Selection of Project

Detailed Feasibility Study Report

The main objective of the Detailed Feasibility Study (DFS) Report is to demonstrate the technical, financial and commercial viability of the project in detail, by examining the findings of the Feasibility Study performing a more detailed assessment.

Prior to applying for DFS co-funding, the Developer shall confirm to AEPC whether international consultants will be involved in the preparation of the report.The DFS is structured in eight sections, summarized below, as follows (please refer to the “Commercial and MSW Biogas Plant DFS Guidelines” link):

Who completes it?

The DFS shall be prepared by the local Prequalified Consultant PQC with or without the support of an Expert Consultant (especially required for cases where technology is new to Nepal) working in conjunction with a local PQC.

A PQC shall always be involved in the preparation of the DFS in order to build the capacity of the local sector. Whether the same entity or different, the DFS technical sections (3 and 4 above) shall be completed by a competent technical PQC. The financial and commercial sections (5 and 6 above) shall be completed by a competent commercial expert associated with the prequalified consulting firms (who may or may not belong to the same company as the technical PQC). The complete DFS report will be submitted by the PQC. SREP has identified a gap in capacity regarding the commercial and financial capabilities of the local PQCs, and has proposed to train new consultants with a background in business administration, economics, or related subject to enhance the capacity of the sector; so that these business consultants can support the PQCs to complete the DFS reports.

The newly trained consultants could be part of the PQCs or new PQCs could be formed. In any case, both the technical and commercial consultants shall work together to complete the report.

Cost

There are two options for covering the DFS cost.

  • The DFS cost may be borne by the Developer and AEPC on a 50/50 basis. The Developers will have to request a tender process for which at least a minimum of three pre qualified consulting firms bid for the DFS; and then the AEPC will make the 50 percent payment share to the PQ firms once the complete DFS is submitted. The cost needs to be approved by the AEPC. AEPC shall check the credentials of the consultant in the case there is an external Expert Consultant who is supporting the PQC.
  • The DFS cost may be borne by the developer in its totality. In this case, AEPC does not need to review the credentials of the consultant if an Expert Consultant is hired and there is no requirement for a tender process including 3 consulting firms bidding for it. However, a PQC shall always be selected to work either alone or along an Expert Consultant to ensure that the capacity of the sector is built. The cost of any of the Initial Environmental Examination (IEE), Environmental Impact Assessment (EIA), Environmental Management Plan (EMP), Social Impact Assessment (SIA), Resettlement Action Plan (RAP) and/or Vulnerable Community Development Plan (VCDP) as applicable is part of the overall DFS cost. The Developer is responsible for ensuring that these documents are included in the DFS and submitted at this stage. AEPC will cover 50% of the cost if the Developer has chosen this modality up to a cap set by AEPC which shall include the worst case scenario from the Environmental and Social Screening plus an allowance for Expert Consultants.

 

NOTIFICATION

Letter of commitment

Once a project has been approved by the TRC, AEPC will issue a letter of commitment as per the standard format “Letter of Commitment” (format yet to be prepared (link). The letter will be addressed to the Developer and express the decision of AEPC to support the project. Evidence

Upon reception of the letter, the Developer shall provide evidence to demonstrate that he/she has the funding sources available to cover the Total Project Cost. If this evidence has been provided during the DFS stage, the ICE will confirm the evidence and, if the check is satisfactory, the letter shall include a statement acknowledging that evidence has already been provided.

Who issues it?

AEPC will issue the letter of commitment to the Developer.

Timeline and Review

The letter of commitment will be issued within 2 days of the TRC meeting. The Developer is then given 90 days to compile all evidence to demonstrate that he/she is capable of covering the Total Project Cost. If evidence is provided within 90 days of issue of the letter, the Developer can proceed to start the Project with one of the Pre-qualified Construction Companies. After 1 month from the issue date the letter of commitment will expire.

Procedure upon expiry

If the Developer fails to compile the financing evidence within 90 days from the letter issue date then the commitment for AEPC support will be revoked. The Developer may gather the evidence required and reapply as soon as possible. The letter of commitment will expire after 90 days. Further delays in the provision of evidence may imply that the project would lose priority against other compliant projects, so the Developer is encouraged to submit the evidence as soon as possible as funding is provided on a first come first served basis.

Disbursement

Project Start and 1st Disbursement

Once the Project has met the requirements as per the letter of commitment, the project would be eligible to receive 50% of the Total Subsidy receivable as per the Subsidy Delivery Policy; paid to the pre qualified construction companies upon approval from the Developer as per the “Project Start Approval Form” (yet to be developed, perhaps this is one of the agreements) link.

Any Environmental and Social mitigation measures required to be implemented by this stage shall have been implemented in order for the project to start and qualify for subsidy at this stage. Please refer to the “Environmental and Social Monitoring Guideline” document link. AEPC shall verify compliance with these measures.

For projects in which a technology new to Nepal is being implemented and an international Technology Provider may be used due to its expertise in a particular technology, the Technology Provider shall participate in partnership with a Pre-qualified Construction Company. The Developer and the Pre-Qualified Construction Company are encouraged to tie the Technology Provider down contractually to the Performance Guarantees. Project Commissioning, Monitoring, 2nd Disbursement and Replenishment Claim.

The Project shall demonstrate that the plant meets the Performance Guarantees as stated in the DFS and as per the “Biogas Plant Commissioning Testing and 1-Year Guarantee Monitoring Guidelines” (link). The PQ Pre-qualified Construction Company shall notify AEPC when the plant is ready to be monitored and measured against the Performance Guarantees. AEPC will monitor performance following the “Biogas Plant Commissioning Testing and 1-Year Guarantee Monitoring Guidelines” and verify whether the project complies with the Performance Guarantees stated in the DFS.

Any Environmental and Social mitigation measures required to be implemented by this stage shall have been implemented in order for the project to qualify for subsidy at the commissioning stage. Please refer to the “Project Operational Manual for the Environmental and Social Safeguards” document link. AEPC shall verify compliance with these measures.

If the Performance Guarantees and other criteria set in the guidelines are met, 40% of the Total Subsidy Support will be channeled to the Pre-qualified Construction Company upon verification from AEPC and approval by the Developer and against bank guarantees, once the “Take-Over Certificate” has been signed, as per the “Biogas Plant Commissioning Testing and 1-Year Guarantee Monitoring Guidelines” (link), which contains a clause for the three parties involved in the project: the Developer, the Pre-qualified Construction Company and AEPC. All three signatures shall be in the document to confirm the success of the Performance Testing. Funding for the subsidy will be sourced from the NRREP budget.

If the Performance Guarantees are not met, the Project shall be given 90 days to rectify any faults or make any relevant modifications to the process in order to meet the Performance Guarantees. AEPC will resume monitoring upon notification from the Developer to check if the Performance Guarantees are met. If the Performance Guarantees are not achieved within the 90-day period, the project will lose priority to receive funding from SREP against other compliant projects. The project, however, shall not be automatically disqualified for funding, and both the Pre-qualified Construction Company and the Developer are encouraged to work towards achieving the Performance Guarantees as soon as possible, even if outside the 90-day period, as the funds will be disbursed on a first come first served basis. If funding is available by the time the Pre-qualified Construction Company and the Developer notifies AEPC of the project readiness to meet the Performance Guarantees, the project will still be eligible for funding upon successful commissioning. Upon successful commissioning of the project, AEPC will submit a Replenishment Claim for SREP to refund 20% of the Project Cost to the NRREP budget as follows:

SREP contribution will comprise 20% of the Estimated Project Cost approved at the DFS stage, or 20% of the Actual Project Cost (APC), whichever is lower, subject to a maximum limit of the total amount of subsidy disbursed by AEPC as per their Subsidy Delivery Policy for the year 2013.

In the case in which the SREP amount is higher than the total subsidy disbursed by AEPC at this stage, SREP will reimburse to AEPC the amount equal to the subsidy delivered and, the remaining funds, will be disbursed post satisfactory completion of the 1-Year reliability period.

No revision in SREP contribution will be considered / accepted in view of - i) cost overruns due to delay in project execution / successful completion; and ii) revision in quantum of subsidy by AEPC in future. The Actual Project Cost is defined as follows:

“Post project completion actual cost of all the items as defined in the Target Project Cost supported by justification of all payments and expenses as defined in the TPC”.

In order for the project to receive the subsidy from AEPC, the Developer shall provide AEPC with evidence to support all actual expenses that form the basis of the Actual Project Cost, including justification for all payments.

In order for the SREP to reimburse its contribution to AEPC, the World Bank shall receive evidence to support all actual expenses that form the basis of the Actual Project Cost, including justification for all payments.

Project Completion, Monitoring and 3rd Disbursement

The Pre-qualified Construction Company must demonstrate that the plant has operated successfully for 1 year after successful commissioning and complied with the criteria set in the “Biogas Plant Commissioning Testing and 1-Year Guarantee Monitoring Guidelines” document (link), regarding equipment reliability, biogas and/or electricity production. The “1-Year Guarantee Agreement” document requires the signatures of AEPC, the Developer and the Pre-qualified Construction Company to verify that the 1-Year Guarantee period has been successful. AEPC will verify whether the conditions have been met.

If the 1 Year Guarantee conditions have been met, 10% of the Total Subsidy Support shall be disbursed to the Pre-qualified Construction Company.

In the case in which the SREP amount were higher than the total subsidy disbursed by AEPC at the commissioning and testing stage, SREP will reimburse to AEPC the remaining amount to make up for 20% of the lowest of the TPC or APC subject to the maximum amount delivered by AEPC as per the Subsidy Delivery Policy, disbursed post satisfactory completion of the 1-Year reliability period.

If the 1 Year Guarantee conditions have not been met according to AEPC´s verification, no subsidy shall be disbursed to the Pre-qualified Construction Company.

If the 1 Year Guarantee conditions have not been met according to AEPC´s verification, and there is an amount of SREP contribution remaining as per the definition above, no reimbursement from SREP to AEPC will be carried out.

Any Environmental and Social mitigation measures required to be implemented by this stage shall have been implemented in order for the project to qualify for subsidy. Please refer to the “Project Operational Manual for Environmental and Social Safeguards” link. AEPC shall verify compliance with these measures.

IMPACT ASSESSMENT AND LESSONS LEARNED:

AEPC will perform regular structured reviews during the duration of the Program implementation period in order to monitor the satisfactory performance of the projects supported from a technical, financial, commercial, environmental, and social perspective, drawing lessons learned as required.

KNOWLEDGE FORUM:

To take advantage of the rich gathering of development actors, the bazaar event will convene a Knowledge Forum that will engage the participants in inventive partnerships, networks, and opportunities for discussion of the key challenges facing development entrepreneurs in the field of waste to energy in Nepal and otherwise.