Niger - Energy Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16734 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF NIGER ENERGY PROJECT (Credit 1880-NIR) JUNE 19, 1997 Water, Urban and Energy 2 Africa Region 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 EQUIVALENI'S Currency Unit = CFA US$ 1 1990 272 CFA Francs 1991 = 282 CFA Francs 1992 = 264 CFA Francs 1993 283 CFA Francs 1994 555 CFA Francs 1995 499 CFA Francs 1996 508 C'FA Francs 1997 507 C'FA Francs WEIGhITS AND MEASURES I meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile ,mi.) 1 cubic meter (mi3) = 262 US gallon I liter per capita per day (lcd) = 0.26 gallon per capita/day ABBREVIATIONS AND ACRONYMS CFAF Francs of the Communaute Financiere Africaine DANIDA Danish Ministry of External Affairs DCA Development Credit Agreement EIB European Investment Bank GON Government of Niger IDA International Development Agency KFW Krediet Anstalt fur Wiederaufbau, Germany NEPA Nigeria's National Electric Power Authority NIGELEC Niger Electric PPF Project Preparation Facility FISCAL YEAR January 1- December 31 Vice President: Jean-Louis Sarbib, AFR Country Director Theodore Ahlers, CD 13 Technical Manager: Max Pulgar-Vidal, AFTU2 Task Team Leader: Mark Segal, AFTU2  FOR OFFICIAL USE ONLY TABLE OF CONTENTS Pages Preface EVALUATION SUMMARY .......................................................... ii PROPOSED OPERATIONAL PLAN ...........................................................v PART I: PROJECT IMPLEMENTATION ASSESSMENT .......................................................... 1I A. INTRODUCTION ...........................................................1 B. STATEMENT AND ACHIEVEMENT OF PROJECT OBJECTIVES ............................................2.......2 C. PROJECT IMPLEMENTATION EXPERIENCE ...........................................................5 D. IDA PERFORMANCE .......................................................... 7 E. BORROWER PERFORMANCE ...........................................................8 F. PROJECT OUTCOME, SUSTAINABILITY, AND FUTURE OPERATION ..........................................9 G. KEY LESSONS LEARNED .......................................................... 10 PART II: STATISTICAL ANNEXES .......................................................... 12 TABLE 1: SUMMARY OF ASSESSMENTS .......................................................... 13 TABLE 2: RELATED BANK CREDITS .......................................................... 14 TABLE 3: PROJECT TMETABLE .......................................................... 14 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL ............................................... 15 TABLE 5: KEY INDICTORS FOR PROJECT IMPLEMENTATION ........................................................... 16 TABLE 6: KEY INDICATORS FOR PROJECT OPERATION .......................................................... 17 TABLE 7: STUDIES INCLUDED IN THE PROJECT ................................ - 17 TABLE 8A 1: PROJECT COSTS ................................ 17 TABLE 8A2: SUMMARY COSTS OF ELECTRIC POWER AND PETROLEUM COMPONENTS ................................ 18 TABLE 8A3: TOTAL PROJECT COSTS .............................................................. 18 TABLE 8B: PROJECT FINANCING .............................................................. 18 TABLE 9: ECONOMIC COSTS AND BENEFITS .............................................................. 19 TABLE 9A : INTERNAL RATE OF RETURN CALCULATION .............................................................. 20 TABLE 10: STATUS OF LEGAL COVENANTS .............................................................. 21 TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS ......................................................... 24 TABLE 12: BANK RESOURCES: STAFF INPUTS .............................................................. 24 TABLE 13: BANK RESOURCES: MISSIONS .............................................................. 25 ANNEX A: BORROWER'S CONTRIBUTION SUMMARY ............................................. 27 ANNEX B: LAST MISSION'S AIDE MEMOIRE ............................................. 32 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.  I  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF NIGER ENERGY PROJECT (Credit 1880-NIR) PREFACE This is the Implementation Completion Report (ICR) for the Energy Project in Niger, for which IDA approved a Credit of US$31.5 million on February 23, 1988. The Credit became effective on July 1, 1988. The Credit closed on December 31, 1996, two years later than the original closing date of December 31, 1994. IDA disbursed US$17.4 million or 55 percent of the Credit amount. The last disbursement took place on May 21, 1997. Co-financing was provided by Krediet Anstalt fur Wiederaufbau (KFW), the European Investment Bank XEIB) and DANIDA. This report was sent to the co-financiers. DANIDA, Niamey, has indicated its agreement. The ICR was prepared by Mark Segal, Team Leader of the Water, Urban, Energy II (AFTU2) Infrastructure Family, Africa Region, and reviewed by Willem Floor. The preparation of the ICR began during the project's final supervision mission, in November/December 1996. It is based on material in the project file. The Borrower contributed to the preparation by providing information and reports useful for the preparation of the ICR, as well as an extensive completion report. The English translation summary of the Borrower's completion report is included in this report. The main text of the Borrower's report (88 pages) is in the project file. The Borrower-had no comment on the Bank's sections of the ICR.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF NIGER ENERGY PROJECT (Credit 1880-NIR) EVALUATION SUMMARY Introduction 1. The Niger Energy Project was part of a integrated approach to meeting energy needs in Niger at least cost while protecting the environment. When IDA appraised the project in 1987 the Government of Niger (GON) was focusing on developments in three priority sub-sectors: household energy, electric power and petroleum. For household energy, predominantly woodfuels, the Government of Niger had developed a plan to decrease woodfuel consumption through conservation and fuel substitution while improving the management of forest resources. In the electric power sub-sector, the emphasis was on rehabilitating and expanding the transmission and distribution system to meet anticipated load growth and replace higher cost diesel generation. The main concern in the petroleum sub-sector was the development of the legal framework and capability to accelerate private sector participation in petroleum exploration. Prior to the Energy Project, IDA had been involved in operations for all three sub-sector: two forestry credit for increasing woodfuel supplies, a project preparation facility (PPF) for- evaluating petroleum prospects, and a technical assistance and engineering credit for defining the least-cost power development program and improving power system organization and management. Also relevant to the sector's overall development was a Structural Adjustment Loan to redefine the role of the State in economic activities including its role the energy sector. PrQject Objectives 2. The project's overall objectives were to develop a strategy to address interconnected energy problems facing Niger's economy, support the financing the related investments, and help improve the operational and financial performance of NIGELEC within the context of the state enterprise reform program. The development of a strategy required some pilot testing of operations in the household energy sector, additional knowledge of the petroleum resources, and efforts to improve the technical and commercial operation of NIGELEC as a state enterprise. The main project components supporting household energy development were policy changes and investments to improve woodfuel supply and promote the use of more efficient stoves. In the electric power sector, the main components were the construction of new transmission capacity, the rehabilitation of existing transmission and distribution facilities, studies for future power system development, additional equipment, technical assistance and training, and financial covenants concerning tariff levels and financial ratios to sustain NIGELEC's viability. The key components for the petroleum sub-sector were equipment and  - 1ii - consulting services to improve understanding of the resource base, preparation of an exploration strategy, and promotion of areas for exploration and training/technical assistance to the Ministry of Mines and Energy (MME). Implementation Experience and Results 3. The project partially achieved its objectives with variable performance among the three energy sub-sectors. It achieved most of its objectives in the household energy and petroleum sub-sectors. Although it did not achieve some important objectives for the electric power sector, especially targets for financial performance, GON has committed to a plan of action for power sector reform which should improve power sector operations and financial performance. The project's objectives are sustainable but fragile. The household energy components has established viable mechanisms to help sustain the country's wood supply and avert shortages anticipated at appraisal. In the petroleum sector, the project has helped GON to formulate a clear regulatory framework for petroleum exploration and development, establish an adequate petroleum data base and an effective domestic capability to manage the data base and negotiate petroleum exploration contracts. In the electricity sub-sector, further investments in sub- transmission and distribution facilities, which the project did not finance, will be necessary to attain the benefits of the transmission line that the project constructed. In addition, the implementation of the planned restructuring of the power sub-sector, to which GON and IDA have agreed, should create the necessary conditions for power system expansion and financial sustainability of the sub-sector. 4. The project's implementation extended two years beyond the original closing date (December 1994) because of additional time necessary to complete important household energy and petroleum sub-sector components. Project costs were US$30.4 million compared to US$78.5 million estimated at appraisal. Bank disbursements on the Credit amounted to US$17.5 million or 56 percent of the appraisal estimate. The lower project costs and Credit disbursements resulted from the cancellation of several sub-components for the electric power sub-sector ( Part II, Tables 8A and 8B). The major factors external to the project which affected its implementation were: the political and social instability resulting from the transition to democracy during 1990-92, a weakened fiscal administration leading to GON arrears in the payment of its electricity bills, and the devaluation of the CFA franc which increased the local currency cost of imported substitutes for woodfuels, kerosene and liquefied petroleum gas (LPG). 5. The key factors subject to Borrower and implementing agency control which had a beneficial impact on the project were: a strong GON commitment to overcome some legal and institutional obstacles in the implementation of the household energy sub- component and timely completion of a new petroleum law and exploration promotion campaign. Those factors subject to Borrower and implementing agency control that were detrimental to the project were: inadequate efforts to rationalize the system of taxation and transportation for woodfuel supply from non-managed forests, the lack of sufficient commitment by GON and NIGELEC to improve the financial and institutional  - iv - management of the power sector during the project's implementation period, the weak management and procurement capability of NIGELEC, and the lack of a clear decision- making process or sufficient knowledge of IDA procurement guidelines necessary for timely completion of the petroleum documentation center. Overall the performance of IDA in project implementation was satisfactory ( Part I, para. 23). Despite some deficiencies, the ICR has rated the overall performance of the Borrower as satisfactory because most of the implementation problems were in the power sector and the Borrower made a commitment toward the end of the project to initiate a power sector restructuring process (Part I, para. 25). The overall outcome of the project is satisfactory (Part I, para. 30). Summary of Findings. Future Operations and Key Lessons Learned 6. The project has completed the necessary pilot operations, data collection and institutional analysis to develop a clear strategy for integrated energy development focused on priority actions in the household energy, petroleum and electric power sectors. The Operational Plan outlines the key actions necessary to sustain project achievements in each of the three sectors. The following lessons emerge from the project's implementation experience and results: a) Taking full ownership of a project requires sustaining a commitment to implement all components, and to address any constraints early in the project's implementation. b) In the household energy sector, it is possible to manage natural forests on a sustained basis with a project that includes both policy and investment components with a flexible approach to implementation and commitment of the Borrower to project objectives. It is important to realistically assess and anticipate both the demand and supply-side risks associated with implementing energy substitution programs. c) In the electricity sub-sector, despite adequate technical design and implementation capability, operational results are not likely to be satisfactory in a fundamentally defective financial and institutional context. d) In the petroleum sub-sector, it is possible that in Niger, and in other countries, an appropriate division of responsibilities between the public and private sectors combined with a supportive business framework will reduce non- commercial risks sufficiently to encourage private international oil companies to sustain the technical and commercial risks of petroleum exploration.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF NIGER ENERGY PROJECT (Credit 1880-NIR) PROPOSED OPERATIONAL PLAN 1. In order to ensure the sustainability of project objectives achieved and to reinforce those that need further attention, it is important for the Borrower and its implementing agencies to adhere to the following plan, which covers the three energy sub-sectors of concern to the Energy Project: Household Enrgy a) It is necessary to reinforce the achievements under Energy II and extend benefits further in Niger through a follow-up project, which would extend over a five-year period. Discussions with donors are underway on the basis of detailed project documents which the project management has developed and updated over the past several years. The fiscal mechanisms introduced under the project should be amended to accommodate the autonomous financing of the project management unit. b) The focus of the second phase will be on the optimal ecological and economic production of wood in rural areas and rural development of wood enterprises. c) A key policy action will be to increase the tax on wood from non-managed forests, and to improve the efficacy of the transportation/taxation control system for this wood. d) The next phase of the household energy project's supply components should be coordinated with the Natural Resource Management Project of the Ministry of Rural Development, Water and Environment. Substantive work has already been done to achieve this coordination. e) A restructuring of the energy efficiency and woodfuel substitution component is necessary taking account of the results of Energy II, which showed that the original projections of fuel wood substitution were too high, and the economic worth of the component was less attractive than anticipated. This restructuring should be aimed at facilitating a rapid transition of the component to autonomous private sector operation, wherein the market place will be the key determinant of inter-fuel substitution.  - vi - Electric Power f) The major problems which constrained the achievement of the project's objectives in the electric power sector should be addressed through power sector reform aimed at increasing the sector's autonomy and commercial viability, and allowing private sector participation in management and operation. g) The Bank, the Government and NIGELEC have agreed that the goals of the power sector are increased electrification, the attraction of private sector funds to expand the network and the reduction of tariffs as feasible through more cost- effective investment and operations. h) In order to achieve this, it will be necessary to implement a sector reform program which includes the adoption of legal, regulatory, financial and corporate structures conducive to private sector participation in a commercial environment free of undue political interference. This is now being developed under a privatization project. Petroleum a) While the project assisted a substantial improvement in the Ministry of Energy's capability to promote, negotiate and manage private sector investment in petroleum exploration, the Ministry is of the view that additional assistance is needed to deepen this competence and to handle the more specialized aspects requiring expert constancy. b) The petroleum documentation center and the laboratory are now operational and capably staffed. Their sustainability depends upon continued budget allocations from the Government. Presently, the ministry budget includes provisions to cover operations through 1997. An operational budget must be sustained in the future to cover recurrent costs, maintenance and enhancement of operations such as the conversion of some data to film base for better archival preservation and duplication. c) The Government should regard these service facilities as part of a long-term investment in the sector and target petroleum concession operators and other beneficiaries as an eventual source of funding.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF NIGER ENERGY PROJECT (Credit 1880-NIR) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. INTRODUCTION 1. The main features of Niger's energy sector which the Energy Project addressed at appraisal (1987) were: an overall low level of energy consumption but high dependence on increasing volumes of woodfuel, which did not appear sustainable, almost total dependence on imports for petroleum and electric power, and insufficient investigation and evaluation of domestic resources that could be economically deployed for meeting Niger's energy needs. Woodfuel accounted for 87 percent of the country's total energy consumption. The greatest concern in the household energy sector was the rapid growth of the urban population (6-7 percent annually) and related high levels of woodfuel consumption at prices which were well below the economic value of the resources. As a result, estimates indicated that demand would outstrip supply in 10-20 years. 2. The main options for mitigating the woodfuel problem were to reduce demand by conservation and substitution and to increase supply by better forest resource management. The Government of Niger (GON) had prepared a development plan for 1987-91 which called for cutting woodfuel consumption in half over a ten year period. On the demand side, the emphasis was to promote improved wood stoves, with estimated savings of 20-40 percent, and to encourage use of efficient kerosene and LPG stoves by the urban households which could afford them. On the supply side, GON planned to establish policies to improve wood supply management through taxation, quotas, and permits, in order to sustain supplies. 3. In the petroleum sub-sector, the GON's strategy was to accelerate private sector participation in exploration by improving the data base on petroleum and making changes in the legal framework. In the power sector, imported electricity with some thermal back-up power was the least-cost supply strategy. Niger was relying mostly on imports from Nigeria for its power supply except for a small amount of high cost, domestically produced coal-fired generation to supply power to the uranium mines and some nearby towns. The rising level of power imports caused GON to look into developing one of the country's few potential hydro resources - the Gambou site. Niger's power investment program focused on constructing a second interconnection with Nigeria to meet potential load growth in the eastern part of Niger and replace higher cost local diesel generation. It also provided for the rehabilitation and extension of the sub-transmission system in Niamey and other areas, as well as the rehabilitation of a small number of isolated diesel stations.  -2 - 4. Prior to the Energy Project, IDA had been involved in all three sub-sectors: two IDA forestry credits supporting increased woodfuel supplies; an advance under the Project Preparation Facility (PPF) for studies to evaluate the economic prospects of the Sokhor petroleum discovery; a technical assistance and engineering credit to define the least-cost power development program and improve sector organization and management; and a Structural Adjustment Loan to redefine the role of the State in economic activities, including its role in NIGELEC (the power utility) and other state- owned companies. IDA assistance was appropriate to help direct energy sector investments to high-priority economic projects, resolve institutional and organizational issues, ensure that energy prices reflect economic costs and mobilize donor financing from other sources. B. STATEMENT AND ACHIEVEMENT OF PROJECT OBJECTIVES 5. The project's overall objective was to develop a general strategy and specific policies to address interconnected energy problems facing Niger's economy along with financing of investments necessary to implement the policies. Within this broad objective, the project had specific objectives and supporting components for the three energy sub-sectors it addressed: household energy demand and supply, electric power supply, and petroleum development. Overall the project partially achieved its objectives with varied performance among the three sub-sectors. 6. For the household energy sub-sector, the project's specific objectives were: on the demand side to promote woodfuel conservation and substitution of other fuels for woodfuel, and on the supply side to promote more effective forest cover management, and to develop renewable energy technology. In support of these objectives the project's policy components focused on: adjusting household energy prices to encourage efficient energy use, developing a more efficient approach to woodfuel supply management on a pilot basis, and giving the responsibility for control and exploitation of forests to contiguous local communities. The related investment components were : on the supply side the establishment of a woodfuel trade and monitoring system, the zoning of wood supply areas around urban centers and preparation of woodfuel supply management plans, and the establishment of rural woodfuel markets and production areas on a pilot basis; on the demand side the promotion of local manufacture and marketing of improved wood-stoves and the importing and marketing of improved kerosene and liquefied petroleum gas (LPG) stoves. The major benefits were to be savings of woodfuel, improvement of the living standards of the population, employment opportunities in woodfuel trade, and reduced cooking time for food preparation using kerosene or LPG stoves. The major costs were to be increased imports of kerosene and LPG but the revenues from woodfuel taxes were to more than offset the additional cost. 7. The achievement of project objectives in the supply components of the household energy sub-sector was substantial. GON amended the forestry and tenure laws to allow villages to sign agreements which give them exclusive rights over their own  -3 - natural forest area. The first woodfuel markets began operating in 1992 and grew impressively from 21 in 1993 to 85 by 1995. About 67 percent of these markets supply some 83,000 tons of wood to Niamey, the capital city, or 16 percent of all woodfuel entering the city. The establishment of woodfuel markets in rural areas has taken place through arrangements which establish sustainable harvesting practices determining the allowable annual cut, and provide guidance on forest and market management. 8. As a result of the project, traders are encouraged to buy wood at prices negotiated with the villagers in rural markets supplied from managed forests, partly because they have to pay a higher tax on woodfuel from non-managed woodlands. The taxes are lower than originally envisaged at appraisal and the road transport control system for vetting the movement and taxation of wood from non-managed forests is not as effective as it should be. Nonetheless, the project induced GON to create a substantial tax differential between managed and non-managed sources of wood, and to establish a partially effective control mechanism over the movement of wood from non-managed forests. The cash flow which the project has generated is substantial by Niger's standards in rural areas (about US$ 165,000 equivalent in 1995) and the villages have invested some of the tax revenues in local projects such as repairing wells and pumps, purchasing emergency grain stocks after harvest when prices are low, and health and social services. Thus the benefits of the project have extended well beyond woodfuel supply to general rural development and improvement of rural living standards. Perhaps the most important long-term impact of this project is that it has established in Niger the principle and the reality of decentralized ownership and control over resources and economic decision-making to the village level, vastly increasing local commitment to the preservation of the resource. It is too soon to reliably measure productivity gains per hectare of forest. However, at the very least, the system, which the project established to determine the allowable cut, has arrested degradation of the resource in the managed areas and provides for its natural regeneration; compared with tree planting, this is by far the more cost-effective approach to sustainable woodfuel supply. 9. On the demand side, the achievement of project objectives was unsatisfactory. The project's Staff Appraisal Report (SAR ) had estimated that by 1997, the promotion of improved stoves for cooking with wood, kerosene, and LPG would save about 180,000 tons of woodfuel between 1988 and 1997. Based on actual stove sales under the project, these savings have been in the range of 15,000 to 23,000 tons per year between 1992 and 1996. The economic rate of return on the component was 8.5 percent, compared with 30- percent estimated at appraisal (Part II, Table 9). 10. A substantial number of higher-efficiency woodfuel stoves were marketed during the project period, ranging between 7000 and 11000 units per year over 1989 to 1994 (data for 1995 and 1996 are unavailable). However, the overall results of the woodfuel conservation/substitution program have been less than planned for many reasons: the initial targets for woodfuel substitution were ambitious in light of the difficulties incurred trying to develop the means for achieving inter-fuel substitution; low woodfuel prices combined with high prices of substitute fuels made fuel-switching much less attractive  than originally envisaged; the unexpected severity of economic hardship in the 1990s reduced the purchasing power of the target market for kerosene or LPG stoves, making this a low priority consumer expenditure; the project encountered serious difficulties finding a substitute stove model compatible with local cooking requirements, hence it engaged a local manufacturer to adapt the imported product to local needs; however, the project incurred difficulties sustaining a reliable supply of equipment from as far away as Indonesia, added to which imported stoves became unmarketable after the devaluation of the CFA franc in 1994. As a result, the project encouraged the local manufacturer to replace imported stoves with locally produced models. Due to product development difficulties and inadequate management the company became insolvent by 1996. The positive result of this experience, however, was the eventual development of a stove model well-adapted to local needs, and a substantial accumulation of technical know-how in its manufacture. It is possible that these gains could be consolidated into a commercially sustainable activity with a restructuring of the company and a recasting of the marketing approach. 11. The other major component of the demand-side program was the development of private sector "Energie-Shops". These shops are small-scale wholesale companies which facilitate the distribution of kerosene (at official prices) and stoves, providing purchasers with convenience and flexibility in their choice of cooking options. The idea was to provide consumers with the standard of convenience in kerosene purchase which they enjoy for woodfuel purchase (principally mobile neighborhood delivery service), which before the advent of these shops was not available. The shops borrowed project funds on commercial terms to become established; they have been servicing their loans satisfactorily and are commercially successful. 12. In the electricity sub-sector, the project's objective was to promote the conservation of electric power and to help NIGELEC provide electricity at least cost. In support of this objective the project's investment components consisted of: the construction of a 132-kv transmission line linking Nigeria's grid with areas in eastern Nigeria and related substations and the rehabilitation of transmission and distribution lines, and several studies for future power system development (preparation of the Gambou hydroelectric project, load management for the Niger Valley, energy conservation in public buildings, a transmission and distribution master plan for the Niamey area, and the technical and economic feasibility of expanding the interconnected system). Finally, the project provided for the extension of office space for NIGELEC and technical assistance, training, equipment and vehicles. 13. The project only partially achieved its objective for the electricity sub-sector, mainly due to suspension and eventual cancellation of the component due to non- compliance with financial covenants in the project's legal agreements, and non- compliance with Bank procurement procedures in the distribution component. The following components were completed. The transmission line from Nigeria to Niger was constructed. The study for the Gambou hydroelectric project was completed and concluded that the project is not economic. NIGELEC also completed the load  -5 - management study but GON did not implement the related pilot project which the study recommended. The Ministry of Energy implemented energy audits and pilot conservation programs in public buildings, an important finding of which was the acceptability of substituting de-humidifiers for air-conditioners, with major savings in electricity consumption. Unfortunately, once this latter component was implemented, it was not sustained due to lack of follow-on planning and funding. 14. The transmission line connecting NIGELEC's grid with that of Nigeria's National Electric Power Authority (NEPA) remains unused because, due to the cancellation of funds, the project did not complete the sub-transmission and distribution components necessary for connecting revenue-paying customers to the grid. Notwithstanding the inevitable loss of productivity from the transmission line, the cancellation of the funds was unavoidable. NIGELEC did not complete the other studies planned for the electricity sector, because of the closure of the component. The extension of NIGELEC's office space did not take place because the company's extension plan involved purchasing a building that was too large for its needs, and involved inappropriate terms and costs. 15. For the petroleum sub-sector, the project's objective was to upgrade Niger's capability to administer a petroleum exploration promotion program. To build this capability the project included components for review of legislative and fiscal regimes, preparation of a synthesis of the country's petroleum geology for greater understanding of the resource base, preparation of an exploration strategy, promotion of areas for exploration activity, storage and retrieval of geological and geophysical data, a petroleum testing laboratory and provision of equipment, training and technical assistance to the Ministry of Mines and Energy. The project achieved its objectives in these endeavors. Niger adopted a new law in 1992 covering petroleum development. The petroleum data systems are in place and have been used to evaluate the country's petroleum potential This, combined with promotional activities financed under the project attracted oil company interest and led to the signing of a new exploration contract and work program with Hunt Oil in 1993. In 1996, Niger also sold acreage relinquished by Elf Oil in 1995. The staff training program was completed, but on a smaller scale than originally planned (training expenditure of 2 million French francs, instead of the 2.6 million planned) due to the lower number of available trainees than anticipated. Twenty-one trainees participated in technical, economic and commercial courses of varying duration. The archives/data center and petroleum testing laboratory are in place and became operational in 1996. C. PROJECT IMPLEMENTATION EXPERIENCE Impementation Recor 16. The project's appraisal estimated an implementation period of six years, from July of 1988 through June 1994, with December 1994 as the original closing date of the Credit. The project was completed two years beyond the original closing date because of  - 6 - additional time needed to complete the household energy and petroleum sector components. (Part II, Tables 3 and 5). The credit closed in December 1996. 17. IDA modified the Development Credit Agreement (DCA) twice during the project's implementation period. In 1989, IDA changed a condition of disbursement that Niger and Nigeria reach a satisfactory agreement on the operation and management of the power transmission line which the project was to construct between the two countries. Originally the condition applied to all disbursements on the project but the modification of the DCA limited the condition to electricity components which were related to the transmission line. IDA modified the DCA again in 1994, to transfer funds from the unallocated component to the remaining project components. 18. Actual total project costs were US$29.7 (for bank and DANIDA financing) compared to US$43 million estimated at appraisal and Bank disbursements on the Credit amounted to US$17.4 million, about 56 percent of the appraisal estimate. The lower project costs and credit disbursements resulted from the cancellation of several sub- components for the electric power sector (Part II Tables 8A and 8B). Major Factors Affecting Project Implementatio 19. Factors External to the Project. During the project's implementation period, Niger faced serious economic and political problems which had an adverse impact on the project's performance. The country's transition to democracy during 1990-92 was marked by political and social instability. A weakened fiscal administration eroded the country's revenue base and caused serious on-going financial problems within the Government. This situation was a factor in GON's non-payment of its electricity bills. The devaluation of the CFA franc increased the local currency cost of imported woodfuel substitutes (kerosene and LPG) in 1994; however, it was also a factor inducing the development of local kerosene stove manufacturing capability. 20. Factors Subject to Control of the Borrower and the Implementing Agencies. Strong Government support of the project's household energy component helped to overcome some of the legal and institutional problems the project faced - in particular the vested interests of the woodfuel transporters and the forestry service to maintain control over the woodfuel harvesting and marketing business. Notwithstanding the high level of GON commitment to the principles underlying the woodfuel management strategy, constructing a new legal framework and administrative capacity took more time than originally envisaged, and there remain problems with respect to both raising the taxes on wood supply from non-managed forests to appropriate levels and to tightening the control system for transportation and taxation of woodfuel from non-managed areas. 21. In the execution of the electric power components, the main problem was the lack of sufficient commitment by the Government and NIGELEC to bring about needed improvement both in the financial and institutional management of the power sector and to the weak management and procurement capacity of the utility. GON's interventions in  - 7 - the power sector often reflected immediate financial and political considerations rather than the long-run developmental requirements of the sector. As well, NIGELEC's lack of adherence to standard Bank procurement procedures led to only partial achievement of the project's objectives for the power sector. 22. In the execution of the petroleum component, the new petroleum law and the petroleum exploration promotion campaign were completed on time. Work on the documentation center and construction of the laboratory started early enough but stalled in 1991, due to insolvency of the bank where GON was keeping the project account. IDA stopped disbursements until the resolution of the banking problem, which happened only in 1994. Then delays to completion of the documentation center occurred due to lack of a clear decision-making process and insufficient knowledge of Bank procurement procedures. Delays and reduction of the staff training program resulted from the lack of sufficient qualified staff available for training. By the closure of the project, substantial training had taken place and the documentation center and laboratory were operational. D. IDA PERFORMANCE 23. IDA's performance overall was satisfactory. It clearly identified the need for an integrated approach in solving Niger's energy problems. The appraisal of the project was satisfactory, focusing on the major sector issues and providing a reasonable assessment of the project's risks. However, the appraisal was overly optimistic about the measurable economic benefits of the woodfuel program, and did not anticipate the depth of the implementation difficulties explained above. In supervision, IDA demonstrated considerable flexibility given the innovative nature of the project, especially in the implementation of the household energy components. 24. In supervising the electric power sub-component, IDA initially focused more on technical issues than on finance and management issues. However, after 1992, IDA made repeated attempts to encourage improvement in the sector's financial condition and management. IDA ultimately took a firm stand on compliance with financial and management covenants, but gave GON and NIGELEC ample time to implement an agreed program of actions. When this did not occur, it became necessary to suspend disbursements and eventually cancel part of the electricity component. In the petroleum sub-sector, IDA's supervision could have taken more care to ensure that the Niger counterparts better understood the Bank's procurement procedures: lack of understanding and experience in procurement delayed the completion of the data center, the laboratory and the training program; however an intensive supervision effort combined with corresponding responsiveness of GON was sufficient to achieve completion in 1996.  E. BORROWER PERFORMANCE 25. The performance of the Borrower and implementing agencies was satisfactory in project preparation. However, performance in project implementation and compliance with covenants varied significantly by project component: satisfactory for the supply side of the household energy component and much less satisfactory for the demand side, satisfactory for the petroleum sector component, and unsatisfactory for the electric power sector component. The overall performance for the Borrower is satisfactory given a commitment toward the end of the project to initiate a power sector restructuring process. 26. In executing the household energy components, GON showed a strong commitment to the project - overhauling existing woodfuel traffic regulations and procedures and enduring the long process of formulating and implementing new land tenure law and tax regulations. GON also supported the new system by appointing dedicated, capable staff to key functions in the forestry service and taking firm administrative steps to prevent woodfuel traders from undermining the new system. GON could have been more firm in controlling fraud in the traffic control system and increasing the level of taxation on wood from non-managed forests, providing a stronger incentive for woodfuel traders to buy their supplies from managed areas. However, it seems instead that GON opted for a more cautious, gradual approach in light of the political counter-pressures and difficult socio-economic conditions it faced. 27. GON did not take sufficient ownership of the project's objectives to avert or minimize implementation and compliance problems in the electric power sector. An adverse combination of factors constrained NIGELEC's operations and undermined its financial performance: for example, low demand growth on account of inability to connect new customers to the grid, political pressure to supply electricity at very high cost to small loads in non-viable isolated locations, political pressure to buy electricity from SONICHAR (another parastatal corporation) at inflated prices, political pressure to maintain excessive staff, and non-payment of government electricity bills. NIGELEC was unable to comply with most of the project's financial covenants. In September 1992, the Bank asked GON to submit a plan within a six-month period for correcting financial and managerial problems, in order to avoid suspension of disbursements for the electricity component. 28. Although GON indicated its willingness to improve NIGELEC's operations, it did not do so within the agreed time period. Therefore in May 1993, the Bank suspended disbursements on the electricity component and gave the Borrower a set of conditions for lifting the suspension. By August 1994, the Borrower had not fulfilled the conditions and the Bank decided to cancel the unused portion of the electricity component. 29. The Borrower satisfactorily implemented the legal reforms and enabling environment needed to attract the private sector into petroleum exploration. In this respect, the project achieved an appropriate allocation of responsibility between the  -9- public sector to establish an appropriate policy framework and the private sector to take fundamental risk. Delayed implementation of the petroleum laboratory and documentation center occurred not only on account of the banking problems noted in paragraph 21, but also from the inability of the Ministry of Finance and the Ministry of Energy and Mines to resolve, in a timely manner, the issue of responsibility for purchasing necessary equipment; considerable effort was needed to resolve procurement and contractual problems affecting their timely completion; however, as a result of intensive supervision and the responsiveness of GON, they were operational by late 1996. F. PROJECT OUTCOME, SUSTAINABILITY, AND FUTURE OPERATION 30. The overall outcome of the project is satisfactory. Its achievements are sustainable but fragile. The project achieved most of its objectives in the household energy and petroleum sectors. Although it did not achieve most of its objectives in the electric power sector, GON has committed to a plan of action on power sector reform, which will create the necessary conditions for private and public investment in a commercialized power system. The operational plan (Appendix C) outlines the major actions that will be necessary to sustain project achievements for each of the project's energy sub-sectors. 31. The project's household energy component has established viable mechanisms to help sustain the country's wood supply and avert shortages anticipated at appraisal. The country's forest cover is 16 percent. Where the rural market system operates, it has placed responsibility for woodfuel supply with the villages. This covers a small but growing portion of the total woodfuel market. The increased cashflow from the markets will provide a greater incentive for introducing more effective management of the surrounding woodlands. 32. Participating villages have shown considerable enthusiasm for the rural market system. Despite an encouraging start, the new system is still vulnerable to renewed obstruction by woodfuel traders and the forestry service, who lose control over resources under this system. It therefore requires careful monitoring and actions to sustain its achievements (Operational Plan). If the system can sustain and extend its benefits, it will serve as a good model of how to transfer economic surplus from urban to rural areas and shift control over natural resources from governments and traders to rural populations. 33. To attain the benefits of the new transmission line which the project constructed, investment will be required for the sub-transmission and distribution components not completed under the project. The power sector restructuring approach recently agreed with GON and now being prepared for implementation under a privatization project should create the necessary conditions for power system expansion and financial sustainability of the sector.  - 10- 34. In the petroleum sub-sector, the project has helped to establish a clear regulatory framework for petroleum exploration and development. It also assisted GON in developing the capability to manage the country's petroleum data base, promote petroleum exploration in Niger and negotiate contracts with international oil companies. The result has been an increased level of petroleum exploration interest in Niger. However, it is important that the GON sustain the capability developed. This will require retention of competent staff and additional staff development. The documentation center and the laboratory will be sustained initially through budget allocation, but given the GON's financial constraints, these service centers should be commercialized. G. KEY LESSONS LEARNED 35. One general lesson is the importance of sustaining a commitment to the implementation of all components and taking sufficient ownership of the project to: address any constraints early on, resolve them to ensure effective project implementation as originally designed, or modify the project if necessary. 36. In the household energy sector, the project has shown that it is possible to manage natural forests on a sustained basis with a project design including policy and investment components, a flexible approach to implementation and a strong commitment from the Borrower. Specifically, (i) it has proved advantageous to establish the legal framework for village-based woodland control and management early in the project cycle; in this way, the enabling environment is created to facilitate implementation of the investment components. (ii) The risks to woodfuel fiscal policy and its implementation should be carefully identified and addressed from the start to the end of the project cycle; this is necessary to insure the implementation of appropriate taxation and control structures in support of project effectiveness. (ii) The clear separation between the control function of the forestry service and the advice and support function for establishing rural markets has been useful. The latter is being carried by the project unit, to date supported by GON, Denmark and IDA. It is necessary to find mechanisms for insuring the financial and institutional autonomy of this group, which is responsible for the overall strategy and administration of the program; its survival has been excessively dependent on uncertain external support. One such mechanism could be a formula allocating to the project unit a small share of the fiscal proceeds of the woodfuel supply system. (iv) Careful analysis of the technical and operational hazards and potential benefits of a fuel substitution program is essential to design cost-effective programming. 37. Concerning the electricity sector, the project showed that despite adequate technical design, satisfactory results cannot be expected from implementing it in a fundamentally defective institutional and financial context. This was recognized in the cancellation of the component and the subsequent resumption of dialogue on sector reform. Hence, before a project begins substantial investment in system expansion, there should be firm commitment, identified mechanisms and some evidence of  implementation to resolve major institutional and financial impediments to the satisfactory performance of the project and the sector. 38. The experience with the project's petroleum sector component indicated the encouraging possibility of developing an appropriate division of roles and responsibilities between the public and private sectors, and with a correct enabling environment attracting private sector willingness to absorb fundamental risk. The experience also indicated the importance of insuring that the implementing agencies, including relevant ministries and other supervisory bodies understand both Bank procurement procedures and the basic principles of efficient procurement practices.  PART II: STATISTICAL ANNEXES  - 13 - TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of Project Objectives Assessment Substantial Partial Negligible Not Applicable Categories Macroeconomic Policies x Sector Policies x Financial Objectives x _ ___ Institutional development x Physical objectives x Gender concerns x Other social objectives x Environmental objectives x Public sector management x Private sector development x Other B. Project Sustainability Likely Uncertain Unlikely x C. Bank Performance Stage of Project Cycle Highly Satisfactory Satisfactory Deficient Identification x Preparation x Appraisal _ x _ _ Supervision x D. Borrower Performance Stage of Project Cycle Highly satisfactory Satisfactory Deficient Preparation x Implementation x Covenant Compliance x E. Assessment of Outcome Highly Marginally Highly Satisfactory Satisfactory Satisfactory Unsatisfactory Unsatisfactory x  - 14 - TABLE 2: RELATED BANK CREDITS Preceding Operations Title Small Rural Operations Loan no. 18900 Year of approval 1988 Purpose Helping the government develop institutional capability in preparation and execution of small rural operations. Status Supervision Title Natural Resource Management Project Loan no. 27960 Year of approval 1995 Purpose Assist Rural Communities in designing and implementing community land based management. Status Supervision Title Energy II Project Natural Resource Management Project Loan no. NA Year of approval NA Purpose Address the various and interconnected energy problems facing the economy by developing policies and a program to redress the growing imbalance between energy demand and supply Status Under preparation. TABLE 3: PROJECT TIMETABLE Steps in project cycle Planned Date Actual Date Identification 1985 1985 Preparation December 86 December 86 Appraisal January 1987 January 1987 Negotiations October 87 October 87 Letter of development policy 1987 1987 Board Approval February 1988 February 23, 1988 Signing March 1988 March 18, 1988 Effectiveness July 1988 July 1, 1988 Project completion June 30, 1994 December 31, 96 Credit closing December 31, 1994 December 31, 1996 NA = Not applicable Source: Project files and Bank Staff estimates.  - 15- TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL (US$ million) Comparative Indicators FY FY FY FY FY FY FY FY FY FY 88 89 90 91 92 93 94 95 96 97 Appraisal estimate 0.7 5.0 11.3 18.3 23.9 28.0 30.6 31.5 31.5 31.5 Actual 0.0 2.4 5.5 7.3 9.2 11.3 12.0 13.5 15.3 17.4 Actual as percent of estimate 0.0 48.0 48.7 39.9 38.5 40.4 41.2 42.9 49.0 55.0 Notes: 1. All US$ figures rounded to the nearest hundred thousand US$. 2. All percentage figures rounded to the nearest one percent. Source: Bank MIS and Bank Staff estimates.  - 16- TABLE 5: KEY INDICTORS FOR PROJECT IMPLEMENTATION Key implementation indicators in the SARlPresidentls Report Estimated Completion Actual Completion Date Date 1. Household Energy Components A. Supply-Side Sub-Components I. Construction of firewood checkpoints. June 1989 July 1991 2. Zoning of areas by brushwood potential December 1990 October 1990 3. Preparation of firewood supply management plans March 1991 September 1993 4. Establishment of firewood production areas. March 1991 September 1993 5. Population sensitization program November 1992 February 92-December 1996 6. Establishment of rural firewood markets. March 1993 February 92-December 1996 7. Implementation of the firewood trade monitoring system September 1994 December 1996 8. Establishment of the firewood taxation system. September 1994 - August 1992 9. Training September 1994 February 92-December 1996 B. Demand Side Components I . Testing of kerosene stoves June 1989 July 1990 2. Preparation of marketing and promotion campaigns November 1990 June 1990 3. Dissemination of improved wood stoves. September 1994 December 1994 4. Monitoring of woodfuel consumption September 1994 December 1996 5. Training September 1994 December 1996 6. Production, importation and promotion of kerosene stoves September 1994 Stove imports began in 1990 with sales by the operator, on a pilot basis, until June 1993. After some design modification, the local production of stoves began. The purchase of equipment for this production began in February 1994, with initial prototype production from July 1995 to the present. The stove promotion campaign is ongoing. II. Electric Power Component A. Design and bidding documents for the Gambou Hydroelectric Project March 1993 March 1994 B. Katsina interconnection November 1991 October 1993 C. 132-kV substations December 1991 not realized by credit D. Distribution System December 1994 not realized by credit E. Rehabilitation of Anou Araren Transmission Line June 1990 January 1991 F. Niamey distribution system December 1994 not realized by credit lII. Petroleum Component A. Legislative review June 1989 February 1991 B. Organizational review June 1989 February 1996 C. Seismic data reprocessing February 1991 March 1994 D. Recovery of documents and information February 1991 December 1996 E. Diagnostic study July 1992 December 1996 F. Negotiation preparation October 1992 April 1996 G. Training October 1994 December 1996 H. Archiving of documents December 1994 December 1996 Source: Project files and Bank staff estimates.  - 17- TABLE 6: KEY INDICATORS FOR PROJECT OPERATION Table not applicable to this project. TABLE 7: STUDIES INCLUDED IN THE PROJECT Study Purpose Status and Impact Engineering Studies and Preparation of Gambou Feasibility study concluded bidding document Hydroelectric Project. the project was not economic preparation. so this component was canceled. Load Management Study Study to determine the most Suspension of component appropriate way to manage the did not allow electric power load for the Niger implementation of the study. Valley. Power system feasibility Determine the technical and Suspension of component studies economic feasibility of did not allow expanding the interconnected imnplementation of this study. electric power system. Source: Project files and Bank staff estimates. TABLE 8A1: PROJECT COSTS Household Energy Component (in US$ million equivalent) All costs rounded to the nearest US$ 100,000 equivalent. Item Appraisal estimate Actual or latest estimate Local Foreig Total Local Foreign Total Costs n costs Costs Costs costs costs Consultants, studies and training 1.0 2.0 3.0 0.9 3.1 4.0 Provision of office facilities, firewood control points 0.3 1.5 1.8 2.0 0.3 2.3 equipment, material and vehicles Operational support 3.0 1.0 4.0 9.4 0.0 9.4 Renewable energy 0.1 0.5 0.6 0.3 0.2 0.5 Subtotal 4.4 5.0 9.4 12.2 3.6 16.2 Source: Project files and Bank staff estimates.  - 18 - TABLE 8A2: SUMMARY COSTS OF ELECTRIC POWER AND PETROLEUM COMPONENTS Appraisal Actual Component Estimate (US$ (US$million) million) Electric Power a/ 53.5 9.4 Petroleum b/ 3.0 4.8 a/ Breakdown by component into actual local and foreign costs in US dollars not available. The original estimate was to cover construction of 132-kv transmission line and sub-stations, 132-kv transmission line rehabilitation, training and technical assistance, studies, and the provision of office space. The actual costs were much lower than the appraisal costs because the component was canceled. h/ All costs are foreign costs. No breakdown available in US$ by component. Costs covered the following components: establishment of geological information systems; review of legislative and fiscal regimes; promotion and negotiations; geological synthesis, strategy and exploration administration; training, equipment, and technical assistance, petroleum documentation center and laboratory. TABLE 8A3: TOTAL PROJECT COSTS TOTAL Appraisal Actual (US$ Estimate million) (US$million) Project Costs 86.0 30.4 TABLE 8B: PROJECT FINANCING (in US$ million equivalent) Source Appraisal Actual estimate IDA 31.5 17.5 KFW 10.0 N/A EIB 6.3 N/A DANIDA 11.5 10.3 Government/NIGELEC 16.7 2.6 TOTAL 86.0 30.4 Note: All financing amounts rounded to the nearest US$100,000 equivalent. Source: Bank MIS and Bank staff estimates.  - 19- TABLE 9: ECONOMIC COSTS AND BENEFITS Component SAR Estimate ICR Re-Estimate Household Energy Major Benefits Incremental increase in wood 110 kg per ha due to Research on productivity increase has forest protection and savings of 180,000 tons by year been on-going for sevcral years but more 1997 in firewood consumption due to improved wood time is needed to achieve conclusive stoves and the substitution of kerosene and LPG for results. firewood. * Savings in firewood consumption are estimated at 15,300 tons in 1996. Major Costs Capital and operating costs for improved firewood management, advertising, testing, training and other costs of improved stove promotion; incremental costs of increased imports of kerosene and LPG Economic Rate of Return 30 percent Does not include long-term ecological 8.5 percent calculated by finding the IRR of benefits. Also does not include estimated wood the benefits of the woodfuel substitution productivity increase. I/ component relative to the costs of this component over 1989 to 1996 inclusive. Electricity Major Benefits Minimum economic benefits approximated by Not achieved valuing incremental sales at the weighted average of low and medium voltage rates for isolated areas Major Costs Generation and transmission costs of connecting Not incurred Katsina to a point in Niger midway between Maradi and Zinder to hook up major load centers along with associated capital and operating costs for distribution Economic Rate of Return 10 percent (base case) 8.5 percent Petroleum No economic analysis prepared for this component. The Ministry of Mines and Energy now has The main benefit was to be the acquisition of data to a petroleum data management system and help the Govemment evaluate its petroleum potential laboratory as well as the capability to more effectively and develop its capability to negotiate and administer contracts with administer petroleum exploration by foreign intemational oil companies. The operators. Govemment has provided a budget allocation for these purposes. Source: Project files and Bank staff estimates.  - 20 - TABLE 9A: INTERNAL RATE OF RETURN CALCULATION Household Energy Component (1989 - 1996 Period) (FCFA millions) 1989 1990 1991 1992 1993 1994 1995 1996 COSTS Project Costs (related to the Demand Component) (a) 123.9 261.6 351.6 337.6 160.8 80.1 233.7 320.0 Additional Costs of Importing LPG and Stoves 14.8 29.8 5.9 13.4 Additional Costs of Importing Kerosene 6.2 5.3 15.0 12.9 1.2 2.6 4.6 TOTAL 123.9 282.5 386.7 358.6 187.1 81.3 236.3 324.6 BENEFITS Total quantity of woodfuel savings (Tons) (b) 3,200 9,300 15,900 22,900 20,600 18,100 15,300 Weighted average market value per kg. 20.0 19.8 19.6 19.7 23.3 25.2 26.0 Economic Savings in Woodfuel Consumption 0 64.3 184.5 310.9 450.1 479.2 455.4 397.6 Cashflow (123.9) (218.3) (202.2) (47.7) 263.0 397.9 219.1 72.9 GDP Deflator index 1988= 100 105.8 98.1 93.0 94.1 94.0 124.7 131.5 137.8 Real Net Cashflow (117.1) (222.5) (217.4) (50.7) 279.8 319.1 166.6 52.9 IRR (c) 8.5% 1 (a) Includes investment and operating costs of the woodfuel substitution component. (b) The difference between projected consumption without the project and actual consumption with the project. (c) covers 1989 to 1996 inclusive  - 21 - TABLE 10: STATUS OF LEGAL COVENANTS Development Credit Agreement Sections 3.01 (a) l Covenant type: Project execution Description: Borrower declares commitment to project objectives ; delegates responsibility for components to the Ministry of Mines and Energy, the Ministry of Agriculture and Environment and NIGELEC. Status: Compliance. Sections 3.01 (b) 1 Covenant type: Project execution Description: Borrower declares that it will cause NIGELEC to perform in accordance with the provisions of the Project Agreement. Status: Non Compliance. Section 3.01 (c) l Covenant type: Project execution Description: Borrower to re-lend proceeds of the Credit to NIGELEC for executing Part B of the project as described in Schedule I and make available to NIGELEC on a grant basis, proceeds of the Credit for Categories I d and of in paragraph I of Schedule 1. Status: Compliance. Section 3.01 (d) l Covenant type: Project execution Description: Borrower not to assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Status: Compliance Section 3.02 Covenant type: Project execution Description: Procurement of goods and services for the project to be governed by Schedule 4 of the Agreement. Status: Compliance Section 3.03 Covenant type: Project execution Description: Borrower agrees that NIGELEC will carry out its part of the project according to the general conditions of the Agreement and pursuant to Section 2.03 of the Project Agreement. Status: Non-Compliance Section 3.04 Covenant type: Project execution Description: Borrower to review annually, with IDA, by September 30, its overall strategy for the energy sector, including the investment program and its sector policies on tariffs, prices and taxes; and obtain IDA's approval for any energy sector investment in excess of US$ 10 million equivalent. Original Fulfillment Date: September 30 of each year Revised Fulfillment Date: NA. Status: Non-compliance - Sector restructuring discussions are in progress  - 22 - Table 10: Status of Project Covenants Development Credit Agreement Section 4.01 (a) Covenant type: Financial Description: Borrower to maintain records and accounts according to sound accounting practices.I Status: Compliance Section 4.01 (b) | Covenant type: Financial Description: Borrower to have accounts audited by independent auditors for each fiscal year of during the project's execution and furnish IDA with audit reports at the end of the fiscal year, along with any other information reasonably requested by IDA Original Fulfillment Date: Submission or audit reports to IDA no later than six months after the end of each fiscal year Revised Fulfillment Date: Not applicable. Status: Delayed compliance. Section 4.01 (c) | Covenant type: Financial Description: Borrower to comply with specifications for retaining records related to withdrawals from the project's Special Account. Status: Compliance. Section 4.01 (c) Covenant type: Financial Description: Borrower to provide separate opinion by independent auditors that the statements of expenditures can be relied upon to support the withdrawals from the project's Special Account. Status: Compliance Section 4.02 I Covenant type: Financial Description: Borrower to review, with IDA the recommendations of the tariff study to be executed under Credit 1511 -NIR, and take all necessary actions to implement the recommendations satisfactory to IDA. Original Fulfillment Date: No later than December 31, 1988. Revised Fulfillment Date: NA Status: Non-compliance Section 4.03 l Covenant type: Financial Description: Borrower to make necessary budget allocations to pay all of its electricity consumption promptly beginning fiscal year 1989. Status: Non compliance Section 4.04 (a) Covenant type: Financial Description: Borrower to cause NIGELEC to reduce all receivables to not greater than three months of billing and maintain receivables at that level thereafter. And take all necessary measures to authorize NIGELEC to interrupt the electricity supply of customers with bills overdue by more than 90 days. Original Fulfillment Date: December 31, 1988 Revised Fulfillment Date: NA Status: Non-compliance  - 23 - Table 10: Status of Project Covenants Development Credit Agreement Section 4.05 (a) Covenant type: Financial Description: Unless IDA specifies otherwise, the Borrower shall increase taxes on firewood consumption to levels in accordance with a timetable satisfactory to IDA. Status: Compliance Section 4.05(b) | Covenant type: Financial Description: Unless otherwise agreed with IDA, the Borrower is to reduce the sales price of kerosene from CFAF 145 per liter to CFAF 105 per liter. Original Fulfillment Date: June 30, 1988 Revised Fulfillment Date: NA Status: Compliance Section 4.05(c) l Covenant type: Financial Description: Unless otherwise agreed with IDA, Borrower to reduce, by 50 percent, the taxes and duties applicable to the import and sale of kerosene stoves. Original Fulfillment Date: September 30 1988 Status: Compliance Project Agreement Section 2.05 Covenant type: Execution Description: NIGELEC to provide progress reports on the electricity component of the project. Status and Comments: Compliance. Section 3.03 | Covenant type: Execution Description: NIGELEC to take out and maintain appropriate insurance Status and Comments: Non-compliance Section 4.01 (c) Covenant type: Financial Description: NIGELEC to provide an auditor's report on all of its accounts including the Special Account for the project.. Original Fulfillment Date: By June 30 of each year of the project Revised Fulfillment Date: Not applicable Status and Comments: Delayed compliance.  -24 - Table 10: Status of Project Covenants Project Agreement Section 4.02 Covenant type: Financial Description: NIGELEC to provide evidence that it has met a reasonable three annual average self- financing ratio for the previous fiscal year and its forecast for meeting this requirement for the next fiscal year. Original Fulfillment Date: Beginning November 30, 1989, by November 30 of each year of the project. Revised Fulfillment Date: NA Status and Comments: Non-compliance - The electricity component has been closed. Section 4.03 Covenant type: Financial Description: NIGELEC to maintain net revenues for each fiscal year at the level of 1.5 times the debt service requirements during the period of the loan. Status and Comments: Non-compliance - The electricity component has been closed. Section 4.05 Covenant type: Financial Description: NIGELEC to make adequate provisions for depreciation and renewal of fixed assets. Status and Comments: Non-compliance - The electricity component has been closed. Source: Project files and Bank staff estimates. TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS Not applicable to this project. TABLE 12: BANK RESOURCES: STAFF INPUTS Stage of project cycle Planned Revised Actual Weeks US$ Weeks US$ Weeks US$ Preparation to Appraisal 13.9 36.3 Appraisal 57.9 165.1 Negotiations through Board 71.7 56.2 approval Supervision 10.0 21.5 26.4 44.4 214.5 294.1 Completion 1.5.5 24.6 16.0 24.9 6.5 17.7  -25 - TABLE 13: BANK RESOURCES: MISSIONS Number Days Specialized Stage of project Month and of in staff skills Performance Types of cycle Year persons field represented Rating Problems Through Appraisal Appraisal through Board Approval Supervision I March 1988 2 4 FA, EE Supervision 2 May 1989 2 12 FA EE, PE I COV, M Supervision 3 January 1991 1 10 FA, EE - 2 COV, M, AF Supervision 4 October 1991 2 9 FA, 2EE, EP 2 COV, M, AF Supervision 5 February 92 4 18 EP, FA 2/3 COV, M, EE, ES Supervision 6 June/July 93 1 3 EP Supervision 7 June 1993 2 12 3 COV, M, Supervision 8 June 1994 EP, ES Supervision 9 and March 1995 2 13 S COV, M completion December 2 17 EC, EE S COV, M 1996 EC, PA Staffing codes: EC = Energy Economist; EE = Electrical Engineer; EP = Energy Planner; ES = Energy Specialist; FA = Financial Analyst; PA = Project Assistant; PE = Petroleum Engineer Project Rating Codes: I no significant problems; 2 = moderate problems; 3 = major problems; S = satisfactory Problem type codes: DO disbursement operations; M = managerial; Source: Project files and Bank staff estimates  ANNEXES  Annex A BORROWER'S CONTRIBUTION SUMMARY The Energy II program, started in 1989, includes: (i) a household energy component (A); (ii) an electricity component (B); and a petroleum component. The main features are as follows: 1. Household Energy Component 1. 1. Features Title: ENERGY II Approval date: Start-up date: Executing agencies: PROJECT JANUARY 1988 JULY 1989 DE/MHE (VO) and HOUSEHOLD DE/MME (VD) ENERGY Financing for 1 st phase: 1 st extension: 2nd 3rd extension: Up to June 1994: July 94-Dec. 95: extension: Jan. -Dec. 97: Dec. 96: US$12.67 million US$1 million SDR 2 million DKK 3 million (DANIDA grant (Credit (Credit (DANIDA grant) administered by the 1880/NIR) 1880/NIR) and CFAF 537 World Bank) million (credit 2796/NIR) VO: Supply Side; VD: Demand Side 1.2. Objectives A. Main objective: Find a global solution to the various interrelated energy supply problems affecting the country's economy by designing policies and programs to correct the most marked imbalances between supply and demand. B. Specific objectives: (I) promote fuel wood conservation; (ii) provide for substitute energy sources; (iii) improve management of natural forest cover; and (iv) promote the development of renewable energy sources. 1.3. Implementation activities (I) Regulation of trade in and transport of fuel wood; (ii) Control over the supply and distribution of fuel wood to towns; (iii) Preparation of master supply plans; (iv) Creation of rural markets and production zones; (v) Promotion of local production and marketing of improved wood stoves; (vi) Local production, import, and marketing of kerosene and butane gas stoves. -27-  Amex A 1.4. Results A. Qualitative Results (I) Adoption of Order 92-037; (ii) Preparation of three master supply plans; (iii) Construction of 17 traffic control stations; (iv) Creation of 92 rural markets; (v) Training of Environment Department agents; (vi) Information SUPPLY SIDE campaign and basic education for local people, and organization of local people into local management groups [SLG]; (vii) Creation of an environmental data bank; (viii) Promotion of private management structures on a local level (GTA/GTI) (I) Identification, testing, and adaptation of a petroleum stove model; (ii) Preparation and implementation of a marketing strategy; (iii) Promotion of DEMAND the private sector in the household energy field (Tchip-Import and Energy SIDE Shops); (iv) Creation of a sales network and SAV for fuels and equipment; (v) Production of tools for promotion, information, and equipment maintenance B. Quantitative results (I) 92 rural markets created; (ii) 314 million FCFA in total sales revenue in rural areas, including 251 million which went directly to village SUPPLY SIDE lumberjacks; (iii) 490 million in forest tax revenue; (iv) 920 persons organized into village management structures; (v) Financing of various development operations, including 40 grain banks, 181 carts, inoculation campaigns, recovery and drilling of water wells, etc. (I) Over 13,000 petroleum stoves, 12,000 basic gas stoves (3 & 5 kg), 10,000 improved metal wood stoves per year, 4,000 wood stoves en banco, per year, made available; (ii) A substantial reduction in urban DEMAND consumption of wood, from an average of 5% a year to 1.14% a year from SIDE 1990 to 1993; (iii) A considerable drop (15% a year) in kerosene prices, as a result of local distribution close to end-users; (iv) Total sales of over 700 million FCFA in 1995 for the Energy Shops; (v) More than 70 permanent jobs created (Energy Shops and Tchip-Import), and more than 500 indirect jobs created for distributors and retailers of fuels and equipment, etc. -28 -  Annex A 1.5. Problems A. For Niger 1. Sluggishness on the part of the Government in applying the laws: rural concessions; revision of the tax on non-managed forests; use of account 3001; 2. Policy coordination, establishing fuel prices, programming, etc.; 3. Weak purchasing power of the local people; 4. Turnover of project management; 5. Poor financial motivation, particularly in the case of moves or transfers: granting of benefits, health insurance, and the like. B. For the World Bank 1. Cross conditionality: Household Energy and NIGELEC; 2. Consistency between sectoral policies and macro-economic policy: fuel prices; 3. Coordination of project monitoring between the resident mission and headquarters, for instance, transition of Energy II and its link with PGRN. 1. 6. Prospects The different evaluation and supervision missions conducted by the World Bank and the prime lender for this component, i.e., DANIDA, confirmed the positive outcome. However, the results are fragile. The plans are to extend it into a second phase, in order to consolidate these results. 2. The Electricity Component The objectives of this component are as follows: (i) promote the conservation of electric power; and (ii) supply electricity at least cost. Success was only partially achieved with this component because of difficulties encountered in reorganizing NIGELEC. These problems were aggravated by political and institutional instability during the 1 990s following democratization of the country. It should be noted that the Credit Agreement on this component was modified in February 1989 in accordance with the clauses contained in Appendix 2. Some of the results achieved were: (i) Rehabilitation of the 132 kV Anou-Araren-Akokan line; (ii) Up-dated study of the Gambou dam; (iii) Interconnection between Katsina and central eastem Niger using a 132 kV line; (iv) Technical assistance to the DEPT; (v) Training by UNISYS of technical and management staff for the computer service; (vi) Training of 8 high-level technicians in Algeria (SONELGAZ); (vii) Training of about 15 electrical technicians/engineers at ESIE; (viii) Mission by NIGELEC officers regarding the accounting software package; (ix) Study on load management; (x) Acquisition of an -29 -  An A accounting software package from UNISYS; (xi) Acquisition of network computation software; (xii) Filing system on assets; (xiii) Accounts audit; (xiv) Acquisition of the A6 computer from UNISYS; (xv) Acquisition of vehicles. The component involving energy conservation and monitoring of government energy billings was successful insofar as technical and economic testing was concerned. Application of this component on a large scale, however, could not be launched. Credit to the electricity component was suspended in May 1993 and was canceled definitively in October 1995. 3. The Oil Component The objective was to improve management of oil exploration. The following was accomplished during implementation: Organization of the Hydrocarbon Office and training plan: The training scheduled for the staff of the Hydrocarbon Office was fully completed in 1995 and 1996, and all the supplies and equipment planned for operating and managing the Office were acquired. Study of Niger's oil potential and development: The specific results were as follows: (i) Monitoring of geological and geophysical works of the companies operating in Niger (Hunt Oil and Esso); (ii) Evaluation of new acquisitions and appraisal of recent drilling in Faringa, Agadi, and Karam; (iii) Participation by the Ministry of Mines and Energy in the Annual Convention of the American Association of Petroleum Geologists (AAPG) in Houston in March 1995, in Nice in September 1995, and in San Diego in May 1996, and in the conference on minerals and oil in Johannesburg in June 1996, and the Forum on Mines and Petroleum in Abidjan in June 1996; (iv) Revision of the 1991 promotion report, incorporating data from Elf Aquitaine; and (v) Training of personnel for the hydrocarbon control laboratory. It should be noted that implementation of this component sparked the interest of a number of oil companies, including the partnership between Elf and Esso, which has made a commitment to a CFAF 30 billion exploration program over a period of five (5) years, as well as Hunt Oil, which has committed to US$30 million, and TG World Energy, more recently. Around a dozen other companies have been in contact with the Ministry of Mines. Petroleum Archives and Documentation Center: (I) Development of the premises housing the petroleum archives and docurnentation center; (ii) Acquisition of supplies and equipment from abroad and in Niamey; (iii) Repatriation of data including 2/3 of Niger's total petroleum documentation comprising seismic profiles, well logs and technical reports, and drilling completion reports. - 30 -  Annex A National Laboratory for Analysis of Petroleum Products: (I) Construction and fitting out of the laboratory rooms; (ii) Delivery and installation of the equipment ordered; (iii) Drafting of the administrative regulations to establish the laboratory and its structure and functions; (iv) Determination and adoption of the standards and specifications applicable to oil products in Niger; and (v) Training of laboratory personnel. Legal Component: A new petroleum code was adopted for Niger by Order No. 92-45 dated December 16, 1992, regulating oil operations in Niger. 4. Global Prospects for the Program The principal achievements have made it possible for the Energy Ministry to make plans to pursue and expand operations through a new program, which has set the following objectives: In the long run: - Energy independence by developing national resources, such as hydroelectric power, coal, solar energy and wind-power; * Supply of electricity to all the main towns of the administrative divisions [arrondissements]; - Environmental protection; * Making power more accessible, by reducing rates and developing sales; * Regional integration, including development of link-ups with other countries, increased trade in the energy sector, and participation in sub-regional projects. In the short run: D Pursuit of a household energy strategy (Energy II, phase II); D Implementation of the Program for Sustainable Management of Traditional Energy Sources (PGDET); * Development of interconnection, including Maradi-Malbaza-Tahoua and Geidam- Diffa-N'guigmi-Maine; * Supply of electricity to rural areas; * Updating and revising feasibility studies on hydroelectric power facilities; * Studies on the master plan for electricity and reorganization of the electrical sub-sector; * Promotion of ENRs * Promotion of control and management of energy. - 31 -  Annex B Aide-Memoire Mission de la Banque mondiale Projet Energie II (Credit 1880-NIR) Niamey, 8-22 novembre 1996 Introduction: Une mission de la Banque mondiale (Messieurs Mark Segal et Kwawu Gaba) s'est rendue a Niamey du 8 au 22 novembre 1996 dans le cadre de la supervision diu projet Energie 11 et de la restructuration du secteur electrique. Elle y a rencontre Son Excellence le Ministre d'Etat charge de l'Economie, des Finances et du Plan, Son Excellence le Ministre des Mines et de l'Energie, Son Excellence le Ministre de l'Hydraulique et de l'Environnement ainsi que les personnels du projet et des ministeres de tutelle, de la NIGELEC, de [a SONIDEP et de la CSPPN. La mission a recu une substantielle documentation traitant des sujets pertinents a son travail. La mission remercie vivement les personnes dont la liste est jointe a cet aide-memoire pour l'accueil chaleureux et l'aimable assistance qui lui ont ete accordes. A. Objectifs de la mission 1. La mission avait les objectifs suivants: 1) supervision du projet Energie II pour l'annee 1996 et participation a l'atelier de la premiere phase du projet Energie Domestique; 2) recommandations pour la poursuite du projet Energie II - Energie Domestique (programme des activites de l'annee 1997, collaboration avec le PGRN); 3) preparation du rapport d'achevement du projet. 4) soutien A la mission Banque mondiale chargee du projet de privatisation de la NIGELEC. B. Supervision du projet Energie II pour I'annee 1996 B. I Volet "Petrole- 2. * Tous les travaux majeurs prevus au titre de l'annee 1996 ont ete realises A savoir: * I'achevement des travaux de mise en place du centre de documentation petroliere et archives ainsi que le caractere operationnel des activites-cle d'archivage des donn6es et de stockage des echantillons (ou carottes) preleves sur le terrain. II est prevu que le responsable du centre suive, avant la cl6ture du credit, une formation en promotion et en commercialisation de cartes geologiques et qu'un autre agent de la direction de 1 energie soit forme sur le systeme informatise de gestion des donnees petrolires afin de le seconder: * le demarrage des activites du laboratoire d'analyses et de contr6le des produits petroliers. Le laboratoire a pu realiser un premier test qui. selon le directeur du laboratoire. a ete bien accepte par le client,  2 * Le Ministere des Mines et de l'Energie est en negociation avec une compagnie petroliere intemationale pour un permnis d'exploration sur le bloc Tenere; cette demarche est le resultat de la promotion Nig6rienne soutenue par le projet. 3. 11 est a envisager que le laboratoire et le centre de documentation pourraient s'autofinancer par la commercialisation de leurs prestations. Cependant, commne les deux entites sont au demarrage de leurs activites, le soutien de I'administration est requis au moins pour l'annee 1997. La Direction de l'Energie au MME a informe la mission que les charges de fonctionnement de ces deux entites sont inscrites au budget du MME pour l'annee 1997. 4. Par ailleurs, la Direction de 1'Energie juge necessaire une assistance technique additionnelle du Cabinet BEICIP notamnment en matiere de suivi des compagnies d'exploration petroliere et de promotion du potentiel petrolier Nigerien. La mission a inforrne la Direction qu'il n existe pas de financement disponible pour ces services a court terme. B.I Volet "Eneraie Domestique" B.2.1 - Administration du projet / Compte Special 5. Suite a la mission de supervision du departement des decaissements de la Banque mondiale, il est apparu necessaire de mettre en oeuvre les actions suivantes: I) une reallocation des fonds du credit 1880-NIR a ete faite pour corriger une mauvaise interpretation des lettres des 19 octobre 1994 et 31 octobre 1995 portant sur les amendements dudit credit 1 880-NIR et qui affectait les budgets de fonctionnement des annees 1995 et 1996 de cette composante; 2) une prorogation a 4 mois du delai de justification des depenses encourues sur le compte special a ete accordee afin que le reapprovisionnement de ce compte permette un decaissement a hauteur des engagements prevus avant la cl6ture du credit. (La lettre adressee a Son Excellence M. Amadou Boubacar Cisse, Mlinistre de IfEconomie et des Finances au sujet des points (1) et (2) est jointe en annexe I): 3) des demarches ont et menees aupres de la NIGELEC et du Ministere des Mines * et de l Energie pour le remboursement d'une somme de 2.000.000 FCFA sur la composante `electricite" exige avant la demande de retrait de fonds pour le reapprovisionnement du compte special. Les deux institutions. par leurs Directeur General et Ministre respectivement, se sont engagees a le faire dans les meilleurs delais; 4) la mission a transmis a la direction du projet et au cabinet concerne les commentaires de la Banque mondiale sur le projet de rapport 1994 d'audit du compte special et leur a rappele de transmettre dans les plus brefs delais le rapport 1995 d'audit du compte special. B.2.2 Appreciation adn6rale du pr.^iet et participation a l'atelier de la premiere p'hase 6. Cet atelier avait pour objectif de presenter le bilan de la premiere phase du Prolel Energie Domestique (PED) et d'identifier les defis a relever pour assurer la perennite de s s  3 acquis dont les plus remarquables sont l'institution d'une strategie de regeneration de la ressource forestiere axee sur la responsabilisation des populations rurales, et comme composante integrante, l' economie et/ou substitution de l'6nergie aux points de consommation. 7. Les organisateurs de l'atelier pnt invite la Banque mondiale a presenter son point de vue sur le projet a la seance d'ouverture de l'atelier. Le discours de la Banque mondiale est joint en annexe 2. 8. Malgre tout le succes enregistre jusqu'a date, la perennite de la strategie adoptee est encore fragile surtout en ce moment oii il faut une progranunation importante pour effectuer sa large diffusion afin de l'amener a un niveau adequat pour la satisfaction des besoins de la population en bois-6nergie. 9. Compte tenu des performnances et de 1'experience des structures de gestion et d'implantation du PED acquise sur une periode de 7 ans, la mission estime qu'il serait souhaitable de maintenir leurs cohesion et efficacite. B.2.3 Etat d'avancement du projet B.2.3. I Amena2ement des formations naturelles 10. La mission note avec satisfaction les informations contenues dans le bilan de l'annde 1996 relatives a la mise en place des schemas directeurs et des marches ruraux ainsi qu'a l'entree en activite des GTA/GTI (Groupes Techniques d'Appui ou d'Inventaire) suite a des contrats conclus entre le PED et des ONG. 11. La mission reitere sa preoccupation, deja evoquee lors de sa mission de supervision de 1 995, concernant l'efficacite du controle forestier. La mission constate avec satisfaction que la taxe est passee de 600 FCFA/stere a 975 FCFA/stere en 1996 et que 60 agents viennent d'&tre recrutes pour renforcer le contr6le forestier du trafic de bois-energie comme prevu dans le programme d'activites de l'annee 1996. M. Le Ministre de l'Hydraulique et de I'Environnement devrait faire en sorte que l'arrete portant application du decret de revision fiscale, sur le bois incontrole soit operationnel avant 1997. 12. La mission reprend les commentaires des directeurs du PED relatifs a l'efficacite du controle forestier: "Rappelons que ce suivi de la part des agents de I 'administration de 1 'environnement est ndcessaire pour garantir le respect des quotas et des cahiers des charges d 'exploitation dejinis aux marchds ruraux. L'amelioration de 1'efficacite du controle forestier des fltx commerciaux de bois-inergie en reste encore et touqours aux espoirs tel que le montrent les diffC,renis rapporis de F. Haaser et notammeni celui redig Li I'issue de la mission du 28/04 au 12/05/96. Dans sa conclusion. cc dernier rappelle que:  4 I) des progres ont dt6 enregistr ds au niveau des recettes et dans I alimentation du - compte 3001; 2) des dIlais de mise en oeuvr-e des recomnnandations faites lors des missions de 1995 sont trop longs; 3) le PED devrait renforcer son action de suivi de la mise en oeuvre de ces recommandations; 4) le bon fonctionnement du compte 3001 est la condition de confiance que peuvent apporter les agents au systeme et rejeter par 1la meme les anciens modes de fonctionnement; 5) le systme, dans son organisation, parait correct et perfectible. Tout depend de la volonti politique et de 'engagement des responsables a poursuivre le processus engage depuis 1989." 13. La mission recommande vivement aux autorites de proceder A une augmentation de la taxe au niveau de 1375 FCFA/stere qui est le niveau requis pour assurer l'efficacite de l'instrument de fiscalite utilise pour r6glementer l'equilibre entre le bois controle et le bois incontr6le. 14. De plus, il avait ete propose lors de la mission de supervision de 1995 que le compte 30-01 du tresor public affecte au contr6le forestier soit domicilie dans une banque commerciale, ger& de maniere autonome par la Direction de l'Environnement et soumis i un controle periodique de l'administration centrale des finances publiques. Toutefois, aucune discussion n'a ete officiellement engagee sur cette question entre le Ministere de l'Economie et des Finances et celui de l'Hvdraulique et de l'Environnement. Le Ministre de I'Economie. des Finances et du Plan saisi de cette suggestion par la mission a estime qu'elle ne poserait pas de probleme en principe. B.2.3,2 Economie et substitution de I'enercie 1 5. Tel que souhaite en noveembre 1995, le PED a remis A la mission une documentation qui compare les coCits de cuisson selon les options adoptees (bois-6nergie. petrole lampant. {az) et a donne des indications sur les couLts de fabrication du rechaud Tchip. La mission a apporte un complement A l1analyse comparative des coits de cuisson. Malheureusement. il y a eu des retards dans 1'execution de i'audit des comptes et de gestion de la societe Tchip- Import ce qui fait que la mission n'a pas eu toutes les informations souhaitees pour faire une analyse approfondie des probl&mes de cette filiere. Cependant, on peut tout de meme constater que: I ) la filiere du rechaud a petrole n est pas concurrentielle comparee a celle du foyer ameliore sur le double plan financier et economique (voir annexe 3 du present aide-memoire); 2) la societe Tchip Import, manufacturiere des rechauds, ne semble pas viable compte tenu du taux de p6netration actuel des rechauds (le niveau moyen des ventes 1995-1996 des rechauds est d'environ 140 unites par mois); 3) les enquetes menees par le projet suggerent qu'une forte proportion des beneficiaires directs de la modeste subvention accordee pour lIachat de rechauds a  5 petrole jugent cette subvention non necessaire et estiment surtout qu'elle n'est pas de nature a influencer le choix de leur methode de cuisson; 4) a partir de ces memes enquetes, il apparait qu'une augmentation notable des ventes de rechauds au rythme de 600 unites par mois pendant 5 ans doublee d'une utilisation reguliere de ces equipements pour la cuisson a un tres faible impact sur la conservation des ressources ligneuses. Toutefois, ce rythme de ventes ne pourra etre atteint qu'apres une action commerciale tres agressive difficilement envisageable avec l'organisation actuelle et les moyens de la societe Tchip- Import; 5) la subvention croisee au petrole lampant deviendra de plus en plus importante au fur et a mesure que sa consonimation augmentera et il y a lieu de craindre qu'elle a dejA engendre des effets pervers comme le developpement de la fraude et/ou la fragilisation du mecanisme de stabilisation des prix des produits petroliers. 16. Du point de vue de la mission, la subvention croisee au petrole lampant a des implications directes non seulement pour le PED, mais surtout pour la fiscalite de l Etat. La mission recommande que le Gouvernement se saisisse de la question de subvention du petrole lampant dans le contexte d'une revue du mecanisme de fixation des prix des prodiuits petroliers qui sera entreprise lors des reflexions sur la restructuration de la filiere des produits petroliers. Sans vouloir anticiper les resultats de ces travaux il convient de suggerer que les Nigeriens devraient payer un prix pour le petrole lampant qui refl&te le couit economique de ce produit. 17. Tout en reconnaissant l'importance du Volet Demande pour la strategie <energie domestique> adoptee par le Niger, la mission estime qu'il s'avere important de modifier plusieurs aspects de sa mise en oeuvre. Les actions suivantes devront donc etre entrepn'ses: 1 ) la restructuration de la societe Tchip Import sur le double plan organisationnel et managerial ainsi que le redressement de sa situation financiere selon les resultats de I'audit: 2) Ilannulation de la subvention a l'achat des rechauds A petrole; 3) lintroduction d'autres intervenants du secteur prive dans la filiere des rechauds a petrole de sorte a en diversifier les sources d'approvisionnement (par exemple importations); 4) le developpement de la fabrication et de la diffusion des foyers amrliores du tr pe Mai Sauki-Plus et au cas ou cela serait possible a un couit abordable 'arnelioration de leur efficacit6 energetique; 5) le maintien de I'appui technique et publicitaire aux foyers amrliores et rechauds a petrole; 6) tout en tenant compte des conclusions des reflexions sur la restructuration de la filiere des produits petroliers, les activites de distribution du petrole lampant et des equipements de substitution par les energy shops ainsi que le service apres vente aux utilisateurs des rechauds a petrole devraient etre maintenues et conduites sur une base commerciale;  6 7) le maintien de la collecte et le traitement des donnees relatives aux tendances des menages en matiere de consommation d'energie ainsi que le maintien des conditions de concurrence sur le marche energ6tique. 18. Cette strategie de restructuration reconnait qu'en meme temps que I'analyse economique provisoire de la substitution est equivoque. (Annexe 3 de cet Aide-Memoire). une auto-,,neration suffisante de la ressource forestiere n'est pas encore assuree. [I est donc raisonnable de proposer un appui judicieux a la conservation et a la substitution qui privilegie la mise en place des structures et des prix d'equipement ainsi que du combustible sur une base economiquement saine, afin que ceux qui veulent faire de la substitution connaissent les options disponibles et contribuent a la conservation de la ressource forestiere sans pour autant constituer un fardeau pour les finances publiques. C. Recommandations pour la suite du projet Energie II - Energie domestique 19. Lors de la mission de supervision de novembre 1995, il avait et convenu entre la mission et les 6quipes PED et PGRN qu'une strat6gie d-integrationi/coordination devait etre adoptee par le Niger avant le mois de juin 1996. Malheureusement, il v a eu des retirds imprevisibles dans le demarrage des analyses necessaires a la realisation de ces objectifs. Comme progres realise. ils ont identifie trois options possibles et choisi "loption III" qui semble avoir V'agr6ement des ministeres de tutelle. Cette option envisage qu'il y aura concertation au niveau de la direction des projets et sur le terrain tout en preservant l independance des structures administratives. Ce cadre de collaboration est decrit avec de plus amples details en annexe 4. 20. Lors des analvses et discussions concemant la mise en oeuvre de certe approche. il est apparu que la question etait plus complexe que pr6vu 1. Les PED et PGRN VOllt soullertre i la Banque monodiale au piUs tard le 7 decenibre 1996 une note conjointe adoptee par lcs \Ministeres de tutelle qui lait erat de tous les postes operationnels ou il n v aura .dUCLUO problemne de coordination et dc'liuibilit6 au financement PGRN ainsi que les points sur lcsqucIs Ics possibilites et la nccessit4 de coordiinationi et dc'liigibilite au financemiienit POGRN sont iolins evidentes. Ce docuMent devra mettre bien en evidence les details par post!S L; depense pour lcs activites du programme 1997 ainsi que les modalites de fonctionnemnnt entre les deuLx projets. De plus. il servira de base ai toutes les discussions ult&rieures entetrc autorit6s Ni-6tiriennes et la Banque. Par exemple, la difference d'approche entre les deux projets pose le probleme d'eligibilite de cenaines activites du volet demande au financement du PGRN notamment celles qui sont directement lices .ux populations urbaines. En plus. les procedures d'engagement des depenses au sein du PGRN e:ant ,.* differentes de celles du PED. quant aux modalites et au calendrier, I'integration des programmes i- niveau retarderait la celerite dans la poursuite des activitrs du PED, ce qui constituerait un handicir a 'a perennite des acquis actuels de ce dernier.  7 D. Financement d'un <projet energie> 21. Au cours des reunions, plusieurs interlocuteurs ont sonde la mission sur la possibilite de preparer un projet dont le theme global pourrait etre le developpement de l'implication du secteur prive dans le secteur de l'energie. Les principaux elements consisteraient en: I ) un appui a la participation du secteur prive dans le secteur de l'electricite; 2) une rationalisation et un appui au programme de substitution en energrie domestique; 3) une assistance A la promotion et au suivi des explorations petrolieres entreprises par les compagnies petrolieres; 4) un developpement des initiatives du secteur prive dans la prestation de services lies A l'economie d'energie et A la facturation de I'electricite (cette operation aura un impact sur la reduction des factures d'energie de l'administration, ce. qui minimiserait le risque commercial sur les foumisseurs de ces services). 2}2. La mission a recu ces propositions avec interet et repondu que la preparation d'un nouveau <projet energie> devrait etre discutee dans le cadre du "Country Assistance Strategy". E. Rapport d'achevement de 1'execution du projet Energie II 23. La mission avait transmis, au Ministere et a la direction du projet. avant son arrivee au Niger, les termes de reference pour le rapport d'achevement consistant essentiellement aux plan du document et indications de la Banque relatives aux objectifs et contenu du rapport. Elle y avait egalement associe un projet de rapport d'achevement benevolement prepare par Willem Floor, ancien charge du projet a la Banque. 24. Des seances de travail ont et organisees entre le Ministere des Mlines et de l Eneraie. Ia direction du projet et,la mission pour preciser les modalites de forme et de fonds du rapport dachevement. La mission tient A noter l abondante documentation foumie par [es composantes 'petrole . `energie domestique" et "'conomie/conservation de lenergie 6lectri4ue" sur lratteinte des objectifs du projet et des mesures A implanter pour en assurer la perennite et estime que ces documents faciliteront sans aucun doute la redaction du rapport d'achevement dont la version finale devra etre disponible avant la fin juin 1997 pour presentation au Conseil d'Administration de la Banque mondiale. Pour la composante "electricite", la Direction de I'Energie et la NIGELEC doivent preparer un rapport rerraqant l historique des evenements pertinents au prograrnme NIGELEC jusqu'A l annulation de cette composante. 25. La direction du projet et la mission ont arrete les programme et calendrier de tra'ajil jusqu&a l'edition de la version officielle du rapport d'achevement. Ainsi, les projets de rapport preliminaire sont a preparer et A echanger entre la direction du projet et la Banque au plus tard en fin janvier 1997. Les commentaires devront etre faits avant la fin fevrier 1997 afin que la version finale du rapport d'achevement de la Banque incluant en ses annexes kes commentaires du client soit disponible vers la fin d'avril 1997.  8 F. Collaboration avec la mission de privatisation de la NIGELEC 26. 11 etait prevu que la mission de supervision du PEII et la mission de la privatisation de la NIGELEC collaborent sur le terrain afin d'assurer la continuite des engagements et de faciliter les travaux ddji agrees avec le Gouvernement lors de la mission de novembre 1995. L'equipe de la Banque mondiale qui travaille sur le sujet de la participation du secteur privc au secteur electrique est en train de pr6parer des options qui seront discutees avec le Gouvemement du Niger. Cependant, il convient de noter ici que les equipes des deux missions maintiendront leur concertation surtout au niveau de la mise en oeuvre de certains aspects de restructuration du secteur qui sont prealables a 1'exercice de privatisation, tels que le cadre institutionnet comprenant la definition des roles et responsabilites des intervenants, la loi de 1'e1ectricit6, la tarification et plus generalement la regulation du secteur. Niamey le 22 novembre, 1996  Liste des personnes rencontrees - lors de la mission de supervision du Projet Energie II 7 Niamey, 8 - 22 novembre 1996 1. Membres du Gouvernement . Son Excellence M. Amadou Boubacar Cisse, Ministre d'Etat charge de l'Economie, des Finances et du Plan * Son Excellence M. MaY Manga Boukar, Ministre des Mines et de l'Energie * Son Excellence M. Labo Kada, Ministre de l'Hydraulique et de l'Environnement 2. Ministere de I'Economie et des Finances Cellule de Coordination de la Privatisation des Entreprises Publiques * M. Hamid Ahmed, Coordonnateur Caisse de Stabilisation et de Perequation des Prix et des Produits du Niger . Mme Dia Bri2itte. Directrice Generale * Mme Ali Fatouma. Directrice d'Exploitation et des Statistiques 3. Ministere des Mines et de ['Energie * M. Mamadou Zanguina, Directeur de l'Energie et du PE 11 - Volet Petrole M M. Adam Melly, Secretaire General du Ministere de l'Energie * M. Rabiou Hassane Yari, Direction de l'Energie M. Mounkaila El. Moussa, Chef de Service Central de l'Electricite * M. Boubacar Oumarou, Chef du Centre de Documentation Petroliere et Archives * M. Djibe Mounkaila, Chef du Laboratoire d'Analyses et de Controle des produits petroliers M .M. Boubacar Nalando. Chef Service Hydrocarbures p.i. 4. Ministere de l'Hvdraulique et de l'Environnement * M. Abdou Daoure, Conseiller Technique du Ministre M. Laouli Ada, Directeur National de I'Environnement * M. Wata Issoufou. Direction de l'Environnement * M. Abdelkader Rene Joly, Chef CAF, Direction de l'Environnement M. Sani Salissou, Gestionnaire du Compte 30-01, Direction de l'Environnement * Lieutenant Toure Adamnou. Commandant Adjoint BTPN a Lieutenant Almadjin Mamane, Chef DIC/BTPN 5. Projet Energie II - Energie Domestique M. Kiri Tounao. Directeur du Volet Demande M. Dan Baria SournaYla, Directeur du Volet Offre M. Pierre Montagne. Conseiller Technique du Volet Offre M. Tiemou Issoufou, Chef Service Technique du Volet Demande M. Bachard Aboubacar, Chef Serv. Evaluation des Programmes - Volet Demande  /o * M. Mamoudou Hamadou, Directeur Adjoint du Volet Offre * M. Dan Mirria Sani, Chef Comptable du Projet Energie Domestique * M. Idrissa Madougou, Directeur General de la Societe Tchip Import * M. Hadi Goni Boulama, Directeur du Cabinet d'audit EFIC 6. Projet de Gestion des Ressources Naturelles (PGRN) * M. Karbo Atahirou, Specialiste en Suivi Ecologique * M. Guero Idi, Specialiste des Ressources en Eau * M. Elhadji Maman Saadou, Specialiste des Ressources Fauniques, Forestieres et Halieutiques 7. Societe Nigerienne d'Electricite (NIGELEC) * M. Mamane Amadou Laouali, Directeur General * M. Amadou Zakhou, Directeur des Etudes et de l'Equipement * M. Adamou Boukari, Directeur Technique - M, Laouali Abdou, Directeur Financier et Comptable * Mi. Arzika Nahamadou, Direction des Etudes et de l'Equipement * M. Moustapha. Chef Service Gros Abonnes 8. Societe Nig&rienne de Produits Petroliers (SONIDEP) M I. Souleymane Hamadou, Secretaire General M. Boulama Manga. Inspecteur General * M. Katzenfort J. Pierre, Directeur des Exploitations 9. Bureau de Cooperation Danoise (DANIDA) * Mime Astrid AQerholm Danielsen, Chef de Section Division d'Afrique de l'Ouest et de l'Est Minist&re Royal des Affaires Etrangeres du Danemarkl * Mme Sophia Maestrup. Representante au Niger 10. Assistance Technique SEED-CIRAD * M. Gerard Madon. Consultant * M. Michel Matly, Consultant 11. Kestrel Cyptus Limited * M. Stuart Beattv. General Manager  / The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL SANK FOR RECONSTRUCTION ANO DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVEkOPMENT ASSOCIATION U.S,A. Cable Address: INDEVAS le l S novembre. 1996 Son Excellence Monsieur Amadou Boubacar Cisse Miinistre Ministere du Finance et du Plan Niamey Republique du Niger Objet: NIGER: Credit 1880-NIR - Projet Energie II Prorogation de la date de justification des fonds Reallocation des fonds Monsieur le Ministre: Suite aux discussions entres les responsables du projet Energie II et 1'equipe du projet de la Banque mondiale. et compte tenu du delai extremement limite imparti avant la cl6ture du credit prevu pour le 31 decembre 1996. nous avons l'honneur de-vous inforrnm que l' IDA n'a pas d'objection a prolonger le delai de justification des depenses sur le compte special de la composante 6nergie domestique (Partie A. categories 5(a) et 5(b) de l'accord de credit) de quatre mois au-dela du 31 decembre 1996 pour les depenses authorisees qui sonit encourues et les biens et services rendus avant le 31 decembre 1996. Nous avons e alement l'honneur de vous informer qu'aux fins de F'Annexe 1 de i'-\ccord de Credit. FIDA par la presente corrige l'allocation des fonds du Credit par Cat&gorie tclle que definie dans la lettre du 31 octobre 1995. En effet. "I'Annexe I jointe a cette derni&re ne refletait pas le niveau des depenses qui devaient etre effectuees au titre des ann6es 1995 et 1996. line copie de F'Aninexe 1. "Retrait des fonds du Credit-. nmoJ'ifi-e est attachee ci-joint. cuillez a-zreer. MNonsieur le .Ministre. 1'expression de ma haute consideration. Ed" r Representant Resident cc. Son Excellence Monsieur Mai Manga Boukar Ministre des JMlines et de F'Energie Son Excellence Monsieur Labo Kada Ministre de V'Hvdraulique et de l'Environnement RCA 248423 L. WUI 64145 :_ FAX (2021 4776-391  ANNEXE I Retrait des Fonds du Cr6dit Cat6corie Montant affcctc % des depenses financ6 exprime en DTS (I ) Partie B du Projet pour memoire. composante e1ectricite deja cl6tur6e (2) Partie C du Projet (a) Services de consultants et 2.590.000 100 % formation a 1'exception de la des d6penses Partie C.5. en devises- (b) Services de consultants pour la 100.000 100