Algeria - First and Second Power Projects

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5194 PROJECT PERFORMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL AND 1293-AL) June 29, 1984 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 ALGERIA FIRST AND SECOND POWER PROJECTS (LOANS 997-AL and 1293-AL) TABLE OF CONTENTS Page No. Preface ........................................................* I Basic Data Sheets ... .......................... I1 Highlights ............ .. . ................. vii PROJECT PERFORMANCE AUDIT MEMDRANDU( I. PROJECT SUMMARY ....................... 1 II. SUPPLEMENTARY COMMENTS ............. 6 Introduction ..................... 6 Pricing System ................................ .... 7 Energy Cost ........... ...........o. .............. Conservation and Demand Management ...................... 10 System Efficiency .............. 0..................... Resource Mobilization ............................... Consulting Services .......... ............ 12 III& CONCLUSIONS ........................................**.* 12 Annexes 1 - 4 ..... o .............. 0 ............. . ..... 16 Appendix A Comments received from the Borrower .................. 18 PROJECT COMPLETION REPORT 1. Introduction .............. ............. ................. 19 2. Project Identification/Preparation ..............*........ 20 3. Project Implementation, Operation and Cost ............... 20 4. Financial Performance ... .0 ............................. 22 5. Operating Performance ................................... 25 6. Justification of the Projects ............................ 26 7. Conclusions ............................................ 27 Annexes 1. Load Growth Data, 1975-1980 ...................... 29 2. Completion Report-IBRD Loan 997-AL; prepared by SONELGAZ, Finance Department, Financial Division ............ 3. Completion Report-IBRD Loan 1293-AL; prepared by SONELGAZ, Finance Department, Financial Division.................... 50 4. Comparison of Estimated and Actual Cost of First Power Project ............................. ........... 68 5. Cumulative Estimated and Actual Disbursements ............ 69 6. Actual and Forecast Loan Allocations ..................... 70 7. Income Statements, 1973-1980 ........... 0 ........... 71 8. Balance Sheets, 1973-1980 .......... ..... ... ..... 72 9. Source and Application of Funds Statements, 1975-1980 .... 73 10. Rate of Return, 1975-1979 lavestments.. .......... 74 This docmewnt hus a rewWcfted dibtriution and may be used by reapients only in the perfmonce of dheir officda duties. Its contents may not otherwise be discosed wihbout World Bank authorizatkIon PROJECT PERFORMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL and 1293-AL) PREFACE This report presents the results of a performance audit of two power projects in Algeria for which the Bank provided Loan 997-AL for US$38.5 million in 1974, and Loan 1293-AL for US$57.5 million in 1976.. The first loan was fully disbursed by March 31, 1980. Disbursement under the second loan was completed on March 28, 1981; the undisbursed balance of US$1.5 million being cancelled on October 5, 1981. 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 Europe, Middle East and North Africa Region's Power and Energy Development Division (June 28, 1982). The loans financed a part of SONELGAZ'sl/ 1976-80 investment program; the objective being to expand capacity and enhance system efficiency. Gas turbines were installed to increase the generating capacity. Also additional transmission capability, and a power dispatch system were established to improve the system performance. The unified part of the system, accounting for the bulk of the electricity supply industry, has benefitted from the investment in the transmission and dispatch system. These gains would mainly result from a more cost-effective investment in the unified system and from improved operation. Moreover, by financing a part of the power expansion program, the Bank has been trying to address sector issues, including: (a) energy pricing; (b) conservation and demand management; (c) system efficiency; (d) resource mobilization; and (e) consulting services. The audit has briefly reviewed these issues. 1/ Societe Nationale de l'Electricite et du Gaz, the state-owned power and gas company. - ii - The PCR is based on two studies by SONELGAZ (PCR, Annexes 2 and 3), and the results of a Bank mission to Algeria. The audit memorandum is based on Bank reports, records and files2/ and discussions with Bank staff associated with these projects. Following standard OED procedures, a copy of the draft report was sent to the Government and the Borrower. Comments received from the Borrower are attached as Appendix A. 2/ Including the Appraisal Reports (No. 415-AL and No. 1121-AL), dated May 20, 1974, and June 8, 1976; the President's Reports (No. P-1446-AL, and No. P-1866-AL) of May 17, 1974 and June 9, 1976; the Loan and Guarantee Agreements dated June 10, 1974 and July 8, 1976; correspon- dence with the borrower; internal Bank memoranda on project issues con- tained in the Bank files; and the minutes of the Board meetings at which the projects were approved. - iii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET ALGERIA: FIRST POWER PROJECT (LOAN 997-AL) KEY PROJECT DATA Appraisal Item Estimate Actual Total Project Cost (US$ million) 64.4 67.5 Overrun (%) - 4.8 Loan Amount (US$ million) - 38.5 Disbursed - 38.5 Cancelled - - Repaid to - Outstanding to - - Date for Completion of Physical Components 6/78 12/81 Proportion Completed by Appraisal Target Date (%) - 50% Proportion of Time Overrun (%)- 87.5 Financial Return on Investment 15% Negative Financial Performance - Inadequate Institutional Performance Good Cumulative Estimated and Actual Disbursements (US$ millions) FY 1974 1975 1976 1977 1978 1979 1980 (i) Appraisal Estimate 1.8 6.0 17.2 29.3 38.5 38.5 38.5 (ii) Actual - 2.3 13.1 22.2 27.9 33.9 38.5 (ii) As % of(i) - 38 76 76 72 88 100 OTHER PROJECT DATA Actual or Item Original Revisions Est. Actual First Mention in Files or Timetable /72 Government Application /73 Negotiations 05/09/74 Board Approval 05/30/74 Loan Agreement Date 06/10/74 Effectiveness Date 12/20/74 Closing Date 06/30/78 2 03/31/80 Borrower Societe Nationale de 1'Electricite et du Gaz (SONELGAZ) Fiscal Year of Borrower Ends December 31 Follow-on Project Name Second Power Project Loan No. 1293-AL Amount (US$ Million) 57.5 Loan Agreement Date July 8, 1976 Borrower SONELGAZ - iv - MISSION DATA Month/ No. of No. of Date of Item Year Weeks Persons Manweeks Report Identification Preparation 1972 Preappraisal 1973 Appraisal 10/73 3 2 6 05/20/74 Supervision I 09/74 0.5 2 1 10/15/74 Supervision II 04/75 2 3 6 08/24/76 Supervision III 12/76 1 2 2 02/04/77 Supervision IV 10/77 1 2 2 12/14/77 Supervision V 06/78 1 2 2 06/19/78 Supervision VI 06/79 1 2 2 06/12/79 Supervision VII 05/80 1.5 2 3 05/30/80 Supervision VIII 02/81 1 2 2 03/27/81 Completion 04/82 2 2 4 Total Staffweeks: 30 COUNTRY EXCHANGE RATE Name of Currency (Abbreviation) Dinar (DA) Date Exchange Rate Appraisal Year Average US$1 = DA 4.09 Intervening Years Average US$1 = DA 4.17 Completion Year Average US$1 = DA 4.37 - v - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET ALGERIA: SECOND POWER PROJECT (LOAN 1293-AL) KEY PROJECT DATA Appraisal Item Estimate Actual Total Project Cost (US$ million) 574.6 574.6 Overrun (%) - - Loan Amount (US$ million) - 57.5 Disbursed - 56.0 Cancelled - 1.5 Repaid to - - Outstanding to - - Date for Completion of Physical Components 12/80 12/81 Proportion Completed by Appraisal Target Date (%) - 80% Proportion of Time Overrun ()- 33% Financial Return on Investment 5.4 Negative Financial Performance - Inadequate Institutional Performance Good Cumulative Estimated and Actual Disbursements (US$ millions) FY 1976 1977 1978 1979 1980 1981 (i) Appraisal Estimate 5.8 22.0 38.0 50.0 57.5 57.5 (ii) Actual - 2.6 20.1 41.4 52.0 56.0 (ii) As Z of (i) - 12 53 94 90 97 OTHER PROJECT DATA Actual or Item Original Revisions Est. Actual First Mention in Files or Timetable /75 Government Application /75 Negotiations 06/08/76 Board Approval 06/22/76 Loan Agreement Date 07/08/76 Effectiveness Date 12/10/76 Closing Date 12/31/80 2 12/31/80 Borrower Societe Nationale de 1'Electricite et du Gaz (SONELGAZ) Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name - Loan No. - Amount (US$ Million) - Loan Agreement Date - Borrower - - vi - MISSION DATA Month/ No. of No. of Date of Item Year Weeks Persons Manweeks Report Identification /a Preparation Preappraisal Appraisal 12/75 3 2 6 06/08/76 Supervision I 12/76 1 2 2 02/04/77 Supervision II 10/77 1 3 2 08/24/76 Supervision III 06/78 1 2 2 06/19/78 Supervision IV 06/79 1 2 2 06/12/79 Supervision V 05/80 1.5 2 3 05/30/80 Supervision VI 02/81 1 2 2 03/27/81 Completion 04/82 2 2 4 Total Staffweeks: 23 /a Part of Loan 997-AL Supervision. - vii - PROJECT PERFORMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL AND 129 3-AL) HIGHLIGHTS From a technical point of view the projects have been a success (PCR, para. 7.1.1). The first project comprised fcur combustion turbines (98 MW) located at Boufarik, four load dispatch centers, and ten substations. The second project included the transmission component of the 1976-80 power expansion program. The loans also financed a number of studies, which aimed at improving SONELGAZ's organization, management and finances. The nearly two-year lag in completing the first project was caused by damage to the dispatch equipment at the Port of Algiers. Moreover, although the third and the fourth gas-turbines were in operation around mid-1979, SONELGAZ refused accepting them until 1981, because of manufactur- ing defects. The second project was one year behind schedule mainly because of the poor quality of subsoil, and delays in advance payment to contractors, and in the release of construction specifications (PCR, para. 3.1.1). The cost overrun of the first project was manageable (PCR, para. 3.2.1). The actual expenditure of $67.5 million was 4.8% more than the appraisal estimate ($64 million). But to stay within the original allocation of foreign exchange, four substation units, included in the project, were deleted and separately financed (PCR, Annex 4). The largest component of the cost overrun related to the dispatch system. A similar review cannot be attempted of the second project cost since SONELGAZ's breakdown of its investment is not in sufficient detail to show the project expenditures separately. A number of technical problems arose under the first project, including excessive vibrations in the turbine bearings, high temperature in the alternator bearings, and undersized air cooling units (PCR, Annex 2, Section 1.6). These defects were eventually removed to the satisfaction of SONELGAZ. In contrast, all contractors and suppliers performed well under the second project (PCR, para. 3.3.2). Despite the don-observance of some covenanted requirements, the two projects contributed significantly to the improvement of SONELGAZ; the utility company being able to cope with the rapid growth of the power sector in Algeria (PCR, para. 7.1.1). The consulting services supported this development. Although the management study, which began in 1973, was delayed by replacement of the original management consultants because of unsatisfac- tory progress, it culminated, after completion in 1978, in the introduction of several organizational reforms (PCR, para. 3.4.1). - viii - A study was also undertaken for making available to SONELGAZ the know-how, applied by Gaz de France, in the planning and management of its gas distribution systems. As a result many Algerian engineers, who directly participated in the studies, acquired the intended skills (PCR, Annex 2, Section 4.3). In addition, SONELGAZ hired consultants to review its gas opera- tion. These evaluations, which were critical, identified areas where changes were considered necessary. In reacting to the proposals, several units of SONELGAZ prepared their own action program (PCR, Annex 2, para. 4.4.3). Because of the non-compliance of SONELGAZ with most financial covenants, a key issue between the Bank and the borrower concerns electricity and gas3/ tariffs. The Algerian tariffs in the 1970s were not aligned with the rapidly escalating international energy cost. Actually the electricity rates were maintained at the 1965 level until recently; natural gas prices being lowered in 1968. However, in March 1980, the Government decided on a 60% increase in the electricity and gas tariffs to be implemented in three stages through January 1982. Concurrently, steps were taken to restructure SONELGAZ's finances. Thereafter the company's cash position, rate of return and debt-service ratio began to improve (PCR, para. 4.3). The Project experience shows the difficulties of meeting institutional objectives of autonomy an: financial viability when the Government's doctrines do not subscribe to those concepts. Although the Government took belated action to raise tariffs by 60%, it considers SONELGAS as a supplier of electricity in support of industrial promotion and social objectives, and its energy pricing policy is not based on using the price mechanism as a means for the efficient allocation and mobilization of resources. In this environment, objectives of financial viability and autonomy probably were not achievable, and the experience demonstrates the importance of a realistic appreciation in the Bank of such difficulties. Also, the PCR maintains that the projects were part of the least- cost expansion program formulated through SONELGAZ's advanced planning capa- bilities (PCR, para. 6.1.1). But a leasc-cost expansion program for SONELGAZ is not the same thing as a least-cost program for Algeria. To reconcile the national and the sectoral interest, the size and composition of power supply and demand should be influenced by a level of electricity tariffs that fully reflects the economic cost of supply, including the economic cost of natural gas and of capital (PPAM, para. 20). 3/ The Bank has been concerned about the overall financial position and prospect of SONELGAZ. This is, for example, reflected in Section 5.01(b) of the Loan Agreement (1293-AL) which provides for submission to the Bank, by November 30 of each year, of separate financing plan for elec- tricity and other activities indicating how the borrower plans for the following two years to meet its projected capital expenditures for its electricity activities and the financing gap, if any, in investments for its gas and other activities. - ix - Other points of major interest concern: - conservation and demand management (PPAM, paras. 29-33); - system efficiency (PPAM, para. 34); - resource mobilization (PPAM, paras. 35-36); and - consulting services (PPAM, para. 37). PROJECT PERFORMANCE AUDIT MEMORANDUM ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL AND 1293-AL) I. PROJECT SUMMARY 1. The develo ment of Algerian energy resources is in the hands of SONELGAZ, SONATRACH, / and SONAREM,2/ all under the Ministry of Industry and Energy. The Societe Nationale de 1'Electricite et du Gaz (SONELGAZ) i' a state-owned company, which has the exclusive right to transmit and distribute electricity. Its power generation functions are, however, non-exclusive. Industrial enterprises requiring power up to 1,000 kVA and those in need of process heat may generate electricity but must sell their surplus output to SONELGAZ. The company is also the sole distributor of national gas. 2. The Government of Algeria had asked the Bank, in the early 1970s, to assist it in financing a part of its 1973-78 power expansion program. Two reconnaissance missions in 1972 and 1973, which preceded the appraisal of the first project, helped in defining the project content, and the scope of consulting services. The first project's generation component was prepared by the nation's power and gas company and the dispatch system by Electricite de France. In contrast, most parts of the second project were prepared by SONELGAZ. Before approval of the first loan, consultants were appointed at the Bank's request to undertake an organization and management study of SONELGAZ. 3. The first loan, made in 1974, helped finance the construction of gas-turbine plants, substations, and a dispatch system. The second loan, made in 1976, conributed to financing the erection of the transmission com- ponent of the-76-180 expansion program, which comprised about 2,700 MW of generating capacity, about 3,400 km of transmission lines, some 4,200 MVA of substation capacity, and new distribution networks in urban and rural areas. 4. The transmission and dispatch components were designed to coor- dinate operation, consolidate investment programs, save reserve margin, and generally improve system efficiency. The additional transmission capability 1/ The Societe Nationale pour la Recherche, la Production, le Transport, la Transformation et la Commercialization des Hydrocarbures (SONATRACH) has the exclusive right for exploring, developing, processing and trading in oil and gas, except that gas for domestic consumption must be sold, in bulk, to SONELGAZ for distribution. 2/ The Societe Nationale de Recherches et d'Exploitation Miniere (SONAREM) is exclusively in charge of exploring, developing, processing, and trading in mineral exports, including coal. - 2- was also intended to transfer surplus electricity from the central area to deficit regions in the east and the west, supply industrial consumers, and tap new power plants. 5. To ensure the most effective use of electrical facilities and to reap the benefits of scale, the power development strategy has emphasized the replacement of isolated or captive power supplies with output from SONELGAZ. Therefore, the captive market has shrunk in size, the refineries and lique- faction plants were connected to tha national grid, and the power requirement of a rapidly expanding petroleum, gas, and industrial sectors have been and are being met. 6. To cater to the growing demand, particularly from the industrial sector, SONELGAZ's generating capacity expanded rapidly in the 1970s. Since Algeria's hydro potential is limited, the power expansion program has focused on the development of steam and gas plants. Of the 2,700 MW planned addition to the generation capacity during 1976-80, over 1,000 M9 were expected to be in gas turbines. In contrast, SONELGAZ's installed capacity in 1974 was less than 1,000 NW, of which only 176 MW were in gas turbines. 7. The appraisal report for the second loan considered the program large but consistent with those in other sectors of the economy. It also thought SONELGAZ capable of implementing the expans ion scheme with the help of consultants, and of operating the facilities because of the training program. The PCR indicates that SONELGAZ has achieved the projects' physical objectives, since electricity sales increased 14.6% a year during 1975-80, which approximated the 14.8% annual growth rate given in the appraisal report (PCR, para. 5.5.1). 8. Of the $64.3 million estimated cost of the first project, $38.5 million were in foreign exchange. The Bank loan financed the foreign exchange cost in full. Actual costs, including local components, totalled $67.5 million, suggesting a small cost overrun. However, to stay within the original allocation of foreign exchange, four substations, included in the project, were separately financed (PCR, Annex 4). 9. The second project, being a sub-sector loan, called for $574.6 million of investment, of which $357.5 million were in foreign exchange. The Bank loan of $57.5 million was to cover 16% of the foreign exchange cost, but the PCR has not been able to break up actual expenditures by project components to determine cost overruns (PCR, para. 3.2.1). Because of project delays, about $1.5 million of the second loan, which could not be disbursed, were cancelled. 10. The PCR indicates that, although both projects fell behind schedule, SONELGAZ's implementation experience was satisfactory. This is because, despite various technical problems (PPAM, para. 12) the main project components were completed on time and provided the needed electricity in support of the country's vigorous load growth (PCR, para. 3.1.1). -3- 11. Further, the loans financed consulting services on organizational issues, electricity tariffs, and natural gas pricing and market. The audit has already highlighted the results of some of these studies (Highlights, page viii), which also assisted in the transfer of technical know-how to SONELGAZ and focused attention on key management, planning, and operational issues. 12. Technically, the two projects were sound. The four gas turbines under the first loan, operated satisfactorily since their main technical problems were resolved by mid-1979 (PCR, para. 5.2). However, although the demand forecast was also realized, PCR's recalculation of the financial rate of return is negative. -This reflects the deteriorating financial condition of SONELGAZ during the period on account of rapidly increasing sales at subsidized prices- - PCR, para. 6.3.1. 13. Because of the erosion of tariffs, in real terms, the PCR shows that SONELGAZ was unable to fully comply with financial covenants under the loan agreements. According to the main covenants SONELGAZ had agreed: (a) to attain for its electricity activities a cash generation ratio of 15% until 1977, and a financial rate of return of 7% after 1977; and (b) to ensure that the ratio of its net annual revenues from power sales to the average electricity debt-service for the year and the previous year would remain at or above 1.5. 14. The realization of these targets depended on increasing power rates by 8% in 1977, 30% in 1978 and 5% in 198S (PCR, section 4.2). But the government deferred adjusting the tariffs until 1980, when it decreed a 60M rise in both electricity and gas rates to be implemented in three stages through January 1982. In addition, the government restructured SONELGAZ's capital through the conversion of short- and medium-term debts into long-term debts, the cancellation of interest payments on government loans and the reduction of deferred interest charges in the balance sheet. 15. Because of these measures SONELGAZ's financial position improved (PCR, Annex 9). The rate of return increased from (-)1.7% in 1979 to 3.9% in 1980, the cash generation from (-)10.0% in 1979 to 3.9% in 1980, and the debt-service coverage from 0.5 in 1979 to 1.2 in 1980. 16. Since the main options in the expansion of generation capacity have revolved around gas turbines and steam plants, and because the first project opted for gas turbines, which also figured prominently in Algeria's 1976-80 expansion program (PPAM, para. 6), the composition of new generating capacity has had important cost implications. According to the appraisal report for - 4- the second loan, gas turbines were expected to have low load factors, which were forecast at 15% as against 42% for steam plants for the year 1980 (Appraisal Report, No. 1121-AL, Annex 13, attachments 2 and 3). Also gas turbines were expected to consume, per unit of energy output, one-third more fuel than steam generators. 17. Experience from other countries suggests that this excessive use of fuel can be pared down by recycling the heat from the gas exhaust through steam plants for generating additional power. The appraisal reports and PCR do not indicate whether the combined cycle option3/ has been considered or not. Bank project staff have stated, however, that the combined cycle plant was a novel technology with virtually no operating experience in developing countries in 1973, when the project was appraised, and, therefore, was not a technical option. 18. Gas turbines in Algeria were not intended to cater solely to peak load consumers. They were also to provide power to industries. The last appraisal report states, for example, that a gas turbine station of 600 MV capacity has been included in the 1976-80 plan for meeting the power require- ments of an aluminum plant at M'Sile. 19. Considering the significant cost implications of investment options, the following table illustrates the comparative cost of electricity supply, based on quantifiable economic rates of return: 3/ The short start-up times of gas turbines have resulted in their wide- spread use as peak load generators. Fuel costs are high, partly because of the lower efficiency of the gas turbine cycle compared with the steam turbine. However, the combination of a gas turbine cycle and a steam turbine cycle, known as combined cycle, greatly increases the efficiency of fuel use in generating electricity. Thailand has been constructing a number of steam generators as well as combined cycle plants at Bang Pakong. Whereas the heat rate for a gas plant at Bang Pakong is 14,000 Btu/kWh, that for a combined cycle unit is 9,200 Btu/kWh, or about one-third less. As for capital costs, combined cycle units cost much less than coal/lignite based power plants. They cost about the same as oil-fired thermal plants. - 5- The Comparative Cost Profile and The Economic Rates of Returns/a of Gas Turbines and Steam Plants Power Cost The Equalizing (c/kWh) Discount Rate Gas Turbines 1. Natural gas priced at SW/an Btu 3.9 19 2. Natural gas priced at 3$/an Btu 8.7/a /b Negative/b Steam Plants 1. Natural gas priced at 6c/mn Btu 3.8 16 2. Natural gas priced at 3$/an Bt-i 7.0 5.5 /a Using the financial rate of return as a proxy. /b Based on a 15% load factor versus a 30% load factor for steam units and, therefore, the average costs may not be considered comparable. At 30% load factor, electricity from gas turbines would cost 6.8c/kWh, but the equalizing discount rate would still be negative. Source: PPAM, Annexes 1-4. The economic returns, based on SONELGAZ's 1980 tariffs (5.3c /kWh), are sen- sitive to the cost of natural gas. If natural gas is priced at 3$/mn Btu4/ the return from gas turbines would be negative. In contrast, the appraisal reports assume a gas price of 6c/an Btu (PCR, para. 6.1.2)4/. Also the 4/ PPAM, para. 28. Bank project staff contend that, while the present economic price for gas probably is close to $3/mn Btu, when the project was appraised in 1973 an economic price of 6c/mn Btu was correct; oil prices had not yet increased fourfold, major exports of natural gas were not a serious option and gas reserves were large in relation to projections of demand. -6- table suggests that electricity from gas turbines could compete with that from steam plants, provided gas turbines are operated at a load factor comparable with the steam plants' . However, the economic return from gas plants would still be negative because of the excessive heat rate. Hence the importance of utilizing waste heat from gas turbines and improving the usage efficiency of fuel. II. SUPPLEMENTARY COMMENTS Introduction 20. Elsewhere the audit has briefly referred to the requirements of a least-cost power expansion rogram (Highlights, p. viii). To achieve such an outcome several conditions_/ must be fulfilled, including right prices for the natural gas and electricity. This is because a considerable subsidy on natural gas, as in Algeria, by significantly curtailing the financial benefits of capital expenditure on energy conservation schemes, discourages investment in them. In other words, since gas turbines consume too wach energy, a suitable price, based on the tradeable value of natural gas, would greatly induce investment in gas efficient and gas saving schemes. 21. Again, because of the power subsidy there is a need to demonstrate why the growth of electricity consumption is essential and should be met. Otherwise, at a subsidized cost, the electricity demand could grow unconstrained and the least-cost solution might well be a cut in the expected growth of consumption rather than a substantial increase in the electricity supply. 22. Some Bank staff have argued, however, that a large part of power consumption in Algeria is unresponsive to price movements. As evidence they state that about 60% of the Algerian electricity supply is consumed by industry and government enterprises, which employ the price as an accounting rather than a resource allocation device. Therefore, even if prices increase appreciably the demand of these consumers would be unchanged, since enterprises either pass on the higher cost to their customers or receive a state subsidy. In contrast, the audit maintains that electricity prices influence directly a considerable part of the market (about 40%). Moreover, public subsidies are not granted automatically. The Algerian treasury, like any other, has scarce resources at its command and must choose among possible expenditure options. The least desirable choice is likely to be the assumption of a greater financial burden by providing more subsidies to 5/ In any optimization model fuels are priced at their opportunity cost, and so is the cost of capital. Also, such models assume that consumers use energy efficiently, either by paying the long-run marginal cost of supply (LRMC), or can demonstrate, through energy audits, that the usage efficiency of electricity is satisfactory. -7- public enterprise for the payment of a higher electricity cost. Instead, the treasury can allay its financial burden6/ by opting for electricity conservation schemes. 23. To review further the key elements necessary for the establishment of a least-cost electricity supply industry the ensuing paragraphs examine issues concerning: the Algerian pricing system; energy cost; conservation and demand management; system efficiency; and resource mobilization. In addition, the audit comments on consulting services, since they also promote the achievement of a least-cost expansion program. Pricing System 24. Prices are managed in Algeria. Because of the emphasis on agricul- ture and on urban-rural income parity, terms of trade have been shifted to favor farm producers. Moreover, the utility prices, including energy, have been sharply lowered in real terms; the objective being to restrain increases in the manufacturing cost. Essential consumer goods have also been subsidized. The following table illustrates price policy reforms in the past: Annual increase in prices, 1970-79 (Z) Agricultural production price index 13.5 Industrial product ion price index 6.8 Energy and water price index 0.8 The Greater Algiers consumer price index 9.5 Source: Tables 9.1-9.3, World Bank Report No. 3668-AL, Vol. II. 25. Domestic price shifts against energy have run counter to the escalating trends in international energy cost. These changes have also been accompanied by an economically disadvantageous rate of growth in energy consumption (PPAM, para. 17). Energy Cost 26. Although Algeria is richly endowed with natural gas and petroleum, energy continues to have a scarcity value in that country. Gas reserves are 6/ The recent economic report (3668-AL, June 25, 1982) states, "a lack of financial discipline in investment and day-to-day management coupled with low productivity and distortions in the price system resulted in sizable financing requirements on the part of public enterprises" - pp. i-11, Vol.I. - 8 - about 22 billion bbl of oil equivalent, and the petroleum reserves 8 billion bbl. Oil prices are also markedly higher than the natural gas cost. This is partly because of a greater ease in marketing petroleum than natural gas. Therefore, electricity generation has been based on natural gas rather than petroleum fuel. 27. The scarcity value of energy is implicit in the European need for natural gas imports, provided partly by Algeria. The following table presents the market prospects (in exajoules7/): 1980 1990 2000 West European Demand/a for Gas Import 1.5 3.8 5.8 Gas Supplyla from: 1.4 7.4 4.5 North Africa (0.5) (2.1) (1.7) Eastern Europe (0.9) (5.3) (2.8) World/a surplus (+) 0.0 (+)4.8 (-)0.7 /a Demand and supply were independently estimated; the supply being based on production capability rather than requirements. Source: World Gas Supply and Demand 1980-2020. A Report of Task Force II, International Gas Union, June 16, 1982. 28. Europe can opt to import a part of its requirements from Algeria rather than West Siberia. Further, supply projections, based on production capability rather than demand, show that Algeria alone cannot produce a glut in the European gas market. Provided that the Algerian gas is priced to compete with the Soviet supplies and also with the competing fuels, it will have a ready market in Europe. There are several reasons for this.favorable prospect. Natural gas, because it is environmentally clean and safe, is a more acceptable fuel than coal, nuclear energy or petroleum products. Further, the West European output, mainly from the Groningen field in the Netherlands, is being sharply reduced. Alternative supplies from the North Sea (Norwegian Troll) are also expensive to develop. Moreover, concerns about the security aspect of natural gas is expected to limit8/ supplies from the Soviet Union. Therefore, the Algerian gas in Europe has an opportunity cost which is about the same as the price the Soviet Union expects to 7/ About one quadrillion Btu. 8/ The Quarterly Energy Review states, "The original conception of 40 bn cu. m. has given way to 21 bn cu. m. actually contracted. While it is not impossible that countries such as Belgium, Holland and Spain may decide to participate at a later stage, the initial aggregate volume will probably not exceed 30 bn cu. m...- - p. 9. Again, "with the precedent of awarding Algeria higher prices than those for competing fuels, which Norway will certainly wish to match because of the cost of production and transportation to continental Europe and the UK, the cheapest alternative for Western Europe will undoubtedly be Soviet supplies...." - p. 12. (See, Natural Gas in Western Europe: A Tale of Two Pipelines, Quarterly Energy Review - Western Europe, The Economist Intelligence Unit, Fourth Quarter, 1982). -9- get from its sales to the continent. Considering the gas price agreements9/ between SONATRACH and Belgium, France and Italy, and the delivery cost of gas through the Trans-nediterranean pipeline, the opportunity cost of gas to domestic consumers is around $3.0/ma Btu. Such a price level is well sup- ported by other studies. According to IEA,10/ the netback valuell/ of Algerian gas to North European pipeline is between $2.37-2.80/an Btu. $1.78/an Btu must be added to this price range for gas gathering and transportation cost. Again, a studyl2/ for the Bank estimates the netback value of gas, based on LNG exports, to range, under eleven different assumptions, from $2.23-4.46/mn Btu. The upper end of the range assumes that gas would be given 100% of the value of crude oil. In contrast, other variants assume an 80% petroleum value for gas. The variants at the lower end portray a higher supply cost caused by the lack of infrastructural facilities at the liquefaction plant sites. The loan agreement with the Electricity Generating Authority of Thailand (EGAT) reflects the Bank policy position on the gas pricing issue. EGAT' s payments are adjusted to the international cost of fuel oil;13/ its current purchase price being about $3.7/mn Btu. In contrast, SONELGAZ has been incurring for its gas consumption a small fraction of the international cost of fuel oil. Conservation and Demand Management 29. Local fuel subsidies have, therefore, been accompanied by a some- what underpriced electricity. The tariff structure has, however, been pro- duction oriented. Many other countries, notably Korea and China, follow 9/ Belgium, $4.8/nn Btu (April 81); France, $5.1/an Btu (Dec. 81), Italy, $4.41/mn Btu (Sept. 82). These prices are f.o.b. and are indexed to a basket of crude oil costs. In contrast Sonatrach's price expectation regarding gas export has been $6.11/mn Btu. 10/ "Natural Gas Prospects to 2000", International Energy Agency, OECD, 1982, p. 127. ll/ The starting point for the estimation of netback value at the well-head is the value of gas delivered to the market. This latter value is determined primarily by the prices of competing fuels. The first step in determining the netback value is to substitute the value of the competing fuel for the value of gas at the consumption end-export market. Next, the fob (or ex-border) price for the producing country is derived from the gas value by deducting from it the regasification (in the case of LNG), and the international transport costs. Finally, the netback value is calculated by subtracting from the gas price (fob) the costs of liquefaction, transport to liquefaction plants, and field processing and development. The flaring of associated gas is justified only when gas has a negative netback value. 12/ The Economic Value of Natural Gas in LNG Export, a Report to the World Bank, Jansen Associates, Inc., October 1982, p. 12. 13/ Report No. 2612-TH, para. 5.02. - 10 - similar policies. In Algeria, the low voltage consumers, mostly households, have paid Bc/kWh and other consumers less than 2c/kWh during the 1970s. Also of the additional electricity supply about two-thirds were intended for the industrial sector. Given such a development strategy the usage efficiency of electrical energy in the manufacturing sector merits close scrutiny. 30. The issure must, however, be reviewed with loral manufacturers. Since this is not possible for this audit, we rely on the level of lcal energy prices which indicates that investments in conservation schemes are unlikely to be profitable; the benefit streams at these prices being financially too low. 31. Key energy indicators portray a more favorable picture, however. The Algerian performance in the 1970s compares well with those of many developing nations. The following table presents a comparative picture of electricity prices, intensity of energy use, and trends in the growth of energy consumption. Average tariff rates Energy Energy/b (USc/kWh) intensity/a elasticity in 1979 coefficient Countries 1973 1977 1979 (1974-79) Algeria 4.2 3.9 4.1 0.42 2.0 Egypt/c 0.3 0.3 0.5 0.76 1.1 Indonesia 2.7 6.6 4.4/d 0.65 1.6 Korea 2.6/e 4.6 6.6 0.61 1.1 Thailand 2.1 3.4 3.9 0.64 1.0 Turkey 1.8 3.1 4.0 0.61 1.6 /a Kilograms of coal equivalent of commercial energy consumption per dol- lar of GNP. /b The ratio between the rates of growth of energy consumption and GDP. /c The rates were maintained in terms of local currency. 7Td The fall in rates is caused by rupiah devaluation. e 1974. Source: World Bank Appraisal, Sector and Economic Reports. 32. Also the Algerian tariff level has not been significantly below those of many developing nations in the 1970s. This suggests a common diffi- culty in raising rates to an appropriate level rather than a satisfactory performance by Algeria. However, although energy consumption per dollar of - 11 - GNP (energy intensity) was moderate in Algeria, the rate of increase in energy consumption relative to the GDP growth rate (energy elasticity coefficient) signals an unhealthy trend. 33. Two dangers are apparent. First, if the current trend in energy consumption is sustained, the growth rate of energy export - the main engine of growth - would decelerate and be reversed. Second, because of a relatively high energy-jutput ratio the rapidly expanding manufacturing sector, designed to diversify the economy and the export trade, would find it difficult to compete in the international market. System Efficiency 34. At the present level of information in the Bank, the performance of the system cannot be ascertained. Three areas merit scrutiny, however: conversion, transmission, and distribution losses; reserve margin requirements; and usage efficiency of fuel. Such studies need to identify programs that: (i) reduce system losses;14/ (ii) minimize the need for reserve margins; and (iii) improve the usage efficiency of fuel in gas turbines consistent with a suitable netback value for natural gas. Resource Mobilization 35. Algeria has achieved impressive gains in domestic savings and investment rates. The bulk of savings have, however, been mobilized by the treasury, largely from taxes on hydrocarbons. Also the rising investment rates were accompanied by high capital-output ratios. The need for improved efficiency and self-reliance by parastatal organizations has, therefore, been a key area of increasing concern. Consequently, the 1971 financial reforms required that public enterprises fund their investment not by treasury grants but by long-and medium-term loans; the financial agencies being made responsible for project performance. The system did not work well in the 1970s chiefly because the achievement of physical targets, during a period marked by unprecedented increases in hydrocarbon revenues, prevailed over financial considerations. Since 1979 the Government has, however, been introducing reform measures. In the electricity supply industry the mobilization issue concerns the need (a) to save energy at the conversion, distribution, and consumption stages, and (b) to mobilize resources by bridging the gap between the existing tariffs and the long-run marginal cost (LRMC) of power supply. Elsewhere (PPAM, paras. 14 and 19) the conservation issue has been briefly reviewed. 14/ See: "Energy Efficiency: Optimization of Electric Power Distribution System Losses", Paper No. 6, World Bank Energy Department, July 1982. - 12 - 36. As for the divergence between existing tariffs and the LRMC of electricity supply, the incremental cost of power can be derived by examining SONELGAZ's least-cost expansion program, based on the opportunity cost of natural gas and of capital. The table in PPAM, para. 31 suggests, however, that adjustment to LRMC pricing is a problem shared by many developing nations.15/ Consulting Services 37. The organizational changes in SONELGAZ and the recent tariff increases in Algeria point to some of the practical outcomes of consulting services. Studies by consultants have also been useful in training staff and stimulating ideas. Rather than being of immediate usefulness, many of the studies, because of their training component, are apt to bear fruit in the long-run. In all cases the major issues chosen for consulting services (PPAM, para. 11) have been appropriate. They address management and other important questions, some of which are also reviewed in this audit. III. CONCLUSIONS 38. From a technical point of view the projects have been a success and contributed to the improvement of SONELGAZ. The utility company was also able to support the rapid expansion of the economy by providing for a vigorous load growth. Further, consulting services assisted SONELGAZ in staff training and a management study, which resulted in the introduction of several organizational reforms. 39. Given the need to conserve Algeria's energy resources and diversify its exportsl6/, the Bank would contribute to the country's development by continuing to resolve the unsettled issues with SONELGAZ and provide it with technical assistance. Moreover, in the energy sector the need for global structural adjustments transcends any differences that might exist between 15/ A recent World Bank report states that of some 33 oil importing develop- ing countries surveyed recently, eighteen have increased their elec- tricity tariffs in real terms since 1974, but only seven have tariffs that are equal to or exceed the long-run marginal cost of supply (Report No. 4442, April 15, 1983, para. 2.09). 16/ The recent economic report (3668-AL, June 25, 1982) states that "Algeria will be able to go on producing natural gas for over 60 years, but there are no more than roughly 20 years of oil reserves". What is needed is "a steady flow of foreign exchange large enough to finance essential Imports until such time as other exports have taken the place of oil..." - p. 80, vol. I. Therefore, in the long-run, -Algerian industry should participate in the international division of labor by trading something other than hydrocarbons or primary products - p. 77, vol. I. - 13 - the Bank and the country concerning the national problems. This is because of world energy interdependence. The further development and conservation of indigenous resources, even in an energy rich economy, is likely to help allay the global adjustment pressure. 40. Inter-country comparisons and the international energy scene suggest that: (a) Algerian gas has an opportunity cost which is about the same as the price the Soviet Union expects to receive from its sales to Europe (PPAM, para. 28); (b) although the Algerian energy consumption per dollar of GNP has been moderate, the rate of increase in energy consumption relative to the GDP growth rate suggests future problems (PPAM, para. 32); (c) Algerian energy prices have not promoted the least-cost expansion programs, or the usage efficiency of energy (PPAM, para. 20); (d) considering the possible social implications of an abrupt hike energy prices, price adjustments must be piecemeal, and should include suitable life-line rates to protect the low-income families against any erosion of their living standard. Furthermore, the response of consumers, which is related to changes in appliances and equipment could be slow; and (e) additional studies are necessary for helping to improve the sector performance (PPAM, para. 34). - 14 - ANNEX 1 PROJECT PERFORMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL and 1293-AL) ILLUSTRATIVE COST OF SUPPLY: GAS TURBINES Fuel Cost ($) Present Value (P.V.) Invest- O&M Variant Variant Energy Energy ment ($) II Stream Stream Cost Streams($) ($/kW) Fixed Variable Gas priced, Gas priced, (kWh) (kWh) Var I. Var II. tear Cost Cost Wean Btu 3$/an Btu 1 60 53.6 53.6 2 122 97.3 97.3 3 61 43.4 43.4 4 8.4 0.9 1.3 64.6 1,314 835 6.7 47.0 18 8.4 0.9 1.3 64.6 1,314 171 1.4 9.6 Total 6,370 245.63 552.51 Memorandum Items: Cost of Supply Variant I Energy stream (P.V., kWh) 6,370 Energy Cost (P.V., dollars) 245.63 Unit Cost (c/kWh) 3.86 Variant II Energy stream (P.V., kWh) 6,370 Energy Cost (P.V., dollars) 522.51 Unit Cost (c/kWh) 8.67 The table assumes: $243/k investment cost incurred in three years; $8.4/kW a year of fixed cost; and 0.07c/kWh of variable cost; (These are based on Bang Pakong cost, Thailand - Report No. 2271-TH, p. 54.) 15 years plant life; 12% discount rate; 15% load factor; and 16,400 Btu/kWh of heat rate. - 15 - ANNEX 2 PROJECT PERFORMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL and 1293-AL) ILLUSTRATIVE COST OF SUPPLY: STEAM PLANTS Fuel Cost ($) Present Value (P.V.) Invest- 06M Variant Variant Energy Energy ment ($) I II Stream Stream Cost Streams($) ($/kW) Fixed Variable Gas priced, Gas priced, (kWh) (kWh) Var I. Var II. Year Cost Cost 6c/an Btu 3$/n Btu 1 80 71.4 71.4 2 160 127.6 127.6 3 1161 14.6 114.6 4 80 50.8 50.8 5 54 30.6 30.6 6 5.6 2.4 1.7 86.4 2,628 1,331 4.9 47.8 30 5.6 2.4 1.7 86.4 2,628 88 0.3 3.2 Total 11,696 438.23 815.18 Memorandum Items: Cost of Supply Variant I Energy stream (P.V., kWh) 11,696 Energy Cost (P.V., dollars) 438.23 Unit Cost (c//kWh) 3.75 Variant II Energy stream (P.V., kWh) 11,696 Energy Cost (P.V., dollars) 815.18 Unit Cost (c/kWh) 6.97 The table assumes: $535/kW investment cost incurred in three years; $5.6/kW a year of fixed cost; and 0.09c/kWh of variable cost; (These are based on Bang Pakong cost, Thailand - Report No. 2271-TH, p. 54.) 25 years plant life; 12% discount rate; 30% load factor; and 10,960 Btu/kWh of heat rate. -16 - ARKEZ 3 PROJECT PERORMAECE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (LOANS 997-AL and 1293-AL) ECONOMC RATE OF RETURN- GAS TURBINES Discounted net benefit Fuel Cost (S) Net Benefit Streams Lnvestment Var. I Var. II Energy Benefit ($) ($) and O&K gas price gas price stream stream Var. Var. Var. Var. Year (/k) 6clan BEt 3$/mn Betu (kWh) ($) I II I II 1 60 (-)60 (-)60 (-)50.4 2 122 (-)122 (-)122 (-)86.2 3 61 (-)61 (-)61 (-)36.2 4 9.3 1.3 64.6 1,314 69.6 59 (-)4.3 29.4 18 9.3 1.3 64.6 1,314 69.6 59 (-)4.3 2.6 The equalizing discount rate (Z) 19.0 neg. The table, based on Annex 1, applies the 1980 tariffs (5.3clkVh) in quantifying the benefit stream. -17 - ANNE 4 PROJECT PERF0EMANCE AUDIT REPORT ALGERIA: FIRST AND SECOND POWER PROJECTS (L0AWS 997-AL and 1293-AL) ECONOMIC RATE OF RETURN- STEAM PLANTS Discounted net benefit Fuel Cost ($) Net Benefit Streams Investment Var. I Var. II Energy Benefit (($) and 06H gas price gas price stream stream Var. Var. Var. Var. Year ($lkR) clan Btu 3$/an Btu (ksh) ($) I II I II 1 80 (-)80 (-)80 (-)69 (-)76 2 160 (-)160(-)160 (-)119(-)14 3 161 (-)161(-)161 (-)103(-)137 4 80 (-)80 (-)80 (-)44 (-)65 5 54 (-)54 (-)54 (-)26 (-)41 6 8 1.7 86.4 2,628 139.3 126.9 44.9 53 33 30 8 1.7 86.4 2,628 139.3 126.9 44.9 2 9 The equalizing discoung rate (Z) 16 5.5 The table, based on Annex 2, applies the 1980 tariffs (5.3c/kWh) in quantifying the benefit stream. - 18 - .APPENDIX A TRANSLATION CO(MENTS RECEIVED FROM THE BORROWER ALGER TELEX 65/69 11 1540 ALGIERS June 11, 1984 IBRD OPERATIONS EVALUATION DEPARTMENT 1818 H ST, N.W. WASHINGTON, D.C. 20433 RE: PPAR ON SONELGAZ PROJECTS (LOANS 997 AND 1293-AL) ATTENTION: MR. SHIV S. KAPUR, ACTING DIRECTOR-GENERAL IN RESPONSE TO YOUR LETTER OF MAY 8, 1984, I AM PLEASED TO INFORM YOU THAT WE HAVE NO SPECIAL REMARKS TO MAKE ON THE REPORT IN QUESTION. BEST REGARDS, DJERIDI, DIRECTOR OF FINANCE, SONELGAZ -19- ALGERIA FIRST AND SECOND POWER PROJECTS LOANS 997-AL AND 1293-AL Project Completion Report 1. Introduction 1.1 Power Sector Characteristics and Development 1.1.1 Under the Ministry of Energy, SONELGAZ is responsible for generation, transmission and distribution of public service electricity throughout Algeria. In addition, certain industrial enterprises are also licensed to generate electricity, but must sell to SONELGAZ all excess generation beyond their own requirements. SONELGAZ is also the sole distributor of piped natural gas, delivered in bulk to SONELGAZ by SONATRACH, the state's hydrocarbons monopoly. 1.1.2 After stagnating during 1963-1966, the power sector has since developed rapidly. In 1966-1974, the average annual rate of load growth was 11.5%/a, followed by an average load growth of 14.6%/a for 1975-1980 (Annexl). In 1980, with a total installed capacity of 1,875 MW SONELGAZ' sales amounted to 5,448 GWh. At present, SONELGAZ serves 1.6 million electricity consumers. As of December 31, 1980, the value of SONELGAZ' power assets in operation was DA 4,100 million, of which 41% was for generation, 15% for transmission, 35% for distribution and 19% for general services. 1.1.3 As in other socialist economies, the development of Algeria's power sector is subordinated to centrally formulated national economic policies. As a result, SONELGAZ' development up to now has taken place without immediate regard for efficiency pricing or true financial autonomy. Recent Government plans, however, indicate that significant modifications may be made to SONELGAZ' corporate organization and financial structure starting in 1983. 1.2 Bank Involvement in the Sector 1.2.1 In 1955, prior to independence, a loan of US$10 million (131-FR) was made to Electriciti et Gas de l'Algirie (EGA) to help finance part of its 1955-1958 development program. Two more loans to SONELGAZ, the successor of Electriciti et Gaz de l'Algirie, followed. A loan of US$38.5 million (997-AL) was made in 1974 for a combustion turbine station, several substations, a load dispatch system, and consulting services to improve SONELGAZ' organization. A second loan was made to SONELGAZ in 1976, Loan 1293-AL, in the amount of US$57.5 million, to help finance part of SONELGAZ' 1976-1980 development program. This report covers the last two loans (997-AL and 1293-AL). Since both projects formed part of SONELGAZ' investment program for 1973-1980, a combined Project Completion Report is deemed appropriate. This report supplements information contained in the completion reports prepared by SONELGAZ for the two Projects in August 1981 (see Annexes 2 and 3). - 20 - 2. Project Identification/Preparation 2.1 Origin, Preparation and Appraisal 2.1.1 Two Bank preappraisal missions in 1972 and 1973 assisted SONELGAZ in defining the scope of the consultancy services included in the First Project. By the time of appraisal in October 1973, a consultant had already been appointed to carry out the management study. The combustion turbines portion of the First Power Project was prepared by SONELGAZ. Electriciti de France prepared the portion on dispatch facilities. The Second Power Project was prepared by SONELGAZ with limited assistance from foreign consultants. The Project was appraised in November 1975. 2.2 Project Objectives 2.2.1 Aside from the critical need for the physical facilities included in the Projects, a principal objective was to improve the organization and management, especially financial aspects of the electric power subsector. To this effect, SONELGAZ engaged consultants, financed from loan funds, to carry out studies of SONELGAZ' organization, gas market, and gas and electricity tariffs. Furthermore, as described in section 4 below, various measures were agreed upon between the Bank and the Algerian Government and SONELGAZ with a view to strengthening SONELGAZ' finances. 2.3 Project Description 2.3.1 The First Power Project (Loan 997-AL) consisted of four 24.5-MW combustion turbines, four load dispatch centers-three regional and one main, ten substations of various ratings and a number of studies. Originally, two of the four combustion turbines were to be installed at Boufarik substation, southwest of Algiers, and the other two at Bab-es-Zouar, east of the city. As it turned out, all four units were installed at Boufarik to accommodate revised system development plans. The Second Power Project (Loan 1293-AL) was essentially the transmission system component of SONELGAZ' investment program for electricity during 1976-1980 and included studies concerning SONELGAZ' organization and development. 3. Project Implementation, Operation and Cost 3.1 Implementation 3.1.1 Aside from the problems mentioned below, no major technical difficulties were encountered during project implementation. Although planned for completion in 1978 and 1980 respectively, both Projects were completed only in 1981. Although the projects as a whole were completed behind the .appraisal schedule, the major physical components, i.e., the Boufarik combustion turbines and the 220-kV lines and substations were completed in time to support the projected load growth (para 5.5.1). The nearly two-year delay in completing the First Project was caused mainly by the damage sustained by dispatch system equipment at the Port of Algiers. About half the equipment and materials destined for the main dispatch center was mishandled and damaged beyond repair. The loss occurred in July 1979, and the equipment - 21 - was not replaced until April 1981. Although in commercial operation since MayNI16, 1979, the third and fourth Boufarik units were not finally accepted by SONELGAZ until 1981 on account of delays by the manufacturer in resolving certain deficiencies in workmanship. Poor quality of the subsoil, delays in payment of advances to the contractors and release of construction specifications were the main causes for delay in the Second Project. No major issues were raised during procurement. Once the initial construction difficulties were overcome the projects were implemented without further complications or delays. Project implementation was good. 3.2 Costs and Disbursements 3.2.1 Annex 4 shows a comparision of estimated and actual costs for the First Project. The total cost for the First Project (US$67.5 million) was only 4.8% over the appraisal estimate (US$64.4 million). The largest overrun (37.4%) occurred in the dispatch system. The differences shown can be attributed to the delays in project implementation (para 3.1.1). In the light of the intervening inflation and design changes introduced by SONELGAZ, the differential costs appear reasonable. A similar comparison for the Second Project was not possible because the available breakdown of SONELGAZ' total investment expenditures was not detailed enough to establish clearly the project components. 3.2.2 Annex 5 gives a comparison of the actual disbursements with the original forecasts. Only 72% had been disbursed by the original completion date of the First Project. For the Second Project the figure was 97%. In spite of the relatively long time (2-3 months) reportedly taken by the Bank to process reimbursement applications, both loans were effectively disbursed. Only US$1.5 milion (2.6%) could not be disbursed because of delays in project implementation and was cancelled. Annex 6 compares actual and forecast loan allocations. The reallocations shown presented no major problem. 3.3 Performance of Contractors and Suppliers 3.3.1 The bulk of the First Project (about 46%) were the four combustion turbines supplied by AEG/Kanis (Federal Republic of Germany). Difficulties involving installation subcontractors and AEG's field organization resulted in 12-15 months' delay and application of the maximum 7% penalty to the contractor. Excessive turbine vibrations, high temperature rise in the alternator bearings and undersized air coolers caused delays in issuing the provisional acceptance. All deficiencies were eventually eliminated by the contractor and the plant successfully completed. CETT (France) and CGE/Alsthom (France), suppliers of the dispatch system and the substations respectively under the First Project also performed well. A detailed account is given in Annex 2. 3.3.2 Under the Second Project, Harris (US) supplied radio communication equipment, and AEG/Telefunken (FRG) and Sadelmi (Italy) supplied and erected 66-kV substations. ASEA/Lepperd (Sweden) and Italtrafo (Italy) supplied and erected power transformers. EUCOMSA (Spain) supplied steel towers and - 22 - Bruno Frate (Italy) was the supply-and-erect contractor for 220-kV and 60-kV lines. In general, all contractors and suppliers performed satisfactorily. Only minor delays in deliveries were encountered. Most of them were beyond the control of the suppliers, e.g., slow advance payments from SONELGAZ, problems in clearing customs, etc. Additional details are given in Annex 3. 3.4 Performance of Consultants 3.4.1 The management study financed under the First Project was started in 1973. One year later, however, the consultants were replaced because of unsatisfactory progress. The study was finally completed in 1978 and led to several organizational changes and improvements. A new major division, the Division of New Works was added and a new electricity distribution district for the Algiers region was established. New inventory controls were introduced and warehousing operations were reorganized. Further studies on electronic data processing applications and work methods and procedures were completed on schedule under the Second Project (Loan 1293-AL) 3.4.2 Training by consultants of higher management staff of SONELGAZ in modern management methods was particularly successful. 4. Financial Performance 4.1 Financial Forecasts 4.1.1 During appraisal of the First Power Project (Loan 997-AL) in 1973, it was noted that during the preceding three years the growth rate of SONELGAZ' revenues had been decreasing, while the operating expenses had been increasing rapidly. It was also recognized that SONELGAZ' financial situation would progressively become weaker as a result of an increasing debt service burden for an ambitious construction program and because earnings from electricity activities were subsidizing gas distribution and miscellaneous other activities. Accordingly, the Government and SONELGAZ agreed to take appropriate measures, involving (a) a curtailment of non-essential components of the investment program, in particular the gas program which was to be reviewed during a gas market study, and (b) the implementation of appropriate financial measures to reduce the debt service requirements of SONELGAZ and, if needed, provide complementary financial assistance in the form of equity contributions. 4.2 Financial Covenants 4.2.1 Specifically, the Government agreed to take all steps necessary to ensure, firstly, that the period of repayment of loans to be granted to SONELGAZ for financing its electricity program would be consistent with the economic life of the assets so financed and, secondly, that the ratio of SONELGAZ' net revenues from electricity operations for each year to the average electricity debt service requirements for that year and the preceding year would be not less than 1.5 (Sections 3.02 and 3.03 of Guarantee Agreement - Loan 997-AL). Furthermore, it was agreed (Sections 5.04, 5.05 and 5.06 of Loan Agreement - Loan 997-AL) that SONELGAZ should attain, for its electricity -23 - activities, a cash generation ratio of 15% until 1977, and a financial rate of return on net fixed assets in operation of 7% thereafter, and that prices for activities other than the sale of electricity and gas should be set at levels sufficient to ensure that revenues from these operations would at least cover costs including reasonably allocated overhead and general charges. For the gas activities, for which the Government had decreed a tariff reduction of about 50% in 1968, it was assumed that the Government would grant subsidies in sufficient amount to meet the difference between the internal cash generation and the debt service related to gas activities. 4.2.2 Before the appraisal of the Second Power Project (Loan 1293-AL) in 1975, the Government had taken steps to strengthen SONELGAZ' financial condition by restructuring its capitalization and by reducing its debt service burden (by conversion into permanent capital of debt amounting to DA 431 million, as well as by conversion of medium-term debt into long-term debt and by deferra. beyond 1975-1977 of repayments of long-term debt falling due in that period). Estimates for the years 1975-80 indicated that the financial targets for SONELGAZ' electricity operations under Loan 997-AL (debt service coverage ratio of 1.5; cash generation of 15% until 1977; rate of return of 7% from 1978) would be attained in 1975 and 1976, but that tariffs would have to be increased if these targets were to be met thereafter. The required average increases were estimated by the Bank at 8% from January 1, 1977, a further 30% from January 1, 1978, followed by 5% additional from January 1980. Although the representatives of the Algerian Government and SONELGAZ agreed to extend the financial covenants under Loan 997-AL to Loan 1293-AL and to take all measures, including tariff measures, necessary to enable SONELGAZ to achieve the covenanted financial ratios (Sections 5.04-5.07 of Loan Agreement 1293-AL, and Sections 3.02 and 3.03 of Guarantee Agreement), there is some doubt as to whether the implications of such policy were fully supported by the higher echelons of decision-makers. 4.3 Tariffs 4.3.1 SONELGAZ' electricity tariffs had remained unchanged since 1965 and were designed to be sufficient only to finance replacement and routine development. The Government's policy is to finance all major works included in the national development program by loans to SONELGAZ (augmented, in the case of rural development and certain other specific works, by Government and customer contributions). There was, therefore, considerable reluctance on the part of some of the government ministries concerned to agree to a tariff increase when this became necessary to achieve the cash generation and financial rate of return objectives provided for under the Loan Agreements. It was not until SONELGAZ began to incur heavy losses during the years 1977-79 that the need for a tariff increase was finally accepted. After discussions between the various ministries concerned which lasted for more than a year, the Government following a decision by the full Cabinet, issued a decree on March 30, 1980 providing for a 60% increase of electricity and gas tariffs in three stages: on April 1, 1980 and on January 1, 1981 and 1982. These tariff increases were actually implemented on the specified dates. In addition, measures were taken to restructure the capitalization of SONELGAZ (by a - 24 - cancellation of-loan interest accrued to the Government which effectively eliminated the accumulated losses of DA 276.3 million at December 31, 1979 and substantially reduced the deferred interest charges carried in the balance sheet at that date; and by a conversion of short and medium term debt into long-term debt). As a result, for the first time in several years, the cash generation, rate of return and debt service coverage ratio began to improve in 1980 (to 3.9%, 3.9% and 1.2, respectively--see Annex 9). 4.4 Remaining Financial Issues 4.4.1 There remain, nevertheless, a need to reassess the financial objectives and capital structure of SONELGAZ. The financial policy and objectives of SONELGAZ, as existing today, is "equilibrium" between (a) consolidated operating expenses, excluding depreciation and including debt service, for all activities (electricity, distribution of natural gas and others) taken as a whole and (b) consolidated revenues. Accordingly, the new gas and electricity tariffs were set with this objective in mind (on a consolidated basis--cross-subsidization of the gas activities by the electricity activities was intentional). The concept of "equilibrium", however, includes also the notion that shortfalls in revenue are to be compensated by loans from government banks ;5 cash generation is insufficient to cover the company's debt service. Such loans either replace and defer existing debt or add to the company's already excessive debt burden. At December 31, 1980, the company had a debt/equity ratio of 69/31 and this ratio is not expected to improve significantly between 1980 and 1985. This is the direct result of the policy followed of financing capital investment to a large extent through loans, rather than through equity capital contributions. 4.4.2 Throughout the dialogue with the Government and SONELGAZ, the Bank has consistently emphasized the merits of adjusting electricity tariffs not only to increase their level to achieve SONELGAZ' financial objectives, but, more importantly, to introduce a tariff structure which would more closely reflect the structure dictated by long-run marginal cost. In this respect, real efforts have been made by the Bank to demonstrate the relevance of the financial performance measures in the context of the Algerian planning system. 4.5 Bank's Performance 4.5.1 The delays in implementing the tariff increases mentioned in para 4.3.1 somewhat strained the relations between the Borrower and the Bank during the years 1977-80. Difficulties were also experienced in obtaining the various annual and quarterly reports called for under the Loan Agreements, such as: - separate two-year financing forecasts for the electricity, gas and other activities, approved by the GJarantor, indicating the Borrower's plans for (a) achieving the financial objectives set forth in the Loan Agreement, (b) meeting the projected electricity capital expenditure and (c) meeting the financing gap, if any, in investments for the gas and other activities (Section 5.01 b of Loan Agreements); -25 - - separate financial statements showing the annual operating results from electricity operations (Section 5.02 of Loan Agreement 1293-AL); - quarterly report containing management information on such matters as organization, personnel, tariffs, collection of receivables, etc. (Reporting Requirements letter of August 21, 1974); - annual revision of five-year forecasts for activities as a whole (Reporting Requirements letter of August 21, 1974); - calculations showing status of compliance with financial covenants concerning rate of return, cash generation, debt service coverage, etc (Reporting Requirements letter of August 21, 1974). 4.5.2 However, all financial reports prepared by SONELGAZ for its own purposes were eventually made available to the Bank, and it became clear that the problems with respect to the submission of financial reports were largely due to the fact that the Bank's reporting requirements were too cumbersome and were not perceived by the Borrower as being useful for management purposes. This was particularly true with regard to the requirements for separate reports for each of SONELGAZ' activities, on which much of the information required was not readily obtainable from SONELGAZ' accounting and management information systems. Had the financial covenants and reporting requirements under the loan agreements been more closely geared to SONELGAZ' financial information systems and reports on its operations as a whole, as used for its own management purposes, many of the reporting problems could have been avoided. 4.6 Audits 4.6.1 The annual audit reports, on the other hand, which were to be submitted to the Bank no later than nine months after each year-end under Section 5.02 of the Loan Agreements, presented a problem beyond the control of SONELGAZ for which a satisfactory solution has yet to be found. Until 1978, these reports were prepared by SONELGAZ' statutory auditor (Commissaire aux Comptes), designated by the Ministry of Finance (Inspection des Finances), but invariably issued with considerable delay. The last audit report covering the financial year 1978 was received by the Bank only in 1982. No further audit reports are expected in the foreseeable future, because since 1979 all audit responsibilities have been transferred from the Ministry of Finance to a newly created Cours des Comptes which does not, at this stage, have the staff to issue annual audit reports on state enterprises such as SONELGAZ. 5. Operating Performance 5.1 Management, Organization, Staffing, Training and Planning 5.1.1 The Borrower's management is satisfactory. The Company has gone through several reorganizations as a result of recommendations from studies carried out under the projects (para 3.4.1). Staff is adequate and capable. SONELGAZ' training program is excellent. Advanced planning methods based on up-to-date computer codes provide SONELGAZ' planning staff with adequate tools to carry out their work with minimum external support. - 26 - 5.2 Boufarik Power Station 5.2.1 As indicated in para 3.3.1, various technical problems arose during the final installation stage of the combustion turbines. These difficulties were eventually resolved however and the four units have operated satisfactorily since mid-1979. 5.3 Dispatch System 5.3.1 Once the damaged equipment was replaced, installation and commissioning proceeded without further mishap. The complete system--four regional and one central dispatch center--have been in commercial operation since December 1981. 5.4 Lines, Substations, and Radio Communications 5.4.1 All lines and substations financed under both Loans have been energized and placed in commercial operation starting November 1978 through December 1981. The radio communications network is in commercial operation since July 28, 1979 in the Central System (Algiers Region) and March 30, 1980 and November 20, 1980 in the Eastern and Western Systems, respectively. 5.5 Comparison of Actual Sales with Appraisal Forecasts 5.5.1 The average annual growth of sales between 1975 and 1980 was 14.6%/a essentially matching the 14.82/a appraisal forecasts. 1. Justification of the Projects 6.1 Least-Cost Solution 6.1.1 The Projects were still part of the least-cost expansion program formulated through SONELGAZ' advanced planning capabilities (para 5.1.1) in connection with the appraisal of the First Project in 1973. The program called for strengthening SONELGAZ' interconnected system to eliminate operating problems arising from regional capacity imbalances and relatively long transmission distances covering about 1,000 km along the coast. The 100 MW of combustion turbine capacity added near Algiers, in the Central Region, and the improved system control possible through to the new dispatch facilities were aimed at remedying problems being experienced in maintaining stability, voltage, system security, and spinning reserve. 6.1.2 In 1975, the appraisal of the Second Project confirmed the 1973 least-cost program. With an economic price for gas delivered at the power station of about USc 6/million Btu, representing the replacement value of fuel gas at the end of the life of Algeria's gas reserves, the least-cost development program adopted was found insensitive to the cost of fuel. Under these conditions, a stream of 320-MW of combustion turbines followed by 660-MW of steam plants was favored over an all-steam development, the second best alternative. - 27 - 6.2 Institutional Development 6.2.1 Part of the justification for the Projects was their institutional development objectives aimed at improving SONELGAZ' organization and management, and ensuring the utility's financial viability (para 2.2.1) In view of the rapid growth forecast for SONELGAZ during appraisal of both projects, a study was carried out to reorganize SONELGAZ along the lines of a modern public utility able to cope with the problems arising from SONELGAZ' large development program. As a result of the study, several improvements have been made in SONELGAZ' organization and work methods and procedures (para 5.1.1) 6.3 Rate of Return 6.3.1 No separate economic rate of return was calculated in the SAR for either of the Projects since both were integral and essential parts of SONELGAZ' program for 1973-1980. Instead, a financial rate of return was calculated on the whole program for the years covered by each of the two Projects. The forecast rates of return were 15% and 5.4% for the First and Second Projects respectively. Forecast revenues at the then prevailing tariffs were used in both cases to measure benefits. A similar calculation using actual investment, operating costs and revenue data for 1976-1980 yields a negative rate of return. This reflects the deteriorating financial condition of SONELGAZ during the period on account of rapidly increasing sales at subsidized prices. Although some relief was provided to SONELGAZ through tariff increases approved in 1980, it fell short of the goal intended through the institution-building components of the Project. 7. Conclusions 7.1 Achievements 7.1.1 Both the subject Projects were essential to the development of the electric power subsector. From a technical point of view the Projects have been a success. The institution-building objectives were also substantially achieved. SONELGAZ' organization has improved and has been able to successfully cope with the vast growth of the subsector since appraisal of the first loan. Data processing and planning activities have been strengthened (para 6.2.1), planned system improvements have been carried out successfully and SONELGAZ has been able to meet on schedule the projected load growth. Significant transfers of technology also took place through the gas and electricity network studies financed under the first loan. One area in which the Project objectives have not really been achieved is that concerning the financial goals of SONELGAZ, because here fundamental differences remain in the viewpoints of the Government and the Bank. 7.2 Lessons Learned 7.2.1 The Bank's expectations on pricing policies were not achieved because of a fundamentally different Algerian Government perspective on the role of - 28 - SONELGAZ. In the Algerian view, before all other considerations, SONELGAZ' role was, and is, to provide adequate supplies of electricity to support the official industrialization programs and social development goals. Pricing has played no role in allocating resources for these programs and goals; and benefits, if any, are measured only at the far end of the production process. 7.2.2 The lesson may be that institutional objective setting for public utilities projects financed by the Bank should be carried out with a more realistic appreciation of the political and social framework, especially in centrally planned economies where the concept of autonomous and financial viable utilities is not readily understood or accepted. - 29 - AlNEt 1 ALERIA FIRST AND SECOND POWER PROJECTS (LOANS 997 AND 1293-AL) SOVELGAZ Estimated and Actual Load Growth Data, 1975 - 1980 Estimate1/ ActuaL Year Sales. Gh rowth Sales, G.'b _T rowth 1975 23735 18.3% 2,756 19.2% 1976 3,280 19.9% 3,238 17.5% 1977 3,730 13.7% 3,586 10.7% 1978 4,240 13.7% 4,375 22.0% 1979 4,830 13.9% 4,884 11.6% 1980 5,460 13.0% 5,448 11.6% 1975-1980 Average 14.8Z/a 14.6%/a I/ Source SAR, Second Power Project, June 8, 1976 2/ SOMBIGAZ .AIHR 2 Pag=eof 20 SOMELGAZ FINANCE DEPARTMENT FINANCIAL DIVISION COMPLETION REPORT - IBED LOAN 997 AL AUGUST 1981 ANNE 2 - 31 - Page 2 of 20 INTRODUCTION Under the terms of Loan Agreement 997 AL, an amount of US$38,500,000 was made available to SONELGAZ in connection with the financing of a project consisting of studies, supply of technical equipment and execu'ion of works and installations, as described in Annex II to the Loan Agreement. This project resulted in the award of 10 contracts, the major one of which related to installation of the Boufarik generating station. The purpose of this report is to describe briefly the main technical and financial aspects of each of the contracts associated with the use of the loan. I. TECHNICAL ASPECTS 1. Boufarik generating station 1.1 Purpose of the contract - - The contract between SONELGAZ and the German contractor covered all the surveys, supply of equipment, installation, training and guarantees relating to a gas turbine generating station at Boufarik, consisting of: 1.1.1: four gas turbine plants with a unit capacity of 24,250 kfW (ISO standard); 1.1.2: extension and modification of the existing 60 kV substation at Boufarik. The contract was broken down into three lots: Lot 1: Extension and modification of the present 60 kV substation at Boufarik. Lot 2: The first and second gas turbine plants with the combined equipment and accessories necessary for operation of the plants. Lot 3: The third and fourth gas turbine plants. ANNE 2 -32- Page 3 of 20 1.2 Date of signature and effectiveness of the contract: The contract was signed by the two parties SONELGAZ and AEG-KANIS on April 28, 1975, which was also the date of effectiveness of the contract. 1.3 Initial timetable proposed in the contract (in months) PRASE LOT 1 LOT 2 LOT 3 Acceptance at factory - 10 10 Start of installation 10 - Completion of installation 15 15 16 Putting into operational service 16.5 16.5 17.5 1.4 Updated timetable under the contract: The start of the civil engineering surveys depended on completion of the soil studies, which thus in fact determined the real starting date for tontract performance. In order to save time, SONELGAZ had proceeded with. signature of the contract without waiting for the soil studies, which were to be completed within a relatively short time. The result was a slight lag in the schedule (5 months), reflected in the new timetable for contract performance. PHASE LOT 1 LOT 2 LOT 3 Acceptance at factory - 15 15 Start of installation 15 - - Completion of installation 20 20 20 Putting into operational service 21.5 21.5 22.5 Date of operational service (Feb. '77) (Feb. '77) (Feb. '77) 1.5 Effective completion dates Lots 1 and 2: Fully operational and provisional acceptance: May 27, 1978. Final acceptance: May 26, 1979. -33- ANNEX 2 QPage 4 of 20 Lot 3: Operational: Kay 29, 1978. Provisional acceptan .e: December 16, 1978. 1/ Final acceptance: not yet signed. Certain reservations have not yet been satisfied. 1.6 Main difficulties encountered Many difficulties arose during execution. of this project, resulting in delays of between 12 and 15 months and involving penalties for the contractor at a zadmum rate of 7Z, as stipulated in the contract. It must be said that some of the major problems encountered by the contractor arose from failure to understand the Algerian market and the difficulty experience4 by the AEG representatives and their subcontractors in adapting to living conditions in Algeria (housing, food, climate, etc.). Another problem was the poor performance of one of the major installation siabcontractors (engine room and accessories) who alone caused more than eight months delay. Lsatly, a certain number of internal problems within AEG itself (a change in project management) caused further delays. In addition to all this, a number of technia1 problems that arose during the final installation stage were the cause of the delay in giving provisional acceptance. These were as follows: 1. Serious vibration in the turbine bearings 2. Significant temperature rise in the alternator bearings. 3. Under-dimensioning of the air-cooling units, etc. - Later, at the stage of putting the installations into operational service, cracks occurred in connecting parts of the first stage nozzles as a result of faulty design of the exhaust hood. These latter defects 1/ Slace accepted. ANNEX 2 -34- Page of 20 have not yet been cured and final acceptance of Lot 3 has still not been given 1/ for this reason.- 2. DISPATCH SYSTE4 Contract 75-107 KD.T and Additional Clauses 1, 2 and 3 with C.E.T.T. (CONS IP, SODETAG, TAI). 2.1 Purpose of the contract: Installation of electricity dispatch centers as follows: - three regional centers, at Annaba, Oran and Algiers. - a national center in Algiers, for telemonitoring, control and rational operation of the electricity distri- bution system. Additional Clauses 1 and 2 provided for the introduction of taxes and Additional Clause- 3 - extended by 14 months the deadline for contract performance 34 months from May 30, 1975)* and - increased the amount and amended the terms of payment under the contract. This was the result of delays in the construction works and of various changes (electricity substations, siting of the Annaba and more especially of the Algiers dispatch centers, and various additions). 2.2 Date of signature: Contract 75-107 KD.T - May 30, 1975 Additional Clause 1 - Jan. 7, 1977 Additional Clause 2 - Feb. 13, 1978 Additional Clause 3 - March 7, 1978. 1/ This has since been resolved to the satisfaction of SONELGAZ. -35- ANNE .aNy6of 20 2.3 Completion time: initially fixed in the contract at 34 months from My 30, 1975. Additional Clause 3 provided for an extension of 14 mogths. 2.4 Schedule: Annaba AL&iers Oran Provisional acceptance 4/10/79 5/30/79 4/30/79 (Additional clause 3) postponed to Feb. '82 Effective date of provisional 5/28/79 10/23/79 acceptance The various delays were caused by a number of incidents, the most important of which were as follows: Failure to complete the construction works for the electric substations in accordance with the schedule; Changes in the siting of the (regional) dispatch centers at Oran and Annaba; Destruction during transportation (July 1979) of half the equipment shipped for the computer facility at the Algiers dispatch center. (This accident led to the scrapping of the original equipment and replacement by new equipment delivered in April 1981.) Date of putting the two computers into service: June:,1981 Expected date of operational service of the system: beginning of December 1981. (This estimate was subsequently confirmed.) Expected date of final acceptance of the system: April 1982. Contract FF DA 75-107 KD.T 44,272,800 2,148,370 Add. Clause 1 4,487,915 Add. Clause 2 Add. Clause 3 3,127,788 1,342,731 TOTAL 47,400,388 8,339,016 AbE 2 -36- raga rof 20 3. HIGH TENSION SYSTE 3.1 Contract 74-202 ID.L with CGEE ALSTEO Date of signature: October 1974 - ount: F 32.872,002 Purpose: Surveys, supply of equipment and installation of VHT/HrT/M substation. mu- orConta-act . Actaal ( SUsoperation .:o tional: OBSERVATIONS ) d-te~- date : ( ) ( OUEDSLY (225/C3/33/KV : MAC 77 - OCT76 : JURE 79 : Voltage build-up and ) civil engineerin ( - delay 4) ( Q313E AMvEUR ). Ö3/33 KV JANUAR= 77 OCT 76 END -80 Civil engineering BEN AKNOUN WAT 75 OCT.76 ' 78 " "s 63/33/KV ( - -- - - ) CONSTANTINE SUD 63/11/KV . FEB. 76 OCT.76 AM. 79 Civil en.nering ( : : delay) SOU1KAHRAS 76elay8 90/30 KV ME 77 76 JAN. 81 ( EL HADJAR :AY 75 ." :DEC.77 : " " ) EXTENSION ( 220/90 KV) AHE 2 -37 - Pag of 20 3.2 Contract 74/138 ID.L with ELECTROBEL Date of signature: August 5, 1974 Amount: EP 17,754,280 Purpose: Technical assistance In monitoring of surveys and works for the VET/MT substations at Oned Sly, Bassi Ameur, Souk Ahras, Constantine South, Ben Aknoun, Bouira and Ain Beida. Contract completion term: Three years. Contract terminated: December 1978. 3.3 Contract 74/139 KD.L with SGI Date of signature: August 9, 1974 Amount: Sr.F 879,840 Purpose: Technical assistance for the monitoring and super- vision of the surveys and works for the VET and BT substations at Marsat El Hadjadj, Laghouat, Bab Ezzouar, Bordj Bon Arredj, Ain Skhouma, Sidi Bel Abbes, Mostaganem, Ghardaia and Ain Kebira. Contract completion: time: 36 months Contract terminated: September 1977. 3.4 Contract 72/193 KD.L with EDF Date of signature: October 13, 1972 Amount: FF 3,395,000 including: contract agreement: F 1,120,000 Add. Clause 1: FF 2,275,000 (March 1979) Payment made in full. ANNEX 2 Page 9 of 20 -38 - 4. STUDIES 4.1 Contract with P.A; Management (November 1973) "Study and Implementation of measures to improve the organizational structure, management systems and work methods of SONELGAZ". Starting date: November 1973 Termination date: October 31, 1975 Phase 1: November 1973--November 1974. Final report on overall organizational structure, with interim reports on: - Information system - Personnel management - Review of computer services - Master plan for computer services Phase 2: December 1976 to September 1975 - Report on personnel administration - Personnel needs. Services completed: September 1975. 4.2 Contract with SEMA (December 19, 1974) Purpose of contract: Assistance in the organization studies conducted by SONELGAZ in the following ares: - Information systems - Organization of the Computer Center - Audit of accounts - Study of administrative procedures and channels - Subscriber management system - Inventory management system Services completed: December 1978. ANE 2 39 - T1 of 20 Areas covered by reports: Organization of the Computer Center Information processing plan Audit of accounts Preliminary design of a subscriber management system Organization of the New Works division Distribution procedures. 4.3 Contract between SOFREGAZ and SONELGAZ This was a contract for assistance with respect to the management and planning of the gas distribution systems operated by SONELGaZ. The purpose of the contract was to enable SONELGAZ to acquire the methods and planning tools used by Gaz de France in the area of surveys of gas distribution systems, by making available to SONELGAZ: - Computer programs and - Experts and by training SONELGAZ's own engineers. 4.3.1. Acquisition of computer programs. Three computer programs were acquired: 1.1 SIMUL: acquired in 1976. Its purpose is simulation of a gas transport network under regular operating conditions. All the planning studies for gas transport networks are carried out with the aid of this program. Using estimated consumption, the program indicates optimum transport parameters in the light of physical constraints and economic objectives. 1.2 APHYRE: acquired in 1976. Its purpose is to analyze the physical characteristi-s of a distri- bution network. Using the description of the network and the consumption levels the program calculates pressures at the junction points and rate of flow in each section. ANNE 2 -40- Page of 20 1.3 REGVAR: acquired in 1979. 0 Its purpose is analysis of a transport network under variable opera- ting conditions. On the basis of variations applied to certain operating parameters it sanulates the behavior of the other factors. 4.3.2 Provision of experts by SOFRAGAZ SOPRAGAZ has made experts available in connection with certain studies carried out on behalf of SONELGAZ. The direct participation of SONELGAZ engineers In these studies has been extremely beneficial from the training standpoint. Seminars have also been conducted by these experts for the purpose of explaining and making available to SONELGAZ staff the methods used and the steps followed. 4.3.3 Training of SONELGAZ engineers in France In addition to short term visits to resolve specific questions, three training - courses' (each lasting five months) were arranged for thei benefit of SONELGAZ engineers in the area of studies of gas distribution systems. To date, 14 engineers have benefited from this training. In conclusion, we may say that the purpose of the contract has been practically achieved. Currently all studies, whether relating to gas transport or distribution, are carried out by SONELGAZS own staff. 4.4 Contract between* GDC and SONELGAZ As a result of the felt need to develop and improve the planning, execution and working methods of its gas operations, SONELGAZ entrusted GDC (Gas Development Corporation) with carrying out an analysis of this branch of is activities. The analysis is concerned specifically with the following: - technical aspects - commercial aspects - management. ANNEX 2 -41 - Page 12 of 20 It should be noted that all the subjects specified in the contract have been examined. 4.4.1 Performance of the contract 1.1 Missions: In order to evaluate the various aspects indicated above, the GDC experts undertook five missions to the different branches of SONELGAZ. Following each mission, GDC summarized the data collected from these branches and submitted a report to SONELGAZ on the progress of the studies relating to the aspects examined during previous missions. Thirteen monthly reports were submitted in this way and given wide circulation within the SONELGAZ branches. 1.2 Conduct of the missions: On the whole, it may be said that the CDC experts obtained the necessary information from the..various SONELCAZ units. They interviewed staff at all levels and visited a large number of transport and distribution.sites.- A seminar was arranged for SONELGAZ personnel on the subject: "Opera- tional practices of the natural gas industry" in the United States. 4.4.2 Final Report The results of the critical evaluation study were presented in a final report in five volumes. Each volume contains detailed report on the practices followed by SONELGAZ, together with recommendations and in some cases a plan for putting into effect the changes that should be made. The analysis of each of the aspects examined is presented in the follow- ing form: (a) General conclusions (b) Recommendations (c) Review and critique of current practices. AIE 2 -42- Page 13 of 20 4.4.3 Conclusion The critical analysis of SONELGAZ's gas operations has made it possible: - to identify the crucial points where changes are needed, and - to stimulate interest in these gas operations. The various SONELGAZ units have accordingly put forward their own comments and criticisms and have drawn up an action program for the short and medium term consistent with the means at their disposal. åMEK 2 YagaI of 20 -43 - I.. FLIA1CIAL ASPECTS. 1- Exmnditurs by project against Lmu 997 AL PROJETScC~ tor Prposeof Contract $ US ( ) .(rUT :m 3065887,25 ) P.AManagement .r sation 3 y 315 037,74 SEMA 1524 174,55 :SOFREGAZ :- of gan ye 895 264,02 ) G. D. C " " 331410,94 ( .. SYSTE - : 8889369,87 ) EDF DAPECO .Sbttons 717477,98 S. G. 1. ' -' 495 581, 03 -: Electrobel :. 404 900,17 ) C G E E ALSTHOM " 7 271 410. 69 ( DISPA'CK SSTE : 8 496114. 95 .C. E. T.T S e and Italation 8496 114,95 OM STATION Supply of equipment 18 048 627,.93 ( Boufarik : A. E. G KHANIS : and canstructton : '18 048 627, 93 ) TOTAL 38 500 000,00 2- .Edtrea by contractor alainst Loan 997 AL 2.1. Contractor: !PA Manaeement * . - ) MANAGEENT - .ORGAIZATION . STUD N: 320 600 . :$US £quivalent ) 1 112387 263 884,68 6 5 01? 11915,73 7 4 172 9 644,53 10 3998 8708,84 15 3776 7 811,79 21 4354 8 851, 25 32 2305 4220,92 ANNEX 2 44-Page 1. of -20 2.2: Contractor: SEMA ..... SEMA . - ORrANTZATON STUD :FF 6 521 930 :.$US Equivalent ( -5 . : 29 292,00 6952,46 ) -( 8 : 596246,00 : 149000,61 ) . . -( 9 : 511456,00 : 117 238,00 ) ( 12 : 298310,00 : 65569.84 ) ( 14 : 148 162, 27 : 34091,64 ) 23 518586,00 . 116970.60 27 818713,25 195444,27 ( 31 : 528755,00 : 112856,23 ) 36 - 144 906,00 31.008,02 48 234 014, 00 47 588,00 ( 53 : 345 303, 00 : 69630.19 ) 61 168775,00 33982,22 67 123 576.00 24 811, 67 ( 74 : 211 630,00 : 42 848,76 ) S94 423 157,00 88582, 16 100 -*427 398, 00 * 89 685, 87 ( 103 : 460443,00 -100 270, 69 . ) - 106 205490,00 43 868,52 112 348772,00 80375,20 .116 : 121 086, 00 : 28298, 84 ) 119 131956,00 31098,68 128 60 113,00 -14 002, 08 :6 916 139,53 : 1524174,55 ) . 2.3. Contractor: SOFREGAZ ( SOFREGAZ - GAS NETWMK STUDY ) N-,I. FF 4757 500 . $US Equivalent ( 26 : 251 021,07 : 55 832.36 - ) ( 40 : 117 800,93 : 24 868,26 ) ( 45 : 346532,75 70451,38 ) . ( 55 : 557 729,65 112465,93 ) ( 66 : 156841,99 : 31490,83 ( 77 : 100 990,73 : 20447,61 ) ( 92 : 623754,31 : 128728,85 ) ( 111 : 350069,96 : 80674,31 ) ( 115 : 390 115,02 : 91 173,21 ) ( 133 : 104 004,29 23 482.33 45 -U° 2 Page 16 of 20 144 173 026. 95 41 140,45 ( 150 : 874755,56 : 214508,50 ) 4 046 643.21 895 26, 02 2.4.* Contrtor: G.D.'C ( GDC - GAS METM STUD ; ) N :$US 319 700 ( 25 : 40000,00 ) ( 29 : 68934,00 ) ( 33 : -16997,00 ) ( 4.1 .: 51 362, 00 ) ( 49 : 49466,00 ) - ( 56 : 23 111,50 ) - ( 60 : 33157,00 ) ( 65 : 22009,50 ) ( 86 : 14373,94 ) (143 15_-000.r00_ _ (.331410,94 2.5.' COntractor: EDF DAFECO E. D. F. DAFECO - 72 193 KD/L (H.T. System) (N* Dem :FF 3 394 619 : $US Equivalent ) ( 3A : 367 658,33 87 143,48 ) ( 20 : 433600,46 97 557,82 ) ( 52 : 25464r1,92 : 51 348,42 ) ( 75 30 216,00 6 156,29 ) ( 96 : 102998,00) 32 826,67 ) ( 104 : . 50 108, 0 ) ( 135 : 930.255.50 : 218 237,48 ) ( 131 : 110701.30 : 24734,23 ) ( 145 52 311.00 : 199473,59) ( 149 : 756 709.00 .3 019 200,31 717 477,98 -46 AIEX 2 Pae17 of 20 2. 6. Contractor: C. E. T. T -ii2.sptchi C. E. T. T- System 75 107 KD/T. Nø FF 44 Z72 800 $US Equivalent 11 4 264 482,00 977 521.67 35 6500866,00 -1 391 101,79 43 117 904,80 23 970,48 44 1019 882.36 207 998, 25 68 122518.25 24 661. 48 71 1850498,00 372305,84 S80' 2 655 668, 00 548 861,84 84 1936 336,00 394724,10 90 -874586,00 180 026, 82 110 - 2911 334.34 639210,84 121 3217798,90 732295,20 123 1080 191,00 256483,40 127 492505,50 115452,99 132 5066423.20 1 143908,61 140 3155581.78 737 019,34 152 2904305,50 689 823, 96 153 256 309,40 60748,34 38 407 580,'8.3 . 8496 114,95 2.7. .Contracto:: A. E. G KANIS A. E. G KANIS e" Boufarik) 75 086 KD/M. (N Dem DM 45322 100 $US Equivalent ( 13 : 4532.210, 00 : 1730 643,81 ) ( 18 : 8464420,00 : 3 252 171, 69 ) ( 42 . 6372315,00 : 2456 818,43 ) ( 47 : 4232210,00 .: 1682303.48 ) ( 58 663428,00 : 280·863, 64 ) ( 64 : 4001 600,00 : 1 670 814,20 ) ( 69 : 1374600,00 580 710,57 ) ( 78 . 80000,00 33 951,53 ) ( 81 : 1158350,00 504573,94 ) ( 85 700 000,00 : 301 594,14 ) ( 88 : 146620,00 65193,42 ) ( 95 931425,60 : 435 036,93 ) ( 99 744541,00 : 365 688,11 ) AUNEX 2 47 -Page 18 of 20 113 434 424,00 220 162. 17 126 88613.86 47439.85 130 4 307 721. 14 2 261 018. 13 136 1059 665,00 580 161,51 138 2 116 105,00 1 168 150,70 142 740139,00 411331,68 - 42 148 388, 00 18 048 627.98 2. 8. Contractor: S. G. I S. G.I.' Electro->Watt N 74 139 KD/L (H.T.System) ,N Dem FS 879 840 $US Equivalent 37 ' 35529,25 13478,76 -51 38086,15 15558,19 57 37903,60 15 450,05 .62 61 036,35 24 196,77 -3 , 49464,60 19 877, 27 91 24 280,25 10 996.99 . 93 - 218 538, 80 105 958, 21 101 113 635,40 58 985,41 108 96469,70 51 313.67 117 68 282,70 42-797,05 124 131 824,90 78 607,57 . 3 145 610,91 . 58361,09 --1 318 662, 61 495581,03 -48- A1EX 2 Page 19 of 20 2.9. Contractor:. ELECTROBEL ELECTROBEL (H.T.)Nm 74 138 KD/L N* Dem *FB 17 754 280 $ US Equivalent . ( 17 : 1332296.00 34 32205 ) ( 22 : 1 250 073, 00 31926,27 ) ( 39 : 1*839 437, 00 - 46418,20 ) ( 63 : 2359289,00 63748.17 ) -( 72 -: 999 625,00 27 717,32 ) ( 83 437 212. 00 12 32., 59 ) ( 98 -- : 1751532,00 57 580,69 ) ( 109 : 415591.00 12 686, 90 ( 120 : 828 776,00 27 923,72 ( 125 1343515,00 46 063,26 ) ( 137 : 253 337,00 8669.12 ) ( 151 - : 1012923,00 35 522.88 ) (------ 13 823 606.00 404900,17 ) 2.10 Contractor: C. G. E. E ALSTROM C. G. E. E. ALSTHOM_-42_DL -H 7Dm) N*Dem FF 32 872 062 $ US Eqtivalent ( 2 :- 1 643 -603, 10 388926,43 ) ( 4 5 662816,60 -: 1345 087,08 ) ( 16 : 1 216 475,00 276092,51 ) ( 19 546 891,95 121 539, 25 ) ( 24 745 891,25 168240,84 ( 28 : 2194 353, 20 488070.21 ) ( 30 : 1 375 823, 15 295 123,60 ) ( 34 911 052,35 194 126, 25 ) ( 38 : 3635525,95 769 806,15 ) ( 46 : 2644891,72 531 850,34 ) ( 50 183 898,00 : 36931,73 ) ( 54 150964,36 3ó 441. 89 ) ( 59 522401,10 103736,02 ) ( 70 717474.55 144303,01 ) ( 76 312 251, 65 63 221,63 ) ( 79 380738,80 78 527, 15 ) ( 87 : 1472 625,54 300 196,25 ) ( 89 : 208092,30 42 834.20. ) ( 97 : 582 472, 59 124247,57 ) ( 102 566547,80 123 377,13 ) (105 : 2989984,62 652 834,50 ) ( 107 : 434571,80 94609,82 ) ( 114 : 384430.15 :. 90 886,59 ) ( 118 : 1 039 205. 13 257759,18 -49- AME 2 SPa! 20 of 20 ( : .: ) ( 122 : 736 472, 69 : 167 603, 87 ) ( 129 358065,65 : 80 983, 08 ) ( 134 194730,71 : 44014,40 ) ( 139 * : 125 540.70 : 29703,49 ) (. 141 425746.57 : 100953,91 ) . 146 : 508523.67 125382.61 ) 2 872 062.65 71410,669 3. Remarks 3.1 Expenditures under Loan 997 AL gave rise to 153 disbursement requests, ovez the period from January 1975 to May 1980. i.e. short of the deadline initially fixed at December 31, 1980. 3.2 The loan was used for payments in different currencies In the following percentages: - French francs: 49.10% - Deutsche mark: 46.88U - Swiss francs: 1.291 - Belgian francs: 1.05% -. US dollars: 0.86% - Pounds sterling: 0.82% 3.2 No particular comment is called for from the technical standpoint, save for the relatively long lapse of time (two to three months) between the date of sending the Invoices to IBRD for payment and the date of receipt by SONELGAZ of the corresponding notices of disbursement for monitoring the use of funds. 3.5 It is worth noting that with respect to the estimaced financial statements that were to be submitted periodically, SONELGAZ must have been faced with considerable difficulties arising primarily from the amount of detail required, which could not always be provided because of the budgetary procedures currently in use In the company. Nay 1982 -50 A= 3 Page 1 of 17 SONELGAZ INANCE DEPARTMENT FINANCIAL DIVISION COMPLETION REPORT - LOAN 1293 AL August 1981 -51- ANNE 3 Page 2 of 17 INTRODUCTION In accordance with the terms of Loan Agreement 1293-AL - Second Energy Project-between IBRD and SONELGAZ, an anount of US$57,500,000 was made available to SONELGAZ to finance the foreign exchange component necessary for execution of the project described in Annex II of the Loan Agreement. The project involved the award of eleven contracts. The status of these contracts is described below under separate headings for the financial and technical aspects. I. TECHNICAL ASPECTS 1. Contract 771149 KD.T + Additional Clause No. 1 with HARRIS (USA) 1.1 Purpose: Supply of radio-telephonic equipment for radio coverage of the Distribution Centers, in the form of local juxtaposed mini-systems. - Additional Clause No. 1 covers supply of additional equipment - for extension of the.systems and various accessories. SONELGAZ was responsible for installation. 1.2 Date of signature Main Contract: August 4, 1977 Additional Clause No. 1: March 3, 1979 1.3 Costs Goods Social Security and Taxes US$ DA Contract 77-149 KD.T 1,364,644 -659,269 Add. C1. 1 268,983 117,180 TOTAL 1,633,537 --776,449 ANNE 3 -52- Page 3.of 17 1.4 Programming The putting in service of the installed equipment and the complete hand-over of the radio networks to the operations departments took place on the following dates: Central systems: July 28, 1979 Eastern systems: March 30, 1980 Western systems: November 20, 1980 The scheduled lead time to completion was 24 months from the date of delivery of the equipment.. Delays in putting the systems into service were mainly due to: - problems in clearance of the goods through customs; - difficulties in the provision of installation material (pylons, housing); - udexpected delay in technical acceptance because the technical specifications of the equipment supplied did not conform with contract requirements; - difficulties in obtaining certain authorizations (relay station sites). 1.5 Status of payments Initial Contract: US$1,364,644 - payment made,in full. Provisional Acceptance: April 26, 1979 Final Acceptance: April 26, 1980 Additional Clause No. 1: US$242,000 has been paid. Provisional Acceptance: December 8, 1980 Final Acceptance: December 8, 1981 AME= 3 -53- . Pe of 17 Full payment is to be completed in December 1981. Amount remaining to be paid by that date. US$26,890. (This has since been paid In full.) 2. Contract 76/060 KD.L with AEG TELEFUNKEN 2.1 Date of signature: Nay 1976 2.2 Amount: DH 35,547,212 2.3 Purpose of Contract: Surveys, supply of equipment and installa- tion of HT/Mr substations, including cne of shielded type. 2.4 Putting in service Substations Date of beginning Contract operational Actual opera- Observations construction date tional date Civil eag.- and installation Tafourah Decesber 1977 End 1978 August 1981 delays 63/11 WV AR2EW WEST April 1978 Feb. 79 Feb. 81 Civil eng. 63/33 kV delays Seybous Dec. 1977 Feb. 79 End 81 Civil eng. 63/33 kV delays 1/ - The substations are not yet in service. - Installation: 100% completed for Tafourah, 70% for Seybous and 60% for Arzew West. The civil engineering works are largely finished. The delays are mainly due to: - Delay in acquisition of land and consequent postponement of the start of construction. - Unsuitable sites and considerable difficulties in execution of civil engineering works by local enterprises. 3. Contract 76/058 KD.L with SEDELMI 3.1 Date of signature: May 1976 3.2 Amount: 17,675,000,845 3.3 Purpose of contract: Surveys, supply and installation of VIT and HT substations. L These substatins are now in service. AM=E 3 Page 5of 17 3.4 Status of contract (pucting into service) Starting date Contract date Actual date of Substation O of patting into puttlng into conatruction service service Civil engLneering delays 225/63/33W7. 1.4.77 31.03.1979 .24.10.79 01 9Delay in site acquisition SlDI MLh IL=s 5.10.77 15.06.79 27.4,80 225/63,733V-r moanCus 1.05.77 28.02.79 05 .05. 79 . Rinor-delay, only . 225/63/33KT 225/63 ~Delay in start of works 1.05.77 - 30.12.78 21.04.79 !53/33/55n- . - * Minor delay only I ZAAI 1.03.78 30.11.78 00.08.79 22 * - Delay in start of construc ion -PETIT L = 1.09.77 31.12.78 15.01.79 Delay in start of construe ion All these substations are in service. Final acceptances have been notified. The delays have been relatively minor. 4. Contract 77/202 KD.L with ASEA/LEPPERD Date of signature: August 27, 1977 Amount: DM 5,743,225 Purpose: Supply and installation of 2 (?4) 220/60 11 kV 120 MVA transformers. ANNEM 3 55 Page 6 of 17 The four (sic) transformers were delivered by the dates specified in 0 the contract. Installation is scheduled as follows: Skikda: October 1981 Algiers East: September 1981 5. Contract 77/203 kV with ITALTRAFO 5.1 Date of signature: August 27, 1977 5.2 Amount: US$1,286,000 5.3 Purpose: Supply and installation of power transformers for the T1emcen, Tebessa, El Kala and Souk-Ahras substations. 5.4 Status The transformers were delivered by the contract dates. Installation of the Tebessa and El Kala transformers still remains to be done. Completion is scheduled for October 1981. (This date was met.) 6. Contract 77/013 KD.L with CEO BRUNO FRATE 6.1 Purpose of the contract Surveys, supply of equipment and construction of the 220 kV Zahana- Relizane line and 60 kV lines to supply the Arzew industrial zone. Supply of 2000 tons of 60 kV and 220 kV SONELGAZ-type pylons. 6.2 Scheduled completion dates The contract was signed In February 1977; contract lead time: 21 months from the date of signature on condition that the advance payment was made by SONELGAZ within three months after signature of the contract. The scheduled date of pucting the installations in service under the contract was the end of November 1978. AM=E 3 - 56 - Page 7of 17 The contract date was postponed to the end of March 1979 because of delay by SONELGAZ in making the advance payment (end of September 1977,'i.e. seven months after the signature of the contract). 6.3 Actual completion dates' *The Zahana-Relizane line was completed in December 1979. *The supply lines to the Arzew industrial zone were completed in April 1980. *Supply of the 2,000 tons of pylons was made as scheduled. 6.4 Reasons for the delay *The poor quality of the subsoil on a section of the Zahana-Relizane 220 kV line made the construction of special pile foundations necessary. The importation from Italy of boring equipment and pow-ing equipment, execution of the boring and construction of the piles caused a delay of about 14 months an this line. *The supplementary works undertaken to bring this 220 kV line into the Relizane substation delayed completion. *Work on the lines intended to supply the Arzew industrial zone was delayed by the removal and dismantling of the lines formerly serving industries in the zone at entry to the MKarsat, Ain El Bya substations and the dependent substations. 6.5 Conclusion Apart from the difficulties referred to above, we can state that the quality of the works was very good and that the contractor spared no effort +a the execution of the work. 7. Contract 79/292 KD.L with EUCOMSA 7.1 Purpose The purpose of this contract was the supply of 3,700 tons of metal pylons for the 60 kV and 220 kV "double three-phase circuit" lines (linnes AN=E 3 -57- Page a of 17 double terne faisceaux) for the Algiers belt line and the two lines from the generating station to the Marsat substation. 7.2 Contract completion dates The contractor was notified bf the award of the contract-In July 1979. Contract lead time: 10 months, calling for delivery to be completed by May 1980. 7.3 Actual completion dates Deliveries under the contract were completed in June 1981, i.e. 23 months after contract effectiveness. Seven months of this 13-month delay was due to SONELGAZ, which was late with the specifications for thetypes of 60 kV pylons. A further six month delay was due to the contractor's inability to ship the goods, which remained in storage In Cadiz. 7.4 Difficulties encountered Difficulties arose during installation of the 220 kV pylons delivered - in 1980 for the 220 kY line from the generating station to the Marsat nubstation. Drilling defects were discovered on the bars and manufacturing defects In the gussets which meant that the contractor's work teams were obliged to make adjustments at the site. The contractor was summoned to Algiers, admitted the defects of manu- facture and shipped a new lot of correct gussets. For the moment it is not possible to say anything about the manufacture of the 60 kV pylons which formed the last delivery in July'1981.(his has been resolved. 8. Contract with TRACTION ELECTRICITE/FI-April 10, 1972 8.1 Date of signature: August 10, 1972 8.2 Amount: BP 24, 103,344 8.3 Purpose: Provision of technical assistance by T.E. for the data processing system In the following areas: ANNEX 3 -58- Page 9 of 17 11. Contract with Institut Francais de Gestion 11.1 Date of signature: April 5, 1978 11.2 Amount: FF 1,488,600 11.3 Purpose of the contract: Training of higher management staff of SOMHELAZ in modern management methods. 11.4 Status of the various programs carried out under the IFG contract: 1. - Full training course: Number of employees trained: 36 Proposed number of trainees: 36 Training of managers in data processing and management methods. -2. - Seminars: Designed to provide updated training for managers in management methods. . Participants: about one hundred staff in 17 seminars. 3. - Simulation model: design and execution of a mangement simul- ation model for teaching purposes representing a distribution center. 4. - Training courses for instructors. 2 instructors were trained under this program. 5. - Short training courses: 3 staff participated in these courses, the purpose of which was to familiarize them with certain management models. 6. - Documentation. No problems to report concerning the performance of this contract. - 59- åA 3 SPage10 of 17 IIf. FINANCIAL ASPECTS 1. xpenditures by pro.jeet acanst Loan 1291l AL PRDJCTS cCffiT~RS PUPPOSE mC' F AC' H.T..SSTE 153.787.71n086 m.q3LLr substatians 17.212.277, 57 ASP. TE iM Szbatations 15-551-1110,55 Lns 14.071.575,57 AS P! --ransfarmrs 3.035.382,14 ITuJ -. - - -. - TransfOrmars '1.255 .c00,c - .eco"s1 - Töier=, LiUs 2.650.373,62 *S2UDIES . P.725 .FP.C. Tfraining --334.369,49 Data processing 205.651173 2p.acm= rU'.."=IM Data processing 127.493,75 F -Organization 1. 20.247,64 * ERRIS Caxn ±ca<tions natuoörk 1.568.856,08 3 10 T 0 2, 1_._56.4.34O,55 2.Expmnditures by contractor agnrst Loan 1293 AL 2.1 Cntractor: .A wwPnma Sus Fquiv. 18 572.325,50 282.450,38 53 5.148.769,50 2.752.517,35 95 2.3c,37 1.374x41 IDTIL 5.723.492,37 3.03>.382,14 -60- *EM 3 2.2 Contraetnr: IT..T.-1 age of 17 _ _ _ 'j Us. - . 97 9.720,00 --109 10.000,00 76. 1.111.680,00 19 124.600,00 2Tå - 125.6000,00 2.93 -contractor: 13 M 9LJ~k 112 34.333.95 16.26.45 - 113 172.278.70 82.339.39 86 .1181.944.97 637.773.42 82 1.283.754.00 633.720.71 . 72 1.452.077.85 843.691.74 62 258.454.72 . 142.008.09 51 2.319.666.77 ..1.220.236.38 48 858.185.95 462.194.80 37 2.168.976.35 1.159.861.11 38 2.362.995.20 1.208.326.06 43 3.879.512.95 2.103.631.44 2 1.942.287.00 824.225.33 17 82.804.85 40.871.10 10. 6.087.390.05 . _ 2.873.751,65 11 1.789.575.80 85.647.90 103 759.778.05 413.379-69 31 2.119.588.79 1.041.062.56 77 1.376.723.85 793.546.52 107 109.735.45 55.179.49 70 183.588.85 102.395.72 1DTIL 30.423.654.10 ~ 15.561.110.56 ·AN1N 3 - 61- age.12 of 17 2.4" Contractor: S=lUM 763.620.05 87 5.568.71 81 238.741.51 65 ..727.202.09 58 104.498.12 50 1.522.979.80 4 1.164.758,47 - 44 1.448.505.80 -- 42 -1.744.298.84 3659.505.66 - 22 1.613.379.25. 19 163.511.13 1 1.767.500.00 16 111 .800.75 15 56t.888.61- 8 715.396.69 7 316.457,00 5 501.761.05 3 383.443.51 91 56.828.77 68 443.225.68 30 787.837.72 32 572.945.31 23 528.006.89 28 194.937.97 26 312.65.49 . TLt 17.212.277.97 - 62- A 3 2-5 Contractor: ' m:0 age 13 of 17 N°.L i 2 ws 6Mi-X. 25 1.329.4#".175.00 1.550.342.96 93 298.631.979.00 357.643.09 85 . 160.413.540.00 185.839.31 73 263.803.229.00 319.640.05 69. 178.842.418.CO 216.388.95 66 - 330.134.894.00 405.583.00 56 436.728.214.00 512.816.18' 41 - 169.278.945.00 202.353.65 39 . 186.376.934.00 217?728.49 21 . 2.191.529.920.00 2.509.117.01 - 20 299.223.125.00 346.495.44 61 . 308.308.038.00 ~2.465.16 46 . . 484.661.670.00 . 583.375.74 - 90 . 354.670.267.00 425.774.63 99 - 564.708.840.00 679.202.20 35 197.850.744.00 248.357.50 33 397.294.427.00 487.459.67 29 . 417.291.103.CO 500.095.01 14 744.655.629.00 857.591.51 9 956.396.641.00 1.125.264.10 6 . 228.497.230.00 261.394.36 4 521.842.850.00 594.772.37 75 . . 542.392.940.00 672.193.88 - .54 . 130.512.376.00 161.124.24 106 260.159.817.00 277.557.07 MTAL 11.953.631.945.00 14-071.575-57 -63 -AE 3 1Page 14 of 17 2.6 Contractor-QCCM.1 fl0 'P TiS SUS 6auiv. 8oD 165.993.10 2.194.25 8Mo 70.557.753.70 952.563.71 80c 93.154.357.70 1.273.009.71 80.i. 29.511.999.00 422.6c5.95 'T 193.490.103.50 2.650.373.62 2.7 Contractor: TU * F.- UoS écaiv. 105 27.295.00 . 6.081.18 27 144.920.00 32.354.01 57 221.356.80 .50.138.83 52- 43-920.00 10.106.70 110 27..080.00 5-532.50 111 179.550.00 -36;682.41 59 94.860.00 22.844.07 !92 79.630.00 -19.313.61 83 226.289.00 .52.283-50 67 67.502.88 .15.958.42 60 53.975.00 -12.712.87 49 20.539,00 4.793.88 47 170.825.50 40.113.89 78 103.252.00 25.433.62 T.t 1.460.995.18 334.359.49 g -64- ANEX 3 Page 15 of 17 2.8 Contractor: SUi ye .Psus éqriv. 94~ 172.309.00 42.057.36 . 108 10.816.CO .2.179.77 102 123.229.00 28.244.67 100 156.775.00 37.841.00 88 74.741.00 18.017.96 79 318.757.00 77.320.97 l MM 856.627.00 205.661.73 2.9 Cotractor: ..I0! LCe : 104 335.02.00 10.687.95 101 936.654.00 32,440.60 64 570-152.00 19.624.10 59 401.181.00 13.723.07 55 381.233.00 12.511.26 71 1.112.380.00 -38.506.76 M_T. _ 3.737.202.00 127.493.75 2.10 Contractor:FIDT 40 36.314.40 8.249.52 24 52.931 11.998.12 'LDT-L 36.843.71 20.247.64 -65- AM 3 Rage 16 of 17 2 g1CoRtractor: l Ii.3sus -- 13 1 36.354.81 98 64.379.05 74 14.645.00 13.113 64.379.05 - 13.1.3 188.069.82 34 2.4.625.00 13.1.10 308.643.07 12 128.758.10 13.1.1 .232.186.51 13.G 178.759.80 84 26.889.33 13.1.1.3 144.206.8O 13.1.1. 56.960.46 TO'EEL 1.568.856.08 ANNEX 3 - 66 - Page 17 of 17 3. REMARKS 3.1 Of the total of US$57,500,000 made available under Loan 1293 IL. US$56,044,348.55 had been used by the end of March 1981, the final date for use of the funds being December 31, 1980. The delays involved in approval of the contracts, together with the sometimes excessive time taken by the contractors to perform the services, are the main reasons for the failIure to spend the total amount of the credit within the period specified in the Loan Agreement. 3.2 As for Loan 997 AL, we would also point out in the case of Loan 1293 AL the considerable lapse of time between the date of the disbursement requests and the date of receipt by SONELGAZ of the corresponding advices of disbursement. May 1982 ALGERIA FIRST POWER PROJECT (LOAN 997-AL) Comparison of Estimated and Actual Cost Data Estimated Cost Actual C,.c Us$ Million US$ million I Total Actual Item Description Local Foreign Total Local Foreign Total over Total Estimate 1. Combustion Turbine Station 10.0 16.3 26.3 13.1 18.0 31.1 + 18.3% 2. Dispatch System 3.1 7.2 10.3 5.7 8.5 14.2 + 37.42 3. Substations 10.2 11.3 21.5 7.3 8.9 16.2 - 32.32 11 4. Studies 2.6 3.7 6.3 2.9 3.1 6.0 - 5.0% 25.9 38.51/ 64.4 29.0 38.51/ 67.5 + 4.8% I/ Estimate was based on 10 substations. Actual cost'applies to only 6 substatione,the remaining 4 were covered separately to stay within the project's original foreign currency allocation 2/ June 1982 (0552P) - 68 - ANNEE 5 AIWERIA FIRST AND SECOND POWER PROJECTS (LOANS 997 AND 1293-AL) Cumulative Estimated and Actual Disbursements (US$ Million) As of December 1974 1975 1976 1977 1978 1979 1980 1981 Loan 997-AL a) Appraisal Estimate 1.8 6.0 17.2 29.3 38.5 38.5 38.5 b) Actual - 2.3 13.1 22.2 27.9 33.9 38.5 c) b) as % of a) - 38% 76% 76% 72% 88% 100% Loan 1293-AL a) Appraisal Estimate 5.8 22.0 38.0 50.0 57.5 57.5 b) Actual - 2.6 20.1 41.4 52.0 56.0j c) b) as Z of a) - 12% 53% 94% . 90% 97% 1/ About US$1.5 million of Loan 1293-AL was cancelled. June 1982 (0552P) - 69- ANEX 6 AIGERIA FIRST AND SECOND POWER PROJECTS (LOANS 997 AND 1293-AL) Actual and Forecast Loan Allocations (US$ Equivalent) Loan 997-AL Loan 1293-AL Amount Loan Amount Loan Category Description Disbursed Agreement Catogory Description Disbursed Agreement I Materials & 35,434,113 27,500,000 (1) Transmission 16,721,949 28,000,000 Equipment Lines II Consultant's 3,065,887 3,000,000 (2) Substations 38,634,627 24,000,000 Services III Unallocated 0 8,000,000 (3) Consultant's 687,773 1,500,000 Services (4) Unallocated 11455,651 1/ 4,000,000 Total -38,500,000 38,500,000 Total 57L500 000 57,500,000 1/ This amount was cancelled. June 1982 (0552P) stas9 aa sm n p s nrs cas aa e-au. -esmettaeS 15. pgemaji eles 1 lamag833363 [ingM6 ig 6m ..i..ela.e 2.320 ..03 5.64 3.5, .,5 ,.5. 3.0 5.35 5.,30 5... f.2S. 6.31, . 6..3. 6.344 3.66 3.4 Am-agreta <.86/fl> 30.531.3 30.2 35.0 m~.5 36.5 16.2 36.0 ...6 16.0 55.6 15.4 22.6 35.4 26.9 2i.2 sinlettill reem. 4 ili> 346.0 564.5 3.0 396.8 631.0 460.3 531.0 1.6 60.0 312.0 98.0 69.9 1.09.0 I0.J 13.0 .11.2 BKutMM?t opetassgepa pImtsii:p03030301 31.1 185 3.1 13.8 13.6 30.0 30.0 50.. 3'.l J5.1 36.3 6.8 13.8 65.9 35.5 51.3 memte l aepies 6.6 5.0 1.3 y.0 3.9 t.6 30.0 36.5 15.1 a0.6 t.5 20.0 10.6 35.1 30.0 5.6 kbiams 5503133 5 63.F3 560.5 5 SJ.6 6. .9 3. 3 01.5 5 35.6 5 56.9 23.3 3 90.3 30 5 10.8 53.1 5 3.0 33.3 atte ~ s t ss. a. p U 6>.5 k3.0 23.5.9 1 34.0 21.3 5 13.0 pi*aast m•mi 3ta a 5 91.6 5 06.6 5 10.5 15.1 358.45 12.5 5 366.6 5 163.0 3 U4.1 69.0 3 SO5.6 e. a 55.3 &110 15 316.4 33.å m.ad.fine,reidas.. !eee Msasaia Q 3 5 5 5 5 3 5 3 364.3 5 1 . 3 500.s 3 310.9 fatta 5 55.6 58.0 3 50.8 *0.3 63.6 48.3 5.5 33.5 65.5 b. 05 0.3 03.0 31.3 136.5 73.5 iaa sa 3 3.3 5 2.1 ..a 6.5 19.5 - 551 - 0.0 • 36.5 • 6.6 - 0 Beremtiesa ..!!d MJ MUd 2-2d 2 M d .L6 " ! la .1 ls EdMd MdHd..!2 pte.L3 r6 pr g 06e.0 .9 331.6 A 31 .4 436.0 433.4 109 111.6 6_41_3 06.4 _10.1 UG3 9.0 1.325.1 41atL0 sis tku im-stim ~a 515.1 5*6, 333.1 N3.6 35.3 544.6 51.5 653.6 1331 33 M58. 66.3 58.3 8S6.3 34.0 al:1A. 0ators aI athargea.@ L$ .0 6.6 03.6 $0.0 b1. 8.0 8.& 131.5 335.0 10.5 30.8 569.1 36.1 303.5 289.0 10.2 ma8~ 314i124 .qt3.3 .0 8 - -K - 55. 64 EN M aoit set lamaene las0 3.2 6. 59. 20.3 70.3 26.2 00.5 .0 98.3 i3.85 21.5 (163.6) 86.5 (164.3) 63.5 <60.0) *Lher am 9. as.a* 39..a • Iram 130 diOiteiooe 3 10.63 ) 11.05 (21.0) 336.03 522.05 310.0) (2315) 13.03 i;aa,l.r . ie rt 133id 35 3t63rs 3 <0.33 0.1 3 35.63 53 6.6 5.3 1.3 1. 13.6 6.E' m*33a3lsens *ther sale5 å 3 3.3 3 34.33 16.35 3.0 38.05 36.55 32.3 . Ta1a. t>.r fl 3 35- .036 11 wc& lama <as) betor* seglitdial, m. Cac'. Roe 5.1 (1.63 3.5 13.1 6.5 fil.) 6.6M 112.9) 93.2) 2.8 Coeaibttia ts ensralmett pr0re. (09 tjut &JU1 33.1 - - - - - - ToM ut imaa (eott 36.33 <33.33 .m33.53 6.1 /L (II.Al (M6.6 (112.9) 5.5> 2.6 L aftnafi ini In77 ri 1mat aof 335333335asia .9- m9 1. Pal =1. "11m= ( el tag m937 eeu@~g pee ad j#. aprase r1pett •, Les 123.,L. I 05 Om . 3 1 tops <5Agre. d).ted go amlsas resamo. ethor tas .eI.r3e 3.= 1ma ass<n s.alpttias • adjusad ta esmds: ~,- ftal Moprm 353 lap..4l2e, ast- 6i*oCs 3.01.% ..t..r.d 9. Ap manbs 6 a.a 3 me30.3 3 leledig ster prchaes e etetsasty.3133 mastllatla set Oseier 33red Imara 3 ,a.o. setr .aptalasdl. il '~3.,0 * 0I. 1..1 l . 22&loama. lOdlreet passaaie Se ala.r ees sldtagaoIiIt asstamisllal. 1mled1q 4eprelaia ps33.s af hsad .3 its a*d localfll.sa3s3tsee 3sea3. ad4.. befrege smast ladi lfor desreda.3s. Sma e s ato 3.åss3. se3st.*.redere by f.... .s 3... maoe SI. 3s3.r.sl resuetleo 3. 3050 hoe lo 0e63 rtl.triqg mssae I. etlesagq esatim .f setars; rato. = lmong distltltlm el hmattd 333 iO76-1OM01. i d2@ dptatim sttdig reforme te s mtem ItS ad 4. Aet*. , W uu~Uf khara .f protit at 06 3.2 13. ar åt03 13? I ~ U nWE mSAlU H b 1 523f-AL) ålmLL fF-- 2eF2jytager3l974afn 974 979 9' t set. ,3.6 ..3 5 5.54.1 1,16,1 3.a63.4 5,575.5 2.. 3,196.5 3.5 2.n?.9 4.6&5. .3 . &.MML,@ , . 1.12-A amIs romg ~ ~ ..71.5 M Sr.0 26.. 3.375. ,6.3 &.6 .1 . 1.1 5.563.5 1 .8 3..6..3 Otde - Im ma... 3 44 .6 3 .s - n8.6 = i n prgt 8g4 negM*. 9ee 44.se. m.... c.-..t..... n, ,6.4 ,... ,.. ... ,,,: 622 é. ,,., .e. M C. 21n-s 1:nn 1:M rMbr n oo oo o -r r Seaas s •s m tte. Smoge.m *sst 5.3 e» as. e.3 26.6 56..3 5n.6 na.3.25.1 56n,e35.a11.3 m.3e58.asi.a ase1. 5.5 .5. .a, run lan E" 7it. 1 .1 si.e n..3 Y. m.h 66.3 8 n.l 3. r . In- Goi ai iffi, må je tät 1 tio tw.i ti J? : a 643 m;uo mama1 .--3. 1:e W.. ...... --- .... i .4 ...... ... 2-. ---4 .71... 6-- - . . .m 4=. .Imam.St u.e m. an.8 56.4 . . . In. * n, m.8 ...3 .33. 3». 134. 1.61 5.5.3. Sesmmihm 3. qed.m t aJia3.6 Sim.> 14.5 565.6 31, 5. 67.5 5 33.6 53.6 3623.0 553.3 358a.3 5.6 ) 35.0 3.45.5 4.8 3.66.5 m .3 4.a 3>.s i., iur r. , n, !I t r .ä i t . z .3 E 6 aiac.. ... .m n-9n15. ..eH) Le t.mi dbot. -17. 4 t. I. 1 1 t.3 j6i.6 .5 3I 4 .1 e 2,22.9 1.143.0 7~ .4 3,675.s s. 3.3 h.3. 5 & 4M 3.. - - P- -- - .. e.= - - - -...- -inn Ba t . al l) ru4r 5. kys . 4n n3 Curstuiefaiea d reosdbt . -. . , -e 56. - .42 5.4.5.J -.- 3 .41.6 -2.L .. 8.537ei (eteis hettc dbt . .6 3.6.2 315.5 3.56. 2.35gfg. .1.4.3 .6. .8. ,*. .6 m. 1 65.3 4 .4 7,5.5 5.8.0 33.37. -o fftel--ge am 46k ren Em . Mn..r Bae ? fåi tiftimimce atäm-o adee 4401 Ana ÖMs 49/." 34,4"t1 lkt -Mmir II I Cobmcce ~kl <W.4L 3.nu 2.6 .6 343. m t$ 9e 8e i 6.6. 6.7" 1 .4e 0 6.. port Afpeciml *5856 g-t1 me li a llIIIM huTjeLffi me et a= 35. 3o553 l (dl falas se letal es,n hd ate. C= =4 363- s J .!GL namnas4w q*ec^*s5M cred6 m, ¶iem-. 567 mi sl. LA Th, M3ed6eff 41 em ceftco ~E feackerp n ma mm Kb m e ~ m mmo. nu itu FgSy AUD 6 8C0110 FNwig r80j4113 (laANiS 997 AND 1293-AL4 JIOCCrieIy AcILvitie@ toauceo and Applicaston ml Contruetiron VS-N (93-60) IDA 8ll53onsi rororr__ Ado-t_ _lut p 9r6 19 =C% MI9 m9 90Atue laternal canb &4641&tiool opera$&@# inceme (Saa) 86.9 13.1 91.1 82.0 132, 16.3 239.1 83.8 321 (11.6) 34,0 3.1 ata105. 1233.4 .3.9 3.4 212.3 199.4 241.6 248.6 263.0 333 6 Leemi 0,bt servSica daartimaties (41.4) (39.83 ('19.8) (24,9 (19,$> (23.), (Ill.0 (014.> Q (3>3,33 (iø.3 Q <89?,) (353,0) Sateremt 811.13 (81.03 (81.33 (133.3) (188.6) (156.) (162.8) (49.9) (324.2) (8 ,2) (389.0) (008.3) Lei atere v espitalig*ed Mi. 31 8 _4.j 56 6 §$ .6 3129. 2 3 M2 Ne Cash seteracie (dallt&) 30.6 # 185.6 00.I 22 4.1 TE6 M ) ( laveamaot cootrilbionøe GOvermmt • rural olectriilettioa l1i.0 90.f 130.0 90.0 110.0 120.0 20,.0 l30. 20.0 260.0 2a0.0 330.0 03ter 25.? 4.4 2M.2 89,? 3I.6 111,0 32,0 M48.3 33.3 193,9 41,4 200,1 1.eq-em dokk 338.4 352.2 49.2 490.4 .33 ) 943.3 1,0>4.1 )1,438.2 8,363,4 >3,133.4 1,28.0. >1,97. &hois-tom ses., vogkina capitsal nd other adjustaements 130.v) __,___) g3 6) 8 g ) _) .h 37.8 634.0 80.6, 5,1 1,311.6 1,1h3 T 5. , , ,',3 ,0. 3, , ArFLICATIMN Conetructioa ptvreg (tucluding inteit chagt4edto consitc«ttonl 51M. i0i.5 9%1J t0.6 1,1b?.% 1.321.6 1,?611 1, 115.28,8. 1,V16.3 ,0. 262. -um nm :m == === == = = =. -=== - -mas smma m- - aman aveulge *etfittty gotatruttion proga* • cutrent and pravous year 498.2 562.6 146.4 ihl.i l,U40.7 1.06.6 3.361.6 1,19.4 3,638.3 1,813.7 .813.4 2,312.5 Coibtributia to isveoteaatt kot casb anaogien (mltet dø4uctiog &mo debt mervite) 20.03 33.61 16.0% 6.6 16.0% 2.43 34.06 -10 38.30 -30.03 9.4% 3.89 Net cash seeratige (after dedutise debk osrvsce 00& at itorfet capttalised) 1.33 46.111 4,91 3.3 23.3 8.3 22.9 -,.M 1W.8 -6.18 19.38 4,63 Avuage ulecttcttly ttd44 satet# ( atnvic* - cuct%k a4 p11itous s1 2,304.4 2. . 2,306,1 2.383,6 J,340,2 2,516,0 4,251, J,091.3 1,051.9 J,100.2 1,670.M 3,934.1 L es Førtien flumoad by gontumer contrib"t108ion2ts 2 )0. 4 61631143. 1 1at4e1 eT own3 s eslo*intai§ 1116d 09681 in aervitt 3,8% 3.81 3.6% J.4 , 4.0% .33 6.6& 0.43 6,48 -13 6.61 J.38 om ve"g. fid14 aeet& i.. se*ice mot of C.08a~ finguod partia 4.43 4,13 4.0% 4.03 4.48 3.13 3.33 0.13 1.08 -1.33 3,38 3.98 Averaga elecetricty datt mervia • euTrenfl id preveioUs yeari Grems deb3 servie 329.0 342.9 918 540.0 116 69.4 203.0 3. J24.9 365.8 431.k 369.3 01,1 avile a1 of interm.1 espitalised 882.4 34, 10,1 303,8 65,0 330,0 316,0 193.1 212.$ 284.0 21,4 326.5 &eetricuty d., ervidd coverage Ogem. debt servi,e 3.1 3,3 3.3 3,1 3.6 3,3 3.4 0.8 8.8 0,1 1 1,2 let debt aekk ise 5.3 3.1 4.4 2.0 6.5 1.9 4.2 3,M 3,3 0.1 2.4 5.4 Li 6oureit 8A, Lod. 59M., 888 r$eof ammeu4, pgeembed 14, 893å (adjuåkhdjl "kappmrte da .eston 1925-80v "Siation de la Jitte" 314v,0 LI teludi3 amottiaattom of locL dm4 not actueli repaid iy 1982 ALOEIA FIRST AND SECOND POWER PaoJECTS (LOANS 997 and 1293-AL) Rate of Return Calculation, 1974-1976 Investment Program 197 1975 1976 1977 igg 1979-1999 2000 1. Total Bales, GWh 2312 2756 3235 3586 4375 2. Sales attributable to Program, OWh 444 926 1274 2063 2063 2063 Costs (million DA. unless otherwise noted) 3. Total Fuel Costs 30 30 33 45 4. Other Operating Costs _J 4 226 292 386, 5. Total Operating Costs 204 256 325 431 6. Average Operating Cost/KWh sold DA 1/ 0.014 0.079 0.091 0.099 7. Operating Costs Atributable to Program 33 33 73 116 204 204 204 8. Construction Expenditures 708 808 1328 1711 -1469 7/ 9. Total Costs Attributable to Program 741 661 1444 1915 204 -1285 Benefits (million DA. unless otherwise noted) 10. Total Bletricity Revenues 448 518 573 690 II. Average Revenue/KWh sold, DA 2/ 0.163 0.160 0.156 0.158 12. Revenues Attributable to Program 4/ 72 148 204 325 325 325 13. Price Index 5/ 100 108.9 122.0 142.9 159.4 159.4 14. Net Revenues Attributable to Program (1975 prices) k1 -669 -673 -1016 -1113 76 1010 Rate of Returns -1.71 1/ Line 10t Line 1 T/ Line 2 x Line6 T/ Line 10 1 Lin4 1 T Line 2 x Line 11 5/ Index of Consumer Prices (1975 * 100) from INF International Finance Statistics / (Line 12 - Line 9) 4-Line 13 x 100 I Residual Value June 1982 0552 P