Liberia - Fourth Power Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4614 PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) June 30, 1983 Operations Evaluation Department 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.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) TABLE OF CONTENTS Page No. Preface ............................................................ Basic Data Sheet ...................................................11... Highlights ............................................................ iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. SUPPLEMENTARY COMMENTS ................................. 1 Factors which Contributed to LEC's Financial Diffidulties ......................... 1 Tariff Structure ..................................... 4 Staff Training ....................................... 5 Service Connections for Urban Poor .....6............ 6 II. CONCLUSIONS .................................. ...7...... 7 Appendix: Comments from the Borrower ............................... 9 PROJECT COMPLETION REPORT I. Introduction .............................................. 15 II. The Power Sector ............................................ 16 III. Project Formulation .......................................... 17 IV. Project Implementation ....................................... 21 V. Reevaluation of the Economic Rate of Return .............. 26 VI. Institutional Development .................................... 27 VII. Borrower and Bank Performance ............................... 28 VIII. Impact of Project ........................................... 28 IX. Conclusions ................................................. 29 Attachments Table 1 - Contract Awards ............................................. 31 Table 2 - Forecast and Actual Cost .................................... 32 Table 3 - Withdrawal of the Proceeds of the Loan ................ 33 Tables 4, 5, 6 - Forecast and Actual Financial Statements .......... 34-36 This document has a restricted distribution and4nay be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) PREFACE This report presents the results of a performance audit of the Liberia Fourth Power Project for which Loan 1600-LBR of US$10.0 million was made in July 1978 to the Liberia Electricity Corporation (LEC), an autonomous, state-owned corporation responsible for generation, transmission and distri- bution of electricity in public consumption areas of the country. The loan was fully disbursed and closed by June 1982. The report consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the West Africa Regional Office. In preparing the PCR, the Region took into account the findings of a project completion mission carried out by its project staff in June 1982. OED staff has reviewed the PCR, the Appraisal and the President's Reports, the loan documents, the Minutes of the Board discussions and other documents in Bank files, and discussed the project with Bank staff. The audit generally agrees with the PCR's coverage on the back- ground, implementation and outcome of the project. The PPAM, therefore, provides mainly supplementary comments wherein it extends the discussion on some of the factors which contributed to LEC's financial difficulties, on the tariff structure, and on two of the project components, staff training and service connections for urban poor. Following normal OED procedures a draft copy of the report was sent for comments to the -Government, the Borrower and the co-financiers for the project. Comments were received from the Borrower and from two of the co- financiers, and they have been taken into account in finalizing this report. The comments from the Borrower have been reproduced as an Appendix to the PPAM. 1/ Project Performance Audit Report No. 1551 on the First and Second Power Projects (Loans 684 and 778-LBR) and Project Completion Report No. 4228 on the Third Power Project (Loan 1150-LBR) were distributed to the Board on March 31, 1977 and December 29, 1982 respectively.  - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) KEY PROJECT DATA Appraisal Actual or Expectation Current Estimate Total Project Cost (US$ million) 31.5 30.1 Overrun % - 4.4 Loan Amount (US$ million) 10.0 10.0 Disbursed 10.0 10.0 Cancelled - - Joint Financing (US$ million equivalent) Saudi Fund for Development 11.0 9.5a Arab Bank for Economic Development 3.7 3.2 b in Africa (BADEA) European Investment Bank (EIB) 4.68 6.7 Date Physical Components Completed 03/31/81 12/31/81 - Proportion Completed by Above Date (%) 100 100 Financial Rate of Return (%) 13 15 Financial Performance Much Improved Slightly Improved Institutional Performance Much Improved Slightly Improved Cumulative and Actual Disbursements (US$ million) As of December 30: 1979 1980 1981 1982 (i) Appraisal estimate 5.5 9.8 10.0 - (ii) Actual 3.8 8.5 9.8 10.0 (ii) as % of (i) 69 86 98 100 /a /b A further US$2.1 million from Saudi Fund and US$0.7 million from BADEA were used towards Diesel Unit No. 3 (Appendix). /c The main project components, i.e., the two diesel generators were commissioned ahead of schedule (PCR, para. 4.03).  - iii - OThER PROJECT DATA Original Actual or Plan Revisions Estimated Actual First Mention in Files or Timetable - Government-s Application Negotiations - - - Board Approval 06/30/78 - 06/15/78 Loan Agreement Date - - 07/06/78 Effectiveness Date 08/31/78 - 12/12/78 Closing Date 06/30/82 - 06/30/82 Borrower Liberia Electricity Corporation Executing Agency Liberia Electricity Corporation Fiscal Year of Borrower July 1 - June 30 Follow-on Project Name None MISSION DATA honth/ No. of No. of Man- Date of Year Weeks Persons weeks Report Identification 02/77 2 2 4 03/77 Appraisal 05/77 6.5 2 13 06/05/78 Total 17 Supervision I 11/78 1 2 2 12/05/78 Supervision II 05/79 2 2 4 06/25/79 Supervision III 12/79 1 2 2 12/77/79 Supervision IV 12/80 1 2 2 03/16/81 Supervision V 11/81 1.3 3 4 12/11/80 Completion 06/82 1 1 1 02/22/83 15 COUNTRY EXCHANGE RATES Name of Currency (abbreviation) Dollar ($) Year: Appraisal Year Average (1977) US$1.00 = $1.00 Intervening Years Average (1977-81) US$1.00 = $1.CO Completion Year Average (1981) US$1.00 = $1.00  - iv - PROJECT PERFORMANCE AUDIT REPORT LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) HIGHLIGHTS The main physical component of the project, i.e., the two-diesel generating units, was commissioned a little ahead of schedule and its final cost was slightly higher than envisaged (PCR, paras. 4.03, 4.17-4.20). This increase in cost, even though small, absorbed the funds originally allocated for the implementation of some of the other minor, but nevertheless important project components (PCR, para. 4.12). The projected load growth, which the two generating units were intended to meet, failed to materialize for several reasons, the most important one being the difficult economic conditions in the country (PCR, paras. 4.21-4.22, 4.24). Nevertheless, the installation of those units was timely; they improved the quality and reliability of the power supply and, more importantly, they provided substantial savings in fuel costs to the utility, because they use a lower cost (i.e., heavy) fuel and have a higher efficiency compared to the older generating capacity (PPAM, para. 19, PCR, para. 8.01). Because of these cost savings, the incremental financial rate of return on the project is 15% which is slightly higher than the appraisal estimate of 13% (PCR, para. 5.01). The measures taken to reduce the unduly high unaccounted-for energy losses were unsuccessful; in fact, for some time, the losses rose to around 34% before they came down to around 30%, the level which prevailed at the time of project appraisal (PPAM, para. 4). The accounts receivable also increased and, in 1982, they represented over five months' average revenue (PPAM, para. 4). Largely because of the above factors, the financial performance of the utility was poor through most of the project period. The rate of return on net fixed assets through 1981 was minimal or negative, and the utility did not meet the requirements of the loan covenant (PCR, paras. 4.25-4.29). For several reasons, the impact of the management consulting team on the institutional development of the utility was lower than expected. The overall training program was also only partly successful. Nevertheless, significant improvements have taken place within the utility. Perhaps for the first time the utility is now managed, and reasonably well, largely by Liberian nationals; its system operation, plant maintenance, long-term plan- ning and financial management are satisfactory (PPAM, paras. 13-16, 21 and PCR, paras. 6.01, 6.03, 9.03). Other points of particular interest are: - the progress which had been made with the legislation, drafted to protect the utility against fraud, was lost with the change of government (PPAM, para. 6); and - the present tariff structure which charges a flat rate to all residential consumers does not meet the requirements of the loan agreement (PPAM, para. 12).  - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) I. SUPPLEMENTARY COMMENTS Factors which contributed to LEC's Financial Difficulties 1. High unaccounted-for energy losses, bad debts and delays in recei- ving payment from customers for the energy supplied have been some of the key elements which have contributed to LEC's financial difficulties for several yearsl/. OED's audit report (No. 1551 of March 31, 1977) on the first two power projects had strongly suggested that the high level of energy losses arose from illegal consumption of energy, defective metering and errors in reading the meters; and that bad debts arose from inadequate control of accounts. 2. The appraisal report for this (fourth power) project had reiterated the observations made in the above OED report and additionally had indicated that: (a) a large number of meters had been found damaged, in some cases deliberately, which automatically resulted in the consumer paying the minimum monthly charge for energy consumption; (b) the total number of LEC consumers, for whom bills were issued continued to be around 15,000 in spite of the fact that some 1,000 (net) additional consumers were officially connected each year./; and (c) there was a suspicion of attempts to defraud LEC by some of its own staff. The report had indicated several measures aimed at reducing the unaccounted-for losses which were already under way, or were expected to take effect during the project implementation period. One of the measures (which was under way since 1976 and was expected to continue for another two years) was the block mapping of areas whereby special crews reviewed the electricity connections block by block in order to detect the illegal connec- tions, to verify that each legal connection had an accurate meter and to ensure that the connection was included in LEC's records. In order to accelerate this program and to increase its effectiveness, an amount of US$450,000 for the purchase of maintenance vehicles and tools was included in the project. Another measure, in the case of customers with faulty electric meters, was to bill such customers on the basis of their estimated consumption rather than billing them the modest minimum charge. A third measure was to intensify effort to prosecute persons suspected of illegal connections; in 1/ Inadequate tariffs and inefficiency (including unnecessarily large labor force) are the other elements of major significance in the recent years. 2/ According to LEC, the total number of consumers for whom bills were issued continued to be around 20,000 inspite of the fact that some 1,000 (net) additional consumers were officially connected each year. In February 1983, just over 23,000 consumers were billed (Appendix). - 2 - this respect, the government was to review the adequacy of existing legisla- tion in order to protect LEC against fraud. Arising from these measures it was hoped that the total system losses would reduce gradually from around 30% in 1977 to 20% in 1982. 3. On the matter of improving LEC's liquidity: (a) the government was required to prefinance all budgeted capital and operating losses on branch stations, and to offset payment of'Government-s electricity bills against debt service payments or any other items relating to LEC's Monrovia's system, which the 'Government made on LEC's account; and (b) LEC was to continue the process of examining alternative solutions in order to improve the effectiveness of delivery of the bills and collection of money from private consumers. With these measures, the accounts receivable, which in 1977 represented about 17 weeks of sales, were expected to decline by nearly 25% in 1982 and represent about 13 weeks of sales. 4. Most of the necessary equipment and vehicles was purchased with the funds from the Bank loan for maintenance of meters, etc., and for accelerating the block mapping program. The program was apparently carried out during the project implementation period but, from all accounts, not with the same degree of intensity and determination as had been envisaged at the time of appraisal'. The monthly reports from the management consultants indicated with regular frequency the number (this was often in three digits) of new meters which were installed, particularly in the case of large consumers, and the expected contribution to LEC's revenue as a result of these actions. The disconnection of illegal and/or delinquent consumers continued. Despite these efforts, the hoped for reduction in unaccounted-for losses and in accounts receivable did not materialize during the project period. In fact, unaccounted-for losses never went below 30%, and they were in excess of 34% particularly during the period following tariff increases--perhaps partly reflecting the hardships of the lower-income population. The net accounts receivable position also deteriorated. In 1982, net receivables represented over'five months average revenue-21. In September 1981, the gross receivables amounted to US$33.8 million which was nearly eleven months' revenue. Of this, the provision for bad debts, including debts which went back over the years and are probably not recoverable, stood at US$19.2 million. 5. The failure to reduce the high unaccounted-for losses apparently transcends well beyond the effectiveness or otherwise of the block mapping program, and of the disconnection of illegal and delinquent consumers. According to one Bank report, about 500 households were being disconnected 1/ According to Bank staff, LEC underestimated the magnitude of the task involved and the manpower and other resources required. 2/ The payables by LEC in 1982 were almost twice the net receivables. The audit does not have the necessary information to identify and segregate the sources of the receivables and payables. - 3 - from electricity service per week mainly becAuse of inability or outright refusal by the customers to pay their bills or because they were connected illegally. The report stated that: (a) illegal hookups could be readily obtained through the services of any number of local handymen; (b) these same individuals would restore the electricity service to a delinquent customer illegally in a matter of hours; (c) about 25% of the disconnections by LEC appeared to arise from its own mistakes and that such mistakes appeared to take place largely in low-income areas; (d) illegal connections and non- payment of bills was not confined mainly to low-income households, the problem also applied to the middle and high income groups; and (e) non-payment of bills, until recently, was not an uncommon practice among large users such as institutions. 6. As provided for at appraisal, the legislation to protect LEC against fraud was drafted and was discussed and reviewed by various ministries and was being reviewed by the Minister of Justice just before the coup. Progress made up to that point in preparing the legislation was lost with the change in the 'Government. Thus, LEC is still without adequate legislative protection against fraud. 7. Other factors have apparently also contributed to the increasing build-up of LEC's accounts receivable including bad debts. One factor is the common practice among a large number of consumers of paying only a fraction of their total bill; so long as a customer pays something on account, his elec- tricity service is not disconnected. The other factor, particularly in the case of residential consumers, is for the customers to misplace their bills (deliberately?) and obtain a temporary replacement bill which, due to LEC's administrative shortcomings, invariably understates their indebtedness to LEC. 8. Again, on the matter of improving LEC's liquidity, the government itself, (because of its own cash constraints), has been delinquent in paying LEC for the energy consumed by its departments and parastatals, and in pre- financing the capital and operating losses on branch stations. Only recently, with the help and prompting of the Bank, arrangements have been made whereby the dues from the 'Government to LEC are offset against LEC's debts to the Government and its agencies. 9. In view of the fact that: (a) the'Government or its agencies and the larger institutions delay the payment of their dues to LEC without any risk of loss of electricity service; (b) some of the upper-income households are perceived by the lower-income households to be consuming electricity through illegal connections; (c) a large proportion of disconnections of electricity service through mistakes of LEC take place mainly in lower-income areas; then it could be concluded that there must be little incentive for the lower-income households to pay for their electricity consumption, let alone pay their bills on time. Such actions, in due course of time, result in bad debts. The net effect is that LEC receives revenues from only around 60% of the energy generated. The honest consumer is therefore forced to bear the burden of paying for LEC's costs of operation through higher tariffs and fuel surcharges, and the service deteriorates due to severe cash constraints. 10. Both LEC and the -Government are aware of this situation and have taken or are in the process of taking a number of measures to correct the situation. One of these measures has been to increase the number of area directors and to assign each director the responsibility for the accounts in his area. Another measure, which is being planned, is to redraft appropriate legislation to protect LEC from fraud by consumers as well as by its own staff. A third measure, which is also being planned, is to order some 10,000 meters to replace all defective meters. The fourth, and probably the most potentially effective measure to improve meter reading and to prevent collu- sion between meter readers and consumers, is the installation of pillar type distribution boxes mounted on the pavement each housing about 10 consumers' meters; these meters are identified by code numbers known only to the accounts department. The cost of implementing this scheme in LECs system is expected to be about US$8.5 million and, coupled with some other measures, could yield excellent results. Tariff Structure 11. LEC was required under a loan covenant to prepare a tariff structure by June 1979 which would ensure that the electricity charges to the low-income households were not beyond their ability to pay. From a practical point of view, such a tariff structure aims to subsidize the smaller consumer (generally a lower-income household) by the larger consumer (higher-income household). 12. Apparently, an appropriate tariff structure has not yet been imple- mented. As will be seen from the table below, through September 1982, the smaller residential consumer was charged a higher average tariff than the larger consumer in the conventional manner of relating charges to the cost of supply. In October 1982, the tariff structure was marginally modified to the effect that all residential consumers were charged a flat rate of 10.1 cents/KWh, irrespective of the level of their electricity consumption. While this tariff structure is a small improvement over the previous tariff struc- ture, nevertheless, it does not meet the requirements in the loan covenant which have been adequately articulated in the appraisal report. More impor- tantly, even the present tariff structure provides little incentive to the higher income households to conserve the use of electricity, which, judging by LEC's poor financial performance (i.e., low rate of return on assets) is underpricedly 1/ Financial performance would improve if unaccounted for losses had been brought under control. - 5 - LEC Tariff Structure (Residential and Commercial) : Up to : From March 1, 1978 : From June 1979 Basic Tariff : Feb. 28, 1977 : up to May 31, 1979 : to Sept. 1982 First 400 KWH : X : 0.08 $ 0.09 $ 0.101 $ Next 1100 KWH : X : 0.07 $ 0.08 $ 0.10 $ Over 1500 KWH : X : 0.065 $ : 0.075 $ 0.094 $ Staff Training 13. The comprehensive training program aimed at all levels of LEC staff, envisaged in the appraisal report, did not fully materialize. Firstly, LEC was required to identify, and to prepare partly through on-the-job training, at least two Liberian nationals for the posts held by each one of the expa- traites in order to ensure that, in due course, at least one qualified (and adequately motivated) individual would be available to replace the expatriate. The on-the-job training was envisaged to be provided by the expatriate con- sultants. LEC, however, had difficulties in attracting and retaining Liberian nationals with adequate potential to take over the posts. Because of these difficulties, LEC was forced to, and did, appoint a few expatriates as full time employees in line positions, and, as a consequence, the on-the-job training to the Liberian nationals was not fully effective. 14. Secondly, an appropriately equipped center was planned to be built on LEC premises and to be provided with 12 man-years of expatriate instructors. The center, however, advanced only up to the design and bidding stage; cons- truction was not started because funds from the Bank loan were used towards other project components, and LEC was not in a position to finance this con- struction from its internal resources. In the meantime, anticipating even by July 1980!' that the center would be ready by August 1980, the Bank project staff devoted considerable amounts of their time and effort to identifying international institutions experienced in training of staff, and discussing LEC's training needs with them. Apparently a move is under way by LEC to use some of the existing buildings as classrooms and workshops for training of staff. 15. The appraisal report had assumed that LEC's supervisory staff would participate in the courses then conducted at a training center of a local mining company, and in the training programs which were scheduled to start from 1979 at Monrovia Vocational Training Center financed under the Bank's Second Education Project (Loan 1266-T-LBR). According to the Bank's project officers, LEC's supervisory staff did attend some of the above courses and programs. 1/ The Bank was rather unrealistic in expecting a centre, whose construc- tion had not even started, to be ready in a matter of two months. - 6 - 16. LEC also sent several of its professional staff, mostly from the engineering discipline but few from the financial discipline, to various training courses within and outside the country. Such staff members were required to serve LEC for specific periods (depending upon the type of train- ing) on completion of their training. These measures have contributed to improving the institutional performance of the utility. Service Connections for Urban Poor 17. This project component was expected to cost about US$450,000 (its offshore cost of US$320,000 was to be paid out of the funds from Bank loan) and was intended to provide connections between the network and households to about 5,000 hitherto unserved low-income families in Monrovia. Further- more, according to para. 2.24 of the appraisal report, the Bank had obtained assurance from the'Government and LEC that by June 1979: (a) LEC would commence to install current-limiting devices at all new connection to low income households where the monthly consumption of electricity is expected not to exceed 40 Kwh (b) connection charges for hitherto unserved low-income households will be eliminated and that arrangements satisfactory to the Bank for financing of their interior wiring installations will be madel/. The component did not appear to have full commitment of the 'Government; on one occasion, the 'Government, in a telex to the Bank, even questioned the effec- tiveness of an isolated measure such as the above component to help the poor people. In 1981, LEC requested a supplementary loan from the Bank to carry out a program of works which included this component. 18. A team of Bank staff from the urban projects division, with consul- tant support, carried out preliminary work and two field visits in connection with an enlarged study which included water supply and electricity service to the urban poor of Monrovia2/. The cost of this preliminary work was not paid out of the Bank loan funds. Subsequently, the consultant, who was supporting the above team, at Bank's suggestion, was retained by LEC to carry out field studies with the object of preparing the implementation of the component. This preparatory work was, however, abandoned due to shortage of funds, since the funds from the Bank loan which were originally envisaged for this component were already disbursed or fully committed towards other com- ponents and LEC was not in a position to finance the component from its own resources. The amount actually disbursed from Bank loan towards this component was US$8,000. The audit, therefore, agrees with the PCR that no lower-income household obtained an electric connection as a result of this component. 1/ These requirements were reiterated in Section 5.08 of the Loan Agreement. 2/ The green cover report under the title "Liberia Monrovia Water, Power and Urban Projects Analysis and Strategies for Improved Access to Services by the Urban Poor" was produced in September 1981. -7- II. CONCLUSIONS 19. The audit agrees with the conclusions in the PCR and reiterates some of the points made therein and in the earlier part of this memorandum. The project contributed to improvement and reliability in LEC's system1/ 2/* The two diesel units provide major savings in fuel costs over the gas turbine units and the older diesel units because they use a lower cost (heavy) fuel and provide higher thermal efficiency. Further fuel cost savings are expected from them when the two units ae fitted with the improved supercharging system and the modified fuel pumpl, as used in the third unit. The method of power system regulation, whereby the generation from the hydroelectric sta- tions controls that from diesel electric generation in the rainy season, and vice-versa during the dry season, is an improvement and appeared to work well, partly because of the reliability of diesel units. (A central control room for load dispatching is planned for the next stage of hydro expansion). 20. While the unaccounted-for system losses are unduly high4-/, measures are in effect or under consideration to reduce these losses. Some of these measures are a reactivation of the old ones, e.g., block mapping, disconnec- tion of service for non-payment, and drafting of adequate legislation to protect LEC from fraud. Other measures are new, e.g., appointment of addi- tional area directors and making them responsible for accounts in their areas, and planned purchase of some 10,000 meters to replace defective ones and fit on new connections. The financial position of LEC, though far from satisfac- tory, has shown improvement in 1981 and 1982 despite the stagnant energy sales arising from several factors, including a downturn in the economy and in particular, some of the industries. 1/ The Borrower has indicated that from June 1982 to the present time, it has encountered a series of mechanical problems with the generators (Appendix). 2/ Commenting on the draft report, one co-financier has stated that: "In the light of the stagnation of demand, the project's timing is question- able. Installed capacity, excluding the third unit financed with Arab funds, is 172.6 MW (source 1981 LEC Annual Report) and even allowing for seasonal hydro output, far exceeds requirements for meeting 1981 average and peak demands of 45.9 and 66.9 MW, respectively." The audit, however, wishes to point out that when the relevant factors, such as availability and reliability of the installed capacity is taken into account, the difference between the effective capacity and system peak demand becomes much smaller. 3/ This modification has not yet been carried out because of lack of funds (Appendix). 4/ Which is a reflection not only on LEC's commercial activities, but also on the environment in the country, created partly by the attitude of the 'Government, its agencies, institutions and higher-income individuals towards paying for their electricity consumption. - 8 - 21. A significant improvement in LEC has been in its institutional development, despite (or because of) the drastic and sudden changes in its senior management following the coup. Perhaps for the first time LEC is managed largely by Liberian nationals (with the assistance of only two expatriates) and, except for the activities in the commercial department, managed reasonably well under the circumstances. System operation, plant maintenance, long term planning and financial management are satisfactory. Draft accounts are available within four months after the end of the year, and annual budgets are realistic and well presented. These improvements reflect the contribution of the management consultants and the training provided by LEC, and most importantly, the motivation and dedication of its staff, particularly the senior management, despite the latter's generally low salaries and fringe benefits (compared with those in the private sector enterprises) which haye been further depressed by the Government's action during 1981 and 1982.1/ 22. Taking all the factors into account, e.g., the progress achieved in some areas and not in others, the social, economic and political situations before, during and after the project period, the audit concludes that overall, the project was moderately successful. 1/ A co-financier has stated that "while technical assistance has been provided, it has been inappropriate to LEC's needs (late, too short, not of sufficient quality) and improvements realized in accounting and financial procedures are not, on balance, commensurate with remaining problems." -9- APPENDIX Page 1 of 6 RCA JUN 09 13500 248423 WORLDBANK LEC TLX NO. 216 JUNE 9, 1983 MR, SHIV S. KAPUR ACTING DIRECTOR GENERAL OPERATIONS EVALUATIONS THE WORLD BANK 1818 H. STREET, N.W. WASHINGTON, D.C. 20433 U. S. A. DEAR MR. KAPUR REs PROJECT PERFORMANCE AUDIT REPORT ON LIBERIA FOURTH POWER PROJECT (LOAN 1600-LBR) ACKNOWLEDGEMENT IS HEREBY MADE OF THE RECEIPT OF YOUR LETTER DATED APRIL 18, 1983 REGARDING THE ABOVE SUBJECT MATTER. AFTER CAREFULLY REVIEWING THE REPORT, WE WOULD LIKE TO COMENT ON A FEW ISSUES AS REFELCTED IN YOUR APPRAISAL IN THE ATTACHMENT TO THIS LETTER. WE WOULD LIKE TO EXPRESS OUR PROFOUND APPRECIATION FOR THE BANK'S CONTIPN1OUS ASSISTANCE IN SU0ORT OF THE DEVELODMENT OF LIBERIA. - 10 - APPENDIX Page 2 of 6 MU0 THE WORLD BANK WASHINGTON, D.C. ATTN: MR. SHIV S. KAPUR RE: FOURTH 00WER PROJECT (LOAN 1600-LBR) COMMENTARIES: PREFACE PAGE 2: PROJECT DATA OED Notes: THE ACTUAL AMOUNT DISBURSED BY THE FOLLOWING LENDING AGENCIES TOWARDS THE FOURTH 00NER PROJECT NEEDS CORRECTION. LENDING INSTITUTION AMOUNT STATED CORRECTED A4OU: Basic Data 1) SAUDI FUND 011.29 M 09.510 M Sheet has been revised II) BADEA 3.92 M 3.176 A III) EIB 5.00 M 6.738 M THE BALANCE LOAN OF 0744,000 IN CASE OF BADEA AND 32.1 MILLION IN CASE OF SAUDI FUND WAS UTILIZED FOR UNIT NO. 3. - 11 - APPENDIX Page 3 of 6 PAGE 1: FACTORS WHICH CONTRIBUTED TO LEC'S FINANZIAL DIFFICULTIES: NO. 2 (B) SHOULD READ: THE TOTAL NUMBER OF LEC CORSUMERS, FOR WHO0 BILLS WERE ISSUED PPAM para.2 CONTINUED TO BE AROUND 20,000 IN SPITE OF THE FACT THAT SOME 1,000 has been revised NET ADDITIONAL CONSUMERS WERE OFFICIALLY CONNECTED EACH YEAR. and a foot- note added WE WOULD LIKE TO STATE THAT IN JUNE 1982 THE NUMBER OF CUSTOMERS BILLED WAS 21,933 AND THE SAME INCREASED TO 23,143 IN FEBRUARY 198- PAGE 5: NO. 9 PPAMpara.9 IT IS STATED THAT LEC RECEIVES REVENUE FROM ONLY A LITTLE OVER has been revised 500 OF THE ENERGY GENERATED. 'OUT OF THE TOTAL ENERGY GENERATIO1, 300 GOES TOWARDS SYSTEM LOSSES AND 703 IS BILLED TO THE CONSUMERS. OUT OF THIS BILLING LEC IS ABLE TO COLLECT AROUWD 900 FOR THE YEAR ENDED JUNE 1982. ACCORDINGLY, IT WORKS OUT THAT WE HAVE BEEN RECEIVING REVENUE TO THE EXTENT OF 630 OF ENERGY GENERATED. PAGE 7: NO. 12 Incorporated IN OCTOBER 1932 THE TARIFF APPLICABLE TO ELECTRIC CONSUMPTION WAS i PREVISED AS GIVEN BELOW: para.12 RESIDENTIAL, COMAERCIAL. GOVERNMENT AND STREET LIGHT - 10.1 CENTS/KWH INDUSTRIAL AND LARGf COMMERCIAL - 10.0 CENTS/KWH - 12 - APPENDIX Page 4 of 6 WE ARE NOT IN AGREEMENT 14ITH THE STATEMENT WHICH STATES THAT LEC WOULD WAIVE THE CONNECTION CHARGES FOR THE 5,000 LOW-INCOME FA'lILIES IN MONROVIA, AND MAKE SATISFACTORY ARRANGEMENTS FOR FINANCING THE INTERIOR WIRING OF THOSE HOUSEHOLDS. WE THEREFORE REFER YOU TO PAGE 16, PART B OF THE LOAN AGREEMENT (1600-LBR) WHICH READS AS FOLLOWS: PROVISION OF ELECTRICITY SERVICE TO ABOUT 5,000 LOW-INCOME HOUSEHOLDS IN AREAS WITH EXISTING LOW-TENSION LINES CONSISTING OF: see PPAM (1) EMPLOYMENT OF A CONSULTANT TO PREPARE AND SUPERVISE para.17 Including THE IMPLEMENTATION OF THIS PROGRAM: AND a footnote which has been added (II) CONNECTION OF NEW LOW-INCOME CUSTOMERS TO THE POIER SYSTEM. OBVIOUSLY, FINANCING THE INTERIOR WIRING OF THE SAID HOUSEHOLDS WAS NOT COVERED BY THE AGREEMENT. PAGE 11t NO. 19 - THE SIXTH LINE: Footnote FURTHER FUEL COST SAVINGS ARE EXPECTED FROM NO. 1 AND NO. 2 added to PPAM para.19 UNITS WHEN THEY ARE FITTED WITH THE IMPROVED SUPERCHARGING SYSTEM AND THE MODIFIED FUEL PUMP - AS USED IN THE THIRD UNIT. WE WOULD LIK E TO ADD TO THE PHRASE THAT THE PROCEDURE WAS NOT CARRIED OUT FOR THE TWO UNITS BECAUSE OF LACK OF FUNDS. (B) PROJECT COMPLETION REPORT EXISTING POWER FACILITIES ------------------------_ - 13 - APPENDIX SHOULD READi Page 5 of 6 THERE EXISTS NINE SMALL DIESEL - ELECTRIC STATIONS, OPERATED BY LEC ON BEHALF OF THE GOVER'IENT, SCATTERED IN RURAL AREAS OF THE Reflected COUNTRY, WITH AN AGGREGATEICAPACITY OF 8 MW. ELECTRIC POWER, in PCR para.2.03 IS GENERATED AT 60 CYCLES IN LIBERIA FOLLOWING THE AMERICAN to which a footnote PATTERN WHEREAS OTHER 4ESTERN AFRICAN COUNTRIES EMPLOY 50 CYCLES, has been added FOLLO11ING THE EUROoEAN PRACTICE. THE LAST LINE READING - THIS SITUATION WOULD POSE A PRO3LEM IF IT WERE PLANNED TO INTERCON'JECT LIBERIA WITH A.NOTHER COUiiTRY SHOULD BE UMITTED BECAUSE WE DO NOT SEE IT AS A PRUBLE0 SINCE THE INTRODUCTION OF THE LATEST TECHNOLOGY OF DC TRA,iSAISSION LINES. MANAGEMENT SERVICES 4.05: SHOULD READ: PCR para. A 5-PERSO4 MANAGEMENT TEAM RECRUITED UNDER THE FOURTH POWER PROJECT 4.05 has been re- WAS PROVIDED BY A SOUTH ASIAN CONSULTING FIRM WHICH WAS ASSOCIATED vised WITH A LARGE ELECTRIC.UTILITY, ETC. 4.09: PCR IT IS STATED THAT IN MARCH 1931, THERE WERE CHANGES IN GOVERNMENT para. 4.05 has been FOLLOWING A COUP. THE STATEMENT SHOULD BECHANGED TO APRIL 1980. revised SIMILARLY AND ENGINEER EDUCATED IN AMERICA WHO HAD BEEN WITH THE LEC ABOUT FIVE YEARS, INITIALLY IN GENERATING AND T AND D CAPACITY, WAS APPOINTED AS MANAGING DIRECTOR IN APRIL 1980 INSTEAD OF APRIL 1981. - 14 - APPENDIX Page 6 of 6 v%'4'4ENTS HERESY 'AADE DE;TAIN TO THE PROJECT PERFOR-A.ICE AUDIT REPORT Ol LIBERIA FO'VRTH %WER PROJECT (LOA 1600-LBR) FUR THE PERIvD iii))I%G JUiE 1932. Footnotes HOwEVER, FRJM AROUD JUii 1982 UP TU THE PRESENT TIME 4E HAVE have been added to ENCOUNTERED A SERIES OF ilECHANICAL PROBLEiMS WITH THE GENERATORS. PCR para. 4.04 and PRESENTLY GVF4 HAS REVEALED THAT AFISURE TOO LOW FOR THE CYCLIC to PPAM para.19 TORQUE VARIATION HAS BEEN USED BY ASEA AS DESIGN BASIS FOR THE BUSHROD UNITS, WHICH RESULTED IN IMPRODER AND INSUFFICIENT SAFETY MARGINS FOR MECHANICAL STRENGTH OF VARIOUS PARTS. IN VIEW OF THE PRAVAILING SITUATION, WE SHALL IN THE NEAREST FUTURE FORWARD TO YOU DETAILED REPORT OJ SAME. REGARDS, HARRY T. YUAN, SR. MANAGING DIRECTUR LIBERIA ELECTRICITY CORPORATION 4293 LEC LI1 249423 WORLDBANK..... - 15 - LIBERIA FOURTH POWER PROJECT - LOAN 1600 PROJECT COMPLETION REPORT I - INTRODUCTION 1.01 The project was the Bank Group's fourth operation in the power sector in Liberia. The Bank had made three previous loans totalling US$16.8 million. The first two, 684-LBR, US$7.4 million, in June 1970 and 778-LBR, US$4.7 million, in July 1971, helped finance projects consisting of a 34 MW expansion of the Mt. Coffee Hydro-electric station, two 19 MW gas turbines, and associated transmission and distribution facilities. A supplementary loan, 778A-LBR, US$2.9 million, was made in 1973 to cover project cost increases and to meet the cost of increasing the capacity of the gas turbine above the rating originally envisaged. The infrastructure was completed satisfactorily, however, the gas turbines proved to be problem prone to a serious degree. The manufacturers eventually shared the cost of repairs for the turbines.!/ 1.02 A Third Power Loan, 1150-LBR, US$1.8 million, made in 1975, financed technical assistance to improve the management, finance and operations of the Liberian Electricity Corporation (LEC), the Borrower, and was intended to formulate a long-range development plan. Despite this loan, on completion of the project the Liberian management remained relatively weak, operations had improved in only one or two areas and the financial position of LEC was not bettered. 1.03 Thus, while the first three Bank loans had contributed substantially to the building of LEC's infrastructure, LEC's capability had not improved much over 1970-77, and its financial situation had deteriorated mainly because of the multi-fold increase in fuel oil prices and poor metering, billing and collections. The Fourth Power Project, the subject of this report, provided for additional generating capacity and for technical assistance to improve LEC operations. - The 1977 accounts of LEC contain a payment of US$ 577,000 in settlement of disputed repair costs for the gas turbines. - 16 - Economic Background 1.04 In 1976 Liberia had a relatively high average per capita income for West Africa of US$450. This reflected the importance of the enclave sectors comprising iron ore mining, rubber plantations and forestry concessions which accounted for much of the GDP and which were the main source of export earnings, whereas in agriculture which supported the bulk of the population the per capita income was about US$100. 1.05 The Government's Four Year Development Program, July 1976-June 1980, foresaw an average GDP growth of almost 7%. However, the Bank estimated a growth in the range of 3-4%, in view of delays in investments in iron-ore mining, and a slowing of exports, and the fact that annual GDP growth in real terms of 6% prior to 1970 had diminished to 3% by 1976. The Government expectation of 7% would therefore have had to anticipate an upsurge in economic growth. II - THE POWER SECTOR 2.01 Liberia's hydropower potential is fairly substantial. The Mano and Cavalla rivers form the borders with Sierra Leone and Ivory Coast respectively, and a feasibility study has been made of the Mano River hydro- electric site (180 MW) jointly by Liberia and Sierra Leone. A feasibility study of hydro-electric development of the St. Paul River which envisages a first plant of 132 MW and two subsequent stations was completed in May 1982. There are also two sites on the St. John's River which bear investigation. An important factor in considering future hydro development is the relatively large capacity of the individual sites in relation to LEC's load and the electricity demand of the mining industry. 2.02 Liberia is without any fossil fuel resources to date, although petroleum investigations are underway. Consequently, the country has to import oil and oil distillates for fossil fueled generating facilities and transport. The increase in oil prices has resulted in an acceleration of activities aimed at developing hydro. Existing Power Facilities 2.03 The LEC's main supply area is the well populated coastal area which includes Monrovia. Prior to the project, the facilities comprised the 64 MW Mt. Coffee plant on the St. Paul River, and the Bushrod thermal power station which contained 4 gas turbine units (2 x 15 MW, and 2 - 19 MW) and 5 diesel- electric units aggregating 9 MW. Total installed generating capacity was 141 MW. Mt. Coffee is a run-of-river plant which operates at full capacity during the rainy season in May-November but declines to about 10 MW output during the dry season. The firm capacity of the system was about 70 MW. 2.04 There are nine small diesel-electric stations, operated by LEC on behalf of the Government, scattered in rural areas of the country, with an aggregate capacity of 8 MW. Electric power is generated at 60 cycles in Liberia, following the American pattern whereas other Western African countries employ 50 cycles, following European practice. This situation would pose a problem if it were planned to interconnect Liberia with another country.1/ 1/ The Borrower does not see this as a problem because D.C. transmission lines can be used. - 17 - 2.05 Electricity power demand grew at an annual rate of 12 percent in 1969-1973, but declined to 3 percent in 1974-1976, mainly because of higher tariffs following the increase in oil prices in 1973. Public electricity supply is accessible to areas containing about 25% of the population. Institutional Background 2.06 Until 1975 power was the responsibility of the Public Utility Authority (PUA), a Government corporation. It was decided in the early seventies to enlarge PUA's responsibilities, which already included water supply, and it assumed control of radio and telecom as well. In conjunction with the Second Power Loan, PUA was converted in 1972 to a public holding company with responsibility for these entities, which became subsidiaries. The reorganization was intended to help overcome the weaknesses in the operations of the organizations but with the continuing single responsiblity for the four sectors, matters did not change. Consequently, the Government abolished PUA in 1975, and the four subsidiaries became separate autonomous state corporations. 2.07 In 1976 LEC produced about 40 percent of Liberia's electric energy, the remainder being produced by private sources, largely iron ore mines which provided their own energy as the public supply was limited to the coastal area. Privately owned generating facilities aggregated about 150 MW, all diesel-electric. III - PROJECT FORMULATION 3.01 The project comprised: (i) The addition of 2 - 13 MW diesel-electric generators to the Bushrod station; (ii) Provision of power service to low income households (iii) Provision of maintenance vehicles and tools; (iv) Technical assistance - provision of a management team; (v) Frequency conversion study; and (vi) Transmission study. Additional Generating Capacity 3.02 In 1976 the need for additional generating capacity was perceived and a consulting firm was hired by LEG to make a feasibility study of the proposed diesel installation. Diesel-electric installations, with a much higher efficiency than gas turbines were, prima facie, the obvious choice between the two. 3.03 The consultants reviewed the load forecast for 1976-1985, and concluded that there would be an annual 7% growth. This constituted a considerable increase above growth in the preceeding period (para. 2.05) and was not entirely consonant with the Bank's outlook concerning the growth of GNP (para. 1.05). In any case, the 7% rate was the basis for initiating the consultants design activities, with the objective of commissioning the station by 1980. - 18 - Technical Assistance 3.04 Under the Third Power Project a multinational team of expatriate utility experts had been hired to fill LEC management positions, train staff and improve operations. Failure to achieve satisfactory results (para. 1.02) was attributed to a variety of causes and was corrected late in the period of the fourth project. It was perceived that a group from an operating utility would have the necessary experience and support and would function as a "team", and accordingly, a team was recruited from an electric utility in 1978 and a continuance of its financing included in the project. Training 3.05 In conjunction with the training program to be mounted by the utility team, a training school on LEC premises was considered necessary and the project therefore provided for the construction of one. Low Income Consumer Supply 3.06 In view of the very low saturation of electricity service in the country, a pilot type program whereby the distribution network was extended to low income areas in Monrovia, entailing connections to 5000 homes was included in the project. The project also provided funds for maintenance vehicles and tools for this purpose, and workshop facilities and instruments for the repair and monitoring of meters. Other Components 3.07 There were also components to finance studies of (i) the implications of converting Liberia's power generation from 60 to 50 cycles (para. 2.04),and (ii) a 175 km transmission line from Mt. Coffee to Gbarnga to replace the small inefficient diesel sets supplying the latter, and the establishment of a rural electrification network in the Gbarnga area. Cost Estimate 3.08 The project cost, exclusive of taxes and duties, was estimated at US$31.5 million of which US$29.4 million or 94% foreign and US$2.1 million or 6% local. The Government undertook to reimburse LEC for any duties or taxes paid on goods imported under the project. 3.09 The cost of the diesel-electric facilities, which constituted an extension of the Bushrod station, was estimated by the consultants. Bids were obtained for the Bushrod extension before the loan was made, so that the actual bid amounts were employed in the appraisal estimate. The estimate included a physical contingency of 5% and price contingencies of 7%, 6.5% and 6% for, respectively, 1978-79-80. The costs of the other components were estimated by LEC. - 19 - Financing Plan 3.10 The European Investment Bank (EIB), Banque Arabe du Developpement Economique en Afrique (BADEA) and the Saudi Fund (SF) participated with the Bank in financing the foreign exchange cost of the project as follows: ARAB IBRD AGENCIES EIB LEC TOTAL US$ million BUSHROD Mechanical Equipment - 14.7 - 0.2 14.9 Electrical Equipment 2.4 - 1.8 0.1 4.3 Civil Works 3.7 - 2.9 1.3 7.9 Other Comp. 3.9 - - 0.5 4.4 10.0 14.7 4.7 2.1 31.5 The Bank and EIB were jointly to finance the foreign exchange cost of the civil works and electrical equipment in the proportion 60/40; the Arab agencies financed the cost of mechanical equipment (diesel sets). The foreign exchange cost of the remaining components was to be financed exclusively by the Bank. Altogether the Bank and co-donors provided 94% of project cost. Project Execution 3.11 The project was carried out under the direction of LEC, with the consultants providing supervision of construction of the Bushrod extension. Procurement was to be on the basis of international competitive bidding. The Loan provided for retroactive financing of US$500,000 for engineering services from January 1, 1977 and US$100,000 for management services from December 1, 1977. The project was to be implemented in 1978--1980 with the commissioning of the first diesel unit planned early in 1980. LEC Finances 3.12 LEC was in a weak financial position: energy losses were very high, accounts receivable excessive, the rate of return low and there was a liquidity problem. The very high energy losses, resulting from illegal connections and errors in meter readings, had led to a partial check of customer connections and records under the Third Power Project. The program proved effective up to a point, and was to be further supported by the provision of vehicles and equipment under the subject project. LEC and Government were also to make intensified efforts to reduce illegal connections. 3.13 Collection of accounts was unsatisfactory. Receivables, net of provision for bad debts, had increased to US$6 million (140 days billings) in 1976 of which private consumers were responsible for 78 percent and Government/public corporations the balance. Under the project it was agreed that Government would settle accounts quarterly by cash or by offsetting them against debt service payments due Government by LEC, and would prepay capital - 20 - and operating expenses of branch stations operated by LEC for Government. Improvements in operating efficiency and controls on operating expenses were to be monitored monthly. 3.14 To strengthen LEC's cash position Government took several measures. It provided a loan of US$2.8 million repayable in 20 years at 2 percent interest. It authorized the continuation of the fuel adjustment clause granted LEC in May 1977 and a 23 percent tariff increase for non-mining customers effective March, 1978. 3.15 With these measures, LEC's rate of return on historically valued assets was expected to reach 8.2 percent in 1978, and range between 11 and 13 percent through 1982. Important Covenants 3.16 The following were the more important undertakings the Government agreed to: (i) LEC to maintain a separate department for the small rural diesel stations owned by Government, recruit qualified personnel for their operation within 10 months of signing of the Loan Agreement and maintain separate accounts for this activity; (ii) Prepare a manpower development program including senior management positions within six months of signing of the Loan Agreement; (iii) Standard debt covenant clause of cash generation to be 1.5 times maximum future debt service; (iv) Commencing in 1978, LEC to revalue assets annually and in- corporate the results beginning in the 1978 audited accounts; (v) Commencing January 1, 1979, LEC to attain an annual return on net revalued assets of 8%; (vi) Review revenue estimates by October 1 each year for the current and following years, and advise the Bank of any measures to be taken to obtain the required rate of return; (vii) Install current limiting devices in all new connections to low service homes; (viii) Provide by June 30, 1979, a tariff structure consonant with the incomes of the low-income households; (ix) Consult with the Bank before planning any new capital expenditures additional to those in the 1977-82 investment program; and (x) Take all necessary measures to reduce losses and accounts receivable. 3.17 The project was appraised in May 1977. Negotiations were held in May 1978; no major issues arose. Board presentation was made June 15, 1978 and the loan became effective December 12, 1978. - 21 - IV - PROJECT IMPLEMENTATION 4.01 The project was of mixed success. The construction of the Bushrod extension, the main infrastructure component, was fully successful. However the implementation of the remaining components, infrastructure and technical assistance, was not. Procurement 4.02 Award of the equipment and civil works contracts for the Bushrod extension was made to the lowest evaluated bidders on the basis of international competitive bidding. While the project provided for the installation of two diesel-electric units the station was designed and constructed for three: the equipment contracts provided for the supply of the two units with an option to purchase a third by December 31, 1980, at a similar price. Construction 4.03 The construction of the Bushrod extension was begun in June 1978, the first unit commissioned in December 1979 (a month ahead of schedule) and the second unit commissioned in May 1980 (seven months ahead of schedule). While the construction of a diesel-electric plant is comparatively simple, nevertheless the suppliers and contractors must be commended for the dispatch with which the job was done. 4.04 The Bushrod extension was placed in immediate service, substituting for the gas turbines, with a major saving in fuel cost. The new facilities have operated successfully since, although in June 1982 both units had to be shut down temporarily when failure of the supercharging equipment occurred.1/ Management Services 4.05 A 5-person management team recruited under the Fourth Power Project was provided by a South Asian consulting firm which was associated with a large electric utility. The management team's job was to advise and support LEC management in its administrative, financial and technical/operating activities, and to improve their functioning,and to train senior and other staff. 4.06 The consultants work commenced in July 1978. They were inclined to communicate through paper channels rather than by more direct personal means, which created a considerable bureaucratic obstacle. Initially, they spent considerable time and effort in analyzing LEC's practices, systems and methods, and made an inordinately large number of detailed recommendations. LEC, with comparatively few qualified staff, was unable to deal effectively with this volume of recommendations, or assimilate them. The most immediate result was the hiring, at the suggestion and with the encouragement of the consultants, of a number of expatriates to bolster LEC's line organization. This had the effect of ultimately improving the administration and operations over a fairly wide spectrum. 1/ The Borrower has indicated, that from June 1982 to the present time, it has encountered a series of mechanical problems with the generators (Appendix). - 22 - 4.07 Unfortunately the training activities were limited. They had been envisaged in conjunction with the provision under the project of a new training school on LEC's premises which, however, was not built for lack of funds. 4.08 On exhaustion in mid-1980 of the funds allocated for consultants, their services were by financed by LEC. In June 1981 the services of the management team finished; however three experts remained, procurement, accounts, and meters and services, financed by LEC. 4.09 In April 1980, following a coup in which a new Head-of-State and administration took power, the senior managements of most state corporations. including LEC, were dismissed. An engineer educated in America who had been with LEC about five years, initially in a generating and T and D capacity, was appointed Managing Director in April 1980. There were some other shifts within the organization as well. 4.10 As of mid-1982 LEC management was not unimpressive, if lacking in depth at middle and lower management levels. The improvement was the result of the change in staff and the installation in the preceding few years of improved systems with the help of the consultants, and of expatriates hired to fill specific posts. 4.11 LEC has still, however, a considerable distance to go to further improve systems and develop staff. Much will depend on whether it can retain good senior management, find the money for a modest number of expatriates maintain salaries at levels sufficient to retain its management and supervisory staff, and fund training and allied needs. Other Project Components 4.12 The remaining project components, which had been allocated about US$1 million collectively in the loan, were victims of a cost overrun on Bank financed components of the Bushrod extension (para. 4.20). They were either not done, or discontinued after they were started (para. 4.15). 4.13 Whether some of the small components could have been done, funded by reducing the infrastructure expenditures, is a question. The amount entailed might have been fitted in if during the early phase of Bushrod construction it had been realized that a significant funds problem was developing and some of the additional work on the Bushrod extension, aggregating US$ 1.0 million, had not been carried out. 4.14 In June 1979 when the allocation for the civil works was fully disbursed, it was agreed to continue disbursements against unallocated 1/ About that time, LEC, well aware of the situation, raised the matter of a supplementary loan for the looming cost overrun but the Bank advised LEC that 1/ This may have indirectly contributed to the problem; once having agreed to disburse against unallocated, the automaticity of the disbursement procedure maky have taken over and "overdisbursed" against infrastructure before new project staff could assess the funds situation. - 23 - it should seek to use surplus funds which it appeared would be available from the US$14.7 million financing provided by the Arab agencies. The Arab agencies refused on the grounds that the civil works contract was financed by the Bank (and EIB) and was not their affair. Subsequently, in September 1980, the Arab agencies used the surplus to finance the third diesel set at Bushrod (para. 4.02). 4.15 Later, in 1981, there appears to have been some confusion between the Bank and LEC. Contracts for the consulting studies of frequency control and transmission were awarded by LEC on the apparently mistaken understanding that the Bank would be able to finance any shortfall of funds entailed. Shortly after, LEC had to suspend these contracts when it became clear that this was not the case. Eventually, LEC decided to finance the studies itself. In April, 1981, the training center was cancelled. The low income power service component was never started. 4.16 In October 1981, LEC proposed a supplementary loan of US$3 million to pay for the two studies, continuing the consultants (para. 4.10), the feasibility study of St. Paul River hydro and the equipping of the two diesel sets at Bushrod extension with improved superchargers similar to those with which the newly ordered third unit was to be provided. While the bulk of the amount was for facilities and services not provided for under the project, the proposal itself illustrates the financial problems LEC was experiencing. The Bank offered to help LEC obtain OPEC funding but this initiative was not productive. At any rate, LEC was disappointed with what it perceived as ambiguities in the Bank's role, for instance, the Bank's insistence on inclusion in the project of the component for electricity service to the urban poor, as contrasted with what eventually happened. Project Cost 4.17 The actual project cost, US$30.1 million, was somewhat less than the appraisal estimate, US$31.5 million, reflecting inter alia the negligible expenditure on the small components and the smaller expenditure on the Arab financed mechanical contract (para. 4.14). Thus actual and estimated costs for the project are not directly comparable. 4.18 The overrun on the civil (Bank and EIB joint-financed) and consulting contracts, approximately US$1.5 million (18%) and US$0.65 million (41%), resulted in part from depreciation of the dollar against the mark and Swiss franc in which the contracts had been denominated. About 2/3 of the civil works overrun was due to extra work. Some of it was essential but some was not, and might have been deferred. Part of the consulting overrun was due to the change in the contract packaging caused by the need to accommodate funding from different sources which could not be consolidated. The original contract packaging, as is usual in such cases, called for a price from suppliers respon- sible for both the supply and installation of the diesel-electric generating units and their civil works. The funding finally obtained for the project forced the split in the contract package into three separate contracts (diesel engine, electric generators, and civil works) needing, therefore, additional work on the part of the consultants. 4.19 The schedule of the loan allocations for each category and the actual amounts allocated are given in Table 3. The amounts actually spent for connection of low-income households, the training components, the frequency conversion study and the transmission study were negligible. - 24 - Actual Project Finances 4.20 The planned and actual project financing was as follows: Loan/Grant Actual Disbursement $US Millions IBRD 10.0 10.0 ARAB AGENCIES 14.7 12.6 E.I.B. 4.7 6.8 LEC 2.1 0.7 Total 31.5 30.1 The basis of the project was that the Bank and co-donors would finance the foreign cost and LEC the local costs. The (consultants) record shows that the co-donors financed almost the entire cost and LEC but a small amount. However LEC noted the following additional payments it had made, separately, in conjunction with the project: US$ Thousands Interest charges on interim overdraft facilities to its bankers prior to mid-1981, pending EIB loan funds - 1,025 Incremental expenses of management team - 240 Studies (to date) - 155 Incremental cost of Bushrod extension - 680 Total 2,100 Load Growth 4.21 The need for the Bushrod extension and the forecast of revenues was based on a load growth of 7% (para. 3.03). In fact, gross energy sales including sales to mines were virtually static through the period 1976-1983. Mining sales have been made since 1981 under an Energy Exchange Agreement under which LEC supplies the (Bong) mine with hydro energy during the wet season in return receiving an equivalent amount of diesel-generated (but cheaper than gas turbine-generated) energy from the mine during the dry period. The exclusion of mining sales therefore provides a better basis for analyzing load growth. On an adjusted basis load growth was about 4% annually; however, all the growth occurred in the 1976-79 period and the load has since been static. This is equally the situation in the residential, commercial and industrial load segments. 4.22 The peak demand in 1976 of 66 MW increased somewhat but was only 69.5 MW in 1980, and somewhat less in 1981. The appraisal forecast 75 MW in 1980 and 97 MW in 1983. System Losses 4.23 Power system losses, including line losses of 15% and unaccounted- for-losses of 13%, were 28% of generated energy in 1975. It had been hoped to reduce unaccounted-for-losses substantially during the project implementation - 25 - period, to a level of total losses of 24% by 1983. Efforts were made to check house connections, meter accuracy and billing records, and unaccounted losses were reduced to somewhat lower levels for a short time but with the large rate increases, losses have since increased and in 1980/81 were 31.51 having reached 34.510 in 1979. 4.24 The failure of the load to increase substantially, and the consequently poor levels of revenue and the inability to reduce unaccounted- for-losses reflect both the weakened economic conditions in Liberia and consumer resistance, sometimes inability, to pay the increasingly high tariffs. The poor economic situation was the result of both the worldwide conditions and Liberia's especially sensitive situation with respect to the price of primary commodities. The high tariffs were mainly the result of the major increase in the price of oil in 1978, which of course also affected severely the world economy. Illegal connections and meter tampering mirror in substantial measure the disproportion between consumers' income, especially domestic consumers', and power bills. However much of the unaccounted losses are due to the illegal practices of commercial firms able to pay. Financial Results 4.25 As was the case with most electric utilities, LEC went through a marked financial change during 1977-82, the period of project implementation. Only in 1982 did LEC make a net surplus after interest charges. Rates of return on net fixed assets were minimal or negative and LEC was in a generally poor (if not precarious) financial position. 4.26 The main reasons were the more than doubling of oil prices which increased LEC's fuel bill accordingly, and inflation, which increased its operating expenses. LEC was able under the provisions of the fuel adjustment clause in its tariff regulations to increase tariffs to partially compensate for the increased fuel cost. From the time the clause was invoked in June 1979, until July 1981, tariffs by this means had increased by a total of five cents per KWh. In addition there was a substantial basic increase in early 1979. Tariffs have remained at the July 1981 level, averaging about 13 cents per KWh, including the fuel surcharge. The large decline in industrial load and the negative consumer reaction to the existing very high domestic tariff has led Government to resist further automatic fuel surcharges since then. 4.27 During 1977 fixed assets were revalued to reflect replacement costs, doubling them from US$60 million to about US$120 million; the change was reflected in the 1978 financial accounts. LEC changed its financial year from calendar year to July 1-June 30 beginning in 1980-81, with accounts for the period ended June 30, 1981, on an 18 month basis. 4.28 A comparison of actual with forecast financial results has limited meaning in view of the changed conditions following the oil price rise. Even the substantial boost to LEC's financial position resulting from the Bushrod extension is obscured in the accounts, when in fact the net income in the 1980-82 period was improved about US$17 million. 4.29 The situation characterized by a low rate of return and very limited funds for investment in new plant, may persist. While significant reduction in unaccounted for losses would lead to marked improvements, much of this loss - 26 - reflects the inability of the lower income consumer to pay. Some of the load would be dropped if, for example, illegal losses were eliminated but this would result in corresponding reductions in fuel and operating costs. Covenant Experience 4.30 LEC failed to meet the following loan covenants: (i) The rate of return of 8% on revalued assets; (ii) Provision of power service to low income housing since this component was dropped from the project; (iii) Reduction of losses and accounts receivable in spite of considerable efforts. V - REEVALUATION OF THE ECONOMIC RATE OF RETURN 5.01 The load growth experienced by LEC since appraisal has been substantially less than estimated and the prospective load growth, in the near and medium term, appears likely to continue to be weak. However, the cost of oil, and of gas-oil which LEC's gas turbines and old diesels burn, increased dramatically during this same period. As a result, savings from the use of heavy oil which the new diesel generators burn, and the much higher efficiency of the new diesels compared with the mix of gas turbines and old small diesels which had provided the bulk of the energy during the dry season, more than compensated for the smaller load growth. The reevaluated economic rate of return on the project is 15%, compared with 13% estimated at appraisal, as a consequence. 5.02 The ERR was reevaluated on substantially the same basis as employed in the appraisal report, taking into account the marked changes noted above. The appraisal estimate of ERR included the cost and benefits of the third diesel set on the basis that the civil works contract included construction of the foundations and bay for its installation, and that it was likely to be installed relatively soon. In actuality, the third unit installation, financed by OPEC, proceeded very quickly and is expected to be commissioned at the end of 1982. The reevaluated ERR has been calculated on the same basis, therefore. At appraisal the ERR was calculated on the assumption that power system losses due to illegal connections and similar causes would decline gradually over time. However they continue to be at the same high level and the reevaluated ERR reflects this, though to the extent that stolen electricity may have been put to productive use it may not all represent an economic loss. 5.03 As noted the LEC load has been almost stagnant. Inasmuch as the new diesels have been in operation almost three years, with much improved service and adequate generating capacity, it is evident that any such previous generating capacity or service constraint which limited load demand has been removed by now. The weak demand therefore reflects the poor state of Liberia's economy and consumers reaction to the increasingly high tariffs. For these reasons the load growth is likely to be modest for some time. Consequently in reevaluating the ERR it has been assumed that there will be some recovery in load growth, but that the growth rate will be of the order of 4-5% over the foreseeable future compared with the estimated 7% at appraisal. In view of this and the treatment of losses (para. 5.02), it is evident that the ERR has been reevaluated conservatively. - 27 - 5.04 An important factor in improving the ERR was that the Bushrod extension was constructed and commissioned in little over a year and immediately put in operation at full capacity, displacing energy generated by the inefficienct gas turbines and old diesels. The savings in fuel, the difference between what it cost and what it would have cost without the new diesels, resulting from actual operations from January 1980 to June 1982 aggregated about US$ 17 million. In this period the new diesels were not needed to supply load growth, the existing capacity having continued to be reasonably adequate in view of the stagnant load growth. As the load grows in the future, the Bushrod extension will be needed to meet it. The reevaluated ERR is based on savings in fuel costs in the first few years and, afterwards, on the benefits obtained from supplying new load. 5.05 Revenue from the new load supplied is based on the average tariff (1982) as a surrogate for the economic worth of power. The usual qualifier, that the consumer's willingness to pay the tariff demonstrates its economic worth, is more than apt in Liberia's case as the consumers resistance to the high tariff level reflected in part in the stagnant power demand, is evidence that at existing tariff levels the economic utility of power is at the margin. 5.06 Experience to date of the new diesels, compared with the mix of gas turbines and old diesels, is illustrative of the benefits of the new generating capacity: 1982 New Diesels Old Facilities Cost per gallon of fuel, $US 0.76 1.03 Cost of fuel per KWh, cents 5.2 14.6 KWh per gallon of fuel 15 6.8 (gas turbines) 12 (diesel) 5.07 The provision of the Bushrod extension proved well justified by the ERR of 15%. In addition, the new facility has much improved service. From the standpoint of the owner, LEC, it is highly valuable, both from the savings in cost and the avoidance of relying on the gas turbines which at one time were prone to failure (para. 1.01). 5.08 It may be argued, nevertheless, that the favorable ERR is a result largely of the marked increase in oil prices without which it would have been poor. To do so would be to ignore that the price of oil is linked directly to economic conditions and that Liberia is but one of the non-oil countries in Africa that are experiencing the same high fuel cost, poor economic growth and high tariff - low revenue scenarios. VI - INSTITUTIONAL DEVELOPMENT 6.01 The project institutional development achievements were marginal. While a considerable amount of on-the-job training was undertaken the scope was limited by the failure to provide the training facility for more formal instruction. The impact of the consultants team on improving procedures and systems was lessened by the disproportionate emphasis placed on detail at the expense of principles and systems. However the improvement in LEC's administration was due in some measure to the consultants intervention as well as to fortuitous circumstances. The displacement of management on the change in Government led to younger and, in some respects, more qualified Liberians - 28 - taking over, and the hiring of some expatriates to fill management gaps, reinforced weak points in the management and provided a means to train management counterparts. 6.02 The possible institutional development benefits, from the activities which would have resulted from doing the low income power supply component in Monrovia and (study of) the rural supply in the Gbarnga area were, of course, foregone. 6.03 Nevertheless there was some institutional development. At the project close both LEC's senior management and organization were better able to administer the organization and develop its capabilities than has been the case during recent years. VII - BORROWER AND BANK PERFORMANCE 7.01 The Borrowers performance was good considering the strains arising from the distortion in financial conditions largely created by the increase in oil prices, and from the change in Government. LEC dealt satisfactorily with the infrastructure component of the project and made considerable efforts to salvage the small components abandoned on exhaustion of the loan funds. In addition LEC was susceptible to institutional development and came away from the project with a certain enthusiasm about further efforts. 7.02 The Bank's performance was adequate. The main infrastructure component, the Bushrod extension, in which the Bank took the initial lead at conception, went very well. Bushrod's success in affording very large savings in the cost of fuel has proved a vital factor in keeping LEC finances at least afloat. As to the smaller components the situation is ambiguous as to whether it might not have been possible to do them (para. 4.13 - 4.14). The Bank's necessarily cautious approach in the aftermath of the coup may have been a factor in this respect. 7.03 The Bank's relations with the Borrower and co-donors gave the perception at times of not entirely adequate communications, for reasons which are not apparent. The OPEC fund rejected the Bank view that surplus funds from OPEC's loan to LEC should be used to meet the overrun on the Association's credit; the EIB and Bank got into a dialogue about the exact role of the expatriate management team; there arose differences between the Borrower and Association, at least this was the perception, over the selection of the consulting firm which was to provide the management team; and there were some other misunderstandings. VIII - IMPACT OF PROJECT 8.01 The impact of the project was considerable. As it turned out it has made a great difference to LEC's financial position as the result of fuel cost savings; while still not good the financial situation and prospects would have been considerably poorer without the Bushrod extension. The quality and reliability of the service provided by LEC has been much improved, as well. Thus while the 15% ERR on the project was good, in itself,it does not convey the full value of the benefits. - 29 - 8.02 The institutional impact of the project was less. LEC was a somewhat better managed and stronger organization at the end of the project implementation but this was in part the result of causal events. On the whole the institutional development achievements were smaller than might have been expected. IX - CONCLUSIONS 9.01 The major project component, the infrastructure development, was fully successful. As it turned out, the extension of the Bushrod station comprising two diesel-electric units with an aggregate capacity of 26 MW provided a major increase in the Borrowers generating capacity which proved very timely in the light of the major increase in oil prices in 1978. The fuel savings obtained from the operation of these units was a significant factor in helping LEC's financial position and in improving the quality of electricity supply. 9.02 The project was less successful in the execution of the several smaller components, an important part of which were cancelled following the exhaustion of the loan on the major infrastructure component. It also failed to reach its full potential in the institutional development of LEC. The failure of the Bank to make the supplementary loan of US$ 3 million requested by LEC (para. 4.16) in 1981 means that many of the benefits expected from Loan 1600 will be lost. 9.03 Nevertheless LEC emerged from the implementation period an improved organization, partly as the result of the institutional development activities and, otherwise, to other factors. LEC is still weak in middle management and at supervisory levels, its financial situation is constrained, and it faces continuing problems in the future. These problems have been mitigated however to the extent that, as the result of the project, LEC's generating capacity is adequate, service is better and the financial position is, relatively improved. Altogether, therefore, the project can be considered successful.  Table 1 - 31 - LIBERIA FOURTH POWER PROJECT - LOAN 1600 PROJECT COMPLETION REPORT Contract Awards Contract Completion Date Project Item Signed Contract Actual Mechanical (Diesel Sets) 9/15/781/ 12/79 01/80 Electro-Mechanical 9/15/781 12/79 12/79 Civil Works 9/15/78- 05/79 12/79 1/ Letters of Intent issued 06/78. LIBERIA PROJECT COMPLETION REPORT FOURTH POWER PROJECT LBR 1600 Forecast and Actual Cost (US$ million) 1/ Cost Estimates- Contract Amount At Appraisal Actual Actual Project Item Including vs Contingencies Contract Foreign Local Total Foreign Local Total Foreign Local Total Estimate% Amount% 1. Mechanical 11.89 0.16 12.05 14.29 0.16 14.45 12.43 0.27 12.70 0.88 1.05 (Diesel sets) 2. Electro-Mechanical 3.82 0.14 3.96 4.61 0.14 4.75 4.48 0.14 4.62 0.97 1.16 Civil 5.24 1.34 6.58 6.56 1.34 7.90 7.86 1.50 9.36 1.18 1.19 Sub-Total, Infra- structure 20.95 1.64 22.58 25.46 1.64 27.10 24.77 1.91 26.68 0.98 1.42 W. 3. Engineering Services 1.24 .08 1.32 1.47 .08 1.55 2.13 .06 2.19 1.41 1.65 Sub-Total 22.19 1.92 23.91 26.93 1.72 28.65 26.90 1.97 28.87 1.01 1.21 4. Other Service Connections 0.33 0.13 0.46 0.01 - 0.01 Vehicles & Tools 0.45 - 0.45 0.26 - 0.26 Training N.A. 0.77 0.25 1.03 0.00 - 0.00 N.A. small components, Management Team 0.74 - 0.74 0.93 - 0.93 largely uncompleted Frequency Conversion 0.06 - 0.06 0.00 - 0.00 Transmission Study 0.10 0.06 0.16 0.03 - 0.03 Sub-Total 2.45 0.45 1.90 1.23 1.23 Total 29.38 2.17 31.55 28.13 1.97 30.10 Total - Round Figures 29.4 2.2 31.6 28.1 2.0 30.1 1/ Exclusive of taxes, Table 3 LIBERIA FOURTH POWER PROJECT - LOAN 1600 PROJECT COMPLETION REPORT Withdrawal of the Proceeds of the Loan US$ Thousands Category Amount Amount Allocated Disbursed Infrastructure Diesel-electric generators and electrical equipment 2100 2315 Civil Works 2460 4383 Consultants Services 1240 2074 Other Components Connection of low income households 320 8 Maintenance vehicles and tools 410 262 Training 680 0 Management experts 680 928 Frequency conversion study 50 0 Transmission study 90 30 Unallocated 1970 - Total 10,000 10,000 LIBERIA ELECTRICITY CORPORATION Actual and Estimated Income Statements 1977-1982 (US$ 000s) 1977 1978 1979 18 mths t,l/ 19821/ 1982 Year Ended Dec. 31, 1977-79 June 30,81 June 30 (Calendar) Actual Estimated Actual Estimated Actual Estimated Actual Actual Estimated Energy Sales - GWH 280 271 266 286 281 305 416 241 423 Revenue per kWh - Cents 5.9 5.8 6.9 6.8 10.2 7.1 12.9 14.6 6.9 Operating Revenue 16,654 15,836 18,455 19,336 28,842 21,827 53,773 35,299 29,307 Operating Expenses Cost of Fuel for Generation 6,404 5,870 5,981 4,900 8,807 4,900 19,425 9,411 4,920 Other Operating Expenses 7,338 6,089 11,229 6,606 12,691 7,147 19,023 15,055 8,064 Depreciation 2,433 2,831 5,416 2,982 5,518 3,127 9,817 7,406 4,619 Bad Debts - - - - - - 6,348 1,311 Total Expenses 16,175 14,790 22,626 14,488 27,016 15,174 54,613 35,148 18,914 Net Operating Profit (Loss) 479 1,046 (4,171) - 4,848 1,826 6,653 (840) 151 10,393 Interest Expense - Net 1,921 1,985 2,246 2,357 2,565 2,871 7,721 4,541 4,684 Extraordinary Items/ (2,918) 266 135 6,571 1,513 Net Gain (Loss) (2,360) (939) (6,683) 2,491 (604) 3,782 (1,990) (2,877) 5,709 Rate Base_3/ - - 118,680 58,932 115,054 60,118 124,256 130,978 89,804 Rate of Return % (3.5) 8.2 1.6 11.1 (0.6) 0.1 11.6 Operating Ratio % 97.1 93.4 122.6 74.9 93.7 69.5 101.5 99.6 64.5 Notes: 1/ Accounts to June 30, 1981 were changed to conform to 1982 format due to a change in auditors for 1982. T/ Amortization of debt revaluation through 1979, thereafter annual gains/losses on debt revaluation. 3/ Estimated figures were not revalued; actual figures were revalued for 1977 but not thereafter. LIBERIA ELECTRICITY CORPORATION Actual and Estimated Funds Flow Statements 1977-1982 (USS 000s) 1977 1978 1979 18 mths to 1982 1982 Year Ended Dec. 31, 1977-79 June 30,81 June 30 (Calendar) Actual Estimated Actual Estimated Actual Estimated Actual Actual Estimated Internal Sources of Funds Operating Income 479 1,046 (4,171) 4,848 1,826 6,653 (840) 151 10,393 Depreciation 2,433 2,R31 5,416 2,982 5,Sl8 3,27 9,817 7,406 4,619 Total Internal Funds 2,912 3,877 1,245 7,830 7,344 9,780 8,977 7,557 15,012 Operational Requirements Increase/Decrease Working Capital (3,339) 2,033 (3,466) 612 836 253 (2,043) (8,609) (87) Interest Charged Operation 1,921 4,550 2,246 4,763 2,565 4,825 7,721 4,541 6,699 Debt Repayment 2,406 2,371 2,969 4,097 3,S34 Miscellaneous 634 (259) 613 835 88 Total Operating Requirements 1,622 6,583 892 5,375 6,983 5,078 10,610 (446) 6,612 Balance Available for Investment 1,290 2,706 353 2,455 361 4,702 (1,633) 8,003 8,400 Capital Investment Construction Expenditure 4,831 5,790 9,004 9,020 18,802 15,370 10,797 12,363 10,640 Contribution for next Hydro Proj. ___ _____ _ _____5 ____n_ . o Total Capital Investment 4,831 5,790 9,004 9,020 18,802 15,370 10,797 12,363 15,640 Balance to be Financed 3,541 8,496 8,651 6,565 18,441 10,668 12,430 4,360 7,240 Financed By Borrowings 1,661 5,321 8,299 6,176 16,580 10,880 13,107 3,019 6,530 Equity 3,800 3,800 200 - - - - 1,253 - Total External Sources 5,461 9,121 8,499 6,176 16,580 10,880 13,107 4,272 6,530 Cash Surplus (Deficit) 1,920 625 (152) (389) (1,861) 212 677 (88) (710) Funds at Beginning of Year 340 341 2,260 966 2,108 577 247 924 2,570 DIr Funds at Year End 2,260 966 2,108 577 247 789 924 816 1,860 M Ln Debt Service Coverage 0.7 0.9 0.4 1.6 1.9 2.0 0.8 0.9 2.2 Annual rontribution to Construction % 26.7 (46.7) 3.9 27.2 4.6 30.6 (15.1) 64.7 53.7 LIBERIA ELECTRICITY CORPORATION Actual and Estimated Balance Sheets 1977-1982 (US$ 000s) 1977 1978 1979 18 mths to 1982 1982 Year Ended Dec. 31, 1977-79 June 30,81 June 30 (Calendar) Actual Estimated Actual Estimated Actual Estimated Actual Actual Estimated Assets Gross Plant in Operation 169,754 80,875 171,326 85,205 172,973 89,355 203,956 205,423 131,965 Less: Depreciation 49,129 22,617 54,590 25,599 59,600 28,726 68,817 78,607 41,605 Net Plant 120,625 58,258 116,735 59,606 113,373 60,629 135,139 126,816 90,360 Work in Progress 1,200 1,879 8,677 6,569 25,832 17,789 4,895 15,606 9,389 Current Assets Cash (Net) 2,260 966 2,108 577 247 789 924 836 1,860 Receivables 8,227 7,012 10,492 7,605 14,663 7,909 18,873 15,756 8,733 Inventory 1,093 1,000 1,634 1,100 3,495 1,200 2,890 2,824 1,700 Total 11,580 8,978 14,234 9,282 18,405 9,898 22,687 19,416 12,293 Fund for next Hydro Project 13,000 Total Assets 133 405 69,115 139,647 75,457 157,610 88,316 162,721 161,838 125,042 Liabilities Capital 14,436 14,436 14,636 14,436 14,636 14,436 14.636 15,889 14,436 Retained Earnings (Deficit) 8,580 10,001 1,898 12,492 1,293 16,274 (5,733) (11,179) 33,502 Revaluation Account 60,801 58,709 58,654 63,690 63,690 Total Equity 83,817 24,437 75,243 26,928 74,583 30,710 72,593 68,400 47,938 Long Term Debt 41,237 43,006 49,782 46,776 63,209 55,702 64,662 62,634 74,660 Current Liabilities Payables 8,351 1,672 14,622 1,753 19,818 1,904 25,466 30,804 2,444 Total Liabilities 133,405 69,115 139,647 75,457 157,610 88,316 162,721 161,838 125,042 1 Current Ratio 1.4 5.4 1.0 5.3 0.9 5.2 0.9 0.6 5.0 Debt/Equity Ratio 33/67 64/26 40/60 63/37 46/54 64/36 47/53 48/52 61/39 0' Note: 1/ Actual assets were revalued at end FY77, estimated were not revalued.