Liberia - Third Power Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4228-LBR LIBERIA ELECTRICITY CORPORATION THIRD POWER PROJECT LOAN 1150-LBR PROJECT COMPLETION REPORT December 6, 1982 Western Africa Region Projects Department Energy Division 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 The official monetary unit is the Liberian dollar with a par value equal to the US dollar. The US dollar is legal tender in Liberia. Fiscal Year January 1 - December 31 Abbreviations LEC - Liberia Electricity Corporation PUA - Public Utilities Authority JICA - Japan International Cooperation Agency OPEC - Organisation of Petroleum Exporting Countries USAID - United States Agency for International Development MST - llanagement Support Team LDC - Less Developed Country  FOR OFFICIAL USE ONLY LIBERIA ELECTRICITY CORPORATION THIRD POWER PROJECT LOAN 1150-LBR PROJECT COMPLETION REPORT Table of Contents Page No. Preface......................................................... Key Project Data ............... ii Highlights ............... iv I. INTRODUCTION AND BACKGROUND ............................ 1 Introduction ........................................... 1 Background ............................................. 1 Power Sector ........................................... 1 II. PROJECT IDENTIFICATION AND PREPARATION ................. 2 Project Identification ................................. 2 Project Description .................................... 2 III. PROJECT IMPLEMENTATION AND COST ........................ 3 Procurement ............................................ 3 Investigation of hydroelectric resources ............... 4 Establishment of a long range development plan ......... 4 Preparation of Detailed Investment Program ............. 5 Provision of Experts to strengthen Management .......... 5 Training ............................................... 6 Tariff Study and Tariff Revisions ...................... 7 Autonomy of LEC ........................................ 7 Project Cost and Disbursement .......................... 7 IV. PROJECT ACHIEVEMENTS AND JUSTIFICATION ................. 8 Quality of Service ..................................... 8 Equipment Utilization and Maintenance .................. 8 Personnel Productivity ........... * . .................... 9 Distribution Efficiency ................................ 9 Billing and Collection of Revenue .10 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.  V. BANK PERFORMANCE ......................... 10 VI. CONCLUSION ......................... 11 ANNEX I Status of Principal Covenants .13 ANNEX II Schedule of Disbursements as of June 30, 1981 .15 ANNEX III Comments on Draft PCR by General Manager of Liberia Electricity Corporation .16 ATTACHMENT: Comments from Borrower ...........................  Project Completion Report Liberia Third Power Project Loan 1150 LBR Preface This is a completion report of the Third Power Project, for which Loan 1150 LBR was approved on July 8, 1975. The objective of the loan was, in the short term to halt the deterioration of the Liberia Electricity Corporation's services and lay the foundation for later improvements, and in the longer term to reestablish the Corporation as an efficient power utility with enhanced planning capability for future developments. The Project Completion Report was prepared by the Western Africa Region on the basis of a country visit in November, 1981, the President's Report of June 25, 1975, and a study of the files. Comments were received from the borrower and have been attached as an Annex, and where appropriate these have been reflected in the report. The project has not been subjected to audit by the Operations Evaluation Department.   - ii - PROJECT COM~PLETION BASIC DATA SHEET LIBERIA - THIRD POWER PROJECT (LOAN 1150-LBR) KEY PROJECT DATA Appraisal Item Expectation Actual Total Project Cost (in US$ million) 1.8 1.8 Cost Overrun (%) Nil Loan Amount (US$ million) 1.0 1.8 Disbursed 1.8 1.8 Cancelled Nil Date Physical Components Completed 12-31-78 6-30-81 Proportion of Time Overrun - 79% Financial Rate of Return on net revalued assets (%) 10% -3.6%(1978) 1.6%(1979) Operational Performance Improved Improved Management and Institutional Improved Not substantial except in certain areas (para. 3.08) Estimated Cumulative and Actual Disbursements (US$ million) FY75 FY76 FY77 FY78 FY79 FY80 FY81 (i) Appraisal Estimate 0.1 0.9 0.6 0.2 0 0 (ii) Appraisal Cumulative Estimate 0.1 1.0 1.6 1.8 1.8 1.8 (iii) Revised Cumulative Estimate 0 0 0.2 0.8 1.2 1.8 0 (iv) Actual Cumulative Disbursements 0 0 0.2 0.8 1.2 1.4 1.8 (v) Actual Cumulative Disbursements as % of Cumulative Estimates 0 0 20 50 67 78 100   - iii - OTHER PROJECT DATA Item Original Plan Revision Ac-tual First Mention in Files 6-15-73 LEC's Loan Application 5-22-75 Nego-tiations 5-19-75 Board Approval 7-8-75 7-8-75 Loan Agreement Date 8-1-75 8-1-75 Effectiveness Date 10-20-75 6-30-80 Closing Date 6-30-79 12-31-80 6-30-81 Borrower LEC Executing Agency LEC Fiscal Year of Borrower Calendar Year July 1 to June 30 Loan Number 1150-LBR Amount (US$ million) 1.8 Loan Date 8-1-75 Follow-on Project "Fourth Power Project" 6-15-78 Loan 1600 LBR MISSION DATA No. of No. of Staff Da-te of Item Month/Year Weeks Persons Weeks Report Appraisal 10-74 3 3 9 6-25-75 Total Supervision I 9-75 1 1 1 9-25-75 Supervision II 2-76 1 2 2 9-30-76 Supervision III 2 77 1 2 2 4-20-77 Supervision IV 11 78 1 2 2 1-05-78 Supervision V 5-79 2 2 4 6-25-79 Supervision VI 12-80 1 2 2 3 16 81 Completion Report 11-81 1.5 1 1.5 12/81 Total 14.5 COUNTRY EXCHANGE RATES Name of Currency Liberian dollar (Ld.) Exchange Rate:_ At Appraisal 1974 US$1.00 Ld $1.00 Intervening Year Average 1975-80 US$1.00 = Ld $1.00 Completion Date (1981) US$1.00 Ld $1.00 / Liberia uses US dollars as official currency.   - iv - Project Performance Audit Report Liberia Third Power Project Loan 1150 LBR Highlights The project originated from the appraisal in 1974 of a project to extend the Liberia Electricity Corporation's (LEC) diesel generating capacity in Monrovia. The appraisal mission for that project concluded that because of a reduced growth rate in demand for power, the project should be deferred for about two years. The mission also concluded that the LEC was badly in need of technical assistance to improve its management. Since neither the UNDP nor bilateral financing was available, the Bank agreed to finance the required technical assistance and some planning studies. The loan became effective in October 1975. It was due to be completed by December 1978 but was extended for two and a half years to June 1981 because of delay in completing a study of the hydroelectric resources of the St. Paul River. The principal objective of the loan was to improve the management of LEC, particularly in the areas of planning and accounting, and also to improve the corporation's cash position, in order to prepare a sound basis for the next stage of development. The project was successful in completing an inventory of potential developments of hydroelectric power on the St. Paul River, including a prefeasiblity study of the preferred project for initial development. A detailed five year investment plan was prepared and the foundations laid for preparation of a long term development plan. The project was not successful in improving the LEC's cash position and only in the planning and transmission and distribution departments was there any marked improvement in management. One of the reasons for this poor performance was the fact that LEC had no previous experience of recruiting expatriates for technical assistance and before the Bank was aware of it the LEC hired a multinational team of experts which subsequently proved to be a failure. Another reason for the lack of success in training management was the difficulty of obtaining suitably qualified Liberians to train because of the inadequate salary scales imposed on LEC by the Government. The main reason for the failure to improve the cash position was the Government's refusal to approve the required tariff increases. Other reasons were, the failure to stop widespread theft of electricity through illegal connections and tampering with meters, and inadequacies in the meter reading and billing departments. The Government did not meet the covenant in the Guarantee Agreement that LEC would be permitted to fully exercise the powers conferred on them by the Act of 1973 establishing the Corporation. As a result of the Government's  default the Borrower did not meet the covenants which required them to (i) introduce a new salary structure adequate to attract qualified personnel, and (ii) take such action including tariff increases as may be necessary to achieve a rate of return on current value of net fixed assets of 10% from January 1977. With regard to (ii) the rate of return on "historically" valued assets was only 1.9% in 1977 and minus 3.6% in 1978, and losses increased from 28% of net KWh generated in 1975 to 34.5% in 1979. The principal lessons to be learned from this project are (i) supervision by the Bank needs to be more frequent than every twelve months (as in this case), especially in the early stages when visits at three or four months intervals might be justified, (ii) unless Governments are prepared to observe the loan convenants which require them to permit parastatal bodies such as LEC to exercise the degree of autonomy conferred on them by their statutes - particularly in the matter of determining adequate levels of staff remuneration and tariffs, there is very little the Bank Group can do to help them improve efficiency through loans or grants for technical assistance.  PART I - INTRODUCTION & BACKGROUND Introduction 1.01 In 1980 there was a general upheaval in Liberia following the coup which formed the present Government. In the period following the coup a number of changes were made in senior staff positions in LEC, in some cases successive changes, as a result of which some senior staff have been in their present jobs for a few months only. This factor made it very difficult for the Bank staff responsible for preparing this project to obtain a coherent picture of the sequence of events, the reason for certain actions on the part of the borrower, or the performance of the main participants in the field. Background 1.02 Before 1972, the Public Utilities Authority (PUA) operated as an autonomous government-owned agency responsible for power, water supply and sewer services. In 1972, when radio, T.V. and telecommunications were added to its responsibilities, PUA was reorganized into a holding corporation with four subsidiary corporations, one of which, the Liberia Electricity Corporation (LEC), was responsible for the power sector. According to their statutes, all of the four subsidiary corporations were to be run as separate entities with full financial autonomy. PUA was to be responsible for policy making only, leaving management functions to the four subsidiaries. However, the law establishing PUA as a holding corporation was unclear about its authority and responsibility, and in practice PUA was very much involved in LEC's day to day management. 1.03 Up to 1975, the Bank had made two loans and a supplemental loan to the Liberian public power sector, 684-LBR1Por US$ 7.4 million in June 1970 and 778-LBR for US$ 4.7 million in July 19711- These loans helped finance a 34 MW expansion of the Mount Coffee hydroelectric plant, two gas turbines for the Monrovia system, and associated transmission and distribution facilities. To cover project cost increases because of currency fluctuations and increase in the size of the gas turbines chosen for installation, the Bank made a supplemental loan of US$2.9 million in 1973 (loan 778A-LBR). The borrower for these three loans was the Public Utilities Authority (PUA). Power Sector 1.04 In 1972 a statute creating LEC as an autonomous government enterprise gave it the authority to borrow money and set electricity rates. It had its own Board of Directors consisting of nine members: a chairman who was 1/ Both these loans and the supplemental loan were the subject of an OED audit in February 1977.  - 2 - previously chairman of PUA, the Minister of Finance, the Minister of Justice, the Minister of Planning and Economic Affairs, and five representatives of the private sector appointed by the President. 1.05 By 1975 about 40 percent of the power consumed in Liberia was supplied by the Liberia Electricity Corporation (LEC), while the remaining 60% was generated and used mainly by iron ore mining companies. LEC's system was the main source of public power and served the capital Monrovia and its environs. LEC's generating plant consisted of two 15 MW and two 17 MW units at the Mount Coffee hydroplant on the St. Paul River, four gas turbines with a total capacity of 68 MW and six diesel units with a total capacity of 13 MW a total of 145 MW. Since the Mount Coffee plant is a run-of-river plant and the dry season riverflow is equivalent to about 10 MW, the total firm capacity of the system was only about 80 MW, allowing for about 11 MW diesel plant in reserve. In addition to these facilities, LEC operated seven small secondary centers on an agency basis for the Government. The mining companies, together with some small privately owned installations, have an installed capacity of about 150 MW. PART II - PROJECT IDENTIFICATION AND PREPARATION Project Identification 2.01 In 1974, LEC requested a third Bank loan to finance a thermal generating facility recommended by its consultants. This facility was planned to provide LEC's system with sufficient capacity to meet demand until the early 1980s. While in the field to appraise this project, the Bank mission concluded that because of reduced load growth the installation of a further thermal generating facility should be postponed by about two years but LEC urgently needed technical assistance to improve its management. The Government accepted both of these conclusions, and the Bank and the Government contacted a number of potential bilateral and multilateral sources for financing a technical assistance project. Since none of the other sources was willing to provide the funds required, the Bank agreed to finance the technical assistance along with some needed studies, as an interim project leading to the Power IV loan for expansion of generating facilities. The objective was to halt the deterioration of LEC's services and reestablish it as an efficient power utility and to determine priorities for additions to generating facililties. Project Description 2.02 The project consisted of: (A) The provision of qualified and experienced personnel, including consultants, to:  -3- i. Investigate the hydro resources of the St. Paul River in order to complete the inventory of hydroelectric potential in the vicinity of the principal load centered around Monrovia; ii. Establish a long range development plan for the power sector in Liberia based on a demand study; iii. Prepare a detailed investment program including the next addition to generating capacity. (B) The provision of experts: i. to strengthen the LEC's management; and ii. to train the LEC's management and operational staff. Details of non standard covenants contained in the loan and project agreements and comments on the borrowers adherence to them, or otherwise, are given in Annex I. PART III - PROJECT IMPLEMENTATION AND COST 3.01 The Project became effective on October 20, 1975 and was scheduled to be finished by December 31, 1978. The closing date was extended to December 31, 1980 and finally to June 30, 1981, in order to provide time to complete the hydro-resources study and the management assistance program. There were no revisions and the project was finally completed at the estimated cost in June 1981. A schedule of disbursements is given in Annex II. 3.02 Procurement. For investigation of the hydroelectric resources of Liberia, ten internationally reknowned consulting firms were approached by Government and nine of these submitted proposals. These procedures and the draft contract with the consultants were reviewed by the Bank and were in line with the Bank's guidelines for selection of consultants. 3.03 Before calling on the Bank for assistance in financing the technical assistance aspects of the project, the Government had already attempted but failed to obtain the services of-a foreign electrical utility to assist LEC in overcoming its management deficiencies. It had therefore hired an individual consultant to assess LEC's manpower needs and help in international recruitment of suitably qualified personnel for key positions. Following pressure from the Ministry of Finance to urgently implement the Technical Assistance Project, the LEC in late 1975 with assistance from this consultant recruited a cosmopolitan group of expatriates. This exercise proved to be a failure (see para 3.08). The LEC then invited proposals from engineering consultants for provision of a team to provide management assistance. Only two firms, both of which operated electrical utilities, submitted proposals, and the preferred firm dropped out because of difficulty in assembling the right team at the time required. LEC then negotiated a contract with the  - 4 - remaining firm for provision of a five man team which started work in July 1978. This team continued working into the fourth power project, as 75% of the expenditures for this part of the third power project were used for the unsuccessful cosmopolitan team. Procedures and the draft contract for the recruitment of the second team were reviewed by the Bank and were in accordance with the Bank's guidelines. Part A. of the Project Investigation of the Hydroelectric Resources of Liberia 3.04 The consultants completed their prefeasibility study of the hydro- electric development of the St. Paul River with funds provided from the loan. This study of the St. Paul River, which is the only large river with hydroelectric potential entirely within the borders of Liberia and within reasonable distance of load centers when combined with other studies already completed or in progress met the project requirements for completing the inventory of Liberia's principal hydro-resources. It recommended a storage dam on the Via River, a tributary of the St. Paul, to which would be diverted a major portion of the St. Paul River flow by means of dams and an interconnecting channel. The other studies referred to are: (i) Mano River, between Liberia and Sierra Leone. A feasibility study of the 180 MW Mano-Basin Development Project was completed by consultants in March 1981. The development would be shared with Sierra Leone. (ii) Cavalla River, between Liberia and Ivory Coast. A feasibility study of the 225 MW Cavalla River hydroelectric scheme was completed by consultants in 1979. The development would be shared with Ivory Coast. (iii) St. John River, a prefeasibility study of the 100 MW St. John's hydroelectric developmnt is now being prepared by Japanese consultant under the sponsorship of Japan's International Cooperation Agency (JICA) and is expected to be completed in 1982. This river rises in Guinea and runs through Central Liberia to the sea. It is, however, relatively remote from LEC's present load centers. Following completion of the prefeasibility study a full feasibilty study of the 400 MW St. Paul River project was completed in October, 1982. Establishment of a Long Range Development Plan 3.05 Until such time as all the studies referred to in para. 3.04 above are completed, it is not possible to prepare a long range development plan for the Liberian Power Sector. This part of the project was therefore not completed, though the funds provided in the loan for this work were utilised in the prefeasibility study of the St. Paul River project, which is a  prerequisite for meeting the objective. The demand study was not carried out, nor would it be appropriate to do so, until nearer the time when all the resource data is available for preparation of the long range plan. Preparation of a Detailed Tnvestment Program 3.06 LEC prepared in November, 1976 a Five-Year Investment Plan based on a 7% annual growth rate. This plan proposed increasing the thermal capacity of the Monrovia system by about 40 MW. The plan also included reinforcement of the 69 kV transmission and the 12.5 kV distribution systems and the construction of 5 new substations. The growth rate on which it is based may be optimistic but the investment plan itself is soundly concieved and marks a step forward in LEC's management capability. In fact, LEC's planning department, which did not exist prior to the date of this loan (1975), is now probably LEC's most efficient department, and in this respect, the loan can be said to have achieved, or surpassed, its objective. 3.07 Following the Five-Year Investment Plan, the LEC's consultant prepared a feasibility study for the extension of the Bushrod plant. This study recommended the installation of three 13.4 MW slow speed diesel units two of which were subsequently financed under the Bank's Power IV Project (Loan 1600-LBR) and the third is being financed by OPEC with their loan No. 205 P. Part B. of the Project Provision of Experts to Strengthen Management 3.08 Partly because of their diverse backgrounds and experiences, and also because the job descriptions and responsibilities for each position were not clearly defined, the cosmopolitan group of expatriates did not work as a team. Some expatriates, disappointed by the lack of leadership and their inability to achieve results, left Monrovia before expiration of their contracts, and none of their contracts were renewed or extended when they expired in 1977. No progress report or final report on their work could be found. Only in the field of planning and transmission and Distribution did these expatriates have any real success and in the case of planning this was largely due to the superior calibre of the Liberian counterpart. Up to 1976, LEC had no planning unit, and all of its programs had been prepared by financing agencies such as USAID. Today LEC's planning department is well organized, staffed, and producing good results. In the field of transmission and distribution some substantial improvements were obtained under the direction of the team member concerned and a certain amount of training provided for Liberian Engineers and Technicians. In other areas, the expatriates were largely ineffective. Most of them were fully competent in their fields, coming from executive positions in their own country, but they were used to working with an efficient staff and seemed to be unable to adjust to the limited training and experience of LEC staff and the difficult working conditions in Liberia. They tended to concentrate more on formulating  - 6 - recommendations in their fields of expertise than in training Liberian staff to implement them. Their recommendations were often uncoordinated, creating needless confusion. 3.09 The LEC than entered into a two year contract agreement with Consulting Engineers from India to field a Management Support Team (MST) starting on July 1, 1978. This five man team comprised a Team Coordinator, Finance Executive,Manpower Executive, Administrative Executive, and Operations Executive. The team was supplemented by short visits of other specialists. The calibre of experts provided varied widely and although good results were obtained in some technical spheres such as switchgear and protection, negligible benefits were obtained in others such as manpower training and finance during the period of the loan. There were, however, secondary benefits since LEC, profiting from the lessons learnt from failure of the technical assistance financed by the loan, has continued its employment of the same consultants but on a more selective basis and with a considerable measure of success. 3.10 The MST first identified the weaknesses of LEC's management and then prepared a Management Improvement Program giving first priority to reduction of system losses and improvement in billing, collection and accounting. A system of monthly Management Information Reports was instituted. These covered energy sales, revenue, energy balance, billing control, disconnections and reconnections, meter installation and particular features of operation and maintenance. Although well conceived, the Management Improvement Program did not result in any great improvement, mainly because LEC was unable to hire sufficient qualified personnel to undertake the required tasks, but also because some members of the team were unable to follow up their recommendations by personally getting down to showing the Liberian staff how to implement them. Nevertheless, their efforts were not entirely wasted and undoubtedly helped to arrest the general deterioration which had been going on prior to their arrival. Training 3.11 Training, which was one of the major objectives of the Third Power Project, was not implemented successfully. Originally, training focused on Senior Liberian staff. Since 1978, however, the training program has been reoriented to include intermediate level staff. Under the terms of their contract, the MST members were required to train counterparts. It was also planned to use the proposed Monrovia Vocational Center to train skilled personnel for LEC. Due to many changes in the country, this center is not expected to be completed before March 1982. The biggest constraint for the training program has been lack of qualified personnel to do the training, mainly because LEC's salary scales do not enable it to attract or retain the managerial and skilled personnel which it needs. Although LEC staff's salaries are higher than those of Government employees, they are about 10 to 50% below the remuneration for similar positions in the mining and commercial sector. This lack of qualified personnel has led to poor training within the corporation and, as a result, LEC is now granting 26 foreign and 16 local scholarships to students in electrical, mechanical and civil engineering,  - 7 - accounting, computing and management. These students are expected to graduate between 1981 and 1984, and then to serve LEC, but there is neither inducement nor compulsion for them to do so, and it is expected that many will be lost to private industry and other corporations on their return. In an attempt to stem such losses, recent scholarships contain a covenant requiring a student after graduation to work a specific number of years for LEC. 3.12 Tariff Study and Tariff Revision. The loan agreement (Section 5.06) required LEC to undertake a tariff study by June 30, 1976 and to adjust tariffs by January 1, 1977 to a level which would achieve a rate of return of 10% on net revalued assets in service. The study was completed, though not until February 1977, and tariff increases of 14% in March 1978 and 25% in June 1979 were implemented as well as the introduction of a Fuel Adjustment charge. These increases were however, quite inadequate to achieve a 10% rate of return on the 1977 revalued assets, which were 2.4 times the previous book value. In fact, the rate of return varied between plus 1.6% (1979) and minus 3.6% (1978). 3.13 Automony of LEC. The Guarantee Agreement contained a clause (Sec. 3.02) specifically requiring the government to "ensure" that the LEC management would be able to fully exercise the executive powers granted to it under the laws governing LEC's operations. Not only did the government fail to ensure that management was able to exercise its lawful powers but it actually prevented management from setting salaries and tariffs at adequate levels to achieve the purposes of the corporation - and in so doing it also broke the covenants in the third loan agreements (4.04c in the loan agreement and 3.02 in the guarantee agreement). In recent times it has gone further and actually forced LEC to reduce salaries of senior management. Salary and tariff levels are two of the most important items affecting the efficiency of an electrical utility over the long term and the Bank's advocacy of autonomy for utilities is based very largely on its conviction that unless the ulility has the freedom to set them at appropriate levels it is impossible to achieve acceptable levels of efficiency. Project Cost and Disbursement 3.14 The Bank's loan totalling US$1.8 million was closed on June 30, 1981 and disbursements were made without cost overrun as follows: Actual as of Category Classification Original App. June 30, 1981 I-A Planning Personnel US$300,000 91,464 I-B Consultant Services 800,000 1,089,516 II Management and Training Personnel 700,000 619,020 Total: 1,800,000 1,800,000 A schedule of disbursements is attached as Annex II.  - 8 - PART IV PROJECT ACHIEVEMENTS AND JUSTIFICATION 4.01 Those parts of the project in Part A, i.e. those relating to hydro- logical studies, preparation of the long term development plan and a five-year investment plan including the next addition to generating capacity, were either satisfactorily completed (paras. 3.04, 3.06 and 3.07) or put in hand and are expected to be satisfactorily completed in the near future (para. 3.05). LEC now has an efficient planning unit under the direction of a competent, qualified engineer. As a result of these studies, the Bushrod thermal plant extension project was carried out in 1980 financed by the Bank's Power IV Loan 1600-LBR, and a full feasibility study of the St. Paul River has been prepared. 4.02 Those parts of the project in Part B, i.e., provision of experts to strengthen management and train management and operational staff have not been entirely successful in arresting the deterioration in LEC's management, finances, and services. This factor cannot be attributed to the change of government following the coup in 1980 since most of the deterioration occured before that event. The objectives which the project was expected to achieve were: (i) over the short-term -- a halt in the deterioration of LEC's ser- vices, and the laying of foundations for an improvement in its operations, in particular, equipment utilization and maintenance, personnel productivity, customer service, billing and collection; (ii) over the longer term -- the reestablishment of an efficient power utility having satisfactory operational and financial controls in addition to planning which would enable it to offer the most economic electrical energy to po-tential users in the country. Quality of Service 4.03 The quality of service has significantly improved during the project period due mostly to the additional generating capacity at the Bushrod thermal station commissioned in 1980. During the beginning of the project, 1975-1977, up to 80 power outages a year occured in each region of the Monrovia system, of which about 10 power outages caused total black out. These outages were reduced by about 50, during 1980 and during the first ten months of 1981 there was only one major power outage causing total black out. Equipment Utilization and Maintenance 4.04 Some progress has been made with regard to LEC technical operations. There was some improvement in the field of switching and protection, though this is still not entirely satisfactory. The maintenance of the Mount Coffee hydro plant has improved during the project period. Power generation and supply has become more reliable since 1980 with the completion of two new slow speed diesels. Most of LEC generating units are now available for maintenance  - 9 - during a period of up to four or five months a year. Since 1980, the use of new slow speed diesels has made a substantial reduction in fuel costs; a gallon of fuel produced 10.5 kWh in 1980 compared with 7.3 kWh in 1979. Personnel Productivity 4.05 Personnel productivity does not appear to have improved as expected. In 1975, it was estimated that one employee served about 16 customers. In June 1981 the number of customers on the meter books was 20,745 and the number of personnel believed to be about 1,300, which means the number of customers per employee was unchanged at 16. It is however, impossible to arrive at an accurate figure since the number of consumers recorded on the meter books is estimated by the expatriate management team provided under the project to be about 20% below the real number and no accurate figure of the number of staff employed could be obtained. The accounts records show 1,416 staff on the books but the personnel department and senior management say it is close to 1,300. Distribution Efficiency 4.06 Recorded system losses increased from 28% of net generation in 1975 to 31.5% in the FY 1980/81 with a peak of 34.5% in 1979. These losses which for such a system should not exceed about 13% are due to a number of factors: (i) significant thefts of energy; (ii) faulty meters; (iii) failure to read the meters accurately; (iv) failure to install meters for every customer; (v) inadequate consumer records. In an attempt to reduce these losses, a Block Mapping Project was undertaken in 1976 on the recommendation of the Finance Ministry and initially obtained encouraging results. Block Mapping consists of examining specific areas of the city one by one and recording every connection, meter and consumer and then checking the results against the records in the accounts department. In the beginning, a 15% increase of billings was reported, but the project was discontinued in 1978 due to lack of support from LEC management. In 1981 the planning department of LEC prepared a study concerning the "Reduction of System Losses in Monrovia" containing original ideas and proposals for stopping thefts and preventing collusion between meter readers and consumers to defraud the Corporation. The project is estimated to cost about US$ 8.5 million and has been included in an application for a loan from OPEC with the Bank's recommendation. The project is expected to reduce losses by 5 to 6% but could well exceed these figures.  - 10 - Billing and Collection of Revenue 4.07 Collection efficiency estimated at 90% in 1975 decreased to 69% in 1979 after which it recovered to 84% in 1980/81. The 1979 figure combined with 21.5% excess losses before billing due to theft etc. means that LEC collected only about 52% of the revenue due to it from consumers, a loss of about US$26 million in that year, which would have given LEC a positive rate of return on its assets if it had been recovered. There are several reasons for this poor record. For example, the disconnection services are inefficient and private consumers are known to have their service restored illegally by local electricians who often are current or former employees of LEC. There is no provision in the electricity laws for prosecution of illegal consumers or persons stealing electricity. Moreover, the Government has set a bad example in the past by not paying its power bills regularly or on time. PART V - BANK PERFORMANCE 5.01 During the project period, the working relationship between the Bank and Liberian Government representatives and LEC staff was good. The Bank's presence almost certainly influenced events to some extent, and if it did little else, it may have prevented an even more rapid deterioration. For example, following discussion with the Bank in 1975, the Government reviewed the institutional relationship between the PUA and its four subsidiary corporations. Following this review, it abolished the PUA on August 22, 1975, thereby removing one of the obstacles to the exercise of real autonomy which experience shows is a prerequisite to the efficient operation of an electrical utility. Regrettably, however, the Government's Ministers subsequently failed to permit LEC to exercise the authority to which it is entitled under the law, about which the Bank was able to do very little (para. 3.13). 5.02 The project success in creating a Planning Unit in LEC, which prepared the First Five-Year Investment Plan for the power sector, led to a feasibility study prepared by consultants followed by an extension of the Bushrod thermal station in 1979/80. 5.03 The investigation of the hydro resources of Liberia was partially underway before the Bank loan was made (see para. 3.04) and the prefeasiblity study of the St. Paul River undertaken with the proceeds of the Bank loan successfully completed an inventory of the major Liberian hydro resources within easy access to the main load center of Monrovia. It has since led to a full feasibility study of the next development of hydroelectric resources in Liberia. 5.04 In achieving the above, the Bank's performance was good but the Bank was not so successful in the more difficult areas of strengthening LEC's management and training of LEC staff. One of the probable reasons for this was inadequate supervision. The average time between consecutive supervision missions was 12 1/2 months which was not adequate to follow up the implementation of so difficult a project. Some programs started and  - 11 - stopped between missions without the possibility of assistance or intervention from the Bank. For example, the recruitment of a cosmopolitan expatriate team for management assistance was started without reference to the Bank. Similarly the Block Mapping exercise was stopped without reference to the Bank. 5.05 In two other respects the Bank failed in its declared objectives. The loan agreement required the LEC to implement a new salary structure adequate to attract qualified personnel, and to raise tariffs so as to achieve a rate of return on fixed assets of not less than ten percent, but it did neither of these things (see paras. 3.12 and 3.13). Both of these issues are fraught with political overtones and it is doubtful whether any amount of increased supervision would have altered the outcome. Only the withholding of substantial and badly needed financial aid until action has already been taken is likely to influence a government in introducing such long term measures which could lead to its short term unpopularity. PART VI - CONCLUSION 6.01 The Third Power Project succeeded in creating an efficient planning unit in LEC, in completing the investigation of the major hydro resources within easy access of the main load center of Monrovia, in preparing a detailed five-year investment plan and in helping to lay the foundation for the establishment of a long range plan for the power sector. The project was not successful, in making any substantial contribution to the strengthening of management or training of LEC's staff. 6.02 One of the main reasons for the failure of the Management and Training aspects of the project was the method of recruitment and choice of the original group of expatriate experts. It is probable that the errors and misjudgements which occured could have been avoided if there had been frequent and closer supervision by Bank staff in the early stages of the project. Certainly, twelve months between supervision missions for this type of project is excessive - even six months may be too long an interval in the initial stages during recruitment and establishment of the experts. The lack of supervision in this case was all the more disastrous because of the total lack of experience of this kind of operation by the management of LEC, who were themsleves feeling their way in the newly established autonomy of LEC. 6.03 Another major reason for the lack of success in improving management is the Government's apparent failure to appreciate the relative importance of an efficiently run electrical utility to the economy of the country. Salaries of LEC staff are held down by Government to levels below those of some other less vital corporations and well below those of commercial competitors for technical and accounting staff in contravention of section 4.04(c) of the loan agreement, added to which the recent reduction in senior staff salaries has had a highly demoralising effect on management. This situation is particularly bad in the accounts department which collects little more than half the revenue due from consumers. Unless the Government permits LEC to  - 12 - offer competetive salaries to its staff it would be a waste of the Bank's resources to give further technical assistance to LEC and the Bank should consider whether it should lend, or support other lenders, in the sector until the Government has taken positive steps to improve the efficiency of LEC Management; or at least until it has provided the framework within which improvement can take place. 6.04 Some conclusions can be drawn as to the merits of this kind of technical assistance for training senior management. The failure of the first team confirms the view that in order to obtain cooperation among the advisers and avoid conflicting advice, it is advisable to hire a team from one organization from which they can be replaced if unsuitable, and to which they can be returned when their particular task is completed. It is also reasonable to conclude that consulting engineering partnerships are not the best type of organization for this work. What is needed are advisers from an electrical utility who have proved their worth doing the same jobs and facing the same problems as the people they are advising. If possible a utility from one of the more advanced LDC's would be the best source since their recent experiences are closer to those of the countries with which the Bank deals in West Africa. Finally it can be concluded that the experts should not always be put in line positions but sometimes put in advisory positions only. If put in line positions the experts in a chaotic situation may not have time to train their counterparts and in any case there is no better way of learning how to do a job than actually trying to do it.  - 13 - ANNEX I Page 1 of 2 LIBERIA THIRD POWER PROJECT - LOAN 1150-LBR Status of Principal Covenants Covenants Action taken as of 6-30-1981 Loan Agreement 3.02 (b) (ii) Prepare a detailed Detailed program was prepared training program in consultation with and implementation initiated. the Bank and initiate such training program. 4.04 Prepare and review in consulta- tion with the Bank and thereafter promptly implement: (a) an organizational arrange- Implemented ment with job description for all senior positions. (b) a manpower plan indicating Implemented recruitment needs. (c) a new salary structure that A new salary structure was will be adequate to attract qualified introduced but was not adequate personnel to seek employment with the and therefore did not meet the Borrower. covenant (see para. 3.13). (d) a work program with Implemented. performance targets to improve the operation of the Borrower. 5.06 (a) The Borrower shall: (i) undertake a tariff study Implemented but 6 months late by June 30, 1976. (ii) take all such action including Not implemented (see tariff increase based on such study, as para. 3.12). may be necessary to achieve, starting from January 1, 1977 an annual return  - 14 - ANNEX I Page 2 of 2 Covenants Action taken as of 6-30-1981 of not less than ten percent (10%) of the current value of its net fixed assets in service. 5.07 The Borrower shall no-t declare Implemented or pay any dividend or make any other distribution on its capital. 5.08 The Borrower shall, by December 31, Implemented by September 1976 1975 increase its share of capital by not less than the equivalent of two million dollars (US$2,000,000) represented by additional common stock to be subscribed for by the guarantor. Guarantee Agreement 2.02 (a) The Guarantor specifically Implemented by September 1976 undertakes, by December 1975 to subscribe for additional share capital of the Borrower, in an amount of not less than the equivalent of two million dollars (US$2,000,000). 3.02 The Guarantor shall ensure that Not implemented the Executive Officer and other man- agement personnel of the Borrower may fully exercise their executive powers and authorities by the Act of July 12, 1973 of the Guarantor establishing the Borrower and any other legislation or regulation of the Guarantor govern- ing the establishment, organization, power, financial structure and opera- tions of the Borrower. Side letter 8-1-1975 Government agrees to provide LEC Implemented by September 1976 the equivalent of $1.5 million by June 30, 1975 for payment of short term liabililties.  - 15 - ANNEX II LIBERIA THIRD POWER PROJECT - LOAN 1150-LBR Schedule of Disbursements as of June 30, I981 Actual IBRD Cumulative Appraisal Revised disbursement Actual FY and Disbursements Estimate estimate as of 6-21-79 % of Quarter in US$ Millions in US$ Million in US$ Millions Estimate 75-76/lst 2nd 0.1 3rd 4th 6-77/lst .143 2nd .143 3rd .236 4th .236 1.0 20% 7-78/lst .236 2nd .424 3rd .786 4th .786 1.6 50% 8-79/lst .786 2nd 1.042 3rd 1.069 4th 1.225 1.8 1.2 67% 9-80/lst 1.287 1.4 2nd 1.320 1.8 3rd 1.385 1.8 4th 1.385 1.8 78% 80-81/lst 1.419 1.8 2nd 1.455 1.8 3rd 1.510 1.8 4th 1.800 1.8 100% Note: The President's Report (Annex III, Page 1) contains only annual dis- bursement figures on a calendar year basis.  - 16 - ANNEX III Page 1 of 3 LIBERIA THIRD POWER PROJECT - LOAN 1150-LBR Comments on Draft PCR by General Manager of Liberia Electricity Corporation Text of Borrower's Comments Remarks It is agreed that there were some The Bank's mission were told on changes in management, but those a number of occasions that changes were not successive and did information was no longer not pose any damage to the continuity available because the person of information and data collection, responsible had left the LEC. which were necessary to aid the appraisal An example is a handwritten team to carry out its task. draft of a manpower development plan prepared by Consultants and LEC which disappeared when the Deputy Director Admini- stration resigned at the time of the coup. A new plan was being prepared from scratch by the incumbent Deputy who had been in office only 13 months, his predecessor having lasted five months. LEC's hydro generating plant Corrections made. consists of two 15MW and two 17MW units for a total of 64MW, instead of four 17MW units for a total of 68MW. The term "hydro resources study" as The point made is explained in stated in your evaluation report, detail in para. 3.04. implies that more than one river was studied. However, the St. Paul River prefeasibility study was completed as a result of the Third Power Project. In this paragraph it was stated that Report amended. "only in the field of planning did these expatriates have any real success..." While this may seem true in the case of only the planning department, we should like to add here that under the very efficient and technically competent  - 17 - ANNEX III Page 2 of 3 manager of the transmission and distri- bution department (a member of the cosmopolitian team) not only was a substantial improvement made in the overall transmission and distribution but a certain amount of training was also provided for Liberian engineers and technicians. As a result of the above, the LEC now operates a more reliable power system manned by some of the same trained personnels. Although the addition of two slow-speed Report amended. diesel units contributed immensely to the system's stability, they by no means were the major factors in providing better reliability of power supplies to our customers. A vigorous maintenance program of both the distribution and transmission systems was inititated by the expatriate transmission and distri- bution manager and his team of Liberian technocrats who worked dedicatedly towards such improvements. It was not clear as to how the figures The PCR refers to the LEC as a of 1,416 for LEC staff strength was whole and not the Monrovia obtained, even though it was stated system alone. that such information was supplied by the accounts department. Please note that at June 1981, the total staff strength of the LEC (inclusive of the branch stations) was 1,328 - LEC main (1,108) and branch stations (220). We suggest that the figure of 1,108 be reflected since the 1150 LBR focussed its financing on the Monrovia system only. We note with some disappointment on the Wording changed. presentation of the Corporation's trend in its collection efficiency. We suggest that improvements be highlighted where necessary, rather than reflecting, indirectly, a negative level of efficiency. For your information, a better format would be to reflect the collection efficiency as follows:  - 18 - ANNEX III Page 3 of 3 1979 (12 months): 69% 1980 (12 months): 90.2% 1981 (12 months): 101.2% 1980-81 (18 months): 84% The improvements in the level of efficiency is mostly due to the efforts being made by the Government of Liberia in settling its debt to the LEC, even though with an unsteady cash outflow. This paragraph states that an Wording changed. "inventory of Liberia hydro resources" was completed. On the contrary, a prefeasibility study of the St. Paul River only was completed thus leading to a full hydro feasibility study of the river. The first sentence in this paragraph Wording changed. should also state that the investigation of the St. Paul River hydro resources...  ATTACHMENT Page 1 of 2 COMMENTS FROM BORROWER / LIBERIA ELECTRICITY CORPORATION P. 0. BOX 165. MONROVIA. LIBERIA CABLE LECORP Novembe. 9, 1982 TELEX 4288 LEC LIB/4310 LEC-BR LOAN 1150 - THIRD POWER PROJECT COMMENTPRIES: PaAa. 1.01 It Ls ag&eed that thete wete some changes in Management, but the.e changes wvelL not ucc4uive. and did not poze any damage to the continuity o6 in6otmation and data coe- tection, which we.e necezaAy -to aid the apptaizat team to catty out its tatk. PaAa. 1.05 LEC'z Hydo genevating Peant conzi6tz o6 two 15MW and -two 17MW units 6o' a totat o6 64MW, in5te.ad o6 6ouA 17MW units 6ot a totat o6 68MW. PaAa. 3.01 The teum "Hyd'o Rezoutces Study" a stated in yout evaTua- tion tepo't, imptiez that mote than oneQ uivet was studied. HoweveA, the St. Paue Rivet Pte6easibitity Study woa com- pteted as a tesu&t o6 the Thitd Powet Poje.ct. PcAa. 3.08 In thi/L pGLaghaph it wau 6tated that "'onty in the 6ie.d o6 Ptanning did these expa&tiate.s have any teat a ucces-6...` WhtZe this may -6eem tAue in the case o6 onty the PZanning Depa'trent, we. houtd Wke. to add hete that unde. the veay e66icient and technica.Ly competent ManageA o6 the T'ans- mizion and DistAibution Depawtment (a membeA o0 the Cos- mopotitian Team) not oney was a oub,6tantiat impLovement made in the. ove.Aae tansmizion and distqibution but a ceAtain amount o6 ttaining was aQLo ptovided 6ot Li.beian Engine.e' and Techniciano. As a %ueuUt o6 the above, the LEC now opetatez a mote tQeiabeQ Powet System manned by some o6 the 6ame ttained peA2onnet6. Pwta. 4. 03 AUthough the addition o0 two teow 6peed diezet unilt, contti- buted imme.nety to the System'6 ztabitity, they by no means we4e the majot 6actouz in ptoviding bettet &etiabitity o6 poweA suppti&e. to ouA Cuwtomeu . A vigotous maintenance ptogtam o6 both the diot,,Libution and tntammizzion sy tem6 weAe initiated by the expat'iate Ttans- miZion and pistAibution Managea and hi team o6 LibeAian Technoctat, who wotked dedicated-ey towaods such impt6vement. t ... /2 LIBERIA'S DEVELOPMENT DEPENDS ON ELECTRICITY  ATTACHMENT Page 2 of 2 Pa,La. 4.05 It wa, not cteao as to how the 6iguwes o6 1,416 60oi LEC Sta66 ,tAength wau obtained, even though-t i-t waz .tated that such in6olLma-ton wa zupptied by the Accounts Vepattme.nt. PZea-e note that at June 1981, the totat Sta66 6t'Length o6 the LEC (inctu,sZve o6 the Bgtanch Stations) wau 1,328 - LEC Main (1,108) - B&anch Station (220). We zuggeut that the 6iguWe o6 1,108 be aLe.tected since the 1150 LBR 6ocuMed it t inancing on the Moniwovia Sy-tem ongy. Pa-a. 4.07 We note with -ome dizappointnent on the ptezentation o6 the Cotpo'tAtion',6 tJend in its cottection e66icZiency. We 4ugge,st that impt'ovement6 be highRighted wheAe nece.-&atwy, AatheVL than tLe.ectinp, indihectt9J a negative