Senegal - Power Engineering and Technical Assistance Project

Docuumcnt of The World Bank FOR OFFICIAL USE ONLY Re"t No. 9160 PROJECT COMPLETION REPORT cENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (CREDIT S-26-SE) NOVEMBER 30, 1990 Industry and Energy Division Sahelian Department Africa Regional Office This docu-n"t has a testricted distribution and may be usd by recipents only in the performance of their oMficial duties. Its contentL may not otherwise be disclosed without World Bank autborization.  GLOSSARY OF ABBREVIATIONS AFDB African Development Bank CCCE Caisse Centrale de Cooperation Economique CVCCEP Public Enterprise Accounts Verification and Audit Committee EDF Electricite de France EDS Electricite du Senegal IDA International Development Association MDIA Ministry of Industrial Development and Crafts SENELEC Soci-te Senegalaise de Distribution d'Energie Electrique SNDE Societe Nationale d'Electricite SONED Societe d'Etudes de Developpement en Afrique WADB West African Development Bank  To wooRLs FOR OFt CAL i ONLY wa"I on. 0 C. 0W33 U.SA Office of Dltne. a gal Opevttima 3'aluafetm November 30, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Senegal Power Engineering and Technical Assistance Project (Credit S-22-SE) Attached, for information, is a copy of a repctt entitled "Project Completion Report on Senegal - Power Engineering and Technic!A Assistance Project (Credit S-22-SE)" prepared by the World Bank' i .-1.ent Li.s9'.on ir Senegal with Part II of the report contributed by the Borrower. No rudit of thiF ;r-ject has been made by the Operations Evaluation Department at this time. Attachment The Gamm.t kuu, g dnbtmi Sarma e' I Of the _ ki enu II Mugo"u my m oghswe b~ dwj= wahx WorS Qg aXUo  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT SENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (CREDIT S-26-SE) TABLE OF CONTENTS Page No. Preface ................................................. i Evaluation Summary ...................................... ii PART I: REVIEW OF THE PROJECT FROM BANK'S PERSPECTIVE .. 1 1. Project Identity .............................. 1 2. Project Background ............................ 1 3. Objectives and Description of the Project ..... 2 4. Project Components ............................ 2 5. Project Design ..... .............. ............ 3 6. Project Organization .......................... 4 7. Project Execution ............................. 4 8. Project Results ....................... .. 5 9. Project Viability ............................. 10. Performance of the World Bank ................. 6 11. Performance of the Borrower .....: . ........... 6 12. Quality of Relations between Parties Involved . 7 13. Consulting Services ........................... 7 14. Information and Data .......................... 7 PART II: PROJECT REVIEW FROM bORROWER'S PERSPECTIVE .... 8 PART III: STAT.STICAL INFORMATION ...................... 14 1. Related Bank Loans and/or Credits .... ......... 14 2. Project Timetable ............................. 14 3. Use of Bank Resources ......................... 14 4. Disbursement Information ...................... 16 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 authorizati3n.  . i - PROJECT COMPLETION REPORT SENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (Credit S-26-SE) PREFACE This is the Project Completion Report for the Engineering and Technical Assistance Project in Senegal's power sector, for which Credit S-26-SE in the amount of US$3.3 million was approved on May 19, 1980. The project was completed on June 30, 1986 and the credit closed on December 31, 1986. The Project Completion Report was prepared by the World Bank's Resident Mission in Dakar based, inter alia, on the President's Report, the Development Credit Agreement, supervision reports, correspondence between the World Bank and the Borrower, Internal World Bank memoranda (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II).  - i$ - PROJECT COMPLE.TION REPORT SENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (Credit S-26-SE) EVALUATION SUMMARY Introduction The engineering and technical assistance project in the power sector was implemented to support the Senegalese Government's efforts to reorganize and develop the power sector and strengthen its energy planning capabilities. When the project was prepared in 1979 Senegal was undergoing a serious economic crisis that significantly impaired its ability to deal with very steep and unanticipated increases in the price of petroleum products on which the economy is highly dependent for its energy consumption. This made implementation of the actions planned in the project very urgent. Objectives The project, the Bank's first operation in Senegal's power sector, had limited objectives, namely, to assist the Government to prepare a national energy plan and improve planning in the power sector, strengthen sector institutions, improve their accounting systems and procedures and ensure rational development of electricity generaCion resources over the medium-term in the interconnected system. Though the Bank's lack of past experience in the sector in Senegal and the complexity of the problems needing attention may have justified the cautious approach towards project objectives, it is nonetheless true that, from the standpoint of the costs incurred by the Bank for the preparation and supervision of this operation, it would have been preferable to set more ambitious objectives. These could perhaps have included the financing of part of SENELEC's investment program, an issue later addressed in 1985 as part of the Energy Sector Rehabilitation Project (Credit 1710-SE). Project execution After a six-month preparation period, the project was appraised in October 1979 and the credit became effective on August 29, 1980. The original closing Gate of December 31, 1983, was postponed twice to December 31, 1986. This delay was motivated by the introduction during project execution of activities not originally planned, followed by two amendments to the credit agreement in January 1984 and May 1985, respectively. Overall, the project was successful, except for the component related to technical assistance to the Energy Directorate of the Ministry of Industrial Development and Crafts (MDIA) and delays in the preparation by SENELEC of the scheduled quarterly progress reports. Project results Overall, t.le project achieved its objectiv Particularly, it facilitated the definition of legal, accounting, f.Luancial and tariff  - i ii - arrangements for the merger of the two former electricity enterprises into a single national electricity company. It also helped to prepare a least-cost development plan for SENELEC which will serve as a sound basis for the expansion of Senegal's electricity network. The results of the project's technical assistance component, however, were less positive, since its contribution to strengthening planning capabilities was insignificant. Likewise, the introduction of the new tariff structures proposed by the consultants was delayed, which created financial problems for SENELEC. Sustainability The viability of the project, like that of future projects in the power sector, depends greatly on SENELEC's capacity to manage those factors that determine its financial equilibrium, in particular the introduction ot an appropriate tariff policy and a better handling of its accounts receivable. Efforts to make progress in this area are currently being made within the framework of the energy sector rehabi..tation project and the first contrat- plan between the State and the company or the period 1987-1989. Lessons to be Learned The main lessons to be learned from project execution are the following: (i) In determining project objectives for a first operation in a given sector in the borrowing country, the World Bank should aim to strike a balance between a cautious approach justified by its lack of experience in that sector and a constant concern to optimize its resources spent on project preparation and monitoring. (ii) A technical assistance project intended to strengthen institutions must be very carefully designed, taking into consideration all factors that determining its success, both institutional and organizational, including staff motivation and effective use of the services of foreign experts. (iii)In a technical assistance and engineering project such as this under review, precise criteria must be defined to make it possible to take into account during execution the requirements not identified during project preparation; this would eliminate the very strong temptation, of those responsible for the projects in both the borrowing country and the donor institution, to finance activities whose priority may seem questionable to either one of the parties involved. (iv) Technical assistance and engineering projects take time to execute regardless of the amount to be financed. Therefore, the execution period should not be too short.  PROJECT COMPLETION SENEGAL POWER ENGINEERING AND TECHNICAL ASSIS'tNCE PROJECT (CREDIT S-26-SE) PART I: REVIEW OF THE PROJECT FROM BANK'S PERSPECTIVE 1. Project Identity Name of Project: Engineering and Technical Assistance Project for the Power Sector Credit Number: S-026-SE Regional Office: Africa Country: Senegal Sector: Energy 2. Project Background 2.1 The engineering and technical assistance project for the power sector, for which IDA provided a credit of US$3.3 million to Senegal in May 1980, was prepared in order to support the efforts initiated by the Senegalese Government to reorganize and develop the power sector and improve energy planning capabilities. The need for progress in these areas had bec.me very urgent given Senegal's great dependence on oil imports for its energy consumption and the economy's inability to deal with sharp and unexpected increases in oil prices as a result of the acute economic crisis affecting it at that time. 2.2 The planning and implementation of a more rational structure for the electricity sector was one of the project's objectives. At that time, two companies, one a state corporation (Electricite du Senegal) and the other a mixed economy company (SENELEC), were jointly responsible for investments in and the operation of the electricity sector. It was planned to terminate this arrangement on December 31, 1981; date at which, the State would become the sole owner of SENELEC. The merger of the two companies would be irreversible and was to be brought about via appropriate legal, financial, accounting and tariff procedures. 2.3 It was also necessary to develop electricity generation resources to reduce the risk of power shortages projected in SENELEC's demand forecast for 1984-1985. 2.4 Finally, against a background of great uncertainty regarding the future of oil prices on world markets, it was vital to strengthen the strategic planning and programming capabilities of the Government in order to facilitate the necessary adjustments in energy policy. 2.5 The credit became effective in 1980 and was closed in June 1986. The project was executed simultaneously with the Second Technical Assistance Project to the parapublic sector (Credit 1398-SE), whose purpose was to improve the management of public enterprises by defining a better working relationship between them and the State, and with the Petroleum Exploration Project (Credit 1323-SE). It was followed by the Energy Sector Rehabilitation Project (Credit 1710-SE), which it helpedl prepare.  -2- 3. Objectives and Description of the Project 3.1 The project objectives were: (i) to help the government prepare a national energy plan and to improve planning in the power sector; (ii) to provide institution-building in the power sector; (iii)to improve accounting systems and procedures in the sector; (iv) to ensure a rational medium-term development of Senegal's generating facilities within the interconnected system. 3.2 The objectives of this project, the first Bank 3peration in the sector, were deliberately limited. In retrospect, we could ask ourselves whether this attitude, reflecting certain caution on the Bank's part, was justified or whether, in light of the urgent prcblems requiring resoluticn, it would not have been better to b Tnore ambitious. 3.3 The first question must be answered in the affirmative if the focus is on the complexity of the sector's problems. In fact, the Government and che power sector enterprises were faced with numerous options, not all of them having the same economic and financial justification. Furthermore, a number of donors were interested in financing operations in this sector, which raised the problem of coordinating their efforts. 3.4 If on the other hand the criterion used is the volume of resources utilized by the Bank to prepaie the project and supervise its execution, it is apparent that these efforts were very substantial in comparison to the small amounlt of project financing. 4. Project Components 4.1 The project components established as a result of the negotiations were as follows: (i) 3 study to determine the optimal organization of the Senegalese power sector, including proposals for the creation of a national entity to replace the two existing companies (SENELEC and EDS); (ii) financial studies concerning the accounting systems and procedures of EDS and SENELEC, consisting of an audit by foreign consultants of the financial statements of these two companies and of their consolidated balance sheets for the years 1979, 1980 and 1981, including recommendations designed to improve financial management in these sectors; (iii)a design study for the headquarters of the future national entity which, on the basis of an analysis of the organization of EDS and SENELEC, was to propose the phased construction of a modest but  -3- functional building and the preparation of bidding documents for its construction; (iv) a feasibility study of the dxpansion of the interconnected power system's generating facilities; (v) six man-years of technical assistance to MDIA in the form of two senior advisors with extensive experience in the area of energy planning; one of thern was to be a personal adviser to the Minister and help prepare proposals regarding the overall organization of the energy sector; the other was to be seconded to the Director of Energy at MDIA and to participate in the preparation of a national energy plan; (vi) the training through scholarships of three Senegalese engineers over a period of three years, to replace the two foreign experts at MDIA, in the field of energy planning techniques in general and the power sector in particular; and (vii)a study on the structure and level of electricity tariffs, including recommendations to be implemented during Senegal's Sixth National Economic and Social Development Plan. 4.2 The project was amended twice, in January 1984 and May 1985, respectively, to include the following additional components: (i) the study of a master plan for distribution for the period 1985- 2005 and a critical review of the feasibility study of the Niayes peat project; (ii) training of SENELEC's power engineers at the Inter-African Electricity School at Abidjan during the years 1984-85 and 1985- 86; (iii)acquisition of spare parts and related services for the rehabilitation of the Saint-Louis diesel plant in the north of Senegal. 5. Project Design 5.1 In general terms the project was well designed, despite some shortcomings in cerzain components. 'The essential features of the project consisted of the consultants' studies and audits of the sector enterprises by outside auditors; the government, SENELEC, the World Bank and the Public Enterprise Accounts Verification and Audit Committee (CVCCEP) attached particular importance to the preparation of appropriate terms of reference, the selection of consultants and the preparation of work programs to reduce the risk of these studies not achieving their objective. The deficiencies in project design can be associated with the technical assistance component under the Energy Directorate of MDIA and similar activities financed by the project.  -4- 5.2 As regards technical assistance, the project design does not seem to be based on a comprehensive analysis of problenms that would have had to be resolved beforehand in order to ensure that the experts to be recruited could contribute efficiently to the process of establishing and developing a planning capacicy. First, the objective to be achieved by recruiting these experts was not clearly defined in the project documents, a fact which had a negative impact on the tcchnical assistance component. 5.3 Secondly, no precise wirk program was prepared for the experts, nor a schedule of activities or performance criteria to facilitate an assessment of either the progress made in strengthening planning capacities or the tasks to be carried nut subsequently to achieve the targeted objectives. These deficiencies in project design partly explain why the results of the technical assistance component were somewhat limited. 5.4 Another gap in project design was the difficult dialogue between the Bank and SENELEC regarding supplemen-arv activities that could De financed from the remaining credit funds. In fact, thi, problem originated from the fact that the project contained no precise criteria for financing an action not identified at the time of negotiations. This omicsion made it difficult for SENELEC to understand the reasons for the BEnk's decisicn to refuse financing under the credit to repair a boiler at, Dakar power station, although it had agreed to similar work at the Saint-Louis power station. To facilitate the execution of er:gineering and technical assistance prujects, it is essential during their preparation to establish precise criteria that must be met for financing activities not identified at that time. 6. Project organization 6.1 The organizdtion of the project did not pose any problems during execution. EDS/SENELEC and the Energy Directorate were responsible for its implementation. As planned, CVCCEP supervised the audit of EDS/SENELEC accounts in line with its mandate. Administrative and financial coordination of the project as a whole, inc]uding disbursements of funds, was SENELEC's responsibility. The project management structure was efficiently iniegrated into SENELFC's organization, which rhus was able to acquire the necessary skills fc managing the implementation of subsequent projects partly financed by the Eank and other donors. The MLnister of Economy and Finance had agreed to delegate credit disbursement functions to SENELEC. This facilitated greatly the disbursement process by cutting down on the time spent in processing payment requests. 7. Project execution 7.1 Apart from a few minor difficulties, the project went well overall. The credit became effective ahead of the date planned in the agreement, which does not happen very oftern in Bank projects in Senegal. The final closing date was June 30, 1986, three years later than the initial closing date. This discrepancy is explained by the fact that the project was amended on two occasi,ns to include new activities. Credit funds were entirely disbursed and there were no cost overruns.  -5- 7.2 The one failure in project execution were the delays in SENELEC's submission of quarterly progress reports, despite the constant insistence of supervision miss.ons. 8. Prolect results 8.1 Overall the project was a success, although the extent to which it achieved its objectives varied from one component to another. 8.2 The project succeqsfully helped to establish the appropriate legal, financial and orgarizational bases for the merger jf the two er.terprises in the power sector and the establishment of the national electricity company. It promoted a rational choice of investments in electricity generating resources through the selection of the most technically reliable, least-cost solution in relation to possible alternatives (fuel oil, hydropower, peat, gas) anl the preparation of an optimal investment execution timetable. 8.3 The project's tariff study and technical assistance compor.ents only partially achieved their objectives. The project financed Lariff studies witi a view to providing SENELEC with a sound and rational tariff structure. The consultants carried out these studies in accordance with their terms of reterence and their work was regarded as satisfactory. However, the government did not allow SENELEC to act immediately on their recommendation that the tariff structure should be based on SEhELEC's long-term marginal cost. As a result tariffs, although raised considerably in 1983, have remained too low and have not enabled SENELEC to generate the cash flow required to service its debt and partially contribute to finance new investments. 8.4 As regards the technical assistance, its impact on the institutional planning and energy programming capability of the Energy Directorate of MDIA was not very significant. Despite the presenice for almost three years of two energy planning experts, the Energy Directorate even now still requires technical assistance in preparing working documents for energy sector meetings. 8.5 It would appear that the difficulties tied to the successful introduction and/or development of an institutional planning capability in the energy sector using the services of experts, even experienced ones, were underestimated. The very fact that one of these experts, who was assigned to the minister's office, suddenly resigned from his post following the decision by the Minister of Industrial Development in November 1983 to second him to the office of the Director of Energy, indicates that ix.rufficient care was paid during project preparation to identifying the necessary conditions for effect've utilization of technical expertise. 9. Project viability '.1 The project enabled SENELEC to make significant progress in planning the development of its generating equipment, introducing a tariff structu..e giving it a healthy financial position, enabling it to finance part of its investments, and developing its human resources. These major achievements can  -6- only be maintained and expanded if the company can solve the problem of rising accounts receivable, with which it was confronted during project execution. Notwithstanding the support received under the technical assistance component of the Energy Sactor Rehabilitation project, SENELEC is still affected by this problem, which is significantly undermining its financial position. In practice the issue revolves overall around Senegal's difficult financial situation, which is not paying for the electricity consumed by governmental entities ; and almost all the public service enterprises. The action plan for the Fourth Structural Adjustment Credit gives priority to rebuilding the financial relations between the State and the public enterprises, including reciprocal debts and ways of preventing State debts to these enterprises from recurring. Until the problem is finally settled, the viability of electricity and other public service sector projects will be in jeopardy. 10. Performance of the World Bank 10.1 In overall terms the performance of the World Bank was satisfactory. Its experts helped SENELEC and the Government to prepare the terms of reference for studies and audits and made every effort to monitor project execution on a regular basis. During the period 1982-1985, eight missions visited Senegal to supervise the project, an average of two a year. This considerable effort permitted timely identification of the numerous and complex pro"'lems linked to the restructuring and reorganization of the power sector, the prcgramming and selection of investments in generation. and tariffs, and ir. conjunction with the government, led to appropriate solutions being found. It should be noted that these problems were all the more difficult in that this was the first Bank operation in this sector in Senegal. The government and SENELEC, confronted by the energy crisis and a risk of inadequate electricity generating resources, had to make a series of difficult choices among a number of competing alternatives as regards investments in electricity generation. 10.2 Supervision by the Bank nonetheless demonstrated certain deficiencies, insofar as it did not attach enough importance to or focus sufficient attention on strengthening the planning capability of the Energy Directorate, and in particular on scrutinizing the role and work program of the technical experts with a view to ensuring that the necessary corrective measures were taken to achieve its objective. 11. Performance of the Borrower 11.1 In general terms the Borrower's performance was satisfactory. SENELEC/EDS and CVCCEP effectively managed the legal and financial studies pertaining to the reorganization of the sector, the tariff studies and the studies on developing production resources. 11.2 The Borrower satisfied all the special conditions in the credit agreement as set oLt in section 3.03. This good performance was the result of SENELEC/EDS's commitment to carry out the project successfully, which was demonstrated right from the start by the latter's agreement to prefinance the studies.  -7- 11.3 It should, however, be noted that the Borrower delayed the establishment of the national electricity company, initially planned for December 31, 1981 to December 31, 1983, and the introduction of the new tariff structure, which occurred only in 1983. 12. Quality of relations between the parties involved in the project 12.1 Overall, the quality of relations among the various parties involved in the project was good and contributed to its success. However, it deteriorated when SENELEC managers felt that the Bank was unwilling to finance the training of electrical engineers from the remainder of the credit although it had been very willing to accept the financing of studies which from SENELEC's standpoint were of low priority. This problem illustrates the need for the Borrower and the Bank to have a clear understanding of the precise criteria to which the funds from a credit may be used to finance certain actions not identified at the time that the project is approved. 13. Consulting services 13.1 Aside from the consultants responsible for the first phase of the study for the expansion of production resources and, to a lesser extent, the experts attached to MDIA, the consultants' performance of those who participated in the project was satisfactory. This is largely due to the fact that these consultants were recruited according to rigorous procedures and had considerable experience in their respective areas. 14. Information and data 14.1 One of the flaws in project execution was the lack of importance attached by those responsible for its implementation to the regular and ti..-ely preparation of the quarterly reports detailing progress. Therefore information that these reports should have contained in order to take the necessary corrective measures were unavailable.  -8- PROJECT COMPLETION SENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (CREDIT S-26-SE) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE I. Introduction The system of private power generating concessions in Senegal started to be gradually abolished in 1972, leading in 1983 to the creation of Societe Nationale d'Electricite, which was made responsible for the generation, transmission and distribution of electricity throughout the country. This entity is entirely government-owned. Nevertheless, it has the legal status of a financially independent industrial and commercial corporation. Furthermore, it is responsible for formulating major policies to be followed in such matters as budget, tariffs, procurement, staff recruitment, investment, etc. It is headed by a Managing Director whose job is to put into effect the policies set by the Board of Directors. The Power Engineering and Technical Assistance Project S-26-SE of June 30, 1980 financed a series of studies which have provided the basis for an Energy Sector Rehabilitation Project cofinanced by the World Bank, the Caisse Centrale de Cooperation Economigue, the African Development Bank, the West African Development Bank and SENELEC itself. The impact of Credit S-26 on SENELEC's outlook may be considered from three major standpoints: - From the institutional standpoint, the Credit paved the way for the merger of two entities, Electricite du Senegal (EDS) and Societe Senegalaise de Distribution d'Energie Electrique (SENELEC), a move which led to a CFAF 63 billion capital increase for the new entity from its CFAF 3.2 billion. Consequently, there was a significant improvement in its borrowing capacity. - From the management standpoint, the audits for fiscal years 1979, 198C and 1981 called for under the Credit Agreement meant not only that the accounting and financial procedures of the two former entities had improved but also that their accounts were certified according to internationally acceptable standards, thus creating confidence among donors in this sector. In addition, improved management procedures to be applied as part of the corporation's human resources and budgeting and financial policies were identified, being introduced progressively under the terms of the concession-agreement (contrat-plan) signed between the Government and SENELEC following the identification study of the sector.  -9- From the standpoint of investment identification and programming, the study allowed SENELEC to undertake an exhaustive inventory of assets in both the generating and distribution fields. In addition, it provided the basis for the clearest possible understanding of how generating facilities needed to expand in the future considering existing national resources and the 'revailing international market constraints. II. Project Identification, Preparation and Appraisal (a) Background The Power Engineering and Technical Assistance Project was IDA's first venture in the power sector in Senegal. The Government's initial request (June 14, 1979) that Bank Group participate in the development of the electric power sector was prompted by its wish to reach a rational decision on future expansion of the country's generating capacity given that higher oil prices were weighing more and more heavily on a sector that was dependent solely on petroleum products for its energy consumption. During discussions with SENELEC management in July 1979, it was indicated that the Government would very willingly accept Bank Group assistance in restructuring the electricity sector, starting from the then-existing provisional situation. The following October, during the project's appraisal process and related meetings with the Government, it became clear that a comprehensive plan for the entire energy sector was needed if the Senegalese economy, increasingly heavy dependent on petroleum products, was to be dealt with effectively. In addition, training requirements and the need for a study on e.ectricity tariffs were also identified and discussed with the authorities until a consensus was reached. (b) Objectives and description of the project The project's objectives as determined at the time of negotiations were to meet immediate needs in the following areas: strengthening of sector institutions; analysis of the sector's financial situation, through external audits of accounts; long-term planning of the power-generating capacity of the interconnected system; technical assistance and training for both the Government and EDS/SENELEC, with a view to formulation of a National Energy Plan at the government level and improved planning in the electricity sector. In more concrete terms, the project consisted of six separate components: (i) A study to determine the optimal organization of the Senegalese power sector, and to examine the legal framework for merging the two existing companies (SENELEC and EDS) in order to create a single government-owned corporation; specific recommendations were to be made and presented before December 31, 1980 in order to  - 10 - allow the Government a full year -- up to December 31, 1981 -- in which to reach its decision. (ii) F'inancial studies concerning the accounting systems and procedures of EDS and SENELEC and involving examinations by external auditors of the financial statements of the two companies and of their consolidated balance sheets, for the years 1979, 1980 and 1981 -- the last day of 1981 being the date scheduled for the decision on the new legal framework for the sector. These studies were to be accompanied by recommendations designed to improve the financial controls over the sector. Audit of 1979 accounts was a necessary step in obtaining basic data pertinent to the proposed reorganization of the sector. (iii) A design study for the location of the future national electricity company. Such study was to propose the phased construction of a modest but functional building based on an organizational analysis of EDS and SENELEC, including preparation of the bidding documents for its construction. (iv) A feasibility study on expansion of the interconnected power system's generating facilities. The consultants were asked to analyze past and present electricity demand and consumption, work up projections of output requirements for the next 10 years, analyze existing generating facilities, propose an expansion plan based on economic comparison of a range of development program options, and prepare bidding documents for the expansion of generating facilities. (v) Six man-years of technical assistance for the MDIA (Ministry of Industrial Development and Crafts) in the form of the services of two advisers with extensive experience in energy resources planning. One of these was to advise the Minister and help prepare the proposal to be submitted by him to the Government regarding overall organization of the energy sector -- a proposal that was to take as its point of departure the existing situation, where the responsibility for energy resources planning was split among various Ministries. The other advisor was to be seconded to the Director of Energy Policy at the MDIA and participate in the preparation of a National Energy Plan. vvi) Training in energy planning techniques for three Senegalese specialists, in the form of three-year scholarships. Two of the three individuals were to replace the two expatriate advisers on energy planning whose services were part of the echnical assistance arrangements; the third was to be emp.oyed by the new corporation, where he would take over development planning for the electric power sector. (vii) A study of the structure and level of electricit-, tariffs, which was to incorporate recommendations to be implemented under Senegal's Sixth National Economic and Social Development Plan.  - 11 - The project itself was never the subject of an appraisal report. Negotiations between the Bank and the Senegalese authorities took place in Paris, April 15-17, 1980, and Credit Agreement No. S-26-SE was signed June 18, 1980. III. Project Execution The project was executed by SENELEC over the period 1980-1986. Its various components -- (A) legal studies; (B) audits; (C) architectural studies; (F) technical assistance to MDIA; (E) training scholarships (MDIA- SENELEC) -- were carried out to the satisfaction of the parties. The legal study made by EDF (Electricite de France) culminated in drafting of the legal instruments on which the new corporation, finally set up in 1983, was founded. The audits of operations in the years 1979, 1980 and 1981, carried out by the Coopers-Lybrand Aziz Dieye Group, the winning bi.ders, not only certified the accounts for those years according to internationally acceptable standards but also included revaluation of the assets of the two original companies and determination of the capitalization of the new SENELEC. The architectural studies were split up: projections of staff size up to the year 2000 were commissioned from Societe d'Etudes de Developpement en Afrigue (SONED); design studies, together with preparation of bidding documents, were commissioned from two firms, SECHAUD-METZ-SCETEC-CASTETS and Goudiaby A. Tepa. These materials were submitted and approved by SENELEC. Because of time pressure, it was thought preferable to postpone the procurement process and incorporate it into a Second Electric Power Project to be submitted to the World Bank. The technical assistance arrangements for the MDIA went ahead normali. Two experts were recruited by the MDIA -- one through SHAWINIGAN and the other through TRANS-ENERG -- to serve as advisers over a three-year period, the first to the Director of Energy Policy and the second to the Minister. Training scholarships: Both SENELEC and the MDIA sent trainees to TRANS-ENERG or EDF either for a single long period or several shorter periods. Those sent by the MDIA for long (nine-month) training with TRANS-ENERG proved to be well acquainted with the problems associated with both power tariffs and energy planning and programming, a factor which made for more effective dialogue between the MDIA and SENELEC. As far as the studies component of the project is concerned, however, since there was a balance left from the first disbursement cut-off date from Credit proceeds allocated for the tariff and legal studies and for the study on expansion of interconnected-system generating facilities, the Bank agreed that the following components might be included: - a study for a generation/transmission master plan; - a critical study on the peat proposal; - Mirrlees spare parts for the Saint Louis diesel plant; - training for ESIE students in the years 1984/85 and 1985/86.  12 - The study on expansion of interconnected-system output capacity and the tariff study were not up to expectations, either those of SENELEC in the first case or those of the MDIA in the second: Only the first phase of the study on expanding the output capacity of the general interconnected system was carried out by the Fichtner Group. Since SENELEC considered their work to be incomplete and their conclusions unsatisfactory, it did not renew their contract for the second phase. With the setting up of Compagnie des Tourbieres du Senegal (a peat-mining company), the Government was actively in favor of a peat-burning power station, and the study effort was oriented so much in this direction that the MDIA decided to finance the peat proposal study by IVO Consultants out of the funds remaining from S/26. The tariff study was carried out jointly by SENELEC and EDF, but was not approved by the MDIA during the period 1981-1985. A supplementary SENELEC-EDF study was therefore undertaken in 1986 and led to publication of Tariff Annex No. 5145 of November 15, 1986. IV. Project impact on SENELEC (a) Structural: The project led to the merger of the two existing companies, SENELEC and EDS, and subsequently to the creation of the new SENELEC with its broader prerogatives. It was also the occasion for drafting of various legal instruwents regulating the sector, e.g., SENELEC's articles of association, the decree regulating power generation, transmission and distribution, etc. (b) Organizational: The project included a full-scale identification study of the power sector. In the early stages, the accounts of the two existing companies were audited and adapted to international audit standards. Once the diagnostic process was completed, a Sector Rehabilitation Plan was formulated, the most concrete manifestation of which was the maintenance agreement, or contrat-plan, spelling out all "rights and obligations" between the Government and SENELEC. (c) Investment planning and programming: The project enabled SENELEC to take fuller account in its forward investment planning of all the constraints affecting its key clients, but at the same time safeguard its own long-term financial health. Direct dialogue was opened between SENELEC and these clients and also between SENELEC and the MDIA. This made it possible to put together a minimal program, the First Electric Power Project, designed to restore SENELEC to financial equilibrium. (d) Financial: The project goal here was to halt the deterioration of SENELEC's financial situation by introducing adequate tariffs and reorganizing its finances. The two components of this objective  - 13 - were achieved. The new tariff structure published in November 1986 will generate sufficient resources in the period 1986-90 to absorb the deficits accumulated in the fiscal years from 1982 to 1985 and to return SENELEC to a profit-making position as of 1986. As to the corporation's improved financial status, it was the result of revaluation of its assets, a move which endowed it with substantial equity capital and with the consequent greater creditworthiness. (e) Management: The diagnostic study showed SENELEC's needs for technical assistance in the areas of generation/transmission, client management and financial management. Three specialists from the HYDRO-QUEBEC Group have now begun developing various performance indicators that should help keep SENELEC management effective. In conclusion, it may be fairly stated that the enumeration of the problems identified through Project S-26 was exhaustive enough to pinpoint the difficulties affecting the sector and to find remedies for them. As far as the disbursement of Credit proceeds is concerned, delays by the Bank in meeting requests for disbursements were often the cause of repeated inquiries from our partners. In addition, the Bank did not always show the anticipated degree of understanding of our requests for reallocation of undisbursed balances. Except for these few difficulties, we are able to affirm that Credit S- 26 was marked by close cooperation with the Bank, which, through its various supervision missions and reports, enabled all parties -- SENELEC, the Bank itself and MDIA -- to remain abreast of problems and correct them despite the delays mentioned.  - 14 - PROJECT COMPLETION SENEGAL POWER ENGINEERING AND TECHNICAL ASSISTANCE PROJECT (CREDIT S-26-SE) PART III: .ATISTICAL INFORMATION 1. Rolated Bank Loans and/or Credit. Loan/Credit Year of No. Title / Typ, of Businges Approval Status Cr. 1398-SE To help finance 07/07/83 Completion of date place Second Parapublic activities aimed at for June 90. Technical improving efficiency Assistance of public enterprises Project reducing the public sector deficit. Cr. 1710-SE To help finance 06/20/88 Under impl mentation. First Energy construction and Sector rehabilitat;on Rehabilitation electricity generator Project facilities, strongth-ning and expanding transmission and distribution systems. Cr. 1323-SE To help tho Governmont 02/08/83 Completed. Petroleum promote petroleum Exploration exploration by foreign Project companies, assist in Carrying out exploration of the Dism Nindio area. 2. Project Timetable Date Date Date Item Planned Revised Actual Idontification (EPS) 6/79 Projoct Brief 07/27/79 Appraisal Mission 10/31/79 Negotiations 4/80 4/16/80 Board Approval 6/80 6/19/80 Signature 6/18/80 Effectiveness 8/29/80 Closing 6/30/84 6/30/84 6/30/86 6/30/86 Completion 12/31/83 12/31/84 6/30/86 12/31/86 3. USE OF BANW RESOURCES Staff Input (SW) Stage of Project Cycle Actual Through Appraisal 9.6 Appraisal through Board Appr. 7.4 Board App. thr. Effectiveness 2.9 Supervision 99.8  - 15 - 4. Mission* Month/ No. of Days in Perform. Year Persons Field Spocialization Rating Loan 1323-SE Appraisal 10/79 Supervision 1 9/80 2 4 EGR,FNA 1 Supervision 2 4/81 1 2 EGR 1 Supervision 3 11/81 3 4 ECN, EGR, FNA 1 Supervision 4 4/82 3 7 EGR, ECN, FNA 1 Supervision 6 1/83 2 8 EGR, FNA 1 Supervision S 12/83 2 12 ECR, FNA 1 Supervision 7 6/84 1 9 EGR 1 Supervision 8 8/84 2 10 EGR, FNA 1 Supervision 9 2/86 2 12 FNA, EGR 1 Supervision 10 8/86 6 16 FNA, ECN 1 Supervision 11 10/86 2 10 FNA, EGR 1  - 16 - SENEGAL POWER ENGINEERING A T.A. PROJECT - CR. S-26-SE PROJECT COMPLETION REPORT DISBURSEMENT INFORMATION (U.S. S UILLI2NS) Appraisal Est. Actual Amt. Actual X of Actual X of FISCAL YEAR Cumulative Cumulative Entimated Total