Ukraine - Hydropower Rehabilitation and System Control Project

Documcnt of The World Bank FOR OFFICLAL USE ONLY Report No. P-6467-UA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$114.0 MILLION TO ITKRAINE FOR A HYDROPOWER REHABILITATION AND SYSTEM CONTROL PROJECT MARCH 23, 1995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency unit = karbovanets. abbrev. Krb USSI = 130.000 karbovaneEs (as of March 1995) WEIGHTS AND MEASURES atm atmosphere Mi Megajoule (l0'J) bcm billion cubic mcter mt million metric tons Gcal Gigacalorie (10' cal) MW Megawan (106W) GW Gigawatt MVA Megavolt Amnpere kg kilogram PJ Petajoule (10'iJ) km- square kilometer psi pounds per square inch koe kilograms of oil equivalent t metric ton kV kilovolt tce tons of coal equivalent kW kilowatt toe tons of oil equivalent kWh kilowatt hour TWh Terawatt hour (10"Wh) m'] cubic meter CALORIFIC VALUES I Unit of Fuel Gcal Coal (ton) 5.0 Wood (ton) 2.0 Natural gas (000rn) 8.5 Mazut (ton) 9.7 Diesel (ton) 10.2 Gasoline (ton) 10.5 Kerosene (ton) 10.3 Liquified Petroleum Gas (ton) 10.8 Crude oil (ton) 10.0 CONVERSION FACTORS I Gcal 4.187 GJ = 3.968 million Btu = 1.163 kWh I tce = 7 Gcal. and I toe = 10 Gcal I kWh of hydro and nuclear energy output converted to primnary thermal equivalent at 250 grams of oil equivalent. ABBREVIATIONS DHE Dniprohydroenergo EBRD European Bank for Reconstruction and Development EU European Union GDP Gross Domestic Product GEF Global Environment Facility LAEA International Atomic Energy Agency IDC Interest During Construction IDF Institutional Development Fund IMF International Monetary Fund LPG Liquid Petroleum Gas NDC National Dispatch Center NERC National Electricity Regulatory Commission PIU Project Implementation Unit PMU Project Management Unit PSP Pump Storage Plant TACIS Technical Assistance for the Community of Independent States UCPTE Union for the Coordination of Production and Transport of Electricity (West European Grid) USAID United States Agency for International Development VAT Value-Added Tax FISCAL YE.AR January I - December 31  FOR OFFICIAL USE ONLY UKRAINE HYDROPOWER REHABILITATION AND SYSTEMS CONTROL PROJECT LOAN AND PROJECT SUMMIARY Borrower: Ukraine. Beneficiaries: Dniprohydroenergo and National Dispatch Center. Poverty: Not Applicable. Amount: US$ 114.0 million equivalent. Loan Terms: Standard variable interest rate with a maturity of 17 years, including five years grace period. Commitment Fee: 0.75% on undisbursed loan balances, beginning 60 days after signing, less any waiver. Onlending Terms: IBRD interest rate plus a mark-up of 1.5% for loan administration. Financing Plan: See Schedule A. Net Present Value: US$ 101.9 million (18.1 percent economic rate of return). Staff Appraisal Report: Report No. 13663 - UA Map: IBRD Map No. 26469 This document has a restricted distribution and may b: used by recipients only in the performance of their lofficial duties. Its contents may not otherwise be disclosed w ithout World Bank authorization.  MEMORANDUM AND RECOMMENDA'TION OF T'HE PRESIDENT OF THE IBRD TO THE 4EXECUITIVE DIRECTORS ON A PROPOSED LOAN TO UKRAINE FOR A HYDROPOWER REH,ABILITATION AND SYSTEMS CONTROL PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to Ukraine for the equivalent of US$ 114.0 million to help finance a project for the rehabilitation of hydropower plants and improvement of power system control. The loan would be at the Bank's standard variable interest rate with a maturity of 17 years. including 5 years of grace. The proceeds of the loan would be onlent to Dniprohydroenergo (DHE) and the National Dispatch Center (NDC) for 17 years, including 5 years of grace, with interest at the IBRD rate plus a mark-up of 1.5 percent per annum. Cofinancing in the amount of US$ 12.9 million equivalent would be provided by other donors on a grant basis to support the implementation of the proposed project. 2. Country Context. Ukraine's economy, with a GDP per capita estimated at US$ 1,910 in 1993, rests on industry and agriculture, which together accounted for about two thirds of GDP. Ukraine is also heavily dependent on trade, notably with the rest of the former Soviet Union (FSU). Real GDP contracted by 14 percent in 1993, bringing the cumulative fall in output since 1990 to 38 percent. This trend accelerated in 1994 as GDP declined by about 23 percent. Due to loose fiscal and monetary policies, the rate of inflation rose to an average of 4,735 percent in 1993 (up from 1,210 percent in 1992), and, in addition, varied significantly from month to month. In the first half of 1994, the inflation rate came down to single digit levels, primarily on account of flagging demand, itself the result of a large drop in real wages and a stringent credit policy. The external situation has become increasingly tenuous, reflecting a significant trade deficit with the FSU -- about US$ 3 billion in 1993 - which was only partially offset by a trade surplus with the rest of the world. 3. In October 1994, the Government adopted a comprehensive program of macroeconomic stabilization and structural reforms, supported by a purchase of US$ 365 million from the IMF's Systemic Transformation Facility and a Rehabilitation Loan (Ln. 3831-UA) of US$ 500 million from the Bank. The Govermnent's program calls for accelerating the transition to a mnarket-oriented economy. Within this framework, the economic package that the Goverrment has adopted aims to break inflationary expectations and promote a sustained recovery in economic growth. To this end, the program focuses on four key interdependent elements. First, a stable political and economic enmironment is required so that producers and consumers can make sound decisions without fear of macroeconomic disruptions. The stabilization of the economy will rest upon tight fiscal and monetary policies. Second, competition in markets is essential to an efficient allocation of resources. In an effort to promote free and open markets, the Govermnent will rely upon the liberalization of prices and domestic and foreign trade; the dismantling of the state order system; demonopolization; and promotion of the private sector. Third, the hardening of enterprise budget constraints through corporatization, privatization and the enforcement of bankruptcy laws will encourage enterprises to respond to the new market forces. The elimination of directed credits and credits to settle inter-enterprise arrears and financial sector reform are expected to support behavioral changes at the enterprise level. Finally, the social safety net is to be strengthened through improved targeting in order to protect the segments of the population most vulnerable to the adjustments associated with the structural transformnation of the economy.  2 4. Sector Background. Energy denand in Ukrainc is characterized by high energy intensity in relation to industrial output and the high share of industry in final energy consumplion. Following a decline of 11 % betwecn 1985 and 1990, the cnergy intensity of GDP increased by 40% in the 1990-1993 period reaching 2.5 kilogram oil equivalent per US$, a ratio that is several times higher than in the most developed countries. Domestic energy production, consisting of fossil fuels and primary electricity (hydro and nuclear power), represented 48% of consumption in 1993-94. The main import items were crude oil and oil products, originating almost exclusively in Russia, and natural gas, originating in Russia and Turkmenistan. 5. In 1993, installed electricity generation capacity was 52,122 MW, consisting of 12,818 MW of nuclear (25%), 32,364 MW of thermal (62%), 4,700 MW of hydro (9%) and 2,240 MW of industrial (4%) power generation capacity. Most older fossil fuel plants (about 23,000 MW) use coal as their primary fuel, but need gas or mazut for co-firing. About 5,520 MW of power generation capacity as well as about 3,500 MW combined heat-and-power plants run on gas and/or mazut as main fuels. Between 1990 and 1993, electricity generation decreased by about 23%, domestic consumption by 15%, and net exports by 96%. Both generation and consumption decreased by a further 14% in 1994. The forced separation of the Ukrainian power system, in November 1993, from the hydro plants on the Volga river that controlled system frequency, revealed serious structural and functiona' weaknesses with negative consequences on overall system operation, security, reliability and quality ot power supply. Inability of the system to maintain the balance of supply and demand in real time led to the separation of all neighboring systems, causing further deterioration of system performance and reduction in export capacity. The existing peaking capacity is provided by aging hydro plants that are in need of rehabilitation. 6. Electricity demand is expected to drop even further during the next three to five years, due to a number of factors such as general economic downturn, electricity price increase and economic restructuring. Assuming that three new nuclear units that are under construction are completed to replace the Chemoby: plant, there is no need for additional base-load capacity in the next decade. Total power generation investment requirements are preliminarily estimated at US$ 3.5 billion in the 1995-2005 period. Of this total. US$ 1.9 billion is needed for nuclear power, including US$ 0.6 billion for safety upgrades, US$ 0.6 billion for deconmmissioning and other works at Chemobyl, and US$ 0.7 billion for the completion of three new nuclear units. The rehabilitation of thermal and hydropower plants and the completion of the Dniester pump storage plant to provide additional peaking capacity requires about US$ 1.6 billion. 7. Gasoline, diesel oil and fuel oil prices are liberalized. Electricity, gas, and coal prices are set by the central govermnent. Local govermnents set the price of district heating, LPG, heating oil, peat and wood. With the exception of electricity, household energy prices cover only a fraction of costs. The difference is covered by central and local govermnent budgets, and also by a non-transparent surcharge on industrial consumers (for gas and district heat). Even for electricity, there are several categories of households who are entitled to discounts, and the cost of these discounts is borne by the industrial consumers. During most of 1994, additional price distortions were caused by: (i) a subsidy to non-household consumers of coal; (ii) an artificial exchange rate that did not allow the passing of the full cost of imported gas to consumers; and (iii) price adjustments for electricity and heat that lagged behind fuel cost increases. Non-payment by customers became a major problem for electricity, gas and heat suppliers, further weakening the financial position of the utilities. In October 1994. the Government  3 started the implementation of a program of price adjustments that: (i) drastically reduces household energy price subsidies; (ii) eliminates the explicit and implicit (through the exchange rate) subsidy to non- household consumers of coal and gas; and (iii) ensures the full recovery of increased fuel and other basic input costs in the price of electricity and heat. 8. The Govermnent's long term investment program assumes that the remaining units of the Chernobyl Nuclear Power Plant would be closed when their reactor channels reach the end of their life in 1998-2003. During discussions with the G-7 Nuclear Safety Working Group, the Governmnent agreed to consider the possibility of the early closure of the Chernobyl plant provided that a solution was found for a set of related issues, such as the financing of replacement nuclear capacity, closure costs, and the mitigation of social consequences. It was agreed that an international Task Force would be formed from Ukrainian and foreign experts with the task of developing a detailed, comprehensive Action Plan for nuclear safety in the context of a power sector development strategy. The joint international Task Force was set up in December 1994, and its work is underway. 9. On May 21, 1994, the President of UKraine signed Decree 244/94 on Market Transformation Measures in the Electricity Sector of Ukraine. The Decree ordered a broad restructuring of the power industry based on the model of separating generation, transmission, and distribution functions, corporatizing and privatizing the generating and distribution companies, setting up a competitive wholesale market for electricity, and establishing an independent agency to regulate the industry (i.e., independent from the enterprises and not subordinated to any Ministry). After some initial delay, the Government adopted an Action Plan to implement the Decree on November 2, 1994. As a first step, a National Electricity Regulatory Commission was established in December 1994. Full implemi atation of the restructuring in the next couple of years is expected to increase the efficiezicy and reliability of electricity supply, restore the financial health of the industry, and create a favorable framework for private investment in power generation. The Bank, jointly with the Ministry of Power (Minenergo), organized a donor meeting in Kiev in July 1994. The purpose of the meeting was to ensure the availability of technical assistance for the implementation of this important reform initiative in the power subsector. The US Agency for International Development, British Know How Fund, EU TACIS, Government of Switzerland, Government of the Netherlands and the World Bank offered technical assistance of about US$ 4 million equivalent for Lt!e first year of the reform (including US$ 450,000 from the Bank's Institutional Development Fund). The Government and the donors asked the Bank to assist the Government in coordinating the implementation of the technical assistance program. 10. Project Objectives. The objectives of the project are to: (i) improve the efficiency, reliability, safety and environmental performance of hydropower plants; (ii) increase hydropower generation capacity; (iii) improve the quality of electricity supply by upgrading load and frequency control, which would also improve the safety of nuclear plants; and (iv) reduce fuel costs by facilitating the economic dispatch of generating units. A decrease in hydropower capacity would lead to further deterioration in the reliability and quality of electricity supply. In view of large frequency flucruations and the high share of base-load plants, it is also necessary to enhance the system regulating capacity by increasing load-following capability and improving system control and dispatch. The Goverrnent of Ukraine assigns a high priority to the improvement of the efficiency and quality of electricity supply.  4 11. Project Description. The project consists of the following components: (a) The initial five years of the rehabilitation program for eight major hydropower plants (57% of total project costs); (b) Installation of dam safety monitoring systems at the main water reservoirs on the Dnieper river (2% of total project costs); (c) Upgrade of communications, dispatch, system control and protection, and generating unit control (38% of total project costs); and (d) Technical assistance for project implementation, and optimization of the use of the reservoirs on the Dnieper river (3% of total project costs). 12. Intemnational Waterways. One of the hydropower plants is about 15 km upstream from the point where the Dniester river forns the borderline between Moldova and Ukraine. There is no dispute between the two countries conceming the operation of this plant. Upgrading of the dispatch and generation control equipment for this plant will not affect the reservoir nor any other water retaining structure, and will have no effect on the flow of the river. 13. Project Cost and Financing. The total cost of the project is estimated at US$ 190.2 million equivalent, of which US$ 106.7 million is in foreign exchange. The proposed World Bank loan of US$ 114.0 million would cover 50% of project costs, and also includes US$ 18.3 million out of a total of US$ 24.1 million of interest during construction. Following a five year grace period, repayment of the principal and in:erest payments would commence and continue for 12 years. The borrower would be Ukraine, whose Government would enter into subloan agreements with the beneficiaries. The beneficiaries would be Dniprohydroenergo (DHE) and the National Dispatch Center (NDC). The subloans would have a maturity of 17 years including five years of grace. The interest rate in the subloan agreements would be equal to the World Bank's standard variable interest rate plus a margin of 1.5% to cover the cost of loan administration. The foreign exchange risk will be bome by the beneficiaries. The beneficiaries would also reimburse the Government for the commitment fee. The Governments of Switzerland, Canada and Norway agreed to provide grants of US$ 12.9 million equivalent to finance part of the cost of the hydropower rehabilitation and technical assistance components. DHE and NDC will finance the remaining costs, part of interest during construction, and the commitment fee, estimated at US$ 88.3 million equivalent, from internally generated revenues. Schedule A presents the project cost table and the financing plan, and Schedule B presents procurement arrangements, disbursement categories and the disbursement timetable. A timetable of key processing events and the status of IBRD operations are provided in Schedules C and D, respectively. 14. Project Implementation. The project would be implemented over a period of 5 years and is expected to be completed by June 30, 2000. Implementation of the project will be the responsibility of the beneficiaries. i.e., DHE and NDC. A Project CoordJination Unit (PCU) in Minenergo will coordinate project preparation activities, technical assistance, scheduling, reporting, training, and other aspects of project implementation requiring coordination between the Project Implementation Units. Separate Project Implementation Units (PIUs) will be set up in DHE and NDC with responsibilities to manage implementation of the hydropower rehabilitation (including dam safety)  5 and the system control components, respectively. The managers of the PlUs will be appointed by the Directors of DHE and NDC, and will havc the title of Deputy Projcct Coordinators of the PCU. Installation of equipment will bc the responsibility of the respective facilities (hydro plants, dispatch centers, thermal plants and substations), which will use their force account and specialized local construction and installation companies, under the guidance of the suppliers with additional assistance from internationally qualified project implementation advisors. 15. Project Sustainability. Following project completion, the life of the hydropower plants will be extended by about 20 years. The operation of the rehabilitated plants is not expected to pose a technical challenge for the well-educated, experienced staff working at the plants. The hydropower plants will continue to be the lowest cosi electricity generators in Ukraine, and the cost recovery arrangement embedded in the contract with NDC is expected to ensure the long term financial viability of DHE. NDC, as the operator of the future wholesale market for electricity, will have a key role in the reformed power industry. NDC, whose activities will be monitored by the National Electricity Regulatory Commission, will recover its costs by adding a margin to the price of electricity it sells to local electricity distributors/suppliers. The facilities installed by the project will be essential for the successful functioning of the wholesale market, including daily bidding, dispatching, metering, verification, and settlements. Under the project, technical training will be provided to NDC staff in the operation and maintenance of the modernized comnnunications, system control and dispatch facilities. The donor funded institutional building effort that has been mobilized in support of the power industry reform will provide the necessary training for NDC's commercial functions (para. 9). 16. Lessons Learned from Past Bank Experience. A review of several decades of the Bank's worldwide lending for the power industry recommended that Bank lending for electric power should focus on countries with a clear commitment to improving the performance of the power industry by commercialization, corporatization and the establishment of a transparent regulatory framework. The proposed project meets these criteria. The Bank's experience in power rehabilitation is limited since there were very few purely rehabilitation projects. To the extent that rehabilitation components can be evaluated separately, performance has been satisfactory. The first loan for US$ 27 million equivalent to Ukraine was approved in June 1993 (Ln. 3614-UA) to finance an Institution Building Project aimed at supporting enterprise reform, financial sector reform, and public economic and financial management. Initially, the implementation of the project suffered from the unstable policy environment, and the lack of coordination between the many implementing agencies. Institutional rearrangements and the improved policy environment significantly improved the performance of the project in late 1994. The irnplementation of the IDF grant (No. 28842) that supports the development of competition in the power industry is progressing satisfactorily. The implementation of the second Bank operation, a Rehabilitation Loan (Ln. 3831-UA) of US$ 500 million equivalent approved in December 1994, has started only recently. 17. Rationale for Bank Involvement. The Bank has been involved in the Ukrainian energy sector since early 1992. An Energy Sector Review (Report No. 11646-UA) was issued in 1993, leading to close cooperation between the Bank and the Govermnent in the area of power industry institutional reforn. The proposed project demonstrates that the Bank is willing to step up assistance to those sectors of the economy that are committed to reform. This is particularly important at this timne when the power industry is making the first bold reform steps. Also, the Bank's support is needed for the imnplementation  6 of high priority investmcnhs under the present conditions of sevcrc rcsource constraints. By increasing the efficiency of electricity generation, (his project is conisistent with the limited Country Assistancc Strategy as discussed by the Board of Directors during the presentation of the Rehabilitation Loan (Ln. 3831-UA) on December 22, 1994. A full Country Assistance Strategy presentation to thc Board is scheduled in FY96. 18. Agreed Actions. At negotiations, agreements were reached on the following: (a) on- lending arrangements between GoU and DHE, and GoU and NDC, including on-lending interest rate, maturity and repayment method; (b) power purchase contract between NDC and DHE, including the tariff formula ensuring the full recovery of investmrent and operating costs; (c) contract between NDC and its downstream customers, including the application of interest penalty and curtailment of deliveries in the case of non-payment; (d) reduction of NDC's delay in paying its suppliers and reduction of NDC's accounts receivable; (e) price setting mechanism for NDC that aliows it to recover an allowance for bad debt in its resale tariff; (f) commitment of DHE and NDC to maintain a self-financing ratio of at least 40% and a debt service coverage ratio of at least 1.5 during the project period; (g) qualifications for Project Coordinator and Deputy Project Coordirnators; (h) signing of suitable contracts between DHE and the turbine and generator manufacturers by November 30, 1995; (i) arrangements for establishing, operating, and auditing the Special Accounts; (j) auditing requirements of the accounts of DHE and NDC; (k) set of Project Performance Indicators; (I) mid-term review of project implementation; and (m) operation plans of DHE and NDC. Conditions for effectiveness include: (a) execution of subsidiary loan agreenents between the GoU and the two beneficiaries; (b) signing of power purchase contract bLtween NDC and DHE; (c) resolution of NDC's arrears for previous hydropower purchases; (d) transfer of owvnership of regional dispatch centers to NDC; and (e) establishment of PCU and PlUs, and appointment of Project Coordinator and Deputy Project Coordinators. 19. Environmental Aspects. The project is expected to have a positive impact on the environnent. The rehabilitated turbines will have improved and longer-lasting sealing, significantly reducing or eliminating the leakage of lubricating oil into the rivers. Improved turbine efficiency will lead to the production of more electricity from hydropower, replacing electricity generated in thermal power plants. Inproved dam safet, monitoring will reduce the risks of accidents and allow for improved water management and control. Introduction of automatic generation control and economic dispatch will lead to a more efficient use of fossil fuel plants, resulting in commensurate reduction in fossil fuel use and the corresponding emission of pollutants. During implementation, there will be no activities that would result in a measurable impact on the existing patterns of water flows and water usage. 20. Program Objective Categories. By rehabilitating and upgrading facilities that utilize a renewable resource, the project is consistent with the objective of environmentally sustainable development. 21. Participatory Approach. Due to their close involvement in project preparation, the beneficiaries are familiar with the details of the project, and are cormnitted to implementation. Specifically, the staff of the hydropower plants and NDC have been closely involved in the preparation of the feasibility studies. The results of the studies have been presented to and approved by the directors of each hydropower plant and the management of NDC. As described above, project implementation will be the responsibility of the beneficiaries.  7 22. Project Benelits. Thrc quantified henefi:s are improvemlcnts in the efficicncy and availability of hydropower plants, and tile increased ef ficiency in thc loading ol hydro- and thennal power generation units. The expected economic rate of return is 18.1 percent. Additional, non-quantified benefits are: (i) the increased security of the power system that will lead to fewer blackouts; (ii) the improved stability of frequenicy that will enhance nuclear safety; (iii) the better environmental performance of the hydropower plants that will reduce the pollution of rivers; and (iv) the improved monitoring of dams and reservoirs that will reduce the risk of dam breaks. 23. Risks. The main risks for the project are that the Government would be unwilling to (i) adhere to the agreed pricing formula for the electricity produced by the hydropower plants; and (ii) implement a strict regulatory policy to prevent the further accumulation of payment arrears. These could seriously undermine the financial position of DHE and NDC, and thereby endanger the implementation of the project. The reform of the power industry based on Decree 244/94 is expected to decrease these risks, but cannot eliminate them. The implementation of the reform itself is subject to political risks. Risks arising from the pricing of electricity have been addressed under the project by requiring the adoption of a tariff formula that includes all operating costs, recovers investment costs, and allows for regular adjustment to reflect inflation. Risks arising from non-payment by NDC's customers (i.e. local electricity companies and large industrial plants) have been addressed by requiring appropriate contractual arrangements, including the reduction/termination of service in the case of non-payment. The beneficiaries' inexperience in implementation of Bank projects poses additional risks. Inferior performance of domestic equipment and domestic supply constraints could also delay project execution and affect the quality of work. These risks have been addressed through the careful planning of activities that are on the critical path, and by providing technical assistance tt' the PIUs in procurement, supervision and quality control. Economic returns are very robust relative to variations in key project parameters. A switching value analysis suggests that project costs do not pose a significant risk because both major components remain economic even in the face of considerable overruns in investment costs. The hydropower rehabilitation comporient remains economically viable even at 60% of the assumed economic value of electricity. The systenm control component retains economic viability even when fuel savings amount to 41 % of the level assumed for the base case. 24. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank, and I recommend that the Executive Directors approve it. Lewis T. Preston President by Sven Sandstrom, Acting President Washington, D.C. [March 23, 19951 Attachments: Schedules A-D  8 SCHEDLULE A UKRAINE HYDROPOWER REHABILITATION AND SYSTEM CONTROL PROJECT Sununary of Project Cost Estimates . | Bill. Krb Mill. US$ Foreign ___|Local_ Foreignl Total Locall Foreignl Total -iTot I ~ ~ ~ ~ ~ ~ ~~~~Ttl Total |1 | Hydropower 2460.6 2131.2 4591.9 45.1 39.1 84.2 46% Rehabilitation 2. Dam Safety 48.5 88.3 136.9 0.9 1.6 2.5 65% 3. System Control and 730.4 2277.1 3007.5 13.4 41.8 55.2 76% Communication 4. Technical Assistance 44.2 230.1 274.3 0.8 4.2 5.0 84% Project Base Costs 3283.7 4726.8 8010.6 60.2 86.7 146.9 59% Physical Contingencies 485.9 674.5 1160.4 8.9 12.4 21.2 58% Price Contingencies 2757.1 1439.7 4196.8 14.4 7.6 22.1 35% Total Project Costs 6526.7 6841.0 13367.8 83.5 106.7 190.2 56% Interest During 819.0 3990.5 4809.5 4.2 20.7 24.9 83% Construction* Total Financing 7345.7 10831.5 18177.3 87.7 127.4 215.1 59% Required . - including commitment fee Financing Plan million US$_ % of Total Local Foreign Total IBRD 0.0 114.0 114.0 53.0% Government of Switzerland 0.0 10.5 10.5 4.9% Government of Canada 0.2 1.6 1.8 0.8% Government of Norway 0.1 0.5 0.6 0.3% Hydropower Company 66.5 0.4 66.9 31.1% National Dispatch Center 0.9 0.4 21.3 9.9% |Total Financing Required 87.7 127.4 215.1 100.0%  9 SCHEDULE B Page I oC 2 UKRAINE HYDROPOWER REHABILITATION AND SYSTEM CONTROL PROJECT Summary of Procurement Arrangements (in US$ million) o Procuremcnt Method"' Total Project Element XICB O7ther 1 Cost 1 Equipment and Goods 9;.4 2.5 '3 64.2 158.1 _____ (91.4) (2.5) (93.9) 2 Works '4 26.8 26.8 3 Consulting Services 1.8 '5 3.5 5.3 _____ ____ ____ ____ _____ ___ ____ ____ ____ (1.8 ) _ _ _ _ (1.8 ) Total | 91.4 4.3 94.5 190J.2 (91.4) (4.3) _ (95.7) 1/ Figures in parentheses are the amounts to be financed by the Bank loan. In addition, the loan would finance interest during construction of US$18.3 million equivalent. 2/ Not Bank Financed. 3/ To be precured through Inlernational Shopping (up to an aggregate amount of US$1.5 million) and Direct Contracting (up to an aggregate amount of US$1.0 million). 4/ Installation to be accomplished by Force Account and local companies, with training and supervision provided by the supplier. who would also assume responsibility for the performance of the equipment. 5/ Procurement under Bank's Guidelines for Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981).  10 SCHEDULE B Page 2 Of 2 UKRAINE HYDROPOWER REHIABILITATION AND SYSTEM CONTROL PROJECT Disbursement by Category Category i Amount lPercentage of Expenditures to be Financed 1. DHE (a) Equipment and 42.4 100% of foreign expenditure Goods 100% of local expenditure (ex-factory cost) 80% of local expenditure for other items procured locally (b) Consulting Services 0.9 100%B of expenditure 2. NDC (a) Equipment and 51.5 100% of foreign expenditure Goods 100% of local expenditure (ex-factory cost) 80% of local expenditure for other items procured locally (c) Consulting Services 0.9 100% of expenditure l 3. Interest During 18.3 100% of foreign expenditure Construction TOTAL 114.0 Disbursement Schedule IBRD Fiscal Year __ __ _19961 19971 19981 19991 20001 2001 Annual (%) 12 18 27 27 13 3 (US$ million) 14.2 20.6 30.8 29.7 15.4 3.3 Cumulative (%) 12 30 57 84 9, 100 (US$ million) 14.2 34.8 65.6 95.3 110.7 114.0  I1 SCHEDULE C UKRAINE HYDROPOWER REHABILITATION AND SYSTEM CONTROL PROJECT Timetable Of Key Project Processing Events a. Time taken to prepare: 9 months (June'94-February'95) b. Prepared by: Government of Ukraine, Dniprohydroenergo, National Dispatch Center, and SGI (consultants) c. First Bank Mission: July 1994 d. Appraisal Mi'qinn Departure: September 25, 1994 e. Negotiations: February 21, 1995 f. Planned Date of Effectiveness: July 11, 1995 Bank Staff Responsible for Project Preparation Laszlo Lovei Task Manager Istvan Dobozi Energy Economist Barbara Evans Energy Economnist Vladislav Vucetic Power Engineer Thomas Kearney Operations Officer Bernard Baratz Environmental Specialist David Craig Peer Reviewer Antanasije Kocic Peer Reviewer Dominique Lallement Division Chief Basil Kavalsky Department Director  12 SCHEDULE D UKRAINE HYDROPOWER REHABILITATION AND SYSTEM CONTROL PROJECT Status of Bank Group Operations in Ukraine (as of January 31, 1995) A. Status of IDA/IBRD Loans Loan/Credit No. Fiscal Year Borrower Purpose Bank IDA Undisbursed L36140-UA 1993 Ukraine Institution 27.0 25.00 Building L38310-UA 1995 Ukraine Rehabilitation 500.0 400.12 B. Status of IFC Operations Amount Undisbursed /R93-219* 1993 Ukraine Venture Capital 2.0 1.2 Fund Fund Equity for financing the Ukraine Fund which is a venture capital fund for emerging privace companies in Ukraine.  13RD 264A9 20 21 11530 35 200 . ~~~~B E L A R U S " < ,:I,4s,1,,;, 0,,, POLAND |RUSSIAN FEDERATIN 9 a _,r, 4 ;_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~II,W, o 7Es D U rotv i /iZie -50' 5 SLOVAK 'swi.) - 7= * ~ ~~~~ ~~ ~~~~~~~~~~~~~~~~~~~~~North Ukr REPUBLIC ' // >\ ACKremerchnk \_ 1 -J *_ PUBI D niprodzerzhinsk Itivions a RYOMANIA 2' MnLestVA U K R A I N E \\'\Ou / \ /"4 oyoih Zcoiha~ HYDROPOWER REHABILITATION AND )\m Dn6.1, SYSTEM CONTROL PROJECT MAIN POWER STATIONS AND ) ivka TRANSMISSION LINES Sea TRANSMISSION LINES oA2V RUSSIAN 730-50 kV 0 \ ,2/ / < / % ; FEDERATION 330-500 kV Q SUBSTATIONS - 4 45 - HYDROELECTRIC POWER PLANTS * THERMAL POWER PLANTS / haited) '-".-' i NUCLEAR POWER PLANTS I I' REGIONAL ELECTRIC ASSOC ATIONS BOUNDARIES * NATIONAL CAPITAL KILOMETERS INTERNATIONAL BOUNDARIES 0 s 0 ISO A ~~ ~~~ ~~~ ~ ~~~~~~~~~~~~~~~0 so10 1500 lIVERS -s-'' ~ B L A C K S EA I 3 MILES BULGARIA 320 D05 50 TOOs10 150 0, i