the upgrading of the Ywama power plant (Component A), will be implemented by EPGE. The component focusing on improving the resilience and capacity of the power network (Component B) will be implemented by DPTSC. The technical assistance to EPGE and DPTSC will be provided through external consultancy support financed under Components A and B, respectively.
Component A: Upgrading Ywama Power Generation Units (US$290 million)
30. The component will finance the replacement of old gas and steam turbines in the Ywama power plant with a highly efficient, state‐of‐the‐art CCGT. This will increase 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 Ywama power plant is in the suburbs of Yangon City, along the Hlaing River. It is a brownfield area partly occupied by old and inefficient gas and steam turbines, with a combined capacity of 240 MW. Due to the acute power shortages in Yangon, this equipment is still under operation despite having one of the lowest thermal conversion efficiencies of all the state‐owned gas‐fired generation plants. The efficiency and capacity upgrade will ensure that the maximum electricity output is generated to alleviate Yangon’s power shortage while using the space available within the existing footprint of the plant. Therefore, the proposed project will finance the energy‐efficient upgrade of the existing units with a highly efficient CCGT plant with a minimum capacity of 250 MW and up to approximately 300 MW (net at site conditions)24 and a thermal efficiency of above 50 percent. The initial budget allocation of US$285 million for the power plant is to be revised within the overall loan amount based on the outcome of the bidding process.
31. The upgrade will be undertaken as a full turnkey project to help address technical and operational challenges during implementation. In addition to the gas and steam turbines that will be upgraded, the Ywama power plant site includes a 240 MW open‐cycle gas power plant and gas engines totaling 52 MW capacity, which are owned and operated by EPGE and a private company, respectively.25 Continued supply from the remaining units in the plant is critical to ensuring a stable supply to the city of Yangon throughout the construction of the
24 Bidders will be allowed to propose a different capacity for the CCGT as long as it respects all specifications outlined in the bidding documents (maximum gas consumption, equipment to be installed in the existing space available, and other functional specifications). Therefore, the specific capacity of the CCGT will only be determined once the bidding is concluded. 25 All these generation units share a connection to gas supply from the Yadana offshore field and they are connected to an adjacent switchyard, which EPGE is currently upgrading to a gas‐insulated switchyard with financing from the Japan International Cooperation Agency (JICA).
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new CCGT, creating operational and coordination challenges during construction. If required, investments such as the relocation of EPGE staff housing adjacent to the plant (to mitigate noise and vibration impacts on employees) would also be financed by the IDA credit. Given the country’s climate vulnerabilities, the new CCGT will be designed to withstand extreme weather conditions including monsoon, strong winds, cyclones, flooding, and seismic events. To help address these challenges, the project will be undertaken as a full turnkey contract covering the demolition, design, supply, installation, testing, and commissioning of the new CCGT.
32. In addition, technical assistance will be provided to EPGE for project implementation and contract management. Specifically, two key consultancy contracts will be financed: (a) an owner’s engineer to support EPGE throughout the procurement processes and project implementation, and (b) an independent consultancy firm to monitor environmental and social safeguards issues. Additional technical assistance to build capacity of EPGE and MOEE for policy making and regulation in the power sector may be provided should the need arise during project implementation. Finally, to help reduce the gender productivity gap at work due to childcare responsibilities, the project will support the setup of a childcare pilot at MOEE. Specifically, this component will finance: (a) the preparation of a detailed rollout plan to guide MOEE in setting up the pilot and (b) initial start‐up funds to cover setup costs required for the operationalization of the pilot. The initial allocation for technical assistance activities and the operationalization of the childcare pilot is US$5 million.
Component B: Improving Resilience of the Power Network (US$60 million)
33. This component will finance investments and measures in existing substations aimed at reducing system constraints and strengthening the resilience and preparedness of the power network against climate change and disasters. Investments will include transmission‐related equipment, mobile substations, and the implementation of adaption measures to protect existing assets functionality against the impact of climate change and emergencies. This component will also support the quick rehabilitation and recovery of the power system from climate shocks or disasters during the life of the project. Activities under this component will cover the following aspects: (a) reinforcing high‐voltage equipment at substations and/or substation rehabilitation to reduce system constraints, increase system capacity, and improve network reliability to meet at least N‐1 redundancy criteria; (b) enhancing emergency preparedness and management capacity through investments in adaption measures to protect and harden equipment against impacts of climate change and disasters such as heat waves, flooding, hurricanes, earthquakes, and landslides; (c) enabling quick and effective recovery of the power system by procuring specialized equipment and spare parts; and (d) supporting the deployment and installation of such equipment in line with prearranged preparedness plans if eligible events happen during the life of the project. Future additional financing may be sought from the GRiF to support the preparedness measures under this component and establish a mechanism that can provide the required funding for recovery after a climate shock or disaster.26 Transmission network equipment to be financed under this component will include, but not be limited to, mobile substations, power and current transformers, power and shunt reactors, switch bays, and protection and control devices. The initial allocation for investments under this component is US$55 million.
34. Power substations and measures under this component will be prioritized based on their relative contribution to support for the implementation of the NEP and improvements in the quality of supply, focusing
26 This would support establishing prearranged funding linked to emergency preparedness plans to be developed by DPTSC for quick recovery of the power system to ensure continuity of services. A GRiF grant could help DPTSC and MOEE set up a financing strategy by complementing project funds under this component, thus leveraging the work carried out by the Ministry of Planning and Finance to establish the Southeast Asia Disaster Risk Insurance Facility, a regional catastrophe risk insurance pool for ASEAN countries.
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on areas where disadvantaged households live. The selection of investments will be based on technical analysis including the following key parameters: (a) substations that lack adequate capacity and/or redundancy necessary to support grid extension for electrification purposes, (b) assets that are the most vulnerable to climate events, and (c) substations that serve households suffering from low quality of electricity supply. Based on the technical screening, substations that serve a substantial share of disadvantaged households27 will be prioritized to benefit from the project’s investments. The development of new substations or new transmission lines and substations would not be financed since the project will be implemented in brownfield locations. Also, investments in areas where there is active conflict will not be supported under the project.28
35. Technical assistance will help strengthen the capacity of DPTSC on resilience aspects and support project implementation. Technical assistance will be provided to develop and implement policies, strategies, and measures to increase climate change and disaster resilience of the power system. Additional consultancy services will support DTPSC in the implementation of the project activities, including in the preparation of technical specifications, contract oversight, and safeguards monitoring. The initial allocation for technical assistance activities is US$5 million.
C. Project Beneficiaries
36. The project will benefit the poorest households by enabling electrification of the most disadvantaged townships in the Yangon region and across the country. Capacity and efficiency upgrades in the Ywama power plant will directly benefit the most disadvantaged households in the Yangon region by making available adequate and reliable electricity supply to enable the implementation of planned investments under the NEP. The Yangon regional government and YESC have developed a detailed implementation plan and secured funding to provide electricity access to all townships across the region within the next three to four years. This electrification program will be undertaken in close collaboration with the World Bank, under the National Electrification Project, and in coordination with other development partners that are financing improvements in the high‐ and medium‐voltage network. As discussed in section I.B, villages in the southern and northern districts which remain unconnected to the national grid are home to approximately 300,000 individuals facing the most disadvantages in the Yangon region. In addition, investments in the transmission component would also benefit poor households. The project financing will target power substations based on their ability to facilitate electricity access, with a focus on those substations covering disadvantaged townships.
37. Firms—particularly SMEs, which are key to supporting the economic transition and sharing its benefits—will benefit from improved quality and reliability of electricity supply. As mentioned in section I.B, SMEs suffer disproportionately from low quality of electricity services when compared to large firms. Small firms reportedly suffer from about 13 outages in a typical month; this is three times more than firms in the East Asia and Pacific region (4.5 outages per month) and almost 50 percent higher than the average small firm in lower‐middle‐income countries. However, only 64 percent of them own a generator (compared to 96 percent of large firms), mostly because of affordability issues. Investments in the Ywama power plant in Yangon and in key substations will benefit firms, particularly SMEs, through: (a) increased hours of reliable power supply due to avoided load shedding and blackouts; (b) reduced costs due to outages, resulting in lower revenue losses; and (c)
27 The criteria will be based on the MDI (World Bank 2019), which identify the most disadvantaged townships by comparing relative levels of nonmonetary development across all townships in the country. 28 These areas are defined as locations where there is continuing or has been recent violence as monitored by the World Bank based on data from the Myanmar Institute for Peace and Security.
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higher power‐supply quality through more‐stable voltage and frequency, which extends the operating lives of electrical and industrial appliances and machines.
38. In addition, the project will benefit the population in the rest of the country by reducing the power system’s vulnerability to climate change, system costs and losses, and GHG emissions. Investments in the transmission component will help improve the system’s resilience to climate change and natural disasters. Also, based on the indicative least‐cost plan developed by the World Bank, the project will contribute to reducing the power system’s costs by 5 percent by: (a) displacing higher‐cost and more carbon‐intensive generation such as coal, emergency power, and LNG‐fueled power plants; (b) reducing the volume of gas consumed per unit of electricity generated; and (c) reducing system transmission losses by about 11 percent, given that generation will take place closer to the main demand center. The project will also result in the reduction in the system’s GHG emissions by 12.3 million tons of CO2 equivalent until 2030.29 The project’s climate co‐benefits are related to: (a) climate change mitigation by upgrading the Ywama power plant30, and (b) the adaption of the power system to climate vulnerabilities through the design of the new CCGT and investments in the transmission infrastructure.
39. Finally, power sector SEEs will also benefit from increased capacity and a diversified labor force. EPGE will strengthen its capacity in project implementation and supervision of large and complex thermal power projects. DPTSC will enhance its understanding of how climate change and disaster risks affect power sector planning and operation and improve its capacity to implement long‐term planning and climate resilience measures. In addition, by exposing DPTSC to international procurement practices, its capacity to engage in larger and more complex procurement processes would be strengthened. MOEE and the sector entities would also benefit from increased workforce diversity and female employees’ availability during working hours, as a result of the setup of the childcare pilot.
D. Results Chain
40. The proposed project focuses on rehabilitating the Ywama power plant and activities to improve the reliability of the power system, particularly its resilience to climate events. Capacity and efficiency upgrades in the power plant would result in increased power output, with the same amount of gas available, in the Yangon area and enable the implementation of the universal electricity access program. Together with investments in the transmission network, these activities will contribute to longer‐term outcomes, including: (a) improved access to reliable and affordable electricity services for households, including disadvantaged households in Yangon and targeted areas; (b) an improved response to climate change mitigation and adaptation and transition towards low‐carbon technologies; and (c) improvements in the enabling environment and in sector entities’ capacity to increase public and private investments. Figure 4 illustrates the results chain in detail.
29 According to the Joint Report on Multilateral Development Banks’ Methodology for Tracking Climate Finance. Avoided CO2 emissions are valued in line with World Bank Guidelines on Shadow Price of Carbon in Economic Analysis (see further details in the Economic and Financial Analysis section). 30 The investments in Ywama power plant will replace the existing inefficient 280 MW gas‐fired generation units with a highly efficient CCGT of up to 300 MW, including the partial demolishment of the existing installed capacity. The capacity expansion represents about 6 percent of the capacity to be installed. Out of all the capacity to be replaced, 240 MW will be kept in the site as back‐up options to respond to emergency events or to maintain supply during maintenance of the new CCGT if needed. Due to gas supply and infrastructure constraints, it will not be possible to have the new CCGT and the back‐up 240 MW capacity operating regularly and simultaneously during the lifetime of the new assets. It is not expected that these constraints will change over the lifetime of the existing asset. The system‐wide least‐cost plan conducted during the preparation of this project shows GHG emissions reduction of the overall system compared to the baseline scenario, where this project does not materialize and the existing equipment continues operation over the medium‐to‐long term.
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Figure 4. Results Chain of the Power System Efficiency and Resilience Project
Source: World Bank staff. Note: TA = Technical assistance.
E. Rationale for Bank Involvement and Role of Partners
42. The World Bank’s support will bring international best practices and know‐how to help address the country’s generation challenges and pioneer approaches to mainstreaming climate resilience for critical power infrastructure. Since Myanmar started its transition, the World Bank Group has supported investments to bring state‐of‐the‐art generation technology to help reduce the growing supply‐demand gap. These efforts have complemented the World Bank Group’s main engagement in the universal electricity access agenda through both public and private sector approaches, as described in section I.B. This project would be a continuation of the World’s Bank leading role in bringing good international practices and know‐how to undertake efficiency and capacity upgrades in a challenging power generation site. World Bank support will also help the Government pioneer approaches and measures to reduce the risks and impacts of climate change and disasters to critical power infrastructure. By providing access to know‐how and finance, the project will support cost‐effective measures to overcome key barriers to mainstreaming climate resilience into the planning, project design, and implementation phases of power transmission projects.
43. The World Bank’s financing and advisory‐services support for the proposed project complements other development partners’ activities in the power sector, coordinated by MOEE through the Energy and Electricity Sector Coordination Group. Many development partners are active in Myanmar’s power sector. In the implementation of the Government’s NEP, there is substantial support from bilateral institutions such as KfW, Gesellschaft für Internationale Zusammenarbeit, and the Italian Government. These projects are implemented in close cooperation with the World Bank‐funded electrification project. To help develop network infrastructure, the
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Asian Development Bank and JICA are providing significant financing to SEEs for the implementation of grid development and strengthening, including the construction of the country’s 500 kV transmission backbone. Finally, in the power generation segment, the French Development Agency and JICA are supporting the development of public sector generation projects in hydropower and one natural gas‐fired power plant. The implementation of the proposed project has been coordinated and complements JICA’s activities. Power supply from the new CCGT will be delivered through the high‐voltage Ywama substation which is being rehabilitated by EPGE with financing from JICA. The overall coordination among development partners is led by MOEE through the Energy and Electricity Sector Coordination Group and the Electricity Access Sub‐Sector Coordination Group. The coordination group is facilitated by JICA and the World Bank and the coordination takes place on a regular basis.
F. Lessons Learned and Reflected in the Project Design
44. Early implementation—facilitated by enhanced hands‐on support, committed partners with dedicated staff, and policy dialogue anchored in a strong country program in the energy sector—has been fundamental to the project design.
(a) Early project implementation. The project design builds on the extensive experience acquired during the implementation of the EPP (which closed in March 2020). Lack of capacity in implementing agencies (IAs) to handle large and complex procurement contracts led to significant delays. To address the capacity constraints and expedite project implementation, the following measures will be introduced: (i) the IAs will initiate the procurement process for the upgrading of the power plant before loan approval; (ii) HEIS, as allowed by new procurement regulation in countries affected by fragility, conflict, and violence (FCV), will be provided on technical and procurement matters to complement the external consultancy support by the owner’s engineer; and (iii) the power plant upgrade will be undertaken under a turnkey design, supply, and installation (DSI) contract to reduce the burden on procurement and contract management.
(b) Committed partners. The World Bank Group’s FY15‐19 Myanmar Completion and Learning Review (Report No. 147607‐MM) finds that stronger commitment by line ministries results in stronger staffing across all fields (technical, safeguards, fiduciary) of IAs, which is critical for more efficient project implementation. Therefore, the following actions have been undertaken: (i) MOEE and the IAs, EPGE and DPTSC, have already put in place full‐fledged Project Implementation Units (PIUs) with dedicated staff, and (ii) MOEE management has committed to expediting government approvals for the project. These actions are already yielding results: the PIUs have been actively involved during project preparation, and procurement activities have been initiated before the proposed loan is approved by the World Bank. In addition, MOEE has demonstrated its commitment to addressing the gender gap identified in the project through the implementation of the childcare pilot.
(c) Policy dialogue anchored in a robust country program. Globally, an important lesson has been learned about the relevance of undertaking investment projects within a policy framework that ensures their sustainability. In Myanmar, the World Bank Group’s analytical work, frequently conducted in parallel with project implementation, has contributed to important policy changes, such as the recent electricity tariff reform, national electrification policies, and introduction of best practices for engaging private sector financing. This engagement will continue during the implementation of this project, anchored in substantial ongoing advisory and lending projects, such as the programmatic energy sector policy dialogue project and the National Electrification Project.
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(d) Design considerations regarding childcare. Access to reliable, affordable, and quality childcare services can benefit employers in terms of improved worker productivity. Childcare activities supported under the project build on key findings from a review of lessons learned during the implementation of similar activities in the World Bank portfolio.31 First, the review emphasizes that childcare services should be piloted before being mainstreamed to ensure their quality and applicability. The childcare at MOEE will be designed as a pilot, which will help track data and information to inform follow‐up activities to mainstream these services to serve a larger pool of MOEE employees and/or other government ministries. Second, a sound, but not overly complicated, diagnostic will be undertaken to identify key aspects of the demand and supply of childcare early during project implementation. This is particularly relevant in the context of this project and, more broadly, FCV countries, where lack of information and baseline data for indicators is frequently a significant challenge. Finally, the partnership across government entities is highlighted in the review as an instrumental factor in delivering childcare services. The project will support a close collaboration of MOEE with the Ministry of Social Welfare (MOSW), which manages a series of programs to support early childhood development, including providing training for the childcare industry employees.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
45. The proposed project will be implemented by EPGE and DPTSC under the oversight of MOEE. The project will be financed by an IDA credit to the Ministry of Planning, Finance, and Industry, which will make the proceeds of the credit available to EPGE and DPTSC. Under the overall oversight of MOEE, the two entities have put in place dedicated PIUs comprising project directors, technical specialists, procurement specialists, financial management specialists, and environmental and social specialists. Both entities will rely on their existing organizational structures and processes to implement the procurement and financial management tasks related to the project. Annex 1 provides further details of the implementation arrangements and the implementation support plan, including a PIU organization chart.
B. Results Monitoring and Evaluation (M&E) Arrangements
46. Monitoring the implementation of the proposed project will involve the evaluation of performance indicators as included in the Results Framework. The EPGE and DPTSC PIUs will monitor the progress of Components A and B, respectively, against the agreed performance indicators (see section VI, Results Framework and Monitoring). The PIUs are responsible for collecting data and updating the Results Framework, with support from the owner’s engineer, and reporting progress every six months. These biannual progress reports will be submitted to the World Bank. The reports will include updates on the functionality of the GRM, which will be in place for citizen engagement and submission of any complaint, concern, or issue that might arise in relation to the project (see section IV.C, Safeguards). The project will also carry out annual impact assessment surveys during
31 Haddock, S., A. Raza, and G. Palmisano. 2019. Addressing Childcare in the World Bank Portfolio: Approaches, Experiences, and Lessons Learned. World Bank Group. http://documents.worldbank.org/curated/en/646911578638203068/pdf/Addressing‐Childcare‐in‐the‐World‐Bank‐Portfolio‐Approaches‐Experiences‐and‐Lessons‐Learned.pdf
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implementation to monitor the impact of the childcare pilot—i.e., the extent to which it reduces the gender productivity gap of staff benefiting from the childcare services (see section IV.C, Safeguards).
47. The project will promote citizen engagement by monitoring the grievances responded as well as publicly and periodically disclosing this information. The main beneficiaries of the project will be households, SMEs, and other firms connected to the public power grid in the Yangon region (see section II.C, Project Beneficiaries). Because of the technical characteristics of the investments, specific citizens and firms or their groups cannot be identified to conduct beneficiary satisfaction surveys. Therefore, the project will monitor how citizens are affected by the project activities during implementation. The objective would be to ensure that citizens have functional mechanisms available to pose grievances and that these are responded to and, to the extent possible, addressed. The indicator will be used to capture the rate of grievances responded to and the results will be publicly disclosed.
C. Sustainability
48. The project has been designed considering key sustainability aspects. For Component A, EPGE has a proven track record in operating and undertaking routine maintenance of gas‐fired power plants, which will be enhanced with experience in the installation, commissioning, and operation of the recently completed high‐efficiency Thaton CCGT. In addition, the project accounts for key spare parts and will explore long‐term service agreements (LTSAs) with manufacturers for nonroutine maintenance. For Component B, DPTSC has substantial experience in the upgrading and operation and maintenance (O&M) of substations. To further enhance its experience with adequate use and deployment of the mobile substations, capacity building will be provided by the manufacturer on mobile substation operation and maintenance.
49. The sustainability of the Ywama CCGT will also depend on the availability of natural gas supply, which is of concern as domestic production will decline starting in 2021. However, according to information provided by MOGE and EPGE for the feasibility study, the gas decline will be offset by a reduction in gas exports. As a result, the current levels of domestic gas supply are expected to remain unchanged in the medium term. As such, the project design contributes to guaranteeing the project’s sustainability as consumption of the CCGT will not exceed the current allocated volume of gas supply for the Ywama gas‐fired power plant. In addition, the new CCGT will have priority for gas allocation given its efficiency and the large number of highly inefficient plants owned by EPGE. Finally, in the longer term, Myanmar plans to develop its offshore gas reserves and import LNG for new greenfield power generation stations.
50. The financial sustainability of the power sector may affect the project in the long run. As mentioned earlier, as a result of the recent increase, electricity tariffs are very close to operational current cost‐recovery levels. To consolidate the financial sustainability of the sector, regular tariff adjustments will be necessary. To this end, the World Bank is providing technical assistance to MOEE to develop a tariff methodology and put in place an adequate process for regular tariff reviews.
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IV. PROJECT APPRAISAL SUMMARY
A. Technical, Economic and Financial Analysis
Technical Analysis
51. The choice of CCGT technology at the Ywama power plant corresponds to the most cost‐efficient alternative to urgently improve the availability and quality of supply. The project will support the capacity and efficiency upgrade of the Ywama power plant by ensuring the maximum output per unit of fuel. This is a key criterion given that domestic gas supply is constrained, as described earlier.32 With this efficiency level, the plant’s marginal costs would be the lowest among the country’s thermal power plants, and it is expected to be operated at base load in the medium‐to‐long term, based on the results of the indicative long‐term planning exercise. Finally, being a brownfield, the plant will use existing gas and electrical grid connections, reducing costs and implementation timelines.
52. The capacity of the new CCGT is based on the space available after the demolition of existing units and power evacuation constraints in the high‐voltage substation. Two CCGT configurations are possible: (a) two gas turbines, two heat recovery steam generators (HRSGs), and one common steam turbine (a 2‐2‐1 arrangement); or (b) one gas turbine, one HRSG, and one steam turbine (a 1‐1‐1 arrangement). Both configurations will have a bypass stack between the gas turbine(s) and an HRSG to allow open‐cycle operation. To achieve value for money and support innovation, the configuration will be left open for bidders to optimize in the DSI tender subject to meeting functional requirements to achieve the lowest levelized cost of electricity (LCOE) per unit of output. The capacity of the power plant will also be left for bidders to optimize based on the equipment configuration, from a minimum capacity of 250 MW up to approximately 300 MW (net at site conditions). Gas for the CCGT will be supplied by the Yadana offshore gas field, which yields gas with poor calorific value, containing about 70 percent methane and 25 percent nitrogen. Therefore, the gas turbines need to be able to operate with such fuel. Liquid fuel as backup fuel is not foreseen. To minimize the need for water intake and structures to be built in the Hlaing River, the recommended cooling method is a closed system with wet mechanical‐draft cooling towers; water intake is also recommended using a floating deck. A pretreatment settling pond will also be necessary due to the high turbidity and suspended solids. All facilities are to be located within the existing footprint of the Ywama power plant.
53. Specific investments and measures will be undertaken to improve the climate adaption and technical resilience of existing substations systemwide. The project will implement: (a) adaption measures that seek to ‘protect/harden’ infrastructure and ‘accommodate/manage’ measures to reduce the sensitivity of assets to climate hazard exposure—including, for instance, investments to elevate or fix equipment to protect equipment from frequent floods or earthquakes; and (b) technical measures to accommodate or manage the impacts of technical faults—including installing equipment to ensure at least N‐1 reliability criteria and increasing the capacity and rating of high‐voltage equipment such as power and current transformers, shunt capacitors and reactors, switch gears, and control and protection systems that adapt the transmission system to higher temperature‐driven demand. Mobile substations are also a proven technological solution to respond to system damage caused by climate change and natural disasters and help address the lack of contingency equipment.
32 A feasibility study analyzed other technology options for the power plant, including reciprocating gas engines and gas turbines. The study concluded that none would represent an advantage over CCGT technology for this specific project.
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Economic and Financial Analysis
54. The economic benefits of the Ywama CCGT power plant derive from: (a) net reduction in the power systems costs, (b) reduction in transmission losses, (c) reduction in energy not served (ENS), and (d) reduction in CO2 emissions. The estimation of the project benefits is based on the outputs from the indicative least‐cost generation plan, which calculated total system costs, including operation and maintenance and annualized capital investment costs, overall transmission losses, and amount of ENS (as the difference between the ‘with’ and ‘without project’ runs). The reduction in total system costs is due to the displacement of higher‐cost energy (LNG, coal, and emergency power) over the 30‐year lifetime of the project and it is estimated at US$60 million on average annually. The project’s contribution in reducing ENS was quantified as the economic cost of operating diesel generators, which are prevalent in Myanmar (about US¢24 per kWh). Reduction in system losses due to increased generation near the main load center was valued at US¢7.1 per kWh, which is the estimated marginal cost of the system. Finally, avoided CO2 emissions were valued using the base case values of US$30 in 2015 increasing to US$80 per Mt of CO2 equivalent by 2050 in line with the World Bank Guidance on the Shadow Price of Carbon in Economic Analysis. Project costs were estimated based on the feasibility study. Capital expenditures (CAPEX) are estimated at US$1,000 per MW installed and correspond to the full cost of the turnkey project, EPGE development costs, and contingencies. Fuel costs are valued at the economic cost of natural gas of US$8.3 per MMBtu, which is higher than the current tariff paid by EPGE of US$7.5 per MMBtu. Finally, nonoperational and maintenance costs are estimated at US$4.5 per MWh.
55. The upgrading of the Ywama power plant has a high economic net present value (ENPV). The project’s ENPV is estimated to be US$165.0 million over a 30‐year discount period and the project yields an economic internal rate of return (EIRR) of 27.9 percent, well above the hurdle rate of 15 percent (see table 2). The ENPV increases to US$241.8 million and the EIRR to 30.9 percent after the consideration of economic benefits from CO2 emissions reduction, estimated at 12.3 million metric tons. Given the uncertainty around some of the variables affecting the economics of this component, a sensitivity analysis has been carried out to assess the robustness of the project to uncertainties and changes in key input variables. Because it is not possible to assess switching value changes in the least‐cost plan, the sensitivity analysis assessed percentage rate changes in the following key variables: (a) CAPEX overrun, (b) operational expenditures (OPEX) overrun, (c) social discount rate, and (d) electricity supply revenue.
Table 2. Results of the Economic and Financial Analysis
Unit Value
Economic Analysis
Social discount rate % 15.0
Economic internal rate of return
EIRR (excluding environmental benefits) % 27.9
EIRR (including environmental benefits) % 30.9
Economic net present value
ENPV (excluding environmental benefits) US$ million 165.0
ENPV (including environmental benefits) US$ million 241.8
GHG emissions avoided Mt CO2 12.30
Financial Analysis
Weighted average cost of capital (WACC) % 2.25
Financial internal rate of return (FIRR) % 14.9
Financial net present value (FNVP) US$ million 734.2
FNPV MMK million 1,101,253.0
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Unit Value
Levelized cost of electricity (LCOE) US¢/kWh 5.7
LCOE MMK/kWh 86.2
56. The project is financially viable, as demonstrated by a financial internal rate of return (FIRR) of 14.9 percent and a financial net present value (FNPV) of US$734.2 million. The project generates enough revenue to service its debt obligations. The estimated LCOE33 of the proposed CCGT is MMK 86.2 per kWh (US¢5.7 per kWh), which is below the average wholesale supply cost of MMK 130 per kWh in Myanmar and above the current average EPGE's sales tariff of MMK 38.4 per kWh (US¢4.2per kWh).
B. Fiduciary
(i) Financial Management
57. The overall financial management risk is assessed as Substantial. The main risks that need to be addressed are: (a) inadequate documentation of policies and procedures and lack of clarity on applicable government rules; (b) insufficient number of finance staff at DPTSC, with limited experience in development partner‐financed projects; (c) little experience at both EPGE and DPTSC in the use of contractors and consultants’ services—meaning they would require assistance in contracting and monitoring these services and in ensuring the quality of their outputs and products; (d) the use of manual processes; and (e) weak capacity to prepare work plans and budgets.
58. These risks have been mitigated by implementing the following measures:
(a) Developing a financial management manual that was adopted by all project staff members in November 2019;
(b) Assigning staff from the finance teams of both IAs to work specifically on the financial management matters of the project;
(c) Providing training in financial management and contract management, including the preparation of annual work plans and budgets for all staff involved in project implementation; and
(d) Allowing the use of Excel to record transactions (by project components and disbursement categories according to government codes) until the Government introduces a computerized accounting system, maintaining a proper document backup system and using online systems and email for recording, reporting, and communication.
59. Annex 5 includes further details of the financial management arrangements.
(ii) Procurement
60. The procurement activities financed by the IDA credit will be carried out by EPGE and DPTSC in accordance with the World Bank’s Procurement Regulations for IPF Borrowers34 (hereinafter referred to as the ‘Procurement Regulations’) and the provision stipulated in the Financing Agreement. For procurement activities
33 The LCOE represents the NPV of all unit costs of electricity generated over the lifetime of a project (assuming all costs of building, operating, and financing the power plant). 34 World Bank. Procurement Regulations for IPF Borrowers: Procurement in Investment Project Financing; dated July 1, 2016; revised in November 2017 and August 2018. http://pubdocs.worldbank.org/en/178331533065871195/Procurement‐Regulations.pdf. IPF = investment project financing.
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approaching the national market, the government directives on national procurement issued on April 10, 2017, with procurement documentation acceptable to the World Bank, would be adopted. EPGE will be responsible for implementing the procurement activities under Component A and DPTSC will implement procurement activities for Component B.
61. The World Bank carried out a procurement capacity and risk assessment (PCRA) and rated the procurement risk High. The main contributing factors were as follows: (a) fragile operating environment with weak institutional structures and inadequate policies, demonstrated through the absence of unified and comprehensive procurement regulations to guide procurement implementation; (b) a weak accountability structure for procurement decisions; (c) the absence of institutional structures and procedures for handling complaints; (d) a lack of expertise in approaching the international market and enforcing the international standard contract conditions required for the implementation of large‐value and technically complex procurement packages under the project; (e) weak and inadequate technical, procurement, and contract management capacities within EPGE and DPTSC; (f) complex and bureaucratic internal review and approval procedures within MOEE that are time‐consuming and likely to affect the timely delivery of the project; (g) possible insufficient interest by qualified bidders; and (h) risks of noncompliance with World Bank procedures, including fraud and corruption issues. These risks would particularly negatively affect key procurement packages that are critical to achieving the PDO: the contract for upgrading the Ywama power plant, the consultancy contracts of the owner’s engineer and environmental and social safeguards management consultant, and the supply of transmission network equipment and works.
62. To mitigate the above risks, critical measures have been discussed and agreed with MOEE, EPGE, and DPTSC:
(a) Establishment of strategic institutional implementation arrangements, wherein each of the IAs sets up a PIU (see annex 1 for further details on the PIU implementation arrangements) led by a senior official and adequately staffed with full‐time and experienced professional experts (assistance from international consultants will also be mobilized to supplement their capacity);
(b) Close procurement support by the World Bank through the implementation of HEIS requested by MOEE, kicking off from the project preparation stage to catalyze key procurement activities;
(c) Adoption of advanced procurement for critical procurement packages; (d) Commitment by MOEE to accelerate review and decision‐making processes; (e) Conducting of market engagement during feasibility studies and prequalification (PQ) processes by
IAs and advertising of procurement notices internationally (lessons learned from similar projects and information from the market research will provide important inputs to the stages of PQ and bidding document preparation);
(f) Development of key performance indicators (KPIs), with support from the owner’s engineer, to monitor the performance of Ywama power plant contractor; and
(g) Intensive training for IAs’ staff on the World Bank’s Procurement Regulations, contract management, and mitigation of fraud and corruption risks.
63. EPGE and DPTSC will implement relevant actions to mitigate fraud and corruption risks, as detailed in annex 4.
64. Through EPGE and DPTSC, MOEE has prepared a Project Procurement Strategy for Development (PPSD) to inform fit‐for‐purpose procurement arrangements and support the PDO. Based on its findings, the IAs recommended a procurement plan that was agreed by the World Bank. Throughout the project’s implementation,
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the PPSD and Procurement Plan will be regularly updated as appropriate. The PPSD recommends the following procurement approaches for key activities to deliver the best value for money:
(a) A single‐responsibility DSI contractor would implement the Ywama power plant rehabilitation (estimated at US$285 million), which is rated high risk due to its technical complexity, high value, and critical role in achieving the PDO. A Request for Bids (RFB) with single‐stage bidding, preceded by a PQ process, will be applied to ensure that only contractors with adequate capacity and experience, among all active in the region, compete for the contract award.
(b) A Quality‐ and Cost‐based Selection (QCBS) approach would be used to engage an owner’s engineer consultancy (estimated at US$2 million) and a safeguard management consultant (estimated at US$1 million), given the strategic importance of ensuring smooth procurement, adequate supervision of the DSI contractor, and sound safeguards management and compliance during the Ywama power plant rehabilitation.
(c) An open competition on the international market (using the single‐stage, one‐envelope RFB method) would be used to procure the transmission network equipment (such as mobile substations, power and current transformers, power and shunt reactors, switch bays, and protection and control devices), which is considered as a standard procurement approach. During the first 18 months of project implementation, mobile substations will be procured with an estimated value of US$9 million. Other transmission equipment to be procured will be decided during project implementation, upon the borrower’s request and outcomes of the ongoing technical assistance work to help the country address climate resilience and adaption.
65. More details on PCRA, procurement risk rating, mitigation measures, and PPSD summary are presented in annex 4.
C. Safeguards
(i) Environmental Safeguards
66. The project triggers the policy on Environmental Assessment (OP/BP 4.01) because of the potential adverse impacts associated with the implementation of Components A and B. The proposed project has been classified as category ‘B’ due to the adverse environmental and social impacts, which are primarily related to the civil works to be conducted during construction or operation of the project’s investments. Physical works are expected to take place within the existing brownfield locations, particularly at Ywama power plant and in existing substations. However, risks are limited and site‐specific, and mitigation measures can be readily designed to mitigate these risks.
67. The implementation of the project will have overall climate mitigation and adaption benefits, including by reducing GHG emissions per unit of power generated. The specific benefits expected are: (a) increased and more reliable power supply; (b) improved systems resilience to climate events; and (c) improved energy efficiency of power generation, thereby reducing GHG emissions per unit of output generated.
68. The potential adverse impacts are associated with the implementation of Component A and, to a lesser extent, Component B. The upgrading of Ywama power generation units, under Component A, involves dismantling two existing simple cycle power plants and relocating an existing gas turbine with steam‐powered
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turbo generator units, as well as its auxiliary systems, to allow space for the installation of up to two high‐efficiency gas turbines and a steam generator. Component B includes the purchase of mobile substations, installation of high‐voltage equipment, and climate resilience works in selected system‐critical, high‐voltage substations. Works will include the anchoring and elevation of existing equipment to reduce the risk of equipment failure during disasters such as earthquakes and floods. The potential adverse impacts of the project related to the dismantling of the existing plant, the installation of the new generation units, and the works at substations include the following: (a) increased levels of dust, noise, and other emissions; (b) increased material stockpiles; (c) increased operation of heavy equipment; (d) increased transportation of construction materials and electrical equipment, and related traffic disturbance and road safety impacts; (e) hazardous waste generated during the dismantling of the old plant, especially asbestos; (f) construction site waste generation, such as construction and domestic waste and wastewater; (g) small‐scale soil erosion due to wastewater and sedimentation, affecting surface water quality and, particularly, the Hlaing River; (g) impacts related to labor influx; and (h) health and safety issues for workers and community. The impacts, however, are expected to be small to moderate, localized, and temporary, and can be mitigated.
69. The potential negative impacts during operation of the project are associated with workers’ health and safety. These are mainly related to exposure to electric and magnetic fields, heat, noise, confined spaces, electrical fires and explosions, and chemical hazards from the power plant, high‐voltage power lines, and substations. The residents living next to the power station would be affected by increased noise. These risks can be reduced by strictly applying national and international technical regulations and standards at the project design stage and by following electricity safety regulations during project operation. The potential risk of oil leakage from transformers is addressed by constructing an emergency oil collection and storage tank. The potential risk of polychlorinated biphenyls will be strictly treated as discussed in the Environmental and Social Management Framework (ESMF) also prepared for this project.
70. To address the project’s negative social and environmental impacts, an Environmental and Social Impact Assessment (ESIA) and an ESMF have been prepared. The safeguards instruments prepared by EPGE and DPTSC are found to be satisfactory. An ESIA for the Ywama power plant was also prepared and submitted for the approval of the Government of Myanmar (GOM). The project will comply with government regulations on environmental and social assessments and the World Bank’s safeguards policy requirements, as specified in the ESMF. The Environmental and Social Management Plans (ESMPs) to be prepared for the activities identified during implementation will follow the ESMF. During implementation, the contractor will undertake a hazard and operability study to identify and evaluate problems that may represent risks to the workers and communities or equipment. Among others, the study would also focus on assessing explosion risks and their impact on the nearby residential areas. The hazard and operability study will propose mitigation measures and include follow‐up actions if it concludes that the location of the current building is in the high‐accidental‐risk zone. If such actions would require the relocation of the power plant workers, EPGE will be responsible and bear the costs of the relocation of the power plant workers. In addition, the contractor will also be required to develop and implement a detailed hazardous waste management plan and occupational health and safety management plan during both the preconstruction and construction phases. These requirements will be included in the bidding documents and the DSI contract. This contract will also include provisions to provide plant staff with material and procedures needed to mitigate potential contagion risks related to the COVID‐19 pandemic.
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(ii) Social Safeguards
71. The project triggers the World Bank Involuntary Resettlement (OP/BP 4.12) policy on a precautionary basis. Although all project activities will take place within the physical footprint of the existing facilities under Component B, it is possible that additional small strips of land may be required to enlarge the footprint of the substations to accommodate new equipment or the installation of new mobile substations. Therefore, a Resettlement Policy Framework (RPF) has been prepared and disclosed as a stand‐alone section of the ESMF report. Involuntary resettlement does not apply to Component A since all project activites will be undertaken within the existing footprint of the power plant. However, to ensure that provisions for land adquisition and access restriction are in place for the layout areas during project construction, a site‐specific Environmental and Social Layout Areas Plan is included as part of the ESIA mitigation measures.
72. The project triggers the Indigenous Peoples (OP/BP 4.10) policy as the specific locations of the activities to be financed under Component B will be determined during project implementation. Although this project is not expected to negatively affect indigenous people, some of the substations may be located in areas where indigenous people reside or work. To ensure that they are meaningfully consulted, OP 4.10 has been triggered on a precautionary basis. Therefore, a Community Participation Planning Framework (CPPF) was prepared and included as a stand‐alone section of the project's ESMF. Among other contents, the CPPF discusses how meaningful and culturally appropriate consultations should be carried out and the main contents of Indigenous Peoples Plans, if the plans are required. The CPPF was presented and discussed with key stakeholders at the national level on February 28, 2020, and the feedback received was included on its final version.
73. The main project risks include gender‐based violence (GBV) and sexual exploitation and abuse (SEA) related to labor influx during construction and noise and vibration during plant operation. Key risk considerations and proposed mitigation measures are as follows:
(a) Noise and vibration. The ESIA conducted for Component A states that noise and vibrations are one of the main risks due to the noise registered (Leq) near the residential building located next to the plant. In that area, noise was found to be 76.5 dB(A), which exceeds the prescribed World Bank Group Environmental, Health and Safety Guidelines’ limit of 55 dB(A) during the daytime and 45 dB(A) during the nighttime for residential areas. This problem especially affects the 80 apartments (buildings E6–E10) housing EPGE staff located 100 meters from the power plant (aerial distance from the center of the plant). Company employees and their families living there are also affected by vibrations, especially those caused by sporadic emergency shutdowns. The ESIA states that sufficient noise control and isolation measures should be adopted to protect the surrounding apartments from the impacts of noise and vibration. In case those noise thresholds cannot be met and other risks such as explosion cannot be mitigated, the borrower has committed to relocating the power plant workers and affected residents in the nearby areas.
(b) GBV and SEA risks related to labor influx are expected to be moderate. The project may bring direct temporary benefits for skilled and unskilled workers, who would be employed during the construction of the project. However, there are GBV and SEA risks. For Component A, workers’ camps are not expected and the project activities will be carried out near residential areas. It is estimated that about 300 workers will be recruited during the dismantling of the old plant at the preconstruction stage. This will increase to about 800 during the construction phase. These workers will be sourced from Yangon City (with an estimated population of over 7 million people) and commute on a daily basis. Therefore, no labor camps will be required. Hence, the ESIA for
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Component A consists of a GBV plan that includes the following mitigation measures: (i) provisions to promote local recruitment of the workforce, including training programs to be delivered by the plant contractor so that local people can become skilled workers and be employed at the plant during construction; (ii) a workers’ code of conduct (for both worker‐community and worker‐worker interactions); and (iii) training and public awareness activities to avoid sexual harassment, sexual assault, and exploitation and human trafficking. For Component B, the risk seems limited since the required works will need relatively mid‐size crews of approximately 60 skilled and unskilled workers, the majority of whom will be recruited locally. Most part of the technical staff will be DPTSC employees and will be accommodated in the residential colonies of DPTSC.
74. Both Components A and B include mitigation measures to ensure that the local communities affected by the project works are properly notified of the timing and scope of the planned works and disturbances are minimized. Such minimization of disturbances may comprise limiting working hours to daylight, taking special precautions when the work is carried out near children's institutions, or traffic management including, if required, the establishment of alternative temporary traffic routes. Especially for Component A, the 650‐meter‐long access road to the plant carries a risk of accidents as it is narrow and has just enough width to allow maneuver of the vehicles. Therefore, proper mitigation measures will have to be adopted to reduce the risk of any incidents on this road.
75. Safeguards implementation, monitoring, and training. The PIUs will be responsible for implementing and monitoring the environmental and social safeguard instruments (ESMF, ESIA, RPF, and CPPF) through their dedicated environmental and social focal points during project implementation. EPGE will therefore be responsible for effectively implementing the environmental and social safeguards for Component A, monitoring their compliance, and regularly liaising with local authorities and communities. EPGE will also be responsible for incorporating the Environmental and Social Management Plan (ESMP) for the Ywama power plant into the standard tender documents to be used as a basis for contractors to implement environmental management during the construction phase. The implementation of the ESMP will be supervised and monitored by the owner’s engineer and an independent environmental and social management consultant firm to be contracted by EPGE for this purpose. The performance and compliance with environmental and social safeguard instruments will also be subject to regular supervision from the World Bank task team. EPGE PIU staff, contractors, supervision consultants, and local community representatives will receive training on the safeguard instruments to be applied to the project. For Component B, DPTSC is responsible for implementing the ESMF, RPF, and CPPF, including the preparation and implementation of subproject ESMPs, Resettlement Plans, and Indigenous Peoples Plans, as required.
76. Public consultations and information disclosure. Consultations on the draft ESIA for the Ywama power plant rehabilitation were conducted by EPGE PIU staff working with affected communities, local authorities, and EPGE staff resident at the plant on December 22 and 23, 2018. Consultations on the ESMF and the RPF were also organized with EPGE and DPTSC officials; the employees at the substations of Taungoo, Tharyargone, and Belin; and local communities in January 2019. A consultation for the CPPF was carried out on January 28, 2020, with representatives of civil society organizations (CSOs) working with ethnic groups at the national level. The feedback received in all these consultations has been incorporated into the project design and the ESIA, ESMF, RPF, and CPPF approved by the World Bank. The draft versions of the ESIA and ESMF, including the RPF and CPPF, were disclosed on the MOEE website on November 29, 2019, and the final versions, approved by the World Bank, were
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disclosed on February 25, 2020. The ESIA was disclosed in the World Bank’s external website on February 6, 2020, the ESMF was disclosed on February 10, 2020, and the RPF and the CPPF were disclosed on February 12, 2020.
(iii) Gender
77. Gender action and M&E. To help reduce the gender productivity gap at work due to childcare responsibilities (identified in section IV.B), the project will support the setup of a childcare pilot at MOEE. Specific activities include the preparation of a detailed rollout plan, in close collaboration with the MOSW, building on lessons learned from similar activities in Myanmar and internationally. The rollout plan set out critical aspects for the implementation of the pilot such as demand at MOEE, logistics, financial sustainability based on users’ contributions, employer legal obligations, quality and safety guidelines, and safeguards instruments to be applied. Based on the plan, the project will provide funding to cover the setup costs required for the childcare pilot such as material to start operations, refurbishment of facilities, and training material for the childcare staff.35 The expected outcome of the activity will be directly linked to the indicator measuring the gap between the respective amounts of time that the male and female MOEE staff using the childcare pilot spend on childcare during working hours, as defined in the Results Framework (see section VI, Results Framework and Monitoring)36. Specifically, the project will carry out annual impact assessment surveys during implementation to monitor: (a) the impact of the childcare pilot on productivity tracking information on key impacts, such as reduction of absenteeism during working hours due to childcare obligations and opportunities to accept promotions and attend trainings; and (b) user satisfaction levels. The feedback collected will guide subsequent MOEE efforts to further improve the pilot for a larger impact on workforce.
(iv) Citizen Engagement
78. The main beneficiaries of the project will be households, SMEs, and other firms connected to the public power grid in the Yangon region. Because of the technical characteristics of the investments, specific citizens and firms or their groups cannot be identified during the conduct of beneficiary satisfaction surveys. Therefore, the project will monitor citizens affected by the project activities during implementation. The objective would be to ensure that feedback received is adequately captured and addressed through a functional GRM available to citizens.
D. Grievance Redress Mechanism
79. The project will have an internal GRM in place that the aggrieved party or parties can use to lodge their complaints and get them amicably settled. During construction, the GRM will be managed by the contractors under supervision of the PIUs. The contractors will inform the affected communities about the GRM availability to handle complaints and concerns about the project. Confirmation that the mechanisms are maintained functional during the implementation of the project will be included in EPGE progress reports, stating if and how
35 The batch will follow the dedicated course on early childhood education currently given at the MOSW. 36 This indicator is considered as a proxy for increased productivity of female MOEE staff because the assumption is that if their child or children are in childcare, mothers have more of an opportunity to focus on their work. While there are important drawbacks in considering time spent during working hours to measure employee productivity, it is important to note that Myanmar is an FCV country with significant lack of data and information on productivity or absenteeism in Myanmar’s public sector. Other aspects of the gender gap identified are in the compatibility of professional growth and childcare, such as promotions or trainings, tackle legislation and national laws. Thus, there was no specific action identified that this project could contemplate.
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feedback received has been used and grievances addressed. If this has not been done, an explanation will be included in EPGE progress reports.
80. In addition, communities and individuals who believe that they are adversely affected by a World Bank (WB)‐supported project may submit complaints to the existing project‐level GRM or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project‐related concerns. Project‐affected communities and individuals may submit their complaints to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of WB non‐compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects‐operations/products‐and‐services/grievance‐redress‐service For more information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
V. KEY RISKS
81. The overall implementation risk is rated Substantial, due to the following main factors: (a) macroeconomic risks; (b) governance and fiduciary risks associated with the procurement and implementation of a large and complex contract; (c) technical risks due to the challenging site and operating conditions at the Ywama power plant; (d) risks related to policies in the gas sector affecting its availability; (e) low institutional capacity (particularly with regard to safeguards implementation and compliance) and competing priorities of qualified staff at IAs to focus on the project; and (e) social tensions among key stakeholders such as the population that remains unconnected to the grid. Other risk factors are rated Moderate. The measures to mitigate substantial and high risks and ensure the achievement of the PDO are outlined in the following paragraphs.
82. Macroeconomic risks. There is substantial uncertainty surrounding the economic impact of the COVID‐19 pandemic, and economic growth is expected to slow down substantially compared to the forecasted 6.4 percent in FY19‐20 due to indirect and direct impacts of the pandemic. The economy is expected to rebound to 4 to 6 percent in FY20‐21 in line with regional peers. However, downside risks are high from a prolonged crisis, compounding domestic uncertainties relating to conflict and elections by November 2020. The economic costs of the pandemic could be high, since it is likely to lead to a simultaneous supply shock (production slows or ceases due to confinement measures) and demand shock (consumption and investment weakens due confinement, loss of income, and weak prospects of investment returns). The Government has recently implemented several measures in response including public health measures and economic stimulus actions, mostly to support cash‐constrained firms in the most vulnerable sectors by reducing interest rates and intervening in the exchange market. To protect households, the Government has implemented an electricity bill waiver for up to 150 kWh (as discussed earlier) and will provide a food basket containing key staples to lower‐income and vulnerable households. In the medium term, additional policy responses would need to focus on using existing buffers for shoring‐up stability and demand.
83. Governance, political, and stakeholder risks. Domestic vulnerabilities associated with the negative spillovers from a flare‐up in conflict and violence could create further indirect economic impacts, especially with respect to tourism revenue, foreign investor sentiment, and the possible revocation of trade preferences. Domestic vulnerabilities in relation to increased conflict and violence can increase social tensions among the population. In the context of the proposed project, the risk is considered substantial within those segments of the
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population that remain nonconnected but reside or work in the proximity of project activities in substations. To mitigate this risk, the project includes a selection criterion of substations and works that would support the extension of the national grid, with focus on those areas where disadvantaged households live.
84. Fiduciary risks. Ensuring a timely and transparent procurement process will be key to mitigating these high risks and achieving value for money. Myanmar faces substantial governance challenges, and the power sector is no exception. In this environment, reputable firms could decide not to participate in the tenders. To mitigate high fiduciary risks in the procurement of the Ywama power plant upgrading, the IAs will engage in a transparent market engagement process, followed by the implementation of an international DSI tender in accordance with the World Bank’s procurement processes. Due to its large value and risks, the process will be reviewed by the World Bank’s Operational Procurement Review Committee. To reduce the risk of long review and approval processes by MOEE, senior management has committed to expediting these reviews. Other measures to mitigate fiduciary risks are described in annex 4.
85. Risks related to the technical design of the project. Although CCGT is a mature technology, space constraints for the installation of the new CCGT, combined with the need to keep the remaining facilities operating during construction, will require careful planning and substantial coordination between the contractor, the PIU at EPGE, and plant operators. EPGE PIU staff will receive training in contract management, follow up closely the agreed implementation schedule with the contractor, and establish direct communication channels with the plant operators. On‐the‐ground technical support from the owner’s engineer will also help identify early any coordination issues that may arise during construction.
86. Risks related to the sector strategies and policies. During plant operation, shortage of gas supply is a risk, particularly given the expected decline in domestic gas supplies in the medium‐to‐long term and uncertain gas allocation rules among power plants. To mitigate this risk, the technology choice was to minimize exposure to fuel shortages by increasing the efficiency of gas utilization and eliminating the need for additional supply allocation for the Ywama power plant. In the medium‐to‐long term, the supply and availability of gas will rely on MOEE and MOGE undertaking some of the actions foreseen to maintain the current levels of domestic gas supplies at around 400 million cubic feet per day (MMcfd). Key planned measures include reallocation of exports to the domestic market, production plateau extension from the Zawtika and Yadana, exploitation of recently discovered reserves, and/or pipeline de‐bottlenecking to increase domestic deliveries. However, it should be noted that success in attracting private investments in the exploitation of recent discoveries is mixed because of an unfavorable fiscal framework for upstream gas and the recent collapse of oil prices, which will make the economics of developing higher‐cost gas projects more challenging. Also, the Government’s approach to LNG has so far consisted in procuring fully integrated power‐to‐LNG projects, thereby reducing other complementary solutions; the risk of having in place appropriate and timing sector strategies that guarantee gas supplies is perceived as substantial. The World Bank will continue its engagement with the GOM on the policy dialogue regarding upstream gas fiscal framework reform to incentivize private sector investments in gas exploration and development through parallel technical assistance and advisory services and analytics.
87. Environmental and social risks and risks related to the institutional capacity for project implementation and sustainability. While there is adequate technical capacity in the development of thermal power plants, only a handful of qualified staff are involved in all projects under implementation and planning, and there is also a lack of institutional mechanisms at MOEE and EPGE to deal with the large number of projects. Qualified staff to implement and supervise compliance with social and environmental safeguards are particularly scarce within the IAs and the national safeguards framework is relatively recent. This could make implementation vulnerable to
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delays and poor management. This is also the first project to be implemented with funding from the World Bank by DPTSC. While the department has been working with other international financial institutions and donors, PIU staff lack knowledge of World Bank policies and procedures. To mitigate these risks, the World Bank will provide training in fiduciary and safeguards issues to PIU staff in addition to HEIS. External support through the owner’s engineer and the independent safeguards management consultant should also support PIUs in the overall oversight. Together these capacity‐building and technical assistance activities would contribute to improving institutional capacity sustainably.
.
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VI. RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Myanmar
Power System Efficiency and Resilience Project
Project Development Objectives(s)
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.
Project Development Objective Indicators
RESULT_FRAME_TBL_PDO
Indicator Name DLI Baseline End Target
Increase the output and efficiency of power generation
Projected energy or fuel savings (CRI, Mega Joules (MJ)) 0.00 440,000,000.00
Increase the output of power generation
Generation capacity of energy constructed or rehabilitated (CRI, Megawatt)
0.00 250.00
Improve the resilience of the power network
Annual outages in targeted substations (Text) N.A. N.A.
Support the government's program on universal electricity access
Disadvantaged/vulnerable people benefiting from access to electricity or improved quality of service (Number (Thousand))
0.00 500.00
PDO Table SPACE
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Intermediate Results Indicators by Components
RESULT_FRAME_TBL_IO
Indicator Name DLI Baseline End Target
Upgrading Ywama Power Generation Units
Plant construction progress (Percentage) 0.00 100.00
Thermal efficiency of energy conversion in the Ywama gas power plant (Percentage) 19.90 54.00
Gap in annual time spent on childcare during working hours between male and female MOEE staff benefiting from the childcare pilot (Days)
15.50 7.00
Implementation support received up to satisfaction to meet technical specifications, contract oversight, and safeguards monitoring contractual requirements (Yes/No)
No Yes
Improving Resilience of the Power Network
Mobile substations deployed for fast response and recovery to climate events (Number)
0.00 4.00
Grievances responded to and/or addressed through the functional GRM available to citizens and within the stipulated response time (Percentage)
0.00 100.00
IO Table SPACE
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators
Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection
Responsibility for Data Collection
Projected energy or fuel savings Annual
EPGE progress report
Measures lifetime fuel savings (over 30 years) achieved through
EPGE
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energy efficiency improvements at the Ywama power plant. Projected savings are calculated against a baseline scenario in the absence of the project in which existing units, with annual average thermal efficiency of 19.9 percent, would continue operating. Savings are defined as fuel savings calculated at plant commissioning on the basis of the guaranteed thermal efficiency by the contractor. The methodology for calculation of gas fuel savings will assume a 80 percent load factor for the new plant
Generation capacity of energy constructed or rehabilitated
Annual
EPGE progress report
The indicator measures in megawatts (MW) the generation capacity of high‐efficiency CCGT at the Ywama power plant constructed through the project. The
EPGE
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capacity corresponds to the net capacity, at site conditions, guaranteed at the commissioning stage by the contractor.
Annual outages in targeted substations
The indicator will monitor the number hours of of outages per year in targeted substations. Targeted substations owned and operated by DTPSC benefiting from new equipment and/or measures to improve infrastructure resilience to climate change and events.
Annual
DPTSC progress report
This indicator is calculated as an aggregation of outage hours in targeted substations. Since specific investments and substations will be defined during project implementation, the baseline and target values will be defined in the first six months of project implementation.
DPTSC
Disadvantaged/vulnerable people benefiting from access to electricity or improved quality of service
This indicators measures the number of people living in disadvantaged townships benefiting from investments to increase electricity access in the Yangon region or to improve the quality of electricity services
Annual
EPGE and DPTSC Progress Report
This indicator captures the number of individuals ho live in townships with a disadvantage index above 7.3 benefiting from the project's investments. These include people provided with access to the public electric
EPGE and DPTSC
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grid in the Yangon region or benefiting from investments in substations financed by the project. The disadvantage index by township is based on the MDI‐2 indicator calculated by the World Bank (Multi‐Dimensional Welfare in Myanmar, 2018).
ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators
Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection
Responsibility for Data Collection
Plant construction progress
This indicator measures the completeness of the construction works to implement the new CCGT unit in Ywama gas power plant.
Six‐monthly
EPGE progress report
This indicator is calculated as design, supply and installation activities completed by the contractor according to the milestones and implementation schedule specified in the contract.
EPGE
Thermal efficiency of energy conversion in the Ywama gas power plant
The indicator measures the thermal conversion
Annual
EPGE progress
This indicator is measured as the share
EPGE
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efficiency at the Ywama power plant.
report
(%) of thermal energy of the associated gas consumption (based on its lower heating value). The indicator will be based on the guaranteed thermal efficiency by the contractor at the plant commissioning stage.
Gap in annual time spent on childcare during working hours between male and female MOEE staff benefiting from the childcare pilot
The indicator will monitor the difference of time spent by men staff and female staff at the Ministry of Electricity and Energy and men on childcare during working hours. The time spent by female will be based on surveys of those benefiting from the childcare pilot implemented by EPGE.
Annual
EPGE progress report
This indicator will me monitored through impact surveys conducted to an statistically significant number of MOEE staff benefiting from the childcare pilot, which will be implemented by EPGE during project implementation.
EPGE
Implementation support received up to satisfaction to meet technical specifications, contract oversight, and safeguards monitoring contractual requirements
This indicator monitors whether implementation support has been provided to the client throughout the implementation of component A of the project. Implementation support, in this case, refers to: (i) assistance from an owner's
Six‐monthly
EPGE progress report
This indicator will be monitored through EPGE's periodical revision of compliance with the contracts signed between the implementing agency and the external consultants. Any
EPGE
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engineer, and (ii) assistance from an environmental and social management consultant.
violation or deviation from compliance with contractual requirements will be reported in EPGE progress reports.
Mobile substations deployed for fast response and recovery to climate events
This indicator measures the number of mobile substations deployed in key locations of the transmission network to support enhanced system recovery in case of climate change events or disasters.
Annual
DTPSC progress report
This indicator is calculated as an aggregation of mobile substations deployed and available for use in case of emergency for fast system recovery.
DPTSC
Grievances responded to and/or addressed through the functional GRM available to citizens and within the stipulated response time
This indicator measures whether the GRM available to citizens during the project implementation is functional to engage citizens and addresses their feedback.
Semi‐annual
EPGE progress report
The indicator will capture: (i) the numbers (aggregated) of grievances received and the number of those responded within the stipulated response time, (ii) if/how grievances are addressed, and (iii) if/how feedback has been used. In the event that grievances are not responded within the stipulated response time or addressed, an
EPGE
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explanation will be included in EPGE progress reports.
ME IO Table SPACE
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ANNEX 1: Implementation Arrangements and Support Plan
COUNTRY: Myanmar
Power System Efficiency and Resilience Project
Strategy and Approach for Implementation
1. The planned implementation period for the Power System Efficiency and Resilience Project is five years. The proposed closing date for the IDA credit is June 30, 2026.
Institutional Implementation Arrangements
2. Lending arrangement. There will be a Financing Agreement between IDA and Myanmar represented by the Ministry of Planning, Finance, and Industry. The Ministry of Finance will make the proceeds of the credit available to the IAs under the Government’s budget. The IAs operate under the control of MOEE.
3. IAs. Component A of the project will be implemented by EPGE, which will own and operate the Ywama power plant. EPGE will engage an experienced engineering consultant to assist as an owner’s engineer providing technical and operational support during project preparation and implementation of the project. DPTSC will be the IA for Component B of the project. Technical assistance activities that are not identified at this stage, and hence not described in this document, will be agreed during project implementation. In that case, if these activities were proposed to be implemented by an agency other than EPGE or DPTSC, MOEE and the World Bank will need to agree on the arrangements before authorizing the activity.
4. PIU and focal points. The IAs have appointed focal staff, confirming PIUs, who will work with the World Bank to accomplish the fiduciary, safeguards, and supervisory tasks over the project implementation. The PIUs include designated staff for each project management area, comprising one project coordinator and two or more chief engineers, procurement specialists, financial management specialists, and environmental and social specialists (see figure 1.1). The chief engineers will manage all technical aspects of the project. The project coordinators will act as liaison and nexus between the World Bank and all designated focal points. The focal points will be responsible for implementing and supervising the project in each specific domain and coordinating with their equivalents in the other PIU as necessary, particularly on contract management and fiduciary issues. These focal points are expected to help distribute the burden of implementation tasks among various specialized offices, accelerating project processes and alleviating the administrative load on specific officials (see section II.F, Lessons Learned and Reflected in the Project Design).
5. Technical implementation and supervision. The PIUs of the proposed project, EPGE and DPTSC, will be responsible for the technical implementation of the project under the overall oversight of MOEE. The PIUs will use their existing organizational structures and processes to implement the procurement and financial management project implementation tasks. Among other tasks, these will include preparing budget and annual work plans, managing project funds in line with eligibility guidelines, operating the Designated Accounts (DAs), enabling the project funds’ disbursements, and applying for withdrawals. The PIUs will also be responsible for the technical supervision of the project, supported by the owner’s engineer and the environmental and social safeguards consultants. As part of this task, EPGE and DPTSC will supervise the contractor’s performance and monitor the overall project implementation. This includes arranging annual financial audits and coordinating the submission of the annual financial audit reports to the World Bank Group.
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Figure 1.1. Institutional Implementation Structure
6. Monitoring. EPGE and DPTSC will monitor the progress of Components A and B, respectively, against the agreed performance indicators (see section VI, Results Framework and Monitoring). The PIUs are responsible for updating the Results Framework and reporting progress every six months. The biannual progress reports will be submitted to the World Bank Group. The progress reports will include updates on the functionality of the GRM, which will be in place for citizen engagement and submission of any complaint, concern, or issue that might arise in relation to the project (see section IV.C, Safeguards).
Implementation Support Plan
World Bank
7. The World Bank team members for procurement, financial management, and social and environmental safeguards will be based in East Asia and Pacific country offices to ensure closer support for the client.
8. Formal supervision and field visits will be carried out semiannually. Through these regular visits, the World Bank will provide support to the implementing units, identify arising issues impeding the project’s progress, and discuss actions to resolve critical bottlenecks. The World Bank will closely monitor the overall progress of project implementation by reviewing the semiannual progress reports, the execution of the Procurement Plan, the actual disbursements of the IDA credit, and so on.
9. Detailed inputs from the World Bank team are outlined below and summarized in table 1.1:
(a) Technical inputs. Inputs of technical specialists will be required to review bid documents and associated technical specifications to ensure that adequate technical standards are observed and that they enable a fair competition. Technical specialists will also be needed to review bid evaluation reports and monitor implementation of the project during construction and commissioning.
(b) Fiduciary requirements and inputs. The World Bank team will help MOEE, EPGE, and DPTSC to identify capacity building needs to strengthen its financial management capacity and to improve procurement management efficiency. Training will be provided by the World Bank's financial management and procurement specialists before the commencement of, and during, project implementation to the extent needed. Formal supervision of financial management
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will be carried out semiannually, while procurement supervision will be carried out as required by the client and project implementation timeline. In addition, a procurement specialist and technical experts of the World Bank have been assigned to provide HEIS to facilitate the procurement of major complex packages and ensure the smooth application of the World Bank’s Procurement Regulations.
(c) Safeguards inputs. Inputs from an environment specialist and a social specialist will be required. The support will focus on institutional capacity building for environmental and social safeguards for EPGE and DPTSC as well as at Ywama power plant and substations as needed. Field visits will be based on the project needs and are expected to be semiannual during the first 18–24 months of project implementation.
(d) Inputs on EPGE’s financial performance. Input will be required from a financial specialist for a regular review of EPGE’s financial status to monitor its financial capability. This exercise will be combined with the supervision of other World Bank‐financed projects implemented by EPGE through semiannual reviews.
(e) Inputs on sector policies. The World Bank will provide, through its staff and consultants as needed, experts who will engage in policy support to MOEE, complementing the activities of other donors.
Table 1.1. Summary of the Implementation Support Focus
Time Focus Skills Needed
First 12 months Monitor and assist in procurement of them main contracts, as appropriate
Procurement Technical
Monitor implementation of institutional capacity building on environmental and social safeguards
Environmental and social
Sector policies including financial viability of EPGE and other sector entities
Power sector policy Financial
After the first year until project closing
Monitor project implementation (including construction progress)
Technical Procurement
Monitor financial management and disbursement Financial
Monitor performance of environmental and social impact management plan
Environmental and social
Sector policies Power sector policy Financial
10. Table 1.2 presents the skills mix required to provide these inputs.
Table 1.2. Skills Mix for World Bank Inputs
Skills Needed Number of Staff Weeks Per Year
Number of Trips Per Year
Comments
Procurement 12 2 Based in the region
Financial management 3 2 Based in the region
Technical 4 2 Based in the region and the headquarters
Environment 3 2 Based in the region
Social 3 2 Based in the region
Power sector policy 8 4 Based in the region and the headquarters
Others (administrative) 6 Field based
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External Consultancy and Specialized Advisory Services
11. To support EPGE and DPTSC on the technical supervision of the project, a firm will be procured as owner’s engineer. The owner’s engineer will work in close collaboration with EPGE and DPTSC to oversight the implementation of all components. Given the limited institutional capacities for safeguards compliance of EPGE and DPTSC, the project is also procuring an ESIA expert to reinforce supervision of safeguards implementation throughout the development of the project. The consultants will work closely with EPGE and DPTSC operational staff and focal points and provide training and build capacity within departments and report directly to EPGE PIU project coordinator.
Proceedings
Fiduciary Proceedings
(a) Financial management and disbursements. The financial management, disbursement arrangements, and reporting requirements will be conducted as detailed in the financial management manual developed for the project. The document also presents staffing, budgeting, and accounting proceedings as well as the internal controls, funds flows, and auditing. The disbursements of the credit shall be made against the expenditure categories defined in table 1.3.
(b) Procurement. Procurement of goods, works, and services will be conducted as detailed in the PPSD and the Procurement Plan developed for the project (see annex 4). These documents also further define the procurement support contemplated under the project.
Environmental and Social Safeguards
12. Detailed proceedings for environmental and social safeguards were specified in the safeguards instruments developed and publicly disclosed for the project: the ESIA, ESMF, RPF, and CPPF. These documents also detail the stakeholders’ consultation and disclosure processes as well as M&E activities to be conducted throughout project implementation.
Table 1.3. Expenditure Categories
Expenditure Category Allocation (US$)
Allocation (SDR)
Financing Percentage (inclusive of taxes)
Goods, Works, Non‐Consulting Services, Consulting Services, Incremental Operating Costs, and Training for the Project
350,000,000 254,900,000 100%
Total 350,000,000 254,900,000 100%
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ANNEX 2: Economic and Financial Analysis
COUNTRY: Myanmar Power System Efficiency and Resilience Project
1. This annex presents the economic and financial analysis for the investments under Component A (Upgrading Ywama Power Generation Units, covering 82 percent of total investments), given that the costs and benefits can be better quantified. The methodology used to assess the economic and financial viability of the project is consistent with the World Bank Guidelines for Economic Analysis of Power Sector Investment Projects and the Guidelines on Shadow Price of Carbon in Economic Analysis 2017.
Project Rationale
2. Through this component, the proposed project aims at addressing a growing gap between supply and demand in Myanmar’s power sector due to inadequate generation capacity. Key issues regarding power generation capacity are summarized as follows:
Peak demand is expected to grow at an average of 11 percent per year according to MOEE’s estimates. This means peak demand would increase from the current level of ~3,500 MW to approximately 10,000 MW by 2030.
Most of the demand growth is concentrated in the Yangon region, which currently accounts for 40 percent of total demand of the entire country. Therefore, electricity supply options are needed to mitigate future shortfalls in this region and free up electricity in the rest of the country.
The current supply capacity is limited and therefore an increase in peak demand in the range of 6,000–9,000 MW over the next decade would require 8,000–11,000 MW of firm capacity addition.
Myanmar’s power generation cost—the so‐called “merit order curve”—is already quite steep, with costs jumping from MMK 50 per kWh (US¢3.3 per kWh; US$1 = ~MMK 1,500) or less for half of the capacity that are hydro units to more than MMK 100 per kWh (if not more than MMK 200 per kWh) for the rest of the thermal units.
To address power shortfalls expected in the next two years, discussions are already under way regarding emergency power in the range of 1,000 MW (LNG ships/barges and other thermal generation).
Because emergency power is the most expensive alternative for meeting demand, the country needs to develop lower‐cost options to reduce the need for emergency power in the medium term and meet the expected growth of demand in the long term.
Least‐cost Justification
3. There is no government‐approved least‐cost power development plan. To evaluate whether the proposed 300 MW CCGT power plant (Ywama CCGT) to be commissioned by 2023 is among the least‐cost options to meet electricity demand, the World Bank developed an indicative least‐cost analysis based on data and information provided by MOEE.
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4. The analysis was conducted using the World Bank’s Electricity Planning Model (EPM) for 2019–2030, which optimizes system‐wide costs including (annualized) capital cost of new plants, operating costs of new and existing plants, and cost of unserved energy and capacity reserve. The EPM considers the physical constraints on transmission between north and south Myanmar, hydro energy limits on a monthly basis, reserve margin requirement, annual limit on gas, spinning reserve requirement, minimum variable renewable energy limit, and hourly profile of demand and solar/wind profile (2–3 representative days/month).
5. The results of the analysis show the following:
Investment requirements would be at least MMK ~30 trillion (US$20 billion) over 2019–2030 even for the lower end of demand growth and slightly higher at MMK ~32–33 trillion (that is, US$1–2 billion more) for other variants of the demand forecast.
Existing and under‐construction generation will not be sufficient to meet the country’s growing demand in the short and medium terms; no single fuel or technology will be able ensure that electricity supply is provided at least cost to support electrification efforts and economic growth.
Myanmar will have to rely on a combination of different generation fuels and technologies. The country needs to develop its domestic renewable energy resources (solar and wind in the short‐to‐medium term) and its hydroelectricity potential (in the medium‐to‐long term). Power imports can also help meet demand at a low costs.
The need for developing cheaper resources on time—hydro, solar/wind, and imports—can barely be overstated given the substantially more expensive alternatives in terms of LNG/HFO that are responsible for the steep supply curve. In the medium term, Myanmar can save around US$2 billion by developing variable renewable energy generation on a priority basis and in the long term, savings could reach additional US$4 billion (in discounted terms) by developing hydro power. The development of renewable energy generation and hydropower would reduce the reliance on more costly LNG.
Among the power generation options, at a levelized electricity cost of about US¢7.3 per kWh (or MMK 110 per kWh), energy efficiency improvements of gas‐fired generation are a least‐cost option. Given that domestic gas is constrained at 415 MMcfd, efficiency improvements in the aging gas‐fired power plants will support the systems’ cost reductions and environmental footprint by decreasing the need for imported LNG and other costly fossil fuels such as HFO and coal. Finally, gas‐fired generation will support increased penetration of seasonal hydroelectricity and variable energy generation by providing firm capacity in the system.
Scenario Analysis
6. The EPM is used to model the following two scenarios:
(a) Without project (base case). It models the physical limits on flows, gas availability, a central view on demand reaching 10.4 GW by 2030, and expansion of the north‐to‐south 500 kV link in 2023. Short‐term rentals (1,000 MW as discussed earlier) also form part of the supply options over 2020–2022 (for a five‐year period). It does not account for the new 300 MW CCGT power plant in the Yangon region, Ywama CCGT.
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(b) With project (alternative case). In addition to the earlier assumptions, a new 300 MW CCGT power plant is added to the generation capacity of the Yangon region.
Project Costs
7. CAPEX costs. The analysis uses estimated costs provided in the feasibility study37 of US$1,000 per kW for the proposed highly efficient CCGT. The costs correspond to a full turnkey project. Estimated investment costs include EPGE’s owner’s development costs and 10 percent contingencies. Implementation time is assumed to be 36 months. Given that the plant will be in a brownfield and will not require improvements in the existing auxiliary services, land, gas infrastructure, and substation upgrading costs were not considered in the study.
8. OPEX costs. Nonfuel costs include fixed O&M costs and variable O&M costs, which are estimated at US$4.5 per MWh according to the feasibility study. Specifically, the following OPEX costs are included: LTSA for the gas turbines, fixed and variable costs of the HRSG and balance of plant systems maintenance, unplanned maintenance, costs of asset management during operation such as turbine rotor replacement and distributed control system refurbishments after 15 or 20 years, operator personnel costs, overhead, and other services, oil, and chemicals.
9. Fuel costs. These are based on the export parity cost of natural gas at US$8.3 per MMBtu (in 2018 US$), which is slightly higher than the current tariff applied by MOGE for thermal power plant of US$7.5 per MMBtu.
Table 2.1. Key Characteristics Assumed for the Ywama CCGT
Plant Name Start Year Capacity (MW)
Fuela Nonfuel O&M Cost
(US$/MWh) CAPEX
(US$ millions/MW) Efficiencyb
Ywama CCGT 2023 300 Gas 4.5 1,000 54%
Note: a. Assuming Yadana gas. b. Site condition.
Project Benefits
10. Based on the EPM modelling, total output from all generation sources to meet demand was estimated based on a least‐cost dispatch from 2023 to 2030 for both scenarios.
(a) Reduced system costs. Reduced system costs were estimated at US$60 million per year on average. Cost reductions are derived from lower electricity generated from higher‐cost generation options including coal (7 percent lower output), LNG (7 percent lower output), and emergency power (4 percent lower output).
(b) Reduced unmet demand. The amount of unmet demand was estimated to be reduced by 459 GWh or a 54 percent reduction compared to the scenario without project. Reduced unmet demand is priced at a willingness to pay of US¢24 per kWh. This is derived from the estimated fuel cost of US¢20–25 per kWh for using diesel generators in Myanmar.
(c) Reduced transmission losses. Given that the proposed plant will be located near the main load center, Yangon, transmission losses are expected to fall by 69.3 GWh by 2030. The reduction in technical losses is quantified at a system average marginal cost of US$7.1 per MWh.
37 Feasibility Study for YWAMA CCPP, undertaken by consultant Tractebel‐Engie for the GOM.
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(d) Avoided CO2 emissions. The project is expected to reduce carbon emissions by 12.3 million tons of CO2 equivalent. The carbon emission reductions are valued based on the World Bank Guidance on the Shadow Price of Carbon in Economic Analysis of Carbon (2017) and using the base case values of US$30 in 2015 through US$80 in real terms by 2050.
Cost‐Benefit Analysis
11. The economic viability of the component was assessed through a cost‐benefit analysis. A business‐as‐usual ‘without the project’ counterfactual sought to assess the economic merits of the project relative to a scenario where the project infrastructure is not constructed. An ENPV of the project was calculated based on the incremental annual net economic benefits of the project, derived from a comparison of total system costs and benefits with and without the project cases. Costs and benefits were discounted over a 30‐year period, where the benefits start accruing in 2023. This economic analysis applied a conservative social discount rate of 15 percent.38 The GHG emissions reductions were estimated using the World Bank’s recommended estimate of the Shadow Price of Carbon in Economic Analysis.39
12. The analysis demonstrates that the Ywama CCGT project is economically viable (see table 2.2). The project yields an EIRR of 27.9 percent, which is well above the hurdle rate of 15 percent. The ENPV is estimated at US$165.0 million over a 30‐year discount period. The project is likely to reduce GHG emissions by 12.3 million metric tons of CO2 over its life, mainly by improving the efficiency of power generation. Including the benefits of avoided environmental damage, the project’s EIRR yields 30.9 percent and ENPV increases to US$241.8 million.
Table 2.2. Results of Economic Analysis
Unit Value
Social discount rate % 15.0
Economic internal rate of return
EIRR % 27.9
EIRR (including environmental benefits) % 30.9
Economic net present value
ENPV US$, million 165.0
ENPV (including environmental benefits) US$, million 241.8
GHG emissions avoided Mt CO2 12.30
Financial Analysis
13. The financial viability of the project depends on its ability to generate sufficient cash flow from operations to satisfy the debt repayment requirements toward financial institutions. Key financial assumptions were derived from a feasibility study of Ywama CCPP.40 The analysis was carried out from a public owner’s perspective and evaluates changes in free cash flows, under the assumption of 100 percent IDA debt financing with a 2.25 percent financing cost. A weighted average cost of capital (WACC) of 2.25 percent was assumed as a discount rate for the Ywama CCGT financial cash flows. This corresponds uniquely to the net cost of concessional debt financing.
14. The project’s main financial costs are associated with the capital and operating expenditures of the plant. The project starts generating revenues from the sale of additional power to customers in 2023,
38 The World Bank Interim Guidelines (issued in May 2016) recommend using a discount rate equivalent to twice the average rate of growth of the projected gross domestic product per capita in real terms. 39 World Bank. 2017. Guidance Note on Shadow Price of Carbon in Economic Analysis. 40 Tractebel Engineering S.A. 2018. Feasibility Study for Ywama CCPP.
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contributing annually to additional cash inflow of approximately MMK 280.6 billion per year (including 5 percent commercial losses). The earnings before interest and taxes amount to MMK 74.3 billion on average per year. Debt is disbursed over a three‐year period starting in 2020, following a 20‐60‐20 percent scheme.
15. As shown in table 2.3, the project renders an FIRR of 14.9 percent well above the hurdle rate and an FNPV of US$734.2 million. These figures demonstrate the financial viability of the project. The analysis also estimates that the LCOE41 of the proposed CCGT will be MMK 86.2 per kWh (US¢5.7/kWh), which is below the average wholesale supply cost of MMK 130 per kWh in Myanmar. With a minimum annual debt‐service coverage ratio of 3.0, the project generates sufficient revenues to cover its debt obligations.
Table 2.3. Results of Financial Analysis
Unit Value
WACC % 2.25
FIRR % 14.9
FNPV US$, millions 734.2
FNPV MMK, millions 1,101,253
LCOE US¢/kWh 5.7
LCOE MMK/kWh 86.2
Sensitivity Analysis
16. Given the uncertainty around some of the variables affecting the economics of this component, a sensitivity analysis will be carried out to assess the robustness of the project in terms of uncertainties and changes in key input variables, as shown in table 2.4. These are tested based on switching values (ceteris paribus) of the percentage changes in key parameters, including (a) CAPEX overrun, (b) OPEX overrun, (c) social discount rate, and (d) electricity supply revenue. The analysis demonstrates that a CAPEX overrun of 73 percent would render the project economically unviable; a 20 percent drop in the electricity supply revenue would lead to a negative FNPV.
Table 2.4. Switching Value Analysis to Base Case Scenario: Project Cumulated Results
EIRR (%) ENPV (US$, millions)
FIRR (%) FNPV (US$, millions)
Baseline 27.9 165.0 14.9 734.2
CAPEX overrun
+5% versus baseline 26.5 153.6 14.26 719.8
+10% versus baseline 25.3 142.3 13.59 705.5
+15% versus baseline 24.1 130.9 12.96 691.1
OPEX overrun
+5% versus baseline 27.7 162.8 13.09 609.5
+10% versus baseline 27.6 160.5 11.09 484.7
+15% versus baseline 27.4 158.2 8.92 360.0
Social discount rate
~10% 27.9 321.2 14.9 734.2
~12.5% 27.9 231.3 14.9 734.2
Electricity supply revenue
+10% versus baseline 27.9 165.0 19.3 1,086.0
−10% versus baseline 27.9 165.0 9.3 382.6
41 The LCOE represents the NPV of all unit costs of electricity generated over the lifetime of a project (assuming all costs of building, operating, and financing the power plant).
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17. Additional sensitivity analysis was carried out for a scenario where additional investments in the amount of US$50 million are added to Component B. When these investments are considered on a pure capital cost basis and without considering accrual of economic benefits or financial cash flows associated exclusively with this component, the project still renders viable economical and financial results.
Table 2.5. Key Assumptions
Value Source
CAPEX US$1,000 per MW Tractebel feasibility study
Nonfuel O&M cost US$4.5 per MWh Tractebel feasibility study
Fuel O&M cost US$8.3 per MMBtu Tractebel feasibility study
Average power supply revenue MMK 125 per kWh World Bank estimate
Marginal generation cost US$24 per MWh World Bank estimate
Generation cost of diesel emergency plants US$7.1 per MWh World Bank estimate
Tax rate 0% Project is exempt of tax
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ANNEX 3: Inclusion and Peace Lens Note
COUNTRY: Myanmar
Power System Efficiency and Resilience Project
Project Name and P code:
Power System Efficiency and Resilience Project (P162151)
Name of Task Leader:
Claudia Ines Vasquez Suarez Maria Ayuso Olmedo
Estimated financing:
IDA: US$350 million Total: US$350 million
Name of Staff/Consultant assisting with IPL:
Maria Ayuso Olmedo
Key project activities:
Component A: Upgrading Ywama Power Generation Units (US$290 million)
Component B: Improving the Resilience of the Power Network (US$60 million) The proposed project aims at increasing the output and efficiency of power generation and improving power network resilience. To do so, project activities will include the upgrading of the Ywama power plant (Component A), which is a brownfield location, and upgrading works in existing substations countrywide of the power system (Component B). Among other benefits, this will help connect the most disadvantaged townships of the Yangon region to the grid. The project also seeks to strengthen institutional capacities by providing implementation support to the IAs of this project and helping MOEE reduce the productivity gap facing women staff due to childcare responsibilities.
Geographic area(s) of intervention:
The main area of intervention is the Yangon metropolitan area (Insen township), where the Ywama power plant is located, with direct benefits across Yangon townships and indirect benefits across the country. Works to improve the resilience and capacity of the power network will be undertaken within the footprint of existing high‐voltage substations. Power substations are located across Myanmar. Specific substations to benefit from the project’s investments will be decided based on technical and climate risks assessments and will be prioritized based on their coverage of disadvantaged households (according to the MDI). Substations in areas where there is continuing or has been recent violence/conflict, as monitored by the World Bank based on data from the Myanmar Institute for Peace and Security, will not be supported under the project.
Inclusion
1. Background. Has the project identified any specific groups that are particularly excluded from the sector of intervention?
The project has identified that households without access to modern electricity services are excluded in the sector of intervention, which is power generation and supply. Many of these households are in more remote rural areas, where most of Myanmar’s poor and vulnerable live, as well as in disadvantaged townships within the Yangon region. The MLCS 201742 shows that, in 2017, only 4.8 percent of urban
42 Central Statistical Organization (Ministry of Planning and Finance of the Republic of the Union of Myanmar), UNDP, and World Bank. 2018. Myanmar Living Conditions Survey 2017: Key Indicators Report. https://www.undp.org/content/dam/myanmar/docs/Publications/PovRedu/MLCS‐2017.pdf
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households were not connected to the public grid versus 75.3 percent of households in rural settings. Lack of access to electricity is particularly notable in border areas, many of which are affected by conflict, as these areas are far from the existing grid infrastructure (see figures 6.2 and 6.3 in annex 6). Although electricity access in the Yangon region is relatively high (70 percent), there is a stark difference among townships. Those with low access to electricity are also facing the most disadvantages across the region (see section I.B for further details).
To address the concerning rates of electricity access in the country, the Government launched the NEP, which seeks to achieve universal access by 2030 through grid extension and off‐grid initiatives. Under this program, the electrification rate increased from 25 percent in 2010–2011 to 50 percent in 2018–2019, according to recent estimates from MOEE. To support the NEP, the World Bank is implementing the National Electrification Project (IDA credit of US$400 million) to extend the public grid and provide off‐grid solutions for the country’s most disadvantaged households. As of November 2019, more than 1.4 million had benefited from access to modern electricity services under this project. Alongside this progress, the use of distributed generation technologies (such as solar PV home systems and local micro/mini grids) has expanded in Myanmar—particularly in rural areas without access to electricity where the use of candles or kerosene is prevalent. The regional government and the Yangon electricity utility, YESC, have also recently designed a detailed plan and secured funding to electrify all households in the Yangon region within the next three to four years.
This project has also identified that SMEs and low‐income households connected to the grid are disproportionally affected in the sector of intervention by low‐quality electricity services that result in blackouts and brownouts, particularly during the summer season. In Yangon, where electrification rate is high (80 percent), 40 percent of the residents reported voltage fluctuations as their main concern.43 Specifically, the bottom 20 percent of households identified power interruptions as the most serious problem of electricity supplied by the public grid. Unable to afford backup power generators and voltage regulators, lower‐income households bear the costs of long outages and damaged electrical equipment. SMEs, which represent 95 percent of the country’s business landscape and are considered one of the key engines for economic growth and job creation, identify the lack of access to reliable electricity supply as one of the main obstacles holding back their growth. In terms of procedures, time, cost, and reliability of electricity supply, the Doing Business 202044 report ranks Myanmar 148 out of the 190 economies analyzed.
In addition, female professionals are often excluded in the technical streams in the power sector and in the specific sector of intervention. The gender assessment and the literature reviewed during the preparation of this project suggest that the public energy sector in Myanmar offers wide opportunities to develop more inclusive workplaces and diverse workforces. There are barriers for women to realize their full professional development potential due to childcare responsibilities, among others. Key findings of research and interviews conducted with EPGE and DPTSC staff show women face a productive gap compared to men given that (a) they are more likely to be distracted while at work, (b) mothers are more likely to take time off work than fathers, (c) they are more likely to be unable to accept a job promotion, and (d) they are more likely to pass on training opportunities. Childcare responsibilities are compounded by the fact that Myanmar’s administrative capital, Naypyidaw, offers limited services, and staff are far from their family support networks.
43 World Bank staff calculations based on data from the MLCS 2017. 44 World Bank Group. 2020. Doing Business 2020: Comparing Business Regulation in 190 Economies. Economy Profile: Myanmar.
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2. Targeting. How are individual beneficiaries or beneficiary groups selected for participation in the project? Does the project include specific actions or design features that focus on inclusion of specifically identified excluded groups? If not, should it? Does the project seek to strengthen or build systems with relevant agencies to address and/or measure social exclusion?
All groups identified as excluded or particularly affected by the sector of intervention are expected to become direct and indirect beneficiaries of the proposed project.
Unelectrified lower‐income households. The project complements the NEP by making available the power supply required for Myanmar to continue its electrification efforts. Specifically, the project will support the implementation of the regional government and YESC to electrify around 300,000 people living in townships facing the most disadvantages in the Yangon region. In addition, substations will be identified and prioritized based on their potential to support electrification efforts, focusing on those serving the most disadvantaged townships.
Firms and SMEs in particular, will benefit from (a) increased hours of reliable power supply due to avoided load shedding and blackouts, (b) reduced risk of power system collapse and outages, and (c) higher power‐supply quality through more‐stable voltage and frequency. While all electricity consumers in the Yangon region will also benefit from these results, the positive impact on SMEs is expected to be greater as it translates into monetary gains due to (a) lower revenue losses, (b) less need for use of backup generators, particularly for SMEs; and (c) extended operating life of electrical and industrial appliances and machines, which translates into less spare parts and purchases of new equipment.
Female professionals at MOEE will benefit from improved access to quality childcare. The project activities include the development of a rollout plan and support for the setup of a childcare pilot program at MOEE. It is expected that the productivity gap between women staff benefiting from the childcare and men will decrease, as measured by reduced absenteeism during working hours (due to childcare obligations) and increased opportunities to accept promotions and attend trainings.
3. Consultations. Have representatives of excluded groups been engaged in project consultations? How widespread were consultations (both geographically, in number, and with different population groups)? What languages other than Myanmar were used?
As part of the project preparation, an ESIA and an ESMF, including an RPF and a CPPF, have been prepared in compliance with national requirements and the World Bank’s safeguard policies.
Consultations were organized by EPGE and DPTSC with support from an independent consultant to integrate stakeholder concerns into the safeguards instruments. Consultations were carried out in the Myanmar language and included stakeholders such as representatives of low‐income households and SMEs (for example, tea shops) from areas near the Ywama power plant. These groups are identified as being disproportionally affected in the specific sector of intervention.
About 30 representatives of CSOs representing several ethnic groups from across the country participated in the CPPF consultation of the project. Consultations were conducted in the Myanmar language in Yangon. Given that specific investments are not yet identified, the objective of the consultation was to bring together CSOs working in areas with significant number of households yet to be connected to the national grid. Key suggestions included engaging early on with local stakeholders, gaining a good understanding of the subproject's local context, and considering sensitive areas like the ones under conflict. CSOs also recommended a modification of the term ‘ethnic minorities’ in the Myanmar‐language
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version of the safeguard’s documents. These recommendations were incorporated into the CPPF and other relevant documents.
During the project preparation, a gender assessment was also conducted to identify potential gaps between the experiences and status of women and men. As part of the gender assessment, consultations were also held with MOEE staff in focus groups (male staff with children, female staff with children, and female workers without children or expecting). In addition, a survey was undertaken to understand how childcare responsibilities affect employees working in MOEE in Naypyidaw, Myanmar. The survey covered 197 respondents out of a total population of 832 employees at EPGE and DTPSC.
4. Assessment and mitigation of exclusion risks in project design. In what ways could implementation of project activities exacerbate social exclusion? How are these risks mitigated? Could the way the Project Management Unit/Agency is perceived by project beneficiaries hinder access to project benefits by certain groups? How is this mitigated?
The project activities have a low risk of further aggravating the issues of social exclusion identified in this note (see section 1) as the project does not introduce new infrastructure or services in the country, but seeks to retrofit existing infrastructure (Ywama power plant and substations) within its current footprint.
The risk of perpetuating the social exclusion of nonconnected households and SMEs is mitigated by targeting criteria for the selection of substations under Component B and by supporting the electrification in the Yangon region. More broadly, the project will complement the Government‐led NEP and the IDA‐funded National Electrification Project.
By improving the quality of service of all connected customers, the project will alleviate the impacts of low‐quality electricity services on low‐income connected households and SMEs, which are more exposed to the economic impacts of revenue losses due to blackouts, expenditures on backup generators, and replacement of spare parts for damaged devices.
Finally, it is expected that by providing improved access to reliable electricity, the project will contribute to private sector investment and job creation. This effect might be mainly observed in Yangon (where Ywama power plant is located), which has one of the highest electrification rates in the country. As a growth pole, Yangon may attract internal migrants from poorer areas of the country, thus playing a role in poverty reduction and, indirectly, in inclusion.
5. Assessment and mitigation of exclusion risks in project design (gender). Has the project considered adaptations to promote gender equality and inclusion of women, especially for those who are unable to leave the home, or who are illiterate?
The project includes specific actions that focus on the inclusion of women in the sector of intervention, as described in section IV.C(iii). To do so, the project will provide technical assistance and start‐up capital to MOEE for the establishment of a childcare pilot at MOEE premises in Naypyidaw.
6. Assessment and mitigation of exclusion risks in project design (access). Has the project anticipated and mitigated potential resistance of government officials to travel to certain types of villages or conflict‐affected areas given fears for personal security? What adaptations to project design and implementation approaches are being considered to reach communities whose movement is restricted?
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Substations located in areas in which there is conflict will not be eligible for financing under the project.
It is not considered that there is a high likelihood of potential resistance of government officials to travel to conflict‐affected areas or certain types of villages in this project given that (a) the presence of government officials is expected to be required mostly in Yangon; (b) physical works will take place in existing facilities, which are already maintained and operated by utility employees; and (c) high‐voltage substations are mostly located in central Myanmar, where there is currently no substantial conflict.
7. Assessment and mitigation of exclusion risks in project implementation. Has the project considered the role that military‐controlled ministries and security forces may play in influencing project implementation on the ground?
Military‐controlled ministries are not involved in the provision of grid‐connected electricity services and are unlikely to influence the implementation of the project on the ground.
8. M&E. Does the Results Framework include indicators to adequately monitor social inclusion? Is technology being used to overcome challenges to monitoring inclusion? What other aspects of social inclusion are monitored by the project through other mechanisms (surveys, studies, consultations, etc.)?
The Results Framework will monitor the number of households in disadvantaged townships that have gained access to the public grid. Increased access will be facilitated by (a) investments in the Ywama power plant, which will support the achievement of 100 percent electricity access in the Yangon region, and (b) investments in power substations to allow the expansion of the national grid. The improved inclusion of women in the public energy sector will be monitored through the reduced productivity gap between women and men while at the workplace resulting from the implementation of the pilot childcare at MOEE.
Peace
9. Consultations. If the project is implemented in conflict‐affected areas, has the task team consulted widely with local CSOs on relevant conflict dynamics and between Government and EAOs?
The project’s main activity, the upgrading of Ywama power plant, is not in a conflict‐affected area. However, given that substations are scattered across the country, the team consulted with CSOs working in close collaboration with EAOs on the CPPF, as described earlier. Activities and works to be implemented in high‐voltage substations will be consulted with local population and stakeholders, including CSOs and EAOs as appropriate, in line with the requirements of the ESMF and the CPPF.
10. Assessment and mitigation of the risk for the project to exacerbate tensions. In what ways might project implementation exacerbate conflict? How is this risk mitigated? What are the attitudes of the relevant EAOs toward the Government, service delivery, the potential project? Are relevant EAOs providing similar services in their areas of control or influence? How will these parallel delivery mechanisms be reconciled?
How are different groups/stakeholders likely to perceive the project? Would differences in perception potentially lead to intergroup violence? What ‘bridging’ mechanisms (to connect different social groups) are or might be contemplated to address possible tensions?
Will the project support internally displaced person camps? If so, how will these services affect discussions around the permanency of camps?
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The risk of exacerbating conflicts or intergroup violence due to the implementation of substation strengthening and climate resilience works is low. Mainly, the works are to be implemented within the footprint of existing infrastructure (substations). No new transmission line or power substation will be financed under the project. As mentioned earlier, the project will not implement investments in areas where there is conflict.
11. Assessment and mitigation of the risk for the project to fuel the conflict. Does the project allocate indirect benefits (employment opportunities, etc) that could be captured or be a cause of local conflict? How is this mitigated?
What direct or indirect effect might the project have on (a) local authority/power, (b) access to natural resources, and (c) illegal trade/activities that may create tensions?
See answer to question 10 above.
12. Assessment and mitigation of conflict‐related risks to project implementation. Do obstacles to including conflict‐affected communities need to be addressed? (for example, eligibility based on presence of government administrative staff, past results achieved or level of governance, recognized communities by township General Administration Departments, etc.). Are security provisions adequate to allow World Bank implementation support to conflict‐affected areas?
See answer to questions 6 and 9 above.
13. Supporting peace. Is the project expected to support peace (for example, related to the national peace process, in terms of trust building delivery of development assistance, etc)?
The project is not expected to support peace directly.
14. M&E. What is the team’s plan to continuously monitor the project’s impact on peace during implementation? Will technology be applied to ease monitoring constraints?
See response to question 8 above.
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ANNEX 4: Procurement Implementation Arrangements
COUNTRY: Myanmar
Power System Efficiency and Resilience Project
Procurement Capacity and Risk Assessment
1. Starting from October 2018 and throughout project preparation, the World Bank has conducted PCRAs for the two IAs, EPGE (Component A) and DPTSC (Component B). These assessments revealed the following findings.
Experience Implementing Public Procurement and Projects Funded by International Financial Institutions
(a) EPGE has some experience in implementing international bidding funded by the World Bank and JICA. Under the World Bank‐financed EPP, EPGE successfully procured a CCGT power plant with a contract value of US$110 million. During that process, EPGE was heavily assisted by independent consultants, who were provided to the GOM by the Norwegian Government on pro bono basis. EPGE’s involvement in the process was mainly reviewing Norconsult’s work and coordinating with the World Bank. EPGE has also acquired some experience in selection of consultants. EPGE hired Tractebel to carry out a feasibility study of Ywama power plant. EPGE’s involvement was also limited since this was a direct selection to an existing contract competitively procured by MOEE as owner’s engineer under the EPP. Hence, a limited number of EPGE staff have been involved in these procurement activities. In October 2018, EPGE successfully awarded a DSI contract of US$140 million financed by JICA’s loan. Despite the procurement experience acquired while interacting with multilateral and bilateral financial institutions, EPGE has rather limited competent resources and largely relies on consultancy assistance to implement procurement activities.
(b) Overall, DPTSC has limited experience in carrying out procurement under international competitive approaches. Although DPTSC has been exposed to JICA procurement procedures, most procurement has been carried out using government procedures with the largest awarded contract of about US$4 million. The scope of goods to be procured under the proposed project is of regular and standard nature for DPTSC and, therefore, the elaboration of technical specifications is not considered a constraint. However, this project represents DPTSC’s first procurement under the World Bank policies.
(c) All procurement documents are subject to concurrence and approval of, sequentially, the IAs’ Management Executive Tender Committees (headed by the managing directors) and the MOEE’s Management Executive Tender Committee (chaired by the minister). All contracts are, however, signed by the respective Managing Director.
Contract Management Capacity
(a) All payment requests, variation orders, and decisions on assigned officials and personnel employed must be submitted for the managing director’s approval under the government approval procedures. In the case of import of goods, the import permissions and customs clearance are issued by the material planning department of DPTSC and the procurement department of EPGE as part of their duties and responsibilities. The detailed payment procedures, authorizations, and internal control issues applying to the project are laid out in the financial management manual of the project.
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(b) EPGE has limited contract management capacity. According to the EPP experience, the owner’s engineer support was key for EPGE to manage the contract with the contractor. Nonetheless, EPGE faced challenges in administering a contract following international standards and practices. Takeover of completed works was time‐consuming. Under the proposed contractual arrangements, the integration of EPGE staff with the contractor’s team throughout implementation will be an area for consideration to ease the takeover upon the completion of works.
(c) To date, the largest contract ever handled by DPTSC was about US$4 million. DPTSC has a contract‐supervision and quality‐assurance mechanism in place managed through its own personnel. MOEE also has an independent quality‐control team managed by the minister’s office with members from different departments. Upon receiving approval from MOEE’s independent quality control team, DPTSC prepares acceptance certificates and consults with the MOEE’s Executive Committee before issuing official certificates to the contractors.
Complaint Management and Dispute Resolution System
(a) The complaint procedures will follow the revised government tender Directive No. 1 of April 2017 and the World Bank’s Procurement Regulations. However, the IAs do not yet have experience in applying complaint procedures under the directive. During the EPP implementation, EPGE received several complaints from bidders, which were resolved with the World Bank’s assistance and support from consultants. Based on this experience, it could be expected that the complex and technical nature of potential complaints will require HEIS and strong technical support from World Bank and consultants.
Need for Hands on Extended Support
(a) Both IAs have capacity constraints in carrying out large‐value, complex, competitive procurement activities, which they have not implemented under the World Bank’s Procurement Regulations. Given the complexity and size of procurement contracts and the necessity to start some activities before consultants are hired, both IAs expressed the need for World Bank’s procurement HEIS. HEIS for both procurement and technical aspects will be provided by the World Bank staff (one procurement specialist and at least one power engineer will work closely with the client). The procurement specialist providing HEIS will be different from the procurement specialist assigned to undertake the World Bank’s fiduciary functions for the project. This arrangement will enhance HEIS quality and guarantee the independence between HEIS providers and fiduciary staff from the World Bank side. The specific scope and modalities of the HEIS have been detailed in the HEIS memo request, which is included in the project document package submitted to the World Bank’s management for approval.
(b) It is expected that HEIS will be provided to EPGE and DPTSC for strategic contracts, including, among others, (i) the owner’s engineer and the environmental and social management consultancy contracts, (ii) the DSI contract for Ywama power plant, and (iii) the supply contract for key transmission equipment. This expanded support is envisioned for the first 18 months from the initiation of the procurement activities.
Procurement Risks and Mitigation Measures
(a) Based on the World Bank PCRA and the PPSD findings, the procurement risk of the proposed project is rated high. Table 4.1 presents the major procurement risks identified and mitigation measures agreed with MOEE and the IAs during the project preparation.
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PPSD and Procurement Plan
2. Through EPGE and DPTSC, MOEE prepared a PPSD, which was agreed by the World Bank. The PPSD presents how major procurement activities under the project will support its development objective and deliver the best value for money. In addition, the PPSD includes the rationale for key procurement decisions, such as the market approach and procurement methods selected. Throughout the project implementation, the PPSD and the Procurement Plan of the project will be regularly updated as appropriate (the procurement plan should be updated annually, at least, or as required). The World Bank will arrange the publication of the agreed initial procurement plan and all subsequent updates on its external website once a no‐objection is provided.
3. The PPSD identified the following major procurement activities to support the PDO achievement:
(a) Ywama power plant rehabilitation DSI contract (US$285 million)
(b) Owner’s engineer consultancy contract (US$2 million) to support both IAs, EPGE and DPTSC, with the procurement and contract management under Components A and B of the project
(c) Environmental and social safeguards management consultancy contract (US$1 million) to support both IAs, EPGE and DPTSC, in management and compliance of safeguards requirements under Components A and B of the project
(d) Contracts for supply of transmission network equipment (such as mobile substations power, current transformers, power and shunt reactors, switch bays, and protection and control device) and works for strengthening and improved resilience of existing substations (estimated at about US$55 million in total).
(e) Technical assistance on strengthening the capacity of DPTSC on climate resilience aspects and support project implementation (estimated at about US$5 million in total).
4. Key findings and recommendations of the PPSD are as follows:
(a) The procurement related to Ywama power plant rehabilitation (US$285 million) is rated high risk due to its technical complexity, critical role in the project, relatively large value, and long‐term contractual period. Therefore, a procurement approach based on a single‐responsibility contractor was recommended. Under this approach, the contractor will be responsible for the overall design, engineering, procurement, construction, commissioning, and testing activities (for the purpose of this project, abbreviated DSI). This modality is considered particularly relevant given the low capacity assessed for EPGE to conduct these activities. The market of DSI contractors is growing fast in Myanmar and in the region. Hence, this procurement package will benefit from an international market approach. A single‐stage bidding will be applied as the feasibility studies conducted during project preparation helped select the most appropriate technology for the power plant, CCGT, and set clear functional requirements. Based on experiences from similar projects, it was also recommended to opt for a PQ phase to help ensure that only contractors with adequate capacity and experience, among all active in the region, compete for the contract award.
(b) The consultancy support for an owner’s engineer (US$2 million) and the environmental and social safeguards expert (US$1 million) are considered of strategic importance. Despite the relatively low value of these contracts, the support to EPGE is critical to ensure an adequate procurement and supervision of the DSI contractor as well as a sound safeguards management
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and compliance during Ywama power plant rehabilitation. Therefore, the owner’s engineer and the environmental and social safeguards consultants will be selected through a QCBS.
(c) The procurement of transmission equipment and works to strengthen existing substations and improve their resilience (US$55 million in total) is considered of standard nature. There is a global competitive market for this equipment in the power industry. During the first 18 months of the project, the procurement of some mobile substations, estimated at US$9 million, is identified as necessary. This equipment package will be procured through a single‐stage one‐envelope RFB with international and open market approach. The capacity of local contractors to implement the works to strengthen substations is perceived to be adequate, which justifies a national market approach. Other specific investments in transmission equipment will be decided during project implementation upon the borrower’s requests and outcomes of technical assistances to help the country address climate adaptation and resilience.
(d) EPGE and DPTSC have not yet implemented the World Bank’s Procurement Regulations of July 2016. At the same time, the procurement of the proposed project is complex and has a large value. Thus, the IAs requested the World Bank’s procurement HEIS to facilitate the procurement of major and key packages and to ensure the smooth application of the World Bank’s Procurement Regulations. HEIS was therefore initiated from the project preparation stage to catalyze key procurement activities (see ‘Need for Hands on Extended Support’ section). The PPSD proposed conducting advance procurement of the owner’s engineer, the environmental and social safeguards consultant, and the DSI contractor for the power plant upgrading, given the timelines required to accomplish them.
5. Table 4.2 presents the proposed procurement arrangements.
Procurement Method and Prior Review Thresholds
6. Based on the high procurement risk of the proposed project at the appraisal stage, table 4.3 presents the procurement methods and prior review thresholds that will be applied.
7. Contracts below the prior review thresholds in table 4.3 shall be subject to post‐review auditing by the World Bank team on an annual basis, according to the procedures set forth in the Procurement Regulations. The sampling rate of post review is at least 10 percent of the total World Bank‐financed contracts awarded across the World Bank portfolio that have not been subject to prior review by the World Bank.
Monitoring by STEP
It is mandatory for the proposed project to use the World Bank’s online tool Systematic Tracking of Exchanges in Procurement (STEP) for procurement information exchanges and recording. The use of the system will facilitate the efficient management of procurement‐related communications and records. EPGE has significant experience in operating STEP under the EPP. An EPGE STEP account for the proposed project has been opened and activated. EPGE has been already trained in its use and has used the system to communicate procurement information with the World Bank. DPTSC is in the process of submitting its registration form to open a STEP account. Throughout project implementation, the World Bank will provide hands‐on support and training to both IAs to ensure their proficiency in using STEP.
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Table 4.1. Major Procurement Risks Identified and Mitigation Measures Agreed with MOEE and IAs
No. Risk Descriptions Mitigation Measures Timelines
1. Inadequate technical and procurement capacities of the IAs
For the proposed project, strategic institutional implementation arrangements were planned from project preparation stage. For each IA, a PIU led by a senior official (for example, the chief engineer) will be established with full‐time working staff from various specialized divisions (project coordination, engineering, procurement, financial management, and safeguards). Assistance from international consultants will also be mobilized to complement the capacity resources. For the purposes of project preparation and advance procurement implementation, each IA has assigned a project team consisting of engineers from technical departments and procurement officers from the procurement department. The World Bank will provide HEIS for strategic contracts. Procurement staff of the IAs will receive intensive training in the World Bank’s Procurement Regulations and contract management.
Throughout project implementation
2. Insufficient interest of bidders It was agreed that EPGE must conduct market outreach/engagement during the preparation of feasibility studies and PQ processes. EPGE and DPTSC will advertise procurement notices internationally.
Before/during PQ Before PQ documents/RFB issuance
3. Delays in procurement processes of major packages (CCGT plant, mobile substations, power transformers and reactors, switch bays, and so on)
The World Bank will encourage and advise MOEE to accelerate the review and decision‐making process. The project will introduce advanced procurement actions. The project will introduce the World Bank’s HEIS as well as support from the owner’s engineer and environmental and social management consultant.
Throughout project implementation
4. Evaluated prices of bids exceeding the costs estimates of the project’s owner
To use realistic costs, the feasibility studies conducted for the project have considered the borrower’s engineering estimates and budgetary proposals from two original equipment manufacturers (OEMs). The budget of the project includes adequate price contingencies.
During the preparation of feasibility studies and procurement documents
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No. Risk Descriptions Mitigation Measures Timelines
5. Lack of adequate experience and qualification of the selected contractor
The qualification requirements based on market research will be carefully prepared at the PQ stage. Lessons learned from similar projects (for example, EPP) will also be incorporated into the qualification criteria.
During PQ or/and bidding stages
6. Lack of coordination between the main DSI contractor and OEM
Generally, the DSI contractor is the sole responsible party. The possibility to request an OEM’s performance guarantee will be explored.
During the preparation of procurement documents and contract management
7. Budget and time overruns during the execution of contracts; change orders to accommodate unexpected works
A detailed feasibility study has been prepared to consider the full scope of works necessary for the completion of the plant. For unforeseen change orders, adequate price contingencies are included. For transmission equipment, lump‐sum contracts will be used.
During the preparation of procurement documents, technical specifications, and contract management
8. Delayed payment due the IAs’ lengthy internal management systems and procedures
Contracts’ payment terms and conditions must be aligned with the World Bank’s standard procurement documents and be fully enforceable. The detailed payment procedures, authorizations, and internal control issues are laid out in the financial management manuals of the project. The managing director will be supported by a qualified team to accelerate the review and approval process.
During the preparation of procurement documents and contract management
9. Sustainability risks related to O&M issues after completion
An LTSA will be included in the DSI contract. During contract management
10. Noncompliance with World Bank procedures (including fraud and corruption issues), which may occur at different levels during project implementation
Procurement staff of EPGE and DPTSC will receive intensive training in the World Bank’s Procurement Regulations and contract management, including mitigation of fraud and corruption risks. The project will implement relevant actions to mitigate fraud and corruption risks, such as (a) bid evaluators to sign code of ethics; (b) IAs to conduct due diligence to detect fraud and corruption allegations for, at least, the recommended bidder; and (c) IAs to implement a contract management plan with KPIs to ensure quality, timeliness, value for money, and integrity.
Throughout project implementation
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Table 4.2. Proposed Procurement Arrangements and Procurement Plan for the First 18 Months
Package/ Contract
Category Es mated Cost (US$ million)
Procure‐ment
Method
Market Approach
Contract Form
Review by Bank
PQ/ REOI
Adversement
PQ/REOI Sub‐
mission Deadline
PQ/SL Evalua‐
on Report
RFB/ RFP
Issuance
Bid/ Proposal Submissi
on Deadline
Bid/ Proposal Evalua‐
on Report
Contract Award
Contract Period
Component A
Upgrading of the Ywama Power Plant
Works (Plant, DSI)
285 RFB Interna onal Lump sum
Prior Review
Apr 15, 2020
May 29, 2020
Sept 15, 2020
Dec 15, 2020
Mar 1, 2021
Jul 30, 2021
Aug 31, 2021
30 months
Owner’s Engineera
CS 2 QCBS Interna onal Time
based Prior Review
Apr 15, 2020
May 15, 2020
Jul 1, 2020
Aug 1, 2020
Sep 15, 2020
Nov 15, 2020
Dec 1, 2020
48 months
Environmental and Social Safeguards Managementa
CS
1 QCBS Interna onal Time based
Prior Review
Apr 15, 2020
May 15, 2020
Jul 1, 2020
Aug 1, 2020
Sep 15, 2020
Nov 15, 2020
Dec 1, 2020
48 months
Setup of the childcare pilot
Works 0.5 RFB Na onal Lump
sum Post n.a. n.a. n.a. Oct 15,
2020 Nov 15, 2020
Nov 30, 2020
Jan 1, 2021
6 months
Component B
Mobile substa ons
Goods 9 RFB Interna onal Lump
sum Prior Review
n.a. n.a. n.a. Nov 1, 2020
Dec 1, 2020
Mar 1, 2021
Apr 1, 2021
12 months
Works for substa on strengthening (resilience) Works
1 RFB Na onal Lump sum
Post Review
n.a. n.a. n.a. May 1, 2021
Jun 1, 2021
Aug 1, 2021
Sep 1, 2021
10 months
Technical advisory consultant
CS 2 QCBS Interna onal Time
based Prior review
Apr 15, 2020
May 15, 2020
July 1, 2020
Aug 1, 2020
Sep 15, 2020
Nov 15, 2020
Dec 1, 2020
30 months
Note: CS = Consul ng Services; n.a. = Not applicable; REOI = Request for expressions of interest; RFP = Request for Proposal; SL = Shortlist. a. Consultant to be mobilized before the bid submission deadline of the Ywama power plant.
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Table 4.3. Procurement Methods and Prior Review Thresholds
Category Indicative Procurement Method Thresholds Prior Review Thresholds
Threshold (US$) Note Threshold (US$) Note
Goods and Non‐Consulting Services
Request for bids (RFB) using open, international market approach
≥1 million All contracts
RFB using open, national market approach
<1 million International competition approach will be used for goods not available in Myanmar, even though the value of contract is less than US$1 million
None
Request for Quotations (RFQ) <0.5 million None
Direct Selection n.a. Same as for competitive selection
The justification to use direct selection is included in the Procurement Plan.
Works
RFB using open, international market approach
≥3 million All contracts
RFB using open, national market approach
<3 million ≥2 million
RFQ <1 million None
Direct Selection n.a. Same as for competitive selection
The justification to use direct selection is included in the Procurement Plan.
Consulting Services
Consultants (firms), international, open market approach
≥0.1 million Consultant firms: ≥0.3 million
Consultants (firms), national, open market approach
<0.1 million None
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Category Indicative Procurement Method Thresholds Prior Review Thresholds
Threshold (US$) Note Threshold (US$) Note
Consultant’s Qualification‐based Selection (CQS)
≤0.5 million Other methods (QCBS, QBS, FBS, LCS) can be applied for contracts with value under US$0.5 million, if appropriate. Use of full RFP is mandatory for CQS above US$0.3 million
≥0.3 million
Individual consultant n.a. depending on the nature of services
Limits on market approach do not apply to individual consultants. The most appropriate market approach will be used
≥0.2 million
Direct selection of consulting firms and individuals
n.a. Same as for competitive selection
The justification to use direct selection is included in the Procurement Plan.
Note: FBS = Fixed Budget Selection; LCS = Least‐Cost Selection; n.a. = Not applicable; QBS = Quality‐based Selectio
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ANNEX 5: Financial Management Arrangements
COUNTRY: Myanmar
Power System Efficiency and Resilience Project
Staffing
1. EPGE and DPTSC will officially assign staff to work on financial management matters as part of the PIUs. EPGE will assign the same financial management staff who were involved in the operations of the EPP. Similarly, DPTSC will also assign at least two dedicated finance officials. DPTSC is assessed to have an adequate capacity to manage Component B despite its limited experience in handling donor‐financed projects. Overall, at least three staff members from each team will work on the project’s financial management. The General Manager of EPGE Finance Unit and the Director of DPTSC Finance Unit will oversee and supervise their respective financial management teams and matters. The officials assigned to work on the project will be responsible for all aspects of its financial management including, but not limited to, budgeting, accounting, reporting, making payments to consultants/suppliers, liaising with the Office of the Auditor General of Myanmar (OAGM) for external audits, and executing any day‐to‐day financial operations.
Planning and Budgeting
2. Although both IAs follow the GOM budgeting processes, they have limited knowledge and experience in preparing annual work plans for projects. Given that the current GOM budgeting processes must obtain parliamentary approval, project planning and budgeting will have to be prepared on time to avoid delays during implementation. To manage this project, annual work plans will be prepared by each IA separately and in consultation with the PIUs’ technical team and the World Bank. This will be done with sufficient details to be submitted to the respective Head of Department and the World Bank for request of no‐objection letters before or at the same time as submission to the Parliament. The work plans should also be detailed enough to allow an estimation of the activities’ cost, and the budget should show cost breakdowns by component/subcomponent and expenditure category. The fluctuations between the estimated budget and the actual expenditures will be reported and explained in detail in the biannual interim financial reports (to meet the requirements regarding external audit information) and will be linked to the physical progress of project implementation.
Accounting Policies and Procedures
3. EPGE’s accounting policy is based on the principles of double‐entry bookkeeping and public enterprise accounting. For DPTSC, the accounting policy is based on single‐entry bookkeeping and public works enterprise accounting, where Accounts Codes (A Codes) and Departmental Codes (D Codes) are used to record receipts and expenditures. Currently, the Finance Department records most of its transactions manually and on hard copies. Based on these manual records and summary transaction sheets, Excel spreadsheets are consolidated for budgeting and reporting purposes. DPTSC engineers and finance staff members are familiarized with the manual recording on stipulated forms. Thus, the current public works enterprise accounting, A Codes and D Codes are considered appropriate for accurate and timely transaction recording and financial reporting. More details on this
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point have been outlined in the financial management manual to further guide both PIUs in carrying out the project’s day‐to‐day financial management.
Funds Flow
4. Each IA will open two DAs at Myanmar Economic Bank: one in U.S. dollars and another one in Myanmar kyat. The ceilings of the DAs will be variable based on biannual cash expenditure forecasts. Funds will flow from the World Bank to the DAs based on the IAs’ requests made through submission of withdrawal applications and cash forecasts approved by the World Bank. Supporting documentation required for documenting eligible expenditures paid from the DA will be the Statement of Expenditure. The frequency for documenting expenditures paid from the DA will be every six months. The reimbursement, special commitment, and direct payment disbursement methods will be used. The minimum application size for reimbursements, special commitments, and direct payments will be US$100,000 equivalent.
5. The project will have a disbursement deadline date of four months after the closing date. This is the final date on which World Bank will accept applications for withdrawal from the recipient or documentation on the use of credit proceeds already advanced by the World Bank. This ‘grace period’ is granted to permit orderly project completion and closure of the credit account through the submission of applications and supporting documentation for expenditures incurred on or before the closing date. Expenditures incurred between the closing date and the disbursement deadline date are not eligible for disbursement except as otherwise agreed with the World Bank.
Recording and Reporting
6. The financial system of MOEE is adequate. MOEE has in place internal control and reporting processes through a manual system that can support the financial management requirements of the project. Excel may at times be used to support their accounting and reporting.
7. Both IAs will be responsible for preparing the financial and progress reports of their components. The reports will be shared with the World Bank no later than 45 days after the end of each semester. The format of the financial reports will be agreed before the project implementation starts.
External Audits
8. The capacity assessment of the OAGM indicates that this office has sufficient capacity to carry out audits for World Bank‐funded projects in Myanmar. Therefore, for this project, the annual financial statements will be prepared by each IA and sent to the OAGM within three months after the end of each fiscal year. The OAGM will conduct separate audits for EPGE and DPTSC on an annual basis. Thus, separate audit reports will be required for EPGE and DPTSC under this project. Each IA will submit copies of the audited financial statements (including audit opinion and auditors’ management letters) to the World Bank no later than 9 months after the end of the financial year (that is, by June 30 of each fiscal year). The audit reports and audited financial statements must be publicly disclosed in accordance with the World Bank policy on ‘Access to Information’.
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ANNEX 6: Maps
Figure 6.1. Map of Republic of the Union of Myanmar
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Figure 6.2. MDI in Myanmar and National Electrification Project On‐ and Off‐grid Solutions
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Figure 6.3. Myanmar Power System Network (2018)