Ghana - Sixth Power

 ICRR 10426 Report Number : ICRR10426 ICR Review Operations Evaluation Department 1. Project Data : OEDID: OEDID : C2109 Project ID : P000925 Project Name : Sixth Power Country : Ghana Sector : Electric Power & Other Energy Adjustment L/C Number : Credit 2109-GH Partners involved : EIB, CCCE, AFDB, SIDA Prepared by : Sunil Mathrani, OEDST Reviewed by : Alain A. Barbu Group Manager : Gregory K. Ingram Date Posted : 08/26/1999 2. Project Objectives, Financing, Costs and Components : The project, supported by a Credit of SDR 15.2 million, (US$20 million) was approved in FY90 and closed in FY98, two years later than scheduled . Only 28% of the Credit was disbursed and a total of SDR 10.9 million was canceled because only one of the project's physical components was fully completed . The stated objectives of the project were to assist the implementing agency, The Volta River Authority (VRA) to (a) maintain the high standard of reliability of the country's electricity supply; (b) meet projected domestic and export demand through 1995, including an interconnection with Burkina Faso; and (c) implement its ongoing program of institutional development . The project comprised (i) the rehabilitation of the Akosombo hydro power plant, (ii) construction of transmission lines in north-western Ghana and an interconnection with Burkina Faso, (iii) construction of a bulk power supply substation in Accra, (iv) distribution materials for network extension in northern Ghana, (v) construction of a training center, and (vi) studies for future generation and transmission needs and tariff policies . 3. Achievement of Relevant Objectives : The project failed to meet virtually all of its objectives . The original technical solution for the rehabilitation of the Akosombo plant was abandoned after the first refurbished unit failed to deliver the expected efficiency gain . It was therefore decided to replace the turbine runners instead of refurbishing them . IDA financed the design and model testing of the new runners. These will provide higher efficiencies than those envisaged at project appraisal . The replacement will cost about US$120 million instead of US$64 million for refurbishment. The work will be completed in 2004 with financing from EIB and VRA itself. Only one of the transmission lines has been fully completed . Work on the line to Burkina Faso and the training school has yet to commence . 4. Significant Achievements : None. 5. Significant Shortcomings : The project was poorly designed and appraised . As pointed out by the ICR, the possibility of exceeding the original 40-year old turbine efficiency by redesigning the runners should have been examined from the outset . No understanding on power tariffs had been reached with Burkina Faso prior to Board approval . The project was inadequately supervised and should have been restructured at an early stage . GOG seriously weakened VRA's ability to meet its local cost obligations by failing to authorize timely tariff increases . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev .: Negligible Negligible Sustainability : Uncertain Uncertain Bank Performance : Satisfactory Unsatisfactory Serious shortcomings in preparation, appraisal, and supervision are highlighted  in the text of the ICR (see Section 9 below) Borrower Perf .: Deficient Unsatisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : (a) Thorough design and preparation prior to appraisal are essential to avoid serious implementation problems; (b) Agreements on contractual terms and tariffs should precede projects to finance international power trade; and (c) Political interference in tariff setting can seriously undermine the finances of even the strongest power utilities in a very short time span. 8. Audit Recommended? Yes No Why? Possibly in the context of a broader review of the Bank's assistance to Ghana's Energy Sector . 9. Comments on Quality of ICR : The ICR is of generally good quality and objective in its discussion of the project's shortcomings . The computation of the EIRR for the turbine replacement is inappropriate given that this component has yet to be implemented . This review only disagrees with the satisfactory rating for overall Bank performance, which is inconsistent with the ICR ’s own assessment of the Bank's performance during preparation and supervision .