Peru - Energy & Mining Technical Assistance

 ICRR 10346 Report Number : ICRR10346 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L3610 Project ID : P008059 Project Name : Energy & Mining Technical Assistance Country : Peru Sector : Electric Power & Other Energy Adjustment L/C Number : L3610-PE Partners involved : PHRD Prepared by : Farrokh Najmabadi, OEDST Reviewed by : Alain A. Barbu Group Manager : Gregory K. Ingram Date Posted : 06/29/1999 2. Project Objectives, Financing, Costs and Components : The project's objectives were to support the Government's reform and privatization work through : a) implementation of sector strategies and policies, especially demonopolization and privatization of SOEs; b ) completion of legal/ regulatory reform in the energy and mining sectors, including environmental regulation; and c ) institution building at Ministry of Energy and Mines and autonomous entities to regulate and monitor sector operations . The project had five sub-components for each of the following areas : overall energy sector; electricity; hydrocarbons; mining; and environmental management. The activities encompassed studies , training, completion and application of regulatory frameworks, promotion programs, reform of procedures, strengthening of various State regulatory entities, creation of data banks and environmental policy formulation and implementation . The project, approved in FY 93, provided $11.8 million for technical assistance from which $ 10.7 million was disbursed. the remaining $1.1 million was canceled in December 1998. The total project cost amounted to $ 15.83 million( 91% of appraisal estimate) and $3.07 million cofinancing was provided by PHRD . 3. Achievement of Relevant Objectives : The objectives of the project were substantially achieved . The legal/regulatory/institutional of the electricity sub-sector was strengthened. An efficient corporate structure for the enterprises was created through setting up autonomous generation, transmission, and distribution companies; a Committee for Economic System Operation of the interconnected systems was created; the Electricity Tariff Commission was strengthened; and periodic tariff adjustments have aleady taken place . In the hydrocarbon sub-sector, the regulations related to the Basic Hydrocarbons Law have been put into practice; PeruPetro is now capable of providing investors with information required for bidding purposes from its data bank; PetroPeru ( the national company) is now better equipped to promote and negotiate contracts for exploration and development; and the Directorate General of Hydrocarbons is a more efficient office. As for the mining sub-sector, in addition to the establishment of a Public Mining Registry which has already helped in reducing the unresolved mining claims, the creation of a data base consisting of geological and mining information and other promotional work as well as attending to the problems of artisan miners have injected a new life in this area. The project also helped the preparation and dissemination of guidelines for environmental protection for the above three sub -sectors notably permissible emission levels, an evaluation of environmental problems associated with informal mining in ten sensitive areas, the undertaking of a limnological study of lakes in the mining areas, and the institutional strengthening of the Directorate General of Environmental Affairs. 4. Significant Achievements : Demonopolization and privatization have noticeably advanced in electricity generation and distribution, hydrocarbon and mining sectors. More than 50 contracts for oil and gas exploration and development have been awarded . Nearly US$ 8 billion have been committed by private companies to develop new products and expand existing mines . Autonomous regulatory bodies are up and functioning and regulations are being enforced . The Electricity Tariff Commission has developed competence in regulating electricity prices . Ministry of Energy and Mines's General Directorates have been reorganized and a modern MIS installed . 5. Significant Shortcomings : The Energy strategy evaluation component was not completed, despite extensive efforts by the Bank to reach consensus on a methodological approach consistent with the new, market - based paradigm for the sector . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Consistency of project design with development needs is critical to the success of technical assistance aimed at sector reforms. So are the careful staffing of the project coordinating and implementing units with competent individuals, and the continuity of project direction both in the Borrowing country as well as the Bank . An unwieldy multiplicity of objectives can adversely affect achievements . Care should be taken that covenants are enforceable . Sufficient resources must be made available for supervision -intensive projects such as technical assistance . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR presents a very clear and detailed account of the purposes and achievements of all the major components of the project.