ADB’s IED takes a dim view of REDSI programme
- The Independent Evaluation Department rates Renewable Energy Development Sector Investment programme for Pakistan less than successful, less than relevant
ISLAMABAD: The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) has rated Renewable Energy Development Sector Investment (REDSI) programme for Pakistan less than successful, less than relevant and less than effective due to design deficiency, methodological issues, and financial and operational risks prevalent in the power sector.
The IED in its validation report stated that the total cost of the multi-tranche financing facility (MFF) investment programme was $2.2 billion, with 23.2 percent from the ADB, 40.9 percent from the private sector, 18.2 percent from other financiers, and 17.7 percent from the government.
Tranche 1’s total cost was $145 million equivalent, with an ADB loan covering 80 percent and the government financing the balance.
At completion, tranche 1’s actual total cost (and of the MFF programme) was $144.7 million, with 77.9 percent from the ADB and the balance from the government.
The programme completion report (PCR) rated the programme successful.
This validation assesses the programme less than relevant due to the design deficiency.
It is less than effective, given the partial achievement of its outcome and outputs.
It was less than efficient due to methodological issues in establishing economic internal rate of return (EIRR).
ADB's Independent Evaluation Department takes a dim view
The reevaluated FIRR for the six subprojects as a whole was below the weighted average cost of capital (WACC) and there were financial and operational risks prevalent in the power sector suggesting less than likely sustainability.
Overall, this validation assesses the programme less than successful.
According to the design and monitoring framework (DMF), the programme’s expected impact was inclusive economic growth and reduction in carbon dioxide (CO2) emissions.
The programme’s intended outcome was increased production and use of clean energy through financially sustainable renewable energy sources.
Its planned outputs had three components.
First, the construction of small to medium-size hydropower stations and other sources of renewable energy units.
Second, preparation of feasibility studies and other due diligence work on new renewable energy schemes.
Third, the introduction of a capacity development programme at the federal, provincial, and project levels.
Tranche 1’s expected impact and intended outcome was fully aligned with that of the programme, with its planned outputs focusing on KPK and Punjab.
The PCR rated the programme less than effective.
The materials available for this validation did not contain records of approved changes in the DMF.
The programme’s intended outcome was partially achieved.
In 2015, the share of renewable energy generation in the total generation was 1.35 percent, below the 1.5 percent target.
The physical outputs were partially delivered.
The PCR rated the programme efficient, as the 16.4 percent reevaluated EIRR of the four completed plants combined, including Marala and Pakpattan in Punjab, and Ranolia and Machai in KPK, exceeded the 12 percent benchmark.
Sensitivity analysis under adverse scenarios suggested that the programme would highly likely remain economically viable.
Energy minister briefs Senate: Rs100bn to be spent on power distribution system replacement
A 10 percent increase in operation and maintenance (O&M) costs combined with a 10 percent decrease in benefits would result in an EIRR of 13.3 percent.
The environmental benefits of avoided CO2 emissions were not quantified or included in the reevaluation.
The PCR rated the performance of the borrower and the executing agency less than satisfactory. The Economic Affairs Division, Ministry of Economic Affairs and Statistics, as the representative of the borrower, demonstrated weak ownership during programme implementation.
The release of counterpart funds was delayed.
Important implementation issues were not responded to in a timely manner.
The AEDB, as the executing agency at the federal level, performed below expectations.
Its efforts to facilitate implementation and completion were less than effective despite advisory assistance from the consultants.
The performance of provincial implementing agencies was below expectation until 2015, when the programme administration was delegated to the resident mission.
On the whole, this validation assesses the performance of the borrower and the AEDB less than satisfactory.
The PCR rated the ADB’s performance less than satisfactory.
At appraisal, the ADB’s Central and West Asia Department and the Pakistan Resident Mission worked closely with the AEDB to ensure timely programme preparation and approval.
The program was approved by the ADB’s Board of Directors within one month of the government’s periodic financing request.
However, the programme design, particularly the use of the MFF, was not appropriate in this context.
The programme ran into significant delays, cancellations, under-utilisation of available funds, and effectively became a stand-alone loan project.
The ADB could have considered design changes to address the issues.
This validation assesses the ADB’s performance less than satisfactory.
Copyright Business Recorder, 2021
Comments
Comments are closed.