China - Sichuan Power Transmission Project

Document of The World Bank Report No: 25612 IMPLEMENTATION COMPLETION REPORT (CPL-38480 SCL-3848A) ON A LOAN IN THE AMOUNT OF US$270 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE CN-SICHUAN POWER TRANSMISSION PROJECT June 16, 2004  CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = Yuan (Y) Y1 = US$ 0.12048 US$ 1 = Y8.28 Exchange Rate During Project Years (Year Average) 1995 Y8.4 1996-2002 Y8.3 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CEPC Chongqing Electric Power Company dBA Decibel with an A frequency weighting DSCR Debt Service Coverage Ratio EHV Extra-High Voltage EIA Environmental Impact Assessment EMS Energy Management System GCB Gas Circuit Breaker GIS Gas Insulated Switchgear GNP Gross National Product ICR Implementation Completion Report IDC Interest During Construction RAP Resettlement Action Plan SAR Staff Appraisal Report SDB State Development Bank SEC Sichuan Economic Commission SEPC Sichuan Electric Power Company SFR Self Financing Ratio SIC Sichuan Investment Company SPC State Power Corporation SRIEP Sichuan Research Institute of Environmental Protection SWED The China Electric Power Construction Engineering Consultant Corporation Southwest Company Vice President: Jemal-ud-din Kassum Country Manager/Director: Yukon Huang Sector Manager/Director: Junhui Wu Task Team Leader/Task Manager: Jianping Zhao  CHINA CN-Sichuan Power Transmission Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 6 6. Sustainability 7 7. Bank and Borrower Performance 8 8. Lessons Learned 9 9. Partner Comments 10 10. Additional Information 10 Annex 1. Key Performance Indicators/Log Frame Matrix 11 Annex 2. Project Costs and Financing 14 Annex 3. Economic Costs and Benefits 16 Annex 4. Bank Inputs 18 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 20 Annex 6. Ratings of Bank and Borrower Performance 21 Annex 7. List of Supporting Documents 22 Annex 8. Implementation of Environment Management Plan 23 Annex 9. Implementation of Resettlement Action Plan 29 Annex 10. Borrower's Completion Report 34 Annex 11. Borrower's Comments 37  Project ID: P036947 Project Name: CN-Sichuan Power Transmission Project Team Leader: Jianping Zhao TL Unit: EASEG ICR Type: Core ICR Report Date: June 17, 2004 1. Project Data Name: CN-Sichuan Power Transmission Project L/C/TF Number: CPL-38480; SCL-3848A Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Power (100%) Theme: Infrastructure services for private sector development (P); Regulation and competition policy (P); Pollution management and environmental health (P); Climate change (S) KEY DATES Original Revised/Actual PCD: 12/21/1993 Effective: 11/20/1995 11/20/1995 Appraisal: 06/25/1994 MTR: Approval: 02/28/1995 Closing: 12/31/2002 12/31/2003 Borrower/Implementing Agency: PRC/SEPC Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautam S. Kaji Country Director: Yukon Huang Nicholas C. Hope Sector Manager: Junhui Wu Richard D. Newfarmer Team Leader at ICR: Jianping Zhao Vukota Mastilovic ICR Primary Author: Mariko Ogawa 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Project objectives were to: (i) alleviate acute power shortages in the Sichuan grid; (ii) assist in the introduction of power sub-sector reforms in Sichuan Province; (iii) support power tariff rationalization; (iv) promote technology transfer for extra-high voltage (EHV) transmission; (v) strengthen institutional capabilities for environmental and resettlement management; and (vi) upgrade management and operation capabilities through staff training. While creation of the 500 kV transmission infrastructure between the 3,300 MW (Bank-financed) Ertan hydro Project and the Sichuan Province, was essential for meeting the province's critical power needs at least cost, transformation of Sichuan Electric Power Corporation (SEPC) from a semi-autonomous government agency to a modern power company was vital for efficient functioning of the greatly enlarged power system. The Project's objectives were consistent with the Government's reform strategy of: (i) commercialization and corporatization of provincial power bureaus; (ii) introduction of competition and transparency of operations; (iii) establishment of a tariff policy consistent with the competitive business framework; and (iv) transfer of new technologies. The objectives were also consistent with the Bank's Country Assistance Strategy (CAS), to: (i) facilitate transition of provincial power companies to autonomous, business-oriented entities; (ii) alleviate power shortages with minimal environmental impact; and (iii) accelerate power sector reforms. This first Bank-financed project for SEPC presented both physical and institutional challenges. The Project supported the first EHV transmission network in a terrain which called for new technologies. Power sector reforms were multidimensional and risky, signaling, as they did, a fundamental change in the way the regional power systems were operating. With adequate consulting services and an extensive training program, project implementation was considered to be within the Borrower's reach. 3.2 Revised Objective: The objectives of the Project were not revised during project implementation. 3.3 Original Components: Physical components: (i) construction of about 2,260 km of 500-kV transmission lines; (ii) construction of five 500/220 kV transformer substations (5,250 MVA) and one 500-kV switching substation; and (iii) reinforcement of the existing transmission network. Environmental components: (i) establishment of environmental management and monitoring programs; and (ii) resettlement and rehabilitation of persons affected by transmission network expansion. Technical assistance components: (i) strengthening SEPC's capability to implement an Action Plan comprising improvements in organization, accounting and financial management information systems; (iii) strengthening environmental and resettlement management capabilities of SEPC; and (iv) provision of engineering and construction management services and training. 3.4 Revised Components: There were no changes to the Project's components during implementation. 3.5 Quality at Entry: The Project's quality at entry is rated as satisfactory. Its objectives were well oriented towards Government's (and Bank's) strategy to remove infrastructural bottlenecks to sustain rapid economic growth and, in parallel, progressively reform the sector to meet the needs of a socialist market economy. Measures to strengthen SEPC's environmental management and resettlement capabilities were essential for - 2 -  ensuring rapid power system growth in an environmentally and socially sustainable manner. In practice, though, the original Resettlement Action Plan (RAP), proved inadequate during implementation. The Staff Appraisal Report (SAR) correctly identified construction delays and cost overruns as major, though manageable, risks facing the Ertan Hydro Project and the Project's transmission system. It sought to minimize those risks through improved procurement arrangements, enhanced project management, substantial consulting support and ample physical and price contingencies. Still, the Project suffered completion delays ranging from six months to two years; the slower than anticipated demand growth served to moderate the otherwise potentially adverse economic impact. Identifying risks of lower than needed power tariff adjustments, the Bank secured agreements with the Government on action plans for pricing reforms. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The Project's overall outcome is rated as satisfactory. The Project financed infrastructure that was a high priority for the economic development of Sichuan Province. Without the transmission facilities constructed under the Project, SEPC would not be able to meet about 20 percent of provincial power demand at a time of rapid economic growth. On the institutional side, the Project's main contribution was helping SEPC implement the Central Government's restructuring strategy at the provincial level. In addition, SEPC improved its technical capabilities in transmission line construction as well as environmental monitoring and management. Furthermore, the Project went beyond original expectations to make Sichuan Province one of the first areas with a competitive market for power generation. In contrast, the Project's achievements in the development of tariff policy were not nearly as far reaching. Instead of eliminating all of the preferential tariff categories, by the closing of the Project, SEPC had achieved 80 percent of this goal, though the average tariff was still below the estimated long-run marginal cost of supply. However, SEPC, throughout the Project remained a financially viable company and the projections for the next seven years show that SEPC will likely sustain this achievement. Physical Objectives The Project substantially achieved its physical objectives