Cambodia - Phnom Penh Power Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 22038 IMPLEMENTATION COMPLETION REPORT (IDA-27820) ONA CREDIT IN THE AMOUNT OF SDR25.8 MILLION (US$40.0 MILLION EQUIVALENT) TO THE KINGDOM OF CAMBODIA FOR A PHNOM PENH POWER REHABILITATION PROJECT March 26, 2001 Energy and Mining Sector Unit East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective) Currency Unit = Riel KHR1,000 = US$ 0.26 US$ 1.00 = KHR3,835 FISCAL YEAR January 1 December I ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank CAS Country Assistance Strategy EDC Electricite du Cambodge ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IPP Independent Power Producer JICA Japan International Corporation Agency LV Low voltage MEF Ministry of Economy and Finance MIME Ministry of Mines, Industry and Energy MV Medium voltage NCB National Competitive Bidding PMU Project Management Unit PPA Power Purchase Agreement TA Technical Assistance UNDP United Nations Development Programnme Vice President: Jemal-ud-din Kassum Country Manager/Director: Ian Porter Sector Manager/Director: Yoshihiko Sumi Task Team Leader/Task Manager: Enrique Crousillat  FOR OFFICLIL USE ONLY IMPLEMENTATION COMPLETION REPORT CAMBODIA PHNOM PENH POWER REHABILITATION PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Perfonnance 10 8. Lessons Learned 11 9. Partner Comments 12 10. Additional Information 14 Annex 1. Key Performance Indicators/Log Frame Matrix 16 Annex 2. Project Costs and Financing 18 Annex 3. Economic Costs and Benefits 21 Annex 4. Bank Inputs 23 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 24 Annex 6. Ratings of Bank and Borrower Performance 25 Annex 7. List of Supporting Documents 26 Annex 8. ICR Mission Aide Memoire 26 Annex 9. Map IBRD No. 26880 31 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   Project ID: P004032 Project Name: PHNOM PEHN POWER REH Team Leader: Enrique 0. Crousillat T TL Unit: EACLF ICR Type: Core ICR Report Date: March 29, 2001 1. Project Data Name: PHNOM PEHN POWER REH L/C/TF Number: IDA-27820 CountryiDepartment: CAMBODIA Region: East Asia and Pacific Region Sector/subsector. PD - Distribution & Transmission KEY DATES Original Revised/Actual PCD: 06/10/94 Effective: 09/30/95 12/20/95 Appraisal: 01/23/95 MTR: Approval: 09/28/95 Closing. 12/31/99 06/30/2000 Borrower/lmplementing Agency: Kingdom of Canbodia/Electricite Du Carnbodge Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Russel Cheetham Country Manager: Ian C. Porter Callisto E. Madavo Sector Manager: Yoshihiko Sumi Vineet Nayyar Team Leader at ICR: Esperanza Miranda Enrique Crousillat ICR Primary Author: Esperanza Miranda 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: HS Borrower Performance: S QAG (if available) ICR Quality at Entry: HS Project at Risk at Any Time: Yes The Project was flagged as a potential risk project during the aftermath of the 1997 national political turmoil and regional financial crisis. This assessment was based on the following risk factors: (i) poor compliance with legal covenants due to delays in the enactment of the Electricity Act and implementation of the sector reform timetable; (ii) shortage of counterpart funds due to the Government's precarious budget situation; (iii) poor financial performance of Electricite du Cambodge (EDC) due to the substantial devaluation of the Riel caused by the regional crisis; and (iv) the weak macroeconomic setting. By the end of 1998, the shortage of counterpart funds and compliance with legal covenants had improved sufficiently enough to remove the project from the "at risk" category.  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: According to the Staff Appraisal Report the main objectives of the Project were to support the rehabilitation urgently needed for Phnom Penh's distribution system as well as the Government's initial efforts to strengthen sector institutions. In addition, the Project would help create an environment in which the power sector can be developed and operated efficiently with the involvement of the private sector. The Project objectives were consistent with the country's priorities at the time of project preparation and loan approval (1994-95). After decades of war, infrastructure breakdown and political disruption, the new Government was interested in reforming the power sector, attracting private sector participation, and strengthening its institutions. According to the October 1995 Energy Sector Position Paper issued by the Government, the primary objective for the sector was the rehabilitation and reconstruction of the existing electricity distribution systems, particularly Phnom Penh, and installation of new generation to alleviate the severe shortage and meet suppressed demand for electricity. The Energy Sector Position Paper also proposed to enact a new power sector law favorable to private participation and to establish EDC as an autonomous corporation possessing a separate judicial personality. In this context, the Government expressed its interest in a project where Bank lending would focus mainly on the rehabilitation and reinforcement of Phnom Penh's distribution system while private sector investors would take care of the city's short term generation needs. The Project objectives were also consistent with the IDA's Country Assistance Strategy presented to the Board in June 1995, which called for the Bank's support to Cambodia to focus on: (i) assisting the Government in strengthening its capacity to set clear priorities and implementing development programs; (ii) carrying out further analytical work; and (iii) supporting critical measures that will have a significant and quick development impact on each sector. The Project objectives were clear and responsive to the Borrower's needs and development priorities, but the Project was too ambitious with regard to the expected outcomes in sector reform to be achieved during project implementation. While the Project was intended to be a stepping stone to long term sector objectives, the proposed timetable for the implementation of sector reform proved to be too optimistic and unachievable during project implementation. Although ambitious targets were useful in putting more pressure on the Borrower, a more realistic timetable would have reduced the risk of noncompliance with legal covenants. The Project was an essential part of EDC's least-cost expansion, since without the rehabilitation of distribution networks, together with construction of a new 11 5kV system, efforts in expanding generation would not yield sustained benefits. 3.2 Revised Objective: The objectives were not revised. 3.3 Original Components: (a) Rehabilitation of Phnom Penh's distribution system comprising: (i) construction of about 23 km of 115 kV transmission circuits around the perimeter of Phnom Penh to connect three new primary 115/22 kV substations; (ii) construction of about 100 cct-km of 22 kV underground and overhead lines, 300 km of low voltage (LV) lines, 40 MVA of distribution transformers, 20 MV Ar power factor correction equipment and about 40,000 consumer connections; (iii) provision of support facilities, including tools and equipment, conmmunications for system operations, storage areas and logistics controls; and (iv) improvement of - 2 -  environmental and safety conditions at existing power plants. (b) Technical Assistance (TA) comprising: (i) within EDC, procurement and engineering, importation of management services, strengthening of commercial operations, setting up an environmental unit, implementing the land acquisition and compensation plan (LACP) and training EDC staff; and (ii) within Ministrv of Industry, Mining and Enery (MvME), defining and implementing a new sector structure and regulatory framework, and training staff in energy planning. The above components were fully directed toward achieving the Project objectives and they took into consideration the specific needs and implementation capacity of both EDC and MIME. 3.4 Revised Components: The components were not revised. 3.5 Quality at Entry: Quality at entry was not assessed by QAG. However, it's the ICR assessment that quality at entry be rated as highly satisfactory. The reasons for this assessment follow. Project objectives were consistent with government priorities and the Bank's strategy for the energy sector. As explained in section 3.1 above, the project responded directly to the urgent needs of the Government to re-establish adequate supply of electricity in Phnom Penh while addressing long-tern issues associated to institutional strengthening and sector reform. Project design was technically and economically sound. Feasibility studies were carried out before appraisal and reviewed by Bank technical experts. Both the design and routing of the transmission line (T/L) component was consciously sought to avoid adverse social impact by choosing concrete/wood poles over transmission towers and by re-routing the transmission line along existing roads to have more flexibility in location and minimize disturbance of land respectively. Consequently, the magnitude of adverse social impact under the project was much less than could have been expected in an urban environment. Also, the Project included a best practice element for monitoring and evaluating: a "Performance Plan" between the Borrower (MIME) and Implementing Agency (EDC) which sets forth the key performance indicators to be achieved by EDC during a period of two years as well as the obligations of MIME to assist EDC in achieving that performance. Project ownership was high. Not only was the Project responsive to the Government's development needs, but also it was prepared in close coordination with the client. A Project Management Unit (PMU), headed by a Project Manager, was established within EDC to familiarize staff with the project preparation/appraisal process and later on, to take responsibility for implementation of the Project. Readiness for Implementation. The execution of several TA activities during project preparation, including a UNDP-funded Technical Assistance project for the Power Sector and a Bank-executed PHRD grant, provided a firm analytical basis for project preparation and prepared the Borrower for a larger scale assistance program. Closed coordination with multilateral and bilateral donors, such as ADB and private sector, also increased Borrower's readiness for implementation. The Bank's safeguards policies on environmental and social issues were fully addressed during project preparation. A land and acquisition compensation plan was a condition for appraisal, and funding was provided under the Project to prepare a development plan for an environmental unit within EDC. -3 -  Institutional capacity was a major focus of project preparation and a key development objective of the Project. Extensive knowledge-transfer was provided to EDC and MIME prior and during project preparation to improve their implementation capacity, including on-the-job-training, language training, management assistance and enhancement of EDC's accounting capabilities. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The overall Project outcome is rated satisfactory since the project achieved most of its major relevant objectives and it has resulted in substantial benefits for the population of the city of Phnom Penh and for the institutional development of EDC and MIME. The Project provided electrification to more than 50,000 consumers, thus, increasing residential and commercial consumers from 43,800 in 1995 to 88,334 by the end of September 2000. System losses have been reduced from 33% in 1995 to 16.5% as of October 30, 2000 as new equipment was installed, wholesalers were phased-out and the entire billing and collection system was computerized. The Project, through a comprehensive technical assistance, has provided a solid foundation upon which the power sector can be developed, extended and operated efficiently. Overall, the Project has enabled IDA, through its involvement in financing EDC's program, to play a key role in helping the Govemment in the initial stages of reform, including the establishment of a suitable legal and regulatory framework, a new structure for a strengthened power sector, and the formulation of sound planning and investment decisions. Rehabilitation of Phnom Penh's Distribution System. The main objective of the Project was to re-establish as soon as possible an adequate supply of electricity in the Phnom Penh area. This objective was fully achieved through the rehabilitation of Phnom Penh distribution system, which brought about the following benefits: (i) improvement of the reliability of supply to existing customers; (ii) reduction of system losses and improvement of transmission and distribution efficiency; and (iii) provision for additional distribution capacity, to satisfy rapidly growing demand. Prior to the Project, a large part of Phnom Penh's distribution network was in poor condition and subject to interruptions, failures and high losses. Much of these losses was the result of the "wholesaling" arrangement under which EDC had been operated since 1991. Under this arrangement, EDC would sell some fifty per cent of its energy to 148 "wholesalers" who were responsible to supply low voltage power to about 40,000 consumers. Although this arrangement relieved EDC from the usually cumbersome retail operation, it was a main cause of high technical losses and financial problems since wholesalers' installations were highly inefficient and poorly maintained, and charged rates were much higher than EDC's authorized retail rate. With the implementation of the Project's distribution rehabilitation component, all wholesaler installations were replaced by a new low voltage network and consumer connections. As a result of the phase-out of wholesalers along with other actions taken by EDC, system energy losses have been reduced from 33% in 1995 to 16.5% as of October 30, 2000. Strengthening Sector Institutions. This objective was fully achieved. With the support of technical assistance provided under the Project, EDC has significantly strengthened its project implementation capabilities, management capability and business operations. EDC has now two Project Implementation Units (PMUs), each headed by a project manager; a fully computerized billing and accounting system which is currently managing over 94,000 customers accounts (from 7,000 customers in early 1995); an environmental unit managed and staffed by local personnel; and, external audits have been carried out on EDC's financial and project statements yearly since 1998 (up to date, EDC is in full compliance with the audit report requirements of the Credit Agreement). The "Performance Plan" between EDC and MIME signed at project negotiations is still used as a model to set up annual performance targets for EDC. The Project also was a key support for the transformation of EDC from a ministerial department to an - 4 -  autonomous corporation with a separate juridical personality. As a result of this, EDC now is managed by a Board of Directors responsible for the company's operations. The MIME has also been strengthened by the advise of consultant experts on sector regulation and energy policy and planning, and a comprehensive training program for both management and staff. Power Sector Reform. The project substantially achieved its objective of establishing an adequate policy and regulatory framework as a key condition for efficient development and operation of Cambodia's power sector. A time-bounded action plan for sector reform was agreed on during appraisal, which included inter alia, the establishment of EDC as a separate entity by December 31, 1995, the enactment of the Electricity Act by June 30, 1996, and the establishment of an autonomous regulatory body for the power sector by September 30, 1996. Although the original timetable had to be formally revised in April 1998 to accommodate long delays in its implementation, several key actions of this plan have been completed: (i) EDC was established as a separate legal entity in September 1996; (ii) EDC's Board of Directors became effective in August 1997; (iii) a study on "Corporatization of EDC and Regulatory Framework of the Electricity Sector" was completed in early 1997; (iii) wholesalers were phased out by October 1998; and (iv) the Electricity Act was passed by the National Assembly in November 2000. The Act was promulgated as law in February 2001 and it has established EAC as an independent regulatory body for the power sector. The implementation of the above actions is particularly worthy in a sector environment hampered by weak institutional capacity and political and economic crisis. Private Sector Development. With the progress made in the three fields mentioned above, i.e. the rehabilitation of Phnom Penh's distribution system, the strengthening of MIME and EDC, and solid progress towards the establishment of a legal and regulatory framework, the project was instrumental in providing comfort to private investors in power generation. The improved conditions of the sector resulted in the commissioning of two IPPs which accounted for 50MW of new installed capacity, more than half of the system's current capacity. Financial Objective. Achievement of this objective was modest. Although the Project did not explicitly include a financial objective, a number of financial performance covenants were included in the Project to ensure EDC's financial viability. EDC's financial performance was considered critical in helping to create an environment in which the power sector could be developed and operated efficiently, therefore, the following financial covenants were included in the Project: (i) EDC should reduce its outstanding accounts receivable to the size of three months of sales revenue by December 31, 1998, and to two-and-a-half months of sales revenues by December 31, 1999; (ii) for each Fiscal Year after 1995, EDC should generate revenues from internal sources at least sufficient to cover all of its expenses; and (iii) for each Fiscal Year after 1998, EDC should eam an annual return of not less than 6%. To date, EDC has not been able to comply with any of the above covenants as a result of its precarious financial condition. EDC's poor financial performance is due to factors largely outside the control of EDC, including a 45% devaluation of the Riel since 1997 and insufficient tariffs that do not recover costs. On the operational side, EDC continues to be beset by: (i) an improving, but still a high level of both technical and nontechnical electricity losses, including theft; and (ii) high levels of accounts receivables, particularly Government arrears. As a consequence, EDC is not generating sufficient revenues to enable it to sustain operations, nor enable self-financing of investment for rehabilitation of existing systems or expansion. In order to improve EDC's financial health and allow EDC to meet its financial targets, IDA along with other donors urged the Government to take corrective actions. A tripartite meeting between MEF, NIAME and donors (ADB and IDA) was held in May 2000 to discuss and agree upon a remedial action plan. In June 2000, the GOC endorsed an Action Plan for EDC's Financial Recovery. The Plan includes key measures for restructuring of domestic and commercial tariffs, reduction of EDC's distribution losses, and reduction of -5-  EDC's account receivables. To date, many key actions of the Plan have been implemented as indicated below: 1. Restructuring of tariff for domestic and commercial consumers: according to the Plan, household tariffs will be restructured according to usage level (demand charges) while hotel tariffs will be reduced to the same rate as other commercial consumers, and industrial tariffs will be reduced to attract more industrial consumers. Govermnent's approval of the new tariff structure was issued on August 9, 2000. The revised tariffs have become effective from August 1, 2000. The new structure is shown in Table 10.2. 2. Reduction of EDC's distribution losses: according to the Plan, transmission and distribution losses will be reduced from 24.4% (1999) to 20% in FY2000, 19% in FY2001, 18% in FY2002, and 17% thereafter. As of October 30, 2000, EDC's distribution losses has come down to 16.5%. 3. EDC's Accounts Receivables: measures to reduce accounts receivables include General Measures for improving billing collection and debt recovery; and Special Measures to reduce the accounts receivables pertaining to Government agencies. Under Special Measures, the Plan calls for payment to EDC of 40.6 billion Riels in government arrears by FY2001 and the issue of an executive directive to the Government Ministries and Departments requesting timely verification and payment of electricity. As of September 2000, Ministry of Economy and Finance (MEF) has already released 31.4 billion Riels to EDC and a draft detailed directive regarding timely verification and payment of electricity by Government Ministries and Departmnents has been submitted to the Prime Minister's office for approval. 4.2 Outputs by components: Rehabilitation of Phnom Penh's Distribution System. The construction, under the Project, of 23 km of 115kV transmission lines around the perimeter of Phnom Penh to interconnect three new 115/22/15kV substations was carried out in accordance with appraisal estimates and it has increased the quality of power supply. A total of 50,992 consumer connections were completed under the Project compared with 40,000 connections estimated during appraisal. The number of EDC's consumers has climbed dramatically from 43,800 in 1995 to 88,334 as of September 2000. In addition, the construction of about 144 km of 22 kV MV lines and 400 km of LV lines have resulted in the improvement of reliability of supply to existing customers as well as improvement of transmission and distribution efficiency. System energy losses have been reduced from 33% in 1995 to 16.5% as of October 2000 mainly as a result of rehabilitation of the distribution system and the phase-out of wholesalers by EDC. Under the Project, EDC also acquired tools, vehicles, radio equipment and a telecommunications system which has facilitated EDC's capacity to monitor system losses and imnproved communications within the central and new built grid substations. A new system control established under this Project has allowed EDC to start monitoring the quality of services by recording interruptions of power supply. Currently, this system control is not operational because of technical problems caused by equipment breakdowns in GS I and GS2 grid substations. EDC is addressing this problem directly with the contractor (LG Engineering) by asking them to fix the problem while the warranty period is still in effect. Technical Assistance. An amount of US$600,000 was provided under the Project for technical assistance to MIME to support legal and regulatory reform. This has been used most effectively for the following activities: (i) engaging local legal counsel to advise MI1ME on drafting and discussion of the Electricity Act; (ii) MIME's Energy Advisor to provide it with advice on energy policy and sector reform; (iii) related advisory services to support MIME in establishing an Electricity Authority of Cambodia (EAC) as the power sector regulator; and (iv) training program for MIvME's staff, including senior management, in the areas of energy planning, economics, financial management, resource management, computer accounting, and English. Technical assistance to EDC (about US$3.0 million) was also implemented satisfactorily, and - 6 -  it comprised the following activities: (i) consulting services for project management and design, technical support, procurement activities, and supervising construction and contractors; (ii) consulting services for establishing an environmental unit within EDC and preparing a due process manual for the project's land acquisition and compensation plan; (iii) computerization of the accounting, billing and collection services; and (iv) training for EDC's staff in contract supervision, project management, and grid operations, including off-site training on HV network operation and maintenance at EGAT (Thailand) and EdL (Lao PDR). 4.3 Net Present Value/Economic rate of return: The economic rate of return of the Project was calculated following the same methodology of the appraisal using actual data for costs and benefits for the period 1995-2000 and a forecast for sales for 2001 onwards. The analysis was done on the basis of the incremental economic cost and benefit streams associated with the Project. The cost stream comprises: (a) investment in the 115 kV line and 115/22 kV substations under the Project; (b) investments in the downstream distribution network to support the demand growth and refurbishment of the existing system; (c) incremental cost of energy purchased from IPP suppliers and produced by EDC's own plant associated with the Project; and (d) incremental operation, maintenance, billing and administration costs due to the Project. The principal benefit stream is associated with incremental electricity sales supplied by the Project; additional benefits arise from the reduction of technical losses, and improvements in the reliability of the system as a whole. The flow of incremental electricity demand is computed for six years, with a one-year time lag after commencement of the first investment in 1995. Energy sales consider actual values for the period 1995-2000 and an annual increase of 10% for the year 2001. Electricity sales are valued at the present average retail tariff of 15.5c/kWh, thus ignoring consumer surplus. The improvement in the system reliability is based on the impact of the project during the last two years (attributed mainly to the 115kV transmission and associated substations) valued as reduced unserved energy at 18c/kWh, which is the estimated full cost for self-generation in Phnom Penh. Energy losses reflect actual values for the period 1996-2000 and an estimate for 2001 based on the last three months. Generation cost is estimated at 9.2c/kWh, which is the average cost of supply excluding taxes; incremental operation and maintenance costs are estimated at 3% of the capital cost of the investment; incremental billing and administration cost are assessed at 5% of incremental sales. The revised internal economic rate of return (IERR) of the project is 21.8%, slightly higher than the appraisal estimate of 21.5%. The project's net present value is estimated at $25 million. Although actual incremental sales were lower than those foreseen at appraisal by 9%, the project's economic performance was favored by 16% savings in capital costs and a larger market penetration (50% of Phnom Penh consumers instead of 42%). These indicators do not include an investtnent of $1.6 million incunred by EDC to prepare the 115kV system for the connection of a future private power plant. In case these investments are included the project's IERR would be 20.8%. 4.4 Financial rate of return: Financial rate of return for the project was neither calculated at project appraisal nor at project completion. 4.5 Institutional development impact. Overall, the institutional development impact of the Project is rated substantial. Prior to the Project, EDC was a very weak utility that lacked skilled management and technical staff. As a result of TA and training provided under the Project, EDC's management and technical skills have improved considerably: (a) two Project Management Units (PMU) have been established within EDC, each headed by a Project Manager; (b) manual accounting and billing has been replaced by a fully computerized accounting, billing and -7 -  collection system, and (c) an environmental unit has been established within EDC. In addition to expanding its own capabilities, EDC headquarter staff is now able to assist provincial branches (i.e. Siem Ream and Sihanoukville) in the use of computers for billing and accounting functions. The project was equally important for the institutional strengthening and development of MIME as a policy maker. TA provided under the project allowed MIME to defme a suitable structure for the sector and set up an appropriate regulatory framework. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The Asian financial crisis was a significant extemal factor beyond the control of the government and EDC, which resulted in the sharp devaluation of the Riel and SDR against the US Dollar. Due to the SDR depreciation, the credit amount went down from US$40 million to about US$35 million. The political crisis of 1997-98 paralyzed all Bank activities in the country and interrupted the policy dialogue for almost a year. Cambodia lost its U.N. membership and fell into a political turmoil for several months after the crisis in July 1997. A new general election took place in July 1998 after which, a coalition government was forrned in November 1998. With this election satisfactorily completed, Cambodia was able to regain its U.N. seat and country conditions returned to normal. The Bank resumed dialogue on sector reform only after the one-year interruption due to this political crisis. 5. 2 Factors generally subject to government control: Pace and scope of energv sector reform. In spite of clear commitment of the Borrower to energy sector reformn, implementation of key actions fell short of appraisal expectations mainly because of delays caused by political instability in the country and lengthy rounds of consultations required prior to any legislative action. The delays in achieving these actions resulted in the government's default with respect to several dated covenants of the credit agreement. However, the process to achieve these actions ensured a great deal of consultation and debate within the government, and most important, it ensured full ownership of the reform process. After a slow but steady, continuous process towards sector reform, a clear sector policy has been installed and an appropriate regulatory and legal framework has been approved. A high level of government accounts payable to EDC has remained a constant problem to EDC's financial health since project preparation. Agreement was reached at project negotiations that the government will take all measures necessary to assist EDC to collect the outstanding account receivables, and that EDC will reduce these to not more that 2.5 months of sales revenue by December 31, 1999. A plan of action to achieve these results was finally submitted to IDA in 1997 but was not implemented. However, the Government has made a firm commitment to address this issue through the submission of a new action plan in June 2000 to reduce EDC's accounts receivables. As explained in Section 4.1 above, this plan is currently under implementation. 5.3 Factors generally subject to implementing agency control: EDC's efficient proiect management allowed the utility to complete the Project within budget in spite of the loss of about US$5 million from credit proceeds due to the depreciation of the SDR during the 1997 financial crisis. A project team, headed by the manager of the PMU, was formed in EDC to coordinate project implementation. This team was able to manage a very good competitive procurement process and keep project disbursements in line with implementation. Although EDC had some difficulties during the initial stages of project implementation with the timely release of counterpart funds by MOF, these difficulties were later resolved with a closer and more open communication between EDC and MOF's senior management. -8 -  Although the scale of land acauisition was small, the issue of comnensation rendered some problems during project implementation. This was mainly due to the absence of applicable law on land acquisition/expropriation prior to the Project, and limited experience and training of local government agencies and EDC in dealing with land acquisition and compensation issues. To address these problems, IDA provided assistance to EDC during project preparation to develop a policy framework and a plan for land acquisition and compensation (LACP). With the government's approval of the policy framework, the timetable for the implementation of the LACP was agreed upon during project negotiations. During implementation, the Project provided TA for consulting services to help EDC implement the LACP including the preparation of a Due Process Manual, and to further develop EDC's policy framework, procedures and implementation arrangements for land acquisition and compensation. 5.4 Costs andfinancing: Estimated total project cost at appraisal, based on December 1994 price levels, was US$45.7 million, of which: (i) US$ 40 million was to be financed by the Association; and (ii) US$5.7 million to be financed by EDC/Government equity. The actual project cost (including interest during construction) amounted to US$ 41.7 million, which was US$4 million or 8.7 % lower than the appraisal estimate. The total IDA financing was US$35.2 million compared with the appraisal estimate of US$40 million due to the depreciation of the SDR against the US$ during the financial crisis. Actual government financing amounted to US$6.5 million. The lower project cost was achieved while completing all physical and institutional components primarily because of a very good competitive bidding process that resulted in lower bid costs for most of the equipment and installation works. 6. Sustainability 6.1 Rationaleforsustainability rating: Sustainability is likely because there is confidence that EDC would maintain the achievements generated by the Project and follow up the reform process initiated under the Project. In addition, the proposed Rural Electrification and Transmission project (FY02) would further support the Government's continued efforts to create an adequate environment for an efficient development and operation of Cambodia's power sector, including direct private participation and overall commercialization of the sector. Financial sustainability of EDC is also expected through the implementation of the Action Plan for EDC's financial recovery announced by the GOC in June 2000, which includes: (i) restructuring of tariff for domestic and commercial consumers (a new tariff structure became effective on August 1, 2000), (ii) reduction of EDC's distribution losses from 24% in FY99 to 19% in FY01 (distribution losses were already down to 16.5% as of October 30, 2000); and (iii) reduction of EDC's account receivables (MEF has already paid off Riel 31.4 billion to EDC in June, 2000). 6.2 Transition arrangement to regular operations: On a technical level, EDC's current organization is fully capable of operating and maintaining the Project investments and providing new service connections. Further investments on power transmission will continue to be a priority of the government as new capacity additions and interconnections with other systems are urgent to accommodate increasing power demand, reduce electricity costs and remove infrastructure bottlenecks. EDC has established two project offices dedicated to implementing externally-funded projects. Both offices are staffed with full time project managers and local staff who are accountable for procurement, disbursement and supervision of civil works. In addition, the proposed Rural Electrification and Transmission project (FY02) would consolidate the power sector regulatory reforms achieved under the Project by providing TA for the following activities: (i) strengthening the policy making capability of MIME; (ii) improving EDC's commercial and financial g9-  performance, and (iii) providing training for the new regulator (EAC). 7. Bank and Borrower Performance Bank 7.1 Lending: The Banks performance during project identification, preparation and appraisal is considered highly satisfactory because of the reasons explained in section 3.5 above ("quality at entry"). Since the initial stages of project identification throughout Board approval, the Bank provided considerable assistance to the Borrower in both the technical, institutional, and sector policy aspects of the Project. The Bank kept continuous communication with EDC during all stages of project lending and made itself readily available for further assistance. 7.2 Supervision: Project supervision is rated highly satisfactory. IDA carried out a total of 12 visits to the field during a period of 5 years of project implementation. During this time, IDA gave timely advise to EDC and MIME on areas of special concem that were affecting implementation of the project, particularly on project management, EDC's finances, and policy planning. During the last year of the Project, supervision was carried out from the field as the project's task team leader moved was relocated to the World Bank office in Vientiane. Therefore, communications between IDA, EDC and the Borrower became even closer. Another positive factor in IDA supervision was the continuity in task management (the project's team leader responsible for project preparation and appraisal was the same throughout project implementation). This continuity in staff permitted a better understanding of the client's needs, and it increased Borrower's confidence and cooperation with IDA. 7.3 Overall Bankperformance: Overall Bank performance is rated highly satisfactory. It should be noted that this assessment is consistent with the comments on Bank performance made by EDC in their own ICR. Borrower 7.4 Preparation: Performance of the Borrower during project preparation is rated satisfactory. The GOC showed a strong interest for the Project during preparation and appraisal, and undertook the necessary upfront actions to meet all the Bank's conditions for Board presentation and project effectiveness, including tariff increases, writing off Government arrears, and levying charges to previously unbilled consumers. 7.5 Government implementation performance: Overall, Government's performance during project implementation is rated satisfactory. The major shortcoming in Borrower's performance was the delay in compliance with several legal covenants regarding the implementation of the sector reform timetable. However, these delays did not have an adverse impact on the project outcome as the government after all carried out many of the actions included in the agreed Action Plan for sector reform (see Section 4.1 above). Through these actions, substantial progress has been made in reforming the sector and setting up a new regulatory framework. For instance, the approval of the Electricity Act by the National Assembly in November 2000 and its enactment as a Law in February 2001, has paved the way for the establislunent of the Electricity Authority of Cambodia (EAC), increased private participation in the sector, and eventual privatization of EDC. Timely release of counterpart funding was a concem during early stages of project implementation, but this issue was later resolved through better communication between MEF and EDC's senior management. - 10 -  7.6 Implementing Agency: EDC's performance is rated highly satisfactory considering that the Project was the first IDA operation in the sector and EDC's staff skills were very limited at the start of the Project. Albeit these limitations, EDC carried out implementation of the Project within budget and without major delays. From project preparation to project completion, EDC showed a strong commitment to the Project and made efforts to implement it in the most efficient and timely manner. The major shortcoming in EDC performance has been its financial performance. However, EDC's precarious financial condition is not the result of its own actions alone but rather, it's the result of several factors beyond EDC's control, including the devaluation of Riel due to the financial crisis, inadequate tariff set by the Government, and large accounts receivables from Government agencies. These factors have made EDC unable to generate sufficient revenues to sustain operations nor to self-finance investments for rehabilitation of existing systems or its expansion. The government has proposed an action Plan for EDC's Financial Recovery which is currently under implementation. 7.7 Overall Borrower performance: Overall, Borrower performance is rated satisfactory. Shortage of counterpart funds and delays in compliance with legal covenants did not have a negative impact on project implementation. 8. Lessons Learned Based on the implementation experience of the Phnom Penh Power Rehabilitation Project, the following lessons can be learned and applied in future projects: (i) Consulting services for project management should be available to the PMIU until all civil works have been fully completed, tested and commissioned to ensure that Bank funding and assistance is available in the case of failures during any of these events. Under the Project, termination of these consulting services prior to testing and commissioning of the 11 5kV substations works meant that EDC was left alone to bring up claims of incomplete works and equipment breakdown to the Contractor. Resolution of these issues has proved to be a heavy burden on EDC's staff time and resources. (ii) Current Bank's procurement practices with regard to conflict of interest could, in some cases, interfere with efficient project implementation in that mandatory selection of different consulting firms for preparation and supervision reduces ownership of bidding documents and continuity in project management. (iii) Collaboration between the Borrower and the Implementing Agency is more effective when there is open communication and clear understanding of the different roles between the different entities involved, particularly, at the senior management level. (iv) Turn-key contracts are easier to manage but they don't allow for substantive technology transfer or on-job training for local staff. Therefore, when selecting contract types, attention should be given to the implementation capacity and technology transfer needs of the Implementing Agency in addition to administrative efficiency; and (v) Implementation of a land acquisition program needs a firm compensation policy that allows the Implementing Agency to apply uniform standards for compensation. - 11 -  9. Partner Comments (a) Borrower/implementing agency: The following are extracts of EDC's own ICR. The full report is in the Project Files. I. Achievement of Proiect Obiectives Overall Results. Project objectives were fully achieved and the project resulted in substantial benefits for the population of the city of Phnom Penh and for the institutional development of EDC. The project provided electrification to more than 47,000 new consumers, thus, increasing commercial activities substantially. A new control system purchased under this project has improved reliability in the distribution network. The project has provided a finn base upon which the power sector can be developed, extended and operated efficiently through a comprehensive technical assistance program to support sector reform. Improving System Efficiency and Quality Supply: The construction of 115 kV Transmission lines linking 3 Grid Substations has increased the quality of power supply. Replacement of old and faulty meters and better monitoring of system losses have resulted in the reduction of transmission and distribution losses in Phnom Penh area. Under the loss reduction program, EDC also acquired tools, vehicles, radio equipment, and a telecommunications system that has facilitated EDC's capability to monitor system losses and improved communications within the central and new built grid substations. Institutional Development:. Strengthening of MIME and EDC's institutional capabilities were upgraded through the implementation of several technical studies and training activities and also through a "technical cooperation arrangement" with EGAT of Thailand and EDL of Lao Democratic. I1. ImDlementation Elxerience and Results Overall, project objectives were achieved and the project resulted in substantial benefits for the population of the central city KOC. The project also provided new control system and reliability of distribution networks. Commercial activities have been increased substantially. In addition, the project provided comprehensive technical assistance program and consulting services for EDC and MIME to support its institutional development. EDC was established as separate entity by issue of Royal Decree in 1996. Whole Sellers were phased out in 1998. The billing system was implemented totally by this project. EDC achieved some improvements in the reduction of distribution losses through the acquisition of equipment and tools that facilitated EDC capability to monitor system losses. The implementation of all contracts awarded in this Project have been accomplished satisfactorily except for LG Engineering (Contractor for Lot 2: Grid Substations) whose work quality is poorly performed. It has been delayed four months. The credit closing date was extended six month from its original date of December 30, 1999 to June 30, 2000 in order to complete additional extensions of new line bays at GS 1. Disbursements under the credit totaled SDR25.8 million equivalent compared with the original credit amount of SDR25.8 million. The undisbursed balance is nil after the balance in the Special Account is fully recovered. The estimated project cost at appraisal, based on late 1995 prices, was US$ 45.6 million, of which: (a) US$ 40 million was to be financed by the Association, (b) US$ 5.6 million to be financed by MEF. The actual project cost was US$ - 12 -  41.69 million (including Cat 3&4) which is slightly lower (by about 8.71%) than the appraisal estimate. The lower cost was achieved mainly because lower bid costs for most of the equipment and installation. The major factor affecting this Project is the devaluation of the SDR due to the Asian economic crisis. About US$ 5 million was lost in the overall project budget. III. Bank Performance Overall, the Bank's performance during this project is rated as highly satisfactory. The identification and preparation of the project were carried out smoothly and capitalized on three factors: (i) EDC's experience with implementation of the project; (ii) technical assistance provided to assist EDC and (iii) the decrease losses of electricity power. Bank's appraisal of the project is considered highly satisfactory since the Bank provided considerable assistance to the Borrower in both the technical, institutional and financial aspects of the project. The Bank kept continuous communication with EDC during this stage of project preparation and made itself readily available for further assistance. Project supervision is also considered highly satisfactory. The Bank carried out a total of 12 visits to the field to review implementation of the project and gave full advises to EDC to follow the Bank Guide Lines and other activities concemed. Also, during project implementation, the Bank assisted EDC with the audit review of the Special Account, EDC Account and accompanying Statement of Expenditures (SOE) by independent auditor. IV. Borrower Performance The Government of Kingdom of Cambodia, as the Borrower of the Project, showed a strong interest in the Project during preparation and appraisal. Government perfomiance during project implementation is rated satisfactory. Performance of EDC, as the Implementing Agency of the Project, can be considered satisfactory from project preparation to project completion. EDC has demonstrated its commitment and ownership of electrification projects through its successful 5-year collaboration with IDA. It has established two Projects Offices dedicated to iniplementing projects, which is staffed with experienced engineers who manage procurement, disbursement and implementation and has appointed a full-time Projects Manager. During project preparation, EDC worked closely with consultants to prepare the detailed engineering design and project implementation plan. EDC along with KOC took key actions that enable the approval of the project, such as, tariff increases, writing off Govenmment arrears, and levying charges to previously unbilled consumers. EDC was successful in arranging the details of a technical cooperation with EGAT & EDL and training program for its staff. V. Summary Assessment of Outcome Given the facts that the project objectives were overall achieved, the project resulted in substantial benefits for only one part of population of the city and project implementation was carried out satisfactorily from a technical and cost viewpoints, the outcome of the project is rated satisfactory. This rating is given mainly on the basis of the actual results achieved under the project and EDC's commitment to the objectives of the project. EDC's precarious financial conditions, although significant enough to threat sustainability of the project achievements, is mostly a result of the current macroeconomic situation which, in addition of being - 13-  a factor exogenous to the project, is showing signs of some improvement already. The exchange rate has remained stable for the late few years as result of some measures - though not sufficient - taken by GOC. (1) Cofinanciers: There were no cofinanciers under the Project. (c) Other partners (NGOs/private sector): Not applicable. 10. Additional Information Table 10.1 EDC's Financial Performance Indicators 1995 1996 1997 1998 1999 2000 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual Electricity Sales 116.7 105.1 159.3 183.4 223.8 230.9 274.8 282.3 327.4 284.2 376.1 415.1 (GWh) Net Income (Ris -4.3 -2.6 -5.4 -8.4 -13.2 -13.6 -2.7 -50.6 10.2 -4.1 28.9 n.a. Billion) ROR on Fixed -11.6 -3.0 -4.0 -5.0 -3.9 -6.0 -0.6 -12.0 4.5 -1.0 7.4 n.a. Assets (%) I_II_ I I I_I I Current Ratio 2.6 0.9 2.11 1.41 1.91 1.1 1.8 0.6 1.6 0.8 2.7 n.a. (times) Source: EDC's Financial Statements n.a.: not available Table 10.2 Revised tariff structure (effective from August 1, 2000) Category Riels/kWh * Domestic 50 kWh per month 350 From 51 to 100 kWh per month 550 More than 101 kWh per month 650 * Government 700 * NGO, Foreigners 800 * Hotel & Guest Houses Small 650 Medium 600 Big 500 * Commercial Small 650 Medium 600 - 14 -  Big 500 * Industry Small 600 Medium 550 Big 500 * Medium Voltage 480 Source: Government's Action Plan for EDC's Financial Recovery. - 15 -   Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: tnUoato x i *t.d 4t PS AJ Eu .sMbUm. Rehabilitation of Phnom Penh's Distribution System: (i) 1995:24% (i) 1995:24% (i) Reduced system energy loses 1996: 22% 1996: 26% (ii) Phase out wholesalers 1997:19% 1997: 24% 1998:17% 1998:20% 1999:15.5% 1999: 24% (ii) Acion plan to phase out wholesalrs 2000 (as of 9/30): 16.5% would be Implemented from August (ii) Wholesalers were phased out 1996 to August in 1998. Power Sector Development Revised Dates: (i) Establishment of EDC as a (i) September 30, 1996 (i) September 30, 1996 separate entity (ii) Enactment of Electricity Act (ii) February 27, 1999 (ii) Ebcricity Act approved by (iiI) Establishment of an autonomous (Iii) August 31, 1999 National Assembly on regulatory body November 6,2000. Royal Decree expected in Feb.2001 (iii) July/August 2001 Strengthen Sector Institutions: (i) Acion Plan to address problem of (i) March 31,1998 (i) June 2000 EDC account receivables. (revised date) (ii) Reduced EDC account (ii) 1996:5 months (ii) 1996:4.6 months receivables (months of sales 1997:4 months 1997:4.7 months revenue) 1998: 3 months 1998: 4.9 months (iii) EDC to achieve a satisfactory 1999:2.5 months 1999:5.8 months annual rate of retum. (iii) not less than 6% by (iii) rate of return was -1 % by the December 31, 1999 end of FY1999. Promote private sector involvement (i) Enactment of Electricity Act (i) February 27, 1999 (i) Electricity Act approved by National Assembly on November 6,2000. Royal Decree expected in Feb. 2001 1/ Although some of these indicators were not included in the last PSR, they have been included in this table for completeness and consistency purposes. - 16 -  Output Indicators: Rehabilitation of Phnom Penh's Distribution System: (i) 115 kV Transmission Lines (km) (i) 23 km (i) 23 km (ii) 115 kV Grid-substations (sites) (ii) 3 sites (250 MVA) (ii) 3 sites (250 MVA) (iii) 22 kV MV Lines (km) (iii) 100 cKm (iii) 144 cKm (iv) 22/0.4 kV Distribution Substations (iv) 125 S/S (iv) 137 S/S (v) 22 kV Distribution Transformers (v) 40 MVA (v) 93 MVA (vi) 0.4 kV LV Lines (km) (vi) 300 cKm (vi) 400 cKm (vii) Customers connections (vii) 40,000 customers (vii) 50,992 customers Technical Assistance to EDC: (i) December 1995 (i) May 1996 (i) Recruitment of Engineering (ii) December 1996 (ii) Completed in 1997. All accounting, Consultant (iii) December 1996 billing and collection services are fully (ii) Upgrading of the Billing and (iv) April 1996 computerized. Accounting System. (iii) Completed. (iii) Development Plan for establishing (iv) Manual completed. It assisted an Environmental Unit within EDC. EDC in carrying out the LACP in a (iv) Preparation of a Due Process satisfactorily manner. Manual for the implementation of the Land Acquisifion and Compensation Plan. Technical Assistance to MIME: (i) Regulatory Framework and (i) December 1996 (i) Completed in late 1997. The study Corporatizaton Study (Phase I & II) (ii) Not available helped the GOC in defining options for (ii) Consulting Services of a Regulatory (iii) Not available sector structure and regulatory Advisor (iv) Not available framework, and the formulation of an (iii) Consulting Services of an Energy action plan for establishing EDC as an Advisor autonomous corporation. (iv) Training Program for MIME staff on (ii) Completed. Consultant provided Energy Economics, Resource expert advice on the new regulatory Management, Energy Planning, framework and assisted MIME in Computer, and English. preparing for the implementation and initial operatons of the proposed regulatory agency (EAC). (iii) Completed. Consultant assisted MIME in developing energy policy and implementing the Ministry's work program. (iv) Completed. 88 staff (manager and non-manager level) received training under the Project. End of project End of project. Although some of these indicators were not included in the last PSR, they have been included in this table for completeness and consistency purposes. - 17-  Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) ._ _. . . . . .E . Edlt. Apprleal ,,~4~ ee ost 'y Cop.t ~ ~ni A. 115 kV Transmission System 115 kV Transmission Lines 1.96 2.21 1.13 115/22 kV Substations 10.07 9.85 0.98 B. Distribution System Rehabilitation 22 kV Rehabilitation 8.77 8.91 1.02 LV Construction and Consumer Services 14.62 11.83 0.81 C. Operational and Construction Support Facilities Operational and Commercial Equipment 2.53 0.43 0.17 Stores and Logistics 0.61 0.54 0.88 Enviommental Enhancement Safety 0.40 0.04 0.1 D. Technical Assistance 3.66 3.26 0.89 E. Land Acquisition and Compensation 0.33 0.44 1.33 F. EDC Administration 0.19 0.19 1 Total Baseline Cost 43.14 37.70 Total Project Costs 43.14 37.70 Interest durng construction 2.52 3.99 1.58 Total Financing Required 45.66 41.69 - 18 -  Annex 2. Project Costs and Financing (continued) Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) E.Wdtur I C* 00 i gOr N CBit 0 ;;;i0| N.B$. To X! tal Cos 1. Works 17.90 0.50 0.50 0.00 18.90 (15.50) (0.40) (0.40) (0.00) (16.30) 2. Goods 20.20 0.00 0.00 0.00 20.20 (20.20) (0.00) (0.00) (0.00) (20.20) 3. Services 0.00 0.00 3.50 0.00 3.50 (0.00) (0.00) (3.50) (0.00) (3.50) 4. Land Acquisition and 0.00 0.00 0.33 0.00 0.33 Compensation (0.00) (0.00) (0.00) (0.00) (0.00) 5. EDC Administration 0.00 0.00 0.19 0.00 0.19 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00 Total 38.10 0.50 4.52 0.00 43.12 (35.70) (0.40) (3.90) (0.00) (40.00) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) E_ Jd cete0ory 1GB NJBA. 'T ot Cost 1. Works 16.93 0.54 0.00 0.00 17.47 (15.16) (0.38 0.00 0.00) (15.54 2. Goods 16.30 0.00 0.00 0.00 16.30 (16.30) (0.00) (o. (0.00 (16.30) 3. Services 0.00 0.00 3.32 0.00 3.32 (0.00) (0.00) (3.32) (0.00) (3.32) 4. Land Acquisition and 0.00 0.00 0.00 0.00 0.00 Compensation (0.00) (0.00) (0.00) (0.00) (0.00) 5. EDC Administration 0.00 0.00 0.60 0.00 0.60 (0.00) (0.00) (.) (0.00) (0.00 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (O.00L (0.00) (0.00) Total 33.23 0.54 3.92 0.00 37.69 (31.46) (0.38) (3.32) (0.00) (35.16) Total excludes IDC. Actual land acquisition and compensation costs are included unde EDC administration costs. "Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. 2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local govemment units. - 19 -  Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate i______________ IDA Govt. CoF. IDA Govt i CoF. IDA i Govt. CoF. A. 115kV Transmission 11.50 0.71 12.21 11.15 0.53 12.06 97.0 74.6 98.8 System B. Distribution System 21.94 1.46 23.40 19.45 1.67 21.12 88.7 114.4 90.3 Rehabilitation C. Operational and 3.34 0.14 3.48 0.85 0.16 1.01 25.4 114.3 29.0 Construction Support Facilities D. Technical Assistance 1.74 0.67 2.41 2.80 0.18 2.98 160.9 26.9 123.7 (EDC) I E. Technical Assistance 1.49 0.17 1.66 0.53 0.00 0.53 35.6 158.3 31.9 (MIME) Interest During 0.00 2.52 2.52 0.00 3.99 3.99 0.0 158.3 158.3 Construction Total Project Financing: 40.01 5.67 45.67 35.16 6.53 41.69 87.9 115.2 91.3 -20 -  Annex 3: Economic Costs and Benefits I nvest nrnt Year Tot al I ncr erent I Nbn- Tech Tot al I ncr erent I Syst em Rel i abi I i t y Pr ogr am Forecast Sal es Losses Ener gy Pur chases ------------------- i n Base Year Sal es ( Il l egal Losses a T Xtra Did Cbst s Oonsrrpt n) Served ( $n) ( GM) (GMS) (0,4 (0, (GM3\) (hrs pa) ( G<M) 0.0 1994 111.9 0.0 0.0 0.0 1.0 1995 93.9 0.0 0.0 28.5 0.0 0.0 5.7 1996 170.2 76.3 0.0 21.4 97.0 0.0 9.3 1997 218.4 124.5 0.0 21.5 158.6 0.0 9.3 1998 265.7 171.8 0.0 20.5 216.0 251 0.0 5.3 1999 264.2 170.3 0.0 24. 9 226.9 1.9 2000 329.3 235.4 0.0 15.7 279. 1 220 0.9 2001 362.2 268.3 0.0 15.3 316. 7 60 5.8 2002 398.4 268.3 0.0 15.3 316.7 60 5.8 2003 438.2 268.3 0.0 15. 3 316.7 60 5.8 2004 482. 1 268.3 0.0 15.3 316.7 60 5.8 2005 268.3 0.0 15.3 316.7 60 5.8 2006 268.3 0.0 15.3 316.7 60 5.8 2007 268.3 0.0 15.3 316.7 60 5.8 2008 268.3 0. 0 15.3 316. 7 60 5.8 2009 268.3 0.0 15.3 316.7 60 5.8 2010 268.3 0.0 15.3 316.7 60 5.8 2011 268.3 0.0 15.3 316.7 60 5.8 2012 268.3 0.0 15.3 316.7 60 5.8 2013 268.3 0.0 15. 3 316. 7 60 5.8 2014 268.3 0.0 15.3 316.7 60 5.8 2015 268.3 0.0 15.3 316.7 60 5.8 2016 268.3 0.0 15.3 316.7 60 5.8 2017 268.3 0.0 15.3 316.7 60 5.8 2018 268.3 0.0 15.3 316.7 60 5.8 2019 268.3 0.0 15.3 316.7 60 5.8 2020 268.3 0.0 15.3 316.7 60 5.8 2021 268.3 0.0 15. 3 316.7 60 5.8 2022 268.3 0.0 15.3 316.7 60 5.8 2023 268.3 0. 0 15. 3 316. 7 60 5. 8 2024 268.3 0.0 15.3 316. 7 60 5.8 2025 268.3 0.0 15. 3 316. 7 60 5.8 2026 268.3 0.0 15.3 316.7 60 5.8 2027 268. 3 0. 0 15. 3 316. 7 60 5. 8 2028 268.3 0.0 15.3 316. 7 60 5.8 2029 268.3 0.0 15.3 316.7 60 5.8 2030 268.3 0.0 15.3 316.7 60 5.8 2031 268.3 0.0 15.3 316.7 60 5.8 2032 268.3 0.0 15.3 316.7 60 5.8 2033 268.3 0.0 15.3 316.7 60 5.8 2034 268.3 0. 0 15. 3 316. 7 60 5.8 2035 268.3 0.0 15.3 316.7 60 5.8 - 21 -  cst s ($ n neiits ($ ) Wt Year Se es --- --- ----- - --- nef it S r eamf or I nvest nr I ncr enent I I ncr erwn I I ncr enntl I I ncr enent al I ncr enntal Syst ern Syst em St r eam R i abi I i t y GlM Rrchases B I/5g Adhi n Sa es Q her a T Loss nef i t s ((n+Trans) Obnsrptn I nr overt Feduction ($ r) (G) 0.0 0.0 1994 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (1. 0) 1995 94 5.7 0.2 4.5 0.3 5.9 0.0 0.0 1.1 (3.6) 1996 170 9.3 0.5 7.3 0.5 9.6 0.0 0.0 1.1 (6.8) 1997 218 9.3 0.8 9.9 0.7 13.3 0.0 0.0 1.2 (6.1) 1998 266 5.3 0.9 10.4 0.7 13.2 0.0 0.0 0.6 (3.5) 1999 264 1.9 1.0 128 0.9 18.2 0.0 0.2 1.8 3.7 2000 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2001 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2002 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2003 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2004 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2005 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2006 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2007 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2008 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2009 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2010 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2011 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2012 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2013 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2014 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2015 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2016 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2017 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2018 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2019 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2020 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2021 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2022 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2023 264 1.0 14.6 1. 0 20.8 0.0 1.0 1.9 7.1 2024 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2025 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2026 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2027 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2028 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2029 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2030 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2031 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2032 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2033 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2034 264 1.0 14.6 1.0 20.8 0.0 1.0 1.9 7.1 2035 264 EFR 21.8% NI. 10% 25.44 12% 16.83 15% 8.61 18% 3.66 - 22 -  Annex 4. Bank Inputs (a) Missions: ste of Project(C:cle No. of Persons and Spc ialty - e _ating e I2 EBonomjlsts; I FMS, etF.)M Ime tieu Devplmt ii t Month/Year Count I Specialty Progress. Ojietive Identification/Preparation April 1994 2 1 EC, I PE. July 1994 5 1 EC, I PE, 1 ES, 1 RF, I FA October 1994 1 1 EC Appraisal/Negotiation February 1995 5 2 EC, I PE, 1 RS, 1 FA Supervision November 1995 1 1 EC S S February 1996 2 1 EC, 1 PMS June 1996 2 1 EC, 1 PMS December 1996 2 1 EC, IFA S S January 1997 1 1 EC November 1997 3 1 EC, 1 FA, 1 SO S S February 1998 1 1 EC December 1998 4 2 EC, 2PE S S February 1999 1 1 EC S S November 1999 2 1 EC, 1 FA S S April 2000 2 1 EC, FA S S ICR November 2000 2 1 EC, 1 OA S S Note: EC=Energy Economist; PE=Power Engineer; ES=Environmental Specialist; RS=Sector Reform Specialist; FA=Financial Analyst; RS=Resettlement Specialist; OA=Operations Analyst; PMS=Project Management Specialist; SO=Sociologist. (b) Staff: Stage of iroject le ActtEstimate o. ;Staff ee t U:S (:''000) Identification/Preparation 109.2 136.5 Appraisal/Negotiation 60.5 135.7 Supervision 87.6 300.3 ICR 6.2 25.3 Total 263.5 597.8 - 23 -  Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating - Macro policies O H OSUOM O N * NA O Sector Policies OH OSUOM ON O NA O Physical * H OSUOM O N O NA LI Financial O H OSUOM O N O NA El Institutional Development O H O SU O M O N 0 NA LI Environmental O H OSUOM O N * NA Social El Poverty Reduction O H OSUOM O N * NA El Gender OH OSUOM ON * NA O Other (Please specify) O H OSUOM O N O NA F Private sector development 0 H * SU O M 0 N 0 NA El Public sector management 0 H O SU O M 0 N 0 NA ElOther (Please specify) O H OSUOM O N O NA - 24 -  Annex 6. Ratings of Bank and Borrower Performance (HS=-Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating O Lending *HSOS Ou OHU O Supervision *HSOS OU OHU O Overall *HS OS O U O HU 6.2 Borrowerperformance Rating O Preparation OHS *s O u O HU O Government implementation performance O HS O S 0 U 0 HU O Implementation agency performance O HS O S 0 U 0 HU O Overall OHS OS O U O HU -25-  Annex 7. List of Supporting Documents 1. Phnom Penh Power Rehabilitation Project, Staff Appraisal Report, Report No. 14378-KH, World Bank, September 5, 1995. 2. Phnom Penh Power Rehabilitation Project, Development Credit Agreement between Kingdom of Cambodia and International Development Association, Credit No. 2782-KH, October 11, 1995. 3. Project correspondence found in the Project File from January 1994 to December 2000. 4. Phnom Penh Power Rehabilitation Project, Implementation Completion Report Mission, Aide Memoire, November 2000. 5. Phnom Penh Power Rehabilitation Project, Implementation Completion Report, Electricite du Cambodge, December 2000. 6. Phnom Penh Power Rehabilitation Project, World Bank Project No. KH-PA-4032, Credit No. 2782-KH, Project Completion Report (Interim), Volume 1 Report, SMEC International, January 2000. 7. Phnom Penh Power Rehabilitation Project, Project No. KH-PA-4032, Interim and Final Reports Land Acquisition and Compensation, SMEC International, December 1996. 8. EDC's project audit Reports for 1998 and 1999. 9. Selected Project Data provided by EDC during ICR mission. Annex 8. ICR Mission Aide Memoire Cambodia Phnom Penh Power Rehabilitation Project (Cr. 2782-K1H) Implementation Completion Report Mission, November 2000 Aide Memoire 1. An IDA mission visited Phnom Penh from November I to 8, 2000 to carry out the Implementation Completion Report (ICR) mission of the Phnom Penh Power Rehabilitation Project. The mission comprised Mr. Enrique Crousillat (Task Team Leader) and Ms. Esperanza Miranda (Operations Analyst). The mission met with officials of the Ministry of Industry Energy and Mining (MIME), Ministry of Economy and Finance (MEF), as well as with managers of Electricite du Cambodge (EDC) and staff of the Project Management Unit (PMU). This Aide Memoire records the mission's findings and agreements reached. The Aide Memoire would be ratified by IDA's management. The mission would like to thank the staff of the above organizations for their excellent cooperation and support. Project Objectives 2. The objectives of the project were the following: (i) support the rehabilitation urgently needed for Phnom Penh's distribution system; (ii) support the Government's initial efforts to strengthen sector institutions; and (iii) help create an environment in which the power sector can be developed and operated efficiently, including the involvement of the private sector. - 26 -  3. Project objectives were fully achieved and the project resulted in substantial benefits for the population of the city of Phnom Penh and for the institutional development of EDC. The project provided electrification to more than 47,000 new consumers, thus, increasing comnmercial activities substantially. A new control system purchased under this project has improved reliability in the distribution network. The project has provided a firm base upon which the power sector can be developed, extended and operated efficiently through a comprehensive technical assistance program to support sector reform. The project was implemented along with other investments programs supported by the ADB and bilateral agencies from Japan and France, among others. A detailed description of the outcomes achieved under each project objective follows. 4. Rehabilitation of Phnom Penh's Distribution System The construction, under the project, of 23km of 115kV transmission lines around the perimeter of Phnom Penh to interconnect three new 115/22/15kV substations was carried out in accordance with appraisal estimates and it has increased the quality of power supply. A total of 47,250 consumer connections were completed under the project compared with 40,000 connections estimated during appraisal. The numnber of EDC's consumers has climbed dramatically from 21,754 in 1997 to 92,530 as of September, 2000. In addition, the construction of about 144 km of 22 kV MV lines and 400 krn of LV lines have resulted in the improvement of the reliability supply to existing customers as well as increase in transmission and distribution efficiency. System energy losses have been reduced from 24% in 1999 to 17% as of September 2000. This reduction is attributable not only to the rehabilitation of the distribution system but also to the phase-out of wholesalers by EDC since 1998. Under the project, EDC also acquired tools, vehicles, radio equipment and a telecommunications system which has facilitated EDC's capacity to monitor system losses and improved communications within the central and new built grid substations. A new system control established under this project has allowed EDC to start monitoring the quality of services by recording interruptions of power supply. Currently, this system control is not operational because of technical problems caused by equipment breakdowns in GS 1 and GS2 grid substations. EDC is addressing this problem directly with the contractor (LG Engineering) by asking them to fix the problem while the warranty period is still in effect (see para. 8 below). 5. Strenethenine Sector Institutions. An amount of US$600,000 was provided under the project for technical assistance to MIE to support legal and regulatory reform. This has been used most effectively for the following activities: (i) engaging local legal counsel to advise MIME on drafting the Electricity Law; (ii) MlME's Energy Advisor to provide it with advice on energy policy and sector reform; (iii) related advisory services to support MIME in establishing the Electricity Authority of Cambodia (EAG); and (iv) training program for MlME's staff on energy planning, economics, financial management, resource management and computer accounting, and external training of senior management staff on regulatory and strategic policy. Strengthening of EDC's institutional capabilities was also achieved through the following TA activities funded under the project (about US$2.7 million): (i) consulting services for project management, design, technical support, procurement activities, and supervising construction and contractors; (ii) consulting services for establishing an environmental unit within EDC and implement the project's land acquisition and compensation plan; (iii) computerization of the accounting, billing and collection services; and (iv) EDC's staff training on contract supervision, project management, and grid operations, including a technical cooperation with EGAT and EDL for the training of EDC staff in HV network operations and maintenance. 6. Power Sector Reform. In spite of long delays, the revised action plan for sector reform, as amended in the DCA in April 1998, has been substantially completed. The major steps toward sector reform supported by the project have included the following: (i) establishment of EDC as a separate legal entity in September, 1996; (ii) appointment of EDC's Board of Directors in August, 1997; (iii) - 27 -  completion of the "Corporatization of EDC and Regulatory Framework of the Electricity Sector" study in December, 1996; (iv) phasing out all wholesalers by EDC since October 1998; (v) formulation of an action plan for EDC's financial recovery, including reduction of EDC's accounts receivables; and (vi) passing of the Electricity Act by the National Assembly in early November, 2000. The Act would establish EAC as an independent regulatory body for the power sector. The implementation of the above actions is remarkable in an environment like Cambodia where the development of the sector has been hampered by weak institutional capacity and most recently, political and economic crisis. Project Implementation 7. Implementation of the project was carried out satisfactorily. A project team, headed by the manager of the Project Management Unit (PMU) was formed by EDC to coordinate and direct the project. Albeit initial delays in procurement and releasing of counterpart funds by MEF, the Project was substantially completed by the original closing date (December 31, 1999) and a six-month extension was required only to allow some extra works and consulting services under the project. The actual Project cost was US$43 million (including IDC) compared with the appraisal estimate of US$45.6 million. The lower cost was achieved mainly because a very good competitive bidding process which resulted in lower bids costs for most of the equipment and installation. 8. During a field visit to the project sites, the mission confirmed that all civil works have been completed and are under operation, with the exception of grid substations GS1 and GS2 (Lot 2) which still have technical problems due to unsatisfactory performance of the contractor LG Engineering. EDC is now contacting the contractor to complain about the problem and find an arrangement by which the contractor agrees to fix the problem. 9. The major factors affecting implementation outside the control of government or implementing agency included: (a) the country's political crisis in 1997 which delayed the action plan on reform and particularly the enactment of the Electricity Law; and (b) the regional economic crisis from mid-1997 and with it, the rapid deterioration of the Riel against the US$, which impacted negatively not only the project's but also EDC finances. Project Outcome and Sustainability 10. Project outcome is satisfactory as the major development objectives of the project have been largely achieved. Sustainability is likely because there is confidence that EDC would maintain the achievements generated by the project and follow up the reform process initiated under the project In addition, the proposed Rural Electrification and Transmission project (currently under preparation) would further support the Government's continued efforts to create an adequate environment for an efficient development and operation of Cambodia's power sector, including direct private participation and overall commercialization of the sector. Financial sustainability of EDC is also expected through the implementation of a recently established Action Plan for EDC's financial recovery (June, 2000), which includes: (i) restructuring of tariff for domestic and commercial consumers (effective from August 1, 2000), (ii) reduction of EDC's distribution losses from 24% in FY99 to 19% in FY01 (as of September 30, 2000, distribution losses were already down to 17%); and (iii) reduction of EDC's account receivables (MEF have already paid off Riel 31.4 billion to EDC in June, 2000). Key Lessons Learned 11. Based on the implementation experience of the Phnom Penh Power Rehabilitation Project, the -28 -  following lessons can be learned and applied in future projects: (i) Consulting services for project management should be available to the PMU throughout the entire duration of project implementation, including testing and commissioning of civil works. (ii) Current Bank's procurement practices with regard to conflict of interest could, in some cases, interfere with efficient project implementation in that ownership of bidding documents and continuity in project management is reduced. (iii) Constant communication and better understanding of the procedures established by the Borrower is key for an effective collaboration between the Borrower and the Implementing Agency; (iv) Turn-key contracts are easier to manage but they don't allow for technology transfer or on-job training for local staff; and (v) A compensation policy which allows the Implementing Agency to apply uniform standards instead of responding to individual requests made by the affected people is essential for the implementation of a land acquisition program. Agreements Reached 12. EDC agreed to revise and update their draft Implementation Completion Report as discussed during the mission and submit it to IDA not later than November 17, 2000. 13. IDA will prepare a draft Implementation Completion Report based on the mission's findings and various progress reports presented to IDA during the mission. IDA will send draft ICR to EDC for comments not later than December 17, 2000. November 8, 2000 - 29 -  IBRD 26880 CAMBODIA < A CHINA PHNOM PENH POWER REHABILITATION PROJECT / Th. b-d-r\., o-, \ nahi,. pO 1d 99 a,y Adgrs~ . orrzl.o Phnom Penb~~~~~~~~~~~~~~~~~hom ~ 0ly, Univers~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ .draro ToAirport~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~noa 1 15 k V TRANSMISSION LINE SCOPE OP IDA DISTRIBUTION 0 KJLOMETERS (Scale Approimate) APRIL 1995