Report and Recommendation of the President

to the Board of Directors

Project Number: 54211-001

February 2021

Proposed Loans
Lien Lap Wind Power Joint Stock Company, Phong
Huy Wind Power Joint Stock Company, and Phong
Nguyen Wind Power Joint Stock Company
Lotus Wind Power Project
(Viet Nam)

This is a redacted version of the document approved by ADB’s Board of Directors, which excludes
information that is subject to exceptions to disclosure set forth in ADB’s Access to Information
Policy.
 CURRENCY EQUIVALENTS
(as of 1 February 2021)

Currency unit – dong (D)

D1.00 = $0.000043
$1.00 = D23,151.00

ABBREVIATIONS

ADB – Asian Development Bank

COVID-19 – coronavirus disease
E&S – environmental and social
EVN – Vietnam Electricity
FIT – feed-in tariff
GHG – greenhouse gas
GW – gigawatt
kWh – kilowatt-hour
LREMDP – livelihood restoration and ethnic minority development plan
MLA – mandated lead arranger
MW – megawatt
PCC1 – Power Construction Joint Stock Company No. 1
PDP – Power Development Master Plan
PPA – power purchase agreement
US – United States

NOTE

In this report, “$” refers to United States dollars.

Vice-President Ashok Lavasa, Private Sector Operations and Public–Private Partnerships
Director General Suzanne C. Gaboury, Private Sector Operations Department (PSOD)
Deputy Director Christopher Thieme, PSOD
General
Director Jackie B. Surtani, Infrastructure Finance Division 2 (PSIF2), PSOD

Team leader Michael Gabisch, Senior Investment Specialist, PSIF2, PSOD

Team members Genevieve H. Abel, Principal Transaction Support Specialist (Integrity),
Private Sector Transaction Support Division (PSTS), PSOD
Rosana Aglibot-Bado, Senior Investment Officer, Office of the Director
General - Risk Analytics Unit (OPSD-RAU), PSOD
Elizbeth Fiona Alpe, Senior Transaction Support Specialist (Integrity),
PSTS, PSOD
Karlo Alberto D. de Asis, Social Development Officer (Safeguards), PSTS,
PSOD
Ninh Le Do, Senior Investment Officer, OPSD, PSODa
Donnah Ethel Gianan, Social Development Officer (Safeguards), PSTS,
PSOD
Tarang Khimasia, Principal Investment Specialist (Syndications), Office of
the Director General - Guarantees and Syndications Unit (OPSD-GSU),
PSODb
Mark Kunzer, Director, PSTS, PSOD
Melissa Manguiat, Senior Safeguards Officer, PSTS, PSOD
Catherine Marsh, Assistant General Counsel, Office of the General
Counsel (OGC)
Nicholas Moller, Principal Counsel, OGC
Rafael Ignacio Miguel Montinola, Investment Specialist, PSIF2, PSOD
Jocelyn Erlinda Munsayac, Principal Safeguards Specialist, PSTS, PSOD
Noel Peters, Principal Safeguards Specialist, PSTS, PSOD
Erika Paula T. Polinag, Associate Transaction Support Officer, PSTS,
PSOD
Abba Grace R. Sanchez, Safeguards Officer (Environment), PSTS, PSOD
Pinnapa Satitpatanapan, Young Professional, PSIF2, PSOD
Amanda Satterly, Senior Social Development Specialist (Gender &
Development), PSTS, PSOD
Samantha Gloria Singson, Associate Project Analyst, OPSD-RAU, PSOD
Timo Teinila, Advisor, OPSD and Head, OPSD-RAU, PSOD
Siela Teng-Almocera, Social Development Officer (Safeguards), PSTS,
PSOD
Shota Yamanaka, Young Professional, OPSD-GSU, PSOD
Huizi Zhou, Investment Specialist, PSIF2, PSOD
a Outposted to the Viet Nam Resident Mission.
b Outposted to the ADB Singapore Office.

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

PROJECT AT A GLANCE
I. THE PROPOSAL 1
II. THE PROJECT 1
A. Project Identification and Description 1
B. Development Impacts, Outcome, and Outputs 3
C. Alignment with ADB Strategy and Operations 3
D. Project Cost and Financing Plan 4
E. Implementation Arrangements 5
F. Projected Financial and Economic Performance 5
III. THE PROPOSED ADB ASSISTANCE 5
A. The Assistance 5
B. Value Added by ADB Assistance 5
C. Risks 6
IV. POLICY COMPLIANCE 6
A. Safeguards and Social Dimensions 6
B. Anticorruption Policy 8
C. Investment Limitations 8
D. Assurances 8
V. RECOMMENDATION 8
APPENDIXES
1. Design and Monitoring Framework 10
2. List of Linked Documents 13
 Project Classification Information Status: Complete

PROJECT AT A GLANCE
1. Basic Data Project Number: 54211-001
Project Name Lotus Wind Power Project Department/Division PSOD/PSIF2
Country Viet Nam, Socialist Republic of
Borrowers Lien Lap Wind Power Joint Stock
Company
Phong Huy Wind Power Joint
Stock Company
Phong Nguyen Wind Power Joint
Stock Company

Portfolio at a Glance https://www.adb.org/Documents/

LinkedDocs/?id=54211-001-Port
AtaGlance
qq

2. Sector Subsector(s) ADB Financing ($ million)

Energy Renewable energy generation - wind 36.00
Total
36.00
qq

3. Operational Priorities Climate Change Information

Addressing remaining poverty and reducing inequalities GHG reductions (tons per annum) 162,430
Accelerating progress in gender equality Climate Change impact on the Project High
Tackling climate change, building climate and disaster
resilience, and enhancing environmental sustainability ADB Financing
Adaptation ($ million) 0.00
Mitigation ($ million) 36.00

Cofinancing
Adaptation ($ million) 0.00
Mitigation ($ million) 0.00
Qq

Sustainable Development Goals Gender Equity and Mainstreaming

SDG 5.5 Effective gender mainstreaming (EGM)
SDG 7.1
SDG 9.4 Poverty Targeting
SDG 13.a General Intervention on Poverty
qq

4. Nonsovereign Operation Risk Rating

Obligor Name Final Project Rating Facility Risk Rating
Phong Nguyen Wind Power Joint Stock Company
Lien Lap Wind Power Joint Stock Company
Phong Huy Wind Power Joint Stock Company
.

5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: B

Qq

6. Financing
Modality and Sources Amount ($ million)
ADB 36.00
Nonsovereign LIBOR Based Loan (Regular Loan): Ordinary capital resources 12.00
Nonsovereign LIBOR Based Loan (Regular Loan): Ordinary capital resources 12.00
Nonsovereign LIBOR Based Loan (Regular Loan): Ordinary capital resources 12.00
Cofinancing 136.00
Commercial Banks (Full ADB Administration) 40.00
Commercial Banks (Full ADB Administration) 40.00
Commercial Banks (Full ADB Administration) 40.00
-Debt - Japan International Cooperation Agency (Not ADB Administered) 2.66
-Debt - Japan International Cooperation Agency (Not ADB Administered) 2.67
-Debt - Japan International Cooperation Agency (Not ADB Administered) 2.67
Others 8.00

Currency of ADB Financing: US Dollar

Note: Due to system limitations, the cofinancing amount for climate change mitigation in the Project at a Glance does not reflect the
cofinancing amount from parallel lenders and commercial banks of $136 million.

Source: Asian Development Bank

This document must only be generated in eOps. 20012021001654951212 Generated Date: 20-Jan-2021 0:17:39 AM
 I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on (i) a proposed loan
of up to $52,000,000, comprising (a) an A loan of up to $12,000,000 and (b) a B loan of up to
$40,000,000 to Lien Lap Wind Power Joint Stock Company (Lien Lap); (ii) a proposed loan of up
to $52,000,000, comprising (a) an A loan of up to $12,000,000 and (b) a B loan of up to
$40,000,000 to Phong Huy Wind Power Joint Stock Company (Phong Huy); and (iii) a proposed
loan of up to $52,000,000, comprising (a) an A loan of up to $12,000,000 and (b) a B loan of up
to $40,000,000 to Phong Nguyen Wind Power Joint Stock Company (Phong Nguyen), all for the
Lotus Wind Power Project in Viet Nam.

2. The loans will support Lien Lap, Phong Huy, and Phong Nguyen to each develop,
construct, and operate a 48-megawatt (MW) wind farm (144 MW in total) in Quang Tri Province
in central Viet Nam. The Asian Development Bank (ADB), in its capacity as the mandated lead
arranger (MLA), has mobilized commercial banks and other development finance institutions to
provide long-term, United States (US) dollar limited-recourse project financing unavailable in the
local market. The project will be one of the first and largest wind farms financed by the private
sector in Viet Nam and will increase the country’s wind capacity by nearly 30%.1

II. THE PROJECT

A. Project Identification and Description

3. Project identification. Electricity demand in Viet Nam has grown at a compound annual
rate of 13% since 2000 and is projected to grow at 8% annually through 2030.2 Meeting this power
demand would require an expansion in generation capacity from 48.7 gigawatts (GW) in 2018 to
100 GW by 2030, as well as alternatives to carbon-intensive power projects to avoid significant
increases in greenhouse gas (GHG) emissions. 3 The Revised National Power Development
Master Plan for the 2011–2020 Period with the Vision to 2030 (Revised PDP 7) sought to increase
the share of wind generation capacity to 2,000 MW by 2025, and 6,000 MW by 2030. 4 The
National Power Development Master Plan for the 2021–2030 Period with the Vision to 2050 (PDP
8) is being finalized and is expected to further prioritize renewable energy.5

4. In 2011 Viet Nam introduced a feed-in tariff (FIT) of $0.0780 per kilowatt-hour (kWh) and
a standard power purchase agreement (PPA) template for utility-scale wind power projects,6 but
from 2011 to 2018 only three wind power projects with a total capacity of 153.2 MW had reached
commercial operation.7 The limited success was because of two key factors: (i) the FIT level was
not deemed sufficient by project developers and financiers and (ii) the standard PPA was not
considered bankable for international lenders on a non-recourse project finance basis. In contrast,
since Viet Nam introduced a FIT of $0.0935/kWh in 2017 for utility-scale solar power projects,
about 8.9 GW of solar capacity had been commissioned by September 2020, which far exceeded

1 As of 2019, the total installed onshore and offshore wind power capacity stood at 490 MW. T. Ha. 2020. Vietnam
approves 7 GW of new wind projects. Eco-Business. 29 June.
2 World Bank. 2018. Vietnam: Maximizing Finance for Development in the Energy Sector. Washington, DC.
3 Vietnam Electricity 2019. Annual Report 2018. Ha Noi.
4 Government of Viet Nam. 2016. The Revised National Power Development Master Plan for the 2011–2020 Period
with the Vision to 2030. Ha Noi. Under the Revised PDP 7, renewable energy sources include wind, solar, biomass,
and small hydropower plants with a capacity of less than 30MW, which are separate from larger and multipurpose
hydropower plants (classified as hydropower).
5 The PDP 8 is expected to be announced publicly in the second half of 2021.
6 Government of Viet Nam. 2011. Decision 37/2011/QD-TTg. Ha Noi.
7 Government of Viet Nam, Ministry of Industry and Trade. 2020. Report to the Prime Minister, 2491/BCT-DL. Ha Noi.
2

the targets under the Revised PDP 7.8 Most of these were financed by local banks, which have
not expressed the same level of interest in financing wind power projects because of their
unfamiliarity with the technology and the greater complexity of wind power projects.

5. To spur interest in wind power development, Viet Nam increased the FIT to $0.085/kWh
for onshore wind projects in 2018. To qualify for this FIT, the commercial operation date must be
before 1 November 2021.9 Viet Nam also revised the standard wind PPA template in early 2019
to improve its bankability, including termination payments, which had previously been identified
as a key project inhibitor by potential financiers.10 In response to these positive developments, a
local project developer, Power Construction Joint Stock Company No. 1 (PCC1), approached
ADB in 2019 seeking long-term US dollar financing for the project. The project stood out among
the many proposals presented to ADB for its significant size; its ideal location with strong wind
resources; and PCC1’s extensive experience in Viet Nam’s power infrastructure sector and
commitment to provide comprehensive sponsor support, which addresses key shortcomings of
the PPA.11

6. Gender context. Viet Nam has made considerable progress in addressing gender
disparities. However, women’s economic opportunities remain constrained due to a persistent
gender pay gap, significant segregation of men and women in terms of occupation and industry
of employment, an unequal burden of unpaid care work, and general resistance to women taking
up leadership positions.12 In 2019, women represented 27% of employees in the utilities sector
and 16% of management positions in Viet Nam.13 Likewise, in the renewable energy sector, only
a small proportion of women are in management, technical, and field-based roles, with the highest
concentrations of women in administration, finance, and human resources. This project
incorporates gender measures that seek to support the closing of these gaps.

7. Project design. The project entails the development, construction, and operation of three
48 MW wind farms (144 MW in total) and the internal transmission lines in Quang Tri Province, to
be implemented under three 20-year PPAs with Vietnam Electricity (EVN). The project is expected
to be commissioned in phases from May to September 2021.

8. Borrowers. The three borrowers—Lien Lap, Phong Huy, and Phong Nguyen—are owned
by PCC1, Renova, Inc. (Renova) and individual shareholders owning less than 3%.
[CONFIDENTIAL INFORMATION DELETED]

9. Sponsors. PCC1 is a domestic leader in the power infrastructure sector in Viet Nam with
more than 50 years of experience. It specializes in constructing power transmission networks and
has interests in industrial manufacturing, energy, real estate, and consulting services. In
particular, PCC1 is one of the largest hydropower developers in Viet Nam with seven operating
projects with a total capacity of 168 MW, two of which were financed by the World Bank. 14

8 The Revised PDP 7 targets 850 MW solar power by 2020, 4,000 MW by 2025, and 12,000 MW by 2030.
9 Government of Viet Nam. 2018. Decision 39/2018/QD-TTg. Ha Noi.
10 Government of Viet Nam, Ministry of Industry and Trade. 2019. Circular No. 02/2019/TT-BCT. Ha Noi.
11 Viet Nam has a huge potential for wind energy as it is endowed with 3,000 kilometers of coastline with high wind

speeds, especially in the southern part of Viet Nam where the average wind speeds are 9–10 meters per second. M.
Rogers. 2019. Vietnam’s Renewable Energy Future. McKinsey and Company Sustainability Blog. 1 May.
12 World Bank. 2011. Vietnam Country Gender Assessment. Ha Noi.
13 International Labour Organization. 2020. ILOSTAT Database (accessed 6 January 2021).
14 The Trung Thu and Bao Lam 1 projects, the first two hydropower projects of PCC1, were financed by the World Bank

through its Renewable Energy Development Project for Viet Nam, which was launched in 2009.
 3

[CONFIDENTIAL INFORMATION DELETED] PCC1 is listed on the Ho Chi Minh Stock

Exchange.15

10. Renova is a Japanese renewable energy developer established in 2000. [CONFIDENTIAL

INFORMATION DELETED] Renova is listed on the Tokyo Stock Exchange.16

11. ADB conducted integrity due diligence and tax integrity due diligence.17 The borrowers,
their shareholders, boards of directors and management, and significant contracting entities do
not appear to constitute significant or potentially significant integrity risks given that there are no
adverse media substantiated with verifiable evidence. [CONFIDENTIAL INFORMATION
DELETED] ADB’s review of the project does not give ADB cause to believe that it is being used
for money laundering or terrorism financing, tax secrecy, tax evasion, or tax fraud.

12. COVID-19 Impacts. The coronavirus disease (COVID-19) pandemic has not had a
material impact on the cost or implementation of the project. The progress is as scheduled. The
project will contribute to meeting the energy demand of Viet Nam in its post-COVID-19 recovery.

B. Development Impacts, Outcome, and Outputs

13. Impacts. The project will be one of the first and largest wind power projects in Viet Nam.
The project is aligned with the following impacts: the share of power produced from renewable
energy sources in the power generation mix in Viet Nam increased to more than 10% by 2030
and the wind power capacity increased to 6,000 MW (2.1% of the total) by 2030 (footnote 4).

14. Outcome. The project will have the following outcome: renewable power delivered to the
domestic grid increased. It will generate an average of 422 gigawatt-hours of electricity from wind
energy and avoid an average of 162,430 tons of carbon dioxide emissions annually.

15. Outputs. The project will have the following outputs: (i) wind power plants of 144 MW total
capacity installed, (ii) gender-inclusive local employment generated, (iii) growth of the local
economy supported, (iv) gender inclusiveness in PCC1’s work environment improved, and
(v) livelihood opportunities of women enhanced.

C. Alignment with ADB Strategy and Operations

16. Consistency with ADB strategy and country strategy. The project is consistent with
ADB’s Strategy 2030, which has a target of 75% of ADB operations supporting climate change
mitigation and adaptation by 2030.18 The project supports three of the seven operational priorities:
(i) tackling climate change, building climate and disaster resilience, and enhancing environmental
sustainability; (ii) accelerating progress in gender equality; and (iii) addressing remaining poverty
and reducing inequalities. It further contributes to three other objectives of Strategy 2030:
(i) expanding private sector operations to reach one-third of ADB operations in number by 2024,
(ii) reaching $80 billion of cumulative climate finance from ADB’s own resources from 2019 to

15 PCC1’s market capitalization was about $192 million as of January 2021.

16 Renova’s market capitalization was about $3.5 billion as of January 2021.
17 ADB. 2003. Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of

Terrorism. Manila; and ADB. 2016. Anticorruption Policy: Enhancing the Role of the Asian Development Bank in
Relation to Tax Integrity. Manila. Further information is provided in Integrity and Tax Due Diligence (accessible from
the list of linked documents in Appendix 2).
18 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila.
4

2030, and (iii) mobilizing financing from commercial sources with a long-term cofinancing target
for private sector operations of $2.50 for every $1.00 of ADB financing.

17. Consistency with country partnership strategy. The project is aligned with two of the
three pillars of ADB’s country partnership strategy for Viet Nam, 2016–2020: (i) increasing the
inclusiveness of infrastructure and service delivery and (ii) improving environmental sustainability
and climate change response. The project also supports the alignment of the country partnership
strategy with Viet Nam’s commitments to the United Nations Framework Convention on Climate
Change of a reduction of 8%–25% in GHG emissions by 2030.19

18. Consistency with sector strategy and relevant ADB operations. The project aligns
with ADB’s Energy Policy, which (i) aims to prioritize and broaden support for renewable energy
projects and (ii) encourages private sector participation.20 The project will contribute to the targets
for wind generation capacity in Viet Nam’s Revised PDP 7 (para. 3). Consistent with a “One ADB”
approach, the project has benefited from close cross-departmental collaboration with ADB’s
Southeast Asia Department in assessing and analyzing Viet Nam’s energy sector.

19. Lessons from previous operations. The project follows ADB’s prior approvals of (i) the
first floating solar project in Viet Nam, the Floating Solar Energy Project (2018); and (ii) two
ground-mount solar projects, the Gulf Solar Power Project (2019) and the B.Grimm Viet Nam
Solar Power Project (Phu Yen Project) (2020).21 The project further builds on results and lessons
from the cooperation between ADB’s Southeast Asia Department and the government for energy
sector reform.22 Based on these previous operations, ADB developed a comprehensive sponsor
support package where PCC1 will be liable for any debt service shortfalls if the borrowers fail to
generate sufficient cash flows for any reason, including but not limited to (i) curtailment or
nonpayment by EVN, (ii) retroactive changes in FIT, and (iii) technical issues in the operation of
the wind farms. This structure partially mitigates the imperfections of the PPA, which provides
comfort to ADB and its cofinancing partners and maximizes the amount of cofinancing with the
minimum possible ADB commitment.

20. Climate change financing. The total ADB A loan and cofinancing amount of up to
$172,000,000 will be counted as climate change financing (mitigation) because it matches the
criteria according to the joint Multilateral Development Banks methodology.23

D. Project Cost and Financing Plan

21. [CONFIDENTIAL INFORMATION DELETED]

19 ADB. 2016. Country Partnership Strategy: Viet Nam, 2016–2020—Fostering More Inclusive Growth and
Environmentally Sustainable Growth. Manila.
20 ADB. 2009. Energy Policy. Manila.
21 ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Loan and

Administration of Loans to Da Nhim - Ham Thuan - Da Mi Hydro Power Joint Stock Company for the Floating Solar
Energy Project in Viet Nam. Manila; ADB. 2019. Report and Recommendation of the President to the Board of
Directors: Proposed Loan and Administration of Loan to TTC Energy Development Investment Joint Stock Company
for the Gulf Solar Power Project in Viet Nam. Manila; and ADB. 2020. Report and Recommendation of the President
to the Board of Directors: Proposed Loan and Administration of Loan to Phu Yen TTP Joint Stock Company for the
B.Grimm Viet Nam Solar Project (Phu Yen Project) in Viet Nam. Manila.
22 ADB. 2015. Technical Assistance to the Socialist Republic of Viet Nam for the Power Sector Reform Program. Manila.
23 European Bank for Reconstruction and Development. 2020. 2019 Joint Report on Multilateral Development Banks’

Climate Finance. London.

 5

E. Implementation Arrangements

22. Table 3 summarizes the implementation arrangements.24

Table 3: Summary of Implementation Arrangements

Aspects Arrangements
Regulatory The project is being implemented under Circular No. 02/2019/TT-BCT of the Ministry of Industry
framework and Trade, which (i) regulates the implementation and development of wind power projects and
(ii) creates a standardized power purchase agreement for on-grid wind power projects.
Management PCC1 and Renova are jointly managing the project: PCC1 is the leader of Viet Nam’s power
infrastructure sector and Renova is experienced in renewable energy project development.
Implementation The construction is ongoing. [CONFIDENTIAL INFORMATION DELETED]
period
EPC The project will be constructed under three fixed-price, date-certain, turnkey EPC contracts.
[CONFIDENTIAL INFORMATION DELETED]
Revenue The project will sell power under 20-year power purchase agreements with Vietnam Electricity.
structure [CONFIDENTIAL INFORMATION DELETED]
O&M Each borrower has signed O&M contracts with reputable contractors. [CONFIDENTIAL
INFORMATION DELETED]
Performance The borrowers will report to ADB on key performance indicators, including output and outcome
monitoring indicators, and submit (i) semiannual unaudited and annual audited financial statements, (ii)
semiannual environmental and social monitoring reports, and (iii) annual development
effectiveness reports.
ADB = Asian Development Bank; EPC = engineering, procurement, and construction; O&M = operation and
maintenance; PCC1 = Power Construction Joint Stock Company No. 1; Renova = Renova, Inc.
Sources: Asian Development Bank and Power Construction Joint Stock Company No. 1.

F. Projected Financial and Economic Performance

23. [CONFIDENTIAL INFORMATION DELETED]

III. THE PROPOSED ADB ASSISTANCE

A. The Assistance

24. ADB’s proposed assistance will have two components: (i) a direct senior secured loan (A
loan) of up to $36,000,000, and (ii) a B loan of up to $120,000,000 to be funded by commercial
banks. The A loan will be provided from ADB’s ordinary capital resources. [CONFIDENTIAL
INFORMATION DELETED]

B. Value Added by ADB Assistance

25. Financing beyond what is available in the markets. Local lenders are unable to provide
long-term US dollar financing, which is required to mitigate the currency mismatch risk given the
US dollar-denominated FIT. International lenders are reluctant to offer non-recourse project
finance loans because of concerns around the bankability of the PPA and the nascent nature of
the renewable energy sector. ADB adds value by (i) developing a limited-recourse financing
structure that addresses key PPA risks to attract international lenders, and (ii) mobilizing a debt
package that meets the currency and tenor requirements of project developers to promote private
sector participation in renewable energy development in Viet Nam.

24 Details of Implementation Arrangements (accessible from the list of linked documents in Appendix 2).
6

26. Resource mobilization and catalytic impact. ADB as the MLA will catalyze financing
from international commercial banks and other development finance institutions, at a cofinancing
ratio of $3.78 for every $1.00 of ADB assistance. ADB’s participation is critical for mobilization, as
ADB is one of the few financial institutions with extensive experience in large-scale renewable
energy projects in Viet Nam, and thus serves as a trusted reference for the market. As one of the
first and largest international limited-recourse project finance transactions for Viet Nam’s wind
power development, the project will demonstrate a replicable model for private sector investments
into wind power projects in the country, and further catalyze private sector funding in the future.

27. Enhanced standards and capacity building. ADB’s involvement will ensure that the
project is developed, constructed, and operated to international good practice standards; and will
strengthen the environmental, social, and gender standards of PCC1 and the borrowers.

C. Risks

28. [CONFIDENTIAL INFORMATION DELETED]

IV. POLICY COMPLIANCE

A. Safeguards and Social Dimensions

29. ADB has categorized the investment in compliance with its Safeguard Policy Statement
(2009) (SPS) as category B on environment, involuntary resettlement, and indigenous peoples.25
ADB has undertaken due diligence and reviewed the potential environmental and social (E&S)
impacts of the project. The safeguard and social reports and plans identified measures to avoid,
minimize, mitigate, and compensate for the adverse impacts as well as benefit Van Kieu ethnic
minorities. The environmental and social measures and the institutional capacity and commitment
of PCC1 to manage the project’s E&S impacts according to ADB’s SPS requirements are deemed
adequate. PCC1 commits to implement the E&S management plans, social safeguard plans, and
corrective actions plans for all three wind farms.

30. Environment. The borrowers’ E&S consultant has prepared initial E&S examination
reports and an environmental compliance audit of existing construction activities for each wind
farm. The project’s transmission line is not considered an associated facility under the SPS
definition as this will be shared with neighboring wind farms. The initial E&S examination (IESE)
reports identified construction impacts to include (i) disturbance of terrestrial ecology; (ii)
generation of dust, emissions, noise, and wastes; (iii) impacts on soil erosion and water quality;
and (iv) occupational and community health and safety risks. The Phong Nguyen and Phong Huy
wind farms are in a protection area managed by the Dakrong Huong Hoa Protection Forest
Management Board and classified as plantation forests. The E&S consultant undertook a critical
habitat assessment and assessed all three wind farms as modified habitats. Key operational
impacts include (i) shadow flicker, (ii) noise, and (iii) bird and bat collision risks. Modeling results
indicated that the Lien Lap wind farm will generate shadow flicker exceeding the World Bank
Group’s Environmental, Health, and Safety Guidelines for Wind Energy, affecting five households.
Affected households will retain the option to relocate should their decisions change during project
operations. The avifauna survey results indicated that none of the recorded species flying within
the rotor sweep zone of the turbines are listed as globally or nationally threatened in the
International Union for Conservation of Nature’s Red List of Threatened Species or Viet Nam’s
Red Data Book, and that the project area does not support significant concentration of migratory

25 ADB. Safeguard Categories.

 7

birds. Impacts during construction and operation will be addressed through implementation of the
E&S management plans and specific sub-plans. Periodic monitoring of physical and biological
impacts and stakeholder consultations will be carried out by the borrowers. Adaptive management
shall be employed when unforeseen terrestrial ecological risks are identified as a result of
continuous monitoring activities.

31. Involuntary resettlement and indigenous peoples. The development of the three wind
farms required acquisition of production forest and agricultural lands, conversion of portions of
modified protection forest, and purchase and leasing of land from private users. The Lien Lap
wind farm will affect a total of 100 households (505 persons), of which 22 households (120 people)
lost 10% or more of their productive land, including 5 Van Kieu households. The expansion of an
existing village road, for use by the community and the Phong Huy and Phong Nguyen wind farms,
affected 61 households (302 persons), involving 12 Van Kieu households (58 persons). No
households experienced physical displacement. None of the economically displaced households
in the Phong Huy wind farm lost more than 10% of their productive land. The Phong Nguyen wind
farm is located within the modified protection forest and only requires a change of land use
purpose. The audit of the government-led land acquisition process and consultations with the
affected persons confirmed that the process (i) was done in accordance with statutory
requirements, where compensation payments and support meet ADB’s SPS requirements on
involuntary resettlement; (ii) ensured participation of the affected households in the inventory of
losses and detailed measurement surveys; and (iii) provided avenues for the affected households
to submit grievances. The audit also confirmed that Phong Huy and Phong Nguyen did not restrict
households’ access to collect non-timber forest products even though portions of modified
protection forest were converted for project use. Aside from land loss, Van Kieu ethnic minority
communities are expected to experience limited adverse impacts because of an influx of laborers
as well as safety, health, and security issues during construction and operation. The project did
not result in commercialization of sociocultural and traditional beliefs of the Van Kieu or any
natural resources located within customary land. The project will provide beneficial measures
through employment opportunities and socioeconomic development.

32. To address the adverse impacts, share benefits, and promote opportunities to all affected
households and Van Kieu communities, livelihood restoration and ethnic minority development
plans (LREMDPs) were prepared for Lien Lap and Phong Huy and an ethnic minority
development plan (EMDP) for Phong Nguyen. Meaningful consultations were conducted when
preparing these plans and will continue during implementation. The borrowers will further
(i) complete the land acquisition for transmission line towers located outside the boundary of the
Lien Lap wind farm, following the principles of replacement cost and measures agreed during
consultation to minimize impacts to affected households; (ii) formalize measures to address
impacts on economically displaced households stated in the LREMDP; and (iii) turn over access
roads upgraded by the project to the respective commune people’s committee upon completion
of construction. Prior to land take, an addendum to the LREMDP for Lien Lap will be prepared for
the additional households affected by the 15 transmission line towers outside the project
boundary. The borrowers will prepare semi-annual E&S monitoring reports, and the lenders’ E&S
advisor will conduct monitoring, mid-program, and post-evaluation audits.

33. Effective gender mainstreaming. Only 17% of PCC1 and its subsidiaries’ staff are
female with few women in management (21% female), technical (9% female), and field roles (4%
female). PCC1 does not have an anti-sexual harassment policy. Following ADB’s Policy on
Gender and Development (1998) and ADB’s Strategy 2030 operational plan for priority 2
8

(accelerating progress in gender equality),26 PCC1 has incorporated measures to promote gender
equality and women’s empowerment in its business. Key features of the gender action plan are
as follows: (i) targets for female workers during construction and operation; (ii) an increase in the
proportion of female managers; (iii) development of an anti-sexual harassment policy; (iv) training
of staff on the new anti-sexual harassment policy; and (v) inclusion of women from the local
community, for the first time, in the company’s training on wind power operation and management.
PCC1 will submit periodic reports on implementation of gender measures to ADB.

34. The borrowers will comply with national labor laws and, pursuant to ADB’s Social
Protection Strategy (2001), will take measures to comply with the internationally recognized core
labor standards.27 The borrowers will report semiannually to ADB on (i) its and its contractors’
compliance with such laws and (ii) the measures taken. PCC1 will develop, implement, and
comply with human resources policies and procedures and conduct regular audits on the
subcontractors' compliance during construction and operation. The implementation of the
stakeholder engagement plan and a grievance redress mechanism will ensure meaningful
engagement with affected people and will follow ADB’s SPS requirements.28

B. Anticorruption Policy

35. The borrowers and sponsors were advised of ADB’s policy of implementing international
best practice relating to combating corruption, money laundering, and the financing of terrorism.
ADB will ensure that the investment documentation includes appropriate provisions prohibiting
corruption, money laundering, and the financing of terrorism; and remedies for ADB in the event
of noncompliance.

C. Investment Limitations

36. [CONFIDENTIAL INFORMATION DELETED]

D. Assurances

37. Consistent with the Agreement Establishing the Asian Development Bank (the Charter),29
ADB will proceed with the proposed assistance upon establishing that the Government of Viet
Nam has no objection to the proposed assistance to Lien Lap, Phong Huy, and Phong Nguyen.
ADB will enter into suitable finance documentation, in form and substance satisfactory to ADB,
following approval of the proposed assistance by the ADB Board of Directors.

V. RECOMMENDATION

38. I am satisfied that the proposed loans would comply with the Articles of Agreement of the
Asian Development Bank (ADB) and recommend that the Board approve (i) the loan of up to
$52,000,000, comprising (a) an A loan of up to $12,000,000 from ADB’s ordinary capital resources
and (b) a B loan of up to $40,000,000 to Lien Lap Wind Power Joint Stock Company; (ii) the loan
of up to $52,000,000, comprising (a) an A loan of up to $12,000,000 from ADB’s ordinary capital
resources and (b) a B loan of up to $40,000,000 to Phong Huy Wind Power Joint Stock Company;

26 ADB. 2019. Strategy 2030 Operational Plan for Priority 2: Accelerating Progress in Gender Equality, 2019-2024.
Manila.
27 ADB. 2003. Social Protection. Manila (adopted in 2001).
28 Summary Poverty Reduction and Social Strategy; and Safeguards and Social Dimensions (accessible from the list

of linked documents in Appendix 2).

29 ADB. 1966. Agreement Establishing the Asian Development Bank. Manila.
 9

and (iii) the loan of up to $52,000,000, comprising (a) an A loan of up to $12,000,000 from ADB’s
ordinary capital resources and (b) a B loan of up to $40,000,000 to Phong Nguyen Wind Power
Joint Stock Company, all for the Lotus Wind Power Project in Viet Nam, with such terms and
conditions as are substantially in accordance with those set forth in this report, and as may be
reported to the Board.

Masatsugu Asakawa
President
22 February 2021
10 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Impacts the Project is Aligned with

The share of power produced from renewable energy sources in the power generation mix in Viet Nam
increased to more than 10% by 2030 and the wind power capacity increased to 6,000 MW (2.1% of the
total) by 2030 (The Revised National Power Development Master Plan for the 2011–2020 Period with
the Vision to 2030)a

Data Sources
and Reporting Risks and Critical
Results Chain Performance Indicators Mechanisms Assumptions
Outcome

Renewable power a. Electricity delivered to offtaker a–d. Annual Changes in regulatory

delivered to the increased by 422 GWh per development environment or power
domestic grid year by 2022 (2019 baseline: effectiveness purchase agreement
increased 0) (OP 3.1.4) monitoring reports
by the borrowers Climate and weather
b. Annual emissions of 162,430b risk
tCO2 avoidedc by 2022 (2019
baseline: 0) (OP 3.1)

c. Number of additional jobs

provided by the borrowers
and contractors during
operation of the project
amount to at least 30, of
which 6 are for women, by
2022 (2019 baseline: 0,
number of women: 0) (OP
1.2)

d. Annual payments to the

government in relation to
operation of the project
amount to at least $0.6 million
by 2025 (2019 baseline: $0
million)

Outputs

1. Wind power 1. Total installed wind electricity 1–5. Annual Construction delays
plants of 144 generation capacity of the development caused by force
MW total project increased to 144 MW effectiveness majeure events
capacity installed by 2021 (2019 baseline: 0) monitoring reports
(OP 3.1.4) by the borrowers Cost overruns

2. Gender-inclusive 2a. Number of additional jobs

local provided by the borrowers
employment and contractors during
generated construction of the project
amount to at least 180, of
which 18 are for women, by
2021 (October 2020 baseline:
 Appendix 1 11

Data Sources
and Reporting Risks and Critical
Results Chain Performance Indicators Mechanisms Assumptions
128, number of women: 13)
(OP 1.2)

2b. Women managers employed

by PCC1, including its
subsidiaries, increased to
23% of total managers by
2023 (2020 baseline: 21%, or
31 women managers of 146
total managers) (OP 2.3.2)

3. Growth of the 3a. Total payments to the

local economy government in relation to
supported construction of the project
amount to at least $22.0
million by 2021 (2019
baseline: 0)

3b. Total domestic purchases

related to construction of the
project amount to at least
$105 million by 2021 (2019
baseline: 0)

4. Gender 4a. PCC1 includes an anti-sexual

inclusiveness in harassment policy in its code
PCC1’s work of conduct by 2021 (2020
environment baseline: No policy) (OP
improved 2.2.3)

4b. At least 80% of PCC1

(including subsidiaries) staff
trained on the anti-sexual
harassment policy by 2023
(2019 baseline: 0%) (OP
2.2.3)

5. Livelihood 5. At least 5 women from the

opportunities of local community are
women participants in vocational
enhanced training on the wind power
project operation and
management by 2023
(October 2020 baseline: 50
total, number of women: 0)
(OP 2.1.1)
12 Appendix 1

Key Activities with Milestones

Outputs 1–5
1. [CONFIDENTIAL INFORMATION DELETED]
2. Develop and implement social and gender-inclusive strategies by 2023

Inputs
Loans
ADB (ordinary capital resources) $36.0 million
Commercial Banks (B loan) $120.0 million

[CONFIDENTIAL INFORMATION DELETED]

Assumptions for Partner Financing

Not applicable

ADB = Asian Development Bank; GWh = gigawatt-hour; MW = megawatt; OP = operational priority; PCC1 = Power
Construction Joint Stock Company No. 1; tCO2 = ton of carbon dioxide.
a Government of Viet Nam. 2016. The Revised National Power Development Master Plan for the 2011–2020 Period

with the Vision to 2030. Ha Noi.

b 422 GWh x 385 tCO2/GWh (grid emission factor for Viet Nam) = 162,430 tCO equivalent.
2
c United Nations Framework Convention on Climate Change. 2019.
The IFI Dataset of Default Grid Factors (v. 2.0).
July 2019.
d The project is tax exempted for the first 4 years during 2021–2024.

Contribution to Strategy 2030 Operational Priorities

Expected values and methodological details for all OP indicators to which this project will contribute results are detailed
in Contribution to Strategy 2030 Operational Priorities (accessible from the list of linked documents in Appendix 2).
Source: Asian Development Bank.
 13 Appendix 2

LIST OF LINKED DOCUMENTS

http://www.adb.org/Documents/RRPs/?id=54211-001-4

1. Sector Overview
2. Contribution to Strategy 2030 Operational Priorities
3. Country Economic Indicators
4. Summary Poverty Reduction and Social Strategy
5. Safeguards and Social Dimensions Summary
6. Gender Action Plan

[CONFIDENTIAL INFORMATION DELETED]