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LESSONS:

Yunnan Dachaoshan Power Transmission Project

sector: Energy | country: China, People’s Republic of

A well-designed project, an experienced executing agency with a strong sense of project ownership, and a committed project management office staff is a formula for project success.

Designing and implementing projects in sectors like the power sector that are undergoing major restructuring involves several uncertainties. These include some policy and institutional uncertainties that cannot fully be foreseen at appraisal. To cope with uncertainties and unexpected developments, close consultation between ADB, the government, and executing agencies during project implementation should be held at the sector level, as opposed to the project level.

Greater attention should be paid to project cost estimates at appraisal. However, the project has demonstrated the benefits of prompt cancellation of loan savings to the executing agency.

Projects in a sector that is undergoing structural reforms require some flexibility in loan covenants to ensure that they remain practical and relevant. In the project, the executing agency saw its asset base and business scope reduced significantly, yet the original financial covenants remained in place. This led to an unrealistic assessment of compliance with the loan covenants.

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