Haiti - Second Power Project

no -mmsof The World Bank FOR OMCIAL USE ONLY Report No. 6459 PROJECT COMPLETION REPORT HlAITI ELECTRICITE D'HAITI (EdH) SECOND POWER PROJECT CREDIT 895-HA October 28, 1986 La ' America and the Caribbean P 1 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.  THE WORLD BANK F OFFICIA USZ ONLY Washinpon. D.C. 20433 U.S.A. Oifke o Dowctow*Cwtal opwatms fvaItuairn October 28, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Haiti Second Power Project (Credit 895-HA) Atte.ched, for information, is a copy of a report entitled "Project Completion Report - Haiti Second Power Project (Credit 895-HA)" prepared by the Latin America and the Caribbean Regional Office. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restricted disribution and may be used by tecipients only in the petformuace of their oMcial duties. Its contents may not otherwise be disclsed without World Sank authoritation.  FOR OMCIAL USE ONLY HAITI PROJECT COMPLETION REPORT ELECTRICITE D' HAITI (EdH) SECOND POWER PROJECT CREDIT 895-HA TABLE OF CONTENTS Page No. Preface ..........................................* * .i Basic Data Sheet .............. .............................oe ii-iv Highlights . .................................................... v CHAPTER I: BACKGROUND 1.1 IDA Lending to the Sector ......... ..................... 1 1,2 Sector Organization .........I........... ................. 1 CHAPTER II: PROJECT PREPARATION AND APPRAISAL 2.1 Project Preparation and Appraisal .oooooooooo**.**.oooo. 2 2.2 Project Description 2...................... 2 2.3 Participation of other Financiag Agencies ..oo*oo***oo* 3 2.4 Retroactive Financing 00000000000000000000*0000000000000 4 2.5 Negotiations, Board Presentation, Credit Signing and Effectiveness *................................ 4 2.6 Major Covenants .. . e .......**00000000000o00000000e0000000 5 CHAPTER III: PROJECT IMPLEMENTATION AND COST 3.1 Timetable of Project Implementatione..................... 5 3.2 Diesel Expansion Component .............................. 5 3.3 Distribution Network Reno7ation Component ............... 6 3.4 Other Project Components Financed by IDA................. 7 3.5 Project Components Financed by CIDA...................... 8 3.6 Changes to the Project 8................................. 8 3.7 Project Cost ....0000000000000.000000. .0......00000.0..0 8 3.8 Allocation of Credit Proceeds and Timing of Disbursements 9 3.9 Performance of Consultants, Contractors and Suppliers.... 9 3.10 Procurement ...............*............................. 10 CHAPTER IV: PROJECT'S OPERATING PERFORMANCE AND JUSTIFICATION 4.1 Losses .........o..oooooooooooooooooo oo.oooooooooooooooo 11 4.2 Project Justification ......................... oo...... 12 4.3 Rate of Return on Investment ...... ...................... 12 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.  Page No. CHAPTER V: FINANCIAL PERFORMANCE 5.1 Actual and Forecast Financial Data * .................... 12 5.2 Actual and Forecast Financial Performance .............. 12 CHAPTER VI: INSTITUTIONAL PERFORMANCE 6.1 The Borrower and the Beneficiary ...... ................. 13 6.2 IDA............................ ........... . 14 CHAPTER VII: LESSONS TO BE LEARNED 7.1 A Successful Project .* ................................ 15 7.2 Supervision of Equipment ....... ........................ 15 ANNEXES ANNEX 1: Summary of IDA Lending to EDH..................... 16 ANNEX 2: Major Covenants of the Joint Project and Development Credit Agreements .... ............ 17 ANNEX 3: Actual and Forecast Project Implementation Schedule ...................................... 19 ANNEX 4: Project Changes and Financing .................... 20 ANNEX 5: Actual and Forecast Project Cost ... .............. 21 ANNEX 6: Actual, Revised and Forecast Credits Allocation .. 22 ANNEX 7: Actual and Forecast Disbursements ................ 23 AtNNEX 8: Rate of Return on Investment...................... 24 ANNEX 9: Actual and Forecast Performance and Financial Indicators......... .................................. 25 ANNEX 10: Actual and Forecast Income Statement.............. 26 ANNEX 11: Actual and Forecast Funds Statement................ 27 ANNEX 12: Actual and Forecast Balance Sheets................ 28  - i - HAITI ELECTRICITE D'HAITI (EdH) PROJECT COMPLETION REPORT SECOND POWER PROJECT (CREDIT 895-HA) PREFACE This is the Project Completion Report (PCR) for the Second Power Project, which was partially financed by IDA Credit 895-HA (US$16.5 million). The Borrower was the Government of Haiti which relent all but a small part (US$0.5 million for the Peligre dam study) of the proceeds of the credit to the beneficiary, Electricite d' Haiti (EdH), the state-owned electrical utility. Also helping to finance the Project were the European Economic Community (EEC) Speeial Action Credit 4-HA (US$6.0 million), administered by IDA and a parallel CIDA grant (Can$17.1 million). IDA approved the Credit on April 17, 1979; effectiveness of the credit agreement occurred on April 21, 1980. EdH completed the Project in June 1984, about one year and -a half late. The PCR was prepared by the Energy Division of the Latin America and the Caribbean Regional Office based on information in IDA files, on discussions with IDA staff and on a final project report prepared by EdH. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED), but the project was not audited by OED staff. A copy of the draft report was sent to the Borrower for comments; however, no comments were received.  - ii - PROJECT COMPLETION REPORT BASIC DATA SHEET ELECTRICITE D' HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Borrower: Government of Haiti Beneficiary: Electricite d' Haiti (EdH) iKEY PROJECT DATA Apptaisal Actual Total project cost (US$ million) 43.9 40.9 Cost overrun (%) - (5) Credit Amount (US$ million) Disbursed by IDA 16.5 16.5 Disbursed by EEC 6.0 5.8 1/ Data Physical Component Completed: - - Generation Port-au-Prince 9/81 01/82 - Generation Provinces 9/81 12/81 - Transmission 6/82 05/84 - Distribution Port-au-Prince 12/81 04/84 - Distribution Provinces 6/82 12/82 Internal Rate of Return 7.5 4.1 2/ Financial Performance Required to Below 7X. earn 7% in Return was 1979, 7-1/2% 507% in in 1980 and 1983/84. 8X in 1981 on. Institutional Perfoinmance Improving Satisfactory 1/ The remainder portion was cancelled. 2/ The lower-than-expected rate of return is due mainly to the fact that incremental electricity sales were lower than expected (para. 4.3).  - iii - MISSION DATA Type of Month No. of No. of Staff Date of Mission Year Weeks Persons Weeks Report Preparation I 2/78 1 2 2 02/15/78 Preparation II 5/78 1 1 1 05/26/78 Appraisal 6/78 2 1/2 2 5 08/16/78 Post-Appraisal I 9/78 1/2 1 1/2 09/29/78 Post-Appraisal II 1/79 1 1 1 01/25/79'. Total 9 1/2 Supervisions I. Training 2/79 1/2 1 1/2 03/01/79 _I. Technical 5-6/79 1/2 1 1/2 06/13/79 7II. Financial 9/79 1 1/4 2 2 1/2 10/23/79 IV. Technical 12/79 1 1 1 01/02/80 V. Technical 3/80 1 1 1 04/17/80 VI. Technical 5/80 3/4 1 3/4 05/30/80 VII. Financial 6/80 1 1/4 1 1 1/4 05/07/80 VItII. Combined 11/80 1 3/4 2 3 1/2 12/11/80 IX. Technical 11/81 3/4 1 3/4 12/10/81 X. Technical 12/81 1/2 1 1/2 12/23/81 XI. Combined 5-6/82 1 1/2 2 3 06/21/82 XII. Technical 3/83 1/2 1 1/8 03/14/83 XIII. Technical 3-4/83 2 1 2 05/11/83 XIV. Combined 7/83 2 2 4 09/14/83 XV. Technical 9/84 1 1/4 1 1 1/ 10/15/84 XVI. Combined 12/84 1 1/4 2 2 1/2 01/08/85 Total 17 3/4 25 1/2  - iv - OTHER PROJECT DATA Original Item Plan Revision Actual First mention in Files 7/b.9/77 Negotiations 2/6/79 Board Approval 4/17/79 Credit Agreement Date 5/31/79 Effectiv6ness Date 8/31/79 10/31/79 4/21/80 1/ 11/30/79 1/31/80 4/30/80 Closing Date 6/30/83 6/30/84 12/31/85 2/ 12/31/85 Borrower Government of Haiti Executing Agency Electricite d' Haiti Fiscal Year of Borrower October 1 to September 30 Follow-on Project Third Power Project Credit Number 1281-HA Amount of (US$ million equivalent) 26.0 Credit Agreement Date 8/18/82 Glossary of Abbreviations EdH - Electricite d' Haiti EEC European Economic Community CIDA Canadian International Development Agency KfW - Kreditanstalt fflr Wiederaufbau (Federal Republic of Germany) -UNDP - United Nations Development Program TELECO E Telecommunications d' Haiti TELEHAITI m Television d' Haiti CURRENCY EXCHANGE RATE Name of Currency Gourde Exchange Rate at Appraisal US$1 - 5 Gourdes Intervening Year Average US$1 = 5 Gourdes Completion Date US$1 - 5 Gourdes 1/ Effectiveness date was postponed to allow EdH to complete negotiations with CIDA (Chapter 2). 2/ Closing date was postponed due to delays in placing orders for distribution materials (6/30/84) and due to problems in diesel units at Varreux (12/31/85).  HAITI ELECTRICITE D'HAITI (EdH) PROJECT COMPLETION REPORT SECOND POWER PROJECT (CREDIT 895-HA) HIGHLIGHTS 1. Credit 895-HA (US$16.5 million) helped to finance diesel generation expansion, distribution network renovation in Port-au-Prince, consultant services and a training program. The Project received additional financing from the European Economic Community (EEC) Special Action Account credit 4-HA (US$ 6 million), administered by IDA, to help finance a diesel unit in Port-au-Prince and a parallel financing from the Canadian International Development Agency (CIDA - Can$ 17.1 million) to finance transmission system expansion in Port-au-Prince and generation expansion and distribution network renovation in provinces. 2. The Project was successful in meeting its objectives of expanding generating facilities to meet electricity demand in several areas of the country, improving EdH's finances through adequate tariff policies and developing EdH's extremely weak institutional and managerial capabilities. & The reduction of energy losses was not achieved in time due to delay in the renovation of the distribution network in Port-au-Prince. 3. EdH completed the Project in mid-1984, about one year and a half later than the appraisal estimate. This delay was due to controversies within EdH concerning observance of IDA Guidelines of Procurement for the contract for Varreux diesel expansion resulting in the dismissal by the Government of the General Manager, the Technical Director snd the technical consultants in 1980. The dismissal of the technical consultants and hiring of new ones caused delays of about two years and a half in the renovation of the distribution network in Port-au-Prince, and consequently, losses could not be rednted to the level expected at appraisal. The initial delay of the Varreux diesel expansion was partially overcome as the contractor was able to decrease the completion time; this component was in operation four mDnths after the appraisal estimated date although with some technical problems, which were corrected later. The CIDA financed transmission and distribution components also suffered delays as a result of lags in the preparation of project designs, bid evaluation and contract award. 4. The total cost of the project was slightly lower than the original estimate. However, the figures are not strictly comparable due to changes and reductions in project scope, mainly for the distribution component. The increased cost of consultant services was offset by the lower cost of  - vi - diesel expansion for the Varreux power station due to a favorable exchange rate. The unit costs of the IDA-financed distribution component were underestimated at appraisal and consequently only 50% of the facilities originally foreseen was constructed. 5. The institutional performance of EdH was reasonably satisfactory, and its financial performance during period execution improved as a result of the application of quarterly fuel adjustments in the tariff. EdH's rate of return was below the 7% covenanted, because electricity sales were lower than expected.  HAITI ELECTRICITE D'HAITI PROJECT COMPLETION REPORT SECOND POWER PROJECT (CREDIT 895-HA) I. BACKGROUND 1.1 IDA Lending to the Sector 1.1.1 Since 1976, IDA has made four credits (amounting to about US$80 million) benefitting Electricite d'Haiti (Annex 1). in 1976, IDA made its first credit (645-HA, for US$16 million) to help finance the first stage of a two-stage development program for 1976-1981 1/. The second credit (895-HA, for US$16.5 million) helped to finance the Second Power Project, which is the subject of this report. The last two credits (1281-HA for SDR 23.1 million and 1527-0-HA for SDR 26.0 million) are helping to finance the expansion of thermal generation, the completion of the renovation of the Port-au-Prince distribution network, the construction of Edh's headquarters and other miscellaneous works. These projects are proceeding: satisfactorily. 1.1.2 In addition to helping EdH to meet electricity demand and to reduce losses, IDA sought to help EdH to improve its institutional and managerial efficiency and to secure adequate electricity rate adjustments to ensure its financial soundness. 1,2 Sector Organization 1.2.1 EdH is an autonomous public utility created in 1971, entirely owned by the Government. EdH is the only entity responsible for public power supply in Haiti. Power sector policies are set by the President of the Board, as there is no regulatory body for the sector, and tariffs are approved by EdH's Board. As of the end of 1985, EdH had an installed capacity of 173 MW; there are 40 MW of captive power plants installed in the country which are mainly for the service of some isolated industries. 1.2.2 The President of EdH is the President of the Republic, who delegates authority on a permanent basis to the Minister of Public Works, Communications and Transport. The Minister acts as the Chairman of the Board of Directors. Other members of the Board are the Minister of Finance and Economy, the Minister of Commerce and Industry, the Minister of Planning, the Governor of the Central Bank and EdH's General Manager, who is appointed by the President of the Republic and is assisted by the 1/ Project Performance Audit Report, No. 3265, Haiti: First Power Project (Credit 645-HA), December 30, 1980.  -2 - Technical, Financial and Planning Directors. The Board regulates and approves major investment plans, borrowings and broad policies. U1. PROJECT PREPARATION AND APPRAISAL 2.1 ProJect Preparation and Appraisal 2.1.1 Preparation for the Second Power Project began in February 1978, based on a two-stage power development program for 1976-1981, recommended by consultants. This program comprised the installation of diesel facilities arn the initiation of the renovation of the distribution network in the country. Due to constraints in the availability of both IDA and local counterpart funds, this program was carried out in two stages, and the first stage covered the minimum facilities needed by EdiH in Port-au-Prince through 1978. 2.1.2 The First Power Project had included the initial stage (1976-1978) of the power development program, and the Second Power Project covered the second stage of the program, for the period 1978-1983. Consultants carried out a long-term pre-investment study ane confirmed the need for the p-ojects included in the second stage of the program. The United Nations Development Program (UNDP) funded this pre-investment study, for which the Bank acted as executing agency. IDA had no difficulty with the project design during project preparation because the technical aspects of the second project were a continuation of the First Power Project and the basic requirements and technical criteria had already been agreed during execution of the First Power Project. 2.1.3 In June 1978, IDA staff appraised the Project and discussed with a CIDA mission the financing plan, defined the responsibilities of consultants to be financed by each institution and prepared a schedule of actions to be taken by EdH, IDA and CIDA for expeditious processing of both credits. The Government and EdH agreed with the financing plan, schedule, and the resulting list of goods. Post-appraisal missions visited Haiti in September 1978 and January 1979 to focus on issues that arose from Government arrears (para. 2.5.1), joint use of poles by EdH and, TELECO, the telephone cmpany of Haiti (Annex 2, para. 3c), additional diesel units for Cap Haitien (para. 3.10.2), and project implementation schedule and possible financing for a third diesel unit in Varreux (para. 2.3.1). IDA staff, the Government and EdH reached agreements on these issues. 2.2 Project Description 2.2.1 The appraisal report defined the Project as consisting of: (a) Project components financed by IDA: (i) 15 MW additional diesel generating capacity at the Varreux power station in Port-au-Prince and 1.5 MW in Cap Haitien;  (ii) Rehabilitation of about 30% of the distribution network in Port-au-Prince; (iii) Consultant services for the project, for the preliminary design of a new head office building, and for studies related to the management and operations of EdH; (iv) Consultant services for the completion of the Peligre dam study; and (v) Training of EdH staff; (b) Project components financed by EEC: (i) 7.8 MW additional diesel capacity at Varreux power station in Port-au-Prince; and (ii) Expansion of one 115/69 kV substation and communications in Varreux; (c) Project components financed by CIDA: (i) generation capacity of 2.0 MW in Cap Haitien, 1 MW in a new power station at Port-de-Paix and 250 kW in a new power station at Miragoane; (ii) Expansion of one 115/69 kV and five 69 kV substations (Petionville, Carrefour and Croix des Bouquets); construction of about 27 km of 60 kV lines; (iii) Renovation and expansion of the distribution networks at Port-de-Paix (16 km of 12.46 kV lines, 600 kVA in transformer capacity) and Miragoane (18 km of lines at various voltages, 275 kVA in transformer capacity); and (iv) Consultant services and training for the project components, 2.3 Participation of other Financing Agencies 2.3.1 The European Economic Community (EEC) Special Action Account financed an additional diesel unit for Port-au-Prince, for commissioning in December 1981. The appraisal report indicated that even after two diesel units financed by IDA had been commissioned in 1981, in 1982 a power deficit of 1.4 MW could be expected in Port-au-Prince under dry weather conditions. In January 1979, IDA proposed and the Government agreed that the full EEC Special Action Account allocation for Haiti (US$6 million) be used to finance the foreign costs of a third diesel unit, substation and communications at the Varreux power station. The availability of these EEC funds allowed Haiti to bring the reliability of power supply for 1982 to better standards.  -4- 2.3.2 The Canadian International Development Agency (CIDA), which appraised the Project jointly with IDA, financed the transmission and substation expansion in Port-au-Prince, and the thermal generation expansion and distribution network renovation in provinces, including the corresponding consultant services and training, (para. 2.2.1.c. and Annex 4). The Government of Haiti relent the proceeds of the CIDA grant to EdH at an interest rate of 8%, a grace period of four years and a maturity of twenty years. 2.3.3 The Kreditanstalt fUr Wiederaufbau (KfW) financed, under other projects, distribution network renovation program in nine provinces during 1978-1983. 2.4 Retroactive Financin 2.4.1 Retroactive financing of about US$1.1 million was included in the Project to finance the purchase of 2x850 kW diesel units for Cap Haitien and the corresponding consultant services. The precarious power situation of the generating equipment in Cap Haitien, which was old and operating poorly with daily power supply curtailments, justified the immediate installation of these units. The new diesel units were satisfactorily commissioned in December 1978, as'scheduled, although technical problems developed in the next years due to poor maintenance. 2.5 Negotiations, Board Presentation, Credit Signing and Effectiveness 2.5.1 No major problems delayed negotiations or Board presentation. Board presentation was conditioned to: (i) make satisfactory arrangements for future settlements of public sector electLicity bills; (ii) a 9 percent increase in average tariffs for fiscal year 1979; and (iii) establishment of _ joint commission between EdH and TELECO to regulate the joint use of poles and the renewal of their networks wherever power and telephone lines met. The two first conditions were met. As regard the third condition, the Government agreed to appoint the commission by September 30, 1979.(Annex 2, para. 3c) 2.5.2 On April 17, 1979, IDA approved a credit of US$16.5 million. IDA also acted as administrator for an EEC Special Action Account credit of US$6.0 million for the Project, in accordance with an agreement between IDA and the EEC. The IDA credit and the EEC Special Action Account credit were made to the Government of Haiti on standard IDA terms. The Government relent the proceeds of the credits to EdH - with the exception of funds (US$0.5 million) required for the Peligre dam study (para. 2.2.1.a) - at the Bank rate prevailing at that time ( 8.0% ) and a maturity of 20 years including a 4-year grace period. On May 31, 1979 representatives of the Government of Haiti signed a Development Credit Agreement with IDA, and a Special Action Credit Agreement with IDA as administrator of the Special Action Account established by the EEC member states. Representatives of EdH, IDA and EEC Special Action Account - IDA acting as administrator - signed a Joint Project Agreement. The Special Action Credit Agreement was cross effective with the Development Credit Agreement.  -5- 2.5.3 IDA conditioned effectiveness of its Agreements to: (i) the signature of a subsidiary loan agreement satisfactory to IDA for the relending of the proceeds of the credit, and (ii) the confirmation by CIDA that it would finance the remainder of the foreign cost of the project (Can$17.1 million). The same conditions applied to the Special Action Agreement. Effectiveness was postponed four times to allow EdH to reach agreement with CIDA (an agreement was finally signed in November 28, 1979) and to allow the Government to prepare the legal opinion on the agreements. Due to these factors, IDA did not declare the credit agreement effective until April 21, 1980, about eight months late. As discussed in the next chapter, this delay was not a major factor in the late start of the Project. 2.6 Major Covenants 2.6.1 Annex 2 sets forth major covenants of the toint Project and Development Credit Agreements. The Government complied with the covenants of the Development Credit Agreement, except for Section 4.03 concerning electricity bill payments; this problem was later solved when, as a condition for negotiation of the Fourth Power Project, the Government settled its overdue accounts receivable with lump sum payments (para. 5.2.3.). EdH complied with the covenants of the Joint Project Agreement, except for Section 3.02 concerning the reduction of losses (para. 4.1) and Section 4.03 concerning the rate of return covenant, which IDA agreed to waive (para. 5.2.2). III. PROJECT IMPLEMENTATION AND COST 3.1 Timetable of Project Implementation 3.1.1 Annex 3 set forth actual and foreca.st completion dates for the various Project components. For the purpose of this report, June 1984 is considered to be the date of project completion, except as otherwise noted. EdH completed the Project about one year and a half after the date expected at appraisal (December 1982). Annex 4 shows the major changes to the physical components of the project. Annexes 5, 6 and 7 compare actual and forecast data for project cost, allocation of the proceeds of the credit and cumulative disbursements, respectively. The following paragraphs discuss the information contained in these annexes. 3.2 Diesel Expansion Component 3.2.1 EdH completed the diesel expansion of the Varreux power plant (3x7.8 MW), including the corresponding 115/69 kV substation and communications in January 1982, four months late although this project component was postponed in its start for twelve months, due to controversies within EdH concerning the selection of the lowest evaluated bidder (para. 3.9.1). The diesel units financed by IDA (2x7.8 MW) and by EEC Action Account (1x7.8 MW) were provisionally commissioned in September 1981, December 1981 and January 1982, respectively.  - 6 - 3.2.2 Final reception of the diesel units took place only in mid-1985, after the manufacturer solved, at his cost, major difficulties related both to the design of the machines and to their operation. In order to solve the problems and to help EdH in finding an acceptable solution, IDA arranged several meetings between EdH and representatives of the manufacturers of the diesel units. 3.2.3 The most important conclusions reached during these meetings were: (a) during two weeks of operation EdH had supplied untreated water to the engines, which require highly purified water, resulting in scaling in the cooling lines and consequently, burned valves. Since the problem occurred while the manufacturer's resident engineer was supervising the plant, the manufacturer agreed to cover the costs of replacing the valves; (b) at the beginning of operation, the diesel units worked at a maximum load of only 5.5 MW because after a few hours of operation a "hunting effect" or frequency variation appeared, which did not allow them to reach the nominal load of 7.8 MW. This problem was caused by accumulation of dirt in the turbo-charger nozzles and blades and by high temperature in the cooling system. Subsequently, the manufacturer either replaced the turbo chargers by new ones manufactured by another company or refitted them on site. Additionally, air cooled radiators were added to increase the cooling capacity for each group by 25%. As a result of these repairs, the 'hunting effect" was corrected and the units operate at rated capacity; and (c) engine case fissures developed near the base plate of the three units at the same location where four similar engines in Honduras presented problems. In October 1984, the manufacturer agreed to replace the eaitire engine block in unit No. 7, the one with the worst fissure problems. 3.2.4 To solve all these problems, EdH requested an extension to the credit closing date to December 31, 1985, which IDA approved. Final reception tests, completed by mid-1985, were satisfactory to EdH. 3.3 Distribution Network Renovation Component 3.3.1 EdH carried out the renovation of the distribution network assigned to this Project (para. 2.2.1.a.), but due to cost increases (para. 3.3.2), the scope of this component was reduced and was completed in April 1984, with a delay of about two and a half years. According to the appraisal estimates, most of the Port-au-Prince distribution network was in poor condition, which caused high distribution losses (para. 4.1). About 30% (12 km2) of the network needed to be restored under the Project. Delays resulted from the President of EdH's decision to change consultants in July 1980 (para. 3.9.1). The new consultants lacked experience with Haitian conditions. The planning task for this project component was  - 7 - considerably larger than envisioned; existing city mapping was incomplete and only inaccurate network drawings were available. Customer connection information had to be obtained in site. In order to reduce the delay and maintain the project cost within the availability of funds, IDA recommended, and EdH agreed, to construct a pilot project of one kiM to help EdH obtain basic network design parameters. This pilot project was executed at Carrefour in Port-au-Prince, ard in addition, Distribzttion Standards were prepared and issued in May 1983. 3.3.2 The cost of the distribution network renovation was underestimated at appraisal because no engineering studies were available at the time. EdH and IDA resources were only sufficient to cover the cost of the pilot project expanded to 2 km2 and the equipment and materials for an additional area of 10 km2. The financing for construction of this area was provided under the Third Power Project, which together with the Fourth Power Project, completed the renovation of the network. 3.4 Other Project Components Financed by IDA 3.4.1 Preliminary design of headquarters. A preliminary design of EdH's s adquarters was prepared by consultants based on a manpower study covering the period 1982-1987. This design led to a high cost estimate due to the costly foundation required and to the high construction standards recommended by the consultants. IDA suggested changes to the design to lower the cost, which were considered in the final design prepared by new consultants, who designed a building of a light structure and more in line with Haitian standards and yet very functional to EdH's needs. The building is being constructed with funds from the Third Power Project. 3.4.2 Training. Despite initial delays, EdH implemented the training program satisfactorily. A center for training diesel station operators, financed by IDA, was opened in the second-half of 1982. Through the First and Second Power Project, IDA helped to provide training to about ftfty percent (50%) of EdH professionals, through fellowships abroad, and to about fifty per cent (50%) of EdH personnel through in-house training. Results were satisfactory in the financial and administrative areas. In the technical area some improvements have been achieved in system planning and technical studies, but a great deal has still to be achieved in engineering and design, construction supervision and operation and maintenance. The program was revised in July 1981, with the assistance of an IDA training expert, and a program was defined to be carried out under the Third Power Project to assure continuity. IDA should carry out an ex-post assessment of the results of EdH's training program. EdH still has insufficient qualified personnel at the managerial level and for engineering and procurement. 3.4.3 Peligre Dam Studies. In view of Peligre's multipurpose function, the Government granted to EdH the funds required for these studies. EdH contracted with the origirnal designers of the dam a study to assess its  - 8 - overall safety. The study concluded that urgent repair works were needed to fix the stilling basin and sluice gate; the repairs were carried out with IDA funds under the Third Power Project. 3.4.4 In-House ComEuter. A computer financed under Credit 895-HA (para. 3.6.2) was installed in June 1982 and computing programs were successfully implemented in the following areas: customer billing, general ledger, payroll, and stock management. EdH with the assistance of the administrative consultants (para. 3.9.2) supervised the installation of the computer and implemented the programs, and now EdH counts with modern pethods of customer billing and accounting. 3.5 Project Components Financed by CIDA 3.5.1 Transmission lines and substations works. EdH completed this portion of the Project in May 1984, with a delay of about two and a half years. The delay can be attributed, on the one hand, to lags in the preparation of project designs, bid evaluation and contract award on the part of CIDA and, on the other hand, to some changes introduced by EdH's consultants to the substation design, which required new studies by CIDA's consultants. The new installations have improved service reliability and voltage regulation. 3.5.2 Generation and Distribution in Provinces. The generating diesel units were commissioned in August 1981, two years late and the distribution renovation was completed in December 1982, six months late, because of initial delays in the engagement of consultants, bid evaluation and contract award on the part of CIDA. The foreign cost of this Project component is about the same as the appraisal estimate. 3.6 Changes to the Project 3.6.1 Annex 4 shows the major changes to the physical components of the Project which were mainly related to the generation, transmission and distribution component financed by CIDA (para.3.5). Additionally, the CIDA consultants recommended, and EdH approved, to supply power to Miragoane with a 23 kV line from Petit Goave, instead of installing 250 kW diesel units as originally expected. The IDA-financed distribution component suffered changes as a result the low estimate of its cost at appraisal and of the delay caused by the consultants (para. 3.3). 3.6.2 As a result of the increasing volume of accounting work, including payroll and stock control functions, EDH proposed in January 1982, and IDA agreed, to amend the description of part (d) of the Project to include an in-house computer (para. 3.4.4). 3.7 Project Cost 3.7.1 Because of the changes in scope discussed earlier, the final costs are not strictly comparable to the appraisal estimates. The final project cost estimate based on EdH data is US$40.94 million (Annex 5), 5X lower than the appraisal estimates, mainly because local coats were lower  (27x) than the appraisal estimates. The foreign cost of ehe project was about the same as the 'ppraisal estimate, despite favorable exchange rate developments during project execution. The foreign cost of the Varreux extension was lower than the original estimate due to devaluation of the foreign currency in which most of the contracts were placed. The cost overrun on consultant services was due to the replacement of technical consultants in the middle of the project execution. This replacement caused work duplication (para.3.9.1) and extra costs for personnel mobilization and initial familiarization with the project. The savings from the cheaper diesel Varreux extension went into financing the higher consultants costs. 3.8 Allocation of Credit Proceeds and Timing of Disbursements 3.8.1 The increase of costs for consulting services (para. 3.7.1), additional costs for the preparation of the Third Power Project and changes in the materials requirements for the distribution network component (para. 3.3.2), together with the exchange rate changes of foreign currencies with respect to the dollar, led EdH to seek, and IDA to agree, to a reallocation of Credit proceeds (Annex 6). Initial poor performance of the consultants for distribution network renovation contributed to the corresponding delays of disbursements (Annex 7). 3.9 Performance of Consultants, Contractors and Suppliers 3.9.1 The initial performance of the technical consultants was poor. The first technical consultants in charge of the Varreux expansion and distribution network renovation, which were engaged under the FPrst Power Project, were replaced unilaterally by the President of EdH in June 1980; IDA subsequently agreed to this decision (para. 6.1.2). These consultants had already prepared the largest part of the standard network design aid mapped part of the city when they were replaced. 3.9.2 The new technical consultant differed in opinion from the previous consultants on how to reach the objectives set and needed time to adjust to the particular situation in Haiti. In the design of the distribution network renovation of Port-au-Prince, the initial performance of these consultants was unsatisfactory, because of the lack of: (i) qualified personnel assigned to the Project in the field; (ii) coordination of activities performed by consultant personnel in its headquarters; and (1ii) understanding of Haiti's local conditions. IDA held several meetings with representatives of the consultants to discuss EdH's complaints. After constant pressure by IDA and EdM, the consultants proposed a new organization and personnel assignment. They improved their work in the areas of construction activities, diesel installation, electric studies and investment program. The final result was a relative improvement in their performance. However, the consultants really never provided the quality of assistance needed by EdR. 3.9.3 The second consultants were given the opportunity to comment on the assessment given in para. 3.9.1 above, The following is a transcript of the consultants comments:  - 10 - "The Consultants replaced the first consultant, upon request from EdM, to execute engineering services according to a program p approved by IDA. At first, the new consultant followed the procedures and methods established by the first technical consultant for the design of the distribution network renovation. However, after evaluation of the approach adopted by the previous consultant and discussions with EdU, the Consultants recommended a new approach for the execucion of the services. This new approach, accepted by EdH, put the emphasis on the use and training of EdH's personnel on site to permit a transfer of technology. Such major changes in working methods were not accomplished without many discussions. They entailed delays of execution in certain occasions. However, standards for all aspects of the distribution networks (materials, design and construction) were established with the full support of EdH and are still in use at EdH more than four years after completion of the Second Power Project. As a conclusion, the Consultants cannot agree with this Report's statement concerning the quality of their assistance. They strongly believe that the quality of their services was of a high standard and reiterate that they always had the full support of Edi." 3.9.4 The performance of the administrative consultants was satisfactory, The main results obtained from their work were: (a) the implementation of the present organization, including selection of personnel, traIning, and the organizational manual; (b) organization of inventory control, document filing and electricity fraud control; and (c) the installation of a computer and programs for customer billing, accounting and payroll. 3.9.5 The performance of contractors and suppliers was generally satisfactory, with the exception of the supplier for the Varreux expansion, which first failed to delifer a proven design (para. 3.10.1). This was later solved to EdH's satisfaction. This contractor was able to offset the initial delay (para. 3.2) reducing the execution period of this project component by seven months. The electrical equipment was delivered as scheduled. 3.10 Procurement 3.10.1 A procurement dispute was one of the causes for the initial delay in the execution of the Project. IDA had agreed with EdH's request to initiate the procurement process for two 7.8 MW diesel units for Varreux power station before Board presentation and bids were opened in February 1979. After the evaluation was made and approved by IDA, EdH requested to award the contract to the second lowest evaluated bidder because of its unsatisfactory experience with the machine's cooling and fuel distribution  - 11 - systems in a similar equipment purchased from a different supplier imder the First Power Project 2/ which caused Edf to be extremely conservative in seeking performance assurances for this type of equipment. A report prepared by EdH recommending disqualifying the lowest bid was considered unsatisfactory by IDA on the grounds that supporcing technical information was incomplete and thus IDA objected to the disqualification of the lowest bidder. IDA's comments on the procurement process led to a protracted discussion with EdH, and this dispute introduced substantial delays in project execution. As a consequence of the delay, the Government dismissed the top managers and EdH's technical consultants (para. 6.1.2). Finally, EdH signed the contract with the lowest evaluated bidder on April 18, 1980. The purchasing of a third diesel unit for Varreux expansion was subsequently included in the contract, as the availability of EEC financing was ascertained only after bid evaluation (para. 2.3.1,). 3.10.2 CIDA was not able to parti~ipate in the financing of two 850 kW diesel units for Cap Haitien, since CIDA's procurement regulations were not taken into account in the bidding documents prepared by EdH and its consultants. In order to avoid delays, these units were financed by the Government and commissioned during 1979, as scheduled. 3.10.3 Procurement for the other Project components financed by both IDA and CIDA, was carried out by IdH and the new technical consultants with minor problems. All IDA financed equipment and materials and consultant services were procured in accordance with the respective Bank grout. Guidelines. All CIDA financed equipment and materials were procured in Canada under CIDA's procurement regulations. IV. PROJECT'S OPERATING PERFORMANCE AND JUSTIFICATION 4.1 Losses 4.1.1 During the period 1978-1984 energy losses in Port-au-Prince remained higher (about 30%) than those forecast at appraisal (Annex 9), thereby producing a slower than forecasted increase of revenue (para. 5.2.2). IDA continuously requested EdH to address the loss problem through a strong campafgn of theft suppression, and through the renovation of the distribution network and system operation improvement to reduce technical losses (para. 4.1.2). EdH established a "Theft Suppression Committee" chaired by the General Director and advised by EdH's administrative consultants. As a result, losses began to decrease, from 32% in 1983 to 26% in 1984. 4.1.2 One of the reasons for high technical losses was the low power factor in the grid, i.e. Peligre hydro plant operated at a power factor 3/ lower than 80%, which resulted in higher than normal value of current ind the transmission system and consequently higher losses. To correct the problem, EdH, with the advise of IDA, prepared a study on reactive power compensation at the distribution level and subsequently purchased 22 MVAr 2/ Project Performance Audit Report, No. 3265, Haiti: First Power Project (Credit 645-HA), December 30, 1980. 3/ The power factor is an electrical term which measures the efficiency of use of electrical equipment.  - 12 - of switched and unewitched capacitors for installation in the distribution substations, which resulted in a substantial decrease in losses. 4.1.3 The renovation of the distribution network in several provinces have helped to reduce drastically losses from 27% in 1979 to 15% in 1984. All tihese renovation works have been completed. EdH and IDA expect similar success will occur in Port-au-Prince with the Third and Fourth Power Projects. 4.2 Project Justification 4.2.1 The main objectives of the project were: (a) to provide EdH with generation, transmission and distribution facilities needed to meet the increased demand in Port-au-Prince and provinces; (b) to improve EdH's finances through adequate pricing and through a reduction in system losses; and (c) to increase institutional and managerial efficiency at EdH and establish a training program for its personnel. The first set of objectives was attained, though with delays. The financial objective was only partially achieved, as losses were not reduced as scheduled. The institutional objectives were suastantially attained and the training program was carried out satisfactorily. 4.3 Rate of Return on Investment 4.3.1 The staff appraisal report estimated a rate of return of 7.5%, based on the investment program as a whole. This is the method customarily followed in power projects, because it is not possible to allocate benefits to specific investments. The actual rate is estimated at 6.5%; lower sales volume than initially projected were compensated by electricity rates increases. V. FINANCIAL PERFORMANCE 5.1 Actual and Forecast Financial Data 5.1.1 Annexes 9 to 12 compare actual and appraisal forecast financial data for the years 1979-1985 in the areas of key financial ratios, income statements, sources and application of funds and balance sheets. The following paragraphs discuss the information set forth in these Annexes. 5.2 Actual and Forecast Financial Performance 5.2.1 EdH's finances improved gradually in the period 1979-1985. Sales increased at an average 8.3% per year, lower than the 12% forecasted. This was due to slow economic growth which mainly affected the industrial sector. Rates of return on revalued assets in operation averaged 5.4% during the period. Although revenue levels were lower than those required to earn the covenanted rates of 7% in 1979, 7-1/2% in 1980 and 8% in 1981 and thereafter, they were adequate to meet EdH's cash requirements because the Government provided additional financial assistance and because EdH's  - 13 - investments were lower than originally planned (as a result of the slow economic growth). In 1983 EdH's finances deteriorated because of an extremely dry season, which required them to increase the utilization of their thermal plants, thereby increasing expenditures on fuel by nearly 100% over the level of the previous year. Moreover, because of the failure of thermal generating units at Varreux (para. 3*2.2), idE had to hire portable emergency thermal units from outside Haiti to help supply the power needs of Port-au-Prince. Due to the rationing that became necessary, electricity sales fell 41 and the rate of return was close to zero. 5.2.2. IDA monitored EdT's financial performance closely and waived the rate of return covenant because EdH gross internal cash generation was sufficient to cover its debt service and to finance a reasonable increase in working capital and the portion of its investment program not financed by foreign loans. EdH also applied the policy of automatic quarterly fuel clause adjustments to compensate for increases in fuel prices since 1979, following IDA recommendations. 5.2.3 EdH had liquidity problems, due to the increase in the average collection period from 45 days in 1978 to 130 days in 1983. This increase reflected the Government's difficulties in making timely payments to EdH for electricity bills. During project execution, IDA expressed to the Government and EdH its concern about the evolution of Government arrears which reached up to 619 days in 1983. The Government made efforts to reduce the arrears, but did not succeed in fulfilling its commidtment. IDA raised this issue in the Fourth Power Project (Credit 1527-0-HA) and the Government signed an agreement with EdHI, satisfactory to IDA, to settle the arrears accumulated up to September 1984, over a period of three years. As agreed, the first payment was made in fiscal year 1984/1985 by compensating it with interest payments due by EdH to the Government for IDA's Credits. VI. INSTITUTIONAL PERFORMANCE 6.1 The Borrower and the Beneficiary 6.1.1 Edi is reasonably well managed and well organized and has made efforts to improve its financial position. EdH's management improved considerably as a result of the direct assistance of the administrative consultants. A new organization was satisfactorily implemented during project execution, mainly affecting the regional orgauization, to decentralize activities (except centralized billing and main accounting) maintaining close head office supervision in the application of the common rules and regulations. 6.1.2 When a new cabinet was formed in late 1979, the new Minister of Public Works dismissed, without prior consultation with IDA, the General Manager, the Technical Manager and the technical consultants in charge of the Varreux expansion and the renovation of the distribution network, whom  - 14 - he deemed responsible for the initial delays of the Project. IDA subsequently did not object to these dismissals. 6.1.3 The Government established in October 1983 a verification program of imports to reduce import-duty evasion. This produced long delays in the import of components for all EdH's projects because of extra time required to verify current prices and to obtain approvals. IDA suggested to the Government, and the Government agreed, to provide written instructions to custom offices to expedite EdH's orders in view of the importance of the power projects to the economy of the country. 6.1.4 Much of the experience gained with the construction of the diesel units for the Varreux power station under the First Power Project was incorporated by EdH in the contract for the diesel expansion under the Second Power Project. The supplier provided a full time resident engineer to train EdH personnel and supervise the operation and maintenance of the units for two years. Additionally, the supplier replaced all the required parts (para 3.2) for the diesel units without cost to EdH. 6.1.5 The preparation of standards for distribution at medium and low voltage has allowed EdH to standarize the medium voltage in provinces at 23 kV and 12.5 kV in Port-au-Prince. These standards now comprise conceptual design and engineering, customer connection and metering, general conditions of supply and joint use of poles by EdH, Teleco and Tele Haiti. EdH has gained experience in distribution work and has prepared specialized crews to continue the renovation of the distribution network under the Third and Fourth Power Projects. 6.1.6 Planning of external aid coordination for the Power Sector in Haiti is being satisfactorily managed. As requested by IDA, a Technical Cocordinating Committee was established in 1982 to coordinate the actions of the various financial agencies and consultants involved in EdH's projects. The scope of the annual meetings covers technical matters, and the review of the progress achieved by EdH, and of its future plans and of the financial needs of the sector. 6.2 IDA 6.2.1 IDA devoted an exceptionally large amount of staff time to the supervision of this project (about 25 staff weeks in 16 missions), mainly due to the series of problems (technical and consultant services) which adversely affected its implementation. This was justified given EdH's lack of skilled staff. 6.2.2 IDA staff worked very closely with the consultants during project execution and contributed successfully to its implementation, by stimulating action to improve consultants performance, and by participating in the review of the distribution network renovation design. IDA also helped EdH to arrive at a solution to the problems presented with the expansion of Varreux power plant.  - 15 - 6.2.3 The Power Sector of Haiti requires IDA's assistance to further strengthen EdH's management, help define power sector policies and provide technical support. IDA is currently assisting EdH to overcome the personnel problems (para. 3.4.2) due to insufficient qualified personnel at the managerial level and for engineering and procurement, through training programs included in the Third and Fourth Power Projects. IDA plays a leading role in helping EdH to secure cofinancing, and other agencies rely on IDA's assessments and recommendations to provide financial support to projects in the sector. VII. LESSONS TO BE LEARNED 7.1 A Successful Project 7.1.1 The proceeds of the credits were usefully invested even though the reduction of losses in the quantities and time expected were not attained. The delay in initial project execution did not affect the provision of electricity, except in 1983 due to the failure of diesel unit at Varreux (paras. 3.2.2 and 5.2.1). Most of the delays can be attributed to the poor performance of the consultants and also to EdH's proclxrement dispute (para. 3.10). 7.2 Supervision of Equipment 7.2.1 The problems discussed in para. 3.2.2 suggest that when dealing with equipment of a new design, special attention should be paid by the Borrower and IDA to (a) the contractual obligation of the manufacturer regarding equipment guarantee, and supply of spare parts during the guarantee period, and to (b) supervision of commissioning tests by experienced personnel representing the Borrower. 7.2.2 In its review, IDA should ensure that technical specifications are very specific both to protect the owner and to avoid conflicts with the bidders. Some areas that deserve special attention are: (a) acceptance or not of new designs or engines tried only at test benches; (b) minimum rating (or overrating) of auxiliary equipment such as heat exchangers, fuel pumps, turbo-changers, valves, diameter of stack (or back-up pressure requirements); and (c) manufacturers obligation to have qualified personnel in the field for up to three years after plant operation, to be responsible for maintenance and to train Borrower's personnel.  -16- HAITI ELECTRICITE D' HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Summary of IDA Lending to EdH Principal Project Credit Year Amount _ Component (million of US$ equiv.) 645-HA 1976 16.0 21 MW diesel capacity at the Varreux power station. 895-HA 1979 16.5 23 MW diesel capacity at the Varreux power station and distribu- tion renovation at Port-au-Prince 1281-HA 1982 26.0 23 KW diesel capacity at the new Carrefour power station and distribution renovation at Port-au-Prince 1527-0-HA 1984 21.6 15.6 KW diesel capacity at the Carrefour power station and distribution renovation at Port-au-Prince Total 80.1  - 17 - ANNEX 2 Page 1 of 2 HAITI ELECTRICITE D' HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Mjor Covenants of the Joint Project and Development Credit Agreements 1. EdH complied with the following major covenants of the Joiut Project Agreement in a satisfactory manner: (a) Section 2.09(a): Establish a coordination committee to be chaired by EdH's Director of Planning and Dispatch, for the purpose of overall coordination in the carrying out of the Project. The Wommittee also included the Chiefs of Missions of the consultants employed under the Project. (b) Section 2.09(b): Establish a planning section within its Department of Planning and Dispatch and employ an appropriately qualified person to service as the Chief of said Section and as Coordinator of the Project. (c) Section 3.01 (b): cause the positions of General Manager, Technical Director, Planning and Dispatch Director and Administrative Director to be filled at all times with competent and experienced persons whose qualifications shall be satisfactory to the Borrower, IDA and the Administrator. (d) Section 3.04 (b): carry out, with the assistance of consultants and under Terms of Reference which shall have been approved by IDA and the Administrator, a study of its manpower requirements through 1985, and furnish said study to IDA not later than December 31, 1979 (para.3.4.3). (e) Section 3.06: (i) carry out a study of the organization of its regional operations; (ii) furnish to IDA and the Administrator not later than December 31, 1979, the findings and recommendations thereof; and (iii) thereafter implement such recommendations as shall be acceptable to EdH, IDA and the Administrator (para. 6.1.1). (f) Section 3.07: (i) employ, not later than September 30, 1979, consultants whose qualifications, experience and terms and conditions of employment satisfactory to IDA and the Administrator to study its existing procedures pertaining to the foregoing, to make recommendations on the measures required fot the improvement thereof and to formulate internal auditing procedures (Annex 4 and para. 3.8.2); (ii) furnish to IDA and the Administrator the aforementioned recommendations and proposed internal auditing procedures; and (iii) put into effect, not later than March 31, 1980, such recommendations and internal auditing procedures as agreed between Edd, IDA and the Administrator.  - 18 - ANNEX 2 Page 2 of 2 (g) Section 4.05 (a): not incur any long-term debt, unless its internally generated funds for the fiscal year next preceding such incurrence or for a later twelve month period ended prior to such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum long-term debt of EdH (including the long-term debt to be incurred). (h) Section 4.07: undertakes not to use its resources for any purpose other than the financing of its investment program, its operational expenses and for the servicing of its debt. 2. EdH did not comply with the following major covenants: (a) Section 3.02: take all measures required to systematically reduce losses of electricity pursuant to targets established in consultation with the Association and the Administrator and monitor decreases in such losses (para. 4.1). (b) Section 4.03 (a): from time to time take all steps necessary or desirable to obtain such adjustments in its power tariffs, as shall be required to earn an annual rate of return at least of seven percent (7%) in fiscal year 1979, seven and one-half percent (7-1/2%) in fiscal year 1980 and eight percent (8%) in fiscal year 1981 and thereafter (para 5.2.2). 3. The Government complied with the following major covenants of the Development Credit Agreement: (a) Section 3.02: cause EdH to carry out the study for improved maintenance and monitoring of the Peligre dam and power station to furnish to IDA the findings and recommendations thereof not later than December 31, 1979 (para 3.4.5) (b) Section 4.01 (a): not undertake, or permit EdH to undertake, prior to the completion of the Project, any investment in the power exceeding the equivalent of one percent (1%) of the net value of EdH's fixed assets in operation without IDA's prior approval. (c) Section 4.04: (i) cause Teleco and TeleHaiti to rehabilitate, respectively, the sections of the telephone and television networks in Port-au-Prince utilizing EdH's power distribution facilities to be rehabilitated under the Project; and (ii) provide, or cause to be provided, promptly as needed all the funds required by Teleco and TeleHaiti for that purpose. A contract was signed with each company on the common use of poles. 4. The Government did not comply with a major covenant: Section 4.03: take all measures necessary on its part to ensure that electricity bills owed EdH by the Borrower's departments and agencies are settled and paid in time under arrangements satisfactory to the Borrower and the Associatin". (para. 5.2.3).  - 19 - .4NNEX 3 HAITI ELECTRICITE D'HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Actual and Forecast Project Implementation Schedule Appraisal Forecast Actual 1. Credit, Grant Approval 1.1 IDA 03/79 05/79 1.2 CIDA 04/79 06/79 2. Effectiveness 2.1 IDA 06/79 04/80 2.2 CIDA 05/79 11/79 3. Engagement Consultants 3.1 Administrative Consultants (IDA) 09/79 11/79 3.2 Technical Consultants (IDA) 1/ 07/78 07/80 3.3 CIDA Consultants 10/79 06/80 4. Procurement 4.1 Generation Call for bids Port-au-Prince (IDA) 10/78 Award 03/79 04/80 Call for bids Provinces (CIDA) 02/80 Award 05/80 08/82 4.2 Transmission, substations Call for bids (CIDA) 01/80 ) Award 04/80 ) 4.3 Distribution ) Call for bids Port-au-Prince (IDA, long ) delivery times) 09/79 ) N/A Award 12/79 ) Call for bids Port-au-Prince (IDA, short ) delivery times) 03/80 ) Award 06/80 ) Call for bids Provinces (CIDA) 12/80 ) Award 03/81 ) 5. Construction 5.1 Generation Port-au-Prince (IDA) 09/81 01/82 Provinces (CIDA) 2/ 09/81 08/83 5.2 Transmission, substation Port-au-Prince (IDA) 06/82 05/84 5.3 Distribution Port-au-Prince (IDA) 12/81 04/84 Provinces (CIDA) 06/82 12/82 i/ The former technical consultants were engaged under the First Power Project (July 1978) and replaced in the middle of the Project (July 1980). 2/ Due to delays, EDH installed emergency diesel unit in Port-au-Prince* N/A - Not available 4/21/869  - 20 - ANNEX 4 HAITI ELECTRICITE D'HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Project Changes and Financing Appraisal Actual A. Project Components Financed by IDA: - 15 MW Diesel Capacity at Varreux power station Same - 1.5 MW Diesel units at Cap Haitien Same - Rehabilitation of about 30% (12 km2) Construction of 2 km2 at Port-au-Prince (Pilot project) plus materials for 10 knV - Consultant Services Same - Training Program Same B. Project Components Financed by EEC: - 7.8 MW Diesel capacity at Varreux power station Same - Varreux Station and Communications Same C. Project Comporents Financed by CIDA: - 2.0 MW diesel capacity at Cap Haitien 1/ - 1.0 MW diesel capacity in Port-de-Paix Same - 250 kW diesel capacity in Miragoane 2/ - one 115/69 kV and five 69 kV substation expansion 69 kV substation expansion at Delmas, Canape Vert, Martissant Carrefour- at Canape Vert, Martissant Feuilles and Croix des Missions Carrefour-Feuilles, Croix des Missions Nouveux Delmas and Toussanirt Brave - Three 69 kV substation construction at 69 kV substation Petionville, Carrefour and Croix-des- construction at Riviere Bouquets Froide and Croix des Bouquets - 27 km 69 kV transmission lines construction 26.2 km 69 kV transmission line, second circuit 8 km 69 kV transmission lines, construction - 16 km 12.5 distribution lines, 300 kVA in 8 km 23 kV distribution line Port-de-Paix extension in La Pointe and Aubert - 10 km 12.5 kV distribution lines, 600 kVA in 26 km 23 kV distribution Les Cayes lines, construction in Petit Go.ave and Miragoane - 18 km distribution lines are various voltage 275 kVA in Miragoane - Consultant services and training Same I/ Financed by the Government. 2/ Replaced by the construction of 26 km 23 kV line Petit Goave-Miragoane. 6/2/86-68  - 21 - ANNEX S HAITI ELECTRICITE D'HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Actual and Forecast Project Cost Components Financed by IDA Credits 895-HA, EEC 4-HA and CIDA Millions US Dollars SAR Estimate Actual Cost LC FC Total LC FC Total A. IDA and EEC 4-HA Financing 5/ Project Component Varreux Extension (3 x 7.8 MW) 2.90 13.10 16.00 2.25 11.50 13.75 Cap Haitian (2 x 825 kW) - 0.50 0.50 - 0.48 0.48 Transmission, Communications 0.20 1.20 1.40 0.20 0.47 0.67 Distribution Port-au-Prince 1.50 4.20 5.70 1.25 4.12 5.37 Consultants 1/ 0.50 3.20 3.70 0.60 5.61 6.21 Training - 0.30 0.30 - 0.09 0.09 Total Cost / 5.10 22.50 27.60 4.30 22.27 26.57 Project Financing EdH Funds 5.10 - 5.10 4.30 4.30 IDA (Credit 895-HA) - 16.50 16.50 - 16.50 16.50 EEC (Credit 4-HA) 3/ - 6.00 6.00 - 5J 5.77 Total Financing 5.10 22.50 27.60 4.30 22.27 26.57 B. CIDA Financinu Project Cost 4/ 2.40 13.00 15.40 1.20 13.18 14.38 Project Financing EdH Funds 0.90 - 0.90 0.30 - 0.30 CIDA Funds 1.50 13.00 14.50 0.90 13.18 14.08 Total Financing 2.40 13.00 15.40 1.20 13.18 14.38 C. TOTAL PROJECT COST 7.50 35.50 43.00 5.50 35.45 40.95 1/ Cost overrun on consulting services was due to the replacement of consultants- in the middle of project execution, this replacement caused work duplication and extra costs for personnel mobilization and initial familiarization with the project. 2/ Price and physical contingencies are included in each item. 3/ Due to rate of exchange fluctuations, EEC Special Credit 4-HA only reached the equivalent of US$5,771,697.95 when fully disbursed, rather than MUS$6.0 estimated at appraisal. 4/ Overall project cost is shown here, as no inforaation is available from CIDA - or EdR on detailed cost of the components financed by CIDA. 5/ Local cost for IDA financing project components are estimated as EdH did not maintain accurate records. Only total local cost was available. 5/22/86s  - 22 - ANNEX 6 HAITI ELECTRICITE D'HAITI (EdH) SECOND POWER PROJECT - CREDIT 895-HA Actual, Revised and Forecast Credit Allocation In thousands of US 1. IDA Credit 895-HA Appraisal Revised Revised Actual 1/ 2 (1) Four diesel units and ancillary works and services for Varreux expansion and provinces 8200 8200 6100 6067 (2) Material and Equipment for distribution network renovation and transmission and telecommunication system for Varreux expansion 3800 3000 4800 4524 3/ (3) Civil works for Varreux expansion and distribution network renovation 200 250 250 239 (4) Consultants services 2300 4350 4850 5193 (5) Training Program 300 250 250 233 (6) Study for Peligre dam 450 450 250 244 (7) Unallocated - - - TOTAL 16500 16500 16500 16500 2. EEC Credit 4-HA (1) One diesel unit and ancillary work and services for Varreux expansion 4400 - - 4893 (2) Transmission and distribution equipment 1000 - - 879 (3) Unallocated 600 - - - TOTAL 6000 - - 5772 i/ Revised in January 1982 for including the purchase of an in-house computer and related spare parts. 2/ Revised in August 1982 as a result of consultant services increase. D, Includes an in-house computer. 5/22/86s  - 23 - AM 7 HAM Electricite d' Haiti (FM) SecwA awr Project - Credit 895-A Actual and Forecast Disbursents -cumlative Disbursement in I Actual mbsI Appraisal FBtmste 1/ Actual as a perontee of IiD ETC Total. Ml E1C 2/ tal AppraSl Fatte MI Fiscal Year and S_ter 1980 Drceter 1980 4.0 1.5 5.5 - - - 0 Jue 1981 7.8 3.0 10.8 1.7 - 1.7 16 1981 Deni1p.r 1981 11.2 4.4 15.6 2.5 2.7 5.2 33 June 1982 13.8 6.0 19.8 3.4 5.2 8.6 43 1982 Dcnb,"er 1982 15.8 6.0 21.8 8.3 5.8 14.1 65 June 1983 16.3 6.0 22.3 9.6 5.8 15.4 69 1983 nIeibher 1983 16.5 6.0 22.5 11.2 5.8 17.0 76 June 1984 13.5 5.8 19.3 86 1984 Decenuer 1984 14.0 5.8 19.8 88 June 1985 15.3 5.8 21.1 94 1985 Deonbetr 1985 15.7 5.8 21.7 95 June 1986 16.0 5.8 21.8 97 1/ Disbunmiht schadille w axmified with respect to vhat is ohmQ in the SAR bec, E rlequested to cOmplete disbursement of the Speciel Account Credit at the end of fiscal year 1981. 2/ Due to rate df eccbarge flucuatiaox, BEC Seda Credit 4iHk only readhed the eqpivalsnt of MIS$5,771 697.95 wen fully disbursed, rather than MlS$6.0 estimited at appraisa1. 5/22/86  - 24 - ANNEX 8 Electricite d'Haiti (EdN) Second Power Project (Credit 895-NA) Rate of Return on Investment From 1978-1985 Investment Progras 1/ (In U8$ thousand, in 1977 constant prices) <---Incr_ental Costs--------- ) (------ onefits--) Operating Costs Total Incremental Incrmental Net Year Invetmnts Fuel Other 2/ Cost sales Bnefits Benefits SNh 1978 6794 -127 521 7187 27 1607 -5580 1979 6124 -644 788 6268 4 2826 -3441 1980 6319 -114 1768 7973 69 4592 -3381 1981 181 282 2379 1041 96 6552 -4289 1982 10266 1184 3064 14513 101 7897 -6616 1983 14307 4262 4147 22717 111 9919 -12098 1984 7996 2571 4528 15095 133 13142 -1953 195 0 4573 4560 9133 133 13142 4008 1986-92 3/ 0 1800 3210 5010- 133 13142 8131 Rate of Return 6.52 I/ Sowrce Adited Financial Statmnts. 2/ It inKluds OM and ainistrative expenses. For forcasting purposes, 0& expenses were correc4ed to reflect normal thermal Ol expenses. 3/ Sm operation and benefit data as 1984 (Average hydrological year). Discount period has been taken as 15 years, which is the asumed life at appraiual for the the dieel plants comissioned in 1978.  - 25 - ANNEX 9 HAITI ELECTRICITE DE HAITI (EDH) SECOND POER PROJECT - CREDIT 895 - HA Actual And Forecast Pertormnce and finanilal Indicators 1978/79 1979/80 1980/81 1981/82 1982/83 SAR ACTUAL SAR ACtUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL , ,..... ....... .... .... .... ..... . . . .... ....... ....... .. ..... 1. Market Penetration (a) Cub Sales in Port-au-Prince 190 173 209 197 230 210 254 220 281 224 (b) GUh Sales in Provinces 16 16 18 20 23 23 24 28 26 23 (c) No. of Customers in P-au-P (1000) 48 47 52 48 56 52 60 55 65 54 (d) No. of customers in Provinces (1000 12 12 15 15 18 19 20 20 23 21 2.- Efficiency Indicators (a) No. of employees: Port-au-Prince 1 650 687 690 799 730 813 780 873 800 855 (b) No. of employees Provinces 1 240 214 250 215 260 243 270 258 300 351 (c) System Losses (S) Port-au-Prince 24 31 22 27 20 29 20 30 19 32 (c) System Losses (X) Provinces 10 27 10 29 10 28 10 19 10 15 3.- Financial Indicators (a) Rate of Return 7.0 4.4 7.5 5.0 8.0 6.8 8.0 5.2 8.0 -0.1 (b) Self-Financing Ratio 2/ 42 47 32 43 26 26 38 36 48 11 (c) Debt Service Coverage 3/ 3.1 3.4 3.0 4.0 2.5 1.7 2.4 3.2 2.6 1.2 (d) Operating Ratio 4/ 47 45 59 44 57 43 62 44 S1 Receivables in Days: (e) Total Sales 45 90 45 93 45 e8 45 117 45 130 (f) - Government Agencies 45 237 45 290 45 298 45 413 46 620 (g) - Private Sector 45 53 45 68 45 63 45 79 45 61 1/ Aduinistrative personnel increased 10% p.a. 2/ Net internal cash generation to total sources of funds 31 Gross operating incose to total debt service. 4/ Operating expenses excluding depreciation to operating revenues 5/ Peligre power plant personnel was aduinistratively transferred to Provinces in 1983.  - 26 - ANNEX 10 HAITI ELECTRICITE DE HAITI (EDH) SECOND POVER PROJECT ACTUAL AND FORECAST INCOME STATENENt Thousand of US$ Dollars 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 SAR ACtUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL ACTUAL Sales (GNh) 206.0 195.2 227.0 218.1 253.0 232.4 278.0 247.9 307.0 257.6 279.5 Average Tariff (US$cents/kWh) 6.46 7.12 7.25 9.03 7.85 10.72 8.81 11.16 9.14 12.76 14.29 Sales Revenue 13303 13893 ;6451 19509 19865 24915 24492 27667 28057 32850 39949 Other revenues 0 84 0 118 0 213 0 79 0 74 338 Total Operating revenues 13303 13977 16451 19627 19885 25128 24492 27746 28057 32924 40287 Operating Expenses - Fuel 1973 3036 2482 4969 3052 6237 3992 7657 4944 14612 11124 - Operation & aintenance 3305 3286 3850 4733 4415 5573 5218 6878 5822 8990 9825 - General & Administrative 1037 1252 1132 1845 1234 2498 1347 2711 1470 3134 3930 - Depreciation 2561 2643 3138 3478 3741 3965 4638 4538 5318 6289 6958 Total Operating Expenses 8876 10217 10602 15025 12442 18273 15195 21784 17554 33025 31837 Operating Income 4427 3760 5849 4602 7423 6855 9297 5962 10503 -101 8450 Interest 2066 1977 2846 2017 4332 2374 5496 2896 5779 4211 5872 Less: Interest Capitalized 508 362 1303 193 2805 597 3543 969 902 1029 2434 Net Interest Charge to Income 1558 1615 1543 1824 1527 1777 1953 1927 4877 3182 3438 NET PROFIT 2869 2145 4306 2778 5896 5078 7344 4035 5626 -3283 5012 -- - - - - - - - - - - - -- - - - - - - - - - - -, - - - - - - - - - - - -  -27 - ANNE 11 HAITI ELECTRICITE DE HAITI (EDH) SECOND POVER PROJECT ACTUAL AND FORECAST FUNDS STAIENT Thousand of US$ Dollars 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 SO U RC ES SAR ACTUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL SAR ACMUAL ACTUAL Internal Cash Generation - Net Income Before Interest 4427 3760 5849 4602 7423 6855 9297 5962 10503 -101 8450 - Depreciation 2561 2643 3138 3478 3741 3985 4638 4538 5318 6288 6958 Total Internal Cash Generation 6988 6403 8987 8080 11164 10820 13935 10500 15821 6188 15408 Less: Debt Service Amortination 170 0 185 0 201 4100 219 375 238 905 1345 Interest 2066 1977 2848 2017 4332 2374 5496 2896 S779 4211 5872 Total Debt Service 2236 1977 3031 2017 4533 6474 5715 3271 6017 5116 7217 Less: Interest Capitalized 508 362 1303 193 2805 597 3543 969 902 1029 2434 lNst Debt Servlce 1728 1615 1728 1824 1728 5877 2172 2302 5115 4087 4783 Net Internal Cash Generation 5260 4788 7259 6256 9436 4943 11763 8198 10706 2101 10625 Contributions Custocer Constribution 350 336 400 301 450 463 500 225 600 463 362 Government Constribution 0 2246 0 1487 0 4455 0 466 0 737 1655 Total Contributions 350 2582 400 1788 450 4918 500 691 600 1200 2017 Borrowings IDA credit 895-HA 3640 0 8132 2253 4940 3289 2704 4834 1416 3272 1968 EEC credit 4-HA 780 0 3076 2112 2580 3660 624 0 0 0 0 CIDA grant 441 0 3137 0 9469 549 2977 4285 1476 2591 3708 Other IDA Credits 0 1716 0 0 0 0 0 0 0 5457 9817 Other External Loans 2088 3099 837 2224 9174 1302 12541 4459 7904 4106 5014 Total Borrovings 6949 4815 15182 6589 26163 8800 18846 13578 10796 15426 20507 TOTAL SOURCES 12559 12185 22841 14633 36049 18661 31109 22467 22102 18727 33149 A P P L I C A t I O N S Construction Program Ons cing Projects 13076 8868 19057 10200 26499 13609 23730 17181 11290 23968 26912 nterist During Construction 448 362 1183 193 2745 597 3543 969 902 1029 2434 Total Construction Program 13524 9230 20240 10393 29244 14206 27273 18150 12192 24997 29346 Variation in Vorking Capital -965 2955 2601 4240 6805 4455 3836 4317 9910 -6270 3803 TOTAL APPLICATIONS 12559 12185 22841 14633 36049 18661 31109 22467 22102 18727 33149 --. - -- - - - - - - - -- - -_- . - - - - -- - - - --.- - -- - - -  - 28- ANNEX 12 HAITI ELECTRICITE DE HAITI (EDH) SECOND POUER PROJECT ACTUAL AND FORECAST BALANCE SHEETS Thousand of USS Dollars 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 A S S E T S SAR ACTUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL SAR ACTUAL ACTUAL ........ ... .......... ........ ....... . . .... .. .. ... .. ..... .. . ........ . *.. ....... . ........... ....... Fixed Assets Plant In Service 99542 111915 109638 128679 139736 139797 169341 166319 185197 192233 210691 Less: Accumulated Depreciation 24379 24740 29210 31242 34982 345986 42055 40375 50303 49662 56169 Net Plan in Service 75163 87175 80428 97437 104754 105201 127286 125944 134894 142571 154522 Vork in Prc2ress 14429 2789 28312 10989 35510 14430 46084 11861 53774 24848 35999 Total Fixed Assets 89592 89964 108740 108406 140264 119631 173370 137805 188668 167419 190521 Current Assets Cash and Banks 1923 2500 1802 2820 3030 4703 4047 5655 11507 966 3012 Accounts Recelvable 1660 2055 2485 3060 3510 Private Sector n/a 1773 n/a 3213 n/a 3819 n/a 5308 n/a 4831 5656 Government Agencies n/a 1040 nia 1766 n/a 2265 n/a 3593 n,'a 6864 660 Govetnment Agencies 1/ 6100 Other Accounts leceivable 0 649 0 894 0 1602 0 590 0 506 890 Inventories 5816 3477 7816 4765 9816 4569 11816 5115 13816 5633 6164 Other Current Assets 619 317 619 387 619 482 619 2329 619 2004 2271 Total Current Assets 10018 9756 12292 13645 15950 17440 19542 22590 29452 20804 24753 TOTAL ASSETS 99610 99720 121032 122051 156214 137071 192912 160395 218120 188223 215274 Capital and Liabilities Capital and Reserves 32633 35253 32633 36309 32633 40331 32633 40365 32633 40670 41893 Retained earnings 12624 12910 16930 16840 22826 23343 30170 28324 35796 26761 33887 levaluation Reserve 12067 16712 17342 27131 22986 26399 30333 30117 39257 W8898 37216 TOTAL CAPITAL AND RSVES 57324 64875 66905 80280 78445 90073 93136 98806 107686 106329 112996 Long-term Debt 32942 26029 44383 32496 67575 40105 89080 53450 99138 67531 85708 Current l'abilities Current Portion of L-T Debt n/a 2S53 n/a 2675 n/a 300 n/a 532 n/a 1345 2330 Interest Payable n/a 1985 n/a 2100 n/s 1379 n/a n/a n/a 2962 3976 Acconmt Payable n/a 1711 n/a 1565 n/a 1693 n/a 1878 n/a 3914 3638 Other Liabilities n/a 0 n/a 0 n/a 0 n/a 1853 n/a 1670 1483 Customers' deposit n/a 893 n/a 999 n/s 1121 n/a 1252 n/a 1385 1694 Total Current Liabilities 8694 7142 86