Romania - Craiova Chemical Project

Domauozit of The World Ban 10R OFFICtAL USE ONLY Report No. 6664 PROJECT COMPLETION REPORT ROMANIA CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) February 26 1987 Industry Department 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.  FOE OFm CLAL USE ONLY THE WORLD BANK Washington DC 20411 USA Opefatumn 1b11U6614* February 2b, 1987 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report: Romania - Craiova Chemical Project (Loan 1634-RO) Attached, for information, is a copy of a report entitled "Project Completion Report: Romania - Craiova Chemical Project (Loan 1634-RO)" prepared by the Industry Department. 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 restncted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Sank authonzatkon.  FOR OFfCIL US ONLY PROJECT COMPLETION REPORT ROMANIA - CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) Table of Contents Page No. Preface *.*. *..ooo o.,o.o* oeX-o**e *oooo e*oo***o . ...*,,o i Basic Data Sheet oooo**e*v****vvv+v**00***00**0*00000ot ii Highlights 000000040 00*0000000 *00OO0 00004 000000040***** iv I. INTRODUCTION I. **.** .....0000*4* 4040004 ........00.........1 II. PROJECT BACKGROUND .o..o.............. ................... 2 A. Project Preparation and Appraisal, Loan Approval and Effectiveness 2..........................*. 2 Be Project Description and Technologies ....2.......... 2 III. PROJECT IMPLEMENTATION AND MAANAGEMENT ...3.............. 3 A. Achievement of Project Objectives .................. 3 B. Project Implementation Schedule .................... 4 Co Project Management ...................o 5 D. Employment and Training .......................... 6 E. Sources of Procurement .........,..........e.. 6 F. Performance of Consultants, Contractors and Suppliers *............eo...e...40404***eoo...44 6 G. Capital Costs, Financing and Disbursements ......... 7 H. Bank Loan Utilization ..., .......................... 8 IV. OPERATING PERFORMANCE o..o......*,eo*.eeeo,o.eeoooeee 9 A. Commissioning and Production Buildup .....6.......... 9 B. Market Information *4........ . ....44.... o 9 C. Environmental Aspects .............................. 10 V. FINANCIAL AND ECONOMIC PERFORMANCE ...., ............... 10 VI. LESSONS LEARNT ........... ......... 14 VII. ROLE OF THE BANK AND RECOMMENDATIONS * ................ 14 This document has a restricted distribution and may be used by recipients only in the peforance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTENTS (Cont'd) Pseie No. ANNEXES 1 - Flowsheet of the Craiova Production Process ................ 16 2 - Financial Return Calculations and Assumptions .............. 17 3 - Economic Return Calculations and Assumptions .......,......, 20 ATTACHMENT I: Project Completion Report prepared by the Borrower 25 ATTACHMENT II: Comments Received from the Borrower ............... 63  - i - PROJECT COMPLETION REPORT ROMANIA - CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) PREFACE The Bank approved a loan of US$40 million equivalent in December 1978, to Banca de Investitii of Romania (Borrower) to assist in the financing of the Craiova Chemical Project implemented by the Craiova Enterprise (Beneficiary). The Project was part of Romania's plans for increasing rapidly the domestic chemical capacity, for both local consumption and exports, by putting to more economic use its natural gas resources. The individual constituent plants included in t1.e Project were commissioned over a period of time from 1983 to 1985. After the commissioning of the major production plants, Bank staff visited Romania in November 1984 to initiate preparation of the Project Completion Report (PCR). A further mission visited Romania in February 1986 to finalize the preparation of the PCR with Banca de Investitii. The Borrower's PCR is also attached. Further comments from the Borrower were received in December 1986 and have been taken account of in the preparation of this report. This project has not been audited by the Operations Evaluation Department.  - Ii - CRA1OVA CHEMICAL PROJECT MLAE 00. 1634-RO) Basic Data Shoet KEY PROJECT DATA (Amountsin 115 mlion) Loan Position -- Loan No. 1634 RtO OIgnal Disbursed Cancelled Repaid&/ Outstanding 40.0 40.0 13.3 26.7 a/ As of Apr,l 30, 1986. An amount of US$2.2 to cover exchange adjustment is also due, making the Borrower's obligation US$30.8 million in total, Cumulative Loan Disbursement FY79 FY80 FY81 FY82 FY83,1 (1) Planned 11.00 37.50 40.00 40.00 40.00 (ii) Actual 6.81 16.80 36.20 39.80 .2 (iii) (ii) as X of (i) 62 45 91 99 100 GM= 3P2j5C DM Oriinal Actual Board Approval - December 1978 Loan Signature - January 1979 Effectiveness - May 1979 Closing Dec. 31, 1982 March 31, 1983 Date of Physical Completion Dec. 1981 December 1985 Completion Time (Months) 51 99 Time Overrun (%) - 94% Date of Start of Full operations Jan, 1982 Dec. 1985 Total Project Cost ($ mil.) 151.5 183.6 Cost Overrun (2) - 21% Financial Rate of Return 212 15% Economic Rate of Return 16% 7%  - iii - MISSION DATA No. of No. of Date of Month, Year Weeks Persons Manweeks Report Identification 05/76 2 3 6.0 04/06/76 Preparation 06/77 2 3 6.0 06/27/77 Preappraisal 10/77 1 1 1.0 12/08/77 Appraisal 03/78 3 2 6.0 04/03/78 Supervision 09/79 1 2 2.0 10/12/79 Supervision 07/80 1 2 2.0 07/30/80 Supervision 10/82 1 2 2.0 10/24/82 Supervision/Completion 11/84 .50 2 1.0 12/13/84 Completion 02/86 2 2 4.0 04/86 OTHER DATA Borrower Banca de Investitli Executing Agency Craiova Enterprise Fiscal Year of Borrower January 1 - December 31 CURRENCY EXCHANGE RATES Currency: Lei Project Appraisal 1 US$ - 18 Lei January 1, 1981 - December 31, 1982 1 US$ - 15 Lei January 1, 1983 - June 30, 1983 1 US$ - 16.50 Lei July 1, 1983 - December 31, 1983 1 US$ - 17.50 Lei January 1, 1984 - October 30, 1984 1 US$ - 21.50 Lei November 1, 1984 - March.31, 1986 1 US$ = 17.50 Lei  - iv - HIGHLIGHTS 1. The project is a part of the overall Romanian strategy for more economic use of its natural gas resources. It is an extension and modernization of the preexisting Craiova Chemical complex and includes facilities to produce methanol, acetic acid, acetic anhydride, vinyl acetate, polyvinyl acetate and ethyl acetate (paras. 1.01-1.02, 2.02-2.04). 2. The Bank loan of US$40 million financed roughly 57% of the total foreign exchange cost ard covered 21% of the total financing needs for the project (para.1.03). 3. The project was completed in December 1985, four years later than planned. The most important reasons for the delays were: the lack of manpower in construction due to a switching in national priorities in favor of power projects; late delivery of locally supplied goods; technical problems with machines leading to a need for their replacement; modifications of construction technologies halfway through implementation; difficulties in making Romanian procurement procedures conform to the Bank's guidelines; and the problems of integrating new facilities in an existing crowdee site (paras.3.01-3.17). 4. The commissioning of the units has been undertaken successfully with the exception of the carbon monoxide (CO) separation and the acetic acid units, where technical problems still persist (paras. 3.14-3.17,