Madagascar - First Energy Project

 First energy project Report No: ; Type: Report/Evaluation Memorandum ; Country: Madagascar; Region: Africa; Sector: Other Power & Energy Conversion; Major Sector: Electric Power & Other Energy; ProjectID: P001523 December 28, 1995 Madagascar: Energy I Project (Credit 1787-MG) The Implementation Completion Report (ICR) on the Madagascar Energy I project (Credit 1787-MG, approved in FY87) prepared by the Africa Regional Office, including the Borrower's own completion report, was reviewed by the Operations Evaluation Department (OED). The credit for an amount of US$25 million equivalent was approved in April 1987 and closed in December 1992, two years behind schedule; an undisbursed amount of US$1.6 million was canceled. The project's broad objectives were to: (i) strengthen energy planning and investment programming in the Government; (ii) improve the soundness of financial management in the sector's parastatals; (iii) stimulate the efficient use of locally available and economically accessible energy resources; and (iv) maximize productive use of sector infrastructure through selective programs of rehabilitation. The project was broken down into a power sector component (including selected investments in generation, transmission and distribution by the National Electricity and Water Company (JIRAMA), the state-owned power utility, as well as related technical assistance); and a household energy component (including pilot production of charcoal from pine and rice husk, promotion of improved stoves, industrial energy audits, and energy planning studies). The project's main physical objectives have been mostly achieved, albeit with a two-year delay caused by civil strife. The reliability of power supply was significantly increased thanks to the rehabilitation of generation capacity; and the promotion of improved stoves for household use resulted in substantial savings in woodfuel consumption. On the other hand, some components (industrial energy audits, pilot production of charcoal and electric boilers) had to be reduced in scope or dropped due to lack of demand. On the institutional side, project activities did help JIRAMA strengthen its investment planning and project management capabilities and the Government improve its policy formulation, particularly in the pricing and taxation areas. But JIRAMA's finances remained unsatisfactory throughout project implementation—resulting in non-compliance with the credit financial covenants—due, inter alia, to persisting Government arrears and insufficient counterpart funding. However, since project completion in 1992, progress was achieved on these fronts; in particular, several tariff increases were enacted and agreement was reached on procedures for the settlement of Government arrears, in the context of the preparation of a forthcoming energy sector development project (currently being finalized). On balance, OED rates the outcome of the project as marginally satisfactory and its institutional development impact as moderate (instead of satisfactory and substantial, respectively, in the ICR), given JIRAMA's poor financial performance during the period of project implementation (1987-92) and only partial achievement of the household energy component's objectives. At this point, sustainability is assessed as uncertain (instead of likely in the ICR), pending actual implementation of the plan to eliminate Government arrears in order to ensure JIRAMA's long-term financial viability. As in the ICR, Bank performance is rated as satisfactory. The main lesson learned from this project is that a firm commitment from the Government and the implementing agency(ies) to the project objectives should be secured at the outset, and evidenced by upfront action (e.g. settlement of Government arrears when they jeopardize financial viability). While reasonably thorough, the ICR is not sufficiently clear on the achievements of the household energy component and on arrangements for future project operation. Also, it should have dealt more thoroughly with the issue of JIRAMA's financial performance during project implementation and should have included the standard data on supervision missions. For these reasons, OED finds the ICR to be inadequate. No audit is planned at this time.