Mali - Biomass Alcohol and Energy Efficiency Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4014-MLI STAFF APPRAISAL REPORT MALI BTOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT May 25, 1983 Industry Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenis may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENTS (as of September 14, 1982)a/ Currency Unit = Malian Franc (MF) MF 1,000 I1S$ 1.54 US$ 1.00 = MF 648 WEIGHTS AND MEASURES 1 Hectare (ha) = 2.47105 Acres 1 Liter = 0.2642 US Gallon 1 Barrel = 159 Liters 1 Metric Ton (t) = 1,000 Kilograms or 2,204.6 pounds 1 Vol. of Gasoline = 0.899 Vol. of Crude oil (thermal equivalence) 1 Vol. of Anhydrous Alcohol = 1 Vol. of Gasoline (as Gasohol Fuel) NOTE: The words alcohol and ethanol are used interchangeably in this report. PRINCIPAL ABBREVIATIONS AND ACRONYMS UJSED APU - Alcohol Production Unit COD - Confederation of Oil Distributors MA - Ministry of Agriculture ME - Ministry of Equipment ON - Office du Niger ONT - Office National des Transports OSRP - Office de Stabilization et de Regularization des Prix RTF - Rehabilitation Task Force lpy - liters per year lpd - liters per day tpd - tons per day tpy - tons per year FISCAL YEAR Government: January 1 - December 31 Office du Niger: July 1 - June 30 a! In May 1983, the Exchange Rate was US$1 MF 710.  FOR OFFICIAL USE ONLY MALI BIOMASS ALCOHOL AND ENERtGY EFFICIENCY PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. I. INTRODUCTION ............................................. 1 II. ENERGY AND AGRICULTURE ........................ . 2 A. Background .................................. 2 B. Energy Situation and Outlook . ................. 3 C. Petroleum Products Consumption ............... 3 D. Petroleum Products Pricing ..... ............. 4 E. Petroleum Products Supply and Marketing ............. 5 F. Agricultural Resources .............................. 6 G. The Sugar Subsector ................................. 6 1. Sugarcane Production ............................ 6 2. Sugar and Molasses Production .... ............... 8 3. Existing Distillery Operations .... .............. 8 H. Government Strategy in the Energy Sector ............ 9 III. THE PROJECT SPONSOP ...................................... 10 A. The Office du Niger ................................. 10 B. Operating Performance ................................ 10 C. Financial Condition ................................. 11 D. Recent Developments ................................. 12 IV. THE PROJECT .14 A. Project Objectives and Scope ..14 B. Project Description ..15 1. Biomass Alcohol Production, Storage and Handling Component .15 2. Energy Efficiency Component .15 3. Gasohol Blending and Distribution Component 19 4. Technical Assistance and Training Component 20 5. Biomass Energy Study Component .20 6. ON Rehabilitation Program .21 C. Project Management ..21 D. Project Schedule ...................................... 22 E. Environmental Impact ..24 F. Raw Materials and Utilities .24 G. Employment and Productivity . .28 This report was prepared by Messrs. S. Capoluongo, P. Geraldes, and N.C. Krishnamurthy of the Industry 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.  - ii - Page No V. PROJECT CAPITAL COST AND FINANCING............. 289 A. Capital Cost...................... 28 B. Financing Plan. .Terms ...ed.....r30 C. Procurement ...................... 32 D. Credit Allocation and DisbursemPents.. t32 VI. FINANCIAL ANALYSIS..................... 33 A. Production and Revenue Estimates. .Gravit 33 B. Production Costsd..34 C.6Financial Projections. .Molasses, .and .Al o35 D. Financial Rate of Return. .for.Biomass.Energy.Std36 E. Financial Covenants.37 F. Auditing and Reporting Requirements .......... 37 G. Risks ......................... 38 VII. ECONOMIC ANALYSIS ..................... 39 A. Key Assumptionsp...39 B. Economic Benefits. ................ma.Income.Statemet 39 C. Economic Costs..................... 40 D. Economic Rate of Return ................ 41 E. Other Benefits..................... 41 F. Foreign Exchange Benefits ............... 42 VIII. AGREEMENTS ........................ 42 ANNEXES 1 Glossary of Terms used in the Report 2-1 Domestic Consumption of Petroleum Products 2-2 Estimated Average Specific Gravity of Petroleuim Products 2-3 Average Domestic Prices of Selected Petroleum Products 2-4 Regional Consumption of Petroleum Products 2-5 Sugarcane Production 2-6 Production of Sugar, Molasses, and Alcohol 3-1 Office du Niger - Income Statement 3-2 Office du Niger - Balance Sheet 4 Draft Terms of Reference for Biomnass Energy Study 5 Project Costs 6-1 Financial Analysis - Basic Assumptions 6-2 Alcohol Production uJnit - Pro-forma Income Statements  Page No 6-3 Alcohol Production Unit - Pro-forma Balance Sheets 6-4 Alcohol Production Unit - Pro-forma Selected Financial Indicators 6-5 Financial Rates of Return 7-1 Economic Analysis - Basic Assumptions 7-2 Investment Cost Allocation 7-3 Economic Costs and Benefits 7-4 Foreign Exchange Benefits CHARTS 1. From Sugarcane to Gasohol (29324) 16 2. Siribala - Existing Distillery (29320) 17 3. Siribala - IIodified Distillery (29321) 18 4. Implementation Schedule (29325) 23 5. Siribala - Sugarmill Energy UJsage (29323) 26 6. Siribala - Thermal Efficiency of Modified Plant (29322) 27 MAP IBRD - 16461  - iv - DOCUMENTS AVAILABLE IN PROJECT FILE Reference Title, Date and Authors A. Feasibility Study for Gasohol Production and Usage in Mali, July 1981, Ministry of Industrial Development and Tourism - Atkins Planning. B. Government of Mali - Ordinance No.81-3/1-RM, April 29, 1981, President of the Republic of Mali C. The Siribala Sugar Mill - Technical Specifications and Operating Description, January 3, 1976, Office du Niger D. Feedlot Projects - Potential for Intensive Livestock Production, 1981, Office du Niger E. Price Structure of Liquid Fuels, August 11, 1981, OSRP F. Presentation Note, 1981, Office du Niger G. World Molasses Prices, August 12, 1981, Y. Akoto, Industrial Projects Department H. Projected Production of Sugarcane and Molasses at Siribala and Dougabougou, August 1982, R. Antoine. I. Analytical Accounts and Comments, June 30, 1982, Office du Niger. J. Mali - Livestock Situation and Prospects, April 1980, World Bank Regional Mission in West Africa.  MALI - BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT I. INTRODUCTION 1.01 The Government of Mali has requested an IDA credit of US$7.6 million to finance a Biomass Alcohol and Energy Efficiency Project (the P'roject). The Project consists of six components: (i) biomass alcohol production from surplus molasses; (ii) energy efficiency improvements at the two existing sugar mills; (iii) 'gasohol' blending and distribution facilities; (iv) technical assistance and training to improve the operating efficiency of two agroindustrial complexes; (v) a study for future expan- sion of biomass fuel production; and (vi) technical assistance and studies to prepare a rehabilitation program for Office du Niger. The Project would enable Mali to produce about two million liters annually of alcohol to replace about an equal amount of imported high cost gasoline. The alcohol would be produced by upgrading and modifying two existing underutilized distilleries at Dougabougou and Siribala (Map IBRD 16461) and processing surplus molasses by-product which is now wasted causing damage to the envi- ronment. In addition, the proposed energy efficiency investments would allow Mali to use exclusively bagasse, the fiber residues from sugarcane, instead of petroleum products to generate steam and electric power for its two sugar mills and distilleries. The import saving from this project com- ponent is estimated to be about 800,000 liters annually of industrial diesel oil. At 1983 prices, Project annual production and savings are cal- culated at about US$ 1.3 million. 1.02 The alcohol produced would be anhydrous ethanol of about 99.6% purity (Annex 1). On the basis of the regional pattern of consumption and the existing gasoline supply system, the alcohol would be blended with regular grade gasoline at the Bamako oil products depot, at a uniform annual rate. The resultant 'gasohol' blend, containing approximately 3.5% alcohol, would be distributed through the existing gasoline distribution system using the same distributors and retail outlets. Gasohol of up to 210% alcohol blend exhibits equal engine performance compared to the gaso- line it replaces; the alcohol from the Project would therefore retail at the same price as regular gasoline. 1.03 The Office du Niger, a parastatal institution, would continue to own and operate the two distilleries at Dougabougou and Siribala. The Dougabougou distillery would continue to produce industrial grade hydrous alcohol of about 95% purity for the domestic consumer and industrial mar- ket. Surplus hydrous alcohol production at Dougabougou, estimated at about two-thirds of total annual production, would be delivered to Siribala for reprocessing into anhydrous alcohol. The Siribala distillery would be modified and upgraded to produce anhydrous alcohol by fermentation of molasses produced at Siribala and from hydrous alcohol received from Dougabougou. The sugarcane plantations presently serving the two sugar plants are expected to yield sufficient cane to meet requirements. However, the thermal efficiency of the sugar mills and annexed distilleries and the reliability of molasses production need to be improved. Project investments in plant modifications, staff training, and the introduction of improved operations and maintenance systems address this need.  - 2 - 1.04 Total financing required for the Project is estimated at US$8.3 million, including US$7.2 million in foreign exchange. The proposed IDA credit of US$7.6 million, equivalent to about 92% of the total financing requirements, would cover full foreign exchange costs and 36% of local financing requirements. Office du Niger and the Government would provide the remaining financing. 1.05 The proposed Credit would be the second Bank Group operation with Office du Niger and the third operation in the energy and industrial sec- tors in Mali. The three prior operations are: (i) an Engineering Credit of US$4.5 million (845-MLI) for Office du Niger, approved by the Board in October 1978, to provide technical assistance for (a) planning an infra- structure rehabilitation program, (b) training of irrigation staff, (c) accounts audit, (d) research, and (e) livestock and socio-economic studies; (ii) a credit of US$8.0 million (986-MLI) to finance the Industrial Sector Development Project, approved in May 1980, consisting of support to the private industrial and traditional sector; and (iii) a credit of US$3.4 million (1134-MLI), approved in April 1981, for a Petroleum Exploration and Energy Planning project. 1.06 The proposed Project was identified by an IDA mission which visited Mali in February 1980. The mission recommended that the Government carry out a feasibility study to: (i) identify the facilities required to pro- duce, at the least economic cost, anhydrous alcohol, and blend and market gasohol; (ii) establish the capital and operating cost requirements; and (iii) assess the economic and financial viability of the required investments. The Government employed consultants with financing under a Project Preparation Facility of US$50,000 approved in December 1980. The feasibility study was completed in July 1981, and reviewed by Government officials with the assistance of IDA staff. An IDA mission consisting of Messrs. S. Capoluongo (Chief), N.C. Krishnamurthy, and P. Geraldes appraised the Project in October 1981. A follow-up mission consisting of Messrs. S. Capoluongo (IDA) and R. Antoine (Consultant) visited Mali in June 1982 to review the proposed implementation arrangements for the Project and to assess the adequacy of sugarcane supply. A second advance of US$900,000 under the Project Preparation Facility was made in May 1983 to provide urgent support for the rehabilitation of Office du Niger, and for engineering work for the Alcohol and Energy Efficiency components. II. ENERGY AND AGRICULTURE A. Background 2.01 Mali has a population of nearly seven million and is one of the ten poorest countries in the world. Per capita GNP was about US$190 in 1982. Mali is handicapped by serious obstacles to development. Extreme variability of rainfall causes sharp fluctuations in crop and livestock production, and access to foreign markets is made difficult by its land- locked position and the long distances--more than 1,000 km--to the nearest seaports, Abidjan in Ivory Coast and Dakar in Senegal. Development is also constrained by the substantial internal distances (the country covers an area of 1.24 million km2), the shortage of skilled manpower, and the narrow domestic market for industrial and consumer products. About 90 percent of  the population is rural and depends on crop farmaing, animal husbandry, forestry and fishing for livelihood. Exports consist almost entirely of agricultural commodities and livestock, and meet only about 60% of merchan- dise imports. B. Energy Situation and Outlook 2.02 Energy demand in 1980, the latest year for which reliable data is available, is estimated at about 760,000 tons of oil equivalent or about 110 kg per capita. It is estimated that firewood meets about 69% of energy demand; petroleum products, 24%; and charcoal, the remaining 7%. Mali has forests covering 40,000 kin2, possibly holding wood reserves of about 150 million tons, but wood is rapidly being depleted around population centers because it is used to meet over three-quarters of houisehold energy demand. Imported petroleum products satisfy virtually all commercial energy demand that is not met by Firewood or charcoal. The contribution of hydroelectric power to energy demand is negligible. Installed hydroelectric capacity, including the Silingue multipurpose scheme, completed in 1982, totals only 55 MW. 2.03 Mali almost entirely relies on fuel wood and imported oil products to meet energy demand because its resources, though diversified, are little developed. The hydroelectric potential of the Niger and Senegal rivers is estimated to be 2,000 MW. Oil shale deposits in the east are a possible source of lhydrocarbons. There are four Sedimentary basins whose hydrocarbon potential remains to be established. The Petroleum Exploration Promotion Project (Cr 1134-MLI) is assisting the Government in evaluating the hydrocarbon potential of the Taoudeni Basin. Potential sources of renewable energy include wind, solar power, and biomass. Agricultural by-products, primarily rice husks, groundnut shells, and sugarcane bagasse and molasses are either wasted or under-utilized; the latter resources form the basis of the proposed Project. 2.04 The cost of petroleum products imports rose from US$23.3 million in 1975 to US$57.2 million in 1979, at an average annual rate of 25%. In 1975, the value of petroleum products imports was equal to 13% of nerchan- dise imports and 32% of merchandise exports. In 1979, these ratios rose to 21% and 49%, respectively. This increase resulted mainly from domestic demand growth and a deterioration in the terms of trade. In 1980, it is estimated that, despite a slight decrease in consumption, the value of imported petroleum products exceeded 60% of merchandise exports, reElecting substantial increases in the international price of oil. High petroleum import costs are a major factor in the serious balance of payment crisis Mali now faces. Therefore, the Government attaches high priority to devel- oping alternative domestic energy resources. C. Petroleum Products Consumption 2.05 Consumptioni of petroleum products in 1980 is estimated at about 220 million liters (180,000 tons). Consumptionl grew at an average annual rate of 9.5% from 107.7 million liters (88,000 tons) in 1971 to 222.7 million liters (182,500 tons) in 1979, but decreased slightly to an esti- mated 220 million liters (180,000 tons) in 1980 because of domestic price increases. This trend continued in 1981 and consumption decreased to an estimated 191.5 million liters (157,000 tons). In the 1980s, petroleum products consumption is expected to start growing again, though at a rate  - 4- lower than in the 1970s, reflecting the trend of the last five years. Gasoline accounts for almost 40% of consumption volume, and its share is increasing. Annex 2-1 shows domestic consumption of petroleum products from 1971 to 1980; Annex 2-2, their specific gravity. The following table summarizes past consumption pattern and growth: Mali - Domestic Consumption of Petroleum Products (million liters) Average Annual Growth Rate (%) 1971 1976 1979 1980 1981 1971-79 1976-81 Liquefied Petroleumt Gas 0.3 0.3 0.4 0.4 0.4 3.6 5.9 Aviation Gasoline 0.9 0.8 - - - - - Premiuim Gasoline 0.9 1.9 1.5 1.0 0.8 6.6 (15.9) Regular Gasoline 43.1 63.8 85.9 85.0 76.3 9.0 3.6 Illuminating Kerosene 11.6 12.3 16.0 16.0 15.2 4.1 4.3 Jet Fuel 5.4 15.0 21.0 21.0 15.9 18.5 1.2 Automotive Diesel 21.9 40.3 53.5 53.0 48.5 11.8 3.8 Industrial Diesel 9.7 21.3 28.2 28.0 21.9 14.3 0.6 Lubricants 3.1 4.6 6.4 6.0 6.0 9.5 5.5 Fuel Oil 9.4 9.7 8.2 8.0 4.9 (1.7) (12.8) Asphalt 1.4 0.6 1.6 1.6 1.6 1.7 21.7 Total 107.7 170.6 222.7 220.0 191.5 9.5 2.3 D. Petroleum Products Pricing 2.06 The Office de Stabilization et Regularization des Prix (OSRP), a Government agency, regulates petroleum product prices. OSRP, in consulta- tion with the private importers, reviews periodically retail prices, and revises them as appropriate. In addition to the ex-refinery prices abroad, OSRP's calculation of retail prices includes transportation costs, foreign taxes, domestic import duties and taxes, handling losses, and price stabi- lization and freight equalization levies. The two levies achieve the pur- pose of ensuring uniform retail prices in time, from one revision to the next, and in various parts of the country. If the importer's actual costs, which also include a reasonable allowance for profit, are lower than the administered price, the Importer pays the difference to OSRP; if costs are higher, OSRP pays the importer out of the price stabilization fund. 2.07 The system works well and, on average, domestic retail prices of gasoline, kerosene, and diesel have exceeded import costs in 1980 and 1981. In January 1982 prices were substantially increased and the current retail price of gasoline is NP 520 per liter (US$31.04 per gallon). This price is substantially higher than the interniational price. The Government, however, taxes kerosene at lower rates than gasoline, for social reasons, and public utilities benefitting from the investment incen- tives law are exempt from fuel taxes. Still, retail prices of all petro- leum products are above their opportunity value and on average exceed import cost by about 15%. Under the Petroleum Exploration Promotion Credit  (1134-MiLI), the Government is carrying out a review of its pricing policies for petroleum products and has agreed to exchange views with IDA on the recommendations of the study. Historical domestic prices of petroleum products are shown in Annex 2-3 and summarized below. Mali - Average Domestic Prices of Selected Petroleum Products 1970 1971 1975 1979 1980 1981 1982 1982 -------------------( MF/li ter)----------------- (US$/ gallon) Premium Gasoline 110 110 150 208 320 441 560 3.27 Regular Gasoline 100 100 140 198 310 416 520 3.04 Kerosene 70 77 110 158 216 280 345 2.02 Automotive Diesel 65 75 110 146 226 301 365 2.13 Industrial Diesel N.A N.A N.A 103 162 214 259 1.51 Fuel Oil N.A N.A N.A 85 128 171 189 1.10 E. Petroleum Products Supply and Marketing 2.08 Mali does not produce any petroleum nor does it have domestic petroleum refining capacity. Therefore, petroleum product demand is met entirely by imports. Five companies (Esso, Shell, Mobil, British Petroleum, and Total) import petroleum products into Mali and distribute them. They are the affiliates of five major international oil companies and share the market about equally. The five marketing companies are members of the Mali Confederation of Oil Distributors (COD) whi^h works closely with Government in coordinating public and private interests in the petroleum sector. The marketing companies import petroleum products from Dakar by rail, and from Abidjan and Parakou by road (Map IBRD 16461). About 65% of total volume is imported from Abidjan, 33% from Dakar, and 2% from Parakou. These shares are the result of an acceptable compromise among several factors, including cost effectiveness, the limited capacity of the railroad, which is fully utilized, the need to diversify supply sources to minimize the risk of disruptions, and the varying accessibility of different regions of Mali to different sources of supply. In 1980, about 60% of all petroleum products by volume was consumed in the Bamako area; 17%, Segou; 14%, Mopti; 7%, Kayes; and 2% Gao. Annex 2-4 shows regional consumption by type of product. All premium gasoline, and about two-thirds of regular gasoline is sold in the Bamako area. This marketing and distribution system works reasonably well, is cost effective, and is considered satisfactory. 2.09 The only bulk storage depot for gasoline in Mali is located at Bamako. It has a capacity of about 6.5 million liters, equivalent to less than one and a half months' consumption in the Bamako area. The depot is owned and operated by the local Mobil affiliate and serves all five oil  - 6 - companies. Each company individually indents its requirements based on its market estimates on a monthly basis. Two small gasoline storage facilities of 300,000 liters each are located at Kayes and Tombouctou. It is esti- mated that an additional 1.8 million liters of storage capacity is avail- able elsewhere in the country at retail outlets and with consumers. The overall petroleum products storage facilities in Mali are limited. The Project provision of additional facilities to store alcohol produced under the Project will contribute to relieving this problem by making available an equivalent volume of gasoline storage (para 4.07). F. Agricultural Resources 2.10 Compared to other countries in the Sahel region, Mali has above- average land and water resources. The average population density - fewer than 6 inhabitants per km2 - is relatively low even after excluding the arid and semi-arid areas. Except for few densely populated centers, land availability is not a constraint to agricultural development. 2.11 About 90% of Mali's population lives in rural areas, mostly in regions with a rainfall of 500 mm annually or higher, which are suitable for crop or livestock production. Although over three quarters of the country receives less than 500 mm of rain annually, the per capita endow- ment of land suitable for crop production or pasture is more favorable than for other Sahelian countries. Altogether, some 2 million ha are estimated to be under cultivation, of which 90% is in rainfed agriculture and 10% under irrigation or flooding. Of some half million farms, about 70% are 5 ha or less. Food crops occupy close to 90% of the land under rainfed culti- vation while the remainder is devoted to cotton (120,000 ha) and groundnuts (120,000 ha). In most areas, land resources are still sufficient to enable fields to lie fallow, thus ensuring restitution of soil fertility. Animal traction is more widespread in Mali than in any other Sahelian country. Fertilizer use is increasing, mainly through the efforts of sugarcane, cotton, and groundnut development projects. 2.12 Mali also has considerable irrigation potential. The Interior Delta of the Niger, the Upper Senegal Valley with its tributaries, and the lakes region on the Niger's left bank have sufficient water resources to irrigate over two million ha. FAO has estimated that Mali's irrigation potential represents two-thirds of the total irrigation potential of the six Sahel countries, estimated at 3.1 million ha. Mali's per capita endow- ment with potential irrigable land was estimated at 0.36 ha, or three times the Sahel average of 0.12 ha. The cost of developing irrigation, however, is higher than that required for rainfed agriculture. Only high value crops like sugarcane, vegetables and rice can justify irrigation invest- ments. Cotton, groundnuts, coarse grains, and rice are the four main traditional crops. In the 1970s, sugarcane has emerged as a fifth major crop. G. The Sugar Subsector 1. Sugarcane Production 2.13 Office du Niger (para 3.01) grows sugarcane with flood irrigation at Dougabougou, approximately 280 km to the northeast of Bamako, and Siribala, some 20 km north of Dougabougou (Map IBRD 16461). There is no  shortage of irrigation water. Up to about 1,300 ha can be irrigated at Dougabougou, and 2,100 ha at Siribala using existing facilities. Cane yields have averaged about 50 tons/ha at Dougabougou, and over Q0 tons/ha at Siribala. This difference is due to improved cane varieties, better soil characteristics, and drainage at Siribala. The only major disease occuring in the area, smut, has so far been satisfactorily controlled. Cultural practices are generally satisfactory although improvements could be made in land grading and planing for better yield performance. Technical assistance for this purpose is included under the proposed Project (para 4.10). Tractors, vehicles, and other agricultural equipment are adequate but their timely and efficient availability needs to be improved. The Dougabougou sugar mill was commissioned in 1966. The one at Siribala began operating ten years later in 1976. Both factories are of standard design and have annex distilleries. They were built with Chinese aid. The cane crushing capacity at Dougabougou is 400 tons per day (tpd); at Siribala, 1,000 tpd. 2.14 Sugarcane production statistics are presented in Annex 2-5 and summarized below: Mali - Sugarcane Production (thousand tons) a/ 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 101 177 208 215 225 173 SO/ a/ First year of operations at Siribala. b/ Dougabougou factory shut down. 2.15 Total sugarcane production increased gradually from about 177,000 tons in 1976/77 to 225,000 tons in 1979/80. In 1981, however, the 15-year old Dougabougou plant, after experiencing frequent break-downs, was shut down for a full rehabilitation. The Siribala plant also experienced operating difficulties due to lack of spare parts and inadequate mainte- nance. Therefore, only 173,000 tons of cane were harvested in 1980/81, and 88,000 tons in 1981/82. The sugarcane throughput was constrained by the operability of the two factories, one of which, Dougahougou, was shut down for the entire 1981/82 campaign. Now the Dougabougou factory has been com- pletely rebuilt with Chinese assistance, and started operating in October 1982; the Chinese have started to repair the Siribala sugar mill and com- pletion is expected in about one year because this mill will continue to operate while it is being repaired. The Malians achieved satisfactory per- formance for 15 years at Dougabougou without any prior experience in sugar operations. It is therefore reasonable to expect that performance in the 1980's will improve as a result of the experience gained in the 1970's and the rehabilitation of the sugar mills. 2.16 The sugarcane planting programs were altered to respond to factory rehabilitation and repair needs during the last two sugar campaigns. It was reasonable to minimize the expected cane supply because  - 8 - sugarcane that cannot be brought to the factory must either be cut and thrown away or, if left standing, it is likely to affect adversely the yield of the following harvest. At Dougabougou no new plantings were made in 1980/81, because of the following season shutdown, but the planting pro- gram for the current season, 1982/83, is well advanced and 229 ha (out of the planned 285 ha) have already been planted. At Siribala factory cane requirements in the last campaign, 1981/82, were met by harvesting only 1,061 ha out of 1,730 ha. No new plantings were made at Siribala during the last season because it is expected that the factory will operate at about 50% capacity in 1982/83 to allow time for repairs and replacement of key spare parts. The planting program, however, has been resumed in September 1982, in time to sustain projected cane requirements of over 200,000 tons in 1984/85 and onwards. 2. Sugar and Molasses Production 2.17 Production of sugar, molasses, and alcohol is given in Annex 2-6 and summarized below: Mali - Production of Sugar, Molasses, and Hydrous Alcohol Molasses Sugar Average Yield Alcohol (tons) (tons) (%of cane) (thousand liters) 1966/67 2,642 1,170 4.8 198.5 1970/71 5,103 2,247 3.7 384.2 1975/76a/ 7,627 5,179 5.2 210.5 1976/77 14,252 7,542 4.3 386.1 1977/78 18,952 8,151 4.0 94.8 1978/79 18,053 8,290 3.9 132.9 1979/80 18,134 8,296 3.7 139.1 1980/81 11,641 5,304 3.3 196.2 1981/82b/ 6,100 3,205 3.9 N.A. Source: Office du Niger a/ Siribala complex started operations. b/ Siribala only. 2.18 Dougabougou and Siribala together produced over 18,000 tons of sugar, and 8,000 tons of molasses annually from 1977 to 1980, when both facilities were operating normally. In 1981, however, as explained above, the 15-year old Dougabougou plant was shut down for a full rehabilitation, while Siribala also had operating problems. As a result, sugar production dropped to about 11,600 tons in 1980/81, and molasses production to about 5,300 tons. Since the Dougabougou factory has been fully rebuilt, and repairs at Siribala are underway, it is expected that past production levels of sugar and molasses can be resumed beginning with the 1984/85 cam- paign (para 4.18). These past levels of molasses production will be adequate to meet the requirements of the proposed Project. 3. Existing Distillery Operations 2.19 Each sugar mill is equipped with fermentation and distillation facilities capable of producing 95% ethanol from the molasses residues  - 9 - remaining after sugar production. Small quantities of this alcohol are produced and sold in Mali for pharmaceutical and industrial uses. However, the market demand is small and less than 10% of the available molasses is used to produce the required alcohol, although the distilleries were designed with sufficient capacity to process all the molasses. The bulk of the molasses has no economical export market outlet because its transporta- tion cost exceeds its current export market value (para 7.07). It is now discarded to the bush, where it creates an environmental problem. This wasted molasses would be the feedstock for fuel alcohol production under this Project. H. Government Strategy in the Energy Sector 2.20 Since petroleum product imports absorb a high and growing share of foreign exchange earnings (para 2.04), the Government intends to develop all potential domestic energy resources to reduce dependence on imported oil products. Mali is undertaking various energy projects with the assis- tance of the international community. Several wood utilization and forestry projects are being implemented with assistance from IDA (Credit 883-MLI) and bilateral aid. As mentioned, a technical assistance project (Credit 917-MLI) for petroleum exploration and energy planning was approved by the II)A Board in April 1981. A power project (Credit 1282-MLI) was approved by the IDA Board in July 1982. Mali also participates in the UNDP-financed, IDA-executed, global project for testing small-scale solar pumping systems. Finally, USAID is financing a US$4.1 million solar energy project. 2.21 The lead time required to exploit most potential domestic energy resources, such as hydroelectric power and solar energy, is long. In addi- tion, demand for liquid fuels, mainly in the transportation sector, is relatively inelastic due to the very low consumption levels, and presents very limited opportunities for interfuel substitutions due to technical and economic reasons. In this context, an opportunity to produce liquid fuel with a short lead time, and using existing facilities has a high priority. 2.22 The molasses which is now wasted can be used to produce approxi- mately two million liters of anhydrous ethanol (ethyl alcohol of 99.6% purity) annually, through better utilization of the existing distilleries. This alcohol would replace an equal volume of gasoline in a blend of gaso- line and alcohol commonly referred to as 'gasohol'. Experience in other countries has shown that gasohol blends containing up to 20% alcohol have practically the same performance as gasoline and that gasoline-powered vehicles do not require significant engine modifications to run on gasohol (see Alcohol Production from Biomass in the Developing Countries, World Bank, September 1980). Because the potential production of alcohol from the currently available molasses is about two million liters per year (lpy), the annual volume of alcohol available for blending would be less than 5% of the current volume of gasoline consumption. Mali, therefore, has the option to introduce a gasohol blend with a modest alcohol content, while achieving significant savings in gasoline imports.  - 10 - III. TRE PROJECT SPONSOR A. The Office du Niger 3.01 In 1932, the French colonial administration created the Office du Niger (ON) to develop the irrigation potential of the central delta of the Niger River, and grow rice and cotton. ON's irrigation system, developed in the 1930's and 1940's, consists of a dam on the Niger River, the Markala barrage, which raises the water level by about 5 meters, a feeder canal upstream of the dam, and two main irrigation canals, the Sahel canal, and the Macina canal. The secondary and tertiary canals can serve up to 53,000 ha of cultivable land of which about 41,000 ha are currently cultivated - 38,200 ha under rice, and 2,800 ha under sugarcane. After independence, in 1961, the Office du Niger was taken over by the Government and became an autonomous parastatal entity enjoying a considerable degree of managerial and financial independence. ON is the largest rural development institution in Mali. 3.02 In addition to the agro-industrial complexes at Siribala and Dougabougou (paras 2.13-2.19), ON operates four rice mills with a total annual capacity of about 70,000 tons of rice, and two experimental feedlots for beef cattle. In 1970, cotton cultivation was abandoned largely because of low yields, poor financial returns, and the resulting farmers' lack of interest. Now ON grows sugarcane on its estate plantations with hired labor, and rice with tenant farmers to whom it provides farm inputs and equipment, credit and marketing services in exchange for a levy covering the use of the irrigated land, and equipment rental and other services. 3.03 ON's total staff in July 1982 was about 9,500, of which 5,400 are seasonal labor. The 4,100 permanent staff include about 400 managers and 800 office workers. The remaining 2,900 are skilled and unskilled laborers. Except for Chinese technical assistance in building and rehabi- litating the sugar mills, ON is managed entirely by Malians who have coped reasonably well with day-to-day operations, considering the dearth of trained staff, but need to strengthen managerial, technical and financial skills. 3.04 ON's statutes allow it a high degree of independence over planning, operations, and finance. The Council of Ministers appoints ON's chief executive, the Director General, who formally reports to the Minister of Agriculture. Seven major departments and three staff divisions report to the Director General. The Government has identified two weaknesses in the existing ON's structure: highly centralized decision-making leading to delays and insufficient supervision, and inadequate coordination among dif- ferent departments. These matters are currently being discussed with several donors with a view to developing a joint program to strengthen OnT and improve its management effectiveness and procedures. B. Operating Performance 3.05 Throughout most of the 1970's, ON's operating performance was good. The area under rice cultivation increased from less than 30,000 ha in the 1960's to nearly 40,000 ha in the mid-1970's. Paddy yields  - 11 - increased from an estimated 1-3/4 tons per ha in 1971 to over 2-1/2 tons per ha in 1978. ON's farming population, which had declined in the 1960's, rose from less than 30,000 in the late 1960's to more than 50,000 in the Jate 1970's. Sugar production increased nearly fourfold, from 5,000 tons in 1970/71 to nearly 19,000 tons in 1977/78, and stabilized at about 18,000 tons in 1978/79 and 1979/80. 3.06 Many factors contributed to these good results which contrast with the sluggish performance in the 1960's. They include better management and the improvement of services provided to farmers which in turn brought about improved farmers' attitudes. Farmers welcomed the termination of cotton cultivation which had become unrewarding (para 3.02). ON improved maintenance of in-field irrigation canals, levelled several irrigated areas, and rented to smallholders most of its estate rice plantations which were reduced from over 10,000 ha to a mere 600 ha. Finally, the drought of the early 1970's combined with the incentives provided by the producer price increases of 1974 brought an important inflow of new settlers to ON. 3.07 ON's primary source of revenue is from the sale of sugar, rice, and related by-products. The Government sets the sales prices which are reviewed from time to time but at least once a year. Several Government agencies participate in the price review. They include OSRP (para 2.06), the Ministries of Agriculture and Finance, and the Office du Niger. ON's input in the review is important, reflecting its role as a major food producer in Mali. Another important source of revenue is the levies tenant farmers pay ON for the use of the irrigated land, equipment, tools, and services. IJnlike most parastatal institutions in Mali, the Office du Niger has operated without direct Government subsidies. C. Financial Condition 3.08 ON did not issue adequate financial reports on its operations from 1964 to 1978. Problems related to the valuation of assets after the transition of ownership from France to Mali are the main reason for this, but accounting and financial control systems and staff are also inade- quate. With technical assistance financed by IDA (Cr. MLI-845), Office du Niger prepared consolidated financial statements for 1979 and 1980 which have been audited but not certified, pending Government decisions on the definition of its rights as a shareholder and as a creditor of Office du Niger and the verification of key assets, mainly receivables and invento- ries. 3.09 The 1979 and 1980 consolidated financial statements of Office du Niger are presented in Annexes 3-1 and 3-2 and summarized in the following page:  - 12 - Office Du Niger - Financial Highlights (MF Million) 1979 1980 1979 1Q80 Revenue 8,644 13,936 Working Capital 11,673 7,997 Gross Income 6,195 3,150 Net Fixed Assets 10,341 12,3Q3 Net Income (loss) 4,218 (1,447) Long Term Debt 1,089 2,083 Cash-flow 5,026 55 Equity 22,924 21,247 Ratios: Net Income/Revenue 49% - Current 3.1:1 1.q:1 Return on Equity 18% - Debt/Equity 5/95 9/91 3.10 In 1979, sugar sales were about 51% of total revenues; milled rice, 26%; other agricultural products and by-products, 13%; and farmers' levies 10%. By-product sales included alcohol sales of less than 1% of total revenues. The 61% revenue increase to MF 13.9 billion (USS 21.5 million) from 1979 to 1980 resulted mainly from price increases, as physical sales volume increased only slightly. Price adjustments, however, were not sufficient to offset cost increases resulting from major invest- ment write-offs charged to income, an increase in staff and other over- heads, and an estimated inflation rate of 68%. Relatively low asset turnover resulting from inefficient management of inventory and receivables also explains ON's 1980 loss and subsequent liquidity problems. 3.11 In 1979 ON's working capital was high compared with sales; in 1980, after a decrease of about 30%, it was still adequate for operations as the current ratio stood at 1.9:1. While ON's current assets are high, their quality needs to be confirmed by the auditors because cash of MF 309 million (US$ 0.5 million) at June 30, 1980 was low relative to inventory and receivables of MF 15 billion (US$ 23.1 million). In 1980, long term debt almost doubled to MF 2 billion (USS 3.1 million) but capitalization remained strong. In summary the above financial statements indicate a good capitalization but deteriorating profitability and uncertain liquidity. It is therefore, important that ON restore and improve the productivity of the assets that sustain its earning power. In the sugar sector, alcohol production and energy efficiency investments proposed under this Project would contribute significantly to increasing the productivity of the exist- ing sugarcane processing facilities. D. Recent Developments 3.12 In 1981 and 1982, ON's rice and sugar production decreased from the 1979 and 1980 levels while costs continued to rise. ON was unable to turn over its inventory and collect receivables quickly enough and was caught in a liquidity squeeze. In fiscal 1982, ON had a cash flow deficit and rolled over about MF 1.1 billion (US$1.7 million) outstanding on bank overdraft facilities of MF 2.6 billion (US$4.0 million). There is concern that this cash shortage may have further adverse effect on production and maintenance of facilities. This liquidity problem was probably caused by heavy expenditures incurred in the construction of a new irrigation canal  - 13 - and the reduction in sugar sales (para 2.18). In fact, a drop in sugar production was to be expected while the Dougabougou mill was shut down for extensive rebuilding. Product prices rose more slowly than rising costs. ON's tenant farmers were particularly hit by this squeeze and apparently fell behind in payment of levies and for goods purchased on credit from ON. Liquidity, however, is expected to improve as sugar production returns to previous levels. The alcohol production envisaged under this project would further strengthen ON finances. 3.13 IDA has financed one previous project to ON for US$4.5 million, beginning in 1978 (Credit 854-MLI), consisting of a three-year program of technical assistance and pilot rehabilitation works (Project Performance Audit Report No. 4414, dated March 25, 1983). As IDA's first action in this irrigation scheme, the project was viewed as a vehicle for evaluating both ON's capabilities and the prospects for larger-scale support, with the basic objective to lay the groundwork for a future, large-scale rehabilita- tion project. To this end, the project aimed to strengthen ON administra- tion, to experiment the alternative types of physical rehabilitation, to prepare plans for and estimate costs of future rehabilitation, and to sup- port agricultural research for crop diversification. The project encoun- tered several difficulties, including delays and cost overruns caused by delays in recruiting consultants and their problems in working with the staff of ON. During this project, it became apparent that the major con- straints in ON are institutional, including its organizational structure and socio-economic conditions of its farmers, and that any improvement in physical facilities should be subordinated to action in these areas. ON has recently taken actions to streamline its management (para 3.14) and to improve its relation with farmers. The proposed Project, which combines technical assistance with productive physical investments in a clearly defined area, would represent IDA's first effort to support these positive new developments. 3.14 By early 1982, largely as the result of financial pressures caused by the deteriorating cash-flow of ON, the Malian authorities recog- nized that important actions must be taken both to increase sugar and rice production and to reform the overly centralized administrative structure of ON. The government also accepted a high-level diagnostic mission in late 1982, led by French representatives with Dutch and IDA financed partici- pants, which collaborated with Malian authorities to produce an ambitious rehabilitation plan for ON, covering three phases. The first would be to consolidate current activities by getting the existing infrastructure operating and by intensifying production. The second would be to rehabili- tate and modernize the irrigation system; and the third would be to expand production onto newly developed land. Subsequent to the release of this rehabilitation plan, representatives of IDA, French, Dutch and other bila- teral aid agencies and of the Malian government have agreed on broad prin- ciples for a coordinated, donor financed program to help rehabilitate the ON. The agreement includes measures to enhance the working conditions of rice farmers (along the lines of on-going Dutch-financed experiments), to improve the quality of irrigation services, and--with respect to the sugar sector--to establish a separate Sugar Division with full managerial and financial autonomy within the ON. The purpose of creating a separate sugar division is to protect the productive assets of the sugar sector and to enable it to function efficiently within an organization that is otherwise  - 14 - chronically short of funds and administratively cumbersome. Tt is all the more important since sugar profits provide essential financial support for rice production. The proposed Project would provide a valuable first step in implementing both the first phase of the Government's rehabilitation plan and in carrying out some of the measures agreed upon by the donors and the Malian Government. IV. THE PROJECT A. Project Objectives and Scope 4.01 The main objectives of the proposed Project are: (a) to reduce Mali's dependence on imported petroleum products by utilizing a domestic renewable energy source (molasses) which is currently being wasted; and (b) to improve substantially the energy efficiency of the two existing sugar mills to reduce their production cost and eliminate the use of imported petroleum fuels. About two million liters annually of anhydrous (99.6%) alcohol would be produced, blended with gasoline, and used as auto- motive fuel. The Project will also improve the energy efficiency of Mali's two sugar mills so they can use bagasse, instead of imported petroleum fuel, to generate power and steam. In addition, the Project will assist Mali to prepare the overall rehabilitation of the Office du Niger. The Project will include the following components: (a) biomass alcohol production by fermenting all the molasses at both sugar plants and subsequent distillation to produce 99.6% ethanol at Siribala; and provision of additional alcohol storage, hand- ling, and transportation facilities; (b) energy efficiency improvements through installation of yeast recycling system at the alcohol distilleries and process control instrumentation and maintenance systems at the sugar mills and distilleries to facilitate alcohol distillation operation to be carried out within the same crushing season as well as modifica- tions to evaporators and piping to utilize steam efficiently and eliminate the need to use external petroleum fuels; (c) additional storage capacity at the Bamako terminal for storage of alcohol, facilities for blending alcohol with gasoline and for loading system modification; (d) technical assistance for introducing better systems for plant maintenance and operations management as well as training of operational, maintenance, and supervisory personnel: (e) a study on future expansion of biomass energy production; and (f) urgently required farm inputs, technical assistance, and studies to prepare a rehabilitation program covering technical, finan- cial, and administrative operations of ON in its entirety.  - 15 - B. Project Description 1. Biomass Alcohol Production, Storage, and Handling Component 4.02 The Siribala and Dougabougou distilleries are designed to produce industrial grade alcohol, i.e. hydrous ethanol up to 95% purity. As des- cribed in detail in the report: Alcohol Production from Biomass in the Developing Countries, World Bank, September 1980, only anhydrous ethanol of at least 99% purity can be used in a 'gasohol' blend of gasoline and up to 20% ethanol. The principal modification required to produce this grade of anhydrous ethanol from the existing facilities in Mali is to add process equipment for additional water removal from hydrous ethanol. This process commonly involves introduction of an 'entraining' liquid such as benzene or cyclohexane, which enables the distillation to be extended to produce anhy- drous ethanol. Chart 1 on the following page illustrates graphically all process steps involved in this component, from sugarcane to gasohol deli- very. 4.03 The existing distillation train at Sirihala would he rearranged and upgraded to allow it to produce anhydrous ethanol (9.6% purity). The same result could also be achieved hy adding two distillation columns to the existing facility. The rearrangement of the existing distillation columns was selected instead of the addition because it will reduce capital cost and the process energy usage. This type of modification will not, however, permit production of the small quantity of hydrous ethanol (95% purity) required as an intermediate product for industrial and pharma- ceutical uses. Therefore, the Dougabougou distillery would be maintained as the source of hydrous alcohol to meet local market demand, while surplus over this demand will be transported to Sirihala for further processing. Siribala was chosen because it has a higher capacity (10,000 lpd) than Dougahougou (4,000 lpd). Charts 2 and 3 on the following pages show the existing and modified distillation systems at Siribala. 4.04 In order to accommodate the proposed increased alcohol produc- tion, it will also be necessary to introduce additional storage, loading and unloading facilities, and vehicles. These would include: (i) vehicle loading facilities at Dougabougou to deliver surplus hydrous alcohol to Siribala; (ii) vehicle discharge facilities and buffer storage at Siribala to accommodate the hydrous alcohol received from Dougahougou; (iii) vehicl.e loading facilities and storage for anhydrous alcohol at Siribala to he delivered to the Bamako hlending depot; and (iv) trucks to transport hydrous alcohol to be reprocessed from Dougabougou to Sirihala. The existing molasses storage capacity is sufficient to meet anticipated requirements. 2. Energy Efficiency Component 4.05 The Siribala and Dougabougou industrial complexes currently do not operate at the level of thermal efficiency for which they were designed. The causes of inefficiency include inadequate process equipment, instruments, and piping as well as poor maintenance and operation. These causes and the remedies proposed under the Project are discussed in detail in paras 4.23-4.25. Both Siribala and Pougabougou would be modified and improved to ensure adequate and economic supply and use of energy. These  -16- Chart 1 MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT From Sugarcane to Gasohol SUGARCANE 67,200 t/py 168,000 tipy FIELDS cane cana SUGAR FACTORIES DOUGABOUGOU SIRIBALA FACTORY YFAC10RY 2,350 t 7 5,880 t Molasses _ Molasses _ ~~~~SUGAR ~~~~~1400 t3 2800 m3 ,o\esso Existing molasses storage DISTILLERIES _ EIN EX IST ING DISTILLE RY DOUGA80UGOU| New 95% 570,000 I/pV 95%ethanol Ethanol storage Existing N \ 95% ethanol . - @ storage 7, DIFIED A^ 100 m3 370,000lit. 95%ethanol DISTILLERY I ,OOsOCiSXzS/ /? _ _- 1 1,930,000 1/py xet,,/rQv 2 New 99o/ -'-f >< 99D'.~~~~99 ethanol QAv<R 200,000 1/pwy ethanol storage 4|N _ A If ~~~~~~90ethanol3 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __sa l e s _ _ _ _ _ 3E x i s t i n g BAMAKO J | ethanol FUELAM storage 250 m3 DEPOT 1,930,000 lit./99% ethanol New 99% ethanol Existing regular storage ( gasoline storage 250 m t . 6288 m3 '_/ /I New blending r- - _ _ flowmeter and I controller L- -- 4 -' GASOHOL" _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ TO RETAIL Existing vehicle loading facilities OUTLETS VVorld Bank-29324  MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT Siribala - Existing Distillery FEEDSTOCK MOLASSES PREPARATION DISTILLATION FROM 95% ethanol MAIN 955ehao MAINS< NUTORGEN ETHANOL PRODUCT TOSTORES MO LA SSES vv,{ ater/ethanol WEIGHING/ ,SAMP LING __HEADS | B vv _ N water/ R AT PREAr 10% ethanol ethanol_ CASCADING FERMENTER distillation DILUTION A2 3 B5 _B - WATER -Ij~~~~~~~~~~~~~~~~~~~~~~~~~~~~SSE HOLDING F OLDIN:G steamg WtretaorldBn-32 steam/waterwte . I I ~~~~~~~~~~~~steam I stea water |STILLAGE water/yeast IRGTION FERMENTATION WATER SYSTEM 1b World Bank-29320 Irt 19  - 18 - Chart 3 MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT Siribala - Modified Distillery water/ethanol/entrainer CONDENSER Reflux 84% ethanol 4 v ~DECANTER entrainer/ ethanol ~ ~ ehaol == w~~~~~~~~~~~~~~~~~~~vaterl / ethanol/ entrainer PREHEATED FEEDSTOCK FROM A B C SIR IBALA FERMENTER (10% ethanol) ethanol/water f t { \ --- *STILLAGE 99.6% ETHANOL PRODUCT TO STORE PREHEATED (FUEL ETHANOL) 95% ETHANOL FEEDSTOCK FROM DOUGABOUGOU World Bank-29321  - 19 - provisions will have the combined result of increasing the design thermal efficiency of both industrial complexes and, more importantly, of improving actual performance to approach the expected energy input. The modifica- tions would involve adding to the sugar mills and distilleries new process equipment, instruments, and piping which would result in increased effi- ciency of steam utilization and distribution facilities. At Dougabougou, provision would be made for a cooling tower to aid thermal efficiency, and a yeast recycling system, to increase fermenter throughput and enahle the distillery to process the annual supply of molasses within the cane crushing season. Any surplus yeast, in excess of the needs for recycling into fermentation, can be used by Office du Niger as an animal feed supplement. Removal of the yeast before distillation will also be beneficial to the distillation. It is anticipated that there will he suf- ficient steam available from the sugar factory to meet hydrous alcohol production requirements during this period. 4.06 At Siribala, in addition to a new cooling tower and a yeast recycling system, the modifications would include complete repiping, addi- tional instrumentation, and evaporation vessels. The steam requirements for production of anhydrous alcohol at the modified Siribala distillery at its maximum expected production rate is estimated to he 2.4 tons per hour. This is less than half of the quantity of surplus steam expected to be available from the sugar factory to operate the alcohol distillery. There would, therefore, be no longer any need for supplementary fuel usage to service the combined sugar and ethanol production activities at Siribala. Efficient steam production and distribution will benefit both sugar and alcohol operations. While the investments described above would involve both the sugar mills and alcohol distilleries it is not always possible to allocate all of these investments clearly to either the alcohol or the sugar plants because most of the facilities are shared between the distil- lery and the mill. 3. Gasohol Blending and Distribution Component 4.07 In order to ensure consistent and satisfactory gasohol quality, alcohol blending with gasoline must be properly controlled at a central storage facility. The only suitable location in Mali is the main storage depot at Bamako which is owned and operated by a Mobil affiliate (para 2.09). A 250,000 liters alcohol storage tank with piping and automatic blending pump would therefore be installed at Bamako depot. This new storage and blending facility will be owned by the Government and leased to the depot operator (para 5.07). The depot operator would blend the alcohol with gasoline when the gasohol is loaded into tanker trucks for delivery to retail outlets. The blending pump can be pre-set to draw the desired proportion of gasoline and alcohol into the vehicles being loaded. This procedure is common in countries where gasohol is widely used and will be adopted in Mali. Because the alcohol will displace an equal quantity of gasoline there would be no net increase in the fleet of delivery vehicles serving the depot. The Alcohol Production UTnit of ON will sell the alcohol ex-distillery to the five petroleum distribution companies for its blending into gasohol. The oil companies will arrange alcohol transport from the Siribala distillery to Bamako depot (para 4.14).  - 20 - 4.08 Alcohol production would be undertaken on a seasonal hasis to take maximum advantage of the steam and power available from the adjacent sugar factories during the cane crushing season. There could be some cost saving if alcohol were blended with gasoline only during the sugar produc- tion season while using regular gasoline during the rest of the year. However, from an operational viewpoint, it is preferable to market a uniform blend throughout the year. This latter approach is contemplated under the Project. The local petroleum distributing companies support this program. During negotiations, it was agreed that, by January 31, 1984, the Government will enter into an agreement satisfactory to IDA with the Mali Confederation of Oil Distributors specifying arrangements for the marketing and distribution of gasohol. 4. Technical Assistance and Training Component (a) Industry 4.09 Technical assistance would be provided to enhance the skills, knowledge, and experience of staff at various levels relative to the requirements of project implementation and subsequent operation. ITnder the Project, a detailed review would be carried out of the technical and operational staff training requirements of the two factories by specialized consultants whose qualifications, selection and terms and reference will he satisfactory to IDA. Upon completion of the review, consultants would prepare a detailed training and technical assistance program. This program will also include provision for implementing revised operation and mainte- nance systems, management information and financial controls systems. Agreement has been reached that the detailed program will he submitted to IDA for approval by January 31, 1984. (b) Agriculture 4.10 In order to assist ON to improve per acre yields of sugarcane and the cane quality, the Project would also include training and technical assistance provisions aimed to support the agricultural staff who manage ON's sugarcane plantations. This component will further contribute to ensure that future cane supply is sufficient and reliable. The provisions would include intensive three-month courses in sugarcane agronomy for eight senior staff and specialized follow-up courses for the agronomist and for the irrigation and drainage managers. In addition, a sugarcane expert would be internationally recruited to provide technical support and on-thejob training to the plantations field managers. The sugarcane expert will be employed for about 12 months. Short term consultants would also he recruited to advise ON on irrigation and drainage, cane varieties, and disease prevention. ON will be responsible for implementing this Component. 5. Biomass Energy Study Component 4.11 The Government is committed to developing further renewable energy resources. The proposed Project would satisfy only a small portion of the demand for liquid fuel. The Project would, therefore, also include provision for a study to assess the potential for additional hiomass fuel production. The main objective of the study would be to assess whether  - 21 - there is economic justification for the production of crops for biomass fuel in Mali. The study will be carried out by internationally recruited consultants acceptable to IDA and will require seven staff-months to com- plete. Draft terms of reference for the study are given in Annex 4. 6. ON Rehabilitation Program 4.12 Since late 1982, Government has taken initial steps to develop a comprehensive ON rehabilitation plan (para 3.14) and discussions with possible donors on basic aspects of reform and rehabilitation have advanced satisfactorily. Given the difficulties in the past, donors have agreed that future interventions should be part of a collaborative, multi-donor effort, even though donors may finance actions separately. However, there is still no feasible program that is both a coherent set of policy reforms with detailed action plans and an integrated package of projects and investments that could be financed by various donors. To prepare this program, ON would set up a Rehabilitation Task Force (RTF). The RTF would report to the ON Director. During negotiations, assurances were obtained that by December 31, 1983, the RTF would be created with the necessary technical assistance and a work program established on terms and conditions satisfactory to IDA. 4.13 To develop a rehabilitation program, the assistance would consist of three resident specialists, qualified in irrigation engineering and operations, agronomy, management and financial analysis, and agricultural development generally. To help set up a unified sugar sector (para. 3.15), assistance would consist of two consultants qualified in sugar industry management and financial accounting. Approximately 15 work-years of expert and consultant services would be provided. In addition to technical assis- tance and logistics needed to develop a rehabilitation program and restruc- ture the sugar sector, the component may also be used to finance technical assistance, equipment and training needed to start implementing the reforms and to finance urgent requirements of fertilizers, and other chemicals for the sugarcane plantations. C. Project Management 4.14 The Office du Niger would be responsible for implementing the alcohol production, storage, and handling component, the energy efficiency component for the sugar industrial complexes, the industrial and plantation technical assistance and training, and the rehabilitation task force. The Ministry of State for Equipment (ME) would be responsible for implementing the gasohol blending component and the biomass energy study. Distribution and marketing of gasohol would be the responsibility of the marketing companies (para 2.08) which would also take delivery of the alcohol ex-Siribala. 4.15 For implementation of those components related to the sugar sector, assurances were obtained during negotiations that by July 1, 1984 a Sugar Division will be established for all ON sugar operations including sugarcane plantations, alcohol distilleries, sugar mills, and support services such as warehousing, storage, maintenance, and transportation. The Sugar Division would have managerial and financial autonomy, including a separate bank account, and a manager and a financial manager. Opening the separate bank account for sugar, into which ON would deposit all reve-  - 22 - nues from the sale of sugar, sugar by-products, and alcohol, is a condition of Credit effectiveness. Control over sugar and alcohol revenues would remain under the manager of the Sugar Division until all expenditures for producing sugar and alcohol were met. In addition, assurances were obtained that, at least three months before the start of each sugar campaign, the head of the Sugar Division would submit to ON's Director for approval an Operational Plan for the cane crushing season. The proDosed project would also create an Alcohol Production TJnit (APTP) as a separate profit center, or self-contained organizational and accounting unit under the Sugar Division. The head of the APTJ would be project manager for all aspects of project implementation related to alcohol production. He would be assisted by a chemical engineer, a financial controller, and two storage operators to be recruited under the project to supplement existing staff at the two distilleries. Establishment of the APTJ with management, staff and terms of reference satisfactory to IDA is a condition of Credit effective- ness. 4.16 An experienced engineering firm acceptable to IDA would be employed to prepare the process engineering package for the alcohol produc- tion, energy efficiency, and gasohol blending components of the Project and bidding documents for the rest of project implementation work. The bidding documents would permit invitation of international competitive bids for a group of contracts covering detailed engineering, supply of equipment, civil works and erection of equipment and start-up of the plants (para 5.08). The engineering firm would also be responsible for supervising the work of the selected principal contractor up to plant start-up and for demonstrating plant performance in accordance with process guarantees under their process engineering contract. This solution would reduce ON's requirement of manpower deployment and management time to a minimum. The engineering firm would also be responsible for carrying out the technical assistance Component except for specialized services such as accounting, and agricultural consultancies, which would be contracted separately suh- ject to IDA approval of the consultants' terms of reference and qualifica- tions. D. Project Schedule 4.17 Chart 4 on the following page shows the Project implementation schedule. Advertising is being arranged and negotiations with the engi- neering firm are expected to be completed in August 19P3. The major part of the engineering design and procurement activities will take place during the 1983/84 cane crushing season. The distillery modifications at Siribala will continue during the 1984/85 cane crushing season, while required pro- duction of hydrated alcohol will be undertaken at the rehabilitated Dougabougou distillery. Work at Siribala will be completed before the end of the 1984/85 cane crushing season, to allow test-runs of the new facili- ty. Installation of new evaporators at Siribala will occur in the second half of 1985 to allow ample time for procurement of the required compo- nents. Introduction of the yeast recycling system and cooling tower at Dougabougou is also planned for late 1985. This implementation schedule was confirmed during negotiations.  MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT Implementation Schedule 1983 1984 1985 1986 0 N D J FM A IM J J A SJ0 N D JIFM M A M J I1 A S 0 N D J F IM A M J DESIGN AND PROCUREMENT -~~~~~~~~~~~~~~~~~~~~~ - - - .................. INSTALLATION: ~ ~ ~ ~ ........ . ..... . .... ..... TRAINING ANDI ..OPERATI......ONAL...... .... SUPPORT r~~~~~~~~~~..... . ... .. - -....... ... . . . .... FUEL ETHANOL COMMISSIONIN.G.. FIRST.. .... .. ......... . .UL YEAR.. PRDUCTI AD NRCRMN ... ...... ..~Wold an 232 CANE SEASON ..... ....... ..... . .......  - 24 - 4.18 Additional alcohol storage facilities at Siribala have been planned for 1984. This will allow the Dougahougou distillery to produce at full capacity, in excess of market demand that year. The surplus hydrous alcohol would be stored for reprocessing at the Siribala distillery as soon as the required modifications have been completed. The timing of the modi- fications at the Bamako depot is less critical and can be established to the convenience of the depot operator. It is, however, necessary to com- plete it before the end of the 1984/85 season in anticipation of receiving the first supplies of anhydrous alcohol from the Sirihala distillery in April/May 1985. The timing of the proposed training and operational support services will be matched to the construction and commissioning pro- gram. Initial production is scheduled for 1%R, and IQP6 would be the first full year of anhydrous alcohol production. E. Environmental Impact 4.19 There are at present no effluent treatment facilities at the Siribala and Dougabougou plants. All wastes from sugar and alcohol produc- tion, and all surplus molasses are currently discharged into the cane field irrigation water systems and into open fields. The proposed development of alcohol production will eliminate molasses from the waste flows and hence considerably reduce the environmental pollution load. F. Raw Materials and Utilities 4.20 The expected molasses production from 19Q onwards is shown below: ON - Expected Molasses Production From 1986 Dougabougou Sirihala Total Cane crushing capacity (tpd) 400 1,000 1,400 Operating days per year 210 210 210 Capacity utilization (%) 80 IQ s0 Cane crushed (tpy) 67,200 168,000 235,200 Molasses Production (% of cane) 3.5 3,5 3.5 Molasses Production (tpy) 2,352 5,880 8,232 4.21 The above estimates are conservative because the current molasses yield at Siribala is about 3.9% of processed cane or about 11% higher than assumed above, and the operating season could be extended by about 10 days (5%). The annual molasses production at Siribala, for example, could as a result be as high as 6,700 tpy. The low yield and utilization rate were assumed to take into account Dougabougou's sluggish performance in recent years. 4.22 Past operating statistics suggest that molasses yield and sucrose content are relatively insensitive to declines in overall factory perform- ance, although the sugar yields have declined primarily due to loss of sucrose to bagasse and mechanical causes. Annual molasses production depends on annual cane throughput, which in turn can be affected by cane availability and factory down-time. While cane supply has been generally adequate, factory down-time has been increasing as performance deteriorated  - 25 - especially at the Dougabougou factory. The main cause of this loss of per- formance is equipment wear and the difficulty of undertaking effective maintenance as a result of the lack of spare parts and materials, and the limited experience of operating and maintenance staff. The Project provi- sion of spare parts, staff training, and the introduction of adequate systems of operation and maintenance would be essential to ensure that the factories are operated efficiently, and future nolasses supply is adequate for planned alcohol production. 4.23 Conventional cane-based sugar mills, with annex distilleries, such as Siribala and Dougabougou, generate all the steam and power they require from bagasse-fired boilers. Energy requirements of these complexes can be met by using about 90% of bagasse extracted from the cane pro- cessed. Chart 5 illustrates the energy production and usage in the exist- ing Siribala sugar mill. The quantities refer to an hourly throughput of 45 tons of cane containing 12.5% sucrose and 137 fiber. Steam, generated at a pressure of 25 bars, is used first for power generation; the exhaust from this, plus additional bypass steam, is reduced to 2 bars pressure for subsequent process heating. Approximately two-thirds of the process steam (11.75 tons per hour) is used in the quadruple effect evaporator section, and a further 25% (4.5 tons per hour) in crystallization. The balance is used in juice heating operations which are each effected in two stages, the second of which takes exhaust vapour from the evaporator section. Steam generation from the bagasse-fired boiler is shown as 26.6 tons per hour, assuming 50% moisture in the bagasse and an average boiler steam generation rate of 2.2 tons per ton of bagasse. Similar pro rata performance is expected at Dougabougou. 4.24 The expected performance described above contrasts with the reported operational experience which has required regular use of supple- mentary petroleum fuel at both Dougabougou and Siribala. Several causes of inefficiency have been identified. They include insufficient steam generation, excess imbihition of water, and inadequate heat transfer in juice heaters, evaporators, and crystallization vessels. Remedial actions would involve stricter control of boiler and cane mill operations, water usage, and improvement of maintenance procedures and general process control. The Project provision of new instrumentation, maintenance and clearing equipment, spare parts and materials, as well as staff training for operations and maintenance aim to correct these causes of thermal inefficiency. As a result of these measures, the Siribala plant should perform at or near the energy efficiency level shown in Chart 5, and so generate sufficient surplus steam for the distillery. Similar pro-rata performance are expected from the Dougabougou plant. 4.25 In order to provide a margin of safety, the distillery stean supply will be further increased by modifying the plant to achieve additional thermal economy. The energy efficiency of sugar production could be further improved by increasing the rate of water removal in the evaporator section and by using the exhaust evaporator vapour to provide the heat required for crystallization. Chart 6 shows the energy usage that would result from the introduction of these modifications at Sirihala. Tf compared with the expected performance from the existing facilities shown in Chart 5, it can be seen that total steam usage for sugar production would be reduced frorm 17.6 to 16.0 tons per hour. This saving of 1.6 tons  - 26 - Chart 5 MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT Siribala Sugarmill Energy Usage BAGASSE 12.1 tlhr. CONDENSATE 17.6 thr. (50% vvater) . POTENTIAL EXCESS BOILER STEAM FOR 9.0 t/hr. 26.6 t/hr. ETHANOL PRODUCTION maximum maximum STEAM FOR SUGAR 17.6 t/hr. PRODUCTION (25 bar) t 2 2 t/hr. 18.0 t/hr. CAN POCWER CANE MLoad GENERATION 65% efficiency 1500 kw, 100% loa 30% efficiency 17.6 t/hr. PROCESS STEAM (2 bar) STEAM STEAM s . . _ . ~~~~~~~~~~~~~~~~~~~~~~~~~Neglig ble 11.75 t/hr. 0.46 t/hr. 0.37 t/hr. 0.56 t/hr. 4.5 t/hr. I QUADRUPLE JUICE JIEJUICE EVAPORATION HEATING HEATING HEATING CRYSTALL- CENTRIFUG- 1 2 3ISATION ATION 4 7 t/hr 0.62 t/hr.~~~~thr VAPOR 3.3 t/hr. 4.5 t/hr. CONDENSATE CONDEN +SATE CONDENSATE 1 . 6.7 t/hr TO IRRIGATION 6.1 t/hr, | ~~~~(excluding feed to | | i~~~~~et condensers) I I ~~~~~~'CONTAMI I IF 14.2t/hr, NATED' 11.4 t/hr. 'U,' 17.6 t/hr. |(from 3 + 4) |0 CONDENSATE ||CONDENSATE| + !1.2 t/hr. Q _ (from 1 + 2) FOCR EX CESS IMBIBITION CONDENSATE WATER Notes:- a) Steam production of 26.6 t/hr. is based on generation rate of 2.2 t. steam per 1.0 t. bagasse. At generation rate of 1.8 t. steam per 1.0 t. bagasse steam production would be 21.8 t,'hr. b) Assume juice from evaporators at 650 Brix. c) Evaporator vapor used to heat crystallisation. VWorld Bank-29323  - 27 - Chart 6 MALI BIOMASS ALCOHOL AND ENERGY EFFICIENCY PROJECT Siribala Thermal Efficiency of Modified Plant BAGASSE 12.1 t/hr. CONDENSATE 16.0 t/hr. (50% wvater) 71 i POTENTIAL EXCESS BOILER STEAM FOR 26,6 t/hr. ETHANOL PRODUCTION .th.Ia maximu 16.0 t/hr. STEAM FOR SUGAR PRODUCTION (25 bar) | 2.2 t/hr. ~~~~~~~~~~~ ~~18. 0 t/hr. CANE MILLS . POWER 80% load GENERATION 65% efficiency 1500 kw, 100% load PROCESS STEAM 16.0 tlhr. (2 barl STEAM v STEAM 14.6 t/hr. 0.46 t/hr. 0.37 t/hr. 0.56 t/hr. Negligible QUADRUPLE JUICE JIEJUICECRSAL EVAPORATI'ON HEATING HEATING HEATING CRSATAL- CETNFG 1 2 3 ST ATION 4i t i Jhr. i'_ AL_ s 4.7 t/hr. 4 3.7 t/hr. 0.35 0.62 3.6 t/hr. 3.6 t/hr. tI/hr. s/~hr. - - ~~~~~~~~~~~~~~~~2.7 VAPOR t/hr 3.6 t/hr. VAPOR CONDENSATE CONDEN rSATE CONDENSATE 1 6,0 t1hr. TO IRRIGATION 6/1 t/hr WATER .WT iexcluding feed tc jet condensers) I'CONTAMI per 12.7 t/hr. agsNATED' t 13.6 tnhr. r f1 'PURE' | 16.0 t/hr. (from 3 + 41 CONENAT CONENAT te p23.3rt/hr. l b If rom 1 + 2) evaoraor ra fs600Brix FOR EXCESS IMBIBiTION CONDENSATE WJATER N otes: - a) Steam production of 26.6 t/hr. is based on generation rate of 2 2 t. steam per 1.0O t. bagasse. At generation rate of 1.8 t. steam per t .0 t. bagasse steam production would be 21.8 t/hr. b) Assume juice from evaporators at 600 Brix. World Bank-29322  - 28 - per hour would be added to the steam available to produce alcohol. A pro- portional reduction of steam usage would be achieved at Dougabougou by the same means. G. Employment and Productivity 4.26 Since the Project basically involves the modification and improvement of the existing plants, the additional employment created will be limited to about 200, consisting of additional workers to operate and maintain the distilleries, and for additional loading, unloading, shipping, and alcohol blending. After project completion, the labor productivity at Siribala and Dougabougou is expected to increase significantly, partly as a result of project training and technical assistance which are expected to improve the two plants' operating and maintenance standards and their energy efficiency. V. PROJECT CAPITAL COST AND FINANCING A. Capital Cost 5.01 The total financing requirements of the Project, including physi- cal contingencies, price escalation, working capital, and interest during construction are estimated at US$8.3 million equivalent (MF 5.4 billion), including US$7.2 million in foreign exchange. The capital cost estimates are detailed in Annex 5 and summarized in the table on the following page.  - 29 - Project Cost Summary Foreign Exchange % of -----MF Million----- ---US$ Thousand--- % of Base Local Foreign Total Local Foreign Total Total Cost Project Component Alcohol P'roduction 29 695 724 44 1,073 1,117 96 20 Energy Efficiency 26 641 667 40 989 1,029 96 18 Alcohol Blending 3 53 56 4 82 86 95 2 Technica'L Assistance - Industry 49 449 498 75 693 768 90 13 - Agriculture 21 188 209 32 290 322 90 5 Biomass Energy Study 6 57 63 10 88 98 90 2 ON Rehabilitation 100 1,387 1,487 154 2,140 2,294 90 40 Base Cost 234 3,470 3,704 359 5,355 5,714 94 100 Contingencies Physical 23 347 370 36 536 572 94 Price 50 740 790 77 1,142 1,219 94 Installed Cost 307 4,557 4,864 472 7,033 7,505 94 W4orking Capital 198 107 305 306 165 471 35 Total Project Cost 505 4,664 5,169 778 7,198 7,976 90 Interest During Construction 171 10 181 263 16 279 6 Total Financing Required 676 4,674 5,350 1,041 7,214 8,255 87  - 30 - 5.02 Base costs were estimated in June 1983 prices. The estimates were prepared by consulting engineers working closely with ON staff and revised by IDA staff at appraisal. Local taxes and duties were excluded from the estimates because Project expenditures wouldl be exempted. Physical contingencies were calculated at 10% of base cost. Price escalation for foreign and local costs is based on projected increases in international US dollar prices of 8% p.a. in 1983; 7.5%, in 1984; 7%, in 1985; and 6% p.a., in 1986 and onwards. The international rates have been used also for local costs assuming that the difference between domestic and international price inflation will be offset by adjustments in the foreign exchange rate in accordance with Government policy. 5.03 About 40% of the Project cost, excluding working capital and interest during construction, is estimated to be needed for alcohol produc- tion, energy efficiency, and 'gasohol' blending and distribution; and the remaining 60% for the technical assistance, training, and study compo- nents. Project costs include US$ 2.6 million for about 260 staff-months of services by internationally recruited specialists. The average cost of these services is estimated at about US$10,500/staff-month, including travel and subsistence cost. B. Financing Plan 5.04 The proposed financing plan for the Project is as follows: Financing Plan (US$ million) Local Foreign Total IDA 0.4 7.2 7.6 Office du Niger 0.2 - 0.2 Govt. of Mali 0.5 - 0.5 Total Financing 1.1 7.2 8.3 5.05 The proposed US$7.6 million IDA Credit would be extended to the Mali Government on standard IDA terms. The proceeds of the IDA Credit, and the Government and ON equity contributions to Project expenditures would be allocated according to the table on the following page.  - 31 - Funds Allocations IDA Credit: US$ Million - Loan to Alcohol Production Unit 4.1 50 - Government Purchase of Blending and Distribution Facilities 0.1 1 - Technical Assistance - ON 0.4 5 - Biomass Energy Study - ME 0.1 1 - ON Rehabilitation Task Force 2.9 35 Total IDA Credit 7.6 92 Equity Contributions: - ON-Rehabilitation Task Force 0.2 2 - ON - Alcohol Production 0.2 2 - Government of Mali 0.3 4 Total Project Expenditures 8.3 100 5.06 The US$4.1 million equivalent loan from the Government to the Alcohol Production Unit will be funded from proceeds of the IDA Credit. ON will use internally generated cash to finance local currency expenditures equivalent to US$0.2 million during the first year of commercial opera- tions. ON's equity contribution to the Alcohol Production Unit will also include the two distilleries and related assets (para 6.09). The Govern- ment equity contribution will finance interest during construction in local currency and wil[L not involve the disbursement of cash. The IDA Credit would also finance the acquisition of blending facilities (US$0.1 million), the Biomass Energy Study (US$0.1 million), and technical assistance for agriculture (US$ 0.4 million), and for ON Rehabilitation (US$2.9 million). The Government will acquire ownership title to the blending facilities at the Bamako depot and will lease them to the owners of the Bamako depot. Funds for the Biomass Energy Study Component would be allocated to the ME budget, while funds for agricultural technical assistance and training would be granted to Office du Niger. 5.07 The Government would onlend to Office du Niger, for the exclusive benefit of the Alcohol Production Unit, US$4.1 million equivalent, for 13 years including 5 years of grace at an interest rate of 9% p.a., and a commitment fee of 0.75% p.a. on the undisbursed portion of the amount. ON will bear the foreign exchange risk. The terms of the subsidiary loan agreement between the Government and ON were agreed to at negotiations, and the execution of a subsidiary loan agreement acceptable to IDA would be a condition of Credit effectiveness. The Government will enter into a financial lease agreement with the owners of the Bamako depot. The lessee will be responsible for operating and maintaining the Project facilities. The lease will expire in 12 years and lease instaLlments would be calcu- lated to yield 13% p.a. These terms were agreed at negotiations. It was further agreed that the lease agreement will be executed by January 31, 1984.  - 32 - C. Procurement 5.08 Contracts for goods, civil works and construction, including the necessary engineering for the Project's alcohol production and energy effi- ciency components (paras 4.02-4.06) shall be separated into lots; the bid- ders for such lots will be grouped under the overall responsibility of a principal contractor who will ensure adequate coordination and efficient execution of contracts covering detailed engineering construction, supply of equipment, installation, and start-up of the modified plants (para 4.16). Contracts will be awarded following international competitive bid- ding in accordance with IDA procedures, with a 7.5% and 15% margin of preference for local contractors on civil works and local suppliers of equipment, respectively. The principal contractor will secure the appro- priate equipment performance guarantees from the vendors. This contracting arrangement would mitigate the risk of cost overruns, and minimize the Project demand on ON's scarce management resources. Because the small size of individual contracts would be unlikely to attract international competi- tion, equipment for gasohol blending (para 4.07) will be procured in accor- dance with local procedures, satisfactory to IDA. Vehicles, tools, office equipment, and training materials for the technical assistance components (paras 4.09, 4.10 and 4.13), estimated to cost less than US$50,000 equiva- lent per contract, and in aggregate not to exceed US$300,000 equivalent, may be procured through prudent shopping, after soliciting bids from at least three reliable suppliers, in accordance with procedures satisfactory to II)A. D. Credit Allocation and Disbursements 5.09 Funds from the IDA Credit would be allocated as follows: IDA Credit Allocation US$ Thousand (a) Civil Works 300 (b) Equipment, Materials and Spares 2,500 (c) Engineering Services 400 ('d) Technical Assistance, Training and Studies 2,650 (e) Project Preparation Facility 950 (f) Unallocated 800 Total 7,600 5.10 Disbursements would be against 100% of foreign,and 95% of local expenditures eligible for IDA financing in the above categories. Disburse- ments will be fully documented. The estimated schedule of disbursements for the IDA Credit is given in the table on the following page.  - 33 - Estimated Disbursement Schedule for IDA Credit (US$ million) Calendar Year Cumulative Undisbursed and Semester Disbursement Disursement Commitment 1983 1 - - 7.6 II 1.0 1.0 6.6 1984 I 0.7 1.7 5.9 ]:I 1.4 3.1 4.5 19a5 I 1.6 4.7 2.9 [I 2.0 6.7 0.9 1986 I 0.6 7.3 0.3 II 0.3 7.6 The above disbursement schedule is based on the implementation schedule presented in Chart 4, and on the investment cost allocation presented in Annex 7-2. The disbursement profile for the Project differs from the stan- dar(d profile for industrial projects as the proposed Project is a rehabili- tation project, the extent of civil works and erection work involved is limited, and the implementation period for this Project is considerably less than for a greenfield industrial project. The Credit is expected to be fully disbursed by December 31, 1986. VI. FINANCIAL ANALYSIS 6.01 The financial analysis was done in current Malian Francs and the major assumptions, detailed in Annex 6-1, are summarized in the following paragraphs. A. Production and Revenue Estimates 6.02 It is assumed that the Siribala distillery will start commercial production of anhydrous alcohol in December 1985, 27 months after the engi- neering and technical assistance contract for the alcohol production and energy efficiency component is signed in September 1983. In 1986, at 90% capacity utilization, the Siribala distillery is expected to produce 1,930,000 lpy of anhydrous ethanol by upgrading hydrated alcohol distilled at Dougabougou and Siribala. This capacity build-up rate is considered achievable considering the simple nature of the production process and that hydrous alcohcol is already under production. 6.03 For the financial analysis, the ex-factory prices of fuel alcohol were calculated to be equivalent to projected domestic prices of gasoline after deducting the distributors' expenses and margins and the cost of transporting the fuel alcohol from Siribala to Bamako. The future price of gasoline was projected on the basis of expected international price move- ments (para 502) adjusted to reflect inland transportation cost, as it is  - 34 - the policy of the Mali Government to adjust periodically domestic prices of petroleum products to reflect import costs (para 5.02); prices also reflect projected price escalation rates. The following table summarizes alcohol prices ex-Siribala projected on the above basis. Mali - Alcohol Prices Price Per Liter Ex-factory 1982 1985 1990 1995 Actual ------Projected