Tanzania - Power Rehabilitation Project

Dacm.t of The World Bank FOR OMCaAL USE ONLY Rebpipio 12564 PROJECT COMPLETION REPORT UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT (CREDIT 1687-TA) NOVEMBER 29, 1993 MICROGRAPHICS Report No: 12564 Type: PCR Infrastructure Operations Division Eastern Africa Department Africa Regional Office This document has a restricted distribution and may be used by reipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bankl autiorization.  CURRENCY EQUIVALENT Currency Unit = Tanzanian Shilling (at Appraisal Year, 1985) Tsh 1. 0 = US$ 0.061 US$ 1.0 = Tsh 16.4 (At Completion Year, 1992 Annual Average) Tsh 1 0 U US$ 0 003 US$ 1 0 = Tsh. 300 ABBREVIATIONS CIDA Canadian International Development Agency EAR Energy Assessment Review ESMAP Energy Sector Management Assistance Program H.E. Household Energy IDA International Development Association MWEM Ministry of Water, Energy and Minerals NGO Non-Governmental Organization NLWA National Urban Water Authority PIP Productivity Improvement Program REDPU Renewable Energy Development Project Unit SAR Staff Appraisal Report SCF Supervising Consulting Firr. SDR Special Diawing Rights TA Technical Assistance TANESCO Tanzania Electric Supply Company TATEDO Tanzania Traditional Energy Development Organization TTI Technical Training Institute UNDP United Nations Development Program MEASUREMENT MW Mega Watts FISCAL YEAR Government: July I - June 30 TANESCO: January I - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.SA Office of Director-General Operations Evalustion November 29, 1993 MEMORANDUM TO THE EXECUTIVE Dl.9CTORS AND THR PRESIDENT SUBJECT: Project Completion Report on Tanzania Power Rehabilitation Proiect (Credit 1687-TA) Attached is the "Project Completion Report on Tanzania - Power Rehabilitation Project (Credit 1687-TA) prepared by the Africa Regional Office. No contribution was received from the Borrower nor were comments sought from co- lenders KfW (Germany) and NORAD (Norway). The project achieved the physical objective of improving the electricity service by rehabilitating the generating plants, transmission lines and distribution network. Also, the household energy component achieved the objective of encouraging efficient domestic energy resources development through a successful pilot production of charcoal and stoves which interested small private entrepreneurs. The project was revised and downsized by 28% as planned co-financing from CIDA, EIB and Finland failed to materialize. IDA, the major lender, contributed US$ 44.3 million to the US$ 63.4 million actual project cost; KfW, US$ 8.0 million; NORAD, US$ 8.8 million; and Tanzania Electric Supply Company (TANESCO), US$ 2.3 million. The project outcome is rated as satisfactory. Its sustainability is rated as uncertain since the main project component did not improve the broader institutional framework which currently does not support cost recovery nor provide independence and autonomy to TANESCO. Development of power sector human skills was negligible; the institutional development impact of the project is rated as partial on account of the success of the improved stoves program. The PCR contains an informative account of the project implementaticn. However, an economic rate of return on the project was not recalculated because TANESCO could not provide the necessary data. The project will be audited together with the Mtera Hydro Power Project (Credit 1405-TA). Attachment 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 Worid Bank authorization.  FOR OFFICIL USE ONLY UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT (CR. 1687-TA) PROJECT COMPLETION REPORT TABLE OF CONTENTS PAGE NO. Preface Summary ii PART I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE ..........I 1. Project Identity .................................................1 2. Project Background .................................................1 Sector Issues and Objectives ..1......... ......................... Energy Sector Organization and Issues ..........................................2 3. Project Objectives and Description ..........................................3 Project Objectives .........................................3 Project Components .........................................3 4. Project Design and Organization .........................................3 5. Project Implementation .........................................5 Part A: Power System Components ..........................................5 Part B: Household Energy (H.E.) Components .........................6 6. Project Results ...........................................8 7. Project Sustainability ..........................................9 8. Bank Performance ........................................... 11 Lessons L4amt ...........................................I 1 9. Borrower Performance ........ ........... ....................... 12 Lessons Learnt: .. ........................................ 12 10. Project Relationship ........................................... 12 11. Consulting Services ........................................... 12 12. Project Documentation and Data . . ........................... 13 This document has a restricted distribution and may be used by ecipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTETlTS (Cont'd.) PAGE NO. PART 11. PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 1 4 PART Im. STATISTICAL INFORMATION A. Table 1. Related Bank Loans and/or Association Credits 1 5 B. Table 2.Project Timetables 16 C. Table 3. Credit Disbursement 17 D. Table 4.Project Costs and Financing 18 E. TableS .Project Results 21 F. TaLle 6. Status of Covenants 22 G. Table 7 (a) & (b). Use of the Association Resources 24 R. Table 8. Project Implementation 26  I UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT (CRI 1687-TA) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Power Rehabilitation Project in Tanzania for which IDA Credit 1687-TA in the amount of SDR 34.7 miillion was approved on May 6, 1986. The credit was closed on June 30, 1992, two years later than original'y expected. Disbursements were complete e July 14, 1992 and the remaining balance of SDR 1 22 million will be canceled when the issue of the outstanding amount of US$ 185,000 from a Special Account is resolved. The PCR was prepared by the Infrastructure Operations Division, Country Department II of the African Region (Preface, Summary, Part I and [II). On May 25, 1993, the Association sent Parts I and III to the Beneficiary with a request to prepare Part 1I by June 30, 1993, and their reply is awaited. Preparation of this PCR was started during the Association's final supervision of the project in June, 1992 and is based, inter alia, on information contained in the Issues/Decision Papers, Project Brief, President's Report, the Development Credit Agreement (DCA), supervision reports, progress reports, correspondence between the Association and the Borrower/Beneficiary, internal memoranda and information gathered in Tanzania.  ii UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT (CR. 1687-TA) PROJECT COMPLETION REPORT EVALUATION SUMMARY Objectives. 1 The five main objectives of the project were to: (i) rehabilitate and improve efficiency in Tanzania's power system in order to achieve rv -tsonable levels of reliability and service; (ii) assist Government and TANESCO in developing a sound, least cost development program for the power sector; (iii) assist TANESCO in improving its financial performance; (iv) assist TANESCO in improving the skills of its operating personnel, particularly in the areas of maintenance and financial operations; and (v) encourage efficient domestic energy resource development and management through pilot activities in charcoal and stove production, and a study on the use of electric cookers. Implementation Experience 2. The project was implemented over five years as against the appraisal estimate of four years. The scope of the project was redefined several times after appraisal because of shortfalls in financing (para. 5.2); the final cost of the reduced project was about US$63.4 million as compared to the appraisal estimate of US$102.6 million (para. 5.15). The components were grouped into two main parts: Power (estimated final costs of US$60.8 million); and Household Energy (estimated final costs of US$2.6 million). Each part was implemented and supervised independently and their design, implementation experience and impact provide interesting contrasts. 3. For the power rehabilitation activities, a Supervising Consultant Firm (SCF) was used to prepare and coordinate all stages of implementation. This arrangement contributed sigrificantly to the success in meeting the project's objective of rehabilitating and improving efficiency in Tanzania's power services. The arrangement was less successfi"l, however, in achieving a transfer of operating skills to TANESCO's staff because of: (i) insufficient trained counterpart staff, (ii) poor personnel management practices including lack of incentives and uncoordinated transfers; and (iii) inadequate attention to this issue in design and implementa-ion. Only minor provisions had been made for staff training and even these were dropped because of shortfid1s in donor co-financing. Improvements were also not achieved in financial operations, despite several efforts, TANESCO did not succeed in recruiting and retaining Technical Assistance (TA) in financial management and computer systems. Partial success was achieved in improving the financial performance of TANESCO through tariff increases. The overall impact of the project on institutional capacity in TANESCO was limited, and it is doubtful therefore that the ultimate objective of "reasonable levels of reliability and service" would be sustainable on the basis of the project activities alone. (paras. 6.1 to 6.3). 4. Project objectives were filly achieved in the Household Energy (H.E.) components and the foundations were laid for signiScant improvements in efficiency in household energy use and supply Institutional capacity was strengthened in both the public and private svctors. Study tours at the beginning  iii of the project played a significant role in influencing decision-makers and re-orienting the focus of the components. In the stove component, following visits to Kenya and Malawi, focus was shifted from an intensive TA managed approach to one of lower TA input and greater involvement of artisans and private manufacturers An energy-efficient, metal-clad ceramic charcoal stove was successfully developed, produced and marketed. About 85 micro-enterprises and 7 centralized production facilities were established and more than 60,000 stoves have been sold through the regular retail services. The pilot demonstrated the economic viability of the improved stove industrv, user acceptability and high user demand. A program was prepared and institutional arrangements made for countrv wide expansion of production of stoves for households as well as a larger model for institutions (para. 6 4) 5. Design of the charcoal production component was also improved during implementation, only steel and brick kilns had been originally envisaged. Following a visit to Senegal and in recognition of local constraints, the program was expanded to include the Casamance kiln from Senegal, an improved earth- bound kiln.. Training in the Casamance kiln technology was provided to small-scale charcoal-makers, trainers from a Non-Governmental organization (NGO) and government staff Under a second approach, technical services were provided to a few private companies to set up commercial charcoal production centres based on a more capital intensive locally adapted brick kiln. A total of 7 centres were established with 17 brick kilns. The latter approach has successfully demonstrated the viability of semi -industrial production of charcoal using non-conventional sources of feedstock (saw-miliing by-products). 6. Benefits. The project contributed to both macro and sectoral growth. The improvements in physical capacity in the power sector had an immediate impact on the reliability of power supply and contributed to meeting the increased demand for power as a result of the recent recovery of the economy. Actual data is not available on the contributions of the project to TANESCOs overall performance (shown in PART III Table 6), and it is therefore difficult to calculate a rate of return on the investments which are only part of a larger program for the power sector which is still ongoing (para. 6.6). 7. The H.E. part of the project appears poised to make a beneficial impact on the environment and growth. The improved stoves and kilns are being promoted on a nation wide basis and the likelihood seems high of a major impact on efficiency in the use of forest resources and a reduction in degradation. The improved techniques and training promoted under the project have laid the foundations for countrywide improvement in the level of technology and further growth in the woodfuel sector (para. 6.7). Sustainability 8. Sustainability of the project achievements in rehabilitation in the power sector depends on further improvements in the broader institutional framework (relating to pricing, structure and regulation policies in the power sector, au.onomy in parastatal management, etc.) and human capital development in TANESCO. Some of the necessary actions are being pursued under ongoing Adjustment and Civil Service Reform programs, Cr. 2330-TA, the Power VI project (approved in May i993) and ESMAPI assistance. The impact of these efforts could perhaps be enhanced by the experiences from this project as well as from elsewhere. I Energy Sector Management Assistance Program  iv 9 First of all, the study tours and cross country experiences proved extremely valuable in influencing decision making and success in the H. E. comrnonent (paras 5. 11 and 8 3). It is also noted that ESMWAP: has been presenting seminars for decision-makers from Eastem European countries on cross countrv experiences, and regulation, structure and pricing decisions in natural monopolies. There seems to be a strong case for including these tools -study tours, cross country experiences and seminars- as important parts of the strategy for influencing decision makers and efficiency in improving the oower sector in Tanzania. 10 The second area for potential improvement relates to the management and coordination of institutional development within TANESCO. Under ongoing and proposed activities by the Bank alone (including ESMAP) there are about twenty discrete TA interventions (some of which involve teams of people), as well as several training activities. The use of a SCF with long term involvement in TANESCO proved extremely successful in designing, coordinating and implementing the technical program (which involved more than twenty suppliers and contractors) and also in some training (paras. 5.4 and 57). The same approach has been successfully used by the Bank elsewhere in institutional development and could be applied to TANESCO. A well established management institute experienced in the power sector should be internationally selected to assist in the formulation and implementation of a comprehensive institutional development program for TANESCO. The Institute should have linkages with power utilities and universities with strong programs in power engineering and related fields. The terms of reference for the Institute should also include close collaboration with and institution building of local and regional management training institutes which will eventually takeover in continuing support to TANESCO and the energy sector. 11. The achievements in the H.E. components are likely to be sustainable since human capacity development and flexibility were intrinsic factors in design and implementation of the component. An NGO was created with project support to: (i) organize and support the artisans involved in stove production who were trained under the project; and (ii) facilitate further expansion of the program. Project staff were also trained and programs prepared for firther expansion of both the stove and charcoal programs (paras. 6.4 and 7.2). The NGO is still a fledgling organization however, and continued technical assistance to the program would be required from ESMAP. Lessons Learnt: 12. The project experience provided the following three lessons: (a) for complex programs involving several independent contractors, (suppliers or TA) a supervising (or coordinating) Consultant Firm can make a valuable contribution to success; (b) study tours, cross-country experiences, workshops and seminars contributed significantly to adaptations of design, technology transfer and sustainability in the H.E. component; (c) intensive support from the Bank and focus on institution building (through ESMAP) also contributed to success and sustainability in the H.E component; a similar approach appears to be yielding good results so far under the ongoing ESMAP support to TANESCO on Loss Reduction and Demand Management. 2At the Joint Vienna anstitute, a new facility set up by international institutions for ttaining of officials and enterprise managers from fornerly centrally planned econoties. See the "ESMAP Connection' October 1992.  UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT (CR. 1687-TA) PROJECT COMPLETION REPORT PART I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1. PROJECT IDENTITY Project Name: Power Rehabilitation Project Credit No: 1687-TA RVP Unit: Africa Country: United Republic of Tanzania Sector: Energy Subsectors: Power and Household Energy 2. PROJECT BACKGROUND Sector Issues and Objectives 2.1 In 1985 when the project was appraised Tanzania's substantial and diverse energy resources were not substantially developed. In addition to large forestry resources, the country has coal deposits and significant proven gas deposits. The hydro potential was estimated at about 4,500 MW, of which 253 MW had been developed so far and 80 MW were under construction. According to a joint UNDP/World Bank Energy Assessment Report', Tanzania's energy consumption totaled about 9 million metric tons of oil equivalent in 1981, of which 92% was consumed as non-commercial energy (fuelwood and charcoal) and the balance as commercial energy (hydroelectricity, coal, and petroleum products). Overall per capita consumption, estimated at about 470 kilograms of oil equivalent, was comparable to other developing countries at sirnilar levels of per capita income. 2.2 The Government's five broad objectives in the energy sector were: (a) to assure minimum needed supplies of energy to the various sectors at reasonable cost; (b) to charge uniform prices for commercial energy within each subsector (petroleum, electricity) throughout the country; (c) to maintain the financial viability of the various supply organizations in the energy field (i.e. power, petroleum); (d) to promote some of the under-developed indigenous energy resources for domestic use and export; and (e) to secure and augment the supp!y of household fuels such as fuelwood and charcoal. lTanza: Ises and Options in the Energy Sector", Report No. 4649-TA, November 1984.  2 Energy Sector Organization and Issues 2.3 Responsibility for energy supplies rested with several different agencies which had recently begun to more actively coordinate their activities. As recommended by the Energy Assessment Report, an Energy Coordinating Committee, on which several ministries and energy agencies were represented, had been established in the Ministry of Water Energy and Minerals (MWEM) to coordinate all energy activities of the Government. MWEM, v_ 1s directly responsible for hydrocarbons, electricity, coal and uranium. Other agencies dealt with fuelwood, village woodlots and village electrification. In the commercial energy sector, MWEM supervised the Tanzania Electric Supply Company, 'Ltd. (TANESCO) and other agencies. 2.4 Energy Pricing. The retail petroleum product prices in Tanzania reflected costs as well as economic and social considerations. While the Government had rapidly increased the prices of petroleum products following international increases, it had not adequately increased power tariffs and there was cross-subsidy among consumers. A tariff study had been undertaken under Cr. 1405-TA, and a major element of its recommendations, an immediate tariff increase of 67% had already been implemented as of March 1, 1986. A semi-annual review and adjustment mechanism was to be implemented and monitored under the Rehabilitation project. 2.5 The Power Sub-Sector. Electricity supply was the responsibility of TANESCO, which was wholly owned by the Government and operated under the supervision of MWEM. TANESCO supplies some 93% of the power consumed in the country, with the balance self-generated by parastatals and private organizations. In 1986, the power system of TANESCO consisted of an interconnected system which provided services to seven urban centers. Twenty-three isolated service areas supplied the urban and industrial centers in the rest of the country. TANESCO's total installed capacity of 401 MW comprised 253 MW hydro and 148 MW diesel and gas turbine power stations; 80 MW of additional hydro capacity was under construction at Mtera; 51% of the present installed capacity was at the Kidatu power station which supplied the main interconnected system. 2.6 There were pervasive signs of age, overloading, corrosion and lack of maintenance (primarily due to lack of spare parts) throughout the TANESCO interconnected system as well in the isolated diesel generating stations, and the whole supply system was in urgent need of rehabilitation. Service reliability had greatly deteriorated, with some 500 major outages per year reported during 1981-83. These incidents were costly, with major outages on occasion cutting such vital services as water supply in Dar es Salaam for several days, and disrupting industrial output. A detailed study of these conditions had been carried out under Cr. 1405-TA and provided the basis for the Rehabilitation project. 2.7 The President's Report for the project had identified the need for improvements in TANESCO's organizational structure and management practices. There was a serious shortage of qualified, mid-level administrative and technical personnel and no incentive structure to reward outstanding employees. An organization and management study was being carried out under Cr. 1405-TA and the agreedupon recommendations of the study were expected to be implemented by December 31, 1986. Under the Rehabilitation project, TANESCO was supposed to prepare an incentive program to be reviewed by the Association and be operative by June 30, 1987.  3 3. PROJECT OBJECTIVES AND DESCRIPTION Project Objectives 3.1 The project had five main objectives which were as follows. (i) to rehabilitate and improve efficiency in Tanzania's power system in order to achieve reasonable levels of reliability and service; (ii) assist Government and TANESCO in developing a sound, least cost development program for the power sector; (iii) assist TANESCO in improving its financial performance, (iv) assist TANESCO in improving the skills of its operating personnel, particularly in the areas of maintenance and financial operations; and (v) encourage efficient domestic energy resource development and management through pilot activities in charcoal and stove production, and a study on the use of electric cookers. Project Components 3.2 The main project components at appraisal were: A. Power System Components (i) Rehabilitation of power stations with total nameplate rating estimated at about 120 MW; (ii) Rehabilitation of existing transmission lines, substations and distribution networks; (iii) Improvement of associated communications facilities and supply of transport, spares and tools; (iv) Technical Assistance: (a) 12 engineers/technicians for a total of 42 person months for supervision of the rehabilitation program and training of staff; (b) 180 person months for engineering services for supervision, technical approvals, drawings and design, inspection and general assistance; (c) 5 technicians/operator-instructors to train technicians and tradesman at the Technical Training Institute (TTI) in Kidatu; (d) 2 financial experts for a total of 60 person months to assist TANESCO in strengthening its Finance Directorate; and (e) 24 person months to develop a proper billing accounting and collection system for NUWA (a major debtor of TANESCO); (v) Overseas training of about 27 person months at recognized power institutes. B. Household Energy Components (i) Charcoal production: Two or three efficient, commercially-sized pilot charcoal production operations including the construction of access roads or trails where needed, vehicles, tools and operator training; (ii) Charcoal cookers: Training of cooker (jiko) manufacturers and/or artisans, initial supply of tools, materials and equipment, and the propagation and demonstration of these cookers in the market place, mainly Dar es Salaam; (iii) Electric cookers: A study of the economic and technical implications of the manufacturing or import of low-cost, 2-burner electric cookers for supply to existing power consumers, especially those in the low cost hydropower areas. 4. PROJECT DESIGN AND ORGANIZATION 4.1 The project design was based on in-depth analyses of the energy sector. The Energy Assessment Report (EAR) provided a thorough analysis of the key issues, sectoral objectives and strategy. Both parts of the project were consistent with the findings of the EAR which had emphasized the urgency of rehabilitation of TANESCO's distribution and transmission operations as well as the need to improve efficiency in the Household Energy sector. Detailed studies had also been carried out under Credit 1405-  4 TA on the requirements and impact of the rehabilitation program and organizational issues in TANESCO (para. 2.7 and 2.8). 4 2 With the benefit of hindsight, design of the power part of the project appears to have been biased in favor of investments in physical capital with insufficient attention to human capital development, and the institutional constraints of a parastatal in the Tanzanian context prevailing at the time. Only token provisions had been made for training and even these were dropped because of finding shortages. During implementation several attempts were made to deal with the institutional problems within TANESCO but apparently without sustainable impact. A Productivity Improvement Program had been introduced under the project but the Staff Appraisal Report (SAR) of the subsequent Power VI project (approved in May 1993) noted that "after a period of initial success there was a relaxation of productivity". This fundamental weakness in design has undermined not only productivity but also the impact of the project in transferring skC'Is (para. 5.7) and sustainability of the physical improvements (para 6. l) 4.3 From a technical point of view the project was well designed. The technical conceptual basis for power generation, transmission and distribution are well known and the power components appear to have been technically well prepared by the consultants. The targets in relation to technical efficiency and rehabilitation of plant and equipment were clear and the components and activities were consistent with the targets. This consistency between technical efficiency and components was maintained even after the several re-designs of components which were made necessary by the recurring financial constraints. 4.4 The household energy components were also based on clear technical concepts which had been successfully implemented in other African countries. The design of the components allowed sufficient flexibility during implementation. The institutional arrangements were appropriate for the nature and scope of the components which were designed with the objective of sustainability. The activities were designed and implemented by Technical Assistance (TA) but adequate provisions were made for training and development of local capacity, including private sector participation (paras. 5.10 to 5.13). The issues of institutional arrangements for post- project sustainability and expansion of activities were also examined by the TA and recommendations were provided. 4 5 Organizational responsibilities for all project components were clearly understood and accepted by the relevant parties. Project design did not attempt to force unnecessary coordination between the Power and Household Energy components for purposes of reporting, auditing and disbursements. They were each allowed to function independently and were supervised by different divisions of the Bank. 4.6 Major responsibility for implementation of the power rehabilitation components were assigned to a supervising consulting firm which had also prepared the components (under Credit 1405-TA). The firm was responsible for all aspects of procurement as well as supervision of the contractors and other engineering aspects of the rehabilitation program. They were also supposed to transfer technical know- how to TANESCO's staff, The technical and engineering responsibilities of the Supervising Consulting Firm (SCF) were clearly defined in the terms of reference and contract and once these had been agreed upon there were no conflicts during implementation. This assignment of responsibility to the SCF contributed significantly to the successful implementation of the rehabilitation program. This design feature, however, was not conducive to sustainability because the arrangements for the transfer of technical expertise were not clearly defined and the minimum pre-conditions for the transfer of skills to higher level local staff were not met (para. 5.7).  5. PROJECT IMPLEMENTATION 5.1 Credit Effectiveness and Project Start-Up. Credit Effectiveness was delayed by the difficulties encountered by Government in meeting the conditions of effectiveness relating to: (i) a plan of action for reduction of the outstanding electricity accounts of NUWA, and (ii) reductions in TANESCO's accounts receivable, except those of NUWA to no more than 90 days of sales. Government finally agreed to assume and pay off NJWA's debts through financing from the budget. A tariff increase of 25 percent was approved, TANESCO increased its collection efforts and the project was declared effective on March 13, 1987, almost six months later than expected and two years after it was appraised. 5.2 The project was plagued by financing problems from its inception. Despite considerable efforts by IDA to secure donor financing it was necessary to redefine the scope of the project several times after appraisal. The scope was reduced after Board approval and then again during implementation because of shortfalls in funding. Project start-up had been well planned. A consulting firm had been recruited (para. 4.6), to first prepare appropriate procurement packages and all bidding documents, and then evaluate the bids and prepare the contracts. The activities proceeded on schedule until they ran into the financing constraints. The shortfalls in donor financing, the delays in IDA credit effectiveness, and the delays in other donor financing (for various reasons including overdue payments from Government) meant that bids had to be revised, canceled or extended. 5.3 The appraisal implementation schedule of three and a half years and the corresponding disbursement schedule of four years were therefore delayed. The credit closing and project completion dates were extended twice and the project was finally closed on June 30, 1992, approximately five years after credit effectiveness (Part III Table 2). Part A: Power System Components 5.4 Implementation of the power system components was well planned by the consultant firm (para. 4.6). The works and materials procurement were divided into nearly twenty construction and supply contracts with detailed implementation schedules which took into account interlinkages where necessary. Draft tender documents were prepared and brought to negotiations but slippages occurred subsequently because of financial constraints and deviations in the bid documents and contracts from Bank guidelines. A representative of the consulting firm had been present in Washington at the time of negotiations but it would appear that he was heavily involved in restructuring the contracts in response to the changes in financing arrangements and was not able to focus sufficiently on Bank procurement requirements. 5.5 Despite the financing delays and the procurement issues most of the contracts were signed by April 1987, due largely to the efforts of the consulting firm. The scope of the rehabilitation of the power stations was changed several times in response to the changes in financing. Expected financing from the Kuwait Fund did not materialize but the shortfall was partially offset by additional finding (US$4.5 million) made available from Cr. 1405- TA. A reduced scope of work was satisfactorily completed but the planned rehabilitation of the Mwanza South diesel plant and of the Ubungo gas turbine were not carried out because of lack of financing. 5.6 The planned rehabilitation of transmission lines, substations and distribution network was satisfactorily carried out. The communications facilities were also improved as envisaged and transport facilities, spares and tools were also provided as planned. In its final report the Supervising Firm noted  6 that elaborate procedures had been put in place to prevent loss of equipment and tools with high local market value. 5.7 The scope of the technical assistance and training components were substantially redefined during implementation because expected funding from the Canadian International Development Agenc, (CIDA) did not materialize. A combined contract for engineering services, supervision and training was awarded to the same firm that had designed the rehabilitation program and was therefore familiar with the nature of the work and working conditions in country (para. 4 6). This familiarity with local conditions was a major asset during implementation. The firm placed a Project Manager supported by a materials handling expert and a senior distribution engineer in TA.NESCO's head office. Engineers were also posted to the field to supervise the various rehabilitation works. The firm also provided practical training for three of TANESCO's staff, one Civil Engineer was seconded to the firm's headquarters in the UK for 1 year and two electrical engineers were seconded for six months each. The training in the UK included work at construction sites and appears to have been usefiul. The practical on-the-job training locally was less successful because there was an insufficient number of trained TANESCO staff to work with the consultants. Furthermore the staff who were actually assigned were often called away for other duties including Regional Administration of TANESCO's operations, or were re-assigned away from the program just when they were beginning to acquire some experience. 5.8 Training in the use of live line maintenance equipment was a small but perhaps the most sustainable feature of the power part of the project. A contract of about US$1.0 million was awarded for the supply of equipment and training for live line maintenance. Despite the lack of adequate facilities the instructor and trainees overcame the problems and considerable progress was made. The original contract was increased slightly to include bare hand work and additional equipment and tools were ordered. Eight teams were trained in live line work and it was noted that Tanesco's staff adapted easily to live line work. After completion of the contract the most competent of Tanesco's live line staff continued to give instruction to other members of Tanesco's overhead line teams. 5.9 The proposals in the SAR for overseas training of about 27 man-months and strengthening of capacity at the Technical Training Institute were not carried out because of a lack of funds as a result of CIDA's withdrawal from the project. CIDA's non-participation also left a gap in financing for TA for improvements in financial management, billing and accounting. Given the magnitude of the financial management problems, IDA funding was reallocated to finance a Financial Controller and a Computer Systems expert. TANESCO, however, despite several attempts, was not successful in recruiting suitable candidates for a meaningfll rength of time over the life of the project. Provisions for TA support in these areas as well as for improvement in the computing equipment and facilities were included in the subsequent Power Engineering and Technical Assistance Project (Cr. 2330-TA) which became effective on June 12, 1992. Assistance to NUWA (the major debtor of TANESCO) was provided as planned under the project. About two years after project effectiveness, a data processing specialist was appointed and accounting workshops and equipment were financed. Part B: Household Energy (H.E.) Components 5.10 Implementation of the H.E. components were coordinated by the Renewable Energy Development Project Unit (REDPU) of MWEM. The Unit had been recently established and satisfactory arrangements within the Unit were a condition of disbursements for the H.E. part of the project. This condition was satisfactorily met and a supervision mission of August 1987 noted that the Unit was well organized with six  7 professional staff including an Adviser (through German TA). The mission also reported that the staff were keen but uncertain about IDA procurement procedures and inexperienced in project management. 5.11 The Bank (through ESMAP)2, therefore provided intensive supervision support in the development of work programs, termis of references and in the selection of consultants. REDPU staff were also sent for training in project implementation and management. Study tours at the beginning of the project played a significant role in influencing decision-makers and re-orienting the focus of the components. It had originally been intended that the stove component would be implemented through an intensive TA managed approach. This approach was dropped however, after a visit by project staff to Malawi, where the approach was being followed in another Bank project. Project management decided to follow the approach they saw in Kenya, of lower TA input and greater involvement of artisans and private manufacturers and distributors. A Kenyan consultant was recruited to implement the program with assistance from local consultants and Ministry staff. The charcoal production component was also similarly redesigned. The SAR had envisaged only steel and brick kilns, after a visit to Senegal it was decided to include the Casamance kiln, an improved earth-bound kiln. A consultant was recruited from Senegal under the same arrangements as for the stove component. Another consultant was recruited to promote the brick kiln. 5.12 The pilot schemes for charcoal and stove production were well planned during implementation with distinct phases. Detailed work programs and terms of references were prepared. Consultant responsibilities for technology transfer were clearly defined and the mechanisms (training, workshops, extension materials etc.) were included in their terms of references. 5.13 A preliminary study on the feasibility of promoting electric cookers was carried out by a local company and it was decided not to pursue the study any further for several reasons. Firs of all, the expected surpluses in power generation did not materialize. Secondly, the available information and preliminary conclusions from the study (albeit a weak one) were that :(i) local manufacture would not be economically feasible; and (ii) even the imported price was likely to be beyond the means of the targeted market. 5.14 Disbursements. The estimated and actual disbursement of the credit is shown in Part III, Table 3. A total of US$44.3 Million (SDR 33.5 million) was disbursed, and the remaining balance of US$1.7 million (SDR 1.2 million) was canceled. Disbursements were much slower than expected because of the initial delay in effectiveness (para. 5.1); the restructuring of components because of financial constraints (para. 5.2); the problems in procurement procedures (para. 5.16); and delays in the execution of a few contracts. Disbursements were completed over a period of five years as compared to the appraisal estimate of four years. 5.15 Project Costs and Financing. The total project cost were estimated at US$ 88.6 million (of which US$ 76.2 in foreign exchange) at appraisal; excluding an estimated US$14.0 nmilion for interest during construction. Following the shortfalls in donor financing, total project costs were revised in April 1990 to US$63.9 million comprising US$ 61.1 million of foreign costs and US$ 2.8 million of local costs. The final estimated costs at project completion in June 1992 were US$63.4 million. The external financing of US$61.1 nmllion was provided by IDA (US$ 44.3 million), Norway (US$ 8.8 million) and Germany (US$ 8.0 million). Details on project costs and financing are in Part III Table 5. 2Energy Sector Management Assistance Program (World Bank/UNDP)  8 5.16 Procurement. Lack of familiarity with Bank procedures was a major obstacle in the initial stages of implementation of both parts of the project (paras. 5.4 and 5.10). A number of documents and contracts had to be revised especially for the power components. A major problem arose in the procurement of bi- metalic conductors. The specifications were incorrectly stated in the bid documents as "corrosion resistant" rather than "corrosion proof" which is the quality required for conditions in Tanzania. This led to some delay and additional costs but matters were satisfactorily resolved through procurement from another supplier. 5.17 Bank procedures were followed during implementation and efforts were made to obtain Bank approval before embarking on procurement action and to comply with Bank recommendations on procurement matters. 5.18 Project Risks. At appraisal, the major risk was considered to be financial and remedial measures were therefore proposed. The major focus in design and implementation was on high increases in tariffs. After substantial tariff increases had been achieved, attention then turned to loss reduction and financial management. A study on loss-reduction was carried out by the Bank under ESMAP and several efforts were made to recruit long term TA in financial management but without success (para. 5.9). The SAR did not address the risk of sustainability of physical improvements in the context of the institutional constraints of TANESCO or in the broader context of a parastatal in Tanzania at the time. On the other hand, institltional risks for the H.E. components were identified at appraisal and satisfactorily dealt with both in design and during implementation with additional support for institutional constraints which emerged. 6. PROJECT RESULTS 6.1 The project was successful in meeting its objective of rehabilitating and improving efficiency in Tanzania's power services. It was less successful, however, in achieving a transfer of operating skills to TANESCO's staff because of: (i) insufficient trained counterpart staff; (ii) poor personnel management practices including lack of incentives and uncoordinated transfers; (iii) inadequate attention to this issue in design and implementation. It is doubtful, therefore that the ultimate objective of "reasonable levels of reliability and service" (para. 3.1) would be sustainable on the basis of the project activities alone. The SAR of the subsequent Power VI project (approved in May 1993) cites the two main problem areas of TANESCO as still being "(i) deterioration of the distr.bution network, due partly to overloading and substandard work; and (ii) low availability of the diesel stations due mainly to inadequate maintenance." There is now general recognitiort of the linkages between the institutional constraints and the operating problems of TANESCO. The Power VI project includes specific measures to address the policy framework for TANESCO and the energy sector as well as human capital development. These measures are expected to enhance the sustainability of the physical improvements under the Rehabilitation Project. 6.2 The project did not include specific financing in support of its objective of assisting TANESCO in developing a least cost development program for the power sector. This objective was already being pursued under the Mtwera Power Project (Cr. 1405-TA) with financing for a study and follow-up discussions. The Rehabilitation project only supported the objective through a legal covenant requiring TANESCO and Government to consult with IDA before embarking on any further investments in the sector. This covenant was only partially complied with because contracts were entered into for expansion of systems without consulting IDA. The contribution of the Rehabilitation Project to the least cost development program was therefore limited .  9 6.3 Partial success was achieved in improving the financial performance of TANESCO through tariff increases and more recently through some loss reduction but again these would not be sustainable without further improvements in financial management capacity and the institutional framework. 6.4 Project objectives were fully achieved in the H.E. components and the foundations were laid for significant improvements in efficiency in household energy use and supply. Institutional capacity was strengthened in REDPU (para. 5. 1 1). An energy-efficient, metal-clad ceramic charcoal stove, the Jiko Bora, was successfully developed, produced and marketed. The pilot demonstrated the economic viability of the improved stove industry, user acceptability and high user demand. Several hundred artisans were trained and satisfactory arrangements were made for private sector production of the stoves and supply of raw materials. About 85 micro-enterprise and 7 centralized production facilities were established and more than 60,000 stoves have been sold through regular retail facilities. A program was prepared and institutional arrangements made for country wide expansion of production of stoves for households as well as a larger model for institutions. REDPU staff were trained in order to enable them to train artisans and demonstrate and promote the program. 6.5 Improved charcoal production methods were also successfully introduced. Training in the Casamance kiln technology was provide to small-scale charcoal-makers, trainers from an NGO and government staff. The more capital intensive brick kiln was introduced to private companies in saw- milling, plantation forestry and other activities. Technical support was provided to set up 7 commercial production centres with 17 brick kilns. The component has successfully demonstrated the viability of semi-industrial production of charcoal using non-conventional sources of feedstock, mainly saw-milling by- products. 6.6 Benefits. The project contributed to both macro and sectoral growth. The improvements in physical capacity in the power sector had an immediate impact on the reliability of power supply and therefore provided positive benefits to consumers. In recent years the Tanzanian economy has experienced recovery as a result of various adjustment and reform programs, and power demand has grown faster than expected at appraisal. The rehabilitation under the project contributed to meeting the increased demand and in turn to the recovery of the economy. Actual data is not available on the contributions of the project to TANESCO's overall performance (shown in PART Im Table 6), and it is therefore difficult to calculate a rate of return on the investments which are only part of a larger program for the power sector which is still ongoing. 6.7 The H.E. part of the. project appears poised to make a beneficial impact on the environment and growth. The improved stoves and kilns are being promoted on a nation-wide basis and the likelihood seems high of a major impact on efficiency in the use of forest resources and a reduction in degradation. The improved techniques and training promoted under the project have laid the foundations for countrywide improvement in the level of technology and fiurther growth in the woodfuel sector. 7. PROJECT SUSTAINABILITY 7. 1 As discussed in paras. 6.1 to 6.3, the project achievements in rehabilitation in the power sector would not be sustainable unless supported by further improvements in the broader institutional framework (relating to pricing, structure and regulation policies in the power sector, autonomy in parastatal management, etc.) and human capital development in TANESCO. Some of the necessary actions are being pursued under the ongoing Adjustment and Civil Service Reform programs, the Power Engineering and  10 TA Project (Credit 2330-TA) and the Power VI project (approved in May 1993) and ESMAP assistance. The impact of these efforts could perhaps be enhanced by the experiences from this project as well as from elsewhere. 7.2. First of all, the study tours and cross country experiences proved extremely valuable in influencing decision making and success in the H. E. component (paras. 5. 11 and 8 3). It is also noted that ESMAP3 has been presenting seminars for decision-makers from Eastern European countries on cross country experiences, and regulation, structure and pricing decisions in natural monopolies. There seems to be a strong case for including these tools -study tours, cross country experiences and seminars- as important parts of the strategy for influencing decision makers and improving efficiency in the power sector in Tanzania. 7.3. The second area for potential improvement relates to the management and coordination of institutional development within TANESCO. Under ongoing and proposed activities by the Bank alone (including ESMAP) there are about twenty discrete TA interventions (some of which involve teams of people), as well as several training activities. The use of a SCF with long term involvement in TANESCO proved extremely successful in designing, coordinating and implementing the technical program (which involved more than twenty suppliers and contractors) and also in some training (para. 5.4 and 5.7). The same approach has been successfully used by the Bank elsewhere in institutional development and could be applied to TANESCO. A well established management institute experienced in the power sector should be internationally selected to assist in the formulation and implementation of a comprehensive institutional development program for TANESCO. The Institute should have linkages with power utilities and universities with strong programs in power engineering and related fields. The terms of reference for the Institute should also include close collaboration with and institution building of local and regional management training institutes which will eventually takeover in continuing support to TANESCO and the energy sector. 7.4 The achievements in the H.E. components are likely to be sustainable since human capacity development and flexibility were intrinsic factors in design and implementation of the component. Training was provided for all participants, and weaknesses in capacity identified during implementation were immediately addressed (para. 5.11). Programs were prepared, including institutional arrangements, for sustainability and expansion of the stove and charcoal production activities. Following the Kenyan experience, an NGO, TATEDO4 was created with project support to: (i) organize and support the artisans involved in stove production who. were trained under the project; and (ii) facilitate further expansion of the program. TATEDO is still a fledgling organization however, and continued assistance would be required from ESMAP to support REDPU staff and TATEDO in the planned country-wide expansion of the stove program. 7.5 Sustainability in the H.E components was reinforced by the flexible approach adopted by the Bank and Government. As discussed in para. 5.11, design of the kiln component was adjusted in response to local constraints and experiences from elsewhere. Flexibility was also demonstrated in the responses to the training needs and in the institutional arrangements which emerged. 3At the Joint Vienna Institute, a new facility set up by international institutions for training of officials and enterprise managers from formerly centrally planned economies. See the "ESMAP Connection" October 1992. 4Tanzania Traditional Energy Development Organization  8. BANK PERFORMANCE 8.1 Bank performance under the project was mixed Considerable staff effort was expended in obtaining cofinancing for the rehabilitation program and the Bank played a key role in coordinating the design and implementation of the overall program. The Bank had a good understanding of the sector based on its previous operations as well as on the Energy Assessment Review This knowledge combined with the Bank's technical expertise contributed to the sound technical approach and success in physical rehabilitation in the power part of the project. Unfortunately the Bank was slow in this project in recognizing the importance of the overall policy and institutional constraints in determining the long-term viability of the improvements in physical capital. It is only subsequently under the Power VI project that these problems are being addressed in a more comprehensive manner. 8.2 In the HE components, supervised by ESMAP, Bank performance was satisfactory; balanced attention was given to both institutional development and project implementation. Supervision was intensified in response to needs (para. 5.11) and the flexible approach by the Bank in design and implementation contributed to sustainability (para. 7.3). A similar approach is being followed under the ESMAP support to TANESO in a Loss Reduction and Demand Management program which was started during implementation of the Rehabilitation project and is still ongoing. The results so far in terms of impact and institution building are encouraging. Lessons Learnt 8.3 The Bank's approach to the two parts of the project provides interesting contrasts in strategy and sustainability. In the H.E. part, major attention was focused on institutional arrangements and human capacity development. Staff were provided with technical training as well as study tours to successful operations in Africa and Asia. Broad objectives and purpose were clear and implementation details were allowed to be flexible. The combination of staff training, well qualified TA and Bank influence led to pragmatic decision making and sustainable arrangements with private sector participation. For example, promotion of stove production and supporting services were not centralized in REDPU but tiansferred to an NGO without any legal covenants to that effect under the project. This decision was not imposed but evolved from a comparison of the experiences in Kenya and Malawi and the training process. The underlying theme appears to be: (i) build the human capital foundations (specific to the subsector); (ii) influence the institutional framework (including the key decision makers); and (iii) the implementation and sustainability details will flow more smoothly and even spontaneously as demonstrated by the initiatives in changing project design and collaborating with the private sector in both stove and charcoal production. 8.4 In the power subsector, on the other hand, the Bank has been focusing on building a complex technical structure on a weak human capital foundation in a highly constrained policy and institutional framework. The Bank had been involved in the power sector in Tanzania for nearly twenty years and the Rehabilitation project was its sixth project in the power sector yet TANESCO was still short of trained staff and minimum conditions were not established for effective transfer of skills by the SCF (para. 5.7 ).  12 9. BORROWER PERFORMANCE 9.1 Borrower performance was weak in the areas of pricing, institutional and management policies in the power sector There was no clearly defined policy on energy pricing, with a clear quantification of the costs and benefits of social objectives and mechanisms for supporting these objectives TANESCO's performance was constrained by anomalies in its institutional framework which eroded its autonomy in establishing efficient management and personnel policies. These constraints along with the massive distortions in the economy created bottlenecks and problems which hampered the pace of implementation of the rehabilitation program, and cons,rained the impact of the training and productivity improvement measures resulting in unnecessary costs and foregone benefits to the country. 9.2 On the other hand, Borrower performance in the H.E. components was a major factor in their success. Positive results and impact were obtained from the institution building efforts. Project management displayed pragmatic and innovative decision-making, with a clear appreciation of the importance of sustainability and the need to collaborate with the private sector. A conscious choice was made to follow the private sector-oriented Kenyan approach rather than the public sector intensive approach of Malawi (para. 5. 11 ). Pragmatic and innovative decisions were also called for in the modalities involved in providing: support to set up TATEDO; financial management services to small enterprises; and technical training and advice to private saw-mills and other enterprises. However not all the constraints of a bureaucracy were overcome. Due to delays in processing MWEM was unable to submit detailed plans for field offices for REDPU before loan closing, even though the proposal had been approved well in advance by the Bank. Lessons Learnt: 9.3 Institutional constraints and capacity were major factors limiting the impact and likely sustainability of the power parts of the project, while in the H.E. parts, focus on institution building contributed significantly to success in implementation and likely sustainability. 10. PROJECT RELATIONSHIIP 10.1 The relationship between the Bank and the implementing agencies was good throughout the project and this contributed to the smooth implementation of the project. There were no major differences of opinion. 11. CONSULTING SERVICES 11.1 Consultants' performance under the project was on the whole satisfactory. Further details are presented in the discussion on implementation. Consultants contributed significantly to the implementation of both parts of the project and most assignments were satisfactorily carried out. The SCF for the power part was strong on technical expertise but weak on procurement matters. There were problems in complying with Bank guidelines and more importantly an error had been made in the specifications for bi- metallic conditions (para. 5.16).  13 12. PROJECT DOCUMENTATION AND DATA 12.1 The Staff Appraisal Report and supporting documents were well prepared and appropriate to the project. Progress reports were prepared on a regular basis for the power cc rnponents by the SCF and by REDPU for the H.E. part. A detailed technical completion report on the physical aspects of the power rehabilitation program was prepared by the SCF but no information is available on the impact of the program on the operating efficiency of TANESCO. A detailed completion report on the H. E. components was prepared by MWEM.  14 UNITED REPUBLIC OF TANZANIA POWER REHABILITATION PROJECT PROJECT (CR. 1687-TA) PROJECT COMPLETION REPORT PART n. PROJECT REVIEW FROM THE BENEFICLARY'S PERSPECTIVE No contribution was received from the Borrower nor were comments sought from co-lenders KfW (Germany) and Norway.  15 PART III STATISTICAL INFORMIATION Table !. Related Bank Loans & Credits Loan"'Credit Title Purpose Year of Sttus Approval First Power Project Provision of generating capacity 1969 Completed Ln.518-TA to meet the projected power demands for 1970-71. (US$ 5.2 million) Second Power Project Provision of financing for the 1910 Completed Ln.715-TA first phase of the Kidatu Hydro Project. (US$ 35.0 million) Third Power Project Provision of financing for the 1976 Completed Ln. 1306-T-TA second phase of the Kidatu Hydro Project. (US$ 37.0 million) Fourth Power Project (Mtera) Provision of generating capacity 1983 Completed Cr. 1405-TA to meet local demand through 1990. (USS 35.0 million) Power Eng. & Tech. Strengthen TANESCO 1992 On going Assistance Project management; enhance the speed Cr.2330-TA and quality of information; ensure that design of the Kihansi (US$ 10.0 million) Hydroelectric Scheme is technically, financially, and economically optimal. l Power VI Project Help meet growing demand for 1993 Not yet electricity at least cost; help effective. (USS 200.0 million) Government restructure the power sector; improve energy et. .iency; provide training and technology to staff of sector institutions; and, promote gas-fueled generation by l_____________________________ private investors.  16 Table 2. Projeet Time Table Item Date Planned Date Revised Date Actual Identification Apr. 1985 Preparation Apr. 1985 Appraisal Jun. 1985 May 1985 Negotiation Mar. 1986 Mlar. 1986 Board Approval May 1986 May 6,1986 Credit Signature Jun.25.1986 Effectiveness Sep. 1986 Mar. 13,1987 Credit Closing Dec.3 1.1990 Dec.3 1,1991 Jun.30, 1992 Jun.30, 1992 Completion Jun.30, 1990 Jun.30, 1991 Jun.30, 1992 Jun.30, 1992  17 Table 3. Credit Disbursement (US$ million) IDA Fiscal Year Appraisal Estimate Actual Actual as % of Annual Cumulative Annual Cumulative Appraisal Estimate 1987 14.9 14.9 1.0 1.0 3 1988 14.8 29.7 15.4 16.4 41 1989 7.4 37.1 11.8 28.2 I71 1990 2.9 40.0 10.5 38.7 97 1991 - - 4.9 43.6 109 1992 0.7 44.3' 111 The USS amounts exceed the apprisal estimates because of the appreciation of the SDR; of the onginal credit of SOR 34.7 million. SDR 33.48 million was disbursed and the remaining balance of SDR 1.22 million will be canceled when the issue of the outstanding amount of USS 185.000 from a Special Account is resolved.  18 Table 4. Project Costs and Financing A. Project Costs (USS million) Item Appraisal Estimate Revised a/ Actual b; Local Foreign Total Local Foreign Total Power Components Generation 0.4 8.5 8.9 0.2 5.9 6.1 Transmission 0.4 3.9 4 3 - 1.3 1.3 Transmission substations 0.3 2.9 3.2 1.4 9.6 11.0 Distribution 5.1 24.8 29.9 0.8 22.4 23.2 Telecommunications 0.1 1.2 1.4 0.1 4.1 4.2 Workshops 1.7 8.0 9.7 - 9.7 9.7 Training & tech.asst. 0.7 6.4 7.1 - Tech.asst.& eqpt. - 2.4 2.4 - 1.5 1.5 Engineering - 1.4 1.4 - 3.8 3.8 Sub-total base cost 8.7 59.6 68.3 2.5 58.3 60.8 Contingencies 2.5 15.1 17.6 - - - Power total cost II 2 74.7 85.9 2 5 58 60 86 Energy Components Pilot charcoal manufacturing program 0.6 0.3 0.9 0. 1 0.4 0.5 Charcoal cooker program 0.4 0.3 0.7 0.1 1.4 1.5 Feasibility study for electric cookers - 0.1 0.1 - - Energy management - 0.1 0.1 0.1 0.5 0.6 Unallocated 0 0 0.2 - Subtotal base cost 1.0 1.0 2.0 0.3 2.3 2.6 Contingencies 0.2 0.2 0.4 - 0.2 0.2 Energy total cost 1L2 .L2 2 4 0 3 2 5 28 2.6 Tech. Asst. to NUWA - 0.3 0.3 - 0.3 0.3 Total Project Costs 12.4 76.2 88.6 2.8 61.1 63.9 63.4 Interest during construction 14.0 - 14.0 Total financing requirement 26.4 76.2 102.6 a! Revised as of April 1990. bJ No break-down figures available; estimates.  19 B. Project Financing (US$ million) Sources Planned Revised a. A;tual Local Foreign Total IDA 1. Generation Rehab. 1.8 4.5 2. Trans. & Dist. Rehab. 18.3 26 8 3. Workshops & Comm. 9.0 5 7 4. Veh. & Asso. Spare Pts. Pt. A 3.0 0.1 5. Veh. Equip. Mat. & Supp.Pts. CI&C2 0.5 0.5 6. Cons.Ser. & Training 3.8 6.1 7. Oper. Costs 0.7 0.3 8. Unallocated 2.9 Fund-A & B 0.3 Sub Total 40.0 40.0 46.3 44.3 Canada 10.2 10.2 10.2 0 Finland 2.3 2.3 2.3 European Investment Bank 6.0 6.0 Norway 8.3 8.3 8.2 8.8 Other Cofinanciers b/ 10.6 10.6 7.8 8.0 TANESCO 11.2 - 11.2 1.5 2.3 Government 14.0 - 14.0 Total 26.4 76.2 102.6 66.1 63.4 a! Revised as of April 1990. b/ Kreditanstalt Fur Wiederaufbau (KFW) signed an agreement with TANESCO in June 1987 for providing DM 10m to the project. KFW's actual financing was equivalent to US$ 8.0 million.  20 C. Finuncial Impact Indicators Appraisal Actual Estimate Average Tariff Increase 24% 25% tl 87); 5% k8;87); 5% (l 88:; 10% 110 88); (1987-1990) _ t5% (l;89). 15% t689) 28% (7 891. Current Ratio 1991 1.2 NiA Debt Service Coverage 1991 1.3 0.7 (1988) Rate of Return 1991 10% -1.3% (1988) Accounts Receivable 1991 75 (days) 110 days (1988) D. Studies Title Purpose Status Impact Kilwa Kivinie - Dar Provide a comprehensive, Completed Completed the final es Salaam Gas definitive feasibility study. in 1989. component required for the Pipeline overall development of the Songo gas field for fertilizer production and domestic use. Tariff Study for the Assess costs and n.a. n.a. Inter-Connection organizational arrangements Between Tanzania Mainland & Zanzibar Production & Provide specific guidance Completed Strengthened the program to Dissemination of for the project on improved in 3/1990. diffuse improved charcoal Improved Charcoal stove countrywide extension stoves. oves for th program. Period 1990-1994  21 Table 5. Project Results A. Direct Benefit Indicators Planned Actual Technical Installed dependable capacity (M%W) 424 413 Peak demand (MW) 220 219 Capacity surplus (MW) 204 110 Generation required (GWh) 1089 1379 System losses (GWh) 163 N/A System losses (%) 15 23 Sales (GWh) 926 1059 Institutional No. of connections ('000) 134 152 Total population ('000000) 24.0 23.2 Per capita consumption (KWh) 38.6 45.7 Sales/Consumer (KWh) 1381 1395 No. of consumers/employee 119 124 B. Economic Impact Appraisal Actual Estimate Economic Rate of Return a/ 12% n.a. Economic Rate of Return b/ Distribution Network Rehabilitation 106% n.a. Transmission Network Rehabilitaticn 82% n.a. Mwanza Diesel Station Rehabilitation 1068% n.a. Total All Components 195% n.a. a/ Based on an evaluation of TANESCO's overall investment program. b/ Based on the analysis of the benefits from prevention of outage losses of the project components.  22 Table 6. Status of Covenants Covenants Status Credit Agrgement: 3.04 Borrower shall consult annually with (i) IDA on TANESCO's investment Partial program; and (ii) with IDA prior to undertaking capital investments, not Compliance - IDA included in TANESCO's investment program, in excess of S 5 million not always equivalent for any individual project or an aggregate amount of capital consulted prior to investments in excess of S S million equivalent in any financial year. undertaking investments. 4.01 Borrower shall furnish a certified copy of the audited accounts, including Delayed Special Accounts reconciliation to IDA as soon as possible, but in any case Compliance no later than six months after the end of each fiscal year. 4.02 Borrower shall review TANESCO's tariffs and take appropriate actions Partial within sixty days of receiving TANESCO's recommendations on such Compliance tariffs. 4.03(a) Borrower shall ensure prompt payment to TANESCO of electricity bills, Partial outstanding for more than forty-five days, of those departments and agencies Compliance of the Borrower that cannot be disconnected for safety or humanitarian reasons. 4.03(b) The Borrower shall furnish to IDA a plan of action for reduction of Delayed outstanding electricity accounts of NUWA. compliance 6.01 (b) TANESCO will establish a Rehabilitation Department. Compliance 6.01(c) TANESCO will reduce its accounts receivable, except that of NUWA, to be Partial no more than 90 days of sales. Compliance 6.01(e) & (fl Cofinancing arrangements with EIB, Finland and Norway have been Compliance - EfB completed. was no longer a co-financier.  23 Project Agreement: 3.04 TANESCO shall (i) furnish quarterly report on outstanding consumer Delayed accounts; report must state proposed action; and (ii) reduce its ac;ounts compliance with receivable to no more than 75 days of sale by 1231:87. 3.04 (i), non- compliance with i______________________________________________________________ _ 3 .04 (ii). 4.01(b) TANESCO shall furnish audited annual report to IDA within six months of Cormpliance with end of fiscal year. delays in the I _____________________________________________________________________ beginning. 4.02 TANESCO shall not incur any debt, unless a reasonable forecast of the Non-compliance - revenues and expenditures of TANESCO shows that the estimated net As of mid-year revenues of TANESCO for each fiscal year during the term of the debt to be '89, TANESCO's incurred shall be at least 1.4 times the debt service requirements on all debt debt service of TANESCO. coverage was below 1.4. 4.03(a) TANESCO shall earn an annual return of no less than 10% of the average Non-compliance - current net value of its fixed assets in operation. It was estimated that the rate of return on average net fixed assets in operation at year- end 1988 was (1.3)%. 4.03(b)(ii) TANESCO shall review semi-annually the adequacy of its tariff's and make Compliance in recommendations to Government. latter half of the project.  Table 7. Use of Bank Resources A. Staff Inputs (in Staff Weeks)_ Stage of 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total Project Cycle Pre-Appraisal 11.5 L . _X A, ras_ 234. _ _____ __ _ _ __ _ __ _ __ _ ___ . _ _ _ __ _ ____ Appraisal 2.3 42.0 '_ Negotiation 7.4 Supervision 2.0 17.6 20.2 18.0 14.9 6.1 2.4 PCR _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 0.6 Total 13.8 51.4 17.6 20.2 18.0 14.9 6.1 2.4 0.6 145.0  25 B. Mfissions Stage of Month/ No.of Specialization Performance Types of Project Cycle Year Persons Represented a/ Rating Status Problems bP 5F Pre-Appraisal 511985 3 Eco, FA. PEng n.a. Appraisal 05/1985 3 Eco, FA. PEng n.a. Post- Appraisal 09/1985 4 Eco, FA, PEng, TS n.a. Supervision 08/1986 1 FA Supervision 04/1988 1 FA 3 F. 1, M Supervision 04/1989 4 Eco. FA, Eng, PEng 3 F, L, M. I Supervision 11/1989 2 FA, IS 2 F. L,M,[I Supervision 04/1990 1 PEng 2 F. L.M. I Supervision 10/1990 1 FA 2 F, L. M. Supervision 09/1991 1 PEng I I _ 2 M, L, I a/ Eco = Economist, Eng = Engineer, FA = Financial Analyst. IS = Institutional Specialist, PEng = Power Engineer, TS = Training Specialist. b/ I = minor problems, 2 = moderate problems, 3 = major problems. c/ F = Financial, I = Impact, L = Legal, M = Management.  26 Table 8. Project Implementation Major Events and Indicators Planned Target/ Actual Completion Date 1. Vehicles and Tool Jun. 1987 Sep. 1988 2. Generation - diesel stations Oct. 1987 Mar. 199 t 3. Transmission - Material Jun. 1988 Aug. 1988 - Transformers Oct. 1988 Oct. 1990 - Substation Equipment Oct. 1988 Oct. 1990 - Tunga Substation Oct. 1988 Aug. 1989 - River Crossing Oct. 1988 Sep. 1989 - Live Line Equipment Oct. 1988 Mar. 1990 - Kiyunji Substation Oct. 1988 Aug. 1990 4. Distribution - Equipment and Materials GTA Nov. 1989 Oct. 1990 HSPE Nov. 1989 Jun. 1990 DAE Nov. 1989 Jul. 1990 SAE Nov.1989 May 1990 l Construction Nov. 1989 Aug. 1990 - Meter Testing Nov. 1989 May 1989 l Protection and Test Equipment Jun. 1989 Oct. 1989 5. Communication System Jun. 1988 Jun. 1990 6. Workshops - Maintenance Jun. 1987 Jun. 1988 - Telecomms. Jun. 1987 Feb. 1989 Total diesel generating capacity 22150 rehabilitated (KW) Lines installed 33 KV lines (kin) 75 11 KV lines (km) 242 LV lines (km) 221 Transformers installed 33/0.4 KV transformers (MVA) 12 11/0.4 KV transformers (MVA) 265 33/11 KV transformers (MVA) II Average tariff increase (1987-1990) 24% See Table 6.c