Project Administration Manual. Indonesia West Kalimantan Power Grid Strengthening Project

Transcription

1 West Kalimantan Power Grid Strengthening Project ( RRP INO 41074) Project Administration Manual Project Number: Loan and/or Grant Number(s): LXXXX; GXXXX July 2013 Indonesia West Kalimantan Power Grid Strengthening Project Date printed: 31/07/2013 time: 4:38:35 PM

2 Contents ABBREVIATIONS 1 I. PROJECT DESCRIPTION 1 A. Impact and Outcome 3 II. IMPLEMENTATION PLANS 3 A. Project Readiness Activities 3 B. Overall Project Implementation Plan 5 III. PROJECT MANAGEMENT ARRANGEMENTS 6 A. Project Implementation Organizations Roles and Responsibilities 6 B. Key Persons Involved in Implementation 6 C. Project Organization Structure 7 IV. COSTS AND FINANCING 8 A. Detailed Cost Estimates by Expenditure Category 10 B. Allocation and Withdrawal of Loan and Grant Proceeds 11 C. Detailed Cost Estimates by Financier ($ million) 14 D. Detailed Cost Estimates by Outputs/Components 15 E. Detailed Cost Estimates by Year 16 F. Contract and Disbursement S-curve 17 G. Fund Flow Diagram 19 V. FINANCIAL MANAGEMENT 21 A. Financial Management Assessment 21 B. Disbursement 21 C. Accounting 22 D. Auditing 22 VI. PROCUREMENT AND CONSULTING SERVICES 22 A. Advance Contracting and Retroactive Financing 22 B. Procurement of Goods, Works and Consulting Services 23 C. Procurement Plan 23 D. Consultant's Terms of Reference 28 VII. SAFEGUARDS 36 A. Environment 36 B. Resettlement 36 VIII. GENDER AND SOCIAL DIMENSIONS 37 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 37 A. Project Design and Monitoring Framework 38 B. Monitoring 40 C. Evaluation 41 D. Reporting 42 E. Stakeholder Communication Strategy 42 X. SPECIAL FEATURES 43 A. Potential Carbon Credit 43 B. Grant: Increasing Access to Electricity 43

3 XI. ANTICORRUPTION POLICY 44 XII. ACCOUNTABILITY MECHANISM 44 XIII. RECORD OF PAM CHANGES 44

4 Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The PT (Persero) Perusahaan Listrik Negara [State Electricity Corporation] (PLN) is wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB s policies and procedures. ADB staff is responsible to support implementation including compliance by PLN of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At Loan Negotiations the Borrower and ADB shall agree to the PAM and ensure consistency with the Loan and Grant Agreements. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan and Grant Agreements, the provisions of the Loan and Grant Agreements shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP), changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

5 Abbreviations ADB Asian Development Bank AFD Agence Française de Développement AFS audited financial statements CDM Clean Development Mechanism CEFPF Clean Energy Financing Partnership Facility CER certified emission reduction CMI Carbon Market Initiative CO 2 carbon dioxide DGE Directorate General for Electricity EBITDA earnings before interest, taxes, depreciation, and amortization EIA environmental impact assessment EIRR economic internal rate of return EURIBOR Euro interbank offered rate EMP environmental management plan FIRR financial internal rate of return ICB international competitive bidding IEE initial environmental examination LED light-emitting diode LAR land acquisition and resettlement NCB national competitive bidding NGO nongovernment organizations PAM project administration manual PIU project implementation unit PLN PT (Persero) Perusahaan Listrik Negara QCBS quality- and cost based selection SAIDI system average interruption duration index SAIFI system average interruption frequency index SOE statement of expenditure SPS Safeguard Policy Statement TOR terms of reference UNFCCC United Nations Framework Convention on Climate Change 1

6 I. PROJECT DESCRIPTION 1. The proposed project will reduce the cost of operating the power system in West Kalimantan. Oil is one of the most expensive power generation fuels accounting for a quarter of power generation in Indonesia and all power generation in West Kalimantan; hence, the average cost of power generation is about $0.25 per kilowatt-hour (kwh). 1 Coal, an abundant local 2 undeveloped resource is a substitute fuel for oil, with costs below $0.10/kWh. 3 However, as developing these coal resources will take time (7 10 years), and West Kalimantan urgently needs additional electricity supply to meet growing needs, West Kalimantan considers access to cross-border power supply a priority to meet rising demand and at reduced costs. The proposed interconnection with Sarawak at a negotiated import price of $0.10 kwh will enable Indonesia's PLN to import 230 MW equivalent of power generation to the West Kalimantan grid by January This will enable PLN to enhance its least-cost generation plan by combining hydropower imports from Sarawak with other Indonesian base-load generation from oil or coal. The proposed power imports may further reduce power generation costs in the future as Sarawak plans to develop more hydropower for an average power generation cost below $0.10/kWh. 2. The West Kalimantan system demand will grow to about 600 MW by 2020, from about 200 MW in 2012, and in the absence of the proposed interconnection, PLN plans to build new coal generation to switch from the rented oil generators that PLN now uses. The interconnection has always been an alternative option to meet long term system demand. Since the early 1990s, the power utilities in the island of Borneo have been developing a 1,300 km long high-voltage power transmission link, the Trans Borneo Power Grid, to connect the West Kalimantan power grid across Sarawak, Brunei Darussalam, to Sabah and enable power exchanges between the BIMP-EAGA countries. 4 This transmission system development will help each area take advantage of the different power systems and different power generation mixes on the island of Borneo: West Kalimantan relies almost entirely on oil, Sarawak largely on hydropower, Brunei Darussalam on gas, and Sabah predominantly on diesel and fuel oil. 3. Reduced Carbon footprint. Currently PLN relies entirely on oil for power generation in West Kalimantan. As PLN will eventually stop using oil-based power generation because of the import, the overall carbon footprint of Borneo will be reduced. The power interconnection will benefit also both West Kalimantan and Sarawak directly. A base-load supply of 50 MW and about 180 MW for 6 hours a day will amount to about 650,000 megawatt-hours of import of cheaper power from Sarawak to West Kalimantan each year, at a negotiated import price of $0.10/kWh PLN as the buyer will save about $100 million by avoiding oil generation and Sarawak as the seller will earn about $33 million with its low-cost power generation. This will also create opportunities for future power exports and sharing of system reserve margins between the two countries enabling further reduction of carbon footprint. 4. The proposed interconnection with Sarawak is of strategic importance to PLN. With the experience of this interconnection, PLN plans to expand its power exchange arrangements with its neighbor, although the West Kalimantan system is relatively small 1 About 3 times more than the average cost of generation by other power systems in Southeast Asia. 2 Indonesia is a lead coal exporter: About 50% of reserve in Kalimantan (34% in East Kalimantan, 16% in South Kalimantan, and about 3% in West Kalimantan). 3 In December 2011, PLN signed an independent power producer contract for 2 x 25 MW at $0.0909/kWh for 25 years. Government of Indonesia, Ministry of Energy and Mineral Resources. 4 BIMP-EAGA refers to the subregional initiative covering Brunei Darussalam Indonesia Malaysia Philippines East ASEAN Growth Area ( 1

7 compared with the Indonesian system: in 2012, demand for power from the West Kalimantan system was about 200 MW compared with total Indonesian system demand of about 30,000 MW; and the proposed 83 km long 275-kilovolt (kv) transmission line is relatively small PLN plans to build about 50,000 km of transmission lines over the next 10 years, including 5,000 km of 275 kv lines. 5. Signed power exchange agreement. On 5 September 2012, PLN and Syarikat SESCO confirmed their commitment to the project by signing the power exchange agreement (PEA) based on the term sheet signed on 18 July The PEA is for 20 years: the first phase covering the first 5 years has take-or-pay and take-and-pay prices. 5 The second-phase duration could be for long term, medium term, or short term within a maximum capacity of 230 MW. The PEA covers purchase of about 50 MW of capacity as base load on a take-or-pay basis for 5 years. In addition, PLN will be able to purchase another 180 MW of capacity as a take-andpay contract. Both parties secured their performance obligations with bank guarantees of $35 million to each other. The parties agreed also to enter into an interconnection agreement before 30 June The PEA includes strict milestone schedules (grid completion: 31 December 2014, and supply start: 1 January 2015) in order to avoid paying the $25,000-a-day penalty to each other. PLN has awarded contracts for four main packages and have signed these contracts under the approved advanced procurement action. 6. ADB s continued support for regional cooperation. The project is aligned with ADB's energy sector assessment strategy and road map 6 and the BIMP-EAGA implementation blueprint, 7 which made improving infrastructure facilities a priority and power interconnection a key strategic pillar. The project is also in line with the Association of Southeast Asian Nations (ASEAN) Connectivity Plan. 8 ADB supports investment in strategic transmission assets that connects regions or countries to optimize power networks by removing transmission bottlenecks and transmitting cheaper power from one area to the other, thereby helping achieve overall regional socioeconomic and environmental improvement. This project is consistent with ADB s country partnership strategy, and country operations business plan, , 10 which support the government's economic growth target of 6.3% 6.8% per annum in to and to remain around 6.5% by 2014 despite protracted global recovery. Furthermore, ADB is now working with PLN on the Sumatra Peninsular Malaysia power interconnection (250 km, 500 kv, high-voltage direct current line for the sharing of power between Indonesia (Sumatra) and Peninsular Malaysia. 7. Partnership with Agence Française de Développement (AFD). This project will strengthen ADB s partnership with AFD in financing PLN projects. In 2010, AFD cofinanced $50 million for the Java-Bali Distribution Performance Improvement project Take-or-pay amounts are like capacity payments: payments for full amounts have to be made even if only a portion of the contract amount is consumed. Take-and-pay allows the buyer to pay only for the amounts used. 6 Sector Assessment: Energy (accessible from the list of linked documents in Appendix 2). 7 BIMP-EAGA BIMP-EAGA Implementation Blueprint, The ASEAN Secretariat, August ASEAN Connectivity. Jakarta. 9 ADB Country Partnership Strategy: Indonesia, Manila. 10 ADB Country Operations Business Plan: Indonesia, Manila. 11 ADB Report and Recommendation of the President of the Board of Directors: Proposed Loan and Administration to the Republic of Indonesia; Java-Bali Electricity Distribution Performance Improvement Project. 2

8 A. Impact and Outcome 8. The impact of the project will be sustainable power supply in West Kalimantan and the outcome is reduced cost of operating the power system in West Kalimantan. 9. The project will have three outputs: (i) construction of about 83 km of 275 kv doublecircuit transmission line between Bengkayang and the border with Sarawak, with a new 275/150/20 kv substation in Bengkayang; (ii) construction of about 145 km of 150 kv doublecircuit Bengkayang Ngabang Tayan distribution line, with a new 150/250kV substation in Ngabang and a four-line distribution feeder extension for the 150 kv Tayan substation and Bengkayang substation; and (iii) new connections to 8,000 households in West Kalimantan. II. IMPLEMENTATION PLANS 10. The Project will be approved in After the four main contracts are signed under the approved advanced procurement action and retroactive financing, the Project implementation period is 30 months commencing 1 August 2013 and Loan closing date is 31 January The Project is expected to be completed by 31 January The Project's milestones of readiness activities and implementation schedule are as follows: A. Project Readiness Activities Indicative Activities Advance contracting actions 1. ADB Respon sible Party Oct- Dec Jan- Mar Apr- Jun Jul- Sep Oct- Dec Jan- Mar Apr- Jun Jul- Sep Oct- Dec Jan- Mar PLN, ADB Retroactive financing actions Establish project implementation arrangements done MOF, PLN, ADB PLN, ADB ADB Board approval Loan signing Government legal opinion provided Government budget inclusion Loan effectiveness Done for 1 st year operation ADB MOF, ADB MOJ,A DB, MOF, BAPPE NAS, PLN MOF,A DB 3

9 2. Government of Indonesia 12 Indicative Activities Monitoring the evaluation performance indicators Respons ible Party Jan- Mar Done Apr- Jun Jul- Sep Oct- Dec Jan- Mar Apr- Jun Jul- Sep Oct- Dec Nov PLN, ADB Counterpart fund allocated for the first year operation of activity Land acquisition and/or land resettlement plan is available Done Done MOF, BAPPEN AS, PLN PLN, MOF, ADB Resettlement plan is updated Project Management Unit (PMU and Project implementation unit are already established Done PLN Bidding, evaluation, and contracting of packages Finalized project admin. manual PLN, ADB 12 Based on Government Regulation No. 2/2006. Conditions prior Loan Negotiations 4

10 B. Overall Project Implementation Plan Indicative Activities A. Design and Monitoring Framework Activities with Milestones Output 1: 83 km of 275 kv transmission network with Substation 1.1 Tender out of two turnkey packages for (i) Bengkayang substations and the (ii) 275 kv transmission link with bid evaluation report approved by January Turnkey contracts signed by June Delivery of equipment and installation of the transmission lines by September Completion/ Commissioning of transmission network with substation by December 2014 Output 2: 145 km of 150 kv distribution network and new substations/upgrade 2.1 Tender out of two turnkey packages for (i) 150kV distribution lines and (ii) new 150/20 kv Ngabang Substation and 150 kv Tayan Substation (Extension) with bid evaluation reports approved by January Turnkey contracts signed by June Delivery of equipment and installation of the transmission lines by October Completion/Commissioning of distribution network and substations by March 2015 Output 3: Grant for new connection 3.1 Indentify household for targeting benefits by December Tender out connection kits and associated equipment by March Install equipment and connect customers March 2015 B. Management Activities Procurement plan key activities to procure contract packages Consultant selection procedures Environment management plan key activities Gender action plan key activities Communication strategy key activities I II III IV I II III IV I II III IV I II III IV I-II Annual/Mid-term review I R R M R R R Project completion report 5

11 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations Roles and Responsibilities Project implementation organizations Management Roles and Responsibilities Executing agency: PT Persero Perusahaan Listrik Negara [State Electricity Corporation] (PLN) Responsible for overall project implementation including submission of the Withdrawal Applications, retention of supporting documents, and any reporting requirements, including, the annual audit report and financial statements. Project Management Unit (PMU) Report to the Board of Directors through the Director of Planning and Risk Management; Responsible for overall procurement, planning, project supervision, monitoring, accounting, and consolidated reporting; Coordination with the Sarawak counterpart; and Selection, contracting, and supervision of project implementation consultants. Project Implementation Unit PIU: GM PLN (Persero) Unit Induk Pembangunan Jaringan Sumatera II And GM PLN (Persero) Wilayah Kalimantan Barat Day-to-day supervision of Project implementation, including undertaking monitoring and reporting requirements as well as resolving environmental and social safeguard issues with the support of the PMU. ADB Lender Main project financier Monitoring project implementation and covenant compliance AFD Cofinancier B. Key Persons Involved in Implementation Executing agency: PT Persero Perusahaan Listrik Negara [State Electricity Corporation] (PLN) ADB Energy Division: Mr. I Made Ro Sakya Head of Corporate Planning Tel: / Fax: address: imadero@pln.co.id Office Address: 13 th Floor, PLN Head Office, JL. Trunojoy, Blok M/135, Kebayoran Baru Mr. Chi Nai Chong Director Tel: (63-2) /Fax: (63-2) cnchong@adb.org Mission Leader: Mr. Sohail Hasnie Principal Energy Specialist Tel: (63-2) shasnie@adb.org 6

12 C. Project Organization Structure TIM KERJA PROJECT MANAGEMENT UNIT (PMU) DAN PROJECT IMPLEMENTATION UNIT (PIU) UNTUK ADB LOAN WEST KALIMANTAN POWER GRID STRENGTHENING PROJECT PMU KDIV RKO (Coordinator) KADIV AKO (Deputy Coordinator) KOORD. PENG. PHLN - SEKRETARIS 15 persons PENGADAAN KDIV RET KDIV DAS SUPERVISI KDIV RET KDIV SIS KDIV TRS IB KDIV KON IB KDIV DIS IB KDIV BTL KDIV AGA KSHK MANAJEMEN RISIKO KDIV MRO KEUANGAN KDIV KEU KDIV BDH KDIV AKT KDIV ANG PIU PROJECT IMPLEMENTOR/ GM PT PLN (PERSERO) UNIT INDUK PEMBANGUNAN JARINGAN SUMATERA II 1 PELAKSANA PROYEK/ GM PT PLN (PERSERO) WILAYAH KALIMANTAN BARAT 2 PROJECT MANAGER PROJECT MANAGER ADMINISTRATION ADMINISTRATION FINANCE AND ACCOUNTING FINANCE AND ACCOUNTING 9 persons TECHNICAL 1 Sumatera II Regional Transmission Construction Unit 2 West Kalimantan Regional Unit TECHNICAL ENVIRONMENT - CDM 7

13 PROJECT ORGANIZATION STRUCTURE Occupation Abbreviations of Department Who Responsible KDIV RKO Head of Corporate Strategic Planning Division I Made Ro Sakya KDIVAKO Project Director of Investment Administration for Tri Setyo Nugroho Construction Koordinator PHLN Coordinator for Loans and Grant Management Karya Hadi KDIV RET Head of Engineering and Procurement Planning Division Basuki Siswanto KDIV SIS Head of System Planning Division Djoko Prasetyo KDIV DAS Head of Strategic Procurement Division Wahyudi Agus KDIV TRS IB Head of West Indonesia Transmission Division Jemjem Kurnaen Raharja J. KDIV KON IB Head of West Indonesia Construction Division Eko Soedartanto Aris KDIV DIS IB Head of West Indonesia Distribution Division Oman Sumantri KSHK Head of Corporate Legal Service Unit Budi Kristanto KDIV MRO Head of Risk Management Division Amir Rosidin KDIV KEU Head of Corporate Finance Division M Ikbal Nur KDIV BDH Head of Treasury Division Tjutju Kurnia KDIV AKT Head of Accounting Tax and Insurance Division Beni Hermawan KDIV ANG Head of Budget Monitoring Planning Division Gong Matua Hasibuan IV. COSTS AND FINANCING 11. The project is estimated to cost $130.0 million (Table 1). The government has requested a loan of $49.5 million from ADB s ordinary capital resources to help finance the project. The OCR loan will have a loan term of 20-years, including a grace period of 3 years, and a repayment based on 5% annuity payment. The loan will have an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, and a commitment charge of 0.15% per annum and such other terms and conditions set forth in the draft loan and project agreements. The government has provided ADB with (i) the reasons for its decision to borrow under ADB s LIBOR-based lending facility based on these terms and conditions and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB. 12. The Agence Française de Développement (AFD) will cofinance the project with a loan of $49.5 million, at an interest rate in United States dollar equivalent to EURIBOR plus 30 basis points and a term of 15 years including a grace period of 5 years. PLN will finance the balance of $18.8 million and Government will finance about $10.2 million. The Government will enter into a subsidiary loan agreement with PLN to relend the $99 million on terms and conditions satisfactory to ADB and AFD. ADB will partially administer the AFD loan in regard to procurement, recruitment of consultants, and disbursement in accordance with a cofinancing agreement to be signed. The Multi-Donor Clean Energy Fund under the Clean Energy Financing Partnership Facility Grant (CEF under CEFPF) will provide a cofinancing grant equivalent to $2 million for the Access to Power component to be administered by PLN. The Multi-Donor Clean Energy Fund under the CEFPF is administered by ADB. 8

14 Item A. Base Cost b Table 1: Project Investment Plan ($million) Amount a 1. Substation 275kV Transmission Line 275 kv Expansion of Existing Grid 150kV SS + lines ADSS replacement Pontianak-Singkayang Land Acquisition and Resettlement Environmental Costs Consulting Services 2.0 Subtotal (A) B. Increasing Access to Power 3.5 Subtotal (B) 3.5 C. Contingencies c 1. Physical Price 3.0 Subtotal (C) 14.3 D. Financial Charges During Implementation d 4.5 Subtotal (D) 4.5 Total a Includes taxes and duties of $11.5 million, government s contribution ($10.2 million) will be as tax exemption. PLN taxes and duties financing of $1.3 million b In mid-2012 prices c Physical contingencies are estimated at 10.5% of base costs. Price contingencies at projected international inflation rate of 0.4% and 6.3% inflation rate on local currency costs. d Includes interest during construction and commitment charges. Interest during construction for ADB loan has been computed at the 5-year London interbank offered rate fixed swap rate plus a spread of 0.4%. Commitment charges for the ADB loan are 0.15% per year to be charged on the undisbursed loan amount. Transportation and insurance cost may be financed by ADB/AFD/CEFPF funds Source: Asian Development Bank Estimates 9

15 A. Detailed Cost Estimates by Expenditure Category 1000' IDR USD Total Local Foreign Local Foreign Total A. Investment Costs 1. Civil Works 193,984, ,984,739 20,413,000-20,413, Equipment 130,224, ,706, ,931,361 13,703,567 54,583,433 68,287, Environment and Social Mitigation 54,452,190-54,452,190 5,730,000-5,730, Consultants 6,942,311 12,063,689 19,006, ,539 1,269,461 2,000, Subtotal (A) 385,604, ,770, ,374,290 40,577,106 55,852,894 96,430, B. Access to energy Distribution Line 8,600,215 8,600,215 17,200, , ,000 1,810, Connection Equipment and Works 5,844,345 5,844,345 11,688, , ,000 1,230, Consulting Services 1,187,875 1,187,875 2,375, , , ,000 Subtotal (B) 15,632,435 15,632,435 31,264,870 1,645,000 1,645,000 3,290, C. Contingencies Physical 57,236,176 50,052, ,288,870 6,022,959 5,267,041 11,290, Price 26,183,523 2,230,447 28,413,970 2,755, ,710 2,990,000 Subtotal (C) 83,419,699 52,283, ,702,840 8,778,249 5,501,751 14,280, D. Financial Charges During Implementat - 42,763,500 42,763,500-4,500,000 4,500,000 Subtotal (D) - 42,763,500 42,763,500-4,500,000 4,500,000 Total Project Cost (A+B+C+D) 484,656, ,449,130 1,126,105,500 51,000,355 67,499, ,500, Tax 43,191,135 66,093, ,284,500 4,545,000 6,955,000 11,500, Grand total 527,847, ,542,495 1,235,390,000 55,545,355 74,454, ,000,000 10

16 B. Allocation and Withdrawal of Loan and Grant Proceeds 13. In Loan/Grant Agreement, the Schedule entitled 'Allocation and Withdrawal of Loan/Grant Proceeds' normally contains both narrative paragraphs and the 'Table of Allocation and Withdrawal of Loan Proceeds'. In this case copy only the table into this section. If a table is not provided then copy the narrative description to this section. Category No. ALLOCATION AND WITHDRAWAL OF ADB LOAN PROCEEDS (West Kalimantan Power Grid Strengthening Project ) Item CATEGORY Total Amount Allocated for ADB Financing ($) Category Subcategory ADB FINANCING BASIS Percentage of ADB Financing from the Loan Account 1 Civil Works 10,210,000 1A 1B 1C 1D 275 kv Line Bengkayang Substation 150 kv Lines Ngabang, Tayan Substation 4,790, percent of total expenditure* 1,245, percent of total expenditure* 3,460, percent of total expenditure* 715, percent of total expenditure* 2 Equipment 34,140,000 2A 2B 2C 2D 275 kv Line Bengkayang Substation 150 kv Lines Ngabang, Tayan Substation 9,500, percent of total expenditure* 12,840, percent of total expenditure* 9,650, percent of total expenditure* 2,150, percent of total expenditure* 3 Consulting Services 1,000, percent of total expenditure* 4 Unallocated 4,150,000 Total 49,500,000 * Exclusive of local taxes and duties 11

17 Category No. ALLOCATION AND WITHDRAWAL OF AFD LOAN PROCEEDS (West Kalimantan Power Grid Strengthening Project) Item CATEGORY Total Amount Allocated for ADB Financing ($) Category Subcategory AFD FINANCING BASIS Percentage of ADB Financing from the Loan Account 1 Civil Works 10,210,000 1A 275 kv Line 4,790, percent of total expenditure* 1B Bengkayang Substation 1,245, percent of total expenditure* 1C 150 kv Lines 3,460, percent of total expenditure* 1D Ngabang, Tayan Substation 715, percent of total expenditure* 2 Equipment 34,140,000 2A 275 kv Line 9,500, percent of total expenditure* 2B Bengkayang Substation 12,840, percent of total expenditure* 2C 150 kv Lines 9,650, percent of total expenditure* 2D Ngabang, Tayan Substation 2,150, percent of total expenditure* 3 Consulting Services 1,000, percent of total expenditure* 4 Unallocated 4,150,000 Total 49,500,000 * Exclusive of local taxes and duties. 12

18 ALLOCATION AND WITHDRAWAL OF GRANT PROCEEDS (Access to Power: Revolving Fund for New Connection) CATEGORY ADB FINANCING BASIS Total Amount Allocated Percentage of ADB for ADB Financing Financing from the Number Item $ Grant Account* Category Subcategory 1 Main Equipment 1,230,000 1A Connection Kits 960, percent of total expenditure* 1B Public Lighting System 30, percent of total expenditure* 1C Compact Fluorescent Lamps 40, percent of total expenditure* 1D Community Centers 200, percent of total expenditure* 2 Consulting Services 250,000 2A Training and Awareness Building 50, percent of total expenditure* 2B Implementation Support 200, percent of total expenditure* 3 Unallocated 520,000 * Exclusive of local taxes and duties Total 2,000,000 13

19 C. Detailed Cost Estimates by Financier ($ million) ADB AFD CEFPF PLN Government Total Cost Taxes and Duties A. Investment Costs 1. Civil Works % % Equipment % % Environment and Social Mitigation 0% 0% % Consultants % % Subtotal (A) % % % B. Access to energy Distribution Line % Connection Equipment and Works % Consulting Services % Subtotal (B) % % B. Contingencies Physical % % % % Price % % % Subtotal (B) % % % % C. Financial Charges During Implementation % Total Project Cost (A+B+C) % % % % Tax % % Grand total % % % % % ADB = Asian Development Bank, AFD = Agence Française de Développement, CEFPF = Clean Energy Financing Partnership Facility, PLN = PT (Persero) Perusahaan Listrik Negara Source: ADB Staff Estimates Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category PLN Govt. Total 14

20 D. Detailed Cost Estimates by Outputs/Components Total Cost % of Cost Category % of Cost Category % of Cost Category % of Cost Category Amount Amount Amount Amount A. Investment Costs 1. Civil Works % % % % 2. Equipment % % % % 3. Environment and Social Mitigation % % % % 4. Consultants % % % % Subtotal (A) % % % % Amount % of Cost Category B. Access to energy 1. Distribution Line % 2. Connection Equipement and Works % 3. Consulting Services % Subtotal (B) % C. Contingencies 1. Physical % % % % % 2. Price % % % % % Subtotal (C) % % % % % D. Financial Charges During Implementat 4.51 Output 1 Output 2 Output kv Line Bengkayang 150kV lines Ngabang, Tayan Ext Access to energy Total Project Cost (A+B+C+D) Tax Grand total

21 E. Detailed Cost Estimates by Year Item Total Year 1 (2013) Year 2 (2014) Year 3 (2015) Year 4 (2016) % of Cost % of Cost % of Cost % of Cost Amount Amount Amount Amount Category Category Category Category A. Investment Costs 1. Civil Works % % % % 2. Equipment % % % % 3. Environment and Social Mitigation % % % % 4. Consultants % % % % Subtotal (A) % % % % B. Access to energy Subtotal (B) C. Contingencies 1. Physical Price Subtotal (C) D. Financial Charges During Implementation 1. IDC Subtotal (D) Total Project Cost (A+B+C+D) Tax Grand total Note: Incudes expenditures under advance actions and retroactive financing. 16

22 F. Contract and Disbursement S-curve 14. Figure 1 shows contract awards and disbursement for the ADB Loan portion over the life of the project and grant (combined), and annually based on the contract awards and disbursement projections. Figure 2 presents contract awards and disbursement for both the ADB and AFD Loans portion over the life of the project and grant (combined). The amounts indicated do not include the contingencies or unallocated and financial charges during implementation. The projections will be reviewed on a yearly basis during the implementation period. Figure 1: Contract Awards and Disbursement S-Curve In $ mil Year Contract Awards (in $mil) Cum. Disbursements (in $mil) Disbursements (in $ mil) Year In $ Million CA Cum CA Disb Cum. Disb

23 Figure 2: Contract Awards and Disbursement S-Curve (ADB and AFD Loan and CEFPF Grant Only) Contract Awards (in $mil) Cum. Disbursements (in $mil) Disbursements (in $ mil) Year In $ Million CA Cum CA Disb Cum. Disb

24 G. Fund Flow Diagram Asian Development Bank ADB Direct payment (UPON PMU VERIFICATION) Government of Indonesia Withdrawal application Draft Withdrawal application Ministry of Finance Loan repayment Counterpart funds PLN (PMU) Service Providers flow of funds PAYMENT REQUEST Claim Consultants, Suppliers and Other Contractors 19

25 Asian Development Bank Government of Indonesia Withdrawal application and bank transfer receipt Draft Withdrawal application and bank transfer receipt ADB Ministry of Finance PLN (PMU) Reimbursement (UPON PMU VERIFICATION) Loan repayment Counterpart funds Service Providers flow of funds PAYMENT REQUEST Claim Consultants, Suppliers and Other Contractors Figure: Reimbursment for Retroactive Financing 20

26 V. FINANCIAL MANAGEMENT 15. The following reflect the project's specific financial management arrangements. A. Financial Management Assessment 16. PLN has a special project implementation office in each geographical region including West Kalimantan, which is commonly referred as Project Implementation Unit (PLN UPK). PLN UPK has finance, budget, accounting, and revenue control divisions with experienced staff. Each unit has computerized enterprise resource planning systems to control financial management, budget planning, and human resource management, and produces branch annual financial statements and budget reports. The financial reports include the balance sheet, profit and loss reports, and cash-flow reports. All the report and activities are regularly audited by PLN internal auditors, external auditors, and state auditors. The financial management system and PLN UPK staff are considered adequate for accounting purposes. However, it is recommended that implementation consultants support PLN finance and accounting staff to follow ADB's requirements and procedures for preparing withdrawal applications and maintaining project accounts, because PLN UPK staffs have limited experience in implementing ADB projects. B. Disbursement 17. The ADB and AFD loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2012, as amended from time to time), 13 and detailed arrangements agreed upon between the Government and ADB. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS), 14 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 (page 76) of the SPS. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list to subprojects financed by ADB. Disbursements including payments to consultants, contractors, and suppliers of the main procurement packages, will generally be made by direct payment. 18. Before the submission of the first withdrawal application, the Government should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000, unless otherwise approved by ADB. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. 19. The project is cofinanced by AFD and ADB is partially administering AFD loan. For the AFD loan, the EA should simultaneously submit two WAs (one to ADB and one to AFD for their records) for AFD financing. ADB will review the WA, and advise AFD to execute the payment. 20. For the CEFPF grant, grant proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2012) Available at: 14 Available at: 15 ADB TA Disbursement Handbook. Manila. 21

27 C. Accounting 21. The Government and PLN will maintain separate books and records by funding source for all expenditures incurred on the Project. Each of PLN's regional offices will also maintain separate records and will submit annual financial statements to PLN for consolidation. Project financial statements will be prepared in accordance with internationally acceptable accounting principles and practices and in accordance with PSAK or Indonesian generally accepted accounting principles. In addition, to the project financial statements, PLN will provide to ADB a copy of its annual consolidated financial statements prepared in accordance with International Financial Reporting Standards or national equivalent. D. Auditing 22. PLN will cause the consolidated project financial statements to be audited in accordance with auditing standards acceptable to ADB by an independent auditor acceptable to ADB. The audited project financial statements will be submitted, in English, within six months of the end of the fiscal year to ADB and AFD. 23. The Independent auditor will provide an audit management letters and audit opinions which cover (i) whether the project financial statements present a true and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting framework; (ii) whether loan and grant proceeds were used only for the purposes of the project or not; (iii) the level of compliance for each financial covenant contained in the legal agreements for the project; (iv) compliance with the imprest fund procedure; and (v) compliance with use of the SOE procedure certifying (a) to the eligibility of those expenditures claimed under SOE procedures, and (b) proper use of the procedure in accordance with ADB s Loan Disbursement Handbook and the project documents. 24. PLN's audited consolidated financial statements will be provided to ADB within one month of their approval by the relevant authority. 25. The Government and PLN have been made aware of ADB's Public Communication Policy (2011) and that the consolidated Audited Project Financial Statements (including audit opinion, financial statements and accompanying notes) will be disclosed within 30 calendar days of receipt by ADB. VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 26. All advance contracting will be undertaken in conformity with ADB s Procurement Guidelines (April 2010, as amended from time to time) (ADB s Procurement Guidelines) 16 and ADB s Guidelines on the Use of Consultants (April 2010, as amended from time to time). 17 The issuance of invitations for bid under advance contracting will be subject to ADB s prior approval. The borrower has been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project. AFD has approved its retroactive financing facility for PLN under this Project. Four international competitive bidding packages have been bid out in August 2012 and ADB has issued no objection for three of the four bids as of 7 March 2013 with a total value of about $68 million. 16 Available at: 17 Available at: 22

28 27. In the case of retroactive financing, withdrawals from the Loan Account may be made for reimbursement, it will cover all eligible expenditures under equipment, civil works, and Consulting Services to be procured under the Project, the equivalent of 20% of the total ADB loan of $49.5 million, incurred before loan effectiveness, but not more than 12 months before the signing of the loan agreement. Same retroactive financing provisions will be included in the AFD loan. B. Procurement of Goods, Works and Consulting Services 28. All procurement of goods and works will be in accordance with ADB s Procurement Guidelines (2010, as amended from time to time). Civil works will be procured through international competitive bidding (ICB) procedures for packages exceeding $10,000,000 equivalent, and through NCB procedures acceptable to ADB for packages up to and including $10,000,000 equivalent. Goods will be procured through ICB procedures for packages exceeding $1,000,000 equivalent, and through NCB procedures acceptable to ADB for packages up to and including $1,000,000 equivalent. For packages of $100,000 equivalent or less, shopping may be used. 29. Before the start of any procurement under NCB procedure, ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB s Procurement Guidelines. 30. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C. 31. All consultants will be recruited according to ADB s Guidelines on the Use of Consultants. 18 The terms of reference for all consulting services are detailed in Section D. Consulting services will include 206 person-months (28 person-months international, and 178 person months national) for project implementation support. Consultants will be selected through ADB s quality and cost-based selection (QCBS) method with a standard quality cost ratio of 80:20. ADB approved advance action on procurement. C. Procurement Plan PROCUREMENT PLAN Project Name: West Kalimantan Power Grid Loan Number: Strengthening Project Loan Amount: $99 million (ADB: $49.5m, AFD: $49.5m) Grant amount: $2 million Date of first Procurement Plan: (Date of loan negotiation) 1. Process Thresholds, Review, and Procurement Plan a. Project Procurement Thresholds Executing Agency: PT Perusahaan Listrik Negara (PLN) Date of this Procurement Plan: (Date of loan negotiation) 32. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds will apply to the procurement of goods and works. 18 Checklists for actions required to contract consultants by method available in e-handbook on Project Implementation at: 23

29 Method Procurement of Goods and Works Threshold International Competitive Bidding for Works Above $10,000,000 International Competitive Bidding for Goods Above $1,000,000 National Competitive Bidding for Works Between $100,000 and $10,000,000 National Competitive Bidding for Goods Between $100,000 and $1,000,000 Shopping for Works Under $100,000 Shopping for Goods Under $100,000 b. ADB Prior or Post-review 33. Except as ADB may otherwise agree, the following prior or post-review requirements apply to the various procurement and consultant recruitment methods used for the Project. Procurement of Goods and Works Procurement Method Prior or Post Comments ICB Works ICB Goods NCB Goods and works Prior Prior Prior Recruitment of Consulting Firms Quality- and Cost-Based Selection (QCBS) Prior Recruitment of Individual Consultants Individual Consultants Prior ICB = international competitive bidding, NCB = national competitive bidding. c. Goods and Works Contracts Estimated to Cost More Than $1 Million 34. Procurements will be undertaken in accordance with the Procurement Guidelines (2010, as amended from time to time) of the Asian Development Bank (ADB). ADB s single-stage, oneenvelope procurement procedure will be used. ADB's and its standard bidding document will be applicable throughout the project for all ICB packages whilst PLN's or national bidding document may be used for the NCB packages provided that they comply with ADB and the Government of Indonesia's requirements. 35. All contracts will be awarded following ICB procedures and the tender documents will be in English. All goods will comply with the relevant international standards. 36. All four ICB packages for the loan component will be under the design-supplyinstallation-testing and commissioning (turnkey) contract. 37. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. 24

30 Package No. General Description Output 1 : Regional Design, Supply, Installation, Testing and Commissioning of kv Transmission Line from Bengkayang to Border (Turnkey Contract) Design, Supply, Installation, Testing and Commissioning of 2 275/150/20 kv Substation at Bengkayang (Turnkey Contract) Output 2 : National Design, Supply, Installation, Testing, and Commissioning of 150 kv Transmission Linefrom 3 Bengkayang Ngabang- Tayan (145 km) and Optical Power Ground Wire (OPGW) (Turnkey contract) Design, Supply, Installation, Testing, and Commissioning of 150/20 kv Ngabang Substation 4 and Upgrading of 150 kv Tayan Substation (4 Line Feeder Extension) (Turnkey Contract) Output 3 : Grant 5 Supply, Delivery and Installation of Electricity Household Connection Kits Estimated amount ($ million) w/o taxes Procurement Method Prequalification Of Bidders Advertisement Date (quarter/year) ICB No Q3/ ICB No Q3/ ICB No Q3/ ICB No Q3/ NCB No Q1/2013 Comments Financed by ADB and AFD Loans Financed by ADB and AFD Loans There will be a replacement of one earthwire through ADSS at existing 150 kv transmission line Pontianak Singkawang Financed by ADB and AFD Loans Financed by ADB and AFD Loans Financed under the CEFPF Grant and administered by PLN (Various contracts below $1 million each) 6 Design, Supply, Installation, Testing, and Commissioning of 20 kv distribution 2.00 NCB No Q4/2013 Financed by PLN 25

31 Package No. General Description lines, 20/0.4 kv distribution transformers, 0.4 distribution system, connection to the households Estimated amount ($ million) w/o taxes Procurement Method Prequalification Of Bidders Advertisement Date (quarter/year) Comments d. Consulting Services Contracts Estimated to Cost More Than $100, Consultants will be selected and engaged under the Project in accordance with the Guidelines on the Use of Consultants by Asian Development Bank and its Borrowers (2010, as amended from time to time). An international consulting firm will be engaged to manage implementation of the Project. The firm will deliver 206 person-months of consulting services (28 person-months of international and 178 person-months of national consulting) following ADB s quality- and cost-based selection method with 80:20 ratio and using full technical proposal. 39. The following table lists the consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. Package No General Description Estimated amount ($ million) w/o taxes Procurement Method Prequalification Of Bidders Advertisement Date (quarter/year) Comments 7 Project Implementation Consultants 1.90 QCBS (80:20) using Full Technical Proposal (FTP) No Q2/2012 e. Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100, The following table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. Package No. General Description Estimated amount ($ million) w/o taxes Recruitment Method International or National Assignment Advertiseme nt Date (quarter/year) Comments 8 Grant Implementation Consultant 0.30 Single-source selection International/ National Q1/2013 Various Individual Contracts 2. Indicative List of Packages Required Under the Project 41. All procurement (goods, works, and consulting services) will be implemented within the coming 18 months. Thus, a separate indicative list of packages is not required. 26

32 3. National Competitive Bidding a. General 42. The procedures to be followed for national competitive bidding shall be those set forth in Presidential Decree No.54/2010 of the Republic of Indonesia, dated August 6 th, 2010 and its Amendments, with the clarifications and modifications described in the following paragraphs required for compliance with the provisions of the Procurement Guidelines. b. Registration 43. Bidding shall not be restricted to pre-registered firms and such registration shall not be a condition for participation in the bidding process. 44. Where registration is required prior to award of contract, bidders: (i) shall be allowed a reasonable time to complete the registration process; and (ii) shall not be denied registration for reasons unrelated to their capability and resources to successfully perform the contract, which shall be verified through post-qualification. c. Prequalification 45. Post qualification shall be used unless prequalification is explicitly provided for in the loan agreement or procurement plan. Irrespective of whether post qualification or prequalification is used, eligible bidders (both national and foreign) shall be allowed to participate. d. Joint Ventures 46. A bidder declared the lowest evaluated responsive bidder shall not be required to form a joint venture or to sub-contract part of the supply of goods as a condition of award of the contract. e. Preferences 47. No preference of any kind shall be given to domestic bidders or for domestically manufactured goods. 48. Regulations issued by a sectoral ministry, provincial regulations and local regulations which restrict national competitive bidding procedures to a class of contractors or a class of suppliers shall not be applicable. f. Advertising 49. Invitations to bid (or prequalify, where prequalification is used) shall be advertised in at least one widely circulated national daily newspaper or freely accessible, nationally-known website allowing a minimum of twenty-eight (28) days for the preparation and submission of bids and allowing potential bidders to purchase bidding documents up to at least twenty-four (24) hours prior the deadline for the submission of bids. Bidding of NCB contracts estimated at $500,000 or more for goods and related services or $1,000,000 or more for civil works shall be advertised on ADB s website via the posting of the Procurement Plan. 27