gujarat solar power transmission project: project completion … · 2019-09-10 · 220 kv...

Completion Report

Project Number: 44431-013 Loan Number: 2778 August 2019

India: Gujarat Solar Power Transmission Project

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – Indian rupee (₹)

At Appraisal At Project Completion (23 March 2011) (9 November 2017)

₹1.00 = $0.0222 $0.0154 $1.00 = ₹44.955 ₹65.045

ABBREVIATIONS ADB – Asian Development Bank APFS – audited project financial statement EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return FY – fiscal year GAP – gender action plan GETCO – Gujarat Energy Transmission Corporation ICB – international competitive bidding IEE – initial environmental examination O&M – operation and maintenance PMU – project management unit SEWA – Self Help Women’s Association TA – technical assistance WACC – weighted average cost of capital

WEIGHTS AND MEASURES km – kilometer kV – kilovolt MVA – megavolt-ampere MW – megawatt

NOTES

(i) The fiscal year (FY) of India and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2019 ends on 31 March 2019.

(ii) In this report, “$” refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Kenichi Yokoyama, Country Director, India Resident Mission, SARD Team leader Jyotirmoy Banerjee, Senior Project Officer (Energy), SARD Team member Prabhjot Khan, Social Development Officer (Gender)

Neha Munjal, Senior Project Assistant, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA I

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1 B. Project Outputs 3 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 4 G. Technical Assistance 5 H. Consultant Recruitment and Procurement 5 I. Gender Equity 6 J. Safeguards 6 K. Monitoring and Reporting 7

III. EVALUATION OF PERFORMANCE 8

A. Relevance 8 B. Effectiveness 8 C. Efficiency 9 D. Sustainability 9 E. Development Impact 10 F. Performance of the Borrower and the Executing Agency 10 G. Performance of the Asian Development Bank 11 H. Overall Assessment 11

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 12

A. Issues and Lessons 12 B. Recommendations 12

APPENDIXES

1. Design and Monitoring Framework 13

2. Project Cost at Appraisal and Actual 15

3. Project Cost by Financier 16

4. Disbursement of ADB Loan and Grant Proceeds 17

5. Contract Awards of ADB Loan and Grant Proceeds 18

6. Chronology of Main Events 19

7. Summary of Contracts in Project 20

8. Status of Compliance with Loan Covenants 21

9. Implementation of Gender Action Plan and Achievements 25

10. Economic Analysis Re-evaluation 33

11. Financial Internal Rates of Return 40

12. Asian Development Bank’s Results Framework 44

BASIC DATA A. Loan Identification

1. Country India 2. Loan number and financing source 2778-IND, ordinary capital resources 3. Project title Gujarat Solar Power Transmission Project 4. Borrower Government of India 5. Executing agency Government of Gujarat

Gujarat Energy Transmission Corporation (GETCO)

6. Amount of loan $100 million 7. Financing modality Project loan

B. Loan Data

1. Appraisal – Date started – Date completed

23 March 2011 29 March 2011

2. Loan negotiations – Date started – Date completed

19 July 2011 19 July 2011

3. Date of Board approval 12 September 2011 4. Date of loan agreement 27 February 2012 5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

27 May 2012 (90 days) 26 June 2012

6. Project completion date – Appraisal – Actual

31 March 2015 31 December 2016

7. Loan closing date – In loan agreement – Actual – Number of extensions

31 March 2015 9 November 2017 One

8. Financial closing date – Actual

9 November 2017

9. Terms of loan – Interest rate – Maturity (number of years) – Grace period (number of years)

Sum of LIBOR plus 0.60%, less a credit of 0.20% 20 years 5 years

10. Terms of relending (if any) – Interest rate

Relending between the Government of India and the Government of Gujarat is on the same terms and conditions as those applicable to the Government of India.

– Maturity (number of years) 20 years – Grace period (number of years) – Second-step borrower

5 years Government of Gujarat on-lending to GETCO

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11. Disbursements

a. Dates

Initial Disbursement 12 December 2012

Final Disbursement 4 October 2017

Time Interval 58.57 months

Effective Date 26 June 2012

Actual Closing Date 9 November 2017

Time Interval 65.4 months

b. Amount ($ million)

Category

Original Allocation

(1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

1A. Substation including feeder bays at Sankhari and Jangral

14.60 12.38 0.00 26.98 25.83 1.15

1B. 66/220 kV and 220/400 kV transformers

11.66 0.96 0.00 12.62 12.25 0.37

1C. 400 kV transmission line

12.78 2.35 0.00 15.13 15.26 (0.13)

1D. 220 kV transmission line

6.77 1.14 0.00 7.91 7.92 (0.01)

1E. 66 kV cable supply

24.87 0.00 20.51 4.36 4.36 0.00

1F. 66 kV cable erection

14.11 0.00 14.11 0.00 0.00 0.00

Contingencies 15.22 0.00 14.22 1.00 0.00 0.00 Total 100.00 16.83 48.84 68.00 65.62 2.38

kV = kilovolt.

C. Project Data

1. Project cost ($ million)

Cost Appraisal Estimate Actual Foreign exchange cost 102.10 69.59 Local currency cost 31.59 15.98 Total 133.69 85.57

2. Financing plan ($ million)

Cost Appraisal Estimate Actual Implementation cost Borrower financed 33.69 19.95 ADB financed 100.00 65.62 Other external financing 0.00 0.00 Total implementation cost 133.69 85.57 Interest during construction costs Borrower financed 2.10 3.97 ADB financed 0.00 0.00 Other external financing 0.00 0.00 Total interest during construction cost 2.10 3.97

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3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual Total baseline costs 110.91 81.60 Contingencies 20.68 0.00 Financing charges during implementation 2.10 3.97 Total 133.69 85.57

4. Project schedule

Item Appraisal Estimate Actual 66 kV cable and laying within the solar park Q2 2011–Q3 2014 Q3 2012–Q2 2013 220 kV transmission line, pooling substation and feeder bays Q2 2011–Q3 2014 Q3 2012–Q2 2015 400 kV transmission line, pooling substation and feeder bay Q3 2011–Q3 2014 Q1 2013–Q1 2017

kV = kilovolt.

5. Project performance report ratings

Implementation Period Single Project Rating From 26 Jun 2012 to 31 Dec 2012 Satisfactory From 1 Jan 2013 to 31 Dec 2013 Satisfactory From 1 Jan 2014 to 31 Dec 2014 Satisfactory From 1 Jan 2015 to 31 Dec 2015 Satisfactory From 1 Jan 2016 to 31 Dec 2016 Satisfactory From 1 Jan 2017 to 9 Nov 2017 Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of Membersa

Consultation mission 12–27 Jan 2010 4 60 a/i,b,c,d Consultation mission 15–19 Nov 2010 4 20 a/i,b,c,d Fact finding mission 23–29 Mar 2011 6 42 a/i,b,c,d,g,h Loan inception 1–3 Aug 2012 1 3 c/i Special loan administration 4–5 Sep 2012 1 2 c/i Loan review 9–0 Oct 2012 3 6 c/i,f,e Loan review 10–18 Jan 2013 4 36 c/i,f,a,k Loan review 29 Jul–1 Aug 2013 3 12 f/i,j,l Safeguard and environment review mission

10–16 Nov 2013 2 14 m/i,n

Loan review 28–29 Oct 2015 2 4 m/i,j Loan review 31 May–3 Jun 2016 3 12 m/i,l,o Disbursement review mission 17–20 Jul 2017 2 8 p/i,q PCR mission 18–22 Feb 2019 5 22 m/i,r,j,s,t

PCR = project completion report. a a = senior climate change specialist, b = lead profession (energy), c = energy specialist, d = social development specialist, e = financial control officer, f = project officer (energy), g = counsel (OGC), h = climate change specialist, i = team leader, j = senior project assistant, k = director, l = associate social development officer (gender), m = senior project officer (energy); n = senior safeguard/environment specialist; o = safeguard officer; p = senior financial control officer; q = financial control analyst; r = social development officer (gender); s = PCR consultant; t = gender consultant

I. PROJECT DESCRIPTION 1. The main purpose of the Gujarat Solar Power Transmission Project was to provide a high voltage connection from the Charanka Solar Park in Patan district of Gujarat to the state and national grids to enable evacuation of solar power generated by the park’s privately funded solar farms. The project’s secondary purpose was to help develop the fledgling solar energy industry in Gujarat and India as an alternative to traditional power generation that relies heavily on fossil fuels. The project supplied and constructed the solar park’s power evacuation infrastructure, including transformer substations, high voltage transmission lines, and related structures and civil works. The project included technical assistance (TA) on gender equity to (i) help women participate in project implementation and operation and (ii) provide vocational training and livelihoods programs for the women living in 18 villages in the Charanka Solar Park area. The project’s impacts, outcomes, and outputs are in the design and monitoring framework (DMF) in Appendix 1. 2. The Asian Development Bank (ADB) approved the project on 12 September 2011 at an estimated cost of $133.69 million, with an ADB loan of $100 million and a Government of Gujarat contribution of $33.69 million.1 The loan was declared effective on 26 June 2012.2 The original loan closing date of 31 March 2015 was extended to 09 November 2017. The associated TA for $400,000 was approved in May 2011.3 3. At appraisal, the project’s planned physical benefits would support the longer term goal of helping develop India’s solar power industry. In 2006, India’s Integrated Energy Policy and National Action Plan for Climate Change aimed to address the major shortfall in electric power and incorporate renewable energy in developing future power generation as part of its 2008 National Action Plan for Climate Change, which included a focus on solar power.4 To operationalize this plan, the national government launched the Jawaharlal Nehru National Solar Mission to help develop 20,000 megawatts (MW) of solar power by 2022. The ADB project was the first major investment under this initiative. Concurrently, the associated TA included more women in solar transmission projects and vocational training in solar farm installation and operation.

II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. The project was relevant to the national government’s and ADB’s energy sector strategies at appraisal and at completion. The project was aligned with India’s strategy for solar power development (para. 3), India’s Eleventh Year Plan, 2007–2012, and ADB’s current country partnership strategy.5 Under the country partnership, ADB supported India’s energy sector and addressed renewable energy through a TA in 2008.6 In 2010, ADB established its Asia Solar Power Initiative to help catalyze the development of solar power in all its developing member countries.

1 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Gujarat Solar Power

Transmission Project. Manila. 2 ADB. 2012. Project Administration Memorandum to India: Gujarat Solar Power Transmission Project. Manila. 3 The TA was a component of a cluster TA. ADB. 2011. Technical Assistance for the Gujarat Solar Vocational and

Livelihoods Project with Gender Focus. Manila (TA 7815, $400,000); and ADB. 2009. Technical Assistance for India: Advanced Project Preparedness for Poverty Reduction. Manila ($14 million).

4 Government of India. 2006. Integrated Energy Policy. Delhi; and Government of India. 2008. National Action Plan for Climate Change. Delhi.

5 Government of India. Eleventh Five Year Plan, 2002–2007. Delhi; and ADB. 2013. Country Strategy and Program: India, 2013–2018. Manila.

6 ADB. 2006. Sector Assistance Program Evaluation for India’s Energy Sector. Manila; and ADB. 2008. Technical Assistance for the Integrated Renewable Energy Development Project. Manila.

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This initiative helped develop commercial agreements between private sector solar power producers and power purchasers (state power utilities). The agreements, so developed were used in their contracts with private solar farm developers in Charanka Solar Park by the Gujarat Energy Transmission Corporation Limited (GETCO), the executing agency for the project. The project loan modality was appropriate because the scope was well defined at appraisal and the executing and implementing agencies were the same (GETCO). There were no other development partners or national programs active in the Charanka area. 5. The state government owned the land for the transformer substation at Charanka and GETCO had acquired the rights of way for the high voltage transmission lines. Although there was no need for physical resettlement, GETCO developed a compensation matrix for temporary impact on agricultural activities along the right of ways as part of the resettlement plan. At appraisal, the plan was to install the high voltage lines during the non-crop dry season to minimize such damages, but because of delays in project implementation, this was not always possible and GETCO developed a revised compensation package with the affected persons as necessary. 6. Changes in the tariff subsidy reduced the highly-subsidized guaranteed 25-year feed-in tariff formula paid to the private solar farms’ project activities to evacuate solar power from the Charanka Solar Park.7 As a result, GETCO funded the internal solar park facilities. The related ADB loan savings were directed to expand the Sankhari substation and remaining savings were canceled from the loan. In 2011, when the Gujarat Electricity Regulatory Commission announced it would reduce this tariff by about 25%, effective from 1 March 2012, private developers rushed to complete their solar farms before that date and the expected 50 MW of solar power increased to about 200 MW. To meet evacuation contracts with private developers, GETCO prioritized the project works to install sufficient internal Charanka Solar Park power collection cables, transformers, and high voltage transmission lines on a rush basis. These time constraints meant that they could not use the international competitive bidding (ICB) procurement required by the ADB loan. GETCO therefore extended contracts on other ongoing projects to install these works. The project design was flexible enough to facilitate this change with no impact on the project outcome and impact, though it did substantially reduce the ADB loan amount (para. 14). The hierarchical linkages of the DMF were logical and the indicators were realistic and measurable (Appendix 1). 7. GETCO used part of the loan savings from the change in scope to expand the Sankhari substation, which removed an evacuation constraint on the Charanka Solar Park system and enabled continued expansion of the private solar power plant facilities beyond the original 500 MW capacity to an expected 1000 MW when fully built-out. 8. GETCO oversaw the environmental, social, resettlement and gender aspects as required by the loan agreement and loan covenants. GETCO regularly updated the e-Ops, project performance management system, and project performance reporting criteria, and disclosed. 9. The project also supported social and gender aspects in the solar park area through the associated TA—the Gujarat Solar Vocational Training and Livelihoods (subproject 14) for vocational training and livelihood development, particularly of women—by encouraging recruitment of residents in local villages to construct, operate, and maintain the project’s physical infrastructure, as well as by the private solar farm developers. 8 7 At appraisal, the feed-in tariff was ₹12.54 per kilowatt-hour for the first 12 years followed by ₹5.00 per kilowatt-hour

for the next 13 years. 8 ADB. 2011. Technical Assistance India: Advanced Project Preparedness for Poverty Reduction—Gujarat Solar Vocational Training

and Livelihoods Project (Subproject 14). Manila. https://www.adb.org/projects/43166-194/main#project-pds.

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B. Project Outputs 10. The project appraisal included three outputs with performance targets, discussed below; the appraisal and actual achieved targets are in the DMF (Appendix 1). 11. Output 1: Procurement, installation, and commissioning of the high voltage transmission system. The high voltage transmission system included (i) the 400/200/66 transformer substation at Charanka Solar Park, (ii) eight 220/66 kilovolt (kV) 100 megavolt-amperes (MVA) transformers, (iii) the 66 kV underground cable grid to collect power from the various solar farms in the park, (iv) the 400 kV double circuit high voltage transmission line from Charanka to Sankhari substation, (v) the 220 kV double circuit transmission line from Charanka to Jangral substation, and (vi) two new feeder bays at Sankhari and Jangral substations. Although most of the related loan savings were canceled (para. 14), some of the savings were used to augment the capacity of the Sankhari substation by adding five new bays and an 80 MVAR bus reactor, which facilitated enhancement of transmission capability to 1000 MW. These were all achieved 2 years later than planned because of a 9 month delay in loan effectiveness (para. 17), GETCO’s additional activities to meet the earlier-than-expected evacuation from the solar farms (para. 6), and the longer-than-proposed time required for procurement through ICB procedures (para. 17). Furthermore, because of the need to rush evacuation capability, GETCO used their own funding to complete the 66 kV underground cable grid, two of the eight 220/66 kV MVA transformers, and 14 kilometers (km) of 220 kV transmission line. Although ADB did not finance these components, GETCO followed the same designs and specifications so that these are integrated smoothly. The commissioning was successfully completed and the high voltage transmission system is functioning as planned at appraisal. 12. Output 2: Vocational training. Under this output, vocational training of 300 students, with a target of 30% women, was to be completed with funds from the TA (para. 9). The TA was a subproject of a cluster technical assistance, TA 0003-IND: Advanced Project Preparedness for Poverty Reduction, financed by the Government of the United Kingdom through the Department for International Development.9 The TA was closed in 2014, before this training was carried out. Thereafter, GETCO organized the training with their own funds. A baseline survey conducted by GETCO found that of the 420 youth in the local areas who expressed interest in vocational skills training, only 23 (5%) were women. The Industrial Training Institute of Harij in Patan District of Gujarat trained 386 students, including 53 women. Although the target of 30% women was not achieved, all of the female students (100%) enrolled at the institute at the time were trained. 13. Output 3: Energy based livelihood enhancement. Activities under this output trained 136 female headed households (against a target of 100 households) in non-traditional livelihood skills, including mobile phone repair, construction of smokeless cook stoves, kitchen gardening, and energy conservation.

C. Project Costs and Financing 14. The total appraised project cost was $133.69 million, with an ADB loan of $100 million and Government of Gujarat contribution of $33.69 million.10 The actual project cost was $81.6 million, including ADB loan disbursement of $65.62 million and $15.98 million from Government of Gujarat.

9 ADB. 2016. Technical Assistance Completion Report: India: Advanced Project Preparedness for Poverty Reduction. Manila.

https://lnadbg1.adb.org/sec0094p.nsf/docbyno/df0dd116b4ff64d64825808a008340cb/$file/in376-16.pdf. 10 The borrower paid the financial charges during construction.

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Although there was reduced output by the ADB project loan, the project achieved its outcomes and impacts. The project costs at appraisal and actual are in Appendixes 2 and 3. The ADB loan was used for ICB contracts, which included equipment supply and installation on a turn-key basis. Out of the original $100 ADB loan, a total of $34.38 million was canceled: (i) $20 million through a minor change in scope in 2013 (para. 11), (ii) $5 million when it was determined that it would not be required to complete the works, and (iii) $9.38 million at the time of loan closing.11 15. The reasons for the reduced project costs for the ADB-financed ICB components included (i) more competitive bid prices because of appropriate packaging of the higher value ICB contracts and because all equipment and materials were available in India, (ii) the devaluation of the rupee from the time the project was appraised in 2010 until the ICB contracts were procured in 2013–2014, and (iii) GETCO’s construction of the 220/66 kV components. Although a portion of the savings were used to expand the Sankhari substations by adding five more bays, the cost of the expansion was less than the savings. D. Disbursements 16. The disbursements from ordinary capital resources totaled $65.62 (81%) of the revised loan amount of $80 million, after the change in scope (para. 14). Year by year disbursements are summarized in the graph in Appendix 4. GETCO followed the direct payment and commitment letter procedure as per ADB’s Loan Disbursement Handbook (2017, as amended from time to time). The annual disbursements were substantially lower than projected at appraisal, partly because of the low readiness of the project at appraisal as indicated by the 9-month delay from loan approval to effectiveness (Basic Data, Section B), the change in scope (para. 14), the time required for GETCO to adjust the scope of the resulting revised ICB procurement packages, and an overly optimistic implementation schedule at appraisal (para. 17). The contract awards at appraisal and actual are in Appendix 5, which indicates that most of the ICB contracts were awarded in 2013 instead of 2012 as per the appraisal.

E. Project Schedule 17. At appraisal of the project (March 2011), completion of works was expected by end of 2014 with loan closing “by 31 March 2015 or “such other date as may from time to time be agreed” by ADB. In actuality, ADB granted a loan extension of 21 months because of delays (para. 16).12 In 2010, the project was not at a high degree of readiness and, because of the need to meet the pending evacuation requirements of the private solar farms already under construction in Charanka, the project was processed on a fast track basis. This led, in part, to the 9-month adjustment from loan approval to the effectiveness date. At the time, the ADB procedure for ICB procurement took 6–9 months, although this was not fully reflected in the schedule developed at appraisal. The chronology of the main project events is in Appendix 6. F. Implementation Arrangements 18. The implementation arrangements were as envisaged at project appraisal. The Government of Gujarat, through GETCO, held overall responsibility for implementing the project. GETCO established a steering committee to help guide the project and facilitate discussions among the Gujarat Electricity Regulatory Commission, Gujarat Power Corporation Limited, and

11 The loan cancellations were effected by approval memos dated 8 February 2013, 1 March 2016, and 12 December

2016. 12 The loan extension was approved on 19 May 2014.

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other state government agencies. GETCO established a dedicated project management unit (PMU) headed by a project director of chief engineer rank, who reported to the managing director of GETCO. The implementation was efficient because it was the same as for internally funded works, and therefore well-established procedures were in place. The PMU established a site office at Charanka Solar Park to oversee day-to-day implementation, quality and quantity control, and construction. The PMU oversaw construction of all mechanical and electrical equipment, transmission tower erection, equipment testing, and commissioning of completed works. GETCO employed independent third party inspection agencies to check that equipment suppliers met specifications. GETCO also assigned two specialist staff to monitor and report on environmental safeguard aspects. The chief financial officer of GETCO oversaw financial matters.13 GETCO documented project progress through quarterly progress reports and submitted them to ADB. G. Technical Assistance 19. To help achieve the two gender-related target outputs in the project’s DMF, which were also in the project’s gender action plan (GAP), the project tapped a TA (para. 9) that was a subproject of a cluster technical assistance, TA 0003-IND: Advanced Project Preparedness for Poverty Reduction, with GETCO as the implementing agency. The TA budget was $400,000, but only $183,000 was expended when the TA was closed in 2014. 20. The TA focused on outputs 2 and 3 of the DMF. Under output 3, United Nations Women, which implemented the livelihood skills training with support from Self Help Women’s Association (SEWA), reported that 136 women were trained in various locally marketable activities including mobile electronics repair (38), smokeless stoves (73), energy conservation (7), and kitchen gardening (18).14 However, output 2, vocational skills training of 300 persons, remained incomplete under the TA because of its early closure (para. 12). Thereafter, GETCO funded the vocational training on personal effectiveness and leadership for all 386 students (including 53 women) by the Industrial Training Institute of Harij in Patan District of Gujarat. Furthermore, GETCO used their own funds to construct a primary school in the village immediately adjacent to the Charanka Solar Park, which enabled girls as well as boys from the local area to receive quality education. Prior to this, families were reluctant to send young girls out of the village to attend school. H. Consultant Recruitment and Procurement 21. During initial contact missions and project appraisal, ADB determined that GETCO had extensive in-house experience with design, procurement, construction, environment and social safeguards, and financial management of electric power transmission infrastructure and related works. Therefore, no technical project consultants were required. GETCO had experienced in-house engineers to review the ICB contractors’ scope changes and construction oversight. ADB did provide support and training of GETCO’s two environment safeguards specialists and they provided adequate oversight and summary reports in accordance with ADB requirements. GETCO recruited and reimbursed services of third-party inspectors to conduct technical monitoring and testing of project equipment and materials. 22. Procurement of the ICB contracts was for turn-key equipment and installation contracts in accordance with ADB’s Procurement Guidelines (2006). GETCO prepared advance procurement

13 During appraisal, ADB determined that GETCO had an established financial management system fully in line with

auditor general of India and ADB requirements. 14 United Nations Women. Advanced Project Preparedness for Poverty Reduction—Gujarat Solar Vocational Training

and Livelihoods Projects: Final Report to the Asian Development Bank, 28 March–31 December 2014. Unpublished.

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for the 66 kV internal solar park connectivity for the private developers along with the associated 220/66 kV substations and 220 kV transmission lines to connect the Jangral and Sankhari substations to the Gujarat grid. However, GETCO completed these contracts with their own funds because the reduction in the solar power tariffs (as of 28 February 2012) that led to a surge in private solar farm completions and increased the expected 50 MW of capacity to be completed by early 2012 to more than 200 MW. To meet the requirements of the solar power evacuation contracts between the GETCO and the private solar farm developers, the 220/66 kV systems had to be brought on line within 3–4 months. As a result, the proposed ADB financing for these contracts was canceled, as requested by GETCO and approved by the government. The 400/220/66 kV system was financed by the ADB loan and the first contract was awarded in early 2013. The 12 procured ICB contracts are in Appendix 7. I. Gender Equity 23. The project was categorized effective gender mainstreaming. To contribute to gender equality and women’s empowerment, the project’s GAP included providing basic social services to enable local villages, especially women, to benefit from the solar park. The GAP incorporated two gender-related performance target outputs of the project’s DMF that were also in the TA (para. 20). In addition, the GAP included the (i) training of up to 300 men and women, (ii) development of community-based infrastructures, and (iii) inclusion of gender equality indicators in the project’s performance and monitoring system. The project adequately implemented the GAP and successfully completed all activities (Appendix 9). J. Safeguards 24. Environment. At project preparation, GETCO carried out an initial environmental examination (IEE) and classified the project as environment category “B” in accordance with ADB’s Safeguard Policy Statement (2009). The IEE included environmental management plans (EMPs) and was disclosed as linked document 12 in the report and recommendation of the President. GETCO subsequently recruited the National Environment Engineering Research Institute to prepare a rapid environmental impact assessment in accordance with Government of Gujarat norms, deemed acceptable to ADB. GETCO established a grievance mechanism, which received no complaints or communications resulting from consultation with villagers or from the web postings, and addressed any minor corrective measures. The construction works were located on government land and the Charanka area is non-arable, uninhabited desert land, with no environmentally sensitive areas. The ICB contracts incorporated environmental mitigation to minimize minor construction-related impacts of temporary road closings and new transmission towers and lines, including compensation for affected land owners. Safety measures were incorporated for all workers, including unskilled local laborers, and for the general public, with high voltage danger signage on all components. The contractors’ safeguards personnel monitored environmental and safety measures. The substations at Charanka Solar Park, Sankhari, and Jangral were fenced with 24-hour security and there were no reported accidents or injuries to government or contractor workers. The private developers are required to fence their solar panel installations and provide 24-hour security as well. The IEE was adjusted and updated as a result of the minor changes in scope, though these did not result in any environment impacts. Semiannual and annual environmental monitoring reports were posted on GETCO and ADB websites. 25. Social development. In addition to gender equity, the project supported social development in the poor, small, rural, remote villages in the Charanka Solar Park area. The specific project impact, as identified in the socioeconomic analysis of the Summary Poverty Reduction and Social Strategy prepared by ADB during appraisal, included (i) hundreds of jobs during

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construction of the Charanka, Sankhari, and Jangral substations and the 200 km of transmission lines (GETCO reported more than 3,000 people worked for the contractors, and much of the unskilled labor was hired from the local area, including several hundred women); (ii) provision of water supply, sanitation, power connections, and street lighting in the villages from counterpart funds; (iii) construction of a new primary school and related facilities from counterpart funds; and (iv) implementation of the gender-focused TA (para. 20). Furthermore, a number of other villages in Patan District were connected to electric power from the 220 kV transmission line. These improvements enhanced the quality of life in the villages and improved opportunities for economic activities. Related long-term benefits are the hundreds of jobs created in constructing the private solar farms and for ongoing operation and maintenance (O&M) of these farms. 26. An indirect impact of the project was the economic activity generated by the private solar developers. The project completion review mission met with a private 25 MW solar farm developer, about 5% of the total Charanka Solar Park constructed to date. He reported that the solar farm employed 1,200 persons for the construction period of about 6 months, including local persons for unskilled labour, with 76 full time jobs for O&M, technical O&M, 24-hour security, cleaning and dust removal of the 173,000 solar panels, and maintenance of the 5-hectare grounds. Most of the O&M staff comes from the local area and women are recruited as available, although limited by local tribal customs and numbers. The developer indicated that the local labor supply was scarce and most women would not work outside their homes after marriage. GETCO submitted social monitoring reports on semiannual basis. The details of the gender equity program are in Appendix 9. 27. Resettlement plan. The project was classified as category B for involuntary resettlement and category C for indigenous people’s impacts in accordance with ADB’s Safeguards Policy Statement (2009). The project did not acquire land from private owners, though GETCO purchased land for their substations in the Charanka Solar Park, Shankari, and Jangral from the state as part of their counterpart funds. GETCO prepared a resettlement plan at appraisal with specific provisions and entitlements and compensated all affected people, including land owners, for temporary disruption and potential loss of crops, plantings, or trees due to construction activities along the high voltage transmission lines and substations. GETCO conducted consultations with affected landowners and local people. No indigenous peoples were affected, but GETCO assisted vulnerable people (para. 20). GETCO received no grievances and had no outstanding issues at the time of preparation of this completion report. K. Monitoring and Reporting 28. No covenants were modified, suspended, or waived during implementation. GETCO complied with the general implementation framework of the project; the status of compliance with the project loan covenants is in Appendix 8. GETCO provided semiannual and annual monitoring reports updating implementation progress, progress status of each ICB contract, disbursements, safeguards, environmental monitoring, social impacts, compensation payments to affected peoples, monitoring of the grievance mechanism, the gender action plan, and audits of project accounts. ADB and the India Resident Mission updated these reports during loan review missions, special disbursement missions, and annual tripartite review missions. 29. The financial arrangement followed GETCO’s financial management system, which ADB had assessed as fully satisfactory and which met ADB procedures and requirements. ADB provided specific training in ADB’s project financial management procedures and requirements. Loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time). Annual project audits were satisfactory and there were no issues

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with the project accounts or disbursement procedures. GETCO submitted the audited project financial statements (APFS) for all the years until fiscal year (FY) 2017. Preparation of APFS for FY2018 was significantly delayed and could not be submitted on schedule, although ADB followed up adequately. GETCO’s design, procurement, implementation, and financial capacities as assessed at appraisal were reasonable.

III. EVALUATION OF PERFORMANCE A. Relevance 30. The project is rated relevant. The project design at appraisal was appropriate based on the facts known then. However, because of the faster-than-expected installation of the private solar farms, GETCO installed some project components that were not financed by the ADB loan. The revised outputs financed under the ADB loan included an additional five-bay expansion of the Sankhari substation, but the works proposed at appraisal, as detailed in the DMF, remain relevant and appropriate at completion. The project loan modality was appropriate because of the defined scope and schedule of the works. The original design was appropriate and properly addressed the components and works required. The DMF results chain was sound and lent themselves to measurement. The delays in project completion were caused by a lack of readiness to proceed and an overly ambitious procurement schedule; although, the original design was appropriate (para. 17). The need to quickly install the power evacuation components inside Charanka was caused by a priority government policy directive to reduce the preferential tariff for the solar power, which was beyond project control (para. 6). 31. The impact and outcomes of the project at appraisal and as completed supported and furthered Gujarat’s and India’s policies on developing alternate energy and solar power through the Jawaharlal Nehru National Solar Mission. The appraised and completed project also meets ADB’s alternate energy strategy, Asia Solar Energy Initiative, to help catalyze generation of 3,000 MW of solar generation projects in ADB developing countries, through its private and public sector lending operations. The project did not overlap with the initiatives of other development partners (para. 4).

B. Effectiveness 32. The project is rated effective because it achieved the physical and gender-focused targets. The project fully achieved the intended DMF outputs (Appendix 1) and exceeded the projected outcome, expanding the capacity of the high voltage transmission system from 500 MW to 600 MW as of 2018. In addition, the five-bay expansion of the Shankari substation enabled up to 1,000 MW additional capacity. Though some of the DMF output indicators were partially achieved under the ADB finance component, they were fully met by GETCO’s funds. The current 600 MW of solar power from Charanka Solar Park will meet the average electricity usage of more than 200,000 homes, or about 1 million persons. The various safeguards for environment, resettlement, and social development were effectively implemented and related monitoring reports disclosed on GETCO and ADB web sites (paras. 24‒27). 33. Through the combined resources of ADB’s TA and GETCO’s corporate social responsibility program, all five activities of the GAP were completed and all of its three quantitative targets were achieved (Appendix 9). Specifically, under the project, (i) the Industrial Training Institute of Harij in Patan District trained 386 students, including 53 women students, who were taking different vocational training courses, in leadership and personal effectiveness; (ii) a total of 136 women in 11 villages in Patan and Porbander districts were trained in non-traditional livelihood skills,

9

including mobile phone repair, construction of smokeless cook stoves, energy audit and conservation, and kitchen gardening; and (iii) a total of 3,200 workers, of whom 30% or 960 were women, were hired by GETCO during solar park construction. Under its corporate social responsibility program, GETCO (i) renovated and upgraded the primary school in Charanka village and constructed separate toilets for girls and boys, installed a drinking water supply, developed the school’s playground, and provided music and computer rooms; (ii) constructed roads; (iii) provided a primary health facility; and (iv) developed two industrial training institutes in Amirgadh and Harij under a public–private partnership scheme.15 The Gujarat Power Corporation Limited provided street lights in the solar park area and nearby villages. According to a teacher at the Charanka Primary School, these facilities, including the constructed roads, made the school more accessible to students, especially girls. C. Efficiency 34. Following reevaluation of the economic analysis undertaken at appraisal (Appendix 10), the economic internal rate of return (EIRR) is estimated at 9.75%, lower than the appraisal estimate of 13.4%. The project is therefore rated less than efficient in achieving the outcome and outputs. A sensitivity analysis assessed the impact of changes in key uncertain assumptions, namely the cost of (avoided) coal-fired generation and the value ascribed to avoided carbon emissions (para. 8; Appendix 10). In summary, the unit value of both variables would need to increase by 25% for the EIRR to exceed the 12% hurdle rate, and this is considered unlikely (but not impossible). The total capital cost in the EIRR reevaluation includes more than $1 billion of private sector investment in solar generation capacity; the ADB loan component represents only around 6% of the total cost of the fully developed solar park. As expected, the project provided a strong impetus to the domestic solar power industry, including manufacture of panels and related equipment. The rapid growth of solar power in the country from 3,000 MW of installed capacity (at the time of appraisal) to more than 25,000 MW as of 2018 is also due in part to the project. This development has led to solar power now having cost parity with thermal generation. There were no cost overruns; in fact, substantial savings resulted in about a third of the loan amount being canceled, and the effects of 21-month project delay (para. 17) were accounted for in the economic reevaluation. Consequently, from a process efficiency perspective, the lower reevaluated EIRR results mainly from the lower value of the avoided carbon dioxide emissions compared to that estimated at appraisal, based on economic development at the time of appraisal. Appendix 10 provides details of the methodology and assumptions underlying the project EIRR reevaluation. D. Sustainability 35. Reevaluation of the financial analysis at appraisal yields an estimated financial internal rate of return (FIRR) of 1.87%, compared to a weighted average cost of the capital (WACC) of 1.67% (Appendix 11). The infrastructure financed by the ADB loan is therefore rated likely sustainable. Financial benefits flowing to GETCO consist primarily of an increase in regulated revenue accruing from newly constructed facilities: the annual revenue requirement is determined by the jurisdictional regulator, the Gujarat Electricity Regulatory Commission, based on its view of reasonable and efficient capital costs, power purchase costs, O&M costs, overhead costs, depreciation, interest on loans and on working capital, and return on equity. The principle underpinning these revenue regulations is that GETCO should earn at least its cost of capital on its investments, subject to transmission fees being adjusted to reflect inflationary increases and/or

15 This information is based on GETCO annual reports for FY 2011–2012 to FY 2017–2018

(http://www.getcogujarat.com/getco_new/pages/dirreport.php) and the project site visit for the preparation of the project completion report.

10

changing regulatory conditions as above. GETCO is a well-funded and profitable electricity transmission company and is able to recover efficient costs through transmission tariffs to operate and maintain its assets. In this context, the project is likely financially sustainable from GETCO’s perspective. The project’s infrastructure and environmental and social aspects are all sustainable and permanent. Institutional sustainability is also ensured given GETCO’s adequate and extensive inhouse technical expertise (para. 21) and adoption of good corporate practices including the adoption and implementation of safety, quality and risk management policies (safeguards and governance structure).16 E. Development Impact 36. As summarized in the DMF, the project exceeded its target of 500 MW of grid-connected solar power generation in Gujarat, achieving about 600 MW evacuated through project-generated transmission infrastructure from the Charanka Solar Park. The project exceeded its total grid-connected solar power generation targets in India of about 1,000 MW by 2013 and 4,000 MW by 2017, achieving 25,000 MW by 2018, six times that expected by ADB at appraisal and higher than the government’s 2022 target of 20,000 MW. The project helped develop the Charanka Solar Park by ensuring that private sector solar farms could transmit their power to the state grid, thereby reducing offtake risk, which encouraged more developers to join the solar park. The project positively impacted the overall solar power industry in India by helping generate a local market for solar panels: 3.5 million have been installed in Charanka, fast tracking home grown manufacturing and competition in India. This in turn has led to much lower costs and instead of a subsidized feed-in tariff and guaranteed offtake price of ₹9/kilowatt when the project was formulated, GEPL are now soliciting bids on the basis of tariff at around ₹3/kilowatt-hour. With that tariff rate, solar power is competitive with other power generation sources, helping to assure future expansion of this source of clean energy. 37. The project had direct beneficial impacts on the thousands of villagers in the Charanka Solar Park vicinity and indirectly for other villages in Patan District, in the form of much improved living conditions including basic services and economic opportunities (para. 20). The project helped ADB’s solar energy strategy to support growth of clean energy in Asia. The associated gender-focused TA supported skills development and livelihood programs in the project area (para. 23; Appendix 1). The project’s development impact is rated satisfactory. The project’s contribution to ADB results framework is in Appendix 12. F. Performance of the Borrower and the Executing Agency 38. The overall performance of the borrower and the executing agency was satisfactory, except for the omission of APFS submission for FY2018. The reduction in project scope was caused by the change in the preferential tariff for private sector solar generation by the state regularity commission, outside the control of either the borrower, GEPCL, or GETCO. The further reduction in use of ADB loan funds was caused by the 20% depreciation of the Indian rupee over the project implementation period, also beyond the control of the borrower and GETCO. Because all the equipment required for the project could be sourced in India, GETCO overestimated the cost of the ICB contracts. GETCO implemented the project professionally and needed a loan extension to adjust already-awarded ICB contracts, to incorporate the increased compensation that affected land owners demanded once it became known that a major project with external financing was

16 GETCO has been operating since 1999 and has successfully gone through the state’s power sector restructuring in

the early 2000. Gujarat Energy Transmission Corporation Limited http://www.getcogujarat.com/getco_new/pages/Policies.php

11

underway; the demand for compensation went up by more than 300% following public consultations. Also, four of the larger ICB contractors were slow to complete their works and their contracts had to be extended. 39. GETCO met or exceeded the social development and gender equity targets set out in the report and recommendation of the President, project administration manual, DMF, and loan agreement. The related monitoring reports were submitted to ADB and disclosed. The financial management of the project was satisfactory, and audits of project accounts reported no discrepancies or issues. The loan covenants were not adjusted and were all complied with. G. Performance of the Asian Development Bank 40. During appraisal and the early years of implementation, more involvement by experienced India Resident Mission staff would have helped develop a more realistic implementation schedule. Assessment of relevance and sequencing of critical equipment was extremely relevant for the project which was realized later. ADB closely monitored project progress through periodic review missions, assessment of quarterly progress reports, and proactive advice on a day-to-day basis on procurement, project management, and capacity building in project management. ADB supported GETCO through workshops on procurement and contract management, gender equity, and social safeguards. ADB provided timely approvals that enabled the project to achieve revised project scopes and milestones and contributed to efficient project execution. Furthermore, ADB, the executing agency, and government officials conducted regular and annual tripartite meetings with senior managers and project staff, which assisted project execution through corrective actions. ADB’s overall performance was satisfactory. H. Overall Assessment 41. Overall, the project is rated successful. It was relevant, effective, and its benefits are likely sustainable. However, the project is rated as less than efficient because its EIRR was lower than ADB’s 12% hurdle rate (para. 34). The completed works under the project were as envisaged at appraisal and fully in line with the Indian government’s solar power development strategy and ADB’s power and solar sector policy. The project successfully implemented the gender component, achieved targets, and provided substantial socio-economic improvements for the villagers in the solar park area. The project boosted the Indian solar power manufacturing sector and encouraged involvement of private solar power developers, which helped to spur India’s explosive growth in solar power generation, more than six times that expected at appraisal. The overall ratings of the project are in the table. The project’s contribution to ADB results framework is in Appendix 12.

Overall Ratings Criteria Rating Relevance Relevant Effectiveness Effective Efficiency Less than efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.

12

IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 42. The project demonstrated the benefit of experienced and sufficiently ranked technical managers to run the executing agency and PMU, with autonomy to plan, design, and implement the project, especially because the changes in scope were quickly processed and implemented. However, ADB’s requirements for all safeguard aspects need to be stressed at appraisal and on a continuous basis throughout project implementation. The project successfully implemented the activities under the gender-focused TA because of the strong commitment by the executing agency to provide benefits to the villagers impacted by the project. 43. All GAP activities and targets were completed and achieved, but with some issues and challenges. The closure of ADB’s TA, the Gujarat Solar Vocational Training and Livelihoods (subproject 14), in 2014 prior to the completion of all GAP activities was the main challenge. However, GETCO’s commitment to gender equality, reflected when it completed the training program from its own funds, helped the project to achieve its outputs. These issues and challenges underscore the need for (i) sound baseline data as an empirical basis for the targeted percentage of women to be employed and for necessary behavior change communication strategies, and (ii) flexibility in TA timeframe to adjust to a project’s situational context. B. Recommendations 44. Involve India Resident Mission staff in a meaningful role during loan formulation and appraisal to ensure full appreciation of local conditions, limitations, sources of equipment, cost estimates, and implementation schedules (para. 40).

45. In cases where project consultants are not required, ADB needs to provide close support to the executing agency and fully apprise senior level managers of ADB procedures and systems so that operational staff will be provided approval and funding to recruit consultants and incorporate related requirements and costs in the cost estimates, bills, and quantity and contracts. 46. Future monitoring. The project has been implemented and resulting facilities are operating as planned. All loan covenants have been met. No further monitoring required. 47. Covenants. The covenants in the loan and project agreements should be maintained in their existing form until 2020. 48. Further action or follow-up. GETCO should submit the APFS for FY2018. 49. Timing of the project performance evaluation report. All the facilities under the project are operating normally. ADB could undertake a project performance evaluation review in 2020.

Appendix 1 13

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and

Targets Project Achievementsa Impact Large scale development of reliable solar power projects in a cost-effective manner in India.

Grid-connected solar power generation capacity in India to increase to about 1,000 MW by 2013 and 4,000 MW by 2017. (2010 baseline: 6 MW) Grid-connected solar power generation to reach about 500 MW by 2015 in Gujarat. (2010 baseline: 0 MW)

Grid-connected solar power generation capacity in India, increased to 25,200 MW by end of 2018. Grid-connected solar power generation capacity in Gujarat increased to 600 MW by end 2018.

Outcome Development of reliable solar power transmission infrastructure for the successful operation of the solar park.

Up to 500 MW of power could be evacuated from the Charanka solar park over the transmission link to the Gujarat and national grid commencing in 2014. (2010 baseline: 0 MW)

Exceeded. 600 MW of solar power evacuated from Charanka solar park (200 MW by 2014 and 400 MW by 2018).

Outputs Physical Investments 1. The procurement, installation and commissioning of the transmission system and associated facilities for the Charanka solar park.

Output 1

1. One 400/220/66 kV substation comprising two 315 MVA transformers and one 125 MVAR bus reactor by 2014 2. Eight 100 MVA transformers at 220/66 kV voltage level by 2014. 3. One 66 kV underground cable grid of about 137 km within the solar park by 2014. 4. About 110 km of 400 kV double circuit transmission line from the solar park to Sankhari substation. 5. About 109 km of 220 kV double circuit transmission line from the solar park to Jangral substation by 2014. 6. Two feeder bays at the substation located at Sankhari and Jangral substations by 2014.

Output 1 Achieved. Completed in 2016

Achieved. 6 transformers financed by the project completed by 2016. 2 transformers funded by GETCO completed in 2012. Achieved. Completed with GETCO funding in 2012. Achieved. Completed in 2016 financed by the project. Achieved. 96 km completed in 2016 financed by the project. 14 km completed in 2012 funded by GETCO. Achieved. Completed in 2016 financed by the project.

14

Design Summary Performance Indicators and

Targets Project Achievementsa Non-physical Investment 2. Vocational training for skilled employment. 3. Energy-based livelihood enhancement.

7. Additional 5 bays with 500 MW transformers and one 80 MVA bus reactor at Sankhari substation (financed by loan savings under the project) Output 2 1. Skills training for up to 300 men and women: target of 30% women, by 2012 2. Livelihood enhancement training for 100 poor households headed by women by 2012.

Achieved. Completed by 2016 financed by the project savings. Output 2 Achieved. By 2015, 386 students trained, 53 students (14%) female, funded by GETCO.b A baseline survey conducted by GETCO found that of the 420 youth in the local areas who expressed interest in vocational skills training, only 23 or 5% were women. Achieved. 136 female headed poor households trained in non-traditional livelihood skills (i.e., mobile phone repair, construction of smokeless cook stoves, energy audit and conservation, and kitchen gardening), funded by the ADB TA.c

Source: Asian Development Bank. ADB = Asian Development Bank, GETCO = Gujarat Energy Transmission Company Limited, km = kilometer, kV = kilovolt, MVA = megawatt ampere, MVAR = megawatt ampere reactive, MW = megawatt, PCR = project completion report, TA = technical assistance, TPRM = tripartite project review mission, a Based on built drawings by GETCO and by ADB review, TPRM and PCR missions. b Report submitted by GETCO, May 2017 as reviewed by the PCR mission. c UN Women. Advanced Project Preparedness for Poverty Reduction-Gujarat Solar Vocational Training and Livelihoods Projects: Final Report to the Asian Development Bank, 28 March–31 December 2014. Unpublished.

Appendix 2 15

PROJECT COST AT APPRAISAL AND ACTUAL ($'000)

Appraisal Estimate Actual

Item Foreign

Exchange Local

Currency Total Cost Foreign

Exchange Local

Currency Total Cost A. Investment Base Costs 84.78 26.13 110.91 65.62 15.98 81.60 B. Contingencies 15.22 5.46 20.68 0.00 0.00 0.00 C. Financing Charges during Implementation 1. Interest during implementation 2.00 0.00 0.00 3.58 0.00 0.00 2. Commitment charges 0.10 0.00 0.00 0.39 0.00 0.00 Subtotal (C) 2.10 0.00 2.10 3.97 0.00 3.97 Total (A+B+C) 102.10 31.59 133.69 69.59 15.98 85.57

Source: Asian Development Bank estimates; GETCO

16 Appendix 3

PROJECT COST BY FINANCIER ($'000)

Table A3.1: Project Cost at Appraisal by Financier

ADB

GOG (through GETCO)

Total Cost

Amount % of Cost Category Amount

% of Cost Category Amount

Item {A} {A/C} {B} {B/C} {C} A. Investment Costs (Total base costs) 84.78 76.4% 26.13 23.6% 110.91 B. Contingencies 15.22 73.6% 5.46 26.4% 20.68 C. Financial Charges During

Implementation 0.00 0.0% 2.10 100.0% 2.10

Total Project Cost (A+B+C) 100.00 74.8% 33.69 25.2% 133.69 % Total Project Cost 75%

25% 100%

Source: Asian Development Bank estimates

Table A3.2: Project Cost at Completion by Financier

ADB

GOG (through GETCO)

Total Cost

Amount % of Cost Category Amount

% of Cost Category Amount

Item {A} {A/C} {B} {B/C} {C} A. Investment Costs (Total base costs) 65.62 80.4% 15.98 19.6% 81.60 B. Contingencies 0.00 0.0% 0.00 0.0% 0.00 C. Financial Charges During

Implementation 0.00 0.0% 3.97 100.0% 3.97

Total Project Cost (A+B+C) 65.62 76.7% 19.95 23.3% 85.57 % Total Project Cost

77%

23% 100%

Sources: Asian Development Bank; GETCO

Appendix 4 17

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table 4.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Annual Disbursement Cumulative Disbursement

Year Amount

($ million) % of Total Amount

($ million) % of Total 2012 0.44 0.7% 0.44 0.7% 2013 16.04 24.4% 16.48 25.1% 2014 20.91 31.9% 37.38 57.0% 2015 14.57 22.2% 51.95 79.2% 2016 8.82 13.4% 60.77 92.6% 2017 4.85 7.4% 65.62 100.0% Total 65.62 100.0% 65.62 100.0%

ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 4.1: Projection and Cumulative Disbursement of ADB Loan Proceeds

($ million)

Source: Asian Development Bank.

18 Appendix 5

CONTRACT AWARDS OF ADB LOAN AND GRANT PROCEEDS

Table 5.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds

($ million) Annual Contract Awards Cumulative Contract Awards

Year Amount

($ million) % of Total Amount

($ million) % of Total 2012 7.32 11.2% 7.32 11.2% 2013 53.36 81.3% 60.69 92.5% 2014 0.00 0.0% 60.69 92.5% 2015 4.93 7.5% 65.62 100.0% 2016 0.00 0.0% 65.62 100.0% 2017 0.00 0.0% 65.62 100.0% Total 65.62 100.0% 65.62 100.0%

ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 5.1: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Source: Asian Development Bank.

Appendix 6 19

CHRONOLOGY OF MAIN EVENTS Date Event 2010 12-27 Jan Consultation Mission 15-19 Nov Consultation Mission 2011 23-29 Mar Fact finding Mission 27 April Management Review Meeting 19 Jul Loan Negotiations 12 September Board Approval 2012 27 Feb Loan Agreement 26 Jun Loan Effectiveness 1-3 Aug Loan Inception Mission 4-5 Sep Special Loan Administration Mission 9-10 Oct Loan Review Mission 2013 10-18 Jan Loan Review Mission 29 Jul-1 Aug Loan Review Mission 10-16 Nov Safeguard review Mission 2015 28-29 Oct Loan Review Mission 2016 31 May-3 Jun Loan Review Mission 2017 17-20 Jul Disbursement Review Mission 9 Nov Loan Financial Closing 2019 18-22 Feb PCR Mission Source: Asian Development Bank.

20 Appendix 7

SUMMARY OF CONTRACTS IN PROJECT

PCSS No.

Category No.

Item Description (Supply and Install Turnkey Contracts)

Contract Amount (ADB Financing)

($)

Actual Disbursed

($)

0001 01B Lot I: 220 kV/66kV, 100 MVA Transformer 1,913,113 1,766,811

0002 01B Lot II: 220 kV/66kV, 100 MVA Power Transformer x 4

1,913,113 1,766,684

0003 01B Supply, erection, testing and commissioning of 400 kV 125 MVAR bus reactor (Lot IV)

993,910 954,744

0004 01B Supply, erection, testing and commissioning of 400/220 kV 315 MV auto transformers (2 nos) (Lot III)

2,852,711 2,834,268

0005 01D Supply and erection of 220kV D/C Charanka - Jangral line on turnkey basis - 95.480 km

8,911,811 7,921,789

0006 01E Supply of 66 kV, 1Cx630 sq. mm cable 5,118,900 4,357,035

0007 01C

Supply & erection of 400kV DC Charanka - Sankhari line - 99.620 km with ACSR twin moose conductor and 1 OPGW cable & 1 earth wire on turnkey basis

16,505,049 15,257,022

0008 01A

Supply, erection, testing & commissioning of 400kV/220kV, 66kV equipments, materials on turnkey basis with all civil works at Charanka substation including Jangral substation

13,299,880 13,299,880

0009 01A

Supply, erection, testing & commissioning of 400kV/220kV/66kV equipments, materials on turnkey basis at 400kV sankhari substation with Scada (Lot-II)

12,617,317 12,526,945

0010 01B Supply, erection, testing & commissioning of 400 kV, 80 MVAR bus reactor (Lot III)

577,722 570,117

0011 01B Supply, erection, testing & commissioning of 220/66 kV, 160 MVA power transformer (Lot 1)

1,603,846 1,584,998

0012 01B Supply, erection, testing & commissioning of 400/220/33 kV, 500 MVA auto transformer (lot II)

3,118,389 2,776,353

Total 69,425,762 65,616,646

Appendix 8 21

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant Reference in Loan Agreement

Status of Compliance

LA, Schedule 4 1. The Borrower shall cause the State and GETCO to carry out the Project with due diligence and efficiency and in conformity with sound applicable technical, financial, business, and development practices. 2. In carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed by the State, all obligations set forth in Schedule 5 to this Loan Agreement. 3. The Borrower shall make available, or cause the State to make available, promptly as needed, the funds, facilities, services, as required, in addition to the proceeds of the Loan, for carrying out of the Project. 4. The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures. 5. The Borrower shall take actions which shall be necessary on its part to enable the State and GETCO to perform their obligations under the Project Agreement and shall not take or permit any action which would interfere with the performance of such obligations. 6. In relation to the Project, the Borrower shall exercise rights under the Financing Arrangements in such a manner as to protect the interests of the Borrower and ADB and in to accomplish the purposed of the Loan 7. In relation to the Project, no rights or obligations under the Financing Arrangements shall be assigned, amended, abrogated or waived without prior notice to ADB. LA, Schedule 5 The following is specified as an additional condition to the effectiveness of this Loan Agreement for the purposes of Section 10.01 (f) of the Loan Regulations: the Subsidiary Loan Agreement, in form and substance mutually satisfactory to ADB and the Borrower, shall have been duly executed and delivered on behalf of the State and GETCO and shall have become legally binding upon the State and GETCO in accordance with its terms. 1. The State and GETCO shall ensure that the project management unit established for the Project: (a) employs sufficient staff with the relevant qualifications, experience and expertise in the fields of: (i) substation implementation; (ii) transmission implementation; (iii)

LA, Schedule 4, para 1 (a) LA, Schedule 4, para 2 LA, Schedule 4, para 3 LA, Schedule 4, para 4 LA, Schedule 4, para 5 LA, Schedule 4, para 6 LA, Schedule 4, para 7 LA, Schedule 5, para 1

Complied Complied Complied Complied Complied Complied Complied Complied

22 Appendix 8



engineering; (iv) procurement and contract management; (v) finance and accounts; and (vi) right of way, environment, social safeguards and safety; and (b) is provided with the necessary office space, facilities, equipment, support staff and management information systems for the entire duration of the Project. 2. The State shall hold quarterly steering committee meetings as required among: (i) Principal Secretary, MOP; (ii) Managing Director, GPCL; (iii) Managing Director, GETCO; and (iv) Managing Director, GUVNL. The purpose of these meetings shall be to monitor the implementation of the Project and the Solar Park and to discuss any issues which may affect the timely implementation of the Project or the Solar Park. 3. The Borrower shall, or shall cause the State to, make available through budgetary allocations or other means, all counterpart funds required for the timely and effective implementation of the Project including any funds required to make land available for the Project, to mitigate unforeseen environmental and social impacts, and to meet additional costs arising from design changes, price escalation in construction costs and/or other unforeseen circumstances. 4. Grid Interconnection: The State shall ensure that GETCO carries out a pilot study on interconnection between the Solar Park and the State’s power grid. If this study determines that dedicated equipment is required to ensure stable power transmission between the Solar Park and the State’s power grid, GETCO shall promptly using its own resources install, integrate and commission such equipment before the completion of the Project. 5. Environment: The State and GETCO shall ensure that the preparation, design, construction, implementation, operation and commissioning of the Project and all Project facilities comply with: (a) all applicable laws and regulations of the Borrower relating to environment, health and safety; (b) the Environmental Safeguards; and (c) all measures and requirements set forth in the IEE, the EMP and any corrective or preventative actions set forth in a Safeguards Monitoring Report. 6. Resettlement: The State and GETCO shall ensure that all land and all rights-of-way required for the Project are made available to the Works contractor in accordance with the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with: (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement; (b) the Involuntary Resettlement Safeguards; and (c) all measures and requirements set forth in the RP, and any corrective or preventive actions set forth in the Safeguards Monitoring Report.

LA, Schedule 5, Para 2 LA, Schedule 5, Para 3 LA, Schedule 5, Para 4 LA, Schedule 5, Para 5 LA, Schedule 5, Para 6

Complied. Complied. Complied. Complied. Complied.

Appendix 8 23



7. Without limiting the application of the Involuntary Resettlement Safeguards or the RP, the State shall ensure that no physical or economic displacement takes place in connection with the Project until: (a) compensation and other entitlements have been provided to affected people in accordance with the RP; and (b) a comprehensive income and livelihood restoration program has been established in accordance with the RP. 8. Gender and Social Inclusion: The State and GETCO shall ensure that the Gender Action Plan is effectively implemented, to achieve its objectives of, among others, enabling the participation of women in employment, skills training and energy-based alternative livelihood activities. 9. Safeguards Related Provisions in Bidding Documents and Works Contracts: GETCO shall ensure effective implementation of following activities, including as required, that all bidding documents and contracts for Works contain provisions that require contractors to: (a) comply with the measures relevant to the contractor set forth in the IEE, the EMP, and the RP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report; (b) make available a budget for all such environmental and social measures; (c) provide GETCO with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP, and the RP; (d) adequately record the condition of roads, and other infrastructure prior to starting to transport materials and construction; and (e) reinstate pathways, other local infrastructure, and land to at least their pre-project condition upon the completion of construction. 10. Safeguards Monitoring and Reporting: The State shall do or cause GETCO to do the following: (a) submit semi-annual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission; (b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP and the RP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; and (c) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the RP promptly after becoming aware of the breach. 11. Prohibited list of investments: The State and GETCO shall ensure that no proceeds of the Loan are used to finance any



24 Appendix 8



activity included in the list of prohibited investment activities provided in Appendix 5 of the Safeguard Policy Statement. 12. Indigenous people: The State and GETCO shall ensure that the Project does not impact indigenous peoples within the meaning of the Safeguard Policy Statement. If due to unforeseen circumstances, the Project impacts indigenous peoples, the State and GETCO shall take all steps necessary or desirable to ensure that the Project complies with all applicable laws and regulations of the Borrower and the State and with the Safeguard Policy Statement. 13. Governance and Anticorruption: The Borrower, the State, and GETCO shall ensure that the anticorruption provisions acceptable to ADB, the Borrower, and the State are included in all bidding documents and contracts financed by ADB in connection with the Project, including provisions specifying the right of ADB to review and examine the records and accounts of the State and GETCO and all contractors, suppliers, consultants, and other service providers as they relate to the Project. The Borrower, the State, and GETCO shall allow and assist ADB's representatives to carry out random spot checks on the work in progress and utilization of funds for the Project. 14. Labor Standards: GETCO shall ensure that civil works contracts under the Project follow all applicable labor laws of the Borrower and the State and that these further include provisions to the effect that contractors: (a) carry out HIV/AIDS awareness programs for labor and disseminate information at worksites on risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction; and (b) follow and implement all statutory provisions on labor (including not employing or using children as labor, equal pay for equal work), health, safety, welfare, sanitation, and working conditions. Such contracts shall also include clauses for termination in case of any breach of the stated provisions by the contractors. 15. Grievance redress: The State shall maintain a grievance redress committee or committees with representation from all stakeholders in the Project facilities for the purpose of addressing any grievances from affected peoples concerning resettlement, environment and any other social issues in a timely manner. 16. Project website: The State shall, or shall cause GETCO, to establish a website for the Project within 3 months of the Effective Date to disclose information regarding the Project including procurement activities relating to the Project.



Appendix 9 25

IMPLEMENTATION OF GENDER ACTION PLAN AND ACHIEVEMENTS

A. Introduction 1. The Gujarat Solar Power Transmission Project was one of first two ADB-financed energy projects in India that was categorized effective gender mainstreaming (EGM).1 As a pioneering gender mainstreaming initiative, the Project was envisaged to serve as a good source of lessons on the potentials and challenges of mainstreaming gender in ADB-supported energy projects. 2. In 2009—2 years prior to the approval of the Project in 2011—the Government of Gujarat launched the Solar Power Policy and proposed to establish a number of large-scale solar parks.2 These solar parks aimed to streamline the development timeline for solar power generation projects given the rapidly growing electricity demand, decreasing availability of land, and increasing reliance on imported sources of fossil fuel in India. Through the Gujarat Solar Power Transmission Project (henceforth, the Project), the Government of Gujarat and Gujarat Energy Transmission Corporation (GETCO), as joint executing agencies, sought to develop a reliable solar power transmission infrastructure for the successful operation of the solar park.3 3. The Project considered not only the physical infrastructure aspects of solar parks but also the social aspects. Hence, part of the Project design due diligence was the carrying out of a socio-economic and poverty assessment in communities along the transmission lines and in the vicinity of the proposed solar park.4 Overall, the assessment characterized these villages, including the Charanka village (the location of the solar park), as remote, living in subsistence-based economies, and with inhospitable living conditions due to extremely hot weather conditions and scarcity of water. These communities were primarily agriculture-based, and with high incidence of poverty (less than $1/ day), illiteracy, and poor standards of living and well-being (no sanitation and drainage facilities, and easy spread of water-borne diseases during monsoon). The roads were in bad shape with no street lights, no public transport system, and people had very limited job opportunities.5 School facilities also needed improvements. 4. To contribute to poverty alleviation, the Project incorporated basic social services, specifically vocational training to assist the youth get jobs in the solar parks, training in energy-based livelihood for poor women, community-based social infrastructures, and giving priority to the local communities for jobs in the solar park. It ensured that these services promote gender equality by enabling women to actively participate and benefit.

1 The other project was the Madhya Pradesh Energy Efficiency Improvement Investment Project, which was also

approved in 2011. 2 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the

Government of India for the Gujarat Solar Power Transmission Project. Manila. 3 GETCO has the mandate to develop transmission infrastructure in Gujarat and served as the implementing agency

of the project. 4 ADB. 2011. ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loan to

the Government of India for the Gujarat Solar Power Transmission Project. Summary of Poverty Reduction and Social Strategy (accessible from the list of documents in Appendix 2). Manila.

5 S. Kumar. Scoping and Need Analysis Study for Commencing Community Development Initiative by Gujarat Energy Transmission Corporation Limited in Charanka Village in Patan District: A Preliminary Report (2011). Unpublished.

26 Appendix 9

B. Gender Issues 5. The social and gender issues, which were identified through the socio-economic and poverty

assessment, were the following:6 5.1. As women were largely responsible for household management (including the fetching

of water and the collection, chopping, and storing of firewood for cooking), the lack of access to energy and the lack of water supply in 55% of the households in the villages exerted a greater toll on women;

5.2. Family heads and villagers restricted women’s mobility outside of their households and, thereby, restrained women’s pursuit of high education, attendance in training activities, and employment;

5.3. Female literacy at 46.3% was lower than the state average of 57.8%; majority of women were educated up to 8th standard. Few completed 10th and 12th standards.

5.4. Most women used traditional chulhas (stoves) made of bricks that are usually laborious and require a larger amount of energy consumption and resources (e.g. firewood or coal), which are detrimental to health;

5.5. Households with electricity connection were not aware of energy conservation options in lighting, cooking and ventilation; and

5.6. Most women did not own mobile phones.

C. Project Gender Features

6. In response to the identified gender issues, the gender action plan (GAP) of the Project had the following five activities: 6.1. Training provided to 300 men and women [Target: 30% women, revised to 5% based

on the results of the baseline survey conducted by GETCO in 2013;7 this corresponds with Output 2 of the project’s design and monitoring framework (DMF)];

6.2. Skills training in energy-based micro-enterprises provided to 100 local women, including women heads of households; this corresponds with Output 3 of the project’s DMF;

6.3. Local workforce employed in semi-skilled and unskilled temporary and permanent jobs created by both the transmission and solar park projects with a target of 30% women workers;

6.4. Community infrastructures developed and assistance provided, particularly: (i) water and sanitation infrastructure; (ii) educational facilities; and (iii) other small-scale infrastructure and support services (e.g., street lighting) as deemed necessary; and

6.5. GAP targets integrated in the project performance monitoring system.

6 UN Women. Advanced Project Preparedness for Poverty Reduction-Gujarat Solar Vocational Training and

Livelihoods Projects: Final Report to the Asian Development Bank, 28 March - 31 December 2014. Unpublished. 7 The (initial) GAP (2011) aimed to support vocational training for skilled employment of up to 300 beneficiaries

(Target: 30% women) targeting the local workforce living in the area of influence of the Project. However, a baseline survey conducted by GETCO found that of the 420 youth in the local areas who expressed interest in vocational skills training, only 23 or 5% were women. Moreover, in their report on the situation of women in the Patan district, UN Women mentioned that only few women finished the 10th level high school education (footnote 7b, p. 9), which was a minimum requirement to qualify for a vocational skills training (see TA7815 paper footnote 7). To facilitate the identification of youth who were qualified for the vocational skills training and in consideration of the remoteness of the villages of Patan district as well as the few interested women, GETCO asked the ADB during a review mission on 31 May–3 June 2016, to change the target participants to local village trainees of the Industrial Training Institute (ITI) Harij as most of these students were from the local villages of Patan district and the objective of the ITI was in line with the project vocational skills training, which was to fill the labor demands created by the solar park and transmission project. This was accepted by the Mission (See para. 16 of the Aide Memoire of the review mission of the Gujarat Solar Power Transmission Project (L 2778 IND), dated 31 May–3 June 2016).

Appendix 9 27

7. To support the achievement of three of five target outputs of the GAP (above 6.1, 6.2, and 6.5), the project tapped an ADB technical assistance (TA) project, the Gujarat Solar Vocational Training and Livelihoods (Subproject 14).8 The TA was a subproject of a cluster technical assistance TA 0003-IND: Advanced Project Preparedness for Poverty Reduction, financed by the Government of the United Kingdom through the Department for International Development.9 For the implementation of Activity 6.2 (in para. 6), which was Output B of the TA, ADB engaged UN Women, which implemented this activity in partnership with the Self-Employed Women’s Association (SEWA). Though the TA subproject closed in 2014 prior to the implementation of activities 6.1 and 6.5, GETCO proceeded with the implementation of the GAP using its own resources.

D. Gender Action Plan Achievements

8. In sum, as shown in the following GAP achievements matrix, all five activities of the GAP were completed and all three quantitative targets were achieved.

Gender Action Plan Achievements Matrix

ACTIVITIES/TARGETS ACHIEVEMENTS STATUS AT

PROJECT COMPLETION

Output 1- Vocational training for skilled employment

1. Skills training provided to support solar power development projects [Target: 5% women]10 Gender sensitive course content and training methodologies developed and implemented. Training facilities catered to women/girls.

• Training provided to all 386 students, of whom 53 were women (14%), of the Industrial Training Institute Harij in Patan District. Training covered 100% women students enrolled in ITI Harij.

• To address the (perceived) gender stereotpes, ADB supported a training on personal effectiveness and leadership in all training courses (for welders, electricians, diesel mechanics, cutters and sewers) administered by ITI Harij. This training was a pre-requisite for employment.

• ITI Harij prepared the gender sensitive training modules and ensured that training facilities (i.e., separate toilets) were available for women.

Activity completed Target achieved

Output 2- Energy-based livelihood Enhancement 2. Skills training provided

to up to 100 vulnerable local women, including female headed households in women-led micro-enterprises in up to 5 villages across the project area of influence.

A total of 136 rural women in 11 villages in Patan and Porbander districts were trained in non-traditional livelihood skills (i.e., mobile phone repair, construction of smokeless cook stoves, energy audit and conservation, and kitchen gardening). An evaluation report presented the participants’ experience of the benefits of the training, as follows:11


8 ADB. 2011. Technical Assistance India: Advanced Project Preparedness for Poverty Reduction - Gujarat Solar

Vocational Training and Livelihoods Project (Subproject 14). Manila. https://www.adb.org/projects/43166-194/main#project-pds

9 ADB. 2016. Technical Assistance Completion Report: India: Advanced Project Preparedness for Poverty Reduction. Manila. https://lnadbg1.adb.org/sec0094p.nsf/docbyno/df0dd116b4ff64d64825808a008340cb/$file/in376-16.pdf

10 In the original GAP the target was estimated at 30%. Based on the results of the baseline survey, the target was aligned during PCR assessment to 5% of the local village trainees.

11 D. O. Stanley. Gujarat Solar Vocational Training and Livelihoods Project: Final Report - TA 7815 Livelihood Training Output – B, February – December 2014 (submitted on 31 December 2014). Unpublished.

28 Appendix 9


PROJECT COMPLETION

Training Benefits Smokeless stove construction

• Reduction of fuel consumption by 30-40%

• Reduction of cooking time to 20-30 minutes because the stove has two tops for simultaneous cooking

Energy audit and conservation

• Reduced electricity cost • See need to support solar power

development Mobile phone repair

• Potential to use skill for livelihood

Kitchen gardening

• Weekly savings of $0.6-0.7 because households can now grow their own vegetables

Output 3- Semi-skilled and unskilled employment of the local workforce including local women 3. Local workforce

employed in semi-skilled and unskilled temporary and permanent jobs across project sites in Patan District. Jobs will cover employment demands created by both the transmission and solar park projects (Target 30% women)

Total of 3,200 workers employed, of whom 960 were women (30%). The women were involved in unskilled and semi-skilled work, such as, sweeping, cleaning, digging, filling, supporting loading and offloading materials, and other general unskilled construction work. All jobs were temporary, offered to women during construction phase of the project.


Output 4- Community infrastructure development or basic community infrastructure and assistance developed in Charanka 4. Basic community

infrastructure and assistance developed in Charanka. Provision of –

• Water and sanitation infrastructure.

Under its CSR Program,12 GETCO (i) renovated and upgraded the primary school in Charanka village and constructed separate toilets for girls and boys, installed drinking water supply, developed the school’s playground, and provided music and computer rooms; (ii) constructed roads; (iii) provided primary health facility; and (iv) developed two industrial training institutes in Amirgadh and Harij under a public-private partnership scheme.13 The Gujarat Power Corporation Limited

Activity completed

12 In fiscal year 2009-2010, GETCO initiated its corporate social responsibility (CSR) program with focus on services

related to education, health and sanitation, and general amenities for the population in its areas of operations. GETCO institutionalized this initiative in its CSR policy (2015) (http://www.getcogujarat.com/getco_new/pages/files/CSR%20Policy%20-%202015.pdf) in compliance with the Companies Act, 2013 (http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf. The Companies Act, 2013 mandates companies—with net worth of INR 5 billion ($72.4 million approx.) or more, or turnover of INR 10 billion ($145.9 million approx.) or more or a net profit of INR 50 million or more during any financial year—all over India to formulate a CSR Policy, constitute a CSR Committee of the Board, and to “spend in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years” (p. 87, para. 135). While the Company Act only urges the companies to, GETCO made the promotion of gender equality and women’s empowerment an integral part of its CSR Policy with explicit mention of specific services to be provided to women and other vulnerable groups, particularly the elderly, children, persons with disabilities, orphans, and socially and economically backward groups.

13 Based on GETCO Annual Reports 2011-2012 to 2017-2018 (www.getcogujarat.com/getco_new/pages/dirreport.php) and project site visit for the preparation of the project completion report.

Appendix 9 29


PROJECT COMPLETION

• Educational facilities, including housing for students.

• Capacity building for maintenance and operations of new facilities.

• Other small scale infrastructure and supporting services to cover basic community development needs (e.g., street lighting, etc.) as deemed necessary.

provided street lights in the solar park area and in the villages within its vicinity. According to a teacher of the Charanka Primary School, these facilities (including the constructed roads) made the school more accessible to students, especially the girls. Details of students at Charankha Primary school

Year Total students No. of girls 2011-12 236 111 (47.0%) 2012-13 232 109 (46.9%) 2013-14 225 100 (44.4%) 2014-15 255 110 (43.1%) 2015-16 250 109 (43.6%) 2016-17 222 100 (47.0%) 2017-18 230 110 (47.8%) 2019-19 229 109 (47.5%)

Output 5- Monitoring & Evaluation 5. Key GAP targets

integrated into the project. PPMS to monitor progress towards gender equality outcomes, targets and indicators.

GETCO submitted quarterly project reports, which included the progress of achievement of the targets of the GAP

Completed

Overall GAP assessment: Successful14

E. Evidences of Project Outcomes on Women and Local Villages

7. Presented here are testimonials of interviewed beneficiaries on the gender equality and social inclusion (GESI) results of the project.15 These testimonials reflect benefits in three areas: women’s economic empowerment, gender equality in human development, and gender equality in decision-making.

Women’s Economic Empowerment Increased sources of income and recognition of earning skills “The construction of the solar park has made a big difference in the lives of the villagers, both women and men. Before, the main livelihood of the people was livestock raising. The dry season was a problem because of lack of water. Hence, they used to move to other villages for water during the dry months. When the solar park was constructed, many people got jobs, like construction work, security guards, drivers, and cleaning of solar panels. With the construction of roads and installation of street lights, more local entrepreneurs emerged and built shops and stores, such that the women do not need to go outside of the village to buy food and other household needs. The solar park generated jobs and livelihood for women and men. They now earn a lot more and have a better life.”

Patel Hinaben Jayantibhai (33 years old, woman, married,

teacher at Charanka Primary School since 2008)

14 Five out of 5 GAP activities were completed successfully (100%) and 3 out of 3 quantitative targets were achieved

(100%). 15 Testimonials were collected from the members of the Self-Employed Women’s Association (SEWA) based in

Ahmedabad, Gujarat, who trained the women villagers in livelihood skills. Teachers of the Charanka Primary School were also interviewed. The PCR mission team also met four women construction workers in the solar park.

30 Appendix 9

“Before our engagement in the project as trainers, we used to share our livelihood skills only to our neighbors. The project gave us a chance to go to remote rural villages to teach poor women. While the women learned skills, which they could use for livelihood, we earned because the project paid us for our training services. We got the recognition of our families, especially our spouses, because they realized that we could train other women and we could earn from doing this. We also felt good that there are trained women, who have started to grow their own vegetables, which reduced their need to go to the market.”

Anjanaben Parmar (40 years old, woman, married, SEWA’s trainer in electricity conservation)

Gender Equality in Human Development Better education and greater mobility and security especially for girl-students “The benefits of the solar park are not only for women and men, but also for the children, especially for the girls. The solar park construction paved the way to the fixing of roads, installation of street lights, and GETCO’s provision of assistance for the renovation of the school, development of a playground, building of toilets for girls and boy, and setting up of computer and music rooms. Before all these, class attendance was low—of 30 students in a class, only 10 used to come, mostly boys. At present, with the improvements and the upgradation of the school, the students are more motivated to study and the parents are more encouraged to send their children to school because the school has become more accessible and safer. The school improvements have also created a more conducive atmosphere for learning. The parents’ fear of untoward things happening to their girls when going out of their villages to study has been resolved. And with the prospect of future jobs at the solar park for their children, the parents now also aim to support their children’s education up to the 12th standard.”

Patel Hinaben Jayantibhai (33 years old, woman, married, teacher at Charanka Primary School)

Self-confidence and ability to speak in public strengthened and poor women in remote villages learned to read, write their names, and count “When we started the training in the two villages, we found the women to be illiterate. So, during our one-month stay there, in between the training in electricity conservation and livelihood, we taught the women how to read, write their names, and count. While the women were very happy with their learned skills, we also felt good at our good deeds. That increased our self-confidence and ability in public speaking. The women wanted us to go back and teach them more livelihood skills so if there would be another chance to go back and train them and other women, we would be very glad to join again.”

Soraswatiben Solanki (45 years old, woman, married, trainer in electricity conservation) Sonalben Sharma (39 years old, woman, married, SEWA’s trainer in mobile phone repair)

Family’s recognition of training skills “Because of the remoteness of the villages of the project, we were required to stay near the villages for 25-30 days. At first my husband did not agree but when he visited me and witnessed how good I was in training other women, he began to support me. Since then, my husband has been very supportive of my work with SEWA and is willing to let me go to remote villages if another training opportunity comes. I attribute this to the opportunity given to me by the project to train women in the rural villages of Patan and Porbander districts.”

Daushanaben Solanki (45 years old, woman, married, SEWA’s trainer in electricity conservation)

Change in the attitude of the community to outsiders “Together with Amorben Rathod, I went to remote villages in Patan. While Amorben was assigned to give training in making smokeless cookstoves, I was assigned to give training in kitchen

Appendix 9 31

gardening. In one of the villages, the people did not allow us to enter because of the belief that all outsiders go to their community to take their resources. Hence, I and Amorben conducted the training in a government school and were able to invite only few participants. In the course of the training, one woman witnessed our good intentions and invited us to her house (to give the training) despite the opposition of her neighbors. Eventually, the other neighbors also realized the benefits of our presence and began to accept us. That experience taught the community that not all outsiders go to their place for selfish reasons.”

Kashirambai Vaghela (52 years old, man, married, SEWA’s trainer in kitchen gardening) Amorben Rathod (54 years old, woman, married, SEWA’s trainer in making smokeless cookstoves

8. The following is a general profile of the interviewed beneficiaries.

Sex Occupations (a beneficiary may have multiple occupations) Female 12 1. Livelihood skills trainer 6 Male 1 2. Construction worker 4 Others 3. Teacher 1 4. Own business/livelihood (animal husbandry,

making cookstoves) 2

Age Group Civil Status Less than 30 Single 2 31–40 8 Married or with partner 11 41–50 5

F. Conclusions and Lessons 9. With its response to the results of the socio-economic and poverty assessment done during the design phase of the project, the GAP strengthened the relevance of the project. The gender equality and social inclusion objectives of the project—as reflected in its DMF and GAP—were also in line with the inclusive growth vision and strategy of the Government of India Eleventh Five Year Plan (2007-2012)16 and ADB’s Strategy 2020, which included gender equity among five drivers of change toward inclusive growth.17 10. The successful implementation of the GAP contributed to the effectiveness of the project. Through the combined resources of ADB’s TA and GETCO’s CSR Program, all activities of the GAP were completed and all of its target outputs, achieved. Specifically, under the project, (i) all 386 students, including all 53 women students, of the Industrial Training Institute, Harij in Patan

16 Planning Commission Government of India. 2008. Eleventh Five Year Plan (2007-2012): Inclusive Growth.

Volume I. New Delhi. 17 ADB. 2008. Strategy 2020: The Long-term Strategic Framework of the Asian Development Bank 2008–2020.

Manila.

32 Appendix 9

District, who were taking different vocation training courses, were trained in leadership and personal effectiveness, which was a common training requirement for employment; (ii) a total of 136 women in 11 villages in Patan and Porbander districts were trained in non-traditional livelihood skills (i.e., mobile phone repair, construction of smokeless cook stoves, energy audit and conservation, and kitchen gardening); and (iii) a total of 3,200 workers, of whom 30% or 960 were women, were hired by GETCO during the construction phase of the solar park. Under its CSR Program, GETCO (i) renovated and upgraded the primary school in Charanka village and constructed separate toilets for girls and boys, installed drinking water supply, developed the school’s playground, and provided music and computer rooms; (ii) constructed roads; (iii) provided primary health facility; and (iv) developed two industrial training institutes in Amirgadh and Harij under a public-private partnership scheme. 11. Challenges and Lessons. All GAP activities and targets were completed and achieved not without issues and challenges. The closure of ADB’s technical assistance (TA), the Gujarat Solar Vocational Training and Livelihoods (Subproject 14), in 2014 prior to the completion of all GAP activities was the main challenge. Another challenge was the difficulty of finding women who were willing and interested to work in the solar park due to cultural restrictions imposed on women’s mobility and the solar park’s requirement of nighttime work (i.e., cleaning of solar panels) because of the extremely hot temperature at daytime. However, GETCO’s commitment to gender equality which reflected in its action that was taken to complete training program from their own funds was constructive for project to achieve its desired outputs. These issues and challenges underscore the need for (i) a sound baseline data to serve as an empirical basis of the targeted percentage of women to be employed and of necessary behavior change communication strategies and (ii) flexibility in the timeframe of technical assistance so as to adjust to the situational context of a project. Overall, against all these issues and challenges, this project showed the potentials of energy projects, particularly solar power development, in contributing to gender equality and women’s empowerment.

Appendix 10 33

ECONOMIC ANALYSIS RE-EVALUATION

A. Background, Approach and Economic Rationale

1. Solar and wind power are still more expensive than conventional coal-fired power in India and impose an additional cost burden due to their intermittency. Government intervention in the form of India’s Electricity Act, 2003, the National Action Plan on Climate Change, and the Jawaharlal Nehru National Solar Mission have created the necessary legal and regulatory framework to internalize the environmental benefits of solar and wind power, thereby attracting private sector investment to the sector. However, the enabling infrastructure to allow for increased penetration of renewal energy (transmission facilities in particular) remains the responsibility of the public sector. This provides the rationale for ADB support.

2. This economic re-evaluation updates the estimated costs and benefit streams of the Project and recalculates the economic internal rate of return (EIRR) is re-evaluated using updated assumptions and actual Project costs, expressed in 2018 terms. The analytical framework adopted for the re-evaluation reflects that used at appraisal. In the “without project” scenario, it was assumed that electricity would have been generated from base-load coal-fired power stations, rather than from solar generators constructed in the Charanka Solar Park as per the “with project” scenario. In this context, the appraisal evaluation and this re-evaluation consider the economic costs and benefits of the entire Charanka Solar Park not just the Project (being the intra-park transmission and transmission connection to the grid). The economic costs of the Charanka Solar Park include both the Project costs and the costs of constructing and operating the third-party generation facilities within the park.

3. The appraisal economic analysis assumed that 500MW of solar generating capacity would be installed in the solar park by 2018, producing 800 terawatt-hours (TWh) over the assumed 25 year life of the assets. In the appraisal analysis, economic benefits were assessed to accrue from 800 TWh of avoided coal-fired generation by way of consumer surplus and avoided carbon emissions. This reevaluation concurs with this approach although does not agree with some of the assumptions adopted at this time.

B. Economic Benefits

4. At appraisal, the capacity of the Charanka Solar Park was assumed to be 500 megawatts (MW). As at 31 December 2018, 612MW of solar generation has been commissioned within the site, and additional generating capacity was under construction. The current estimate of Charanka Solar Park capacity is 1,000MW. The re-evaluation assumes that the remaining capacity is auctioned in increments of 80MW per annum, between 2019 and 2024, as shown in Table 1.

5. At appraisal, an assumption was implicitly adopted that all output from the solar park would be incremental. The unit value of willingness to pay was not provided.

6. Gujarat has had significant power and energy surpluses for at least the last 10 years and other than a constrained 8-hour per day supply to agricultural consumers, all consumers have their demand for electricity met. The state government’s forecast is for peak surpluses to continue until at least 2022 (the last year of the forecast), excluding the capacity provided by solar power and wind power, albeit with the surplus reducing from around 3 MW in 2019 to 1.4 MW in 2022.1 1 The perceived intermittency of renewable energy resources makes it difficult to assess the dependable capacity that

they provide to the grid. For this reason, intermittent renewable energy resources (including solar power) are not

34 Appendix 10

Taking this into account, along with the fact that very few states are still reporting energy and/or capacity deficits in keeping with government’s stated intention to provide 24-hour, 7-day per week electricity to all consumers by 2019, this re-evaluation assumes that assumes that electricity generated in the solar park is entirely non-incremental (that is, a resource cost saving) and that electricity exported from the solar park displaces base-load coal-fired generation during daylight hours. The economic benefits of non-incremental output were assessed as the sum of the avoided variable cost of coal-fired electricity generation and the avoided cost of greenhouse gas emissions.

Table 1: Installed Solar PV Capacity and Electricity Output 1

Installed Capacity Electricity Export Year Capacity

Addition (MW)

Total Capacity

(MW)

Total Export (MWh)

Change Year on Year (MWh)

2011 0 0 0 0

2012 216 216 295,247 295,247

2013 0 216 363,594 68,347

2014 0 216 356,510 (7,084)

2015 75 291 480,259 123,749

2016 96 387 661,905 181,646

2017 185 572 767,921 106,016

2018 40 612 1,053,469 285,548

2019 80 692 1,199,534 146,065

2020 80 772 1,336,096 136,561

2021 80 852 1,472,248 136,152

2022 80 932 1,607,991 135,743

2023 68 1,000 1,722,040 114,049

2024 0 1,000 1,716,874 (5,166)

2025 0 1,000 1,711,723 (5,151)

2026 0 1,000 1,706,588 (5,135)

2027 0 1,000 1,701,468 (5,120)

2028 0 1,000 1,696,364 (5,104)

2029 0 1,000 1,691,275 (5,089)

2030 0 1,000 1,686,201 (5,074)

Y Y Y Y Y

2050 0 1,000 1,587,861 (4,778)

2051 0 1,000 1,583,098 (4,764)

2052 0 1,000 1,578,348 (4,749)

2053 0 1,000 1,573,613 (4,735)

2054 0 1,000 1,568,892 (4,721)

2055 0 1,000 1,564,186 (4,707)

2056 0 1,000 1,559,493 (4,693)

2057 0 1,000 1,554,815 (4,678)

2058 0 1,000 1,550,150 (4,664)

2059 0 1,000 1,545,500 (4,650)

2060 0 1,000 1,540,863 (4,636)

included in official capacity balances (that is, they are ascribed no “capacity value”); only the energy value of the resource is taken into account.

Appendix 10 35

MW = megawatts, MWh = megawatt-hours 1/ Selected years shown for brevity. Source: GETCO and Asian Development Bank staff estimates

7. The estimated short-run marginal cost of typical cost-fired generators was adopted as a minimum estimate of the unit value of resource cost saving (calculated at INR 2.87 per kilowatt-hour expressed in economic terms, based on typical coal plant parameters in India and using the World Bank’s coal price forecast to value coal at its border price equivalent value2).

8. The appraisal evaluation attempted to assess the value of local and global environmental benefits of the project. 3 It estimated local benefits from a literature review, but the value of these benefits was not provided. To calculate global environmental benefits, the appraisal evaluation estimated the value of avoided emissions from coal-fired generating plant using an emissions factor provided by the Central Electricity Authority, however the quantum was not provided. The analysis adopted the value of clean development mechanism (CDM) credits at $5 per ton of avoided carbon emissions as a proxy for the value of adopted emissions. In addition to these environmental benefits, an additional unit benefit equal to the value of renewable energy certificates (RECs).4 The base case appraisal analysis included an estimate of RECs at INR 14.5 per kilowatt-hour as a benefit, the equivalent of $300 per ton of avoided CO2 emissions. In actual fact the value of the RECs was lower than estimated at appraisal, which resulted in a lower re-evaluated EIRR.

9. For this reevaluation, the avoided cost of greenhouse gas emissions was estimated using the methodology set out in ADB’s guidelines. 5 A grid emission factor for solar and wind projects in India of 0.878 tons of CO2 per MWh was used. The recommended value of avoided emissions of $36.30 per ton of CO2 in 2016 (increased by 2% annually in real terms) was adopted.6 When fully developed, the Charanka Solar Park will be responsible for some 1.5 million tons of CO2 emission reduction per annum, with an economic value of $65 million (INR 4,500 million) per annum.

10. Benefits are summarized in Table 2.

2 World Bank (2016). Commodity Markets Outlook. October 2018 update. 3 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loan - India: Gujarat

Solar Power Transmission Project. Manila. 4 A renewable purchase obligation (RPO) scheme was introduced as part of the Electricity Act 2003. It required

jurisdictional electricity regulators in each state to set annual RPO targets for electricity distributors and some large power consumers (including those with captive power plants). Introduced in parallel was a renewable energy certificate (REC) program to allow states with limited renewable energy resources to meet their RPO targets by buying RECs from renewable energy generators or traders in other states. The REC certificate price was intended to be determined in a market auction process subject to the lower and upper bound prices of Rs12 and Rs17 per kilowatt-hour.

5 ADB, Guidelines for estimating greenhouse gas emissions of Asian Development Bank projects: Additional guidance for clean energy projects. Mandaluyong City, Philippines, 2017

6 ADB,Guidelines for the economic analysis of projects. Mandaluyong City, Philippines, 2017

36 Appendix 10

Table 2: Summary of Economic Benefits for Reevaluation

Benefit Unit 2012 2013 2014 2015 M2020

Avoided coal-fired generation

Quantum (GWh) 295.2 363.6 356.5 480.3 1,336.1

Unit value (INR/kWh) 2.9 2.9 2.9 2.9 2.9

Value (INR million) 846.8 1,042.8 1,022.5 1,377.4 3,831.9

Avoided CO2 emissions

Quantum (thousand tCO2) 259.2 319.2 313.0 421.7 1,173.1

Unit value ($/tCO2) 34.9 35.6 36.3 37.0 40.9

(INR/tCO2) 1,922.5 2,117.5 2,181.6 2,354.9 2,800.3

Value INR million 498.4 676.0 682.9 993.0 3,285.0

GWh = gigawatt-hours, kWh = kilowatt-hour, tCO2 = tons of carbon dioxide Source: Asian Development Bank estimates.

C. Economic Costs

11. The domestic price numeraire was used for this reevaluation. Traded Project inputs were valued at their border price equivalent values and then adjusted to the domestic price numeraire by multiplying by the shadow exchange rate factor (SERF) used at appraisal (1.04; footnote 3). Non-traded inputs were valued at domestic prices. It was assumed that there are no significant distortions in the wage rates for skilled labor. In the case of unskilled labor, underemployment exists in the economy, and a shadow wage rate (SWR) of 0.75 was adopted. Taxes, financing charges and unspent physical and price contingencies were excluded. The overall (specific) conversion factor was accordingly estimated at 0.84.

12. In lieu of the actual O&M data from GETCO, this re-evaluation adopts the regulatory allowance for O&M costs of 1% of Project capital costs, escalated at the rate of inflation (as per the financial re-evaluation).

13. For this economic re-evaluation it was necessary to include the cost of the solar PV plant developed within the park (as per paragraph 4 above). Based on information provided by one solar PV developer and general market trends, it was assumed that the specific (financial) capacity cost has declined from Rs 120 million per MW in 2011 to around Rs 70 per MW today. These values were adjusted using a specific conversion factor of 0.86 to convert to economic costs.7 A plant factor of 20% was assumed for all solar PV capacity, reflecting the typical plant factor achieved on existing plant calculated from data supplied by GETCO. Solar plant operating cost of Rs 0.85 million per MW (fixed in real terms) was assumed, based on reported operating costs for one solar PV plant within the park.

14. The Project assets (transmission lines, transformers, buildings and switchgear) have long lives. The solar generation equipment within the park generally have shorter lives and will be replaced during the life of Project assets. A 50-year evaluation period was adopted. Replacement of solar generation power electronics was assumed to occur at 10-year intervals, reflecting the

7 The specific conversion factor assumed that the cost of a plant comprising 80% tradeable equipment, 18% local

skilled labor and 2% local unskilled labour.

Appendix 10 37

shorter expected lives of these components. Solar panel output was assumed to degrade at 0.3% per annum, based on industry norms.

D. Economic Internal Rate of Return

15. At appraisal, the Charanka Solar Park did not initially meet the ADB’s (then) EIRR hurdle of 12%. The project was deemed economically viable only when the value of renewable energy certificates (RECs) was included as a project benefit, in addition to Clean Development Mechanism (CMD) and localized environmental benefits. RECs would ordinarily be treated as a transfer payment and excluded from the economic analysis. However, it was argued that the REC scheme functioned in such a way as to provide a proxy for the environmental benefit of the project.

16. On the basis of the assumptions outlined above, the re-estimated EIRR of the Project is 9.75%, lower than the applicable 12% hurdle rate (see Table AX.2). Sensitivity analysis was undertaken to assess the impact of changes in key uncertain assumptions, namely the cost of (avoided) coal-fired generation and the value ascribed to avoided carbon emissions. In summary, the unit value of both variables would need to increase by 25% for the EIRR to exceed the 12% hurdle rate, and this is considered unlikely (but not impossible). Because almost 700 MW of the total 1,000 MW of solar PV capacity is already installed, the analysis is not particularly sensitive to the future capital cost of solar PV capacity.

17. Additional benefits have not been valued, including the avoided health-related costs of particulate pollution from coal-fired generation, and nurture of the domestic solar panel manufacturing industry. Inclusion of these benefits, particularly the latter, may improve the EIRR to the hurdle rate of 12%. However, because the re-calculated EIRR is less than 12%, this PCR considers the Project to be less than efficient. It is important to note that the Project’s capital cost represents only around 6% of the overall capital cost against which EIRR has been calculated, suggesting that this rating says more about the timing of the Government’s push into solar PV capacity than about the ADB-supported solar park infrastructure.

E. Sustainability

18. GETCO is a well-funded and profitable electricity transmission company. As a regulated monopoly, it has limited exposure to market risk and is able to recover efficient costs through tariffs to operate and maintain its assets. In this context, the Project is entirely sustainability from GETCO’s perspective. The solar PV plants have been developed by private sector developers and given the high feed-in tariffs that were previously offered to these developers, the solar PV plants are likely profitable and generating adequate cash flows for their owners. The spare capacity that is yet to be taken up in the solar park will not be supported by government subsidies and instead offtake prices will be set through a competitive process. This presents some risk that the remaining park capacity is underutilized, but that would only serve to reduce the EIRR of the overall solar park and would not materially reduce the Project’s sustainability.

38 Appendix 10

Table 2: Installed Solar PV Capacity and Electricity Output 1

Installed Capacity Electricity Export Year Capacity

Addition (MW)

Total Capacity

(MW)

Total Export (MWh)

Change Year on Year (MWh)

2011 0 0 0 0

2012 216 216 295,247 295,247

2013 0 216 363,594 68,347

2014 0 216 356,510 (7,084)

2015 75 291 480,259 123,749

2016 96 387 661,905 181,646

2017 185 572 767,921 106,016

2018 40 612 1,053,469 285,548

2019 80 692 1,199,534 146,065

2020 80 772 1,336,096 136,561

2021 80 852 1,472,248 136,152

2022 80 932 1,607,991 135,743

2023 68 1,000 1,722,040 114,049

2024 0 1,000 1,716,874 (5,166)

2025 0 1,000 1,711,723 (5,151)

2026 0 1,000 1,706,588 (5,135)

2027 0 1,000 1,701,468 (5,120)

2028 0 1,000 1,696,364 (5,104)

2029 0 1,000 1,691,275 (5,089)

2030 0 1,000 1,686,201 (5,074)

Y Y Y Y Y

2050 0 1,000 1,587,861 (4,778)

2051 0 1,000 1,583,098 (4,764)

2052 0 1,000 1,578,348 (4,749)

2053 0 1,000 1,573,613 (4,735)

2054 0 1,000 1,568,892 (4,721)

2055 0 1,000 1,564,186 (4,707)

2056 0 1,000 1,559,493 (4,693)

2057 0 1,000 1,554,815 (4,678)

2058 0 1,000 1,550,150 (4,664)

2059 0 1,000 1,545,500 (4,650)

2060 0 1,000 1,540,863 (4,636) MW = megawatts, MWh = megawatt-hours 1/ Selected years shown for brevity. Source: GETCO and Asian Development Bank staff estimates

Appendix 10 39

Table 3: Economic Internal Rate of Return Reevaluation 1

(Rs million)

Benefits Costs Net

Year Non-Incremental

Avoided Emissions

Project Third Party Economic Benefits

Output Capital O&M Capital O&M

2011 0 0 320 0 22,286 0 (22,606)

2012 847 498 425 7 0 183 730

2013 1,043 676 1,095 18 0 183 422

2014 1,022 683 1,430 33 6,021 183 (5,961)

2015 1,377 993 968 42 7,091 246 (5,977)

2016 1,898 1,481 559 48 12,571 327 (10,126)

2017 2,202 1,678 321 51 2,501 484 524

2018 3,021 2,490 0 51 4,601 518 341

2019 3,440 2,891 0 51 4,233 585 1,462

2020 3,832 3,285 0 51 3,895 653 2,518

2021 4,222 3,692 0 51 4,601 721 2,542

2022 4,612 4,113 0 51 2,796 788 5,090

2023 4,939 4,493 0 51 0 846 8,535

2024 4,924 4,569 0 51 353 846 8,243

2025 4,909 4,647 0 51 452 846 8,207

2026 4,895 4,725 0 51 871 846 7,852

2027 4,880 4,805 0 51 188 846 8,600

2028 4,865 4,887 0 51 377 846 8,478

2029 4,851 4,969 0 51 377 846 8,547

2030 4,836 5,054 0 51 377 846 8,616

Y Y Y Y Y Y Y Y

2050 4,554 7,071 0 51 377 846 10,352

2051 4,540 7,191 0 51 1,394 846 9,440

2052 4,527 7,313 0 51 319 846 10,624

2053 4,513 7,437 0 51 0 846 11,053

2054 4,500 7,563 0 51 353 846 10,813

2055 4,486 7,691 0 51 452 846 10,828

2056 4,473 7,821 0 51 871 846 10,526

2057 4,459 7,954 0 51 188 846 11,328

2058 4,446 8,089 0 51 377 846 11,261

2059 4,432 8,226 0 51 377 846 11,385

2060 4,419 8,365 0 51 377 846 11,511

EIRR: 9.7%

ENPV: (9,544) EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operations and maintenance 1/ Selected years shown for brevity. Source: Asian Development Bank staff estimates

Source: Asian Development Bank staff estimates

40 Appendix 11

FINANCIAL INTERNAL RATES OF RETURN

A. Introduction

19. At appraisal, a financial analysis of the Project was conducted from the perspective of the Gujarat Energy Transmission Corporation Limited (GETCO), the owner of the assets developed through the Project. This financial reevaluation re-calculates the financial internal rate of return (FIRR) for the Project and reassesses financial viability by comparing the FIRR with the estimated weighted average cost of capital (WACC) for the Project. The unit of account selected for this re-evaluation was the Indian rupee (Rs). At appraisal, analysis was presented in dollars; some analysis and tables are presented here in dollars to facilitate comparison with the appraisal estimates.

B. Capital Costs and Financing Structure

20. At appraisal, the estimated cost of the Project was $133.69 million. Actual cost was almost 40% lower in US dollar terms at an estimated $81.60 million, despite many costs being rupee denominated and a falling exchange rate.1 At appraisal, the financing plan assumed that the Project would be financed by 25% equity and 75% debt. The actual capital structure on completion was 20% equity and 80% debt.

Table 1: Project Capital Cost and Financing ($ million)

Source Appraisal Actual

Counterpart 33.69 25.2% 15.98 19.6%

ADB 100.00 74.8% 65.62 80.4%

Total 133.69 100.0% 81.60 100.0%

Sources: Asian Development Bank; GETCO

C. Weighted Average Cost of Capital

21. At appraisal, the WACC was estimated at 1.4% (real, post-tax), based on an assumed capital structure of 25% equity and 75% debt. This re-evaluation uses the actual project capital structure of 20% equity and 80% debt. The appraisal WACC estimate assumed a nominal cost of equity of 10%, however no rationale or calculation methodology was provided. This reevaluation has adopted the return on equity allowed by the jurisdictional regulator (14%) as a proxy for the required return on equity for the purposes of WACC calculation.

22. The Project debt has a variable interest rate based on LIBOR plus a margin. The appraisal WACC estimate was based on cost of debt of 3.5%. The actual 6-month LIBOR dollar rate since 2015 has been significantly lower than 3.5%. The current 10-year LIBOR dollar fixed swap rate is 2.692%. Therefore, this re-evaluation uses a cost of debt of 3.0%.2

1 GETCO provided total Project cost in rupee terms but no data was available identifying the year of expenditure.

Therefore, total project cost in dollar terms was imputed from annual loan drawdowns. 2 An argument could be made for adopting a lower cost of debt, for example based on the estimated effective interest

rate over the life of the loan. However, such an approach would not significantly affect the WACC calculation nor the conclusions of this re-revaluation. Therefore a point estimate based on current LIBOR rates was adopted.

Appendix 11 41

23. Re-estimating the WACC using the same methodology, but updated for the assumptions set out above, gives a WACC of 1.7% (real, post-tax).

Table 2: Weighted Average Cost of Capital (%)

Item Weighting Nominal Cost

Tax Rate Tax Adjusted Nominal

Cost

Inflation Real Cost

Weighted Component

of WACC

Appraisal Estimate

Equity 25.2 10.0 0.0 10.0 5.0 4.8 1.2

ADB Debt 74.8 3.5 33.9 2.3 2.0 0.3 0.2

WACC 1.4

Re-evaluation

Equity 19.6 14.0 0.0 14.0 5.0 8.6 1.7

ADB Debt 80.4 3.0 33.9 2.0 2.0 0.0 0.0

WACC 1.7

D. Financial Internal Rate of Return and Financial Viability

24. At appraisal, financial viability was examined by comparing the incremental costs and benefits of with-investment and without-investment scenarios, from GETCO’s perspective. This financial re-evaluation adopts the same methodology. The Project assets (being predominately transmission lines, transformers, buildings and switchgear) have long lives. A 50-year project life was adopted. Financial benefits flowing to GETCO consist primarily of an increase in regulated revenue accruing from newly constructed facilities: an annual revenue requirement (ARR) is determined by the jurisdictional regulator, Gujarat Electricity Regulatory Commission, based on its view of reasonable and efficient capital costs, power purchase costs, operations and maintenance (O&M) costs, overhead costs, depreciation, interest on loans and on working capital, and return on equity. The principle underpinning these revenue regulations is that GETCO should earn at least its cost of capital on its investments (subject to some side constraints). That is, in principle the FIRR on efficient capital investments should equal their WACC.

25. As set out above, the actual Project capital costs are approximately 40% lower than the appraisal estimate. Normally lower capital costs would result in a higher rate of return (the same financial benefits generated at lower financial cost). However, GETCO’s tariff regulation requires that GETCO’s tariffs are set to achieve a target rate of return on the value of equity invested. Because the capital cost of the Project is lower, GETCO’s equity is lower and, in the long run, GETCO’s tariffs will be slightly lower. Therefore, the lower capital cost does not materially affect the estimated FIRR.

26. At appraisal, GETCO’s O&M costs for the project were calculated as 2% of substation capital costs and 7% of the transmission network capital costs, both escalated at 6% per annum. In lieu of the actual O&M data from GETCO, this re-evaluation adopts the regulatory allowance for O&M costs of 1% of Project capital costs, escalated at the rate of inflation. However, because (efficient) O&M costs are a pass-through for tariff-setting purposes (that is, GETCO can recover its actual O&M cost through tariffs), the analysis is not sensitive to this assumption.

42 Appendix 11

27. The capacity of solar generation that can be connected at the park is now estimated at 1,000MW. At appraisal, the estimated capacity of the park was 500MW. This additional capacity gives rise to significant additional benefits. However, these benefits are not captured by GETCO and therefore do not affect the estimated FIRR.

28. At appraisal, the FIRR was calculated at 8.8%. The FIRR exceeded the estimated WACC of 1.4%, indicating that the project was financially viable. The re-estimated FIRR is 1.9% (Table 3). The FIRR exceeds the estimated WACC at 1.7% and the FNPV is positive, indicating that the project is financially viable.

29. Insufficient details were provided in the appraisal FIRR estimate to allow for a comparison to be made between the appraisal FIRR and the re-evaluated FIRR. However, as noted above, the intention of the tariff regulations to which GETCO is subjected is to allow for recovery of efficient cost and for a rate of return more-or-less equal to WACC. Under this regulatory framework, any excess profit would be recovered from GETCO in future years through lower tariffs. In this context, an FIRR of 8.8% against a WACC of 1.4% does not appear to be realistic.

E. Sensitivity Analysis

30. Now that the assets are constructed, in service, and included in GETCO’s regulatory asset base, and given that O&M costs are a pass-through for tariff setting purposes, the Project’s financial performance is only sensitive to the life of the assets. In particular, if the assets were taken out of service prematurely and were removed from GETCO’s ARR (without a corresponding pass-through of asset write-off costs), then GETCO would not recover its full cost of capital. For example, if the assets were removed from service in 2030 and there was no regulatory write-off, then the FIRR would fall to -1.2%. Given the life of the solar park generation assets and their expected build-up to 1,000MW and growing demand for electricity in India, it seems unlikely that the Project’s assets will be taken out of service prematurely.

F. Conclusion

31. The re-estimated FIRR of 1.9% exceeds the re-estimated WACC of 1.4%. This indicates the project is financially viable. A FIRR approximately equal to the WACC is an expected outcome for investments made by utilities subject to economic regulation and is consistent with the form of economic regulation applied to GETCO. The FIRR of 8.8% calculated at appraisal would indicate a failure of the regulatory regime.

Appendix 11 43

Table 3: Financial Internal Rate of Return Calculation (Rs million) 1

Revenue Costs Net Cash Flow Year Capital O&M Tax

2011 46 382 0 16 (352)

2012 139 508 9 41 (419)

2013 208 1,309 22 57 (1,179)

2014 291 1,709 39 68 (1,525)

2015 515 1,157 51 125 (818)

2016 654 669 70 157 (242)

2017 310 384 66 36 (176)

2018 773 0 78 187 508

2019 698 0 86 161 451

2020 643 0 93 143 408

2021 618 0 99 135 385

2022 588 0 104 125 359

2023 561 0 109 116 336

2024 535 0 114 107 314

2025 509 0 118 99 292

2026 484 0 122 91 271

2027 450 0 125 80 245

2028 427 0 127 73 227

2029 405 0 129 66 209

2030 383 0 131 60 192

Y Y Y Y Y Y

2050 90 0 61 1 28

2051 61 0 61 (0) 0

2052 61 0 61 (0) 0

2053 61 0 61 (0) 0

2054 61 0 61 (0) 0

2055 61 0 61 (0) 0

2056 61 0 61 (0) 0

2057 61 0 61 (0) 0

2058 61 0 61 (0) 0

2059 61 0 61 (0) 0

2060 61 0 61 (0) 0

2061 61 0 61 (0) 0

FIRR: 1.9%

FNPV: 397 FIRR = financial internal rate of return, FNPV = financial net present value., O&M = operations and maintenance 1/ For brevity, only selected years are shown. Source: Asian Development Bank estimates.

44 Appendix 12

ASIAN DEVELOPMENT BANK’S RESULTS FRAMEWORK

Level 2 Results Framework Indicator Original Target Revised Target

Achievement

Methods/Comments

1.Installed energy generating capacity (MW)

2.Transmission lines installed or upgraded a

(km)

3.Distribution lines installed or upgraded (km)

4.New households connected to electricity (no)

5.Greenhouse Gas Emission Reduction (tCO2-

equiv/yr))

6.Number of people receiving direct support for vocational training for skilled employment and livelihood enhancement.

500 MW

400 kV 110 km

220 KV 109 km

66 kV 137 km

Total 356 km

NA

NA

O tCO2-equiv/yr

400 (including 190 women)

NA

110 km

96 km

NA

207 km

NA

NA

NAc

NA

600 MW

109 km

96 km

137 km

207 km

NA

NA

1.5 million td

522 (including 189 women)

As per take off meter at Charanka

As per as built drawingsb

As-built drawings “

Completed by GETCO

As-built drawings

Estimated from ADB guidelines

Based on GAP assessment conducted by ADB.

ADB = Asia Development Bank, tCO2-equiv/yr = tons of carbon dioxide equivalent per year, km = kilometre, GAP = Gender Action Plan, GETCO = Gujarat Energy Transmission Company Limited, kV = kilovolt, MVA = megawatt ampere, MVAR = megawatt ampere reactive, MW = megawatt

a In addition, one 400/220/66 kV substation comprising two transformers of 15 MVA and one bus reactor of 125 MVAR rating, eight 220/66 kV transformers of 100 MVA rating and two feeder bays at substations, one 66 kV underground cable grid of about 137 km within the solar park, about 110 km of 400 kV double circuit transmission line from the solar park to Sankhari substation and about 109 km of 220 kV double circuit transmission line from the solar park to Jangral substation.

b Actual achieved, one 400/220/66 kV substation comprising two transformers of 15 MVA and one bus reactor of 125 MVAR rating, six 220/66 kV transformers of 100 MVA rating and two feeder bays at Jangral substation, 5 additional bays at Sankhari substation, 96 km of 400 kV double circuit transmission line from the solar park to Sankhari substation and about 109 km of 220 kV double circuit transmission line from the solar park to Jangral substation. The 66 kV

underground cable grid of about 137 km within the solar park, 14 km of 220 kV double circuit transmission line from solar park to existing connection point and two 220/66 kV transformers installed by GETCO.

c RSSD desktop screening for Gujarat Solar Park indicates that the addition of 500 MW of solar generation capacity in the Charanka Solar Park will result in 692,478 tons of CO2 reduction per year. The ADB financed project will evacuate this clean power to the Gujarat grid. d The revised solar generation capacity, due to the ADB financed project, that can be evacuated from the Charanka Solar Park when it is fully built out, will be 1000 MW. This would result in 1.5 million tons of CO2 reduction per year.