Philippines - Transmission Grid Reinforcement Project

Document of The World Bank FOR OFFICIAL USE ONLY R eport No. P-6658-PH MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEY4T TO THE EXECUTIVE DIRECTORS ON TWO PROPOSED LOANS IN AN AMOUNT OF US $250 MILLION TO THE NATIONAL POWER CORPORATION OF THE PHILIPPINES WITH THE GUARANTEE OF THE REPUBLIC OF THE PHILIPPINES FOR A TRANSMISSION GRID REINFORCEMENT PROJECT FEBRUARY 20, 1996 This document has a restricted distribution and may be used by recipients only in tht performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of June 30, 1995) Currency Unit = Pesos (P) P 1 = US$0.04 US$1 = P25.0 WEIGHTS AND MEASURES b/d = Barrels per day (1 barrel = 159 liters) BTU = British Thermal Unit (0.253 kilo calories) GWh = Gigawatt hour (1,000,000 kWh) kg = Kilogram (2.205 pounds) km = Kilometer (0.62 miles) kW = Kilowatt (1,000 watts) kWh = Kilowatt-hour(860 kilo-calories) kV = Kilovolt (1,000 volts) kVA Kilovolt-ampere (1,000 volt-amperes) MNMBOE = Million Barrels Oil Equivalent = 0.144 MMTOE Millic n Tons Oil Equivalent MVA = Megavolt-ampere (1,000 kVA) MW = Megawatt (1,000 kilowatts) TOE = Tons of oil equivalent tcf Trillion cubic feet Ton = Metric Ton (1,000 kilograms) TWh = Tera watt hour (109 watt-hours) ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BOT Build-Operate-Transfer CAS Country Assistance Strategy DOE Department of Energy EHV Extra High Voltage (138 kV, 220 kV, 500 kV and 380 kV HVD ) ERB Energy Regulatory Board ESP Energy Sector Plan (1992) IDC Interest During Construction IPP Independent Power Producer JEXIM Export and Import Bank of Japan MIS Management Information Systems NLDC National Load Dispatch Center NPC National Power Corporation PD Project Director PMI Project Management Institute (U.S.A.) PHRD Policy and Human Resource Development (Japanese grant progi am) PMO Project Management Office RAP Resettlement Action Plan TRANSCO Proposed name for NPC's Transmission Company FISCAL YEAR January 1 to December 31 PHILIPPINES  FOE' OFFICIAL USE ONLY Transmission Grid Reinforcement Project Loan and Project Summary Borrower: National Power Corporation (NPC) Guarantor: Republic of the Philippines Beneficiary Not Applicable Poverty: Not applicable Amounts: US$100 million equivalent US$150 million (Currency Pool Loan) (Single Currency _:an) Terms: Currency Pool Loan: Standard variable loan payable in 20 years, including five ye ars of grace at the Bank's standard variable interest rate; Single Currency Loan: Floating rate single currency loan payable in 20 years inclu( ing five years of grace at LIBOR base rate plus LIBOR total spread; Commitment Fee: 0.75% on undisbursed credit balances, beginning 60 days al er signing less any waiver. Financing Plan: See Schedule A. Economic Rate of Return: 21% Staff Appraisal Report: No. 14844-PH Map: IBRD No 26879 Project ID Number: 4571 This document has a restricted distribution and may be used by recipients only in the perform arice of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatiori.   MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT O' THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMIENT TO THE EXECUTIVE DIRECTORS ON TWO PROPOSED LOANS TO THE NATIONAL POWER CORPORATION OF THE PHILIPPINES FOR A TRANSMISSION GRID REINFORCEMENT PROJECT 1. I submit for your approval the following memorandum and recommeiidation on two proposed loans to the National Power Corporation (NPC) of the Philippines for JS$250 million equivalent to help finance a Transmission Grid Reinforcement Project. The loans would be guaranteed by the Republic of the Philippines. The first loan, for US$100 million equivalent, would be at the Bank's standard variable interest rate, with a maturity of 20 years, including five years of grace; the second, for US$150 million, would be a floating rate single zurrency (US$) loan, also with a maturity of 20 years, including five years of grace. Background 2. Since 1992 there has been a qualitative improvement in the structure o- the Philippine power sector. This change, which was initiated in 1989 by the issue of Presidontial Executive Order 215 ending NPC's monopoly on generation, has accelerated since 1992 with an enthusiastic response from the private sector to the Government's call for help to relieve chronic power shortages. Independent Power Producers (IPPs) are now expected to play a precominant role in future development of generation, complimenting the role of the investor and c nsumer owned utilities that distribute electricity throughout the country. NPC's current generation facilities include 2,000 MW of hydro and 2,300 MW of thermal plants; in addition, NPC owns the nationwide extra high voltage transmission (EHV) grid and the high voltage ,ubtransmission networks. Under existing long-term contracts with some 35 IPPs, NPC will also be the purchaser of more than 80% of their 3,000 MW of production. These arrangements enx isage that NPC would provide an adequate transmission system to evacuate the electricity produced, much of which is on a 'take or pay" basis, and subject to substantial penalties if it fails to construct the required transmission facilities. The proposed operation supports the construction of an important transmission development that is needed to connect the grid to two major IPPs to be commissioned in 1998 and will help bring about the economic dispatch of energy generated throughout the power system. 3. Under its 1992 Energy Sector Plan (ESP), the Government is committed to privatization of NPC's various operations, including its transmission activities. To assist the Government in formulating a strategy for the power sector, the Bank prepared a study entitled 'Structural Framework for the Power Sector" (Report No. 13313-PH, November 30, 1994). W'hile supporting the Government's objectives, the report recognizes that complete privatization Is likely to take several years, given regulatory, commercial, and financial constraints and the extent of effort needed to prepare different parts of the company for the financial and operational changes that privatization will imply. The proposed project would continue the efforts under previous projects to support well targeted preparations for NPC's privatization. 4. A principal recommendation of the aforementioned Bank study, aimed at improving the environment for private participation in the power sector and enhancing competition, is that the IPPs need to be furnished with unbiased access to an efficient transmission system. In general, this implies that the EHV grid and subtransmission networks must be strengthened and extended as needed to serve the system's growing load; moreover management of the EHV grid should be kept  -2- separate from the interests of any particular supplier or distributor. The study also recommends the formation of a separate government-owned company to absorb and, thereaft(r. operate and maintain the transmission operation. The key steps towards accomplishing this objeclive would be: (a) for NPC to organize its transmission activity into an autonomous profit center. (b) to develop wheeling charges to reflect the cost of providing the needed equipment, operation aiid maintenance of the networks, interest and taxes, and yield a surplus sufficient to enable self financing of a reasonable proportion of new investments, and (c) to develop a modem transpa ently operated generation dispatch function to support the transmission operation. The proposec project would support these activities including strengthening the role of the National Load Dispatch Center (NLDC) operation. 5. The framework established by the Government for the eventual structun of the power sector is reflected in the draft Omnibus Electric Power Industry Code that tI c Government proposes to submit to Congress for consideration. The Bank has reviewed and corunented on the draft legislation and is satisfied that the draft code would provide a sound basis for rationalizing the responsibilities of the respective power sector agencies. Specifically the main pi ovisions are as follows: * The Department of Energy (DOE) would serve mainly as the policyi maker for the sector. It would formulate strategic vision and define the framework vN ithin which the Energy Regulatory Board (ERB) would adjudicate. * ERB would remain a quasi-judicial agency for regulating mainly thb tariffs of all companies that quaiify as electric utilities. However, the approacl to regulation would reJy most heavily on market forces and thereby limit the inter 'entions of the regulator. ERB's span of jurisdiction would be altered to include the pow er to award franchises, thereby briniging franchising and certification activities uncler the same organization * NPC through its subsidiaries, would limit its role to being an owner al d, for the time being, operator of its generating facilities. It would retain lead responsibility for developing hydropower projects and would be one of many supplirs of therrnal electricity, all competing on an equal commercial footing. In the n ~ar term, until DOE develops the needed capabilities, NPC would continue to undertake power sector planning under contract to DOE. Also, in the near term, urtil distribution subsector reform has taken root, NPC would continue as the wholesale- of electricity, including the management and operation of the subtransmission networi Ws. * A new national transmission company (TRANSCO) would be establis ied to serve as owner, developer, and operator of EI-V networks, providing all supp iers with non- discriminatory access to the EHV7 grid for a fee. To ensure adequ tte and timely service, TRANSCO would submit its investment program annuall- to ERB for approval. To ensure that its charges are fair, its cost-based rates woul I be subject to regulation. Within TRANSCO, a national dispatch entity would be cr ,ated, with the rules for dispatch initially to be made by a technical committee consisting of representatives of parties to existing power sales contracts with advice 'rom DOE and ERB.  -3- Project Objectives 6. The objectives of the project are to: (a) evacuate power from two major generation plants at Sual and Masinloc, both expected to be operational in 1998; (b) reinforce overloaded substations and extend the EHV grid in northwest Luzon and in western Visayas; (c) strengthen the transmission system and the load dispatch operations so that these can be integrated into an autonomous transmission subsidiary, and (d) support the restructuring of NPC under the Government's power sector reform program. Key performance indicators would b - monitored and would include meeting agreed dates for project implementation, targets for reserve reductions, and financial indicators. Project Description 7. The project has four main components: (a) the northwest Luzon transmission component comprising: (i) the development of a double circuit transmission line interconnection at 230 kV from Masinloc to a new substation at Labrador, and thence at 500 kV extending about 225 km to 500/ 230 kV substations at San Manuel and San Jose, (ii) associated 230 kV interc nnections from Labrador to the Sual power station, (iii) reinforcement of eight 230/69 kV substzLtlons supplying the central Luzon subtransmission networks, and (iv) supply of conductors for the rehabilitation of the southern Luzon Naga-Tayabas 500 kV line; (b) the NLDC component comprising the installation of a new national load dispatch center, communications, metering and protection equipment in Luzon and Visayas; (c) the Visayas subtransmission component o reinforce the 138/69 kV systems in Negros, Panay and Cebu, and (d) the provision of expert services comprising: (i) engineering services for the design and implementation of the NLDC facilities, (ii) project management services for transmission and substations, (iii) management consulting services to support NPC's privatization program, (iv) the provision of office equipment, MIS facilities, and (v) architectural and design services associated with the new TRANSCO headquarters. Additionally, the Bank assisted ERB in securing a PHRD grant to assist in establishing a basis for wheeling charges. 8. The total project cost is US$750 million. Total financing of about UJS$750 million (including Interest During Construction (IDC)) would be provided by: (a) two Bark loans totaling US$250 million equivalent (50% of the foreign exchange cost and 36% of the total project cost, excluding IDC); (b) loans by ADB and the Japan EXIM Bank (US$246 million ,quivalent), and (c) a loan by KfW (US$29 million equivalent). The balance of about US$221 nillion, including the provision of US$56 million for IDC, would be financed by NPC from local borrowing and internal cash generation. NPC would bear the foreign exchange risks for the loam from the Bank which would be guaranteed by the Government. US$20 million in retroactive financing from February 1, 1996 for advance payments in the turnkey transmission line and conductor supply contracts is being recommended. Breakdowns of the project costs and financing plan are given in Schedule A. Procurement amounts and methods and the disbursement profik are shown in Schedule B. The time table of the key processing events and status of Bank groiup operations in the Philippines are presented in Schedules C and D respectively. A map is attached. The Staff Appraisal Report No. 6658-PH dated February 20, 1996, is being distributed separ itely. Project Implementation 9. NPC would be responsible for implementing all project components in ac ,ordance with a Project Implementation Plan satisfactory to the Bank. A Project Director (PD). reporting to  -4- TRANSCO management, would serve as NPC's representative for implementing the project. In addition, the PD would be responsible for overseeing the development of the Masinloc power station, and for coordination with the developers of the Sual power station. The PD was appointed at an early stage of project preparation and has been closely involved in all decisions relating to project formulation. The PD is supported by a small team with office facldities at NPC's headquarters and has been provided with adequate budget to support his operatiom. 10. NPC's Engineering Department, under an agreement with the PD, would be assigned project engineering responsibility for the transmission components both in Luzon and Visayas. It will be assisted by consultants. Implementation of the NLDC subproject has been assigned to a project team based in the existing load dispatch operations unit. This team is led by a Project Manager also certified by the US PMI, who will coordinate closely with the PD iin reporting to the Bank. Management of the TA component would be coordinated by NPC's Manager of Corporate Services, working closely with NPC's Privatization and Restructuring Executive Office. Project Sustainability 11. To help ensure sustainability the project includes the following activities: (a) the development of an independent transmission operation providing IPPs with unbiased access to the power market, thereby increasing competition among suppliers; (b) the creation of the NLDC to manage generation dispatch operations and facilitate the application of wheeling charges; complemented by support to the Energy Regulatory Board (ERB) to appraise th. framework and the particulars of proposed transmission charges, and (c) the strengthening of the subtransmission networks to help provide the distributors with better service and thereby improve their chances of taking over regional high voltage networks as a key step towards reform of the distribution sector. Lessons from Previous Bank Involvement 12. The Bank had limited involvement with NPC over 1978-88. Since thea, the Bank has made five loans to NPC, with the most recent Loans 3700-PH and 3746-PH, to f nance the Leyte Geothermal project, receiving Board approval in February and June 1994 respectix ely. Two of the earlier loans (the Bacon-Manito Geothermal Project (Loan 2969-PH) and the Eneigy Sector (Loan 3163-PH)) closed in December 1995, and implementation completion reports are under preparation. During 1995 US$55 million was canceled from the Power TTansmission and Rehabilitation Project (Loan 3626-PH) to reduce the scope of work in response tk changes in IPP development projects. Each of these three loans has encountered implementation delays, largely due to NPC's preoccupation with its chronic generation shortfall. NPC and the Bank have identified other important reasons for these delays, and addressed them in thc: ongoing Leyte Geothermal Project. Specific corrective measures include: (a) appointment of PDs under a Project Management Office to manage the responsible design groups in the Engineering Department, as well as outside consultants; (b) strengthening NPC's procedures to deal with cnvironment and resettlement issues; (c) training in the implementation of Bank procurement procedures, and (d) standardizing bid documents to ensure a uniform approach in the evaluation and award of contracts. The proposed project would strengthen NPC's capabilities in project preparation and execution, making better use of modem technology and available project managemcrnt software. Rationale for Bank Involvement 13. The policies and programs pursued by the Government are in accordance with the Bank's policies and guidelines for power sector reform and the reform program is progressing  -5- satisfactorily. The project is consistent with the Country Assistance Strategy (CAS) presented to the Board with these loans. It would support the Government's efforts to move from the current economic recovery into a period of sustained growth. As discussed in the CAS, the Bank's support to the Philippines addresses the long term development issues designed to enhance competition and upgrade infrastructure. The relevant priority areas for Bank assistance include strengthening infrastructure to ensure that the full benefits of new generation capacity reach the public. This will require measures to focus on improving private business environment and strengthening policy/project implementation-all of which are embodied in the proposed project. 14. Although the amount of Bank financing has been modest relative to NPC's overall needs of recent years, the Bank's broad involvement in the Philippines' power sector has enabled it to provide considerable strategic guidance to the sector in general and to NPC in parti ular. The 1992 Energy Sector Plan (ESP), formulated by the Government in consultation with the Bank, outlines a series of actions toward reforming the energy sector, while the Bank's Power Sector Study provides a strategic framework for restructuring and privatizing the power sector. The Government has moved a long way towards laying the foundations for reform and has succeeded in adding a large number of IPPs onto the grid. It has now begun to concentrate on the privatization of NPC and the separation of transmission from generation activities. Thesc latter actions, embodied in the Government's Philippines Energy Plan 1994-2010 represent the most difficult aspects of the ESP. 15. The Bank's continued financial involvement as well as its technical assistance would help the Government implement critical aspects of the program and the last remaining stages of power sector restructuring. Indeed, bearing in mind the significant penalty charges which NPC is liable to pay to the owners of the Sual IPP, successful implementation of the project is of vital importance to NPC. The Bank's presence in the power sector would also help ensure satisfactory and timely completion of the reform process that the Government has embarked upon. The proposed project specifically supports reorganization of NPC's transmission activities including (a) setting a time table for the establishment of an autonomous transmission company leading to its eventual privatization, and (b) the provision of a framework of procedures (i.e. a Grid Code) for implementing optimal load dispatch. Agreed Actions 16. During negotiations agreements were reached with the Government that it would (a) conduct an annual review of progress in carrying out its program for restructuring and privatizing the power sector, exchange views with the Bank with respect to its future implementation, and take all measures necessary for such implementation; (b) present to Congress for consideration not later than July 30, 1996, a proposed Omnibus Power Industry Code, which proposed legislation it shall certify as an administration bill; (c) exchange views with the Bank and the Borrower on the actions needed to carry out the agreed power development plan no later than October A each year; (d) investigate by June 30, 1996, (i) the underlying inefficiencies in economic load dispatch and draw up a timebound plan for eliminating said inefficiencies, the plans would include specific steps for promoting competition in power, and (ii) thereafter carry out said plan, and (e) take all measures necessary to enable NPC to adjust the structure or level of its tariffs to permit NPC to meet its agreed financial targets. 17. On its part NPC agreed to (a) submit an application to ERB by October 31, 1996, for a new rate structure designed to (i) phase out subsidies between grids, (ii) introduce long run  -6- marginal cost principles in the Luzon grid, and (iii) introduce appropriate charges or the wheeling and ancillary services in the Luzon grid; (b) prepare a timebound action plan to establish transmission activities as a separate corporate entity and establish a holding company by March 31, 1997, with attributes, functions, and resources acceptable to the Bank; (c) no later than October 1 of each year, prepare a Power Development Plan for the follovA ing five years, exchanging views with the Guarantor and the Bank, and thereafter take all necessary steps to implement the plan; (d) maintain its tariffs at levels that enable its net revenues to y ield (i) a rate of return on net revalued assets in operation of 7% in its fiscal year 1996 and 8% thcreafter; and (ii) maintain net revenues sufficient to cover the company's debt service requirements for each fiscal year; (e) not incur additional debt unless its debt service coverage ratio exceeds 1. through 1999, and 1.3 thereafter; (f) prepare and review with the Bank, by December 31 of each year, its projections in respect of its capital expenditures and the demand for power supplied by it for the following five years (g) fumish to the Bank, by June 30 of each year, audited financial statements for the previous year, together with the certification and long form report prepared by an acceptable auditor, and (h) submit to the Bank at the end of each quarter comprehensive reports on the implementation of the project and provide detailed external monitoring and evaluation reports to the Bank at quarterly intervals during the implementation of satisfactory Resettlement Action Plans (RAPs). Conditions of effectiveness will be (a) fulfillment of all conditions precedent to the effectiveness of financing agreements with ADB, JEXIM and KfW, and (b) finalization of a detailed resettlement action plan acceptable to the Bank and approval of the RAPs by all necessary corporate and government bodies. Environmental and Social Aspects 18. The project has an environmental category B classification. NPC has completed a satisfactory Environmental Assessment for the transmission lines. They do not pose any significant environmental problems as they are routed mainly near existing roadway; or adjacent to existing 230 kV lines, and affect no forest or sensitive areas. Land acquisition for the project will involve relocation of about 766 households, and payment of compensation for affected assets and easement fees for the rights-of-way. The costs for relocation and compensation for the project are estimated about US$30 million (3% of project costs). There are four components of the project that will involve land acquisition and/or right-of-way compensation. These are: (a the northwest Luzon transmission line (affecting 600 households); (b) the Sual-Labrador transmission line (affecting 24 households); (c) the KfW financed Masinloc-Labrador transmission line, (affecting 89 households), and (d) the Visayas subtransmission which includes the Panay IV Did Negros IV transmission lines (affecting 53 households). 19. The Bank has been working with NPC to revise its policy framework for 1l md acquisition and resettlement, for transmission projects in particular. A new policy framewors (RAP I) has been agreed for transmission projects which will be piloted under this project. NPC' compensation policy for transmission projects has, until recently, been limited to offering cash comnpensation for affected assets, which has often tended to be below replacement and/or market value. The new policy framework for transmission projects includes: (a) alternatives to cash compensation, such as replacement land and/or livelihood development schemes for equitable res.-ttlement and rehabilitation of affected people; (b) compensation at replacement value for houses structures; (c) compensation for crops and trees at fair market and economic values, respectively, and (d) coverage for those with weak tenure status. Resettlement Action Plans for th, four project components (RAP II) are being prepared by NPC. The acceptability and clearance of RAP II by the Bank is a condition for loan effectiveness.  -7- Benefits and Risks 20. The main benefits of the project are to (a) increase transfer capacity and improve the reliability of the EHV transmission of bulk power to the major load centers in central Luzon; (b) reduce generation reserve requirements in the Luzon-Visayas grid, and (c) reduce losses and improve the quality of supply to consumers in the western Visayas region. Timely implementation would avoid crippling financial penalties under 'take-or-pay" contracts with BOT developers. The 500 kV extension will also facilitate development of hydro resources in the north 'the most likely prospects being San Rogue (300 MW) and Casecnan (200-600 MW)). The development of a load dispatch system would protect the consumer through cost effective selection of generation alternatives. The NLDC component would ensure that supplies are brought into the system according to merit and that the basis for future contracting takes into account responsibilities by individual generators for achieving coordinated power system operations. The overall ERR for the project is estimated at 20%. 21. The technologies for all project components are conventional and well proven. The basic planning of the transmission system and related components has been comprehensivclv reviewed as part of project preparation; therefore, implementation should proceed fairly smoothly. Project risks are primarily associated with NPC's financial and implementation weaknesses. If NPC is unable to meet its financial targets or to achieve its implementation targets, the project could face cost overruns and delays. A delay beyond six months could affect the commissioning of the Sual plant in early 1999, and -subject NPC to heavy penalties associated with 'take-or-pay" contractual provisions. In this respect the Bank is requiring considerable improvement in NPC's project management and reporting capability prior to loan approval, and will be monitoring this aspect of the project closely. This should ensure that potential problems are identified and addressed early in implementation. In addition, the proposed covenants requiring the Republic of the Philippines to support NPC's financial needs, if necessary, should ensure a timely completion of the project investment program. Another risk factor that may affect the performance of the project is the possibility that power demand will grow at a lower rate. In this case, the estimated ERR would still be 16%. 22. While NPC's financial situation has improved over the past five years it is still not fully satisfactory. For the next five years the company is expecting to face cash flow constraints as a result of excessive reliance on foreign currency denominated debt. The severity of these constraints depends on the company's ability to (a) maintain its tariffs at or near statutory ceilings, and (b) raise equity capital from private interests in support of NPC's restructuring program To the extent that the Government and NPC are acutely aware of this issue and given the Government's agreement to ensure that NPC has adequate funding for its investment program, the Bank believes the risks are manageable.  -8- Recommendation: 23. I am satisfied that the proposed loans would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve them. James D. Wolfensohn President The World Bank Washington, D.C. February 20, 1996 Attachments  -9- Schedule A Project Cost Estimates and Financing Cost Estimates (component costs include provision for land acquisition and compensation) --U w millions- Local Foreign Total A Northwest 500/230 kV Grid Extensions 115.7 363.6 479.3 Maisinloc Labrador 230 kV Transmission System 7.6 25.3 32.8 500 kV Transmission Lines 44.9 92.1 137.0 500/230 kV Substations 57.2 208.8 266.0 EHV Transmission System Extension and Reinforcement 6.1 37.4 43.5 B TRANSCO HQ, NLDC, Protection and Communications 10.7 38.7 49.4 TRANSCO HQ and Office Equipment 5.0 1.0 6.0 National Load Dispatch Center and RTUs 0.5 16.7 17.2 Upgrading Communications Systems 4.4 12.5 16.8 Upgrading Protection Facilities 0.1 6.4 6.5 Engineering and Architectural Services 0.7 2.1 2.8 C Visayas 138 kV Grid Extensions 9.4 17.5 26.9 D Institutional Support and Project Management 8.5 9.5 18.0 Management Information Systems 1.5 9.5 11.0 Project Management and NPC Engineering Support 7.0 0.0 7.0 Total Base Cost 144.3 429.2 573.5 Physical Contingencies 14.5 43.1 57.6 Price Contingencies 30.5 32.1 62.6 Total Project with Contingencies 189.3 504.4 693.8 Interest During Construction 18.8 37.4 56.2 Total Project Financing 208.2 541.8 750.0 Summary of Project Financing US$million Source Local Foreign Total Bank Loan 21 229 250 ADB/JEXIM Loans 246 246 KfW Grant/Loan 29 29 NPC Internal Cash Generation 187 37 225 Total Project Financing 208 542 750  -10- Schedule B Pape 1 of 2 Procurement Arrangements (US$million) Procurement method ICB VCB Other NBF Total Works Subtransmission Erection, Buildings, 14.3 6.4 20.7 (8.8) (8.8) Goods Conductors, Transmission & Substation materials 78.5 78.5 Protection Relays, MIS and Office Equipment (76.7) (76.7) Goods and Installation Transmission & Substations Turnkey Contracts 151.7 353.4 505.1 (120.7) (120.7) NLDC & Communications Facilities 41.3 41.3 (39.3) (39.3) Consultancies and Other 4.4 4.4 (4.4) (4.4) NPC Administration and Project Costs Land acquisition & Compensation 33.7 33.7 Local Consultants and NPC Engineering 7.8 7.8 PMO Administration 2.1 2.1 Total 271.6 14.3 4.4 403.4 693.7 (236.8) (8.8) (4.4) 0.0 (250.0) Note: Figures in parenthesis are the respective amounts financed by the Bank loans. ICB: Intemational Competitive Bidding. NCB National Competitive Bidding NBF: Not-Bank-Financed includes the parallel co-financing components, taxes and administration and compensation Other Other includes Consultancies.  -1 1- Schedule B Pa2e 2 of 2 B. Disbursements .4mount of the Loan Allocated % of Ex genditures Category to be, Ti anced (US$million) Currency Pool Single Currency (1) Works 3.2 4.8 75% (2) Goods 24.8 37.2 100% of foreign expenditures, 100% of local expendituwes (ex-factory cost), 70% of local expend tures for supply of goods including supen ision (3) Goods & Installation Contracts: Transmission Lines 46.0 69.5 85% Load Dispatch facilities 18.0 27.0 95% (4) Consultants' services: 2.0 3.0 100% (5) Unallocated 6.0 9.0 TOTAL 100.0 150.0 Disbursement Profile Disbursements in USSmillions FY95 FY96 FY97 FY98 FY99 FYOO Annual (Bank Fiscal Year July I-June 30) 18 15 81 96 30 10 Cumulative 18 33 114 210 240 250  -12- Schedule C PHILIPPINES TRANSMISSION GRID REINFORCEMENT PROJECT Timetable of Key Project Processing Events (a) Time taken to prepare the project: 13 months (b) Prepared by: NPC with the assistant e from Bank missions (including servic s financed by a PHRD Grant). (c) First Bank mission: July, 1994 (d) Appraisal mission departure: June, 1995 (e) Negotiations: February, 1996 (f) Planned date of effectiveness: July, 1996 (g) List of relevant PCRs and PPARs: Nil This report is based on the findings of an appraisal mission consisting of John Irving (Senior Powt r Engineer), Jamil Sopher (Principal Financial Analyst), Enrique Crousillat (Energy Economist), Sumila Gulyani (Resettlement Specialist), Jack Fritz (Environmental Engineer) who visited the Philippines in June 1995. Peer Reviewers were Messrs. Rafael Moscote, Arun Sanghvi, Anil Malhotra and Alfonso Mejia. The project was cleared by Mr. Callisto E. Madavo, Director EAI, and Mr. J. Shivakumar, Chief EAlIN. Contributions were made to the preparation of the report by Darayes Mehta and Martin Edmonds, with overall coordination of its production by Ms Kajal Jagatsing.  -13- Schedule D Page 1 of 2 STATUS OF BANK GROUP OPERATIONS IN PHILIPPINES A. STATEMENT OF BANK LOANS AND IDA CREDITS /a (As of December 31, 1995) Amot nt (USS million) Loan or (!ess cancellations) Credit Fiscal Undis- Number Year Borrower Purpose IBRD IDfJb bursed One hundred and sixty loans and seven credits have been closed. 6,052.77 171 1 31.21 Of which SALs, SECALs and Program Loans 1903 1981 Republic of the Philippines SAL I 199.96 2266 1983 Republic of the Philippines SAL II 302.25 2277 1991 Republic of the Philippines Environment & Natural Res. Mgt. 66 00 2469 1985 Republic of the Philippines Agriculture Sector Inputs 150.00 2787 1987 Republic of the Philippines Economic Recovery Program 300.00 2956 1988 Republic of the Philippines Program for Govt. Reform 200.00 3049 1989 Republic of the Philippines Financial Sector 300.00 3539 1993 Republic of the Philippines Economic Integration Loan 200.00 1.652.21 66 00 0.00 3084 1989 Dev. Bank of the Philippines Manila Power Distribution 65.50 8.86 3099 1989 Republic of the Philippines Health Development 70.10 6.33 3146 1990 Republic of the Philippines Municipal Development II 40.00 8.97 3204 1990 Republic of the Philippines Coconut Farms Development 120.95 75.44 3242 1990 Republic of the Philippines WS/Sewer/Sanitation I 58.00 28.28 3244 1991 Republic of the Philippines Second Elementary Education 200.00 61.98 3261 1991 Republic of the Philippines Communal Irrigation II 46.20 31.90 3263 1991 Republic of the Philippines Earthquake Reconstruction 125.00 22.94 3360* 1991 Republic of the Philippines Env. & Natural Res. Mgt. 158.00 35.17 3430 1992 Republic of the Philippines Highway Management 150.00 132.48 3435 1992 Republic of the Philippines Engineering & Science Educ. 61.00 35.92 3439 1992 National Electrif. Adm. Rural Electrification 91.30 86.90 3455 1992 Republic of the Philippines Municipal Development III 68.00 60.26 2392 1992 Republic of the Philippines Second Vocational Training 36 D0 28.97 2506 1993 Republic of the Philippines Urban Health & Nutrition 70 D0 70.86 3523 1993 Dev. Bank of the Philippines Telephone System Expansion 134.00 107.66 3603 1993 Republic of the Philippines Tax Computerization 63.00 51.77 3607 1993 Republic of the Philippines Irrigation Operation Support II 51.30 41.72 3626 1993 Philippines National Power Corp. Power Transmission & Rehab. 54.55 13.21 3700 1994 National Power Corporation Leyte Cebu Geothermal 147.00 124.88 3702 1994 Philippines National Oil Co. Leyte Cebu Geothermal 64.00 34.23 3745 1994 Subic Bay Metropolitan Authority Subic Bay Freeport 40.00 18.39 3746 1994 National Power Corporation Leyte Luzon Geothermal 113.00 99.99 3747 1994 Philippine National Oil Co. Leyte Luzon Geothermal 114.00 101.56 3852 1995 Republic of the Philippines Women's Health & Safety 18.00 17.70 3938 1996 Land Bank of the Philippines Rural Finance II 50.00 50.00 3939 1996 Land Bank of the Philippines Rural Finance II 50.00 50.00 3940 1996 Land Bank of the Philippines Rural Finance II 50.00 50.00 Total 8,255.67 277 1 1487.56 of which has been repaid 2,765.73 10 31 Total now held by Bank and IDA 5494 2i27 Amount sold 31.35 Of which repaid 31.35 Total Undisbursed 1.356.52 99 34. 1,487.56 la The status of the projects listed in Part A is described in a separate report on all IBRD/IDA-ftnanced projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. Amounts Pre presented net of cancellations. /b Principal amounts in US$ equivalent at date of negotiations, and undisbursed amounts in equivalent are valued at exchange rate applicable on the date of this statement. Indicates SAUSECAL Loan and Credits.  -14- Schedule D Page 2 of 2 B. STATEMENT OF IFC INVESTMENTS (As of December 31, 1995) Undisbursed Original Gross Commnitments Ircluding IFC IFC Parti- Held partici- Fiscal Loan Equity cipant Total by pants' Year Obligor Type of Business ---------------- US$ million ------------------- IFC portion 1963173 Private Dev. Corp. of the Philippines a Financial Services 6.52 4 36 8.48 136 - 1967/89 Manila Electric Company Infrastructure 30.64 3.64 2.96 3 2J. 21.46 1970 Paper Industries Corporation a/ Timber, Pulp & Paper - 0.81 1.40 2' - 1970/72 Mariwasa Manufacturing Company a Cement & Construction Mat. 0.38 0.26 0 55 19 - 1970/87/ PhilippmeLong1DistanceTelephoneCo. Infrastructure 88.50 0.03 40.00 12 .53 47.03 1092 88/90 1971/77 Philippne Petroleum a/ Mining and Extraction 6.20 2.07 - 2' - - 1972 Marinduque Mining & Ind. Corporation a/ Mining and Extraction 15.00 - - I C0 1973 Victorias Chemical Corporation a/ Chemical & Petrochemicals 1.85 0.35 - 20 1974 Filipinas Synthetic Fiber Corpomtion a' Textiles 1.50 - - 5o - 1974 RFMCorporational Food&Agribusiness 1.20 - - 1.20 1974/79 Maria Cristina Chemical Industry Mining and Extraction 1.55 0.64 - i') 0.44 1975 Philippines Polyamide Ind. Corporation a/ Textiles 7 00 - - C - 1976 PhilagroEdibleOils, Inc.a/ Food&Agribusiness 265 0.19 - 8 - 1977 Sarmiento Industries a/ Timber, Pulp & Paper 3 50 - - 50 1977/85 Acoje Mining Co Inc. a/ Mining and Extraction 2,50 1.22 - 72 - 1978 Cebu Shipyard & Engineering Works a Manufacturing 2.10 - - I - 1979/90 General Milling Corporation Food & Agribusiness 4.00 1.73 - .73 1.73 1980 Consolidated Ind. Gas, Inc a/ Chemicals & Petrochemicals 4.50 - - 5) - 1980 Philippines Associated Smelting Mining and Extraction - 5.00 - .0() and Refining Corporation (PASAR) a! 1980 Venturm in Industry & Business Financial Services - 0.24 - 2 - Enterprise, Inc. (VIBES) a/ 1980/83/ All Asia Capital Trust Financial Services 3016 2.77 6.00 3 91 27 73 16,51 89/90/95 1981 Loans to Small & Medium Scale Financial Services 18 50 0.64 - I 4 - - Enterprises (SMSE) a/ 1981/92 Davao Union Cement Corporation Cement & Construction Mat 16.00 085 - 1 8' 0.85 1982 NDC-Guthrie Plantations, Inc. a! Food & Agribusiness 11.00 - - I 0) - 1986/91/92 Pure Foods Corporation a/ Food & Agribusiness - 4.46 - 4' - - 1987 BPI Agribank Financial Services - 098 - 98 1988 First Philippine Capital a/ Financial Services - 4.20 - 2 ) 1989 Hamnbrecht & Quist Finamcial Services - 2.28 - 228 2. - 1990 First Philippine Fund a/ Financial Services - 2973 - 2 7 1990 The Manila Fund (Cayman) ae Financial Services - 70O - 0 - 1991 Automated Microelectronics a/ Manufactuiing 9.00 280 - 1 8 ' - 1991 AvantexMill Corporation Textiles 11.25 233 - I 5 971 1991 Best Chemicals Chemicals & Petrochemicals 6.50 230 - 8 4.04 1991 Hopewell Energy Infrastructure 10.00 1 10 - II I 095 1991 Makati Shangri-La Hotel Hotels and Tourism 29.50 - 29 50 5 0 1213 1993 Bacnotan Cement Corp. Cement & Construction Mat 18.00 9.24 - 2 .2 14.03 - 1993 Hopewell Power Infrastructure 60.00 10.00 4000 11 .0 70.00 24.80 1993 Mactan Shangri-La Hotel Hotels and Tourism 12.00 - 1200 2 0 5 73 - 1993 Northem Mindanao Power Infrastructure 12.50 4.50 21 00 3 0., 15.96 0.24 1993 Pilipinas Shell Petroleum Oil Refining 50 00 - 85 00 13 0 38.75 - 1994 Hambrecht & Quist Financial Services - 2.50 - 2.50 .5 010 1995 WaldenAB Ayala Management Financial Services - 0.05 - .0 005 0.02 1995 Walden AB Ayala Ventures Financial Services - 375 , 3 75 1.85 1996 All Asia Capital Growth Financial Services - 4.00 - .' 4 00 2.00 1996 All Asia Capital Managers Financial Services - 0.04 .01 0 04 - 1996 Asian Ventures Limited Financial Services - 0.01 1.0 001 - 1996 Pangasinan Electric Corporation Infrastructure 30 00 - 196.00 22 .0 30 00 226.00 Total Gross Commitments b/ 504.00 116.07 442.89 106 9; Less Cancellations, Terminations, Repayments & Sales 23430 72.60 83.79 39 .6' Total Commitments Now Held c/ 269 20 43.47 359.10 67. %2 313.17 282.44 Total Cormmitments Held & Pending Conumitments Total Undisbursed Commitments 1529 421 2 L 4J 1 a/ Investments which have been fully canceled, terminated, written off sold redeemed or repaid b/ Gross commitments consist of approved and signed projects. c/ Held commitments consist of disbursed and undisbursed investments.  12u , 122 12X' 126. PHILIPPINES TRANSMISSION GRID REINFORCEMENT PROJECT -8 Cu,rrin38o A / 7f1k / O~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~XSN N PROPOSED) ,aI~ /. : '>, 'EXISllNO Banbay ; CT -A R fguIlHVDC MONO POLAR UNES IVN aCRCUa -,*, . ,/ -,R Sa3 L500kV ERANSMSSJK N tIES San ' ' ISBP uho! - 200 k _ kRANSMSSN IM "ES1l9R \ -.s ';_.|- .. | >' '--' ..... ~~~~~~~~~~~~~~~~~~23D kVTMAIRSSK " tfi,5 (KFWI / -. CA- G YAN ------ 11 S/ 138LVTRAY SMISSK NUNE5I 5/138 kV TRANSgSSION * *ISUISWI 000009g , btuniio u DI A , SIAS5AKONS 5 Bihga Soboo ,/ , s~~~~~~~~~~~~~~~asTnot4s mmd I / 1E HY0,0 POWER STIXJS - . ~ 0 IOTRMAi POWER SDnEOLS Suol ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 i. GEOTHErvMALPW R PtANTM 16- So.Cru6 * r-,j/ nbg - -. P0wCE 0I16ES C TRAL N L UZON Mor,inic , i lkl >,<13> .. .... ........ \ 0 50 10 0 150 200 Li"oon \ NA\3 I ; <'reln5elBe w lo P/ilippine Sea 14' ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~14- ./ . \ < g u-(3/ 1\- >& c~~~~~~~~ATANDUANE S /~~~~~~~~~~~~~~~~~ / ~~~~~~Pinomcn , .- . . N ~~~~~~~~~~~~~so uTrH E RN T-'.,, i _, , _, _, i *. ~~~~~~~~~~B.-o M.anito M I N Djo R Oj BICOL I , -l ... d...... .oj . ... ROMBON I12 Cobooungon d~~~ ' I SlAh,. doo _. 5)/ ).I* a M~~~~~~~~~~~~~~ASB3ATE -12" Y*-' 12'-- 1210 . T.,,,,,,,xo MERALCO SYSTEM jilT'Bonm PIA - A y : T EA, ,, N D,n~~~~~Ie I ~~~~TogoIn ; r,zbs > ~~~~~~~~~~~~~~~ ~~PIA N A Y , / .|; o i ^ ASTE A ~~~~~~~V.Sig 9 =1 A'1eg lL1 7 v = )j WESTERNi M _ rgp4 ,o .o 9P