Ghana - Sixth Power Project

Document of THE WORLD BANK FOR OFFICIAL USE ONLY Report No 19547 IMPLEMENTATION COMIPLETION REPORT REPUBLIC OF GHANA SIXTH POWER PROJECT (Credit 2109-GH) June 30, 1999 Energy Team Infrastructure Group Africa Region This document has a restrcted 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 authonzation.  CURRENCY EQUIVALENTS Currency Unit = Cedi-Annual average Year US$1.00 = Cedi 1991 368 1992 437 1993 649 1994 957 1995 1200 1996 1637 1997 2000 1998 2400?? WEIGHTS AND MEASURES 1 gigawatt hour (GWh) = 1 million kilowatt hours 1 kilovolt (kV) = 1,000 volts 1 kilowatt MW) 1,000 watts 1 kilowatt hour (kWh) = 1,000 watt hours 1 megawatt = 1,000 kilowatts ABBREVIATIONS AND ACRONYMS AFD Agence Francaise de Developpement AfDB African Development Bank CCGT Combined Cycle Gas Turbine CEB Communaute Electrique du Benin CFD Caisse Francaise de Developpement ECG Electricity Corporation of Ghana EECI Energie Electrique de la Cote d'Ivoire EIB European Investment Bank EIRR Economic Internal Rate of Return FRP Financial Recovery Plan GOG Government of Ghana MoME Ministry of Mines and Energy NED Northern Electricity Department NEP National Electrification Project PURC Public Utilities Regulatory Commission SIDA Swedish International Development Agency SCADA Supervisory Control and Data Acquisition SONABEL Societe Nationale Burkinabee d' Electricite VRA Volta River Authority FISCAL YEAR OF BORROWER January 1 -December 31 Vice President Calisto Madavo, Jean-Louis Sarbib, AFR Country Director Peter Harrold, AFC1O Technical Manager Mark Tomlinson, AFTG1 Task Team Leader Joel Maweni, AFTGI  FOR OFFICIAL USE ONLY TABLE OF CONTENTS PREFACE EVALUATION SUMMARY. PART I: PROJECT IMPLEMENTATION ASSESSMENT ..............................................1.. A. INTRODUCTION L B STATEMENT AND ACHIEVEVIETS OF PROJECT OBJECTIVES ..2. C. PROJECT IMPLEMENTATION EXPERIEVCE... D. PROJECT OUTCOME, SUSTAINABILITY, AND FUTURE OPERATION .6 E. IDA PERFORA1NCE ... F. BORROWER PERFORMANCE 8 G. MAJOR LESSONS LEARNED B PART II: STATISTICAL TABLES .1.. Table 1: Summary of Assessments .................................................... Table 2: Related Bank Loans/Credits. 12. Table 3: Project Timetable .................................................. 3.. Table4: CreditDisbursements: CumulativeEstimatedandActuaL ................................................. 14 Table 5: Key Indicators for Project Implementation .................................................. 15 Table 6: Key Indicators for Project Operation ................................................. 15. Table 7: Studies Included in Project ................................................. 1.6. Table 8A: Project Costs ................................................. 1.7.. Table 8B: Project Financing ................................................. 18. Table 9A: Economic Costs and Benefits ................................................... . Table 9B: Economic Costs and Benefits ................................................. 20. Table 10: Status ofLegal Covenants .................................................. 26. Table 10: Status ofLegal Covenants ..................................................27.. Table 12: BankResources: StaffInputs ................................................. i. Table 13: BankResources: Missions ................................................. 31.. Table 14: Indicators ofFinancial Covenant Compliance ................................................. 32 APPENDICES A. ICR Mission Aide Memoires B. Borrower's Contribution and Comments Map: EBRD 21913 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.  :  IMPLEMENTATION COMPLETION REPORT SIXTH POWER PROJECT (Credit 2109-GH) Preface 1. This is the Implementation Completion Report (ICR) for the Sixth Power Project in Ghana, for which IDA approved a credit of SDR15.2 million (US$20 million) on March 27, 1990. The Credit became effective on November 9, 1990 and closed on June 30, 1998, two years after the original closing date of June 30, 1996. 2. As of the closing date 28.3% of the credit was disbursed, and the remaining balance of SDR 10.9 million was canceled. The EIB provided the equivalent of US$28 million, which together with the IDA amount financed the foreign cost of the Akosombo Hydropower Plant rehabilitation component of the project, while VRA financed the local cost. Financiers of other components of the project included: CFD (US$19. 14m), SIDA (US$5m) and AfDB (US$790,000). 3. Under-utilization of the Credit occurred because the original technical solution of refurbishing the hydro turbine runners at Akosombo was abandoned after one refurbished unit had failed to register the expected efficiency gain. It was therefore decided to replace the runners instead and IDA financed the design of the runners and model testing. The design was completed in September 1998 and resulted in turbine that will provide efficiencies higher than those envisaged at project appraisal. On the basis of these designs, VRA will replace the runners with EEB and own financing. IDA financing could not be extended for the runner replacement or for other un-funded components because at the time the decision was made to switch from rehabilitation to replacement, VRA was already in default of financial covenants under the Credit. 4. The ICR was prepared by Messrs. Reynold Duncan, Power Engineer, (AFTGI), and Takeshi Kikukawa, Energy Specialist, (AFTGI). It was reviewed by Messrs. Mark Tomlinson, Sector Manager, (AFTG1), Jaime Biderman, Lead Specialist, (AFTS 1), and Joel Maweni, Sr. Financial Analyst, (AFTG1). Comments were also received from previous members of the Ghana energy team; Messrs. Mark Segal, Sr. Economist (CPW), Carlos Algandona, Sr. Power Engineer, (CPW) and Said Mikhail, Sr. Power Engineer (AFTGI). This report was processed by Erica Hyde, Team Assistant (AFTGI). 5. Preparation of the ICR began during the Bank's supervision mission in October, 1998 and the draft ICR was completed following the supervision mission of February, 1999. It is based on material in the project files and information from the borrower, in particular that on project costs. The borrower's comments and contributions are attached; the co-financiers' comments have been incorporated as footnotes to paras. (iv) of the Evaluation Summary and para 17 of the main text.   -i- IMPLEMENTATION COMPLETION REPORT GHANA SIXTH POWER PROJECT (Credit 2109-GH) Evaluation Summary Introduction i. The Sixth Power Project was part of a broad program of improving infrastructure to support economic expansion and reforming public enterprises to deliver goods and services more efficiently. It focussed on generation, transmission, distribution and institutional development. The implementing agency of the project was Volta River Authority (VRA) and the project was in accordance with VRA's development plan for the period 1991 - 1996. The IDA Credit was used to co-finance the generation component with European Investment Bank (EIB). Project Objectives and Description ii. The main objectives of the project were to enable VRA to maintain the high standard of reliability of the country's electricity supply and meet projected domestic and export demand up to the year 1995. The projectwas also to assist VRA to implement its on-going program of institutional development, designed to meet the challenges of the 1990s. The project components consisted of: (i) the rehabilitation of the Akosombo hydropower plant, (ii) transmission development within Ghana and construction of a sub-transmission line to Burkina Faso; (iii) construction of a second bulk supply substation in Accra; (iv) provision of Northern Electricity Department (NED) needs up to 1994 for network extension in the Northern Region; (v) the establishment of a training center; and (vi) studies for future generation and transmission development and tariffs. Implementation Experience and Results iii. Some of the project components remained incomplete as of the planned completion date of the project and neither the training center nor the line to Burkina Faso had commenced yet. Except for the line to Burkina Faso, the main reason for the delays was unavailability of funding, as some tentative financing at appraisal did not materialize. Furthermore, VRA was unable to provide the counterpart funding as agreed at appraisal due to its poor financial performance, caused by low tariffs, reduced hydro generating capacity and the high cost of thermal supplementation. The distribution component was superceded by the NEP (Cr. 2467-GH), whereas VRA is yet to secure funding for the training center.  - ii - iv. IDA's involvement in the project ended on completion of the design and model testing of replacement runners for the Akosombo plant, when it was decided, jointly by the borrower and IDA, to change the project design. As a result, the IDA Credit was under-utilized. IDA financing could not be extended for the runner replacement or for other un-funded components because at the time the decision was made to switch from rehabilitation to replacement, VRA was already in default of financial covenants under the Credit.' v. The project achieved its objectives only to a limited extent. All studies, except the generation development plan, were successfully completed, but out of six physical components, only the transmission line to Wa was completed. Whereas the redesign of the rehabilitation component shows an increase of 2% in the EIRR (Economic Intemal Rate of Return), completion will be delayed by a further eight years. The first phase of the Bulk Supply Substation for Accra will be completed in 2000; the sub-transmission line to Burkina Faso was yet to commence due to disagreement on tariffs between VRA and SONABEL(Societe Nationale Burkinabee d'Electricitie), the power utility of Burkina Faso. The decision by Burkina Faso to develop its own diesel-driven power plants may have been partly responsible for the delay. vi. During implementation, VRA did not comply fully with the rate of return on fixed assets (ROR) covenant. The main constraints were inadequate revenue due to adverse hydrological conditions, the high cost of operating Tema diesel power plant and inadequate tariffs due to GOG's reluctance to approve increases. Under the ongoing sector reform program, GOG has since established the Public Utilities Review Commission (PURC), which is an independent body, reporting to the legislature and among whose responsibilities is the review and approval of tariffs. Future Operation and Sustainability vii. The only physical component completed, the overhead line to Wa, has sufficient capacity to sustain demand growth in the Upper West Region of Ghana well into the next decade. The cost of operation and maintenance will be sustained by revenues from energy sales in the areas that were electrified and those whose power supply system was reinforced by the line. Operation and maintenance will make use of the existing, decentralized, organizational structure and resources. Overall, the project's sustainability is rated uncertain because it is too early to assess, unambiguously, the outcome of the main component, the Akosombo turbine runner replacement, now expected to be completed in year 2004. 1 In its comments of June 25, 1999, BIB states ""...1DA fmnacing could not be extended for the runner replacemnent or for other un-funded components because .VRA was in default of financial covenants under the Credit" (