Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15247 PROJECT COMPLETION REPORT THE INDEPENDENT STATE OF WESTERN SAMOA THE AFULILO HYDROELECTRIC PROJECT (CREDIT 1781) DECEMBER 29, 1995 Industry and Energy Operations Division Country Department III East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (as of August 1994) Currency Unit = Western Samoan Tala (WS$) US$1.00 = WS$2.53 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet I kilometer (km) = 0.62 mile 1 knot = 0.52 meters/second = 1. 15 miles/hour 1 kilometer (km) = 0.621 miles 1 square km (kM2) = 0.386 square miles 1 kilovolt (kV) = 1,000 volts (1,000 V) 1 megawatt (MW) = 1,000 kilowatts (1,000 kW) I gigawatt hour(GWh) = 1 million kilowatt hours (1,000,000 kWh) I ton of oil equivalent (toe) = 10,500,000 kilocalories ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank AIDAB - Australian International Development Assistance Bureau EC - European Community EIB - European Investment Bank EPC - Electric Power Corporation IFAD - International Fund for Agricultural Development GWS - Government of Western Samoa LICB - Limited International Competitive Bidding NDC - National Disaster Council PWD - Public Works Department EPC FISCAL YEAR July I - June 30 FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.SA. Office of the Dlrector-General Operations Evaluation December 29, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Western Samoa Afulilo Hydroelectric Project (Credit 1781-WSO) Attached is the Project Completion Report on Western Samoa: Afulilo Hydroelectric Project (Credit 1781-WSO, approved in FY87) and its supplement (Credit 1781-1-WSO, approved in FY93). The summary was prepared by the East Asia and Pacific Regional Office. The main text was contributed by the Asian Development Bank (ADB) which co-financed the project. The Borrower, the Electric Power Corporation (EPC) did not contribute to the PCR. The IDA credits totaling SDR 3.2 million were closed on January 26, 1995, two years after the original closing date, at which time SDR 0.55 million were canceled. The main objective of the project was to reduce the country's dependence on imported fuels for electricity generation through a greater exploitation of the country's hydro power sources. The project comprised the building of the 4MW Afulilo hydroelectric plant and consultant services for its design, procurement and construction supervision. The project met its objectives albeit at twice the expected cost and three years behind schedule. The main causes of cost escalation and delay were: (i) a need to change the scope of the project based on detailed engineering designs which were only available after Board approval; and (ii) the repair of damages inflicted by two cyclones. The financial rate of return is reestimated at seven percent compared to twelve percent at appraisal even though electricity tariffs were almost doubled. But EPC did not comply with the covenants on debt service coverage and rate of return on revalued assets (it was always less than 5 percent), and reporting on its finances was deficient. IDA was lax in applying remedies during its execution, and significant environmental issues are still outstanding. The project outcome is rated as satisfactory because it met its major objective and the reestimated economic rate of return is about 10 percent. Sustainability is rated as uncertain, however, since Borrower financial and management problems may affect project operation and maintenance. Institutional development impact is rated as negligible given the remaining financial problems and poor operating and monitoring capacity of EPC. No audit is planned. Robert Picciotto by Francisco Aguirre-Sacasa Attachment This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The Independent State of Western Samoa FOR OFFICIAL USE ONLY Afulilo Hydroelectric Project Credit and Supplemental Credit - 1781 and 1781-1-WSO Project Completion Report Table of Contents PREFACE EVALUATION SUMMARY FROM IDA's PERSPECTIVE PROJECT DESCRIPTION Objectives, rational and scope ................................1....................... EVALUATION OF IMPLEMENTATION Project components ..............1.......................................... Implementation arrangements ............................... ......................... I Project costs ........................................................ I Project schedule ........................................................ 2 Engagement of consultants ....................... ................................. S Procurement of goods and services ........................................................ S Performance of consultants, contractors and suppliers .............. ............... 5 Conditions and covenants ....................... ................................. 6 Disbursements ........................................................ 6 Environmental impact ................ ........................................ 7 Project benefits ........................................................ 7 Performance of borrower and executing agency ...................... .................. 8 Performance of the Bank (ADB) ................................................ ........ 9 CONCLUSIONS AND RECOMMENDATIONS Conclusions ........................................................ 9 Recommendations ........................................................ 9 Project related - future extensions ................................................... 9 Project related - environment ........................................................ 9 Financial aspects ...................0..................................... t Institutional aspects ....................... ................................. 10 General ........................................................ 10 APPENDICES Project events ........................................................ 12 Implementation schedule ................. ....................................... 14 Procurement of goods and services ........................................................ 15 Status of compliance with covenants (ADB) ........................................... ..... 16 Financial performance of EPC ............................ ............................ i8 Projects and actual loan disbursements (ADB) ............................. ............... 19 Financial and economic re-evaluation ........................................................ 20 DATA Basic data related to the ADB loan ....................................................... 23 MAPS Upolu island ........................................................ 30 Afulilo hydroelectric scheme ....................... ................................. 31 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. The Independent State of Western Samoa Afulilo Hydroelectric Project Credit and Supplemental Credit - 1781 and 1781-1-WSO Project Completion Report PREFACE This is the Project Completion Report (PCR) for the Afulilo Hydroelectric project in Western Samoa for which credit 1781 -WSO in the amount of SDR 2.4 million was signed on June 18, 1987, and a supplemental credit 1781-1-WSO in the amount of SDR 0.8 million was signed on May 26, 1993. The project was co-financed by the Asian Development Bank (ADB), the Commission of the European Community (EC) and the European Investment Bank (EIB). The credit closing date was August 31, 1993, and the supplemental credit closing date was August 31, 1994. The credit and supplemental credit accounts were closed on January 26, 1995, and undisbursed balances of SDR 384.80 and SDR 544,891.69 were canceled. Under an agreement between the International Development Association (IDA) and the ADB, the ADB was responsible for the administration and supervision of the implementation of the project. This PCR consists of an evaluation summary from IDA's perspective, prepared by IDA staff, and a project completion report (PCR) prepared by staff of the ADB subsequent to an ADB project completion mission in August 1994. The ADB loan and ADB supplementary loan closed on November 15, 1993 and December 31, 1994 respectively. The Independent State of Western Samoa Afulilo Hydroelectric Project Credit and Supplemental Credit - 1781 and 1781-1-WSO Project Completion Report SUMMARY FROM IDA's PERSPECTIVE Background The project was jointly appraised by the Asian Development Bank (ADB), the Commission of the European Community (EC), the European Investment Bank (EIB) and IDA in September 1986, when project costs were estimated to be US$17.2 million. The financing arrangements were ADB: US$ 5.4 million equivalent; EC: US$ 4.75 million equivalent; EEB: US$ 2.54 million equivalent and IDA: US$ 3.0 million equivalent. ADB agreed to be responsible for supervision and administration of the project. In June 1989, bids for the civil works contract were received which exceeded the appraisal estimates (see paragraph 7 of ADB's PCR). Based on the revised estimates, and the civil works bid price, the project cost increased by 55% to US$26.6 million. The co-financiers re-confirmed the economic and financial viability of the project in July 1990, and as a result the contribution of the EC to the project was increased to US$11.4 million to finance the extra project cost. ADB and IDA did not increase their lending for the project. Changes to the appraised design, which were approved by the co-financiers, included a larger power house and an oversized penstock with a bifurcation, in anticipation of a future stage of the scheme's development, which will be the proposed expansion of the plant by a planned 2 MW generator and the Vaipu basin pumping scheme, which will increase energy production at the power-house by 25% to 30 GWh per year. Project objectives The project's overall objectives were to support Government's energy policy of developing indigenous renewable energy resources (hydropower) for generating electricity at an economic cost to displace high cost electricity generated by burning imported diesel at Upolu's diesel power station, which is more complex to operate and maintain than hydroelectric plant, and which consumes expensive imported spare parts and consumables. Cyclone damage and the need for a supplemental credit Two cyclones struck Western Samoa in 1990 (Cyclone Ofa) and in 1991 (Cyclone Val), with continuous wind speeds in excess of 90 miles/hour. Damage was considerable, and the storms are estimated to have caused over US450 million worth of damage. Damage, sustained at the site of the Afuililo Hydroelectric Project, which was under construction, involved both high wind and water damage to the site works and to the contractors' on-site offices and housing, and the destruction of 400 tons of cement. In addition, the effect of the cyclone included the loss by the main contractor of more than three month's working time. In September 1992, the project, which was nearing completion was re-appraised by ADB, EC, EIB and IDA. The joint mission estimated that the costs of the damage inflicted by the storms on the partly completed works, resulting contractors' delays, increased interest during construction, and - ii - redesigns of some structures to protect them against higher than expected wind velocities, would increase project costs by about US$6.6 million, from US$26.6 million to US$33.2 million. Details of the estimated project cost to completion, and the arrangements for project financing via an IDA supplemental credit (SDRO.8 million), an ADB supplementary loan (US$2 million equivalent), and an increase in EC financing (US$ 1.4 million equivalent) are shown at Tables 1 and 2 of the PCR. The actual cost of the project, including interest during construction, was US$32.5 million. Results Based on the tariff rates, the financial internal rate of return (FIRR) was at re-appraisal estimated to be 10 percent compared with 12 percent at appraisal. The project's economic internal rate of return (EIRR) was estimated to be 12 percent compared with 11 percent at appraisal. On a sunk cost basis the financial and economic intemal rates of return were estimated to be 21 percent and 24 percent respectively. Completion of the project was judged to be attractive compared with the diesel generation alternative. The economic equalizing discount rate (on a sunk cost basis) with the diesel alternatives was estimated at 11 percent; the financial equalizing discount rate for EPC being 19 percent. In addition the project would (i) decrease the reliance on an imported fuel which would have inherent price uncertainties; (ii) decrease harmful atmospheric emissions; and (iii) have the potential for future expansion via the proposed Vaipu pumping scheme. Details of ADB's estimates of the EIRR (9.7%) and the FIRR (7.4%) at project completion are given at paragraph 23 and Appendix 7 of the PCR. Implementation Construction work on the project commenced in September 1990, and the project was originally scheduled to commence generation in late 1992. At re-appraisal the mission concluded that if no further force majeure occurred, the Afulilo scheme could be expected to be commissioned in April 1993. In fact, reservoir impounding began in May 1993, the scheme began trial operation in June 1993, and was in full commercial production by November 1993. Environmental impact Prior to appraisal the project's environmental impact was assessed by ADB-financed consultants and judged by ADB and the donors to be positive. The project was expected to have little effect on flora and fauna, and the hydro-generated electricity would reduce the need for diesel generation and thus reduce exhaust emissions in the Apia region. These expectations have been realized. The ADB makes some recommendation to the Government at paragraph 30 of the PCR, which will further help to protect and improve the environment. Benefits, sustainability and risk The completion of the project is bringing about major improvements to the economy of Western Samoa, because with this scheme and the other run-of- the-river hydroelectric power stations, which are currently being rehabilitated, and are generally less expensive and easier to maintain, Western Samoa has been able to become nearly totally self-reliant on an indigenous renewable energy resource for the country's generation of electricity. The project - iii - specific risk regarding possible reservoir seepage, identified at appraisal in 1986, which could have jeopardized the sustainability of the project, was studied further and addressed successfully in the final project design. The sustainability of this hydroelectric scheme is judged to be very robust. Compliance with covenants Compliance with covenants for credit 1781-WSO and for supplemental credit 1781-1-WSO has generally been satisfactory, except for EPC's financial performance and the delayed submission to IDA of EPC's audited annual accounts. IDA's and ADB's covenants with the Government and with EPC are generally similar. The difficulties that EiPC has in complying with them, in particular because it is difficult for EPC to recruit and retain staff of a high caliber, are dealt with in paragraphs 24, 25 and 26 of the PCR. Findings and lessons learned By ceding project administration to ADB and not participating in supervision missions, IDA was not in a position to exercise quality control. IDA was not intimately involved in the procurement exercise for the civil works, nor involved in the change in the project design, which brought about large increases in costs compared to the appraisal estimates. At the time of appraisal the project design depended on the results of a feasibility report. Some of the costs and time over-run probably could have been avoided if the financiers had proceeded to project approval on the basis of a detailed project design, or better still, waited for the results of the civil works procurement procedure to be known. I ASIAN DEVELOPMENT BANK - PROJECT COMPLETION REPORT 1. PROJECT DESCRIPTION Objectives, Rationale and Scope 1. A principal objective of the long-term energy policy of the Govemment of Western Samoa has been to reduce the country's dependence on imported fuels through development of indigenous renewable energy sources. The Afulilo Hydroelectric Project was formulated in line with this policy to assist the country develop its hydroelectric resources and thereby displace diesel-electric power generation and also supplement electricity generation from run-of-river hydropower stations. The Project, executed by the Electric Power Company (EPC), provided the first storage hydroelectric plant in Western Samoa with 4 MW of installed capacity. 11. EVALUATION OF IMPLEMENTATION A. Project Components 2. The Project, based on conventional hydropower plant design, provided for the following components: (i) a concrete dam with two ungated spillways on either side of a central column including sluice and intake, (ii) a headrace running through two tunnels (0.5 km and 0.4 km long, respectively), (iii) a surge chamber and a high-pressure penstock, (iv) a powerhouse with provision for three 2-MW turbogenerator sets and three transformer bays; (iv) two 2-MW turbine-generators, auxiliary equipment, step-up transformers and switchgear; (v) power transmission lines; (v) consulting services; and (vi) the services of a technical review expert (TRE). B. Implementation Arrangements 3. As envisaged during appraisal, EPC established a Project Office to supervise the day-to-day implementation of the Project. This Project Office was jointly headed by a full-time local Project Coordinator and an expatriate Project Engineer. Both of them reported directly to EPC's General Manager. EPC also employed an expatriate Project Distribution Engineer on a one-year contract to assist with the transmission reinforcement included in the Project. C. Project Costs 4. At the time of Project appraisal in September 1986 the total cost of the Project was estimated at US$17.2 million (exclusive of import duties and taxes), comprising US$13.6 million (about 80 per cent) in foreign currency costs and US$3.6 million equivalent (about 20 per cent) in local currency costs. The appraisal cost estimate was made in 1986 prices and was based on an EPC-financed feasibility study.' It included provisions for physical contingencies and price escalation. Afulilo Hydro-Electric Project, Partial Development, Feasibility Study Report, January 1986. 2 5. Financing for the Project was originally provided by the Bank, the World Bank, the European Community (EC), the European Investment Bank (EIB) and the Government/EPC. The Bank made a loan of US$5.4 million from its Special Funds resources to finance part of the foreign exchange cost, including US$100,000 for service charge on the Bank loan during construction (IDC) and US$100,000 for cost recovery of the prior TAY The World Bank, through the International Development Association (IDA), agreed to co-finance the Project by providing a credit amounting to US$3.0 million. The EC, through its Energy Development Fund (EDF) facility, provided a grant of ECU 5.8 million (US$5.7 million equivalent) under the Lome Ill Convention, including US$0.6 million equivalent to finance part of the local currency cost of the Project, and a TA grant of up to ECU 1.0 million (US$1.0 million equivalent) for consulting and training services in engineering to EPC. EIB extended a loan amounting to US$1.5 million equivalent to co-finance a part of the local currency cost of the Project. The Govemment/EPC financed the remaining part of the local currency cost of the Project amounting to US$1.5 million equivalent. 6. Design and construction supervision consultants were recruited in June 1987. Following a review of the report produced by the feasibility consultant, design changes were found to be necessary. In particular, the following alterations were adopted: (i) integration of a diversion culvert and a discharge sluice at the dam, thereby avoiding a gated overflow spillway; (ii) realignment and shortening of the headrace by having two tunnels (instead of one) with a buried pipeline connecting them; (iii) construction of an underground surge tank; (iv) redesign of transmission lines to account for higher wind speeds; and (v) enlargement of power house and penstocks to accommodate a third 2 MW turbine generator in the future. These modifications would have been considered at Project appraisal if the engineering design had been finalized at that time instead of being included in the engineering consultant's terms of reference. 7. After opening the bids for civil works in June 1989, the appraisal estimates were found to be inadequate partly as a result of the changes referred to above in the scope of work envisaged at appraisal. A reassessment of the Project's viability was carried out in September 1989 based on revised cost estimates which increased the Project cost by 55 per cent to US$25.1 million. However, this reassessment confirmed that the Project remained the least-cost generation alternative. A revised financing plan was finalized in July 1990 to cover a total Project cost of US$26.6 million. The increase by US$1.5 million over the September 1989 estimate was due mainly to increased consulting services envisaged. The bulk of the additional financing required above that arranged at appraisal was provided by EC, the share of which in the Project financing increased from US$5.7 million to US$10.7 million equivalent. EIB's contribution increased from US$1.5 million to US$3.2 million while the Government's/EPC's share increased from US$1.5 million to US$3.6 million equivalent. An amount of US$0.23 million was provided by Australian International Development Assistance Bureau (AIDAB). 8. In July 1992, a Development Partners' Meeting was held between representatives of the Government/EPC and the five co-financiers in Western Samoa to review the Project. The Government and the EPC reported that the cost of the Project had increased from the July 1990 estimate mainly because of currency fluctuations, damage and suspension of work caused by TA No. 350-SAM: Feasibility Study of Fagaloa/Afulilo Hydropower Scheme, for US$348,000, approved on 22 April 1980. 3 Cyclone Val in December 1991, need to further strengthen transmission lines to withstand wind speeds up to 200 km/hr, increased piling efforts to meet weak geological conditions at the powerhouse site and the extended period of engineering consulting services required. A Bank Reappraisal Mission visited Western Samoa in September 1992 and estimated the Project cost as US$33.2 million equivalent, consisting of a foreign currency cost of US$28.4 million and a local currency cost of US$4.8 million equivalent. This represented an increase of US$16.0 million, or 93 per cent, over the appraisal estimate, and US$6.6 million over the July 1990 cost estimates. Details of the Project costs and financing plans at Project appraisal, (September 1986), revised estimates (July 1990) and at reappraisal (September 1992) are shown in Table 1 and Table 2, respectively. Table 1. Comparison of Total Costs (US$'000) Item Appraisal Revised Estimatesb' ReappraisalY (September 1986) (July 1990) (September 1992) Civil Works 8,406 13,633 17,170 Electrical and Mechanical Equip 4,221 5,174 5,632 Transmission Lines 1,535 2,212 3,425 Consultant's Services 1,638 4,047 4,342 Interest and Other Charges 1,300 1,376 2,478 TA Recovery 100 136 151 Total 17,200 26,578 33,198 gl Includes contingencies d Based on disbursements and foreign exchange rates as of 31 July 1990. S Based on disbursements as of 31 July 1992 and foreign exchange rates as of 31 July 1990. 9. On April 22,1993 the supplementary loan of US$2.0 million from Special Funds resources was approved by the Board.Y This increased the Bank's financing of the Project cost in dollar terms to US$7.7 million but in relative terms, the Bank's share in the total Project cost decreased from 31.4 per cent to 23.2 per cent. The balance of the cost overrun was covered by supplementary financing of US$1.6 million from EC, US$1.0 million from IDA and US$2.0 million from the Government/EPC. The Government and EPC were granted retroactive financing in view of the fact that proceeds of the first loan were expected to run out prior to the proposed supplementary loan becoming effective. The purpose of retroactive financing was to enable the Government and EPC to continue payments under the two existing Bank-financed contracts (consulting services for construction supervision and construction of civil works), thereby Y Loan No. 1228-SAM(SF): Afulilo Hydroelectric Power (Supplementary). 4 avoiding their suspension. Retroactive financing, was estimated at 40-50 per cent of the proposed loan amount of US$2 million. Table 2. Financing Plans (US$1000) Item Appraisal Revised Estimates ReappraisalY (September 1986) (July 1990) (September 1992) ADB 5,400' 5,763Y' 7,763 IDA 3,000! 3,1240 4,124 EC 5,745 10,727 12,137 EIB 1,540 3,152 3,152 AIDAB 0 229 229 GovernmentVEPC 1.515 3,583 5.603 Total 17,200 26,578 33,198 ' Includes contingencies Y Based on disbursements and foreign exchange rates as of 31 July 1990. B Based on disbursements as of 31 July 1992 and foreign exchange rates as of 31 July 1990. 10. The actual Project cost1' including IDC is US$32.47 million with US$27.03 million in foreign exchange and US$5.43 million in local currency. It has exceeded the appraisal estimate of US$17.2 million by US$15.3 million or 89 per cent, but is lower than the supplementary loan processing estimate of US$33.2 million by US$0.7 million or 2 per cent. The commissioning of major equipment under the Project was completed by mid-June 1993 when trial operations commenced. D. Project Schedule 11. Key Project events are listed in Appendix 1 and a comparison of projected and actual implementation is presented in Appendix 2. Commercial operations began in November 1993, more than three years behind the appraisal schedule. The delays incurred during Project implementation are primarily due to: (i) delays in procurement and (ii) delays in construction. The actual time taken for procurement was three years against the appraisal estimate of one and a half years. One year was lost between the time of bid opening in June 1989 and the commencement of contracting for civil works due to the need to have a revised financing plan. The delays in construction were due mainly to: (i) increased scope of work above that envisaged at appraisal, including expansion of the powerhouse to accommodate a third turbine- it See pages (iv) and (v) - Project data. 5 generator set; (ii) damage caused by Cyclone Val which made a temporary suspension of work necessary; (iii) poor condition of public roads to the site; (iv) change in the regulations goveming the storage of explosives which slowed tunneling work considerably; (v) the sinking of two ships in October 1991 bearing cement and other construction materials; (vi) breakdown of the cable crane used for penstock installation; (vii) land disputes which halted work on the Taalefaga- Lalomauga transmission line and delayed construction of the new 33 kV line to Tanugamanono; and (ix) the need to clear the reservoir of trees and other vegetation. E. Engagement of Consultants and Procurement of Goods and Services 1. Engagement of Consultants 12. A consortium of engineering consultants assisted EPC in implementingthe Project. The services provided by the consultants included the preparation of detailed design, technical specifications and tender documents, as well as tender evaluation and construction supervision. An independent expert specialized in the design and construction of hydropower schemes of this nature was engaged as the Technical Review Expert (TRE) to review and advise EPC and the Bank periodically on matters concerning Project design and implementation. Both the consultants and the TRE were engaged by EPC following the Bank's Guidelines on the Use of Consultants. 2. Procurement of Goods and Services 13. Procurement of goods and services to be financed jointly by the Bank, IDA, and EIB was undertaken on an international competitive bidding basis in accordance with the Bank's Guidelines for Procurement. Procurement of goods and services under the EC grant followed procedures set out by EC, which were found satisfactory to the Bank. The various contract packages and their financing are shown in Appendix 3. F. Performance of Consultants, Contractors and Suppliers 14. The engineering consultants on the whole performed satisfactorily though broader experience with small-scale hydro plants on their part would have been of further benefit to the Project. The Technical Review Expert (TRE) advised the consultants on project design aspects prior to production of tender documents, and also made periodic site visits throughout the construction stage. The TRE gave useful advice to the consultants conceming project design aspects. The TRE was critical of the standard of workmanship during his third and fourth site visits in July and October 1992, but noted a marked improvement in quality during his fifth and sixth visits in January and June 1993. The civil contractor, though experienced, was unable to keep-to l.e~'R,ect schedule partly due to weak site management, the poor state of repair of plant and unL. taffing. Several external factors, including two cyclones in February 1990 and Recember 199-a.nd a change in the Government's regulations governing the storage of explosives, also imp;eded progress. 1. All e, suppliers performed satisfactorily with the exception of the mechanical contractor for the provision of the emergency gates, the delivery of which was delayed; considerable site rettification work and replacement of incorrect parts was also necessary. 6 G. Conditions and Covenants 16. Appendix 4 gives details of the status of compliance with loan covenants. EPC has generally failed to comply or only marginally complied with most of the covenants in the Project and Loan Agreements. One of the covenants that EPC has not fully complied with is that concerning land acquisition, which required all land for the Project to be acquired and made available to EPC prior to the award of the civil works contractY Acquisition of land was impeded by the complicated system of ownership in Western Samoa, according to which land does not belong to specific individuals but rather to community entities. EPC has also yet to take appropriate action over soil conservation and watershed management as outlined in the Loan AgreementY Furthermore, EPC failed to renew insurance coverage2' for its power plant and distribution systems prior to its lapsing in August 1992 and only obtained appropriate coverage in July 1994 (as a condition of effectivity of the Supplementary Loan).A 17. In respect of financial performance (see Appendix 5), EPC has not been meeting its rate of return covenant with the Bank (5 per cent rate of return on revalued assets).Y EPC's rate of return performance in FYI 993 (actual) and FY1994 (provisional) were 2.7 and 3.4 per cent, respectively, while the projected figure for FY1995 is 1.0 per cent. EPC, has also not been complying with the covenants on debt-service ratio (less than 1.3 times the estimated maximum debt-service requirement)§' and on self-financing ratio (20 per cent of capital expenditures).Z' EPC's five-year average self-financing ratios for FY1991 and FY1992 were 21.9 and 6.4 respectively. Also, EPC has not been fumishing the Bank, on a regular basis, with its unaudited financial statements within six months and audited financial statements within nine months of the close of the fiscal year to which they relate, its approved budget for the following fiscal year and its updated five-year financial projections (including a tariff review) by 30 June of each year, as required under the Project AgreementY Another significant element in EPC's financial performance is its delayed payment to the Government of the interest on Bank loans and IDA loans and the annual 2 per cent foreign exchange risk charge on all outstanding foreign loans. H. Disbursements 18. A comparison between projected and actual disbursements is presented in Appendix 6. The first disbursement for the original loan (SAM-813) was made in August 1987; however, due to delays in Project implementation, the last disbursement was in November 1993. Disbursement of funds under the supplementary loan were held up due to delayed effectiveness of the loan. The supplementary loan approved on 22 April 1993 was declared effective only on !/ Loan Agreement, Schedule 6, para. 2 (a). 3 Loan Agreement, Schedule 6, para 5. Project Agreement, Section 2.05. A' Loan Agreement, Section 7.01 (c). Project Agreement, Section 2.16. Project Agreement, Section 2.17. Project Agreement, Section 2.18. A' Section 2.09 (i) and (ii). At the time of PCR Mission, the Bank had still not received audited financial statements for 1993 and approved budget for 1995 (unaudited statements and a preliminary budget were however made available). 7 30 June 1994. Arrangements have been made for the loan account to remain open for a further six months until all disbursements under the supplementary loan have been effected. I. Environmental Impact 19. An environmental impact study was included in the initial feasibility report. This study was judged to be less than adequate by the Bank's OENV. A more detailed environmental impact assessment (EIA) was carried out in 1987 as part of the Project design and, together with technical studies, formed the basis of the Bank's decision to proceed with Project implementation. In view of the relative size and cost of the Project, the South Pacific Regional Environment Programme commissioned a further EIA, which was carried out by the New Zealand Department of Conservation in December 1991. This assessment noted that a significant environmental effect of creating the Afulilo storage reservoir was the submergence of the Punataemo'o swamp forest, an important highland swamp forest in Western Samoa upstream of the Afulilo dam. However, in respect of downstream effects, it gave an assurance that the reduced waterflow from the Afulilo Basin was unlikely to have any serious hydrological effect on the Vaipu swamp, which lies immediately downstream of the dam. Given that the Vaipu swamp would be the only remaining highland swamp in Western Samoa, the report stressed that any future expansions of the Project should be preceded by a detailed EIA. 20. There was no need to relocate any persons as a result of the Project. Land use alteration was negligible except for the uninhabited Punataemo'o swamp. Extensive clearing of vegetation in the Afulilo Basin was, however, necessary before impounding of the reservoir could commence. Residents living near the water discharge from the powerhouse (in the vicinity of Fagaloa Bay) have complained of increased mosquito infestation, foul smell and reduced fish catch in the Fagaloa Bay. It is suggested that these and other possible environmental concerns be addressed by a post-commissioning environmental report, as recommended in the December 1991 EIA. J. Project Benefits 21. The major objective of the Project was to displace costly electricity supply from diesel generating plants. The Project accomplished that objective through the addition of 4 MW of storage-based hydropower generating capacity to the existing run-of-river hydropower generating capacity of 6.3 MW. A review of the Project performance indicates that 18 GWh of electricity was produced over the 12 months ending on 30 June 1994 (at 51 per cent plant factor). The Project's electricity output during this period was restricted by inflow needs for reservoir fill-up (particularly in July and August 1993) and to some extent by the rate at which power distribution facilities could be expanded to supply suppressed demand. It can be reasonably expected that the Project output will gradually increase to the appraisal estimate of 24 Gwh a year (68 per cent plant factor) with the easing of operational constraints and better coordinated operation of the Project with EPC's other hydropower plant as well as with the thermal power plant.Y 2! Afulilo Hydroelectric Project, Partial Development, Feasibility Study, January 1986. A Bank-financed ADTA to assist such improved coordination is programmed for 1995. 8 22. The Project will save foreign exchange by limiting the need to import equipment, diesel oil and spare parts for diesel power plants. In terms of diesel oil use displaced, the Project will save the country about US$1.6 million per annum in foreign exchange. Beneficiaries include about 8,000 families and about 1,200 businesses and other establishments on Upolu Island. The Project has provided greater access to electricity as well as greater security of electricity supply with hydro generating plant which is more reliable than diesel generating plant. During the construction period, the Project provided much-needed employment for local labor, estimated at 3,000 staff-months. After commissioning in June 1993, the Project resulted in 20 permanent jobs for operating and maintaining the power plant. 23. A re-evaluation of the FIRR and EIRR was undertaken based on actual Project costs and other data available at Project completion (Appendix 7). The FIRR was determined to be 7.4 per cent and the EIRR to be 9.7 per cent. The EIRR and FIRR expected at Project appraisal were 11.0 per cent and 11.7 per cent respectively. The re-evaluated FIRR and EIRR are not as low as would have been expected, given the substantial Project cost overrun, due mainly to an increase in the average tariff from 28 sene/kWh at appraisal to 43 sene/kWh at present. K Performance of Borrower and Executing Agency 24. The performance of the Borrower (the Government) was satisfactory while that of the executing agency (EPC) was less than satisfactory. Continuing institutional weaknesses at EPC, including prolonged vacancies in its key engineering and financial positions, resulted in weak administration of EPC and the Project. 25. EPC's has failed to comply or only partially complied with a number of the loan covenants in both the original loan and the supplementary loanY EPC's difficulties in attracting and retaining experienced and qualified staff contributed to the delay in filling the vacant Financial Controller's position, as well as delays in the submittal of various financial reports, including financial accounts, approved budgets and five-year plans. The appointment of new staff for the position of Government Controller and Chief Auditor in the Government also held up the release of audited accounts. 26. Despite three separate increases in the electricity tariff since the time of appraisal,Y EPC's financial performance has been unsatisfactory (see para. 17). This is attributable to high operating costs resulting mainly from high levels of outage at EPC's run-of- river hydro generating plant and weak operations and maintenance capabilities. Further tariff increases will, however, be required particularly in view of the increasing level of debt that EPC has to meet. See paragraphs 16 - 17. At the time of appraisal, tariff was set at 28.1 sene/kWh and was thereafter increased to 32 sene/kWh in August 1990, 40 sene/kWh in December 1990 and 43 sene/kWh in December 1992. 9 L. Performance of the Bank 27. The performance of the Bank was generally satisfactory. At the time of Appraisal, the Bank accepted the cost estimates as the most appropriate based on the feasibility study. Some of the cost and time overrun difficulties may have been avoided if the Bank had proceeded to Project approval with a detailed Project design in hand. However, the steps taken by Bank staff to reassess the Project in September 1989, revise the financing arrangements In July 1990, reappraise the Project in September 1992, and provide supplementary financing in April 1993 to expedite the Project, are noteworthy. There was good cooperation between the Bank, the Executing Agency and the co-financiers, although the involvement of five separate donor agencies added an unnecessary level of complexity to the Project. The Bank acted as administrator of the IDA credit and, in so doing, provided an efficient arrangement that served to reduce some of the reporting burden on EPC. Bank staff carried out periodic Review Missions sometimes in collaboration with other donor agencies. These Review Missions assessed the progress of the Project and were useful in resolving Project implementation problems. III. CONCLUSIONS AND RECOMMENDATIONS A. Conclusions 28. The Project has been successful. It met the major objective of displacing diesel electricity based power generation by adding 4 MW of storage-based hydro power generation and thereby helped the Government to develop its indigenous energy sources and reduce its reliance on imported diesel oil. Despite the cost and time overruns encountered in implementation, the Project is still economically and financially viable with re-evaluated EIRR and FIRR at 9.7 per cent and 7.4 per cent respectively. B. Recommendations Project Related (i) Future Extensions 29. In its power expansion plan for Upolu Island, EPC stated that it plans to install a third generator-turbine unit in the Taalefaga power house as soon as possible. It is recommended that further operating information and analysis should be carried out by EPC before taking a firm position regarding the addition of the third unit. (ii) Environment 30. It is recommended that the Government undertakes to: (i) prepare a post- commissioning environmental report, as recommended in the December 1991 Environmental Impact Assessment made by the Department of Conservation of New Zealand; (ii) carefully record rainfall and inflow data and establish a Catchment Committee to manage the watershed of the Afulilo Basin; and (iii) draw up a timetable for completing the payment of approved land compensation claims. 10 (iii) Financial Aspects 31. An assessment of EPC's financial performance indicates that the company is experiencing severe difficulties (see para. 23). To redress the situation, it is recommended that EPC improve its plant and staff operating efficiency, minimize its thermal power generation and obtain government approval for continued tariff increasesY In addition, it is recommended that EPC pursue measures such as the payment of performance bonuses and the introduction of bonding arrangements to attract and retain specially trained staff. It is essential that EPC ensure payment of interest on Bank and IDA loans in accordance with the agreed re-lending arrangements between EPC and the Govemment. (iv) Institutional Aspects 32. The piggy-backed technical assistance of US$200,000 provided with the original loan for the Project had as its objective the strengthening of EPC's financial management and accounting and auditing systems. The assistance was satisfactorily carried out, although EPC has found it difficult to sustain the systems and procedures introduced due to rapid staff turnover. EPC has, however, established systems to: (i) prepare its financial statements and projections; and (ii) input its billing, inventory and accounting information for batch processing on a bureau-managed computer. It is recommended that EPC examine the cost-effectiveness of having its own minicomputer, as recommended by the technical assistance consultant. General 33. The Govemment and EPC stressed the difficulty of coordinating loans from several donor agencies. In particular, the negotiations for supplementary financing were complicated by the need to meet the requirements of five separate co-financiers. It is recommended that the Bank, when determining the number of co-financiers of projects in small DMCs, take into account the terms of financing, the financing gap and the documentation requirements of the co- financiers. It is essential that the executing agency concerned be fully capable of coordinating and fulfilling the obligations to the financiers. 34. The Project commenced commercial operations in November 1993. A mission for the Project Performance Audit Report (PPAR) could be scheduled towards the end of 1995. An appropriate ADTA from the Bank to assist in improving EPC's institutional performance is programmed for 1995. 11 APPENDICES No. Page 1 Project Events 12 2 Implementation Schedule 14 3 Procurement of Goods and Services Through Intemational Competitive Bidding 15 4 Status of Compliance with Loan Covenants 16 5 Financial Performance of EPC 18 6 Projected and Actual Loan Disbursements 19 7 Financial and Economic Re-evaluation 20 12 Appendix 1 Page 1 PROJECT EVENTS PROCESSING Original Loan 04-18 May 1986 Fact-Finding Mission 08-19 Sept 1986 Project Appraisal 28-29 Oct 1986 Loan Negotiations 04 December 1986 Loan Approval 24 December 1986 Signing of Loan Documents 22 May 1987 Loan Effectivity Supplementary Loan 07-18 Sept 1992 Reappraisal Mission 22 April 1993 Loan Approval 03 May 1993 Signing of Loan Documents 30 June 1994 Loan Effectivity IMPLEMENTATION Consulting Services Technical Review Expert 15 October 1987 Bank approves shortlist of consultants 22 January 1988 Bank receives evaluation report 28 January 1988 Bank approves EPC's evaluation 30 August 1988 Date of contract September 1988 Consultant commences services November 1988 First Review Mission 04-07 November 1991 Second Review Mission 07-16 July 1992 Third Review Mission 20-29 October 1992 Fourth Review Mission 19-30 January 1993 Fifth Review Mission 05-17 June 1993 Sixth Review Mission 07-15 December 1993 Seventh Review Mission 08-17 March 1994 Eighth Review Mission (Reference in text: page 4, para. 11) 13 Appendix 1 Page 2 of 2 Engineering Consultants 05 December 1986 Bank receives shortlist of consulting firms 12 December 1986 Bank approves shortlist of consulting firms 17 December 1986 EPC sends invitations to shortlisted firms 26 February 1987 Deadline for submission of proposals 13 May 1987 Bank receives evaluation report 29 May 1987 Bank approves EPC's evaluation 26 June 1987 EPC executes contract 26 July 1987 Consultants commence services 31 Dec 1993 (tentative) Consultants complete services Civil Works 13 January 1988 Bank receives draft prequalification documents 28 January 1988 Bank approves draft prequalification documents 03 March 1988 Invitation for prequalification issued 31 May 1988 Opening of proposals for prequalification 18 July 1988 EPC submits reports on prequalification to Bank 19 August 1988 Bank approves EPC's recommendation of prequalification 05 September 1988 Draft tender documents sent to Bank 10 October 1988 Draft tender documents approved by Bank 12 June 1989 Bid opening 08 June 1990 Agreement on revised financing plan 26 July 1990 Date of contract for civil works 12 September 1990 Start of the construction work 28 February 1991 Bulk excavation of dam commenced 14 August 1991 Tunnelling commenced 03 July 1992 Excavation completed 18 May 1993 Impounding of the reservoir commenced 05 June 1993 Penstock installation completed 08 June 1993 Start of wet commissioning 15 June 1993 22 kV main transmission line completed 15 June 1993 Taelefaga power house commissioned 15 June 1993 Start of trial operations 09 July 1993 Official opening 15 November 1993 Commercial operation 14 Appendx 2 IMPLEMENTATION SCHEDULE - APPRAISAL AND AClIAL 1987 1988 198 1900 1901 | 1992 1930 104 ACTMTY 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 21314 1121314 1 234 1 234 CONSULPTiNG SERVICES Enginsering/Supervision ....... Technical Review Expert 1/ - ~ ~ ~ ~ ~ ~ ~ ~~M Ahibune ,. 2% 0 rgs r5l,S5srlSssis IMPLEMENTATION Civil Works: T T T T T, - Mobrisation - Afulilo Dam - Afulilo Tunnel - Pipeline T - Powerhouse arnd Tailirace Pipe Supply |T T T M S: SpilT ayGates T T T, M P E Generating Equipment T T T M S: E C ElecticalEquipment T T T M S S E c Transmission Lines: - SupplyConbract T. T T M $ - Erection bon F - Field Visit Apprakiga T - Tender Period M - ManuLacturing -~Actual S - Shipping E - ErectionAnswtnllation C - Commissioning 1/ Memorandum of Understandng of 30 Augut 1988 betwen EPC and Consultant llowed for n estimated 5 field viss bsting a to dof two man-months with services to be completed before 31 March 1901. Subsequently, by Amendment No. 1 to the MOU the termination dawn extended to December 1904. The TRE made eight separate field visits to W. Samoa (marked by F). (Reference in text: page 4, pragraph 11) PROCUREMENT OF GOODS THROUGH INTERNATIONAL COMPETITIVE BIDDING COUNTRY OF SUBMISSION PROCURE- CONTRACT TEN D ER S OF BANK CONTRACT LOT DESCRIPTION MENT VALUE " ISSUED r OPENED EVALUATION APPROVAL DATE 1-h (D (D ACI CIVIL WORKS (LOT ACI) b GER / NZL 39,130,371 22FEB89 12JUN89 04AUG89 21FEB90 26JUL90 (D 0 CD CONSULTING SERVICES b AUS/ GER 8,080,899 26NOV86 27FEB87 21APR87 02JUN87 26JUN87 Xi AM2 PIPES & HYDRAULIC EQUIPMENT NET 5,114.017 22FEB89 20JUN89 c c 25OCT90 AM3 TURBINES & HYDRAULIC MACHINER' FRA 1.961,783 22FEB89 20JUN89 C ' 12SEP90 AE4 GENERATORS & ELECTRICAL EQPT ITA 4,853,200 22FEB89 20JUN89 c c 27JUN91 CD AE5 TRANSMISSION LINE EQPT. UK 8.600.000 22FEB89 20JUN89 C ' 07MAR91 * All contracts were denominated in Western Samoa Tala but disbursed in different currencies b These two contracts were co-financed by the Bank and other donors. ' These contracts were financed by other donors. hence were not submitted to Bank for approval of evaluation. Blemme 823pm3cuwl ID - x W~ 16 Appendix 4 Page ¶ STATUS OF COMPLIANCE WITH LOAN COVENANTS Loan Covenants Status of Compliance 1. Take out and maintain insurance against such 1. Not complied with between August 1992 and June risks and in such amounts as shall be consistent 1994. with sound practice. PA 813, Sec. 2.05(a). 2. Insure the goods to be imported/financed out of 2. Complied with. the proceeds of the Loan. PA, 813, Sec. 2.05(b). 3. Maintain records and accounts, goods and services 3. Complied with. financed out of the Loan, to disclose the use thereof in the Project, to record the progress of the Project and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition. PA, 813, Sec. 2.06. 4. Furnish to the Bank quarterly reports on the 4. Partially complied with. Submittal of execution of the Project and on the operation and report was frequently delayed at start of management of the Project facilities. PA, 813, Project. In February 1989 more frequent Sec. 2.08 (b). monthly progress resumes were requested, however, these did not arrive regularly until May 1991. 5. Maintain separate accounts for the Project and 5. Delayed compliance. for its overall operations. PA, 813, Sec. 2.09 (a)i. 6. Furnish to the Bank not later than 9 months after 6. Not complied with.'/ the cLose of the fiscal year to which they relate, audited accounts and financial statements. PA, 813, Sec. 2.09 (a)iii. 7. Furnish to the Bank not later than six months 7. Not complied with. after the end of each fiscal year, unaudited annual financial statements on its operations for such fiscal year. PA, 813, Sec. 2.09 (b)i. 8. Furnish to the Bank by 31 December of each year, 8. Not complied with.!' approved budget for the following fiscal year and updated five-year financial projections. PA, 813, Sec. 2.09 tb)ii. 9. Maintain its tariff rates at levels sufficient to 9. Not complied with (EPC's SFR for 12 months cover all operating expenses, interest and debt ending June 1992 was 6.4 per cent). d amortization and to finance a reasonable portion (20%) of EPC's capital expenditures effective FY1979. PA, 813, Sec. 2.16(c). 10. Maintain its net revenues at least 1.3 times the 10. Not compLied with; 1992 DSR was 1.1 times.1' maximum debt service requirement. PA, 813, Sec. 2.17(a). 11. Maintain its rates for the sale of electricity to 11. Not complied with; 1992 ROR was negative or generate revenues sufficient to achieve a minimum minus 4.3 per cent.!' annual ROR of 5%. PA, 813, Sec. 2.18(a). 12. Borrower (GoWS) to take action in the course of 12. Partially complied with. Asset RevaLuation 1987 for training, studies and other measures Study was carried out under EC financing. The required to strengthen the long-term internal Final Report was received by EPC in November capability and management of EPC including 1990. The audited accounts for 1992 were received in August 1994. The unaudited accounts for 1993 were received in August 1994. Approved budget 1995 not yet received. Based on 1992 audited accounts. (Reference in text: page 6, para. 16) 17 Appendix 4 Page 2 STATUS OF COMPLIANCE WITH LOAN COVENANTS Loan Covenants Status of Compliance revaluation of EPC's assets and preparation of guidelines for revaluation and depreciation methods to be used, and propose a tariff structure and levels appropriate for conditions in Western Samoa. LA, 813, Sch. 6, para 3(a). 13. Borrower (GoWS) to permit EPC to implement the 13. Not complied with. recoemmendations of a tariff study financed by EC grant. LA, 813, Sch. 6, para 4. 14. EPC shall monitor water run-off and sediment 14. Not complied with. loading of the watershed; assess the severity of soiL erosion; and take appropriate remedial action for soil conservation and watershed management. LA, 813, Sch. 6, para. 5. 15. No civil works contracts under the Project shalL 15. Not compLied with. Land acquisition matters be awarded unless evidence satisfactory to the were still being resolved at the time of Bank shall have been submitted to the Bank awarding of the civil works contract. showing that all the land and rights over land required for the Project shall have been acquired. LA, 813, Sch. 4, para. 7. 16. The access road to the dam site will be 16. Complied with. The work on the road was constructed by the Government/EPC from their own financed in part by a grant from AIDAB. resources and the work will be completed on a timely basis in accordance with the Project implementation schedule. LA, 813, Sch. 6, para. 2(b). 17. The Borrower shall ensure that EPC shall conduct 17. Not complied with. an annual overall review of its tariff levels and shall submit a copy of a report thereon to the Bank for comments by 30 June of each year. Such report shall also contain EPC's proposals for taking any corrective measure as may be necessary to ensure the financial health of EPC. LA, 1228, Sec. 4.03. 18. EPC shall have secured appropriate insurance 18. Delayed compliance. Effectivity of coverage for EPC's generating power plant against supplementary loan deLayed 10 months because of such risk and in such amount consistent with non-comptiance. sound power utility practices. LA, 1228, Sec. 7.01(c). i8 Appencdx 8 ELECTRIC POWER CORPORATION ACTUAL AND PROJECTED FINANCIAL PERFORMANCE (We$-000) Year Ending 31 December Year Ending 30 June 1988 1989 1990 FY1991 a FY1992 FY199S FY1994 FY1995 Item -------EAUDITEDUDITED--- UNAUD. EST. BUDG. OPERATION Energy Generation (GWh) 42.13 42.83 41.00 23.46 44.95 52.38 60.87 63.95 Systems Losses (%) 12.00 11.80 10.00 13.60 11.20 11.60 16.00 14.00 Energy Sales (Gwh) 37.08 37.90 38.90 20.22 39.92 46.30 51.13 85.00 PROFITABILIrY Average Revenue (Sene/KWh Sold) 27.00 26.91 29.84 39.41 38.01 40.32 41.67 41.28 Increase in Average Revenue (%) -0.3 10.9 32.1 -3.6 6.1 3.4 -0.9 REVENUES Electricity Sales 10.010 10,199 11,013 7,969 15,171 18,669 21,308 22,703 Others 211 828 1,031 e64 1.186 612 290 243 Total Revenues 10,221 11,027 12,044 8,6O3 16,356 19,280 21,598 22,946 OPERATING EXPENSES Fuel and Oil 2.874 3,725 4,919 4,023 6,958 7.905 4,220 4,336 Purchased Power 14 87 113 Management and General Expenses 3,080 3,180 4,298 2,585 4,489 4,817 6,309 9,316 Depreciation 3,742 4,525 4,306 2,045 4,079 4,752 6,854 6,854 Total Operating Expenses 9.497 11,429 13,523 8.653 15,505 17.489 17.470 20,618 OPERATING INCOME 725 (403) (1,479) (20) a51 1,791 4,128 2,32a INTEREST AND OTHER EXPENSES Interest 767 844 807 353 689 745 3,545 4,867 Other (581) 2.570 2,844 2,886 4,696 (626) 232 725 Total Interest and Other Expenses 206 3,415 3,651 3,238 5,385 118 3,777 5,592 NET INCOME (LOSS) 518 (3,817) (5,129) (3.258) (4.534) 1,673 352 (3.264) LIQUIDITY Net Income Before Interest 1,285 (2.973) (4,323) (2,905) (3,45) 2,418 3,897 1,603 Add: Depreciation 3,742 4,525 4,306 2,045 4,079 4,752 6,854 6.8s4 Other Non-Cash Items (317) 540 1,052 (1.117) 1,289 (694) Intemal Funds 4,711 2,091 1,036 (1,977) 1,503 6,476 10,751 8,457 Less: Debt Service (Principal & Interest) 11.901 1.942 2,006 409 1.386 1,449 6,505 6,427 Changes in Working Capital (7,102) (23,566) 4,153 4,563 811 (5.262) (3,763) 2,410 Net Internal Funds (86) 23,816 (5,123) (8,949) (694) 10.289 8,008 (380) Capital Expenditures 10,530 27,548 12,145 11,263 9,712 36.858 17,000 7.964 RATIOS Operating Ratio (%) 92.9 103.7 112.3 100.2 94.8 90.7 80.9 89.9 Rate of Retum on Revalued Net Fixed Assets (%) b/ 1.8 -3.9 -4.9 -6.3 -4.3 2.7 3.4 1.0 Debt-Service Ratio (fimes) c/ 0.4 1.1 0.5 -4.8 1.1 4.5 1.7 1.3 Self-Financing Ratio - Five Year Moving Average (%) d/ 37.0 19.0 15.4 21.9 6.4 12.4 29.6 34.1 a/ For six-month period, January to June. EPC changed its financial year in 1991, from January - Decemberto July - June. b/ Operating income divided by one-half the sum of the revalued net fixed assets in operation at the beginning and at the end of the respective year. c/ Intemal Funds divided by debt service (principal and interest) dl Net internal funds divided by capital expenditures. Five year moving average calculated using average of the amount of the two fiscai years preceding, two fiscal years subsequent and the respective fiscal year. Revalued Rate Base 70328. 83293. 93567. 90839. 86198. 92028. 139687 178359 (Reference in text: page 6, para. 17) 19 Appendix 6 PROJECTED AND ACTUAL LOAN DISBURSEMENTS (US$ million) PROJECTED ACTUAL Year Qtr. Disb. Cumulative % Disb. Cumulative % 1987 1 II III 0.156 0.156 3.01 0.269 0.269 4.36 IV 0.008 0.164 3.17 0.001 0.270 4.37 1988 I 0.158 0322 6.22 0.257 0.527 8.53 II 0.062 0.384 7.42 0.002 0.529 8.56 III 0.062 0.446 8.62 0.193 0.721 11.68 IV 0.062 0.508 9.81 0.115 0.836 13.54 1989 I 0.191 0.699 13.50 0.000 0.836 13.54 II 0.427 1.126 21.75 0.004 0.840 13.61 III 0.427 1.553 30.00 0.019 0.859 13.91 IV 0.427 1.980 38.25 0.102 0.961 15.57 1990 1 0.427 2.407 46.50 0.000 0.961 15.57 II 0.427 2.834 54.75 0.089 1.050 17.01 III 0.427 3.261 63.00 0.024 1.074 17.39 IV 0.427 3.688 71.25 1.360 2.434 39.42 1991 1 0.427 4.115 79.50 0.757 3.191 51.68 II 0.306 4.421 85.41 0.389 3.580 57.98 III 0.300 4.721 91.21 0.193 3.773 61.11 IV 0.455 5.176 100.00 0.288 4.061 65.77 1992 I 0.150 4.211 68.20 II 0.133 4.344 70.35 III 0.091 4.435 71.83 IV 1.175 5.610 90.86 1993 I 0.518 6.128 99.25 II 0.027 6.155 99.69 III 0.000 6.155 99.69 IV 0.019 6.174 100.00 Total 5.176 100.00 6.174 100.00 Note: Above projected disbursement of $5.176 million is the equivalent of SDR 4.324 million. Actual Loan amount is SDR 4.428 million. The difference of SDR 104,000 is allocated to Prior Technical Assistance cost (see Schedule 3, Loan Agreement). Conversion rate used was 1 SDR = 1.197 US$. (Reference in text: page 6, para. 18) 20 Appendix 7 Page 1 FINANCIAL AND ECONOMIC ANALYSES A. FIRR and EIRR 1. The life of the Project is conservatively assumed to be 30 years. 2. Energy generation in 1993 is actual. From 1994, generation is expected to gradually build up to the appraisal estimate of 24 GWh. 3. Throughout the Project life, station use and losses are assumed at 13 per cent of total generation output. (The actual five-year average was 12.5 per cent.) 4. Operation and maintenance cost is assumed at 2 per cent of capital cost. 5. Average revenue is estimated at 43.31 sene/kWh or US$0.1714/kWh based on: (i) the tariff of WS$0.43/kWh and the minimum charge of WS$1 0 per month; (ii) 16,746 consumers (1992); and (iii) annual sales of 61.65 GWh (estimated 1992 sales). 6. Consumer surplus for domestic consumers has been calculated based on: (i) a kerosene price of 67.9 sene/liter; (ii) a kerosene equivalence factor of 1.7; and (iii) a consumer surplus (curvature correction) factor of 35 per cent. 7. Consumer surplus for other consumers (industrial, commercial, etc.) has been calculated based on the use of a 2.5-kW diesel generator set as alternative to electricity from EPC. This set is assumed to have an economic life of 10 years, an annual usage of 1,800 hours, a fuel consumption of 0.4 liter/kWh and a capital cost of WS$7,900. The diesel price is assumed to be 84 sene/liter and the consumer surplus (curvature correction) factor at 35 per cent. 8. The exchange rate is assumed at US$1.00 to WS$2.5259. 9. The standard conversion factor used to convert market price to border price is 0.9. (Reference in text: page 8, para. 23) AFULILO - CALCULATION OF FINANCIAL RATE OF RETURN ('000$) CAPITAL COST O & M TOTAL GENERAT. SALES REVENUE NET FX LC TOTAL COST COST (GWh) (GWh) 0.1714 BENEFIT 1987 (874) 0 (874) (874) (874) 1988 (571) 0 (571) (571) (571) 1989 (468) (128) (597) (597) (597) 1990 (2,199) (227) (2,426) (2,426) (2,426) 1991 (7,075) (933) (8,008) (8,008) (8,008) 1992 (5,154) (1,053) (6,206) (6,206) (6,206) 1993 (5,347) (1,388) (6,735) (6,735) 7.3 6.4 1,102 (5,632) 1994 (5,458) (1,306) (6,764) (644) (7,408) 21.0 18.3 3,132 (4,275) 1995 (644) (644) 22.0 19.1 3,281 2,638 1996 (644) (644) 23.0 20.0 3,431 2,787 1997 (644) (644) 24.0 20.9 3,580 2,936 1998 (644) (644) 24.0 20.9 3,580 2,936 1999 (644) (644) 24.0 20.9 3,580 2,936 2000 (644) (644) 24.0 20.9 3,580 2,936 2001 (644) (644) 24.0 20.9 3,580 2,936 2002 (644) (644) 24.0 20.9 3,580 2,936 2003 (644) (644) 24.0 20.9 3,580 2,936 2004 (644) (644) 24.0 20.9 3,580 2,936 2005 (644) (644) 24.0 20.9 3,580 2,936 2006 (644) (644) 24.0 20.9 3,580 2,936 2007 (644) (644) 24.0 20.9 3,580 2,936 2008 (644) (644) 24.0 20.9 3,580 2,936 2009 (644) (644) 24.0 20.9 3,580 2,936 2010 (644) (644) 24.0 20.9 3,580 2,936 2011 (644) (644) 24.0 20.9 3,580 2,936 2012 (644) (644) 24.0 20.9 3,580 2,936 2013 (644) (644) 24.0 20.9 3,580 2,936 2014 (644) (644) 24.0 20.9 3,580 2,936 2015 (644) (644) 24.0 20.9 3,580 2,936 2016 (644) (644) 24.0 20.9 3,580 2,936 2017 (644) (644) 24.0 20.9 3,580 2,936 2018 (644) (644) 24.0 20.9 3,580 2,936 2019 (644) (644) 24.0 20.9 3,580 2,936 2020 (644) (644) 24.0 20.9 3,580 2,936 2021 (644) (644) 24.0 20.9 3,580 2,936 2022 (644) (644) 24.0 20.9 3,580 2,936 FIRR = 7.4% AFULILO - CALCULATION OF ECONOMIC RATE OF RETURN ('000$) CAPITAL COST O & M TOTAL GENERAT. SALES REVENUE NET FX LC TOTAL COST COST (GWh) (GWh) 0.2267 BENEFIT 1987 (874) 0 (874) (874) (874) 1988 (571) 0 (571) (571) (571) 1989 (468) (115) (584) (584) (584) 1990 (2,199) (204) (2,403) (2,403) (2,403) 1991 (7,075) (840) (7,915) (7,915) (7,915) 1992 (5,154) (947) (6,101) (6,101) (6,101) 1993 (5,347) (1,249) (6,596) (6,596) 7.3 6.3 1,291 (5,305) 1994 (5,458) (1,175) (6,634) (634) (7,267) 21.0 18.3 3,728 (3,539) 1995 (634) (634) 22.0 19.1 3,905 3,272 1996 (634) (634) 23.0 20.0 - 4,083 3,449 1997 (634) (634) 24.0 20.9 4,260 3,627 1998 (634) (634) 24.0 20.9 4,260 3,627 1999 (634) (634) 24.0 20.9 4,260 3,627 2000 (634) (634) 24.0 20.9 4,260 3,627 2001 (634) (634) 24.0 20.9 4,260 3,627 2002 (634) (634) 24.0 20.9 4,260 3,627 2003 (634) (634) 24.0 20.9 4,260 3,627 2004 (634) (634) 24.0 20.9 4,260 3,627 2005 (634) (634) 24.0 20.9 4,260 3,627 2006 (634) (634) 24.0 20.9 4,260 3,627 2007 (634) (634) 24.0 20.9 4,260 3,627 2008 (634) (634) 24.0 20.9 4,260 3,627 2009 (634) (634) 24.0 20.9 4,260 3,627 2010 (634) (634) 24.0 20.9 4,260 3,627 2011 (634) (634) 24.0 20.9 4,260 3,627 2012 (634) (634) 24.0 20.9 4,260 3,627 2013 (634) (634) 24.0 20.9 4,260 3,627 2014 (634) (634) 24.0 20.9 4,260 3,627 2015 (634) (634) 24.0 20.9 4,260 3,627 2016 (634) (634) 24.0 20.9 4,260 3,627 2017 (634) (634) 24.0 20.9 4,260 3,627 2018 (634) (634) 24.0 20.9 4,260 3,627 2019 (634) (634) 24.0 20.9 4,260 3,627 2020 (634) (634) 24.0 20.9 4,260 3,627 2021 (634) (634) 24.0 20.9 4,260 3,627 2022 (634) (634) 24.0 20.9 4,260 3,627 EIRR = 9.7% 23 BASIC DATA Loan No. 813-SAM(SF) Loan No. 1Z8.AM(SF) A. Loan Identification 1. Country Western Samoa 2. Project Title Afulilo Hydroelectric Project 3. Borrower Independent State of Western Samoa 4. Executing Agency Electric Power Company (EPC) 5. Amount of Loan $5.4 million ! $2.0 million 2 B. Loan Data 1. Appraisal/Reappraisal - Date Started : 08 September 1986 07 September 1992 - Date Completed 19 September 1986 18 September 1992 2. Loan Negotiations - Date Started : 28 October 1986 Not necessary - Date Completed 29 October 1986 Not necessary 3. Date of Board Approval 04 December 1986 22 April 1993 4. Date of Loan Agreement 24 December 1986 03 May 1993 5. Date of Loan Effectiveness - In Loan Agreement 24 March 198723 02 August 1993S4 - Actual 22 May 1987 30 June 1994 6. Closing Dates - In Loan Agreement 31 December 1991 30 June 1994 - Actual 15 November 1993 Not yet close&' The equivalent in various currencies of SDR 4.428 million from the Bank's Special Funds resources. The loan amount at appraisal was US$5.4 million equivalent. The equivalent in various currencies of SDR 1.457 million from the Bank's Special Funds resources. The loan amount at re-appraisal was US$2.0 million equivalent. Loan effectiveness date was extended to 25 May 1987. Loan effectiveness date was extended to 30 June 1994. Loan closing date was extended to 30 June 1994. Loan is expected to be closed by 31 December 1994 at the latest. 24 7. Terms of Loan - Interest Rate 1 percent per annum 1 per cent per annum - Maturity (in years) 40 years 40 years - Grace Period (in years) 10 years 10 years 8. Disbursements Loan No. 813-SAM(SF) (a) Dates Initial Final Time Interval 28 Aug 1987 15 Nov 1993 6 yrs. 2-1/2 months Effective Date Original Closing Date Time Interval 22 May 1987 31 Dec 1991 4 yrs. 7 months (b) Amount (US$'000) Net Original Last Revised Amount Amount Undisbursed Item Category Loary AJlocationY Availabley DisbursedS' Balance!' Equipment and Materials I 3,122 3,697 3,765 3,765 0 Consultants' Services II 1,183 2,351 2,132 2,132 0 Interests & Other Charges III 127 150 143 143 0 Prior TA Costs IV 127 150 136 136 0 Unallocated V 841 46 0 0 O Total 5400 6 394 6176 6J76 0 !' Amount converted from SDR to USS equivalent using exchange rate at the time of appraisal (September 1986) of 0.820000. Y Revised amount based on 11 September 1992 exchange rate of 0.692444. 2 Based on the actual exchange rates used during disbursements. Y As of 15 November 1993. 25 Loan No. 1228-SAM(SF) (a) Dates Initial Final Time Interval 28 September 1994 Ongoing Effective Date Original Closing Date Time Interval 30 June 1994 30 June 1994 None (b) Amount (US$'000) Net Supplemen- Amount Amount Undisbursed Item Category tary Loany AvailableY DisbursedY Balance Equipment and Materials 1 1,380 1,476 0 1,4763 Consultants' Services II 620 663 445 218' Total 2,000 2.139 445 1,694 ' Amount converted from SDR to USS equivalent using exchange rate at the time of Reappraisal (September 1992) of 0.728500. 3' These figures are based on the actual figures as of 18 October 1994. -Y EPC estimates that amount allocated will be fully utilized. 9. Local Costs Financed: No local costs were financed under the Loan. C. Project Data 1. Project Cost (USS million) Appraisal Reappraial Estimate Etimnate Actual Foreign Exchange Cost 13.59 28.39 27.03 Local Cost 3.61 4.81 5.43 Total Cost 17.20 33.20 32.47 2. Financing Plan (USS'000) Appraisal Reappraisal Actual Foreign Local Total Foreign Local Total Foreign Local Total (j) Implementation Costs (a) Borrower Financed 0 315 315 792 2,718 3,510 0 3,984 3,984 (b) ADB Financed 5,200 0 5,200 7,476 0 7,476 8.057 0 8.057 (c) EC Financed 5,190 555 5,745 12,327 0 12,327 11,394 0 11,394 (d) EIB Financed 0 1,540 1,540 3,152 0 3,152 3,377 0 3.377 (e) DA Finawced 3.000 0 3,000 4.124 0 4,124 3,667 0 3,667 (f ADAB Financed 0 0 0 229 0 229 228 0 228 Total 13390 2,410 15,800 _8100 2.718 30,818 26,723 3,984 30,707 (iH) IOC Costs, Taxes and Duties (a) Borrower Financed 0 1,200 1,200 0 2,093 2.093 0 1.448 1.448 (b) ADB Financed 100 0 100 136 0 136 155 0 155 (c) EC Financed 0 0 0 0 0 0 0 0 0 (d) EIB Financed 0 0 0 0 0 0 0 0 0 (e) DA Financed 0 0 0 0 0 0 0 0 0 (f) AIAB Financed 0 0 0 0 0 0 0 0 0 Total 100 1 200 1,300 136 2093 2.229 155 1.448 1.603 (ii) TA Recovery 100 0 100 151 0 151 155 0 155 Total 13,59 3,610 17.20 2387 4,811 3 27 3. Cost Breakdown by Projed Component (US$'0D0) Aprpm Estimate Ackal Foreign Toa Foreign Local Total A Prepwnatory Work 1. Land Acquaiiton Srvey 0 40 40 e6a 0 65 2. Land Compensation 0 50 50 0 407 1 407 3. Resrvor Invtigation 190 30 220 ff 0 96 4. Accs Road 0 85 85 e8a' 50 118 Sub-Total A 190 205 395 228 456 684 B. Main Civil Contract 1. Mobrrzation 800 0 800 2. Ahlilo Dam 2,530 570 3,100 3. Tunnel at Ahluo 200 30 230 4. Pielmw & swge Chamber 1,250 200 1,480 8. Powerhous and Tailrace 400 90 490 e. PcrmanrtHousing 70 30 100 0 122 122 7. Physical Contingencies 20% 980 180 1,160 Sub-Total B 5,930 1,100 7,030 14.938 1,093 16,031 " C. Mechanical and Elctrical Woul 1. Pipline (Supply only), Pipm & Vavs 1.050 28 1,078 2,079 0 2,079' 2. Gonrating Equipnmnt 875 25 900 3 Spiheay Gate 210 10 220 0 0 0"B 4. Electrical and Commnwication Equipment 1,185 70 1,255 5. Physical Contingencies 10% 340 10 350 Sub-Total C 3,660 140 3,800 4,880 0 4,850" D. Tranamiasion Lines 1. Mobilization & Equipmert 200 0 200 2. Transmission Lins Erection 760 258 1.015 3 Physical Contingencies 95 25 120 Sub-Toab D 1,055 280 1,335 2,720 1,256 3,977 E. Consulting Servic 1 Engneruingand Construction 1,185 110 1,295 2,091 595 3,285 2 Technical Review Expert 50 0 80 209 0 200 3 Project Engineer 0 0 0 840 5 845 4 Tranamiuson Enginer 0 0 0 0 35 35 5. Contbngency 115 0 115 0 0 0 Sib-Total E 1,350 110 1,480 3,740 a38 4,374 F. Escalation 1,205 575 1,780 0 0 0 G. IDC and Other Charges 1. FinrncedbyADB 100 0 100 185 0 185 2. FinrncedbyEPC 0 1.200 1,200 0 1,448 1,448 Sub-Total G 100 1,200 1,300 155 1,448 1,603 H. RecoveryofPriorTACosts 100 0 100 317 0 317 I. Micelanous Costs 10' 0 0 0 84 545 629 TOTAL PROJECT COST 13,590 3,10 17,200 27,033 5,433 32,406 I Representing AS85,000 grantfrom AIDAS. 2' This corresponds to an estimate for WSS1 miRon As yet, no compeation has besn paid. I Representing AS1 25,D00 grant from AJDAB 4' Reprenriting a AS90,000 graant from AIDAS " Al items except permannt housing are under one cue works contract (ACI). 6' Under one cortract for Pipes and Hydraulic Stee Structures (AM2). Design alted to exclude spillway gates. " In addition to the contract for Pipm & Hydrclic Stel Structerss (AM2) this includes two contracts: AM3 - Turbinss and Mechanical Equipment (USS775202) AE4 - Generwora and Electrical Equipmcnt (US11,91 7,749) 9 All items under tiess contracts. AE5 - Tranemision lines and line mtriai (US$3,398,303) AEC - Tranmmision line and constructon equipment (US$91,274) AE7 - EPO ltw erection (US$37A394) ° Includestaining (US$82,108), reseroirlearing (US$410,894) and schoolinTalkga n(S$118,545). 28 4. Project Schedule Appraisal Estimate Actual (a) Date of Contract with Consultants - Engineering Apr 1987 26 June 1987 - TRE July 1988 30 Aug 1988 (b) Commencement of Services - Engineering Apr 1987 July 1987 - TRE Jul1988 Sep 1988 (c) Completion of Services - Engineering Oct 1990 Dec 1993 - TRE Mar 199f-' Ongoing (d) Completion of Engineering Designs - Jun 1989 (e) Civil Works Contract - Date of Award Jul 1988 26 Jul 1990 - Completion of Work Oct 1 9903/ 25 Jun 1993 (f) Equipment and Supplies Dates - First Procurement Dec 1987 12 Sep 1990 - Last Procurement Sep 1988 29 Nov 1991 - Completion of Equipment Installation Jun 1990 15 Jun 1993 (g) Start of Operations - Completion of Tests and Commissioning - Jun 1993 - Commercial Operations Oct 1990 Nov 1993 ' No date is mentioned in the Appraisal Report. This date was specified in a Memorandum of Understanding of 30 August 1988 between EPC and the TRE and was extended to December 1994 by Amendment No. 1 of January 6,1994 to the MOU. 2' The date of completion of work was extended to 30 June 1993 by Amendment to Principal Loan Agreement (see Supplementary Loan Agreement, Section 5.02). 29 D. Data on Bank Missions No. of No. of Specialization Type of Mission Date Persons Staff-days of Members 1' Fact Finding 4-18 May 1986 6 84 a, b, c, d, e, f Appraisal 8-19 Sep 1986 5 55 a, d, e, f. g Review 31 Jan-5 Feb 1987 1 5 h Inception 25 Nov-1 Dec 1987 2 12 e, h Review 31 Jan-5 Feb 1989 1 5 h 18-24 Aug 1989 2 12 f. h 21-29 Jan 1991 1 8 i 3-12 Feb 1992 2 20 d, Development Partners' Meeting 17 July 1992 1 1 i Reappraisal 7-18 Sep 1992 2 20 a,d Review 14-24 June 1993 1 11 d PCR 8-19 Aug 1994 3 27 k,l,m jj a - Sr. Financial Analyst/Economist. b - Sr. Country Economist, c - Sr. Environmental Specialist, d - Project Engineer, e - Financial Anatyst, f - Staff Consultant, g - Counsel, h - Sr. Project Engineer, i - Project Economist, j - Technical Assistant, k - Senior Energy Specialist, I - Young Professional, m - Sr. Assistant (Project Administration) 1 7240OW 171o10lW WESTERN SAMOA UPOLU ISLAND AFULILO HYDROELECTRIC PROJECT _ V ait ~~~~~~~~~Samoni -130555S X 113055S i ~~~~Upgmdhng to 33 kV Kilomsters Futur Fbnned 66kV LEGEND: o Towni * Hydro Power 9atio n * I DOiesel Power Selteon _Main Road ,-'--cZa River Pacific Ocean ____Existing 22kcV Transmisston Uine (unless othoerwse tlated) . .., Future Planned Construction ____Construdted under Projed 172140W 1703W X 5 0 Satel~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- 31 ~~~~~~~~Map 2 / WESTERN SAMOA / AFLILO HYDROELECTRIC PROJECT ~~~~ ~~General Layout ((/ ~Fagaloa Bay/ ~~~~~~~~~~~~~~~~...........uw x - ~~~~~~~~~~' .' ..........B ELEFAGA ........, ...........~~~~~~~~~~~~~~~~~~~~~.... ...... S. -... ''.: : ; . :. ~Tunnel 2 i tLEGEND: , s%; ~~~~. ....,,,.,.,.___ Transmission Line 150 - 5^; ~~~~~~~~~~~~~~~~Pipeline - , - ~~~~~~Road < -- ..... 0., R~~~~~~~~~~~~Fiver * 2 > * * * m ~~~~~~~~~~~~~~~~Land Elevation (merer) j Vaipu Swamp \\s: :: ....~~~~~~~~~~~~~~~~~~~. . . . . :. . . . .. . . .. g ~~~~~~Headrace : ; ..--X ~~~~ ~~~Tunnel 1X < \ \ i t \ ~~~~~~~~~~~~~~Afulilo Reservoir \ 8 ~~~~~~~~~~~~Atu/doFas \ X 8 .- .S \s;J--,-P, ... * ..4 . , je : * .X46~~~~ vi Fagalepolo IMAGING Report No: 15247 Type: PCR