Completion Report

Project Number: 36352-013 Loan Number: 2429 August 2017

Viet Nam: Song Bung 4 Hydropower Project

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – dong (D)

ABBREVIATIONS

ADB – Asian Development Bank EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan EVN – Viet Nam Electricity FIRR – financial internal rate of return GAP – gender action plan POE – panel of experts REMDP – resettlement and ethnic minority development plan RMIU – Resettlement Management and Implementation Unit SB4HP – Song Bung 4 Hydropower Project SB4HPMB – Song Bung 4 Hydropower Project Management Board SEIA – summary environmental impact assessment TA – technical assistance

WEIGHTS AND MEASURES

GWh – gigawatt-hours km – kilometer m – meter m3 – cubic meter m3/s – cubic meters per second MW – Megawatt (one million watts) tCO2 – tons of carbon dioxide

NOTES

(i) The fiscal year (FY) of the Government of Viet Nam ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends. (ii) In this report, "$" refers to US dollars.

At Appraisal At Project Completion (15 May 2008) (31 December 2015)

D1.00 = $0.000062 $0.000045 $1.00 = D16,150 D22,150

Vice-President S. Groff, Operations 2 Director General R. Subramaniam, Southeast Asia Department (SERD) Director A. Jeffries, Energy Division, SERD Team leader M. Suga, Social Development Specialist, SERD Team members J. Almera, Senior Operations Assistant, SERD

M. Kiefer, Energy Specialist, SERD M. Ramas, Project Analyst, SERD A. M. Tuan, Senior Project Officer (Energy), SERD

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. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 6 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14 B. Lessons 14 C. Recommendations 14

APPENDIXES

1. Design and Monitoring Framework 16 2. Chronology of Main Events 18 3. Project Outputs 20 4. Currency Equivalents 21 5. Summary of ADB-Financed Contracts 22 6. Appraisal and Actual Project Costs 23 7. Projected and Actual Cumulative Disbursements 24 8. Project Implementation Schedule 25 9. Status of Compliance with Major Loan Covenants 26 10. Land Acquisition, Resettlement, Livelihood Restoration, and Gender Aspects 36 11. Economic and Financial Reevaluation 42 12. Analysis of Implementation of Environmental Safeguards 45

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Viet Nam 2429 Song Bung 4 Hydropower Project Socialist Republic of Viet Nam Viet Nam Electricity (EVN) $196 million 1667

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower – Amount on-lent

17 April 2007 24 April 2007 12 December 2007 13 December 2007 26 June 2008 6 October 2008 6 January 2009 16 January 2009 – 30 June 2014 21 July 2016 1 LIBOR + 0.20% per annum 25 5 LIBOR + 0.75% per annum 25 5 Viet Nam Electricity (EVN) $196 million

9. Disbursements (by ADB)

a. Dates

Initial Disbursement

19 May 2009

Final Disbursement

29 Mar 2016

Time Interval

82 months

Effective Date

16 January 2009

Original Closing Date

30 June 2014

Time Interval

65 months

b. ADB Loan Amount (US$ million)

ii

Category Original

Allocation Last Revised

Allocation Amount

Disbursed Undisbursed

Balance a

1. Civil Works 108.66 135.76 127.97 7.79

2. Goods 40.60 35.67 31.06 4.61

3. Consulting services 5.25 6.12 6.11 0.01

4. Resettlement costs 13.90 12.70 1.20

5. Financing Charges During Implementation

19.02 4.55 3.30 1.25

6. Unallocated 22.47 - - -

Total 196.00 196.00 181.14 14.86

a The undisbursed balance was formally canceled by the borrower at project closing.

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 87.53 181.14

Local Currency Cost 179.75 81.49

Total 267.28 262.63

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Implementation Costs

Borrower Financed 48.94 35.85

ADB Financed

Domestic Bank Financed

176.98

18.16

177.84

30.73

Total 244.08 244.42

Financing Charges During Implementation

Borrower Financed 0.00 0.00

ADB Financed

Domestic Bank Financed

19.02

4.17

3.30

14.91

Total 23.19 18.21 ADB = Asian Development Bank.

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3. Breakdown by Cost Category ($ million)

Cost Category Appraisal Estimate Actual

A. Base Cost

1. Technical design and feasibility study 6.14 4.49

2. Project management and commissioning 5.55 6.45

3. Access road to project site and administration building 9.96 9.29

4. Major civil works (dam and spillway) 59.70 88.63

5. Major civil works (tunnel and power station) 39.97 39.34

6. Electro-mechanical equipment 32.57 26.34

7. Hydro-mechanical equipment 7.34 5.16

8. Transmission line 6.73 –

9. Resettlement cost 16.97 43.43

10. Environmental mitigation 0.56 1.67

11. Realignment of highway no. 14 D 9.18 7.50

12. Consultancy services 4.55 6.95

13. VAT and other taxes 15.45 5.17

Total Base Cost 214.67 244.42

B. Contingencies

Physical 16.84 –

Price 12.58 –

Total Contingencies 29.42 –

C. Financing Charges During Implementation 23.19 18.21

Total 267.28 262.63

4. Project Schedule

Item Appraisal Estimate Actual

Date of contract with consultants

Construction supervision consultant Q1 2008 4 Feb 2009

Independent monitoring consultant Q1–Q4 2008 20 Feb 2009

Completion of technical design Dec 2008 Q4 2008–Q3 2009

Civil works contracts

Date of first contract award 30 Aug 2009 15 Jun 2010

Date of last contract award N/A 14 Dec 2012

Completion of works 15 Aug 2013 3 Dec 2014

Equipment and supplies contracts

Date of first procurement Q1 2009 Q4 2009

Date of last procurement N/A Q4 2011

Completion of equipment installation Q2 2013 Q3 2014

Other milestones

Reservoir filling Q2–Q3 2014 Q3–Q4 2014

Commissioning Q4 2013 Q4 2014

Project completion date 30 Jun 2014 31 Dec 2015

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5. Project Performance Report Ratings

Implementation Period

Ratings a

Development Objectives

Implementation Progress

From 16 January 2009 to 31 December 2009 Satisfactory Satisfactory

From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory

From 1 January 2011 to 31 December 2011 On track

From 1 January 2012 to 31 December 2012 On track

From 1 January 2013 to 31 December 2013 On track

From 1 January 2014 to 31 December 2014 On track

From 1 January 2015 to 31 December 2015 On track a New rating system in place from 2011 onwards

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D. Data on Asian Development Bank Missions

Name of Mission

Date of Mission

No. of Persons

No. of Person-Days

Specialization of Members a

Fact Finding Mission 31 Jul–11 Aug 2006 9 108 a, b, c, d, e, f, g, h, i

Post Fact Finding Mission 26 Aug–1 Sep 2006 5 35 a, d, e, i, j

Pre-Appraisal Mission 25 Sept–6 Oct 2006 5 60 a, b, d, j, k

Appraisal Mission 17–24 2007 N/A N/A N/A

Loan Inception Mission 1–8 Apr 2009 9 80 d, l, m, n, o, q, r

Consultation Mission No.1 31 Aug 2009 2 1 l, m

Safeguard Review Mission No.1 26 Nov–6 Dec 2009

and 13–17 Dec 2009

3 48 d, o, p

Loan Review Mission No.1 22–26 Feb 2010 4 20 f, m, n

Safeguard Review Mission No.2 9–20 Mar 2010

26 Mar–8 Apr 2010

4 104 d, p, r

Safeguard Review Mission No.3 27 Apr–6 May 2010 3 30 d, p, r

Safeguard Review Mission No.4 7–11 June 2010 3 15 m, s, r

Safeguard Review Mission No.5 29 Jun–15 Jul 2010 4 68 d, p

Safeguard Review Mission No.6 20–26 October 2010 3 21 d, p

Safeguard Review Mission No.7 3–14 Mar 2011 7 84 d, p, t

Safeguard Review Mission No.8 30 May–9 Jun 2011 1 11 d

Loan Review Mission No.2 12–16 Dec 2011 8 40 f, m, n, r, v

Safeguard Review Mission No.9 8–12 March 2012 2 10 s, w

Special Project Admin. Mission 2–9 Jul 2012 5 40 f, s, u, v

Consultation Mission No.2 25–26 Aug 2012 3 6 d, o, p, x

Loan Review Mission No.3 5–7 Feb 2013 4 12 r, s, u, y

Loan Review Mission No.4 20–23 Aug 2013 6 24 f, n, s, u, v, z

Safeguards Review Mission No.10 24–28 Feb 2014 2 10 f, w

Safeguards Review Mission No.11b 22–24 Apr 2014 5 15 w, aa

Safeguards Review Mission No.12 14–15 Jul 2014 3 6 w, aa

Midterm Review Mission 4–20 Nov 2014 5 20 f, n, s, u, v, w

Safeguards Review Mission No.13 23–27 Mar 2015 4 20 f, s, aa

Safeguards Review Mission No.14b 19–24 Jun 2015 4 24 s, aa

Loan Review Mission 5 28 Sep–1 Oct 2015 5 20 n, s, v, aa

Safeguards Review Mission No.15b 11–17 Sep 2016 4 28 s, aa

Project Completion Review b 1–11 Nov 2016 and 12–19 Dec 2016

9 171 g, n, s, v, aa

Notes: a a: financial specialist or mission leader; b: project specialist; c: operations officer; d: social development and resettle-

ment specialist; e: poverty reduction specialist; f: environment specialist; g: administrative assistant; h: advisor; i: director; j: energy economist specialist; k: legal counsel; l: resettlement specialist; m: infrastructure specialist or mission leader; n: project implementation officer; o: project administration officer; p: Japan Fund for Poverty Reduction consultant; q: programs officer; r: staff consultant; s: social development specialist; t: Department of External Relations staff; u: energy specialist; v: project analyst; w: social sector specialist; x: director; y: deputy country director; z: associate disbursement analyst; aa: technical assistance consultants

b Combined with other projects in the area.

I. PROJECT DESCRIPTION 1. Background. Since the early 1990s, the Government of Viet Nam has taken major steps to promote the development of the energy sector in order to meet the country’s rapidly increasing demands for socio-economic development. Since 2000, the government has emphasized the development of environmentally sustainable energy sources, of which hydropower has been and continues to be the most important. The Comprehensive Poverty Reduction and Growth Strategy, 2001–2010 mentioned a series of policy objectives that were highly relevant to the generation of hydropower, notably, to (i) optimize the use of natural resources and other renewable sources for electricity generation, (ii) minimize pollution and environmental damage in the generation of electricity, and (iii) increase the allocation of financial resources for the electricity sector. 1 Against this background, the government requested the Asian Development Bank (ADB) to support the development and construction of the Song Bung 4 hydropower plant. At the time of the request, the total hydropower generating capacity of Viet Nam was about 8,000 megawatts (MW), and the planned capacity of the Song Bung 4 Hydropower Plant (156 MW) would add about 2% to the national total. The plant would be constructed and operated by a subsidiary of Viet Nam Electricity (EVN), a state-owned enterprise with a statutory monopoly on electricity distribution in the country. 2. Project objectives and scope. The Song Bung 4 Hydropower Project (SB4HP) was designed to contribute to Viet Nam’s increasing power demand in an environmentally sustainable and socially inclusive manner.2 The intended outcome of the project was to increase power generation capacity in Quang Nam Province in central Viet Nam through sustainable use of hydropower, and mitigation of adverse environmental and social impacts. The intended outputs of the project were (i) construction and commissioning of the 156 MW Song Bung 4 hydropower plant and associated facilities including a dam, a powerhouse, a transmission line, and an access road; and (ii) improvement of livelihoods of project-affected persons in a sustainable manner. Because the hydropower plant delivers power to the national grid, the main beneficiaries of the project consist of persons with improved access to electricity throughout Viet Nam. In addition, the persons who are compensated and permanently resettled due to the project benefit from improved access to public infrastructure and livelihoods.

II. EVALUATION OF DESIGN AND IMPLEMENTATION 3. The design and monitoring framework at appraisal in May 2008, compared to achievements at the project completion date in December 2015, is in Appendix 1. The main project processing and implementation events are presented chronologically in Appendix 2. A. Relevance of Design and Formulation 4. Relevance of the project. The strategy of the government to develop environmentally sustainable energy sources, mainly hydropower, has been relevant for the socio-economic development of Viet Nam. Also, the thematic priorities of ADB’s Country Strategy and Program for Viet Nam, 2006–2008,3 namely, (i) sustainable growth through infrastructure development, (ii) inclusive social development, and (iii) a geographic focus on the central region, are relevant. SB4HP supported both government strategies and ADB’s country partnership strategy and was designed to increase electricity output in an environmentally sustainable and socially inclusive manner. This objective was relevant at the time of appraisal both to the government and ADB.

1 Government of Viet Nam. 2003. The Comprehensive Poverty Reduction and Growth Strategy (CPRGS). Ha Noi. 2 ADB. 2008. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Socialist Republic of Viet Nam for the Song Bung 4 Hydropower Project. Manila. 3 ADB. 2005. Country Strategy and Program Update Viet Nam, 2006–2008. Manila.

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The project also directly addressed a series of policy objectives mentioned in the government’s Comprehensive Poverty Reduction and Growth Strategy, 2001–2010 (footnote 1). 5. Project preparation. In 2004, ADB provided a small-scale technical assistance (TA) for initial screening of the project's environmental and social issues, and in 2005, ADB approved the project preparatory TA which started in 2006.4 In January 2007, the consultants provided a feasibility study report that contained a detailed design of SB4HP. This report was prepared in close consultation with EVN, the executing agency of the project, representatives of provincial and district governments, project affected people, and nongovernment organizations. In 2007, EVN established the Song Bung 4 Hydropower Project Management Board (SB4HPMB) as the implementing agency to manage the project on its behalf. The feasibility study report was updated in May 2008, because of the issuance of a new government regulation on the minimum flow from the dam reservoirs (environmental flows).5 ,6 Due to this new regulation, the technical design required revised discharge estimates from the original feasibility study (63.5 m3/s instead of 88.4 m3/s). Consequently, the estimates of the project’s economic and financial internal rates of return and social and environmental safeguards documents were also revised. There were no further design changes during implementation other than the increased number of relocated households by 63 and the additional compensation requested by government (paras. 10–12). The project formulation process was adequate and the project design and implementation arrangements were sound. The quality of the work of the project preparatory TA consultants was generally good and their deliverables were satisfactory. B. Project Outputs

6. The project had two outputs which were achieved satisfactorily.7 7. Output 1: Construction and commissioning of 156 MW Song Bung 4 Hydropower Project and associated facilities. The main output of the project is the 156 MW hydropower plant in the province of Quang Nam in central Viet Nam, 150 kilometers (km) southwest of Da Nang, the country’s third-largest city. The plant is located on the Bung River, a tributary of the Vu Gia River, and forms a cascade with the Song Bung 2 and Song Bung 5 hydropower projects. A 110-meter high concrete dam captures the flow of water from the Bung River, thereby creating a reservoir with a surface area of about 15.8 km2 area in the Zuoih and Ta Bhing communes in the district of Nam Giang. Water from the reservoir is conveyed through a 3.1 km tunnel and drops 26 m to an aboveground powerhouse. The water discharged from the powerhouse returns through a short tailrace canal to the Bung River, 5 km downstream of the dam. The project scope also included a 35 km long 220-kV transmission line from the powerhouse to Thanh My in Nam Giang district to evacuate power to the national grid.

8. The hydropower plant was commissioned in December 2014 and has the same capacity as planned (156 MW). The dam height, reservoir area, and gross reservation storage are all within 5% of the estimated dimensions at appraisal. These do not have any impact on the achievement of the planned output of adding 156 MW of capacity that contributes to meeting peak demand requirements. Following are the two main changes to the original scope: 4 ADB. 2004. Technical Assistance to Viet Nam for Preparing the Song Bung 4 Hydropower Project Phase I. Manila.

and ADB. 2005. Technical Assistance to Viet Nam for Preparing the Song Bung 4 Hydropower Project Phase II. Manila.

5 Environmental flows include the quantity and timing of water flows required not for power generation but to maintain the downriver ecosystem.

6 Government of Viet Nam. 2008. Decree 112/2008/ND-CP on management, protection and integrated exploitation of resources and environment of hydropower and irrigation reservoirs. Ha Noi.

7 Appendix 3 provides the planned and actual outputs.

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i) The 35-km transmission line was removed from the project scope and built by

National Power Transmission Corporation, another EVN subsidiary, rather than by SB4HPMB.8 The line was completed in October 2014 in time for the commissioning of the power plant. The actual cost of the transmission line is $8.0 million based on the information provided by EVN which is within the estimated cost ($6.7 million base cost plus contingencies).

ii) The dam height was increased by 5 m to accommodate additional dead reservoir storage from 173 million m3, anticipated at the time of appraisal, to 277 million m3.9 This revision was required to ensure the increased environmental flows required by the government issued decree (footnote 6). This increased the cost of the major civil works package by $28.9 million ($88.6 million actual vs. $59.7 million plus physical and price contingencies at appraisal).

9. Even with the increased dam height, the estimated impact of the additional storage requirement is a reduction in annual power generation of about 20 gigawatt-hours (GWh). At the time of appraisal, the average annual electricity output of the plant was estimated at 491 GWh. The actual generation was 363 GWh in 2015 (the first year in which the plant was fully operational) and 440 GWh in 2016. Due to the impacts from the El Niño effect, the incoming river flow was much lower during 2014–2016 than in preceding years.10 Thus, power production was also much lower than the estimated long-term average. However, generation of 440 GWh in 2016 under such an extreme weather condition is promising for future performance, since production levels in higher rain fall years would increase. Long term production levels cannot be extrapolated from the actual production in just the first two years under extreme weather conditions prevailing in the region. Nevertheless, the reduced sales is captured in the financial and economic reevaluation, and the project remains financially and economically viable even assuming reduced sales based on the 2015 and 2016 extreme weather conditions. 10. Output 2: Improvement of livelihoods of project-affected persons in a sustainable manner. A total of 507 households were affected by the project. Of these, 269 needed to be relocated permanently (265 of these moved to the project-financed resettlement sites), 100 households were severely affected (defined as sustaining losses amounting to more than 10% of household income) and 138 were marginally affected. At the appraisal stage, the estimated number of households to be relocated was 206, and by project completion, the number increased by 63 additional affected households. 11. As required by the loan agreement, EVN adopted a resettlement and ethnic minority development plan (REMDP), ensuring that all affected persons were compensated for damages at replacement cost and provided livelihood restoration measures to help them improve or at least maintain living standards and income generation capability to pre-project level.11 In accordance with the REMDP, compensation, livelihood assistance, and physical relocation activities commenced in 2008 and were completed in 2014. The government requested additional compensation which was not included in the REMDP to compensate affected households in the village of Parum B, which lost access to productive lands. The payment of these additional

8 This was part of the government’s strategy to unbundle EVN as a vertically integrated utility into separate corporations

covering its power generation, transmission and distribution functions. 9 Dead storage refers to water in a reservoir that cannot be drained by gravity through a dam's outlet works, spillway

or power plant intake. 10 In 2014, nearby Singapore experienced the driest February since records began in 1869. The third driest February

was in 2015. Hydropower projects in neighboring Laos also experienced lower output due to the El Niño effect. 11 Resettlement and ethnic minority development plan for Song Bung 4 Hydropower project can be found in,

https://www.adb.org/sites/default/files/project-document/62141/36352-01-vie-remdp-01.pdf

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benefits was finalized by the end of 2015. For households that were relocated permanently, the project constructed resettlement sites, including access roads, houses, and community facilities such as schools, health centers, and meeting houses. All infrastructure that was built under the REMDP was handed over to Nam Giang District People’s Committee by 2015, which is now responsible for their operations and maintenance. Thus, output 2 is achieved satisfactorily. 12. The total estimated resettlement cost at appraisal was $16.97 million, while the actual cost was much higher at $43.43 million equivalent. This is mainly because the government issued a new decree in 2009 that resulted in a major increase in average compensation payments.12 Other reasons include the increase in affected households to be resettled, higher compensation costs because of inflation accrued during the two-year period between preparation and approval of the project, and the decision to compensate one additional village due to lost access to non-flooded land. C. Project Costs 13. At appraisal, the total project cost was estimated at $267.3 million, base cost ($214.7 million), physical contingencies ($16.8 million), price contingencies ($12.6 million), and financial charges during construction ($23.2 million). At appraisal, it was envisaged that ADB would finance $196.0 million from its ordinary capital resources. EVN would finance the remaining $71.3 million ($49.0 million from its own resources and $22.3 million from a dong-denominated loan from the Viet Nam Development Bank). The proceeds of the ADB loan were to be used to finance 100% of the net-of-tax cost of the major civil works for the dam, the electromechanical and hydromechanical equipment, and the consulting services, and 67% of value added tax and other taxes. The proceeds of the Viet Nam Development Bank loan were expected to finance the resettlement costs. All other cost items were expected to be financed in full from EVN’s own resources. 14. In December 2015, at the loan closure, the actual cost of the project was $262.63 million, including $18.21 million of financial charges, which is $4.65 million lower than the estimated project cost ($267.28 million). ADB had financed a total of $181.14 million of the total cost,13 and government financing was $81.49 (the Viet Nam Development Bank $45.64 million, and EVN own resources $35.85 million). Although the actual project cost was very close to the project cost estimated at appraisal, there were differences in the cost categories as provided in part C of the Basic Data section. Significant differences are: (i) financial charges during construction were lower than expected, mainly because of a substantial decrease in LIBOR (5% in 2007 at project appraised, but less than 1% during 2009–2016, when funds were disbursed), (ii) the actual cost of major civil works (dam and spill way) was higher by $28.93 million ($88.63 million vs appraised $59.70 million), (iii) resettlement costs were far higher than anticipated ($43.43 million vs appraised $16.97 million), and (iv) the removal of the transmission line reduced the project cost. In addition, because the actual depreciation of the dong against the US dollar was higher than the estimated depreciation in the feasibility study, the project benefited from exchange rate gains for its local currency expenses. These gains were relatively modest because the goods and works contracts, which accounted for about 65% of the total project cost, were payable in US dollars. Appendix 4 has details of US dollar exchange rates in relation to the dong. Appendix 5 has an overview of contracts financed from the ADB loan proceeds. Appendix 6 has a comparison of project costs at appraisal and completion.

12 Government of Viet Nam, 2009. Số: 69/2009/ND-CP. additionally providing for land use planning, land prices, land

recovery, compensation, support and resettlement. Ha Noi. 13 ADB disbursed $180.0 million by the loan closing date (31 December 2015) and $1.1 million was disbursed during

the financial closing period in 2016.

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D. Disbursements 15. The loan was disbursed in accordance with ADB’s Loan Disbursement Handbook (2007 as amended from time to time). The statement of expenditure procedure was used to reimburse eligible expenditures not exceeding $100,000. Until mid-2013, disbursement was slightly lower than anticipated, mainly because of a delay in the commencement of the civil works contracts. Appendix 7 contains projected and actual disbursements.14 The total disbursement of ADB loan proceeds was about $181.14 million, against the approved $196 million. There were savings and cost overruns across different cost categories which are discussed in para. 14. There were no issues with counterpart financing.

E. Project Schedule 16. A detailed project schedule comparison at appraisal and as actually implemented is in Appendix 8. The loan was approved by ADB’s Board of Directors in June 2008, signed by the borrower in October 2008, and declared effective in January 2009. The project implementation started in February 2009, with the appointment of a construction supervision consultant by SB4HPMB. The technical design was approved in July 2009, 6 months later than scheduled due to the government’s new decree on increased environmental flow (footnote 6). Thus, procurement of the main civil works and equipment took place six months later than expected, in June 2010. The works were mostly completed in October 2014 (unit 1 in September and unit 2 in October), the month in which the hydropower plant was fully commissioned. The delay of commissioning of the plant was only 9 months behind the target at appraisal (December 2013) and only 3 months behind the original loan closing date (June 2014). The construction of resettlement infrastructure and the actual relocation of villagers to the resettlement areas took place between Q2 2009 and Q3 2014. The loan was closed in December 2015, 18 months after the original loan closing date of 30 June 2014 and the loan account was closed in July 2016. 17. Extension of the project closing date. In July 2013, ADB approved an extension of the loan closing date by 18 months from 30 June 2014 to 31 December 2015. The main reasons for considering an 18-month extension were:

i) Construction of dam and spill way. Delays were foreseen in the contract for construction of dam and spill way due to two reasons: (a) poor management of civil works contracts during the first year, and (b) poor geology in the left abutment caused delays in dam construction and subsequent reservoir impounding. Regarding the poor management of civil works contracts, in June 2010, EVN awarded contracts for the civil works of dam and spillway, and waterway and power stations and it was observed that construction planning was poor and lacked effective control of the workforce and subcontractors, partly because the project manager had no relevant work experience in Viet Nam. After the contractor replaced its project manager in mid-2011, contract management improved and remained adequate until completion. Overall, delay from contract award to completion was one year longer than envisioned.

ii) Procurement of electro-mechanical equipment package. The procurement of this package started in Q4 2009 and was completed in December 2011. The original target was to complete the procurement within a year. The reason for delay was due to rebidding as discussed in para. 28. This additional one year in the delivery of the equipment contributed to the delay in completion of the works

14 The methods used to disburse ADB loan proceeds were: (i) disbursement from the imprest account, (ii) direct

payments, (iii) reimbursement, and (iv) disbursements against a Letter of Credit which were appropriate.

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contract as the schedule of the power station civil works was dependent on equipment deliveries. Therefore, equipment installation was commenced in the Q1 2012 and completed in Q3 2014.

18. The project implementation was efficient when considering that the construction of the hydropower plant and related infrastructure—from the appointment of the main works contractor to the commissioning of the hydroelectric power plant—took only six months longer than the estimated duration during appraisal (54 months instead of 48 months). Similarly, the relocation of villagers to resettlement areas started 15 months later than expected as it was aligned with the actual project implementation. Periodic review missions including a mid-term review mission were fielded to monitor project implementation. The design and implementation arrangements were adequate and outputs were achieved efficiently. F. Implementation Arrangements 19. The implementing arrangements of the project were satisfactory. EVN was the executing agency. It assigned all responsibilities for project implementation to the SB4HPMB, except for the approval of technical designs, bid documents, and contract awards, which were retained by EVN headquarters. In 2007, EVN established SB4HPMB with approximately 45 full-time professional staff to implement the project. Most personnel assigned to SB4HPMB were transferred from Hydropower Management Board Number 3, an EVN subsidiary that was responsible, among other things, for the completion of the 64 MW Song Hinh Hydropower Plant. In 2008, SB4HPMB established a dedicated Environmental Management Unit and a Resettlement Management and Implementation Unit (RMIU). In general, these arrangements worked well. G. Conditions and Covenants 20. Loan effectiveness conditions. On 16 January 2009, three months after the Loan Agreement was signed, the borrower met the loan effectiveness conditions and the loan was declared effective. 21. Loan and project covenants. The Loan Agreement and the Project Agreement contained a series of covenants that were divided into two main categories: (i) project implementation, and (ii) financial and other matters. Appendix 9 has a detailed overview of the status of compliance with the loan covenants. At loan closing, the borrower had complied in full with all loan covenants, except certain financial covenants and financial reporting covenants further detailed below.

i) Financial covenants

22. Following the Loan Agreement (Article IV, Section 4.04, Schedule 5, para. 4), “The Borrower shall ensure, through appropriate tariff adjustments and other means, that EVN maintains (i) a self-financing ratio of 25% or above; (ii) debt–service coverage ratio of 1.5 or above; and (iii) a long-term debt–equity ratio of 70:30 or less.” EVN was in compliance at the time of project approval. During implementation, EVN was in compliance with the self-financing ratio only in 2012, in breach of the debt–service coverage ratio throughout 2009–2015 and in compliance with the debt–equity ratio from 2012 to 2014 (in breach only in 2010 and 2011). The table below provides financial ratios for each year from 2006–2015.

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Financial Ratios of Viet Nam Electricity, 2006–2015a Ratios Covenant 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

DER <70:30b 1.33 1.44 1.17 2.57 3.17 4.57 1.78 1.83 1.90 1.80

DSCR >1.5% 2.77 2.63 1.37 1.24 0.59 0.70 1.27 1.12 1.14 1.03

SFR >25% 34.40 43.60 15.55 23.60 3.22 (24.53) 29.00 (4.85) 15.0 24.15

( ) = negative, DER = debt–equity ratio, DSCR = debt–service coverage ratio, SFR = self-financing ratio. a 2016 data is not yet available. b 70:30 is equivalent to 2.33. Annual DERs are shown in the decimal equivalent. Source: EVN’s audited financial reports.

23. Country and sector level issues are the cause for the breach in financial loan covenants. Viet Nam has relied predominantly on a public-sector model for financing power infrastructure expansion needs. This model has come under strain as demand for power supply and investment needs have continued to grow at a rapid rate. The maintenance of retail electricity prices below cost recovery levels over many years impacted the sector’s cash flows, leaving EVN with no option but to increase debt to meet capital expenditure needs. In addition, EVN’s financial performance has been adversely affected by factors including hydrology, fuel price hikes and currency risks (dong devaluation was almost 40% from 2009 to 2016, and affected EVN's financial performance significantly by increasing EVN’s debts in dong terms as they were mostly denominated in foreign currencies such as the US dollar and yen). When EVN did not comply with the financial covenant in the loan agreement for SB4HP, it was simultaneously in breach of identical covenants in the loan agreements of other power sector projects financed by ADB.15 Recognizing this issue, the government initiated a roadmap to develop a competitive electricity market and a detailed tariff reform, which are ongoing. ADB has been instrumental in this reform process through the provision of nine TA projects, which led to the promulgation of the Electricity Law; the road map for the development of a competitive electricity market in 2006; the launching of a competitive generation market in 2012; and ongoing development of the wholesale electricity market and transmission pricing regulation. To improve the sector’s overall financial viability, ADB is discussing support for policy reforms with the World Bank and the German development cooperation through KfW for the 2018 to 2020 period which would cover sector restructuring and tariff reforms. In addition, the World Bank is assisting EVN to address financial challenges including getting corporate credit rating and issuing a long-term bond in the international capital market.

ii) Financial management, auditing, and reporting 24. The Loan Agreement (Schedule 5, para. 5) and Project Agreement (Article II, Section 2.09) required: (i) the borrower maintain separate accounts for the project including those relating to the financing provided by EVN, (ii) maintain records of all the payments made from the project accounts, (iii) provide quarterly progress reports and annual audit reports of the Project accounts, and (iv) provide consolidated accounts of EVN within 6 months of the end of each fiscal year. EVN fulfilled all four requirements except that the annual audit reports only covered contracts partly or wholly financed by ADB. Therefore, the status of this covenant is partially compliant. H. Related Technical Assistance 25. Japan Fund for Poverty Reduction grant. The Japan Fund for Poverty Reduction provided a complementary grant of $2 million to support the implementation of the REMDP. Most of the grant was used to finance livelihood improvement of and capacity building for project-affected persons, and operational and implementation support for the RMIU.

15 At the time of project appraisal, ADB had committed about $1.5 billion in loan funds to help EVN’s investment plans.

Some of these loans were subject to the same financial covenants.

8

26. TA 7861-VIE. A small-scale TA also supported the resettlement of the persons affected by the project. The TA engaged consultants to supervise and guide the resettlement process and ensured resettlement and associated livelihood development activities were successfully implemented. To ensure the sustainability of livelihood enhancement activities, the TA introduced fish-caged farming and a financial literacy program to the affected people. The consultants also included a panel of experts (POE) comprising a social safeguards expert, an environmental expert and a dam safety expert to monitor safeguards implementation. The TA physically completed all its activities by end May 2017. I. Consultant Recruitment and Procurement 27. Consultant recruitment. SB4HPMB recruited two consulting firms to support project implementation: (i) a construction supervision consultant for 8 years from February 2009 to March 201716 (using the quality and cost-based selection method), and (ii) an independent monitoring consultant for 5 years from February 2010 to August 2015 (using fixed budget selection). The recruitment of firms was undertaken in accordance with ADB’s Guidelines on the Use of Consultants (2006, as amended from time to time). However, the original budget for the construction supervision consultant was not commensurate with the scope of works, and ADB consequently approved an increase of the budget from $5.1 million to about $6.1 million. 28. Procurement. Procurement of all works and goods financed by the ADB loan was carried out in accordance with ADB’s Procurement Guidelines (2006, as amended from time to time).17 Appendix 5 has a list of six procurement packages (works, goods, and consulting services) procured under ADB loan using international competitive bidding procedures. All packages were procured without delays except the 1 year delay of the procurement of electro-mechanical equipment which required re-bidding. The reason for this was that the first tender, which used a “one stage, two envelope” procurement method, was not successful. On March 2011, ADB requested the cancellation of the bid because of a perceived conflict of interest between bidders. To minimize further delays, ADB approved the use of “one stage, one envelope” method for the second tender, and eventually awarded a contract in December 2011. With two bidding processes, the equipment was procured within 27 months. Procurement issues were addressed through rebidding and there were no other significant procurement issues. J. Performance of Consultants, Contractors, and Suppliers 29. Performance of consultants. SB4HPMB was generally satisfied with the performance of the construction supervision consultants and independent monitoring consultants. They timely submitted reports of acceptable quality. Therefore, consultants’ performance was satisfactory. 30. Performance of contractors and suppliers. The performance of the main civil works contractor was poor during the first year of contract implementation. The project director was replaced in mid-2012 which improved the performance significantly. In June 2016, about 18 months after commissioning of the hydropower plant, a report from the POE stated: “The works have been carried out to an unusually high standard of design and construction.” 18 The construction resulted in the loss of life of three workers during the first year of construction and in

16 EVN financed the contract from 1 Jan 2016 to end March 2017 as loan closed already by 31 December 2015. 17 The procurement methods were: (i) international competitive bidding for civil works with estimated cost of more than

$3 million and supply contracts with an estimated cost of more than $1 million; and consultants recruitment methods were: (i) quality and cost-based selection for the construction supervision consultant, and (ii) fixed budget selection for the independent monitoring consultants.

18 Consultant’s report. 2016. Song Bung 4 Hydropower Project—3rd Project Review for Asian Development Bank.

9

many injuries. Out of three deaths, two deaths were road accidents due to bad weather and poor road conditions and the third person died due to electric shock from the power house. The families of the workers were provided with timely and sufficient compensation. Corrective action was taken through better occupational health and safety training such that from the second year onwards, there were no more reports of such incidents. Although this toll is not unusually high when compared to large construction projects undertaken in the region, this leaves scope for improvement of contractor’s health and safety practices in future projects. The performance of contractors and suppliers for ADB-financed contracts was generally satisfactory. K. Performance of the Borrower and the Executing Agency 31. EVN, the executing agency, provided counterpart funds as specified in the loan agreement. EVN complied with most loan covenants except financial covenants and financial audits of the project accounts resulting in an unqualified opinion in all years (this was primarily because of uncertainties about the method used for revaluation of assets and the company’s departure from International Financing Reporting Standards). Project financial reports and financial audits were submitted on time and were generally of good quality, and the audits correctly pointed out EVN non-compliance with the financial ratios in the loan covenant. It should be noted, however, that in contravention of the loan agreement, the financial audits did not cover cost items co-financed from sources other than ADB. EVN ensured that procurement plans were implemented properly, there were no delays in submission of procurement related documents for ADB approval. It complied with ADB’s social and environmental safeguards policy. Resettlement activities were completed in harmonization with the project with very minimal delays in comparison to the targets at appraisal. Although a loan extension was required, the project achieved intended outputs at original loan closing: the hydropower facility was largely constructed in accordance with the original design and the project provided more resettlement infrastructure than was originally envisaged because of the higher than expected number of project-affected persons. Throughout the course of the project, the borrower and EVN were responsive to the requests of ADB and submitted timely progress reports. Overall the performance of the borrower and the executing agency is satisfactory. L. Performance of the Asian Development Bank 32. ADB conducted regular loan review missions, a midterm review, many safeguard review missions, several special-purpose missions, and two project completion review missions. ADB was responsive to the requests of the borrower, EVN, and SB4HPMB, and no delays were reported on ADB’s approval of withdrawal applications or approvals and issuance of no objection. ADB staff spent adequate time training SP4HPMB staff on project implementation procedures and provided relevant guidelines in a satisfactory and timely manner. Advice on technical and implementation issues, preparation, and evaluation of bid documents, and matters of loan admini-stration were appreciated by the SP4HPMB staff involved in the project, as well as by consultants, contractors, and suppliers. ADB ensured that gender aspects were adequately addressed by the project (Appendix 10 contains a summary of the achievements of the gender action plan [GAP]). EVN’s financial difficulties were due to a variety of factors discussed in para. 23. ADB held discussions with EVN and the government on the measures to improve the financial situation of EVN. While this issue is beyond the scope of this project, improvements over the years were not sufficient to achieve compliance. Para. 23 discusses ADB support in financial recovery of power sector. Performance of ADB is satisfactory.

10

III. EVALUATION OF PERFORMANCE A. Relevance 33. The objective of the project was to increase electricity supply in an environmentally sustainable and socially inclusive manner. This objective was highly relevant at the time of appraisal, both to the government and to ADB. The project directly addressed a series of policy objectives mentioned in the government’s Comprehensive Poverty Reduction and Growth Strategy, 2001–2010 (footnote 1), and supported three of the five thematic priorities mentioned in ADB’s country strategy and program for Viet Nam, 2006–2008, including concentrating a major portion of the ADB’s resources in the Central Region to ensure more balanced regional economic development. 34. The government’s Social Economic Development Plan, 2011–2015 19 and its Social Economic Development Strategy, 2011–202020 continue to place a high priority on sustainable economic development, protection of the environment, improving environmental quality, effective adaptation to climate change, and balanced regional development. ADB’s long-term strategic framework for 2008–2020 identifies five core areas of operations, two of which are directly related to the overall objectives of the government and EVN—infrastructure development and environmental management.21 The project is also the first hydropower project in Viet Nam to receive financing from a multilateral financial institution. It has been designed to address environmental and social impacts in a sustainable and socially inclusive manner including a livelihood enhancement program and achieved design objectives. Thus, the project is rated highly relevant.

B. Effectiveness in Achieving Outcome 35. At the loan closing on 31 December 2015, the project had achieved its intended outcome of "increased power generation capacity in Quang Nam Province through sustainable use of hydropower, and mitigation of adverse environmental and social impacts". During project design, the targeted increase in the overall hydropower generation capacity in Quang Nam Province was set in the design and monitoring framework at 1,000 MW. The generating capacity in the province increased from 210 MW in 2008 to 1,029 MW in 2016 an addition of 819 MW. This is a good achievement and the project contributed its share as planned. The difference is outside the control of the project and because some small hydropower projects in Quang Nam province were cancelled by the government due to environmental impacts, and one of the hydropower plants, the Song Bung 2 project with capacity 100 MW, is ongoing. Therefore, the project is rated as highly effective. C. Efficiency in Achieving Outcome and Outputs 36. The project added much needed peak generating capacity to Viet Nam’s supply mix. The project performance rating was continually on track. The project completion date was extended by 18 months due to risks assessed during the startup phase, but the power plant was completed in September 2014 and commissioned in October 2014 nearly within the appraised project implementation period (original loan closing date was 31 June 2014). There was only 9 months’ delay in the construction and commissioning of the power plant against the appraised completion date because the construction started about 9 months later than envisaged. Resettlement of

19 Government of Viet Nam, 2011. Social Economic Development Plan, 2011–2015. Hanoi. 20 Government of Viet Nam, 2011. Social Economic Development Strategy for 2011–2015. Hanoi. 21 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila

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affected households, and the cash compensation for lost assets and livelihood rehabilitation assistance was completed in 2014. An additional set of compensation was paid to affected households in Parum B as they lost access to un-flooded productive land. This was not part of the original REMDP but the government agreed to the additional compensation payments. These additional payments were completed by the end of 2015. Resettlement costs were far higher than anticipated at appraisal due to the reasons discussed in para. 12. 37. Economic assessment. At appraisal, the estimated economic internal rate of return (EIRR) of the project was 14.8%, which was higher than the economic opportunity cost of capital of 12%. At project completion, the reevaluated EIRR was higher (15.8%), mainly because of the higher assumed value of environmental benefits using the current ADB standard. Therefore, the project remained economically viable. If the climate benefits had been valued at the levels assumed at appraisal, the EIRR would have been 12.68%, and thus still economically viable. The economic evaluation is in Appendix 11. 38. Due to lower-than-expected electricity generation in 2015 and 2016, mainly because of the El Niño effect, the benefits of the project in its initial years of operation were lower than estimated at appraisal. Just with the actual production in the first two years, this cannot be extrapolated to be permanent. Production would increase in higher rain fall years. After reevaluation of the benefit streams at lower electricity generation assuming such weather events, the project remains both economically and financially viable.22 The project is rated efficient. D. Preliminary Assessment of Sustainability 39. The project’s financial internal rate of return (FIRR) was 7.6% at appraisal and is 4.5% at project closing. The reevaluated FIRR remained above the weighted average cost of capital, which was estimated at 3.5% at appraisal and recalculated at 3.8% for this evaluation. 23 Therefore, the project remained financially viable at the reduced output level (Appendix 11 has the results of the economic and financial reevaluations). Main reasons for a lower FIRR than the estimated value at appraisal are: (i) reductions in revenue from electricity sales due to assumed lower production than appraised value and lower electricity wholesale rate; and (ii) the expected sale of certified emission reduction credits under the Clean Development Mechanism did not materialize.24 40. The sustainability of the project will depend on EVN’s financial performance. Throughout the project implementation period, EVN did not fully comply with loan financial covenants. EVN incurred significant financial losses in 2010–2011 due to a variety of factors, mainly, (i) low rainfall that caused a temporary shift away from lower-cost hydropower towards more expensive thermal power production, (ii) a substantial devaluation of the dong against EVN’s major borrowing currencies (the US dollar and yen), and (iii) tariffs that did not cover the full cost of providing power. Although EVN’s financial results in 2012 were improved, particularly due to better rainfall, this is not a sustainable solution. While EVN was profitable in 2013, results were not as good as in 2012. EVN has thus remained susceptible to continued financial difficulties due to the risks to

22 9% reduction of appraised estimates of the economic benefits was used to reflect the assumed reduction in annual

electricity output from 491 GWh to 450 GWh. This is considered as the worst-case scenario. The production was already high in 2016, a year still affected by the most recent El Niño event.

23 This is equivalent to stating that the Financial Net Present Value discounted at the weighted average cost of capital remained above zero.

24 The annual average carbon emission reductions generated from the project were estimated at 223,905 tCO2. While the project is registered with UNFCCC as a CDM project, EVN so far did not attempt to sell certified emission reductions, mainly because the monitoring effort for the validation of the CER was higher than the expected revenues as the carbon price was very much lower than the price in 2012 when the project was registered.25 World Bank. 2016. A Financial Recovery Plan for Vietnam Electricity. Washington.

12

which it is most vulnerable (hydrology, foreign exchange, high levels of debt, and continued growth in electricity demand). The government has approved gradual increases in tariffs toward full cost recovery, however these adjustments have been slow due to social and affordability concerns. A gradual electricity tariff adjustment to reach full cost recovery between 2017 and 2020 is very important for a sustainable power supply in Viet Nam. Non-tariff related recommendations included developing a sustainable debt financing strategy, developing and implementing a new investment strategy, and improving operational efficiency and risk management. These measures should complement, not substitute for, tariff increases.25 In light of these, ADB is continuing to work with the government in sector reforms to help improve the financial position of EVN. 41. The project assets are operated and maintained by SB4HPMB, a subsidiary of EVN, which is staffed with persons with substantial experience in operation and maintenance of such plants. The works contractor and suppliers of equipment provided as-built drawings and operation and maintenance manuals, and provided on-the-job training to SB4HPMB staff before handing over the power plant. Equipment includes 2 years of after-sales support. The project also financed other physical infrastructure, mainly access roads to, and common infrastructure in, resettlement sites. This type of infrastructure is not technically complex and relatively easy to maintain by the relevant local governments. Therefore, the risks to the project assets are low over the lifetime of the project. 42. The SB4HP reduced the share of power generated by fossil fuels in Viet Nam by 156 MW. Thereby, it reduced CO2 emissions (estimated amount 223,905 tCO2

annually). Because the project generates only hydroelectric power, its positive impact on climate change is high. The project is rated as likely sustainable. E. Impact 43. Social impact. The project was classified category A in accordance with ADB classification criteria with respect to involuntary resettlement. EVN acquired about 2,685 hectares (ha) of land. Of this total, 1,791 ha was agricultural land (67%), with the balance consisting mainly of forest land and state-managed land. The combined area of residential land purchased was very minimal and was about 2.5 ha (less than 1% of the total acquired land). Resettlement activities were well implemented. Based on the evaluation by the independent monitoring consultant, the livelihoods and incomes of resettled households were restored at or above before-project levels. SB4HPMB prepared resettlement plans in accordance with the project’s resettlement framework and the government’s resettlement policy and implemented these plans once approved by ADB. The cost of resettlement (including compensation payments) was almost three times higher than anticipated at appraisal, partly because the due diligence had underestimated the number of affected persons and the required amount of compensation, and also because the government issued a regulation (during project implementation) that resulted in a substantial increase in the compensation payments to which affected persons were entitled. There were delays in the construction of access roads to resettlement sites compared to appraisal targets (24 months), construction of new villages (15 months) and relocation to new villages (9 months). The resettlement activities were harmonized with project implementation. 44. Environmental impact. The project was classified as category A for the environment. An Environmental Impact Assessment (EIA), with Summary Environmental Impact Assessment (SEIA) and Environmental Management Plan (EMP), was prepared for the hydropower plant,

25 World Bank. 2016. A Financial Recovery Plan for Vietnam Electricity. Washington.

13

dam, powerhouse, 35-km 220 kV transmission line,26 and the access road. In accordance with Environment Policy 2002,27 the updated SEIA was disclosed for 120 days on ADB’s website, in addition to the EIA dated 2007 and SEIA dated 2006. A series of public consultations of project affected people, government stakeholders, and seven non-governmental organizations took place in 2005–2006. The project is located inside the Song Thanh Nature Reserve, where 143 ha were inundated and became part of the reservoir. The project implemented a reforestation program to offset biodiversity and conservation losses. The predicted negative impacts were (i) the safety of people downstream of the dam, (ii) sediment transport during construction and operation, (iii) water pollution during construction, (iv) changes in water quality, and (v) effects on fish and aquatic life in the 5.5 km downstream of the dam. These were addressed in the EIA and monitored as part of the updated EMP (2010) implementation. Ministry of Natural Resources and Environment required the release of an environmental flow of 3.68 m3/s daily to sustain aquatic life downstream of the dam. An independent monitoring agency was engaged to monitor the implementation of the EMP. The annual average carbon emission reductions generated from the project were estimated at 223,905 tCO2 and EVN registered the project with the United Nations Framework Convention on Climate Change secretariat as a Clean Development Mechanism project since 22 August 2012. Unanticipated impacts which were not in the EIA were managed successfully.28 The analysis of the implementation of the environmental safeguards of the project is in Appendix 12. 45. Socio-economic impact. The socio-economic benefits of the project consist mainly of improved access to electricity and the benefits of using an environmentally-friendly source of energy as opposed to power from a thermal power plant. Gross domestic product growth and power consumption are generally correlated and interdependent. The country’s sustained economic growth (more than 6% per year during 2005–2014) would not have been possible with a less successful power sector development program. Although the project benefits are significant, they are widely spread over Viet Nam and cannot be ascribed to a specific population group as the SB4HP delivers its output to the national grid. 46. Impact on gender equality. When ADB adopted a new categorization system on gender mainstreaming in 2012, the project was categorized as “some gender elements” for gender development. However, project design stipulated to implement a GAP and EVN prepared a GAP to ensure that males and females would benefit equally from the project. Key gender interventions included (i) facilitating extensive participation of women from the outset, (ii) ensuring fair representation of women in project activities and making conscious efforts to hear women’s concerns, (iii) mandating equal compensation and entitlements for women and men, and (iv) facilitating access to a wide range of training opportunities for livelihood restoration for both women and men. At loan closing, the agreed actions had been implemented and there is evidence that compensated women’s socioeconomic conditions improved due to the project. Various reports show that positive gender-related resettlement benefits are emerging.29 More specifically, women living in new resettlement sites appear to have a better lifestyle, reduced workloads, greater autonomy, and access to social or health services. They are also empowered through having been part of the project resettlement process.

26 In 2012, the transmission line was removed from the project scope and implemented by the National Power

Transmission Corporation under EVN, and completed and connected to the national grid in October 2014. 27 ADB. 2002. Environment Policy 2002. Manila. 28 Unanticipated impacts include: (i) cows and water buffalos encroaching on the tree plantation lands, and (ii) some

villagers used small or motorized boats for fishing in the reservoir during the night which is dangerous and disruptive of the aquatic life. The implementing agency discussed the first matter with local government and village heads and installed bamboo fencing with wires. To address the illegal fishing, the patrol guards of the area were instructed to be more vigilant towards this illegal activity.

29 In particular, Navigating Gender-Inclusive Resettlement: The experience of the Song Bung 4 Hydropower Project in Vietnam. ADB (2014).

14

47. In general, the project had significant positive impacts on the social and economic development of the region. Environmental and social negative impacts were adequately mitigated.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 48. The overall rating of the project is successful. The project was highly relevant at the time of appraisal in addressing government and ADB development policy objectives and remained highly relevant at the loan closing. The project was rated highly effective as it contributed its share towards the outcome target of increasing the hydropower generation capacity in Quang Nam Province by 819 MW during the implementation period. The sustainability of the project’s benefits and impacts was rated likely sustainable because of EVN’s non-compliance with financial covenants. The reevaluated economic assessment confirms that the project is economically beneficial. The project was rated efficient, as the delay in project commissioning was only 9 months. B. Lessons 49. Resettlement. Resettlement costs were higher than estimated and more time-consuming than anticipated during preparation. Other than the underestimation of the number of households to be relocated and rates subject to inflation due to project delays, other reasons for high costs were outside the control of the project. 50. Project management. For this project, the appointment of an inexperienced project manager without relevant work experience in Viet Nam resulted in an avoidable delay in the commissioning of the hydropower plant. Appointing experienced project management experts is important. 51. Health and safety practices of works contractors. During project implementation, three workers died because of work-related accidents and several suffered various injuries (falls, electrocution, and road accidents). Although this toll is not unusually high compared to large construction projects in the region, there is substantial scope for improvement of the health and safety practices of works contractors in Viet Nam. C. Recommendations

1. Project related 52. Future monitoring. As the project was categorized as complex for environment and social safeguards, ADB agrees with the POE recommendations for EVN to (i) engage an independent monitoring agency which will carry out monitoring activities to include analysis and interpretation of data and further recommend improvement in the monitoring and enhancement of environmental protection; (ii) ensure continuous training on livelihood enhancement activities for affected households; and (iii) conduct a dam break study to consider the effect on dams downstream particularly on safety and stability. ADB should keep in close contact with EVN through ongoing loans to ensure adequate safeguards capabilities including project monitoring during operations. 53. Covenants. Most of the covenants were complied with, except for financial covenants, namely the self-financing ratio, debt–service coverage ratio, and long-term debt–equity ratio

15

discussed in para. 22. These financial covenants shall be continued in future projects to ensure government commitment to improve sector sustainability. 54. Further action or follow-up. EVN’s financial stability is critical for sector sustainability, and a sustainable sector providing a reliable power supply is an essential service for socio-economic development. While the government and EVN are attempting to implement actions to ensure a sustainable financial environment, support from development partners is essential. ADB has been engaged in Viet Nam energy sector reforms since 1995. As one of the leading development partners in the energy sector, ADB shall continue to support the government in sector reforms, such as those mentioned in para. 23, to help improve the financial position of EVN in coordination with other leading development partners. 55. Timing of the project performance evaluation. ADB will closely monitor the project’s performance. The progress of sector reforms will also be monitored to assess potential impacts on the project. The power plant was commissioned in October 2014. It is prudent to let the project be operational for at least three years before undertaking a project performance evaluation. Hence, it is recommended that the project performance evaluation be scheduled in 2018.

2. General

56. The approval of the project’s technical design was delayed by 6 months, which could have been avoided by advanced project design. The risk of revisions and delays to projects during implementation needs to be mitigated by thorough due diligence during project preparation. The ADB country partnership strategy (2012–2015) final review also notes that greater emphasis is needed in investing enough time and resources in the preparation of projects.30 This includes greater upstream work on getting the technical designs and costs, procurement packages, and bidding documents right to improve procurement procedures and reduce implementation delays. 57. Since the government is in the process of establishing a wholesale competitive generation market and, in general, preparing for more private investment in power generation, ADB shall explore support to the government on introducing public private partnerships as an applicable modality for future, similar projects.

30 ADB. 2015. Country Partnership Strategy Final Review: Viet Nam, 2012–2015. Manila.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance

Targets/Indicators Achievements Comments

Impact

Meeting Viet Nam’s increasing power demand in an environmentally sustainable and socially inclusive manner

No power shortages in Viet Nam by 2015 Achieved. Power shortages were no longer an issue by 2015.

Reduction in greenhouse gas emissions per unit of economic output and electricity output over 2008–2015 by 10%

Partially achieved. CO2 emissions per unit of GDP increased by about 1% from 2008 to 2014, but CO2 emissions per unit of electricity output decreased by 26% in the same period (no data for 2015).

The decrease in CO2 emissions per unit of electricity output was caused mainly by an increase in the share of hydropower in the total output (from 35% in 2008 to 42% in 2014). Source: International Energy Agency (2016).

Outcome

Increased power generation capacity in Quang Nam Province through sustainable use of hydropower and mitigation of adverse environmental and social impacts

Addition of 1,000 MW of hydropower generation capacity in Quang Nam Province without significant outstanding environmental and social issues

Partially achieved. Hydropower generating capacity in Quang Nam Province increased from 210 MW in 2008 to 1,029 MW in 2016, an addition of 819 MW.

Some small hydropower projects were removed by the government in the Quang Nam Province due to environmental and social impacts and delays in Song Bung 2 project were not envisaged.

No known significant outstanding environmental and social issues. The expected outcome (a fivefold increase from 2008 capacity) appears overly ambitious.

Outputs

1. Construction and commissioning of the 156 MW Song Bung 4 Hydropower Project and associated facilities

Completion of Song Bung 4 hydropower project in accordance with the technical design by 2013

Achieved. Hydropower facility was fully completed and commissioned in October 2014.

2. Improvement of livelihoods of project-affected persons in a sustainable manner

Relocation of affected persons by 2012 and improvement of their livelihoods by December 2013 as outlined in the REMDP

Achieved late. The program to improve livelihoods was completed by the end of 2014, about 1 year behind schedule.

The number of persons that needed to be relocated permanently was higher than estimated at appraisal (249 instead of 206).

Implementation of capacity building programs for affected persons as outlined in the REMDP by 2013

As above. –

No legitimate claims by project-affected persons in Vu Gia River basin during 2008–2013

Achieved. No legitimate claims outstanding at the closing date.

–

CO2 = carbon dioxide, GDP = gross domestic product, MW = megawatt, REMDP = resettlement and ethnic minority development plan

Appendix 1 17

Inputs

Funding ($ million)

ADB Borrower Total ADB Borrower Total

1 Technical design and feasibility study - 6.14 6.14 - 4.49 4.49

2 Project management and commissioning - 5.55 5.55 - 6.45 6.45

3 Access road to project site and administration building - 9.96 9.96 - 9.29 9.29

4 Major civil works (dam and spillway) 59.70 - 59.70 88.63 - 88.63

5 Major civil works (tunnel and power station) 39.97 - 39.97 39.34 - 39.34

6 Electro-mechanical equipment 32.57 - 32.57 26.34 - 26.34

7 Hydro-mechanical equipment 7.34 - 7.34 4.72 0.44 5.16

8 Transmission Line - 6.73 6.73 - - -

9 Resettlement cost - 16.97 16.97 12.70 30.73 43.43

10 Environmental mitigation - 0.56 0.56 - 1.67 1.67

11 Realignment of highway no. 14 D - 9.18 9.18 - 7.50 7.50

12 Consultancy Services 4.55 - 4.55 6.11 0.84 6.95

13 VAT and other taxes 10.38 5.07 15.45 - 5.17 5.17

Contingencies 22.47 6.95 29.42 - - -

Financing Charges during Implementation 19.02 4.17 23.19 3.30 14.91 18.21

Total 196.00 71.28 267.28 181.14 81.49 262.63

ADB = Asian Development Bank, VAT = value-added tax

Source: Asian Development Bank.

Appraisal (May 2008) Completion (Dec 2015)

18 Appendix 2

CHRONOLOGY OF MAIN EVENTS

Date Event

2006

31 Jul–11 Aug Fact-finding mission

26 Aug–1 Sep Post fact-finding mission

25 Sep–6 Oct Pre-appraisal mission

2007

17–24 April Appraisal mission

12–13 December Loan negotiations

2008

26 June Approval of ADB loan

6 October Signing of ADB loan

2009

16 January Effectiveness of ADB loan

4 February Signing of services contract TV-02 (construction supervision consultant)

1-8 April Inception mission

20 May Initial loan disbursement

31 August Consultation mission No.1

26 November–17 Dec Safeguard review mission No.1

2010

20 February Signing of services contract TV-01 (independent monitoring consultant)

22–26 February Loan review mission No.1

9–20 March, 26 March–8 April

Safeguard review mission No.2

27 April–6 May Safeguard review mission No.3

7–11 June Safeguard review mission No.4

15 June Signing of civil works contracts XL-01 (dam and spillway) and XL-02 (waterway and power station)

29 June–15 July Safeguard review mission No.5

20–26 October Safeguard review mission No.6

2011

17 February Signing of goods contract TB-05 (hydro-mechanical equipment)

3–14 March Safeguard review mission No.7

30 May–9 June Safeguard review mission No.8

12–16 December Loan review mission No.2

27 December Signing of goods contract TB-04 (electro-mechanical equipment)

2012

8–12 March Safeguard review mission No.9

2–9 July Special project administration mission

25–26 August Consultation mission No.2

Appendix 2 19

CHRONOLOGY OF MAIN EVENTS

Date Event

2013

5–7 February Loan review mission No.3

20–23 August Loan review mission No.4

4–20 November Midterm review mission

2014

24–28 February Safeguards review mission No.10

22–24 April Safeguards review mission No.11

30 June Original ADB loan closing date

3 July Approval of extension of ADB loan closing date to 31 December 2015

14–15 July Safeguards review mission No.12

3 December Commissioning of hydroelectric power plant and related infrastructure

2015

23–27 March Safeguards review mission No.13

19–24 June Safeguards review mission No.14

28 Sep–1 Oct Loan review mission No.5

31 December Revised ADB loan closing date

2016

28 June Final loan disbursement

21 July Loan account financially closed and undisbursed amount canceled

11–17 September Safeguards review mission No.15

28 November Borrower’s project completion submitted to ADB

1–11 November PCR mission (part 1)

12–19 December PCR mission (part 2)

ADB = Asian Development Bank, PCR = project completion report. Source: Asian Development Bank.

20 Appendix 3

PROJECT OUTPUTS

Planned and Actual Physical Outputs

Output PLANNED

At Appraisal (Aug 2008) ACTUAL

At Completion (Dec 2015)

Output 1: Construction of the hydroelectric plant and related infrastructure

Reservoir area at full supply level 15.80 km2 15.65 km2

Gross reservoir storage 493 million m3 511 million m3

Dead reservoir storage 173 million m3 277 million m3

Average annual electricity output 491 GWh 400-450 GWh

Dam height 110 meters 114 meters

Transmission main 35 km – a

Output 2: Resettlement of affected communities

Number of affected households (not identified) 507

Number of households relocated 206 269

GWh = gigawatt-hour, km = kilometer, m3 = cubic meter a The transmission main was financed by the National Power Corporation, another EVN subsidiary, outside the scope

of the project and realized in October 2014 well in advance of commissioning of the dam. Source: Asian Development Bank.

Appendix 4 21

CURRENCY EQUIVALENTS (D to $1.00)

1 January–31 December Actual PPTA Estimate

2008 16,988 16,437

2009 18,475 16,891

2010 19,499 17,359

2011 20,263 17,839

2012 20,932 18,833

2013 20,956 18,877

2014 21,231 19,438

2015 21,768 –

2016a 22,302 –

D = dong, PPTA = project preparatory technical assistance. a From 1 January 2016 until 21 July 2016 (the date on which the loan account was

closed). Source: Asian Development Bank.

22 Appendix 5

SUMMARY OF ADB-FINANCED CONTRACTS ($’000)

Source: Asian Development Bank. Loan and Grant Financial Information Services (2016)

Contract NumberDate of

ContractDescription of Contract Contractor/Supplier

ADB-

Financed

XL-01 15 Jun 2010 Dam and Spillway Sinohydro Corporation Ltd. 88.63

XL-02 15 Jun 2010 Tunnel and Power Station Sinohydro Corporation Ltd. 39.34

TB-04 27 Dec 2011 Electro-Mechanical Equipment Hydrochina Huadong-Alstom 26.34

TB-05 17 Feb 2011 Hydro-Mechanical Equipment Hydraulic Equipment Joint Stock Company 4.72

TV-01 20 Feb 2010 Independent Monitoring Consultant VICA Consultants International Ltd. 0.11

TV-02 4 Feb 2009 Construction Supervision ConsultantMott MacDonald in association with Power

Engineering and Consultng Company 46.00

Resettlement Compensation - Resettlement Costs c/o SB4HPMB 12.70

Financing Charges During Implementation 3.30

181.14

Works

Goods

Consulting Services

TOTAL

Appendix 6 23

APPRAISAL AND ACTUAL PROJECT COSTS ($ million)

.

Component Foreign Local Total Foreign Local Total

A. Base Cost

Technical design and feasibility study - 6.14 6.14 - 4.49 4.49

Project management and commissioning - 5.55 5.55 - 6.45 6.45

- 9.96 9.96 - 9.29 9.29

Major civil works (dam and spillway) 16.34 43.36 59.70 88.63 - 88.63

Major civil works (tunnel and power station) 9.85 30.12 39.97 39.34 - 39.34

Electro-mechanical equipment 29.76 2.81 32.57 26.34 - 26.34

Hydro-mechanical equipment 1.74 5.59 7.34 4.72 0.44 5.16

Transmission Line - 6.73 6.73 - - -

Resettlement cost - 16.97 16.97 12.70 30.73 43.43

Environmental mitigation - 0.56 0.56 - 1.67 1.67

Realignment of highway no. 14 D - 9.18 9.18 - 7.50 7.50

Consultancy Services 2.87 1.68 4.55 6.11 0.84 6.95

VAT and other taxes - 15.45 15.45 - 5.17 5.17

Total Base Cost 60.56 154.10 214.67 177.84 66.58 244.42

B. Contingencies

Physical 4.34 12.50 16.84 - - -

Price 3.60 8.98 12.58 - - -

Total Contingencies 7.94 21.48 29.42 - - -

C. Financing Charges During Implementation 19.02 4.17 23.19 3.30 14.91 18.21

TOTAL 87.52 179.75 267.28 181.14 81.49 262.63

Source: Asian Development Bank.

Access road to project site and

administration building

Appraisal Estimate Actual

24 Appendix 7

PROJECTED AND ACTUAL CUMULATIVE DISBURSEMENTS ($ million)

Year Projected a Actual

2009 1.0 1.0

2010 14.4 11.1

2011 29.2 25.9

2012 70.8 67.6

2013 132.4 129.1

2014 170.1 166.9

2015 – 180.0

2016 – 181.1

Source: Asian Development Bank Loan Financial Information System (2016).

PROJECTED AND ACTUAL CUMULATIVE DISBURSEMENTS ($ million)

Source: Asian Development Bank Loan and Grant Financial Information Services (2016).

0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015 2016

Projected Actual

Appendix 8 25

PROJECT IMPLEMENTATION SCHEDULE

Source: Asian Development Bank estimates.

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

FS approval by the Government

Loan approval

Loan signing

Loan effectiveness

Technical design

Technical design approval

Recruitment of supervision consultant

Prequalification of contractors

Procurement of main civil works

Procurement of equipment

Preparatory civil works

Construction of dam and spillway

Construction of intake, tunnel, surge chamber and penstock

Power station civil works

Power station equipment installation

Reservoir filling

Commissioning

Access roads to resettlement sites

Construction of new villages

Relocation of villages

Original schedule (from RRP)

Actual schedule

2014 2015Component

2007 2009 2010 2011 2012 20132008

26 Appendix 9

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Loan Covenant Source Status of Compliance

ARTICLE IV, LOAN AGREEMENT

1. (a) The Borrower shall cause EVN to carry out the Project with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental and hydropower practices.

LA, Art. IV, Section 4.01

Complied with.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Schedule to the Project Agreement.

Partial compliance. See “status of compliance” of Schedule 5 below.

2. The Borrower shall make available to EVN, promptly as needed the facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

LA, Art. IV, Section 4.02

Complied with.

3. 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.

LA, Art. IV, Section 4.03

Complied with.

4. The Borrower shall take all action which shall be necessary on its part to enable EVN to perform its obligations under the Project Agreement, including compliance with the financial ratios as outlined in paragraph 4 of Schedule 5 to this Loan Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

LA, Art. IV, Section 4.04

Not in compliance. See “status of compliance” of paragraph 4(a) of Schedule 5 below.

5. (a) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

LA, Art. IV, Section 4.05

Complied with.

(b) No rights or obligations under the Subsidiary Loan Agreement shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.

Complied with.

SCHEDULE 5, LOAN AGREEMENT

A. PROJECT IMPLEMENTATION

1. As the Project Executing Agency, EVN shall be responsible for the implementation of the Project through SB4HPMB.

LA, Schedule 5, para. 1

Complied with.

2. The Project Director of SB4HPMB, directly reporting to EVN’s Vice President for Generation Projects in the Central Region, shall have the overall responsibility for implementing the Project. SB4HPMB shall coordinate and monitor all Project construction activities, including mobilization of design and supervision consultants,

LA, Schedule 5, para. 2

Complied with.

Appendix 9 27

Loan Covenant Source Status of Compliance

preparation of bid documents, bid evaluation, construction supervision and approval of payments to the contractors. SB4HPMB shall appoint a full-time Project Manager and other staff, who shall be supported by implementation supervision consultants, for the day-to-day management of the Project. The Environment and Social Division of SB4HPMB shall be responsible for the environmental and social aspects of the Project. Prior to commencement of the civil works, SB4HPMB shall set up (i) an EMU to implement the EMP and undertake environmental monitoring during

construction phase of the Project; and (ii) a RMIU, consisting of SB4HPMB staff, representatives from Nam Giang District

Peoples Committee and the resettlement consultants, to manage the resettlement and livelihood restoration activities of the affected people.

The RMIU shall engage local contractors and local communities to implement the REMDP.

Complied with. EMU established in 2008. Complied with. RMIU established in 2008 with required composition. Complied with. Efforts were made. However, those were not successful, mainly because of a shortage of adequately skilled persons.

B. FINANCIAL AND OTHER MATTERS

Project Design

3. The Borrower shall ensure that the Project is designed and constructed in accordance with best international practices with respect to hydropower plants, and is in conformity with the environmental laws and regulations of Viet Nam, ADB’s Environment Policy (2002) and the recommendations of the EIA and SEIA. The Borrower shall also ensure that the design and construction personnel work in close coordination with the supervision consultants to be recruited under the Project, including making available any designs, specifications and related information and reports to the latter.

LA, Schedule 5, para. 3

Complied with.

Financial Issues

4. The Borrower shall ensure, through appropriate tariff adjustments and other means, that EVN maintains (i) a self-financing ratio of 25 per cent or above; (ii) debt–service coverage ratio of 1.5 or above; and (iii) a long-term debt: equity ratio of 70:30 or less. The Borrower shall also ensure that adequate tariff increases are proposed by EVN and processed by the relevant authorities of the Borrower in a timely and effective manner.

LA, Schedule 5, para. 4

Not in compliance. EVN was in compliance with the debt–equity ratio except for the years 2010–2011 (effected through a revaluation of assets) but was in breach of the debt–service coverage ratio and self-financing ratios during the implementation period 2008–2015.

Financial Management, Auditing and Reporting 5. The Borrower shall ensure that EVN

LA, Schedule 5, para. 5

28 Appendix 9

Loan Covenant Source Status of Compliance

(i) maintains separate accounts for the Project including those relating to the financing provided by EVN;

(ii) maintains records of all the payments made from the Project accounts; (iii) provides quarterly progress reports and annual audit reports of the Project

accounts, with separate auditor’s opinion on the use of imprest account and statement of expenditure procedures under the Project, within 6 months of the end of each fiscal year during the Project implementation period; and

(iv) provides consolidated accounts of EVN within 6 months of the end of each fiscal year during the project implementation period.

Complied with. Complied with. Partial compliance. Progress reports were submitted starting from in April 2009. However, audit reports only covered expenditures financed by ADB. It did not include those relating to the financing provided by EVN. Complied with.

Resettlement and Ethnic Minority Development Plan

6. (a) The Borrower shall ensure that the REMDP prepared for the Project is implemented in a timely and effective manner by EVN with the assistance of consultants to be engaged by EVN. The consultants shall be mobilized before commencement of any land acquisition and resettlement activities. EVN shall update the REMDP based on the final technical design, in accordance with the related regulations of the Borrower and ADB’s Policy on Involuntary Resettlement (1995) and other related requirements. Provisions and principles adopted in the REMDP shall supersede the provisions of the Borrower’s regulations wherever there is a conflict or gap.

LA, Schedule 5, para. 6a

Complied with.

(b) The updated REMDP shall (i) include components that have resettlement impacts which were not anticipated, fully determined or identified as part of the Project during the feasibility study; (ii) be prepared in full consultation with and disclosed to the affected persons; (iii) be submitted to ADB for review and approval before implementation of the updated plans; and (iv) be fully implemented with respect to the reservoir area before impounding.

LA, Schedule 5, para. 6b

Complied with. REMDP (Vol. 1, 2 and 3A) were updated by EVN consultants with support from ADB, disclosed to all affected persons, and approved by ADB in 2010 before the start of implementation.

(c) The Borrower shall cause the Quang Nam People's Committee to ensure that further consultations are undertaken during Project implementation with the affected persons both in the reservoir area and upstream and downstream communities to ascertain their preferences with regards to proposed mitigation measures and implementation arrangements.

LA, Schedule 5, para. 6c

Complied with. During 2008–2013, SB4HPMB organized many community consultants with the support of ADB and JFPR consultants.

(d) The Borrower shall cause EVN to undertake (i) a survey on the downstream impacts after the commissioning of the Project, and (ii) appropriate mitigation measures for impacts that are not adequately addressed during the Project implementation.

LA, Schedule 5, para. 6d

Complied with.

Appendix 9 29

Loan Covenant Source Status of Compliance

(e) The Borrower shall ensure that appropriate land use rights, land for community-based agro-forestry program, priority access to forest resources in the resettlement areas and priority rights to fishing in the reservoirs of Song Bung 4 and, possibly Song Bung 5, should it materialize, shall be accorded in a timely manner to the affected communities as outlined in the REMDP.

LA, Schedule 5, para. 6e

Complied with

(f) The Borrower shall ensure that EVN, on a best effort basis, provides power supply to the non-electrified villages in the Dai Son commune under any other relevant project.

LA, Schedule 5, para. 6f

Complied with.

(g) The Borrower shall cause EVN to ensure adequate financing and other resources, for which EVN is responsible, are provided in a timely manner for effective and timely implementation of the REMDP. EVN shall, every 6 months, submit to ADB its budget estimates for the resettlement activities, which shall have been prepared in consultation with the RMIU. EVN shall also provide adequate contingencies in the budget estimates to meet any unforeseen circumstances or impacts.

LA, Schedule 5, para. 6g

Complied with.

(h) The Borrower shall also ensure that the planning and implementation of resettlement activities financed by EVN shall be closely coordinated with the ADB-supported Japan Fund for Poverty Reduction Project for livelihood activities.

LA, Schedule 5, para. 6h

Complied with.

(i) The Borrower shall also cause EVN and Quang Nam People's Committee to ensure that

LA, Schedule 5, para. 6i

(i) district-level resettlement committees established pursuant to the REMDP include representatives from the district-level VWU offices;

Complied with. Committees

established in 2008.

(ii) district-level resettlement committees include representatives from the commune-level VWU offices as well as female representatives from amongst the affected communities belonging to the Co Tu ethnic group;

Complied with. Committees established in 2009 with JFPR support.

(iii) grievance redress mechanisms are established on completion of detailed technical design;

Complied with.

(iv) training is provided on livelihood activities […] and women from the downstream and upstream villages.

Complied with. Activities co-financed by JFPR grant.

Gender and other social issues

7. (a) The Borrower shall cause EVN to ensure that LA, Schedule 5, para. 7a

(i) the GAP prepared for the Project is fully implemented and monitored in accordance with its terms, related Borrower regulations and ADB’s Policy on Gender and Development (1998) in a timely manner, and adequate resources are allocated for this purpose; and

Complied with.

30 Appendix 9

Loan Covenant Source Status of Compliance

(ii) all contracts under the Project incorporate provisions and budget to the effect that contractors […] Plan.

Complied with.

(b) The Borrower shall cause EVN to ensure that in the resettlement sites for Co Tu villagers

LA, Schedule 5, para. 7b

(i) land use rights for farming and user rights for forest products shall be issued in the names of both husband and wife;

Complied with.

(ii) women, as well as men, are included in the training on extension services and community based forestry development and management; and

Complied with.

(iii) separate workshops are conducted for the Co Tu women for design and implementation arrangements of livelihood activities under the REMDP.

Complied with.

(c) The Borrower shall ensure that (i) EVN develops monitoring indicators disaggregated by gender and ethnic groups for purposes of monitoring and related reporting, and (ii) conducts gender sensitization training on gender and resettlement for its relevant staff and the members of district, commune and village-level resettlement committees.

LA, Schedule 5, para. 7c

Complied with. Activity co-financed by JFPR grant.

(d) The Borrower shall continue to monitor the sustainability of the livelihoods of the affected persons after the commissioning of the Project, including the mitigation of adverse impacts on the livelihood of the downstream and up-stream communities, and maintain a close dialogue with ADB on the matter.

LA, Schedule 5, para. 7d

Complied with.

Environmental Management Plan

8. The Borrower shall cause EVN to ensure that LA, Schedule 5, para. 8

(i) the EMP is fully updated upon completion of the final technical design, incorporating recommendations and information from the Strategic Environmental Assessment conducted under ADB-financed Technical Assistance No. 4713 (Capacity Building in the Strategic Environmental Assessment of the Hydropower Sector) as deemed appropriate by the Borrower and ADB and further Project specific mitigation measures are duly included in the updated EMP to be implemented during the construction and operation of the Project;

Complied with.

(ii) the updated EMP is approved by ADB and received no-objection from the Ministry of Natural Resources and Environment of the Borrower, if the need be;

Complied with.

(iii) a further update of the EMP is undertaken with emphasis on the environmental management of the Project during operational phase, including refining of the budget requirements and specification of the related responsibilities, prior to the commissioning of the Project; and

Complied with.

Appendix 9 31

Loan Covenant Source Status of Compliance

(iv) an EMU is established within SB4HPMB to update and implement the EMP, and the necessary financing and staff resources are made available in a timely manner.

Complied with. EMU was established in 2008.

Independent monitoring

9. (a) The Borrower shall cause EVN to ensure that independent monitors, acceptable to ADB, are recruited and financed by the Loan to monitor the implementation of the REMDP, EMP and GAP. The independent monitors shall be mobilized on completion of the detailed technical design and provide detailed reports on such implementation to EVN and ADB, concurrently, every six months during Project implementation until the objectives of the REMDP have been achieved.

LA, Schedule 5, para. 9a

Complied with. Independent monitoring consultant appointed in February 2010; provided semi-annual reports until project closing.

(b) The Borrower shall also cause EVN to ensure that (i) a panel of experts, consisting of internationally renowned experts engaged by ADB at its own cost to monitor implementation of the REMDP, is provided with such information and access to the Project site as the panel may reasonably request; and (ii) any shortcomings identified in the independent monitors’ detailed reports, to be issued annually, are promptly addressed by EVN in a manner satisfactory to ADB until such time that the REMDP has been fully implemented.

LA, Schedule 5, para. 9b

Complied with.

(c) The reports produced under sub-paragraphs (a) and (b) hereabove shall be disclosed in accordance with the requirements of ADB’s Public Communications Policy (2005).

LA, Schedule 5, para. 9c

Complied with

Anticorruption

10. (a) The Borrower shall comply with, and shall cause EVN to comply with ADB’s Anticorruption Policy (1998, as amended to date) and the Policy relating to Enhancing ADB’s Role in Combating Money Laundering and the Financing of Terrorism (2003). The Borrower (i) acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; (ii) agrees to cooperate fully with, and to cause EVN to cooperate fully with, any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation; and (iii) agrees to refrain, and cause the Project Executing Agency to refrain, from engaging in money laundering activities or financing of terrorism and shall allow, and cause the Project Executing Agency to allow, ADB to investigate any violation or potential violation of these undertakings.

LA, Schedule 5, para. 10

Complied with.

(b) Without limiting the generality of the preceding paragraph, the Borrower shall (i) ensure that EVN conducts periodic inspections on the contractors’ activities

LA, Schedule 5, para. 10

Complied with.

32 Appendix 9

Loan Covenant Source Status of Compliance

related to fund withdrawals and settlements; and (ii) ensure and cause EVN to ensure that all contracts financed by ADB in connection with the Project include provision specifying the right of ADB to audit and examine the records and accounts of EVN, and all contractors, suppliers, consultants and other service providers as they relate to the Project.

(c) In addition to these requirements, to deter corruption and increase transparency, the Borrower shall create and maintain a website to disclose information about procurements related to the Project. For each contract, the website shall include information on, among others, the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods/services, including consulting services, procured. In addition to the web-based disclosure, stakeholders, which include civil society and non-governmental organizations, shall be provided detailed information on procurement on public notice boards in their respective provinces.

LA, Schedule 5, para. 10

Complied with. Website link is http://asb4.vn

ARTICLE II, PROJECT AGREEMENT

1. (a) EVN shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental and hydropower practices.

PA, Art. II, Section 2.01

Partial compliance. See “status of

compliance” of Schedule 5 of the LA.

(b) In the carrying out of the Project and operation of the Project facilities, EVN shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to EVN and all obligations set forth in the Schedule to this Project Agreement.

Partial compliance. See “status of compliance” of Schedule 5 of the LA.

2. EVN shall make available, promptly as needed, the funds, facilities, services, equipment and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

PA, Art. II, Section 2.02

3. (a) In the carrying out of the Project, EVN shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

PA, Art. II, Section 2.03

Complied with. It was required to replace the first project manager of the civil works contract for the dam.

(b) Except as ADB may otherwise agree, all Goods, Works and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB

Complied with.

Appendix 9 33

Loan Covenant Source Status of Compliance

4. EVN shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. EVN shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

PA, Art. II, Section 2.04

Complied with.

5. (a) EVN shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities to such extent and against such risks and in such amounts, as shall be consistent with sound practice.

PA, Art. II, Section 2.05

Complied with.

(b) Without limiting the generality of the foregoing, EVN undertakes to insure, or cause to be insured, the Goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

Complied with.

6. EVN shall maintain, or cause to be maintained, records and accounts adequate to identify the Goods, Works and consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

PA, Art. II, Section 2.06

Complied with. Unlike the LA, the project agreement does not require the maintenance of financial records for expenditures financed by EVN.

7. (a) ADB and EVN shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

PA, Art. II, Section 2.07

Complied with.

(b) EVN shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan.

Complied with.

(c) ADB and EVN shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, EVN and the Loan.

Complied with.

8. (a) EVN shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of EVN; and (v) any other matters relating to the purposes of the Loan.

PA, Art. II, Section 2.08

Complied with.

34 Appendix 9

Loan Covenant Source Status of Compliance

(b) Without limiting the generality of the foregoing, EVN shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

Complied with.

(c) Promptly after physical completion of the Project, but in any event, not later than three (3) months thereafter or such later date as ADB may agree for this purpose, EVN shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by EVN of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan

Complied with.

9. EVN shall: PA, Art. II, Section 2.09

(i) maintain separate accounts for the Project;

(ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and

Partial compliance. Audits only covered expenditures financed by ADB but did not include those relating to the financing provided by EVN.

(iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language.

Complied with.

EVN shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Complied with.

10. EVN shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan and any relevant records and documents.

PA, Art. II, Section 2.10

Complied with.

Appendix 9 35

Loan Covenant Source Status of Compliance

11. (a) EVN shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

PA, Art. II, Section 2.11

Complied with.

(b) EVN shall at all times conduct its business in accordance with sound administrative, financial, environmental and hydropower practices, and under the supervision of competent and experienced management and personnel.

Complied with.

(c) EVN shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, hydropower and maintenance and operational practices.

Complied with.

12. Except as ADB may otherwise agree, EVN shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

PA, Art. II, Section 2.12

Complied with.

13. Except as ADB may otherwise agree, EVN shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project.

PA, Art. II, Section 2.13

Complied with.

14. Except as ADB may otherwise agree, EVN shall duly perform all its obligations under the Subsidiary Loan Agreement, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subsidiary Loan Agreement.

PA, Art. II, Section 2.14

Complied with.

15. EVN shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its Charter and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.

PA, Art. II, Section 2.15

Complied with.

ADB = Asian Development Bank, Art. = Article, EIA = environmental impact assessment, EMP = environmental management plan, EMU = Environmental Management Unit, EVN = Viet Nam Electricity, GAP = gender action plan, JFPR = Japan Fund for Poverty Reduction, LA = loan agreement, PA = project agreement, REMDP = resettlement and ethnic minority development plan, RMIU = Resettlement Management and Implementation Unit, SB4HPMB = Song Bung 4 Hydropower Project Management Board, SEIA = summary environmental impact assessment, VWU = Vietnam Women’s Union.

Source: Asian Development Bank.

36 Appendix 10

LAND ACQUISITION, RESETTLEMENT, LIVELIHOOD RESTORATION, AND GENDER ASPECTS

1. In June 2008, the Asian Development Bank (ADB) approved the loan for the construction of the Song Bung 4 Hydropower Project in Quang Nam Province. Construction started in June 2010, the closure of the river and diversion of flows began in January 2012, and impoundment of the reservoir started in August 2014 and was completed in October 2014. The commissioning of Generating unit 1 was in September 2014 and in October 2014 for generating unit 2. 2. The project’s social impacts varied from physical relocation to households only losing assets such as trees, crops and minor structures. A total of 26,864,733.7 m2 of land was affected, which includes the reservoir area, dam construction site, access roads, quarries, and secondary structures. There was a total of 507 affected households out of which 503 affected households were of ethnic minority origins and 40 households were headed by women. Affected households can be divided into those directly affected by the reservoir and dam areas (482 households), and those affected by resettlement site access roads (25 households in Cong Don Village in Zuoih commune). 3. The Song Bung 4 reservoir inundated four Co Tu villages in August 2014, namely Thon 2, Pa Dhi, Pa Rum A, and Pa Rum B, resulting in the relocation of 265 households in one of the most remote and mountainous communes in Nam Giang District. Pa Pang is the host village for those resettled from Thon 2. As such, 25 Pa Pang households were also compensated for land acquired to accommodate affected people from Thon 2. The reservoir also flooded the upland agricultural lands of 52 Co Tu households in two villages in Cha Val Commune (Ta Ul village) and Ta Poo Commune (Vinh village). These households lost more than 10% of their upland crop and grazing land. Furthermore, 29 households in Ta Bhing commune and 28 households in Cady commune were affected by the reservoir inundation by losing their graves.1 The project also addressed downstream impacts, which occurred mainly in a Co Tu Village in Thanh My commune and a Kinh village in Dai Son commune. 4. To address the relocation and compensation of affected people, a Resettlement and Ethnic Minority Development Plan (REMDP) was prepared. The preliminary REMDP was prepared in accordance with the laws of Viet Nam and the safeguard policies and procedures of ADB, most notably ADB’s Involuntary Resettlement Policy (1995) and Policy on Indigenous Peoples (2003). The updated REMDP (2010) then reflected ADB’s new Safeguard Policy Statement (2009). The REMDP specifically addressed (i) compensation to replace lost physical and non-physical assets, (ii) assistance for relocation, and (iii) assistance for rehabilitation. Resettlement plans were prepared and implemented for each component. The implementation of the REMDP was financed by Viet Nam Electricity (EVN). In addition, ADB—via a grant from the Japan Fund for Poverty Reduction (JFPR)—financed enhanced livelihood improvements designed to complement the activities financed by EVN to restore and improve the livelihoods of affected people in the directly affected upstream area as well as in the downstream communes. 5. The REMDP specified the entitlements for identified impacts were all subject to endorsement and acceptance by both the relevant government authorities and ADB. The entitlements were also consulted and agreed with the affected persons. Table A10.1 provides a summary of affected households by impacts.

1 Physical relocation assistance for graves was not paid to affected households as Co Tu do not have the custom to

displace their graves. The grave displacement assistance was therefore paid to a company in charge of displacing the graves. Each affected household was given D350,000 to carry out rituals to leave their graves.

Appendix 10 37

Table A10.1: Affected Households by Impact

Affected Village

Affected Commune

Total Number of Affected Households

Number of Affected Households by Impact

Marginally Affected Relocated

Severely Affecteda

Parum A Zuoi 49 49

Parum B Zuoi 76 76

Pa Dy Zuoi 76 76

Thon 2 Ta Pooh 64 64

Pa Pang Ta Pooh 25 25

Vinh Ta Pooh 131 52 4 75

Cong Don Zuoi 25 25

Ta Ul Cha Val 61 61

TOTAL 507 138 269 100 a Defined as sustaining losses amounting to more than 10% of household income. Source: SB4HPMB based on actual compensation payment data.

6. The infrastructure built under the REMDP included the construction of the resettlement sites, access roads, houses, and community facilities such as schools, health centers, and meeting places. The cash compensation for lost assets and livelihood rehabilitation assistance was completed in 2014. An additional set of compensation was paid to affected households in Parum B as they lost access to un-flooded productive land. This was not part of the original REMDP but the government agreed to the additional compensation payments. These additional payments were completed by the end of 2015. All infrastructure that was built under the REMDP was handed over to Nam Giang District People’s Committee by 2015, which is now responsible for their operations and maintenance. The main reasons for the delay in REMDP implementation than appraisal targets can be summarized as follows: (i) the Nam Giang District Compensation Board did not have sufficient staff to timely complete surveys in the affected area, which is extremely mountainous and difficult to access, (ii) the new decree on compensation (69/2009/ND-CP) required changes to institutional arrangements pertaining to land acquisition, and (iii) implementation of REMDP was harmonized with civil works which experienced some delays (without completion of these works, the REMDP could not be completed). 7. Project impacts were monitored and addressed with specific regard to household vulnerability. Table A10.2 provides an overview of the affected households by category of vulnerability.

Table A10.2: Affected Households by Vulnerability Category Affected Village

Total Affected HHs

Ethnic Minority HH

Single Woman Headed HH

Resettled HH

Parum A 49 48 3 49

Parum B 76 75 6 76

Pa Dy 76 74 6 76

Thon 2 64 64 9 64

Pa Pang 25 25 3 –

Vinh 131 131 13 4

Cong Don 25 25 – –

Ta Ul 61 61 – –

TOTAL 507 503 40 269 HH = household. Source: SB4HPMB based on actual compensation payment data.

38 Appendix 10

8. Impact on land. The project affected different types of land. The total land area affected by the project was 26,864,733.7 m2, including agricultural land (17,907,139 m2), forest land (5,494,009 m2), residential land (24,733.2 m2), and land managed by the state (3,183,056.4 m2). Table A10.3 shows the different types of land affected.

Table A10.3: Land Affected by the Project

(m2) Decision on Land Acquisition and Handover

Total Acquired

Agricultural Land

Residential Land

Forest Land

Managed by State

Access road 326,280.0 67,848.0 – 255,572.0 2,860.0

Access road to the resettlement site Parum B

494,944.0 34,057.0 651.0 347,855.0 82,362.0

O&M zone and 110kV line 45,841.0 45,314.1 – 182.9 18.2

The 110kV TL corridor 68,197.9 49,088.6 – 7,519.2 340.1

The 35kV TL branch for the construction (incl. corridor)

18,294.7 17,335.8 – – 958.9

Road Papăng 351,658.0 72,917.0 – 277,257.0 –

Ancillary area 360,605.0 340,077.0 769.0 12,854.0 1,185.0

Main dam and factory 1,068,987.0 341,368.0 – 727,619.0 –

Quarry, explosive warehouse 355,715.0 355,715.0 634.0 – –

Quarry safety corridor 622,029.0 622,029.0 – – –

The main 35kV TL corridor 4,822.6 2,832.6 – 1,716.1 133.3

Construction of the area of Papang

1,175,057.4 452,704.7 – 670,142.0 45,002.9

Line 22kV to resettlement site Papang

65,834.4 – – 60,868.3 4,966.1

Administrative center of commune Zuooih, construction of the areas of Padhi, Parum A, B; flood avoidance road; access road to Padhi; wet-rice area and access road to the host village Papang

4,424,181.7 4,299,037.9 1,255.2 0.0 122,903.5

Transmission line corridor to the Parum A, B, and Padhi

964.8 958.6 – – 6.2

Construction of Song Thanh Ranger Station

300.0 – – – 300.0

Reservoir area: + commune Zuôih 5,030,350.4 3,083,065.4 18,216.8 195,289.8 1,542,791.2 + commune Chaval 2,103,256.8 1,036,452.1 959.5 784,015.7 282,115.5 + commune TaPơ 7,873,048.1 4,611,972.0 2,247.7 2,153,117.9 1,097,113.5

Reservoir flood zone Parum B 2,474,365.9 2,474,365.9 - - -

Total 26,864,733.7 17,907,138.7 24,733.2 5,494,008.9 3,183,056.4 kV = kilovolt, m2 = square meter, O&M = operation and maintenance, TL = transmission line Source: SB4HPMB based on actual compensation payment data. 9. The implementation of the REMDP ensured that all affected persons were compensated for their damages at replacement cost and provided livelihood restoration measures to help them improve or at least maintain living standards and income generation capability to pre-project level. Compensation, livelihood assistance, and physical relocation activities commenced in 2008 and were completed in 2014. Based on the data provided by Song Bung 4 Hydropower Project Management Board (SB4HPMB), the total amount of compensation and assistance for affected

Appendix 10 39

households was about D446.87 billion (equivalent to about $21.3 million assuming an exchange rate of $1=D21,000). Table A10.4 summarizes total compensation granted to each village group.

Table A10.4: Total Compensation and Level of Impact

Categories

No. of affected

households Level of Impact

Compensation and Assistance

D (billion) % Total

Loss of land for construction of access road

B 0.74 0.2

Loss of land for construction of access road to the resettlement site Parum B

72 AHs + 2 organizations

B 4.18 0.9

Loss of land for construction of a 110-kV line 23 B 4.75 1.1

Loss of land for construction of a 35-kV line branch (including corridor)

18 B 0.23 0.1

Loss of land for construction of road to Papăng village

24 B 0.78 0.2

Ancillary area 61 A 8.54 1.9

Main dam and Factory 9 A 0.91 0.2

Quarry, explosive warehouse (ancillary area I, II)

35 A 4.33 1.0

Quarry safety corridor 47 B 8.96 2.0

The main 35 kV line corridor 58 B 1.21 0.3

Construction of the resettlement site in Papang

25 A 12.58 2.8

Administrative centers of Zuooih commune, construction of Padhi, Parum A, and B; flood avoidance road; access road to Padhi; wet-rice area and access road to Papang

101 A 9.14 2.0

Reservoir area:

+ commune Zuôih 201 A 164.47 36.8 + commune Chaval 25 A 12.90 2.9 + commune TaPơ 68 A 175.20 39.2

Graves of commune Cadhy, commune Tabhing, Tapooh and Zuôi

190 B 2.67 0.6

Non-flooded area in Parum B

A 35.27 7.9

Total 446.87 100.0 AH = affected household, kV=kilovolt Source: SB4HPMB based on actual compensation payment data.

10. The Nam Giang District Resettlement Implementation Unit managed compensation payments. Documents related to the compensation were disclosed to the affected households. All entitlements of affected persons, including compensation and allowances, were delivered prior to physical displacement or actual loss from houses and land, and of assets. At the resettlement sites, all infrastructure including kindergartens, schools, clinics, water and supply systems, and roads and bridges within the area as well as meeting places were completed before the residents came to the new residential areas. At the beginning of REMDP implementation, the external monitoring agency identified several weaknesses that required addressing. One of these was ineffective consultation. This was improved by the ADB missions and SB4HPMB but led to some delays. ADB and SB4HPMB mobilized a full-time community mobilization consultant to address the gaps. The consultant established connections with the stakeholders, especially the implementing agencies and communities.

40 Appendix 10

11. Each household received permanent agricultural land and upland (for annual crops, perennial crops, and forage crops), with a minimum area of 1.5 hectares per household. Both men and women from the households were provided with land use rights certificates. Each household received 1000 m2 of land, consisting of a 400 m² plot for the construction of a new house and 600 m2 for a house garden. For the four households who voluntary self-relocated, rental subsidy was provided until they had completed their new house. Additional allowances were provided based on the number of persons per household as a life stabilization measure for 48 months. Furthermore, each relocated household received poverty reduction assistance for 60 months. 12. For vulnerable affected households, including poor and/or ethnic minority people and households headed by women, additional compensation and special allowances were provided to help them improve their socio-economic status. Severely affected households were also provided allowances to get job training and receive subsistence. 13. Restoration of livelihood. As of 2016, all affected households have settled in the new resettlement sites and are engaged in productive livelihood activities (i.e., agriculture, livestock rearing, and home gardening). Provision of seedlings under the livelihood restoration part of the REMDP included acacia and fruit trees. In addition, livestock such as pigs, chicken, and cows was provided. The vocational training program pursuant to Decision 52/2012/QĐ-TTg on vocational training for those whose land was acquired was offered but none of those affected registered to participate. One livelihood program was implemented under JFPR. This program concentrated on livelihood assistance for 253 households in the resettlement sites and 73 households in the downstream areas. The program commenced in 2009 and ended in 2013. Under the JFPR, six models of raising cows, pigs, and poultry, and five crop models (planting wet rice, paddy rice, bean, vegetables, and fruit trees) were provided. The non-agricultural models included training on driving, veterinary services, literacy programs. In total, vocational training courses were offered to 4,855 people (2,453 women and 2,402 men), including technical assistance (TA) in cultivation, breeding, monitoring, evaluation, and maintenance. 14. From 2014 to 2015, another TA project was implemented to help maintain and increase the efficiency of the livelihood recovery program. This program provided training courses on financial management and livestock husbandry and farming.2 Under the livestock husbandry and farming component, fish cages were provided along with training on how to manage these. 15. Gender actions. Women’s socioeconomic conditions improved during the post-resettlement time. Various reports show that some positive gender-related resettlement benefits are emerging.3 In particular, women living in new resettlement sites appear to have a better lifestyle, reduced workloads, greater autonomy, and access to social or health services; they also feel more empowered through having been part of the project resettlement process. Positive gender interventions have included (i) facilitating extensive participation of women’s right from the outset, (ii) ensuring fair representation of women in project activities and making conscious efforts to hear women’s voices, (iii) mandating equal compensation and entitlements for women and men, and (iv) facilitating access to a wide range of livelihood restoration training opportunities for both women and men. 16. The importance of women’s participation was formalized through the formation of women’s

2 ADB. 2008. Technical Assistance to Viet Nam for the Implementation and Monitoring of Song Bung 4 Hydropower

Project Resettlement and Ethnic Minority Development Plan. Manila. 3 ADB. 2014, Navigating Gender-Inclusive Resettlement: The experience of the Song Bung 4 Hydropower Project in

Vietnam. Manila

Appendix 10 41

groups in each village, and the creation of village resettlement development groups composed of affected people, with a requirement for 50% women’s representation. The Women’s Union, formed by key members of the village resettlement development groups, took an active part in the implementation of the resettlement activities. Maintaining social cohesion in the context of a change of lifestyle is also an important issue and women are key actors to ensure this cohesion. 17. Women play an important and responsible role in managing the finances of the households. TA-7861-VIE has a specific focus on women. The TA aimed to provide affected persons, especially women, with the financial literacy skills to allow them to manage their household finances as well as a better appreciation of financial planning in managing the livelihood assistance extended to them. 18. Women’s unions are present at each administrative level from village to province. Women’s unions at commune and district levels provide support and training for the organization of women’s unions at village levels. Women’s unions at the village level continue as an active group and develop some programs (e.g., assisting pregnant women for their first child with an allowance of D70,000 and creating a fund by collecting D5,000/ woman per month that can be used by women who need to borrow money; up to 2016, nobody used the fund). The role of women’s union at village level is critical to ensure social cohesion. To ensure sustainability, women must continue to meet on a regular basis and continue to be part of the existing committees. Women’s unions are active at the village level in all the villages. Women’s unions at the commune and district levels are strong organizations able to assist women’s unions at the village level. 19. Biodiversity conservation. The loss of biodiversity due to the flooding of land areas for the reservoir were addressed and mitigated through reforestation plans in which biodiversity offset areas were identified. The proposed mitigation measures were based on a biodiversity assessment in the Vietnamese Environmental Impact Assessment and ADB’s Environmental Impact Assessment, supplemented with panel of experts reports before and during reservoir inundation in 2014. The plans were designed to grow proper native plant species in two conservation offset plantations, one bordering the Song Bung 4 Hydropower Plant Reservoir and the other bordering the Song Thanh Nature Reserve. 20. The conservation offset program will be implemented until 2023 with a total budget of D17.1 billion. Forest nurturing (management) activities have been taking place since 2015 using a community-based management approach. Protection forest areas of 141.5 hectares are managed by the Agriculture Department of Nam Giang District, and an area of 65.5 hectares of special use forest is managed by the Song Thanh Nature Reserve, which employs about 200 Co Tu people. The living rate of the forests is high (above 85%) and the growth of the species Lat hoa Chukrasia velutina, Sao den Hopea odorata and Lim xanh Erythrophleum fordii is observed as normal. Forest nurturing activities were planned twice a year but expanded to three times a year because ground vegetation had crowded out the planted trees. The area by the reservoir, which is managed by the Agriculture Department of Nam Giang District, is only accessible via speedboat and therefore is unlikely to be harmed by outsiders. The protection phase of the replantation forest is scheduled for 2017 and the Agricultural Department has recommended extending the nurturing phase to 2019 for better results.

42 Appendix 11

ECONOMIC AND FINANCIAL REEVALUATION

1. Overview. This appendix describes the methodology used to assess the economic and financial feasibility of Song Bung 4 Hydropower Project at appraisal. It then updates the results of the analyses using data that were available at the loan closing date and discusses the potential causes of differences between the original and updated results. At loan closing, the original spreadsheet models that were used to prepare the economic and financial analysis of the project were no longer available. Therefore, a new model was prepared replicating the original cost and benefit streams yielding the same results. This model was used to reevaluate economic and financial internal rates of return. The methodology used for preparing the original economic and financial analyses was considered sound. A. Economic Reevaluation

2. Economic costs. The economic cost of the project consisted of (i) the economic investment cost including the cost of social and environmental mitigation, and (ii) the economic cost of managing, operating, and maintaining the hydroelectric power plant and its related infrastructure as well as the access roads and common infrastructure built for the resettlement sites. Economic costs, exclusive of taxes and duties, were expressed in constant dong (domestic price numeraire) and adjusted by a shadow exchange rate factor.1 The total project cost at the closing date was 1.3% higher than the total project cost at appraisal and the infrastructure was mostly completed within the timeframe envisaged at appraisal (The power plant was commissioned in Q4 2014, the original project closure is Q4 2014).2 3. Economic benefits. The economic benefits of the project consisted of:

(i) Non-incremental benefits. These are the economic benefits of replacing thermal

power by less costly hydropower and can also be viewed as the avoided cost of thermal power that would be used in the “without project” scenario. Part of the non-incremental benefits consists of environmental benefits in the form of reductions in greenhouse gas emissions.

(ii) Incremental benefits. These are the economic benefits arising from increasing the electricity output. The increase enables consumers to purchase more electricity from Viet Nam Electricity (EVN) at a much lower cost than alternative suppliers (such as diesel generators). Incremental benefits were valued based on the estimated willingness to pay of residential, commercial, and industrial consumers.

4. At appraisal, the valuation of environmental benefit was estimated at $10.0 per Certified Emission Reduction (CER) units for one ton of CO2 equivalent. This estimate was much lower than the specific value of $36.3 per ton of CO2 equivalent that ADB uses now as standard.3

1 This shadow exchange rate factor has been estimated following ADB guidelines and Economics and Research

Department (ERD) Technical Note No. 11, Shadow Exchange Rates for Project Economic Analysis, and assuming there are no distortions in factor or commodity prices. The estimation uses import and export data from International Monitory Fund; for import taxes, the estimation uses values from the state budget revenue from the General Statistic Office of Vietnam (www.gso.gov.vn); export taxes have been estimated by applying the export tax rate to the respective values of the three most relevant exports products where export taxes are applicable (Statistic Yearbook on Vietnam Trade 2012).

2 The total project cost figure at the time of closing includes the cost of the transmission line in order to be consistent when compared to the projected cost at appraisal.

3 $36.3 per ton of CO2 equivalent in 2016 real prices. This price is increased by 2% annually in real terms to reflect increasing environmental damage or benefits accruing to emission reductions over time. This value is based on the

Appendix 11 43

5. Reevaluation of economic benefits and costs. At appraisal, the project’s economic internal rate of return (EIRR) was estimated at 14.8%. The EIRR was reevaluated based on:

(i) the actual economic investment cost, which was about 1.3% higher than the appraisal estimate4;

(ii) the actual construction period from Q1 2010 to Q3 2014; (iii) estimated environmental benefits of $36.3 per ton of CO2 equivalent (which would

increase by 2% per year from 2016 onwards); (iv) a reduction in other economic benefits of 9% compared to appraisal estimates to

reflect the assumed reduction in annual electricity output from 491 GWh to 450 GWh (this is considered as the worst-case scenario. The production was already high in 2016, a year still affected by the most recent El Niño event);

(v) the actual operation and maintenance cost (1% of the investment cost); and (vi) an update of the shadow exchange rate factor to 1.05. 6. After adjusting economic cost and benefit streams based on the above assumptions, the EIRR increased to 15.8% and the project, therefore, remained economically viable. The increase in the EIRR was solely due to an increase in assumed environmental benefits from $10.0 to $36.5 per ton of CO2 equivalent. Without the assumed increase, the EIRR would drop to 12.68%. B. Financial Reevaluation

7. Financial costs. The financial costs of the project consisted of the (i) financial investment cost including costs of social and environmental mitigation, and (ii) the financial cost of managing, operating, and maintaining the hydroelectric power plant and other project-financed infrastructure. Financial costs were expressed in constant dong and included physical contingencies, but not taxes and duties as EVN recovers taxes. As was the case for economic costs, differences in financial costs at appraisal and at project closing were minor. 8. Financial benefits. These project’s financial benefits consisted of revenues from the sale of incremental electricity output. These revenues were estimated at appraisal based on an average output of 491 GWh per year and a unit price of $0.044 per kWh. This unit price was considered realistic, but reduced sales of 450 GWh was considered due to the reduced production in 2015 and 2016 than the estimates output (i.e., 9% lower than the output assumed for the original financial analysis). Table A11.0 shows the electricity output by month from October 2014 to December 2016. At the appraisal, the annual revenue from revenue from the sale of CER units was estimated at about $2.2 million. Because of the collapse of the Clean Development Mechanism, EVN was not able to realize this revenue and this was therefore not considered in the reevaluation. 9. Reevaluation of financial benefits and costs. At appraisal, the project’s financial internal rate of return (FIRR) was estimated at 7.6% when revenues from the sale of CER units were included, and 6.5% without this source of revenue. The FIRR was reevaluated based on:

estimates of the global social cost of carbon as reported by the International Panel on Climate Change’s Fifth Assessment Report.

4 The actual economic investment cost figure at the time of closing includes the cost of the transmission line to remain consistent when compared to the appraisal estimate.

44 Appendix 11

(i) the actual financial investment cost, which was about 1.3% higher than the appraisal estimate (footnote 2);

(ii) the actual construction period (from Q1 2010 to Q3 2014); (iii) the actual financial revenue from the sale of CER units (zero);

(iv) the estimated financial revenue from the sale of electricity output and an estimated unit price of $0.038 per kWh,5 and based on the actual electricity output during 2014–2016, and an annual electricity output of 450 GWh during the remainder of the benefit period; and

(v) the actual operation and maintenance cost (1% of the investment cost). 10. After adjusting the financial cost and benefit streams based on the above assumptions, the FIRR was 4.9%. This is above the original and recalculated weighted average cost of capital of 3.5% and 3.8% respectively. The project remained financially viable also after taking account of slightly higher financial costs and lower financial benefits.

Table A11.1: Monthly Electricity Output of Song Bung 4 Hydropower Plant October 2014–September 2016

(GWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2014 47.8 31.1 13.2

2015 40.5 22.2 45.8 25.8 36.6 30.9 21.5 25.0 24.2 50.2 29.7 10.4

2016 19.9 19.2 30.0 21.5 23.6 17.3 22.3 32.0 37.0 54.5 76.1 87.0 GWh = gigawatt-hour Source: Actual readings from Song Bung 4 Hydropower Plant log books.

Table A11.2: Weighted Average Cost of Capital

Amount share nominal rates weighted real rates

($ million) (%) (%) (%)

ADB loan 181.14 69% 5.6% 3.1%

Domestic Banks 45.64 17% 10.5% 4.0%

Equity 35.85 14% 11.5% 7.2%

Total 262.63 100% 3.8%

Source: Asian Development Bank estimates.

5 VCBS Research and Analysis. 2016. Vietnam Power Industry 2016. Hanoi. The report estimates that contract prices

of hydropower plants are in the range of 750 D/kWh to 950 D/kWh.

Appendix 12 45

ANALYSIS ON IMPLEMENTATION OF ENVIRONMENTAL SAFEGUARDS A. Introduction 1. The Song Bung 4 Hydropower Project (SB4HP) consists of a 156 MW hydropower plant located along Song Bung in the upper part of the Vu Gia River in Nam Giang District, Quang Nam Province, in central Viet Nam. The basin area of the Song Bung 4 reservoir is 1,477 km2. The dam affects a 5.5 km stretch of the Bung River due to reduced downstream water flow. The Environmental Impact Assessment (EIA) prepared in 2007 anticipated significant project environmental impacts, namely, (i) soil erosion, (ii) loss of biodiversity, (iii) increased pressure on Song Thanh Nature Reserve (STNR) in the province, (iv) loss of river continuity because of the dam; (v) a river reach with strongly reduced flow, and (vi) daily water level fluctuations downstream of the power plant because of changes to power production levels to accommodate peak demand periods. Measures were developed in the Environmental Management Plan (EMP) to mitigate and monitor the impacts. The adverse environmental and social impacts of the project were minimized and offset to acceptable levels through environmental and social management measures. Details of these activities are provided in the EMP, the resettlement and ethnic minority development plan, and the public health action plan. 2. The environmental benefits of SB4HP included (i) a better distribution of power generation resources, (ii) independence of fuel price variations, (iii) less emissions of greenhouse gases, (iv) contribution to the development of the area, (v) irrigation benefits in the dry months of the year, (vi) positive contribution to minimize salt intrusion on the floodplain, and (vii) enhanced watershed maintenance. 3. An Environmental Impact Assessment (EIA) was prepared for the hydropower plant, which included a dam, a powerhouse, a 35-km 220 kV transmission line,1 an access road, and other related infrastructure. In accordance with the Asian Development Bank’s (ADB) Environment Policy 2002,2 an updated Summary Environmental Impact Assessment was disclosed on ADB’s website for a minimum of 120 days prior to loan approval. Previously disclosed were the EIA dated 2007 and the earlier Summary Environmental Impact Assessment dated 2006. The EMP was updated in March 2010 based on strategic environmental assessment of the hydropower sector and was subsequently approved by Viet Nam Electricity (EVN) and ADB. An environmental management unit (EMU) was set up to update the EMP and to supervise its implementation. B. Environmental Management 4. Public consultation and information disclosure. As part of the EIA process from ADB’s Environmental Policy 2002, in 2005–2006 a series of public consultations took place with project affected people, government stakeholders, and several non-governmental organizations, such as World Wildlife Fund, World Vision, the Foundation for International Development and Relief, BirdLife International, International Rivers Network, International Union for Conservation of Nature, and the American Museum of Natural History. Consultation meetings were held with relevant government agencies and non-governmental organizations, including the Ministry of Natural Resources and Environment (MONRE) and the Department of Natural Resources and Environment (DONRE) in Nam Giang Province, the People’s Committee in Quang Nam District, and with the STNR administration, along with meetings with EVN, and the Song Bung 4

1 In 2012, the transmission line was removed from the project scope and was implemented by the National Power

Transmission Corporation under EVN, and was completed and connected to the national grid in October 2014. 2 ADB. 2002. Environment Policy 2002. Manila.

46 Appendix 12

Hydropower Project Management Board (SB4HPMB). These meetings discussed environmental issues arising from the project. The views of these various groups were considered in the EIA with the mitigating measures included in the EMP. 5. Carbon emissions and clean development mechanism registration. The project is estimated to save an average of 223,905 tCO2 annually. Since 22 August 2012, SB4HP had been registered in the United Nations Framework Convention on Climate Change secretariat as a Clean Development Mechanism (CDM) project activity. This was the first large-scale registered CDM project activity under EVN. SB4HP also entered an Emission Reduction Purchase Agreement (ERPA) with a Singapore-based company. The agreement featured a floating carbon price for all certified emission reduction (CER) credits generated from the project. The agreement is valid for 7 years starting from Q3 of 2014. Until June 2017, there has been no trading of CERs and the expected sale of CER credits under the CDM has not occurred 6. Capacity development of the SB4HPMB. During the first loan review mission on 22–26 February 2010, EVN requested support from ADB’s environmental staff to strengthen SB4HPMB’s capability on environmental management. Upon request by EVN, unused funds from ADB’s “TA 4711-VIE: Environmental Management Plan Improvement and Implementation and Downstream Impacts Management for Son La Hydro Power Project” was used to support capacity building of SB4HP experts. 3 In addition, training workshops on environmental management and monitoring during construction and operation were included in the terms of reference of the panel of experts for the environment funded by ADB’s “TA 8761-VIE: Implementation and Monitoring of Song Bung 4 Hydropower Project Resettlement and Ethnic Minority Development Plan.”4 The following training workshops were provided:

(i) 03 August 2011. Training to SB4HPMB environmental experts on the use of portable monitoring equipment;

(ii) 31 October 2011 to 4 November 2011 (Part 1) and 29 November 11 to 1 December 2011 (Part 2). Training on Hydropower Development: Environmental Management and their Environmental Management Plans, for 36 participants from SB4HPMB and Song Bung 2 Hydropower Management Board, Central Rural Power Management Board, Provincial Department of Natural Resources and Environment, the Provincial People’s Committee of Quang Nam, STNR, District Forest Department, District Agriculture Department, contractors, consultants, and external monitors;

(iii) 7–12 November 2011. Study Tour to Theun Hinboun Hydropower Plant and Mekong River Commission in Lao PDR for 12 participants from SB4HP, Quang Nam DONRE, and the Nam Giang district peoples committee;

(iv) 25–26 November 2013. Training on Watershed Management and Biodiversity Conservation in Hydropower Development for 31 participants of EVN and implementing agencies and stakeholders of two ongoing projects, Song Bung 4 and Song Bung 2;

(v) 24–26 March 2015. Training on Environmental Management and Monitoring during Hydropower Plant Operation for 19 participants from SB4HPMB’s environment and social safeguards staff, STNR, Quang Nam DONRE, and district agriculture and rural development board (DARD) officials; and

3 ADB. 2005. Technical Assistance to Viet Nam for Environmental Management Plan Improvement and Implementation

and Downstream Impacts Management for Son La Hydro Power Project. Manila. 4 ADB. 2013. Technical Assistance to Viet Nam for Implementation and Monitoring of Song Bung 4 Hydropower Project

Resettlement and Ethnic Minority Development Plan. Manila.

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(vi) 18 March 2016. Training on Integrated Water Management during Operation of Hydropower with 18 participants from Song Bung 4 and Song Bung 2 power projects and local government staff.

7. EVN has retained the trained EMU staff that monitored the construction phase to continue during the operation and maintenance phase of the SB4HP. They continue to receive training from EVN, Quang Nam Province DONRE and international agencies. During the operation phase of SB4HP, the STNR provides specialized training to its forest officers and patrol guards on enforcement of regulations and patrolling. C. Environmental Monitoring 8. The environmental monitoring program was satisfactory during construction and operation. In August 2011, as part of the capacity development of SB4HPMB’s EMU, portable monitoring equipment (two of each) were purchased for SB4HP for multi-parameter water quality metering, sound level metering, dust monitoring and toxic gas monitoring. The supplier provided onsite training for their use and maintenance. During the construction phase, there was an independent, third party environment monitoring agency that monitored surface water quality, groundwater, air quality, noise and vibration, hazardous waste, and reforestation. The results showed the project was compliant with Vietnamese laws and regulations. SB4HP submitted 10 monitoring reports that were all disclosed on the ADB website. Semiannual reports and annual implementation plans of the EMP were also prepared and submitted every year during construction (2010–2014) and disclosed on the ADB website. Furthermore, during the first 2 years of operation of the hydropower plant (2015–2016), annual reports were submitted and disclosed on the ADB website. SB4HPMB ensures that the monitoring during operations complies with the EIA and EMP. The midterm review mission in November 2014 concluded that environmental compliance was generally satisfactory. This was confirmed during the project completion report review mission in May 2017. 9. During the first year of operation of the hydropower plant in 2015, the Centre for Environmental Technology of Da Nang was the third-party monitor engaged by SB4HPMB to carry out environmental sampling during operations and prepare the necessary monitoring reports. Mott MacDonald, the project implementation consultant, had been retained in 2015 for operational support. SB4HPMB referred to the EIA and EMP mitigating measures, and monitoring during operations is ongoing. 10. Reservoir clearance. The residual impacts on reservoir clearance are minimal but monitoring continuous. The reservoir watershed area to be cleared was estimated to be 1,500 ha from a survey undertaken in 2009–2010 with 108,922 tons of biomass, which were mostly evergreen broadleaf forest, poor secondary forest, mixed forest, production forest, residential plants, annual crops, shrubs, grass, and forest remnant and vacant lands. SB4HPMB hired Power Engineering Consulting Joint Stock Company 3 in 2012 to prepare the Biomass Clearance Plan, which was reviewed by ADB, MONRE, and Quang Nam DONRE in January 2013, and updated and approved by EVN in July 2013. Biomass clearance was undertaken by the A Vuong Protection Management Board from April 2013 to July 2014 in full compliance with the plan. It was estimated that the minimum biomass that had to be removed was 42,292 tons. MONRE accepted the clearance results in July 2014 and approved for SB4HPMB to inundate the reservoir on 01 August 2014. 11. Physical and cultural resources. Prior to the clearance of biomass and the inundation of the reservoir, the graveyards of the resettled villages had to be relocated. The survey also

48 Appendix 12

found that 11 graveyards were scattered within the watershed, containing 1,585 graves or tombs. SB4HPMB arranged through a designated company to relocate these tombs to a new graveyard of about 10.06 ha following local rituals and culture. 12. Reforestation and conservation: Biodiversity Offset Program. The conservation offset program and reforestation is generally satisfactory. Replanting of 65.1 ha within the special use forest of the STNR Management Board was completed in 2014 and will be maintained from 2015 to 2023. Replanting for 141.5 ha of protection forest by the Nam Giang District Reforestation Management Board was completed in 2013 with continuous maintenance from 2014 to 2021. However, the panel of experts for the environment recommended planting additional species with the existing two species to encourage biodiversity, as required for offsetting. Quang Nam Province issued letter No. 927/UBND-KTN, dated 9 March 2016, on the satisfactory completion of the reforestation of affected areas in accordance with Decision No. 4330/QD-UBND on approval of the general plan of reforestation of SB4HP. The STNR and DARD are responsible for watershed protection measures. DONRE inspects regularly with their latest inspection on 24 May 2017 during the project completion report mission visit. The integrated watershed management is implemented based on the recommended framework for watershed management for both Song Bung 4 and Song Bung 2 power plants. 13. Environmental flow. MONRE has approved the environmental flow (3.68 m3/s) as required by law. During monitoring of the environmental flow, and from ADB missions, it was found that the pipe to maintain environmental flow, along with several mountain streams, contributed to sustaining aquatic life downstream of the dam. Thus, the downstream section of river (about 5.5 km) from the dam had sufficient volume of water to support the aquatic ecology. 14. Aquaculture/fishery. The resettlement and ethnic development management plan included a fishery development program that required the Nam Gang District to establish the management of the reservoir fisheries in collaboration with the affected villagers. Pa Dhy and Vinh villages have fish cage farming under the guidance of fishery experts from Quang Nam Province’s DARD together with budget support from Nam Giang DARD. The patrol guards of SB4HP monitor and control the incoming boats that are fishing within the reservoir, especially those from other villages. The regulation on licensing and registration of boats rest with the local government as is the ban on all electro-fishing. The patrol guards from the STNR also monitor for illegal entry and electrofishing. 15. There is concern on the safety of fisher folks if fishing is practiced downstream of the dam. During the rainy season, there are heavy releases of excess water to prevent overflow, which could endanger lives. An aquaculture project in Pa Dhy and Vinh villages, which are near the reservoir, is a source of livelihood that serves to offset the loss of fishing downstream of the dam. A fishery expert was hired under ADB’s technical assistance to work with the resettled villages in pilot programs on aquaculture. The fishery expert recommended that a reservoir fishery, such as the fish cage method, is a better and safer option than increasing compensation flow to allow for downstream fishery cultivation. 16. Occupational health and safety and workers’ camps. The project consistently complied with national laws and regulations of Viet Nam except for lapses in the first year due to the contractor’s poor performance. They also hired an environmental specialist and health and safety staff who contributed to better performance and reduced occupational health and safety issues for the rest of the construction period. The workers’ camps had water supply and toilets, cooking and dining facilities, and adequate living quarters. The project provided workers with personal protective equipment, especially hard hats, ear plugs, gloves, boots, and goggles.

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During construction, residents complained about the dust from trucks coming from the rock quarry. This was mitigated through water spraying the road three to four times a day. There were three lives lost during the first year of construction; two deaths were caused by road accidents due to bad weather and poor road conditions. The driver of one vehicle was involved in an accident while avoiding road potholes, and there were no guard rails or concrete barriers on the road. The third worker died due to electric shock from the powerhouse. The families of the workers were provided with timely and sufficient compensation by the contractor. Corrective action was done through better occupational health and safety training and road improvement such that from the second year onwards, there were no more reports of such incidents. E. Unanticipated Impacts and their Management 17. During the site inspection in March 2015, SB4HPMB observed that revegetation sites with newly planted seedlings were being used as grazing sites for cows and water buffaloes, mainly by people from the Vinh village. There were at least six plantation sites where many animals were observed: in former construction sites, the maintenance workshop, two workers’ camp on the left bank, and disposal sites No. 3 and 4. SB4HPMB discussed this matter with the villagers and the local authority and, at the same time, wire fences were installed to avoid entry of animals to replanting sites. 18. Some of the villagers near the reservoir have small or motorized boats for fishing in the reservoir. However, patrol guards observed that electrofishing was taking place, particularly at night. This is dangerous and also disruptive to the aquatic life in the reservoir. The SB4HPC and STNR patrol guards were instructed to be more vigilant of this illegal activity within the reservoir.

19. The cost for environmental mitigation provided by EVN increased from the appraisal estimate of $0.6 million to $1.7 million. This was due to (i) additional environmental staff employed by the contractor for EMP implementation and monitoring, (ii) reservoir biomass clearance, and (iii) reforestation under the conservation offset program. F. Lessons and Recommendations 20. A large infrastructure project like a hydropower plant has many challenges that require good management and coordination with all staff, contractors, workers, communities, government, and stakeholders. The SB4HP project experienced this during project preparation and especially in the first year of construction. 21. EVN, SB4HPMB, and the contractors demonstrated a satisfactory level of environmental due diligence in the implementation of the project. The review missions and semiannual environmental monitoring reports indicate that environmental mitigation measures and environmental monitoring and reporting, as set out in the project EIA and EMP, were mostly fulfilled and complied with the loan covenants.

22. Better access roads with road safety measures should be built during site preparation and before full construction to avoid accidents. More training on occupational health and safety for workers including vehicle drivers should be part of contractors’ bid documents.

23. As part of project preparation, a community health and safety risk assessment should be undertaken. The assessment should produce a comprehensive public health management plan to be included in the loan covenants and monitored regularly. A public health action plan was

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developed for this SB4HP but only for the resettled communities with an emphasis on the establishment of health care facilities.