Philippines - Rural Electrification Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5732 PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) June 24, 1985 Operations Evaluation Department Thb decument has a weatrict dIhistatin and may be =sd by redplemts Ody la the Perfwmace Of dNrell dwl. Ifts cmlt may mu otherwise be disclosed without World Bank atherdiaties. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) TABLE OF CONTENTS Page No. Preface .............................. I Basic Data Sheet .................................................. ii Highlights ................................................. ... v PROJECT PERFORHANCE AUDIT BEHORANDUM I. BACKGROUND ............. ......... .... .... ... ... 1 II. PROJECT OBJECTIVES AND DESCRIPTION ...................... I III. PROJECT IMPLEMENTATION ............ * ................. 3 IV. EVALUATION OF PROJECT SUCCESS ........................... 4 Project Design ........................................ 4 Project Objectives ................................... 5 Project Definition ............. ...................... 7 Economic Evaluation . ......... ...................... 8 Sustainability ....... o........o............o............ 10 Attachnent 1 - Comments Received from National Economic and Development Authority ........ ...................... 11 Attachment 2 - Comments Received from National Electrification Administration ..................................... 13 PROJECT COMPLETION REPORT I. Introduction .......... ............................. 15 II. Project Description .............................. ....... 15 III. Project Implementation and Cost ......................... 16 IV. Financial Performance ................................... 19 V. Institutional Performance and Development ............... 22 VI. Project Justification ...... ................. ........... 23 VII. Conclusions - .............. ............ * ..... 24 Annexes 1. Consumer Connections, Sales and Supplies by Rural Electric Cooperatives, 1978-2000 .......... 26 2. NEA Data of Major Contracts ................27 3. NEA Actual Annual Program Expenditure ......... ... 28 4. Accumulated Disbursements - ......... .............. .. 29 5. NEA Income Statements ......................... .30 This document has a restriced distribution and may be used by recipients only in the performance of I roki dutism. Its contents may not otherwise be dised whout Word Bank authriatio TABLE OF CONTENTS (continued) Page No. Annexes (continued) 6. NEA Funds Flow Statements ........... ..... ....... 31 7. NEA Balance Sheets ................ ............... 32 8. Constmer Connections , Sales and Supplies Attributable to Project (Luzon, Visayas, Mindanao) 33 9. Project Costs and Benefits and Economic Rate of Return ........ ... ............. . 36 10. Long-run Marginal Costs of NPC Supply to RE Cooperatives .... ............................ 40 11. Electricity Sales and Revenues by Cooperative, 1982 ... 41 12. Main Undertakings in Loan Documents ..... . ............... 45 PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PREFACE This report represents a performance audit of the Philippines First Rural Electrification Project, for which Loan 1547-PH for US$60 million to the National Electrification Administration (NEA) was approved on April 4, 1978. The loan was fully disbursed. The report consists of a Project Completion Report (PCR) prepared by the Projects Department of the East Asia and Pacific Region and a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED). The borrower drafted the first version of the PCR. OED has reviewed the PCR against the Appraisal and President's Reports and the transcripts of the Executive Directors' meeting which considered the proj- ect. Project files and documents have also been reviewed and discussions have been held with Bank staff. Further, an OED mission had discussions with officials of NEA, electric cooperatives and Government departments in October 1984. In the audit's view, the PCR gives, on the whole, a fair account of the experience under the project. The PPAM has summarized several of the PCR' s issues and findings, expanded on the discussion of others and added new topics. The draft Project Performance Audit Report was sent to the Govern- ment/borrower for comments. Their comments are shown as Attachments 1 and 2 to the PPAM. PROJECT PERFORHANCE AUDIT BASIC DATA SHEET PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) KEY PROJECT DATA Appraisal Actual or Estimate Current Estimate Total Project Cost (US$ million) 160.5 175.2 /a - Overrun (%) - 9.2 7- Loan Amount (USS million) 60.0 60.0 - Disbursed 60.0 60.0 Date Physical Components Completed 09/81 09/82 /a Proportion of Physical Components Completed by Original Completion Date (Z) n.a. n.a. Time Overrun (Z) 0 37 /a Economic Rate of Return (%) 22 16 Cumulative Estimated and Actual Disbursements (USs million) Bank FYs: 78/79 79/80 80/81 81/82 82/83 (i) Appraisal 16.0 52.8 60.0 60.0 60.0 (ii) Actual 0.3 26.0 54.2 58.9 60.0 (iii) Actual as % of Appraisal 2 49 90 98 100 OTHER PROJECT DATA. Original Date Actual Date First Mention in Files n.a. 04/02/75 Government's Application n.a. 04/06/76 Negotiations (completed) n.a. 02/28/78 Board Approval n.a. 04/04/78 Loan Agreement 05/10/78 Effectiveness 08/10/78 08/17/78 Closing 12/31/81 09/30/82 /b Borrower and Executing Agency National Electrification Administration (NEA) Guarantor Government of the Republic of the Philippines Fiscal Year of Borrower January 1 - December 31 Follow-up Project None /a Information provided in PCR. In the audit's view, the information is only a very rough guide to assessing actual project performance. /b Final disbursement made on March 23, 1983. MISSION DATA Month/ No. of Staff- Date of Year Persons weeks Report Identification n.a. n.. n.a. U.S. Preparation n.a. n.a. n.a. n.a. Preappraisal 04/77 1 1 06/30/77 Appraisal 09/77 3 9 03/13/78 Supervision 1 07/78 2 4 08/16/78 Supervision 2 04/79 2 4 05/01/79 Supervision 3 02/80 2 2 02/27/80 Supervision 4 12/80 2 4 01/07/81 Supervision 5 05/81 2 4 06/26/81 Supervision 6 02/82 2 6 04/23/82 Supervision 7 11/82 3 6 12/15/82 Completion 04/83 3 6 09/22/83 Total 46 CURRENCY EXCHANGE RATES Name of Currency (Abbreviation): Peso (P) Appraisal Year Average (1977) US$1 = P7.40 Intervening Years Average (1978-82) US$1 = P7.73 Completion Year (1982) US$1 = P8.50 PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) HIGHLIGHTS The project built on earlier pioneering work by the Government, supported by USAID, towards electrification of the rural Philippines. At the time the loan wns made, the Philippines were believed to be one of the most advanced developing countries in rural electrification (PPAM, para. 1). One of the project's fundamental objectives was improvement in the standard of living of the rural poor, with the majority of beneficiaries belonging to the lowest income groups of the country. The project was part of a program of bringing electricity to each household in 1990. It was to finance the capital expenditures for rural electrification in 1979-80, and the Bank loan was to finance three quarters of the foreign exchange cost (PPAM, paras. 2-3). One of the project's primary functions was to finance investments. Due to the advanced development of the rural electric sector by the end of the seventies, the project's contribution to institution building and sector organization was less important (PPAM, paras. 4 and 11). Project implementation was fairly uneventful, though start-up dif- ficulties in procurement were experienced (PPAM, para. 6). The financial performance of the electric cooperatives was uneven, with many of them not meeting the required standards. The financial performance of the National Electrification Administration (NEA), the agency managing sector development, also was below expectations (PPAM, paras. 8-9). For primarily financial reasons, the program's 1990 target of ener- gizing all households will not be reached (PPAM, para. 12). The project's requirement that cooperatives recover economic cost and achieve an 8% financial rate of return, may not have been consistent with the 1990 electrification target and the unqualified objective of improving the standard of living of the rural poor (PPAM, para. 13). The fundamental project objective, improvement of the standard of living of the rural poor, had little bearing on project design and opera- tions. The project provided to a significant extent electricity to the non- rural population, and therefore the adjective "rural- in the project title was partly misleading (PPAM, paras. 14-15). -v - The appraisal and the PCR differed on what constituted the proj- ect. This prevented proper accounting for project cost and overrun of cost and implementation time (PPAM, paras. 16-17). The methodology followed in the PCR's economic analysis was not fully adequate. Some benefits were double counted, and others were excluded from the analysis. However, this had no bearing on the PCR's economic rate of return (16%) as the inaccuracies in methodology cancelled each other (PPAM, paras. 19-20). The project achievements are likely to be sustained, not the least because of the importance of electrification to the affected population. Because of the sector's current financial problems, the sustainability of the long-term rural electrification programs has been weakened (PPAM, para. 21). -1- PROJECT PERFORMANCE AUDIT HEMORANDUK PHILIPPINES: FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) I. BACKGROUND 1. The project, approved in 1978, capitalized on some ten years of pioneering work by the Government, assisted by USAID, toward electrification of the rural Philippines. Major steps in the development of rural electrifi- cation, all supported by USAID, were: a 1965 power survey of the country; a feasibility study of two pilot rural cooperatives (co-ops) undertaken in 1966 by a technical assistance team from the National Rural Electric Cooperative Association (NRECA) of the U.S.; the subsequent design and construction of two prototypes of rural electric co-ops; and various feasibility studies, also by consultants from NRECA, on the development of a national program of rural electrification. In 1969, in a declaration of national policy, the Government made rural electrification a national priority, and to streamline the institutional framework, the Government formed the National Electrifica- tion Administration (NEA), a central agency charged with managing the program and performing control and support functions related to the operating utili- ties-mostly co-ops. It was NEA's responsibility to draw up the development programs, secure financing of the initial capital expenditures, license elec- tric power franchises, establish and enforce financial and operating guide- lines for the electric utilities, and supervise the utilities. Implementa- tion of the initial plan of rural electrification, aimed at some five million rural people, was launched in 1972, with major funding arranged through a USAID loan, the US PL 480 program and Japanese capital assistance. At the time the Pank Loan 1547-PH was made, NEA was well established, more than 90 co-ops were in existence and the Philippines were believed to be "one of the most advanced developing countries in the field of rural electrification". I/ II. PROJECT OBJECTIVES AND DESCRIPTION 2. The rural electrification program was part of the Government strat- egy, covering various economic sectors and activities, of bettering rural life. Rural electrification was perceived as having a significant effect on the improvement of the economic base of rural areas and yielding important institutional and social benefits. Once the power supply systems were in place, they were expected tc trigger complementary rural projects, such as for drinking water supply (to improve sanitation), pump irrigation (to in- crease farm output) and small-scale industries (to broaden and strengthen the rural economy). The SAR, reflecting Bank focus on the rural disadvantaged, declared the -improvement in the standard of living of the rural poor, who 1/ Staff Appraisal Report (SAR), para. 2.14. - 2 - constitute the majority of the low-income population", to be one of the "fundamental objectives" of the project.2/ Most of the project beneficia- ries were expected to be -among the lowest income groups of the country".3/ 3. At the time the loan was made, NEA was close to reaching its target of establishing an electric co-op in each province of the country. Under its long-range program, the agency was planning to bring electricity to each barrio (local administrative unit) by 1984 and to each household in the country by 1990. The project was to finance the electrification program in the years 1979-80, and the Bank loan, in the amount of US$60 million, was to finance about three quarters of the project's foreign exchange cost. For the remaining one quarter, NEA expected to tap other external sources. Total project cost was estimated at US$160.5 million. 4. A pri1mary function of the project was the financing of sector investments. Due to the advanced development of the rural electric sector by the end of the seventies, the project contributed relatively little to the sector's institutional and policy framework, except in two areas. It set, under a Statement of Policy of NEA, standards of financial performance of the co-ops and guidelines for NEA's loan funding of the co-op's start-up invest- ments and operations, and it committed NEA to establish a planning unit. Issuance of the policy statement was a condition of loan effectiveness, and adherence to and enforcement of the provisions of the statement were NEA obligations under the loan. The policy statement established that co-ops should recover the economic cost of supplying power as soon as possible after commercial operations had started, and that they should achieve a financial rate of return on revalued net fixed asset of 8% not later than in the fifth to tenth year of operations. The functions to be performed by the NEA plan- ning unit were, inter alia, preparation of five- and ten-year development plans for the co-ops, which would be updated annually, and creation of a cor- prehensive data base for rural electrification. 5. The principal items financed under the project were materials and labor for the construction of transmission, primary and secondary distribu- tion lines. Other items were transportation and administration, consultants' services, working equipment, headquarter facilities and load promotion. Most of the Bank loan funds were assigned to the procurement of various types of materials. Because of the US dollar appreciation during implementation, there were some savings in the loan account, which were ultimately used for investments in NEA's 1982 electrification program. 2/ SAR, para. 4.09. 3/ SAR, para. 6.05. -3- III. PROJECT IMPLEMENTATION 6. Project implementation was moderately uneventful, except that there were initial procurement difficulties experienced by NEA, the procurement agent for all goods and services. On account of these initial delays and the use of savings in the loan account for investments in 1982, the PCR reported a total project delay of 12 months or 37Z.4/ Actual project cost as esti- mated in the PCR were US$175.2 million (against US$160.5 million estimated at appraisal), which would imply a cost overrun of about 9%.5/ 7. The implementation arrangements proved adequate.6/ Local engi- neering firms, supervised by NEA assisted by consultants, were in charge of engineering designs and construction supervision. Contractors built the transmission lines and the backbone distribution system, and the co-ops installed the lateral lines and service drops on force account. 8. The financial performance of the some 100 co-ops in existence was uneven.7/ While in 1983, for example, some co-ops generated handsome net operating profits, others incurred net operating losses, and all co-ops as a group suffered a net loss.8/ As a consequence, some co-ops deferred loan service payments to NEA and fell into arrears in payments to the National Power Corporation (NPC), the Philippines' principal power generating utility, for purchases of bulk power.9/ A few co-ops earned financial rates of return as required under the Statement of Policy (PPAM, para. 4), but the majority of them fell short of the financial goal. 4/ PCR, para. 3.09. 51/ PCR, para. 3.10. 6/ PCR, para. 3.01. 7/ PCR, paras. 4.04-4.07. 8/ However, there was an improving trend, as the aggregate loss in 1983 was less than that in 1982, which was less than that in 1981. The National Economic and Development Authority (NEDA) pointed out that poor financial performance in the period in question was not confined to the power and electrification sector, but reflective of the general state of the econozy (PPAM, Attachment 1). NEA made similar observations (PPAM, Attachment 2). 9/ Coops generate their own power only to a limited extent. 9. NEA's financial performance was satisfactory in the early years of project implementation. 10/ However, in more recent years, the operating ratio exceeded the target (90%) set under its 1978 policy statement on financial performance, and due to the co-ops' delinquent loan payments, NEA required Government assistance in meeting its debt service obligations. This is a potentially serious development, as noted in the PCR, which could affect the funding of future rural electrification programs. 10. NEA's planning unit was established as required under the project. However, the production and periodic updating of five- and ten-year plans for the co-ops has not yet made sufficient progress.11/ The PCR alludes to the need for a computerized data system which obviously was not identified and financed under the project. IV. EVALUATION OF PROJECT SUCCESS Project Design 11. The Philippines' rural electrification program was characterized by full central and local Governments' backing, active and frequently enthusias- tic support by the local population, strong leadership by NEA and competent guidance in the critical earlier years by USAID financed experts familiar with the US co-op system. While rural electrification in the Philippines, in principle, could have been based on several alternative -ganizational and institutional set-ups, it followed the U.S. co-op model because of the USAID start-up funding, and this arrangement has served the country well. The Bank project had the good fortunes of building on a well-initiated and functioning electrification program, and it took the commendable approach of staying within the existing framework. The project may not have added new basic ideas to the rural electrification sector, but its financing helped to keep the momentum going. 12. Financing under the Bank loan was very important, as subsequent funding for new program expenditures has been drying up, and the co-ops' in- ternal cash generation is increasingly becoming limited due to the country- economic situation and the low profitability of serving -marginal" co-op customers. It is now clear that the program's ambitious earlier target of energizing the entire country by 1990 will not be met for lack of funding as by the end of 1983, only about 52% of all households (about 4.2 million out of 8.1 million) ultimately to be served were connected and in a large number of Barangays (local administrative units), only about one quarter of all households were energized.12/ 10/ PCR, paras. 4.01-4.03. 11/ PCR, para. 5.03. 12/ NEA, Status of Program Implementation as of December 31, 1983. -5- 13. In an effort to make individual co-ops financially self-sufficient after some five to ten years of their establishment, the project introduced the requirement that co-ops should recover the economic cost of their ser- vices and achieve a financial rate of return (on revalued net fixed assets) of 8% (PPAM, para. 4). The requirement implied that each co-op should become financially independent of others or NEA and that subsidies to a co-op from external sources would be generally limited if not ruled out. It seems, how- ever, that these financial policies were not fully consistent with the coun- try's 1990 electrification target (of connecting all rural households), as the electrification program, because of the dispersion and income levels of the not-yet connected rural households, is increasingly confronted with diminishing returns on new investments. For the same reason, and because the scope for a co-op's internal subsidization of services is limited, the postu- lated financial policies may not have been fully consistent either with the project's unqualified -fundamental" objective of "improving the standard of the rural poor-. Under such policies, many -rural poor" are likely to be faced with a long wait until electricity reaches their homes. Against this background, a rethinking of the financial policies for the co-ops seems in place, in combination with a revision of the schedule for meeting the pro- gram's targets. Among the questions to be addressed would be, whether and to what extent the social and economic merits of the program should be subordi- nated to the criteria of financial investment returns and what sources for subsidies could be tapped, if any, if subsidization was deemed desirable. A related question, of course, would be, what and how large the social and eco- nomic benefits of rural electrification are. NEA agrees with the audit that the financial objectives for the co-ops may be in conflict with the objec- tives of the electrification program, and it concludes that the co-ops' financial targets might be replaced to some extent by socio-economic targets (PPAM, Attachment 2). Pre- Bct Objectives 14. Evaluation of project success is inextricably linked with the definition of project objectives. As noted earlier in this report, -improve- ment of the standard of living of the rural poor- was -one of the fundamental objectives" of the project. What other fundamental objectives were pursued under the project, was not explicitly revealed in the project documents.13/ Support for the rural poor was consistent with Government policies, and evok- ing such support in its documents made the project attractive to those inter- ested in the rural and poverty content of Bank lending. To highlight the project's rural context, the attribute "rural- was included in the project title. 13/ Bank staff note that institution building, in particular financial strengthening of NEA and the co-ops, was also an -important" project objective, through not one which was made explicit. In the audit's view, it would be desirable that in the interest of clarity, good proj- ect design and accounting for project success, "important" objectives always be explicitly stated up-front in project documents. -6- 15. Unfortunately, the stated project objective had little operational significance. To some extent, it was also misleading. The project did not characterize in any detail its declared target group, the "rural poor", nor formulate operational policies by the co-ops and NEA which would demonstrate that the project was indeed focused on the rural poor as it was implied in the project objective. Only if it was concluded that everybody in rural areas was poor, woul the project's lack of operational precision not matter, but such a conclusion was hardly borne out by statistics.14/ Further, the project provided also electricity for municipalities whose population, to a significant extent, did not belong to the rural poor either. The project title "Rural Electrification Project" accordingly told only part of the story.15/ Apparently, no special effort was made under the project to moni- tor the degree of achievement of -the fundamental objective", and so the PCR did not pick up this theme either.16/ The conclusion from this would be that as a matter of routine, design and performance of Bank projects should be linked to the dominant project objective(s) and that achievement of such objective(s) should be closely monitored. 14/ Overstating the objective of supporting the -rural poor" was apparently not confined to this project. In a recent Bank staff working paper, it was noted, that Bank "RE [Rural Electrification] projects are frequently claimed to benefit the 'poor'.... However, the meaning of 'benefiting the poor' is rarely specified carefully, target groups are not identi- fied and the data base does not include income distribution data". 15/ According to statistics given in the SAR (Table 6.1, page 1), the popu- lation described as being representative of the population benefiting from the project, was classified as belonging to either "towns" (i.e., large, medium and small "municipalities" with average populations each of 95,000, 36,000 and 15,000 people, respectively) or "villages". The population in "villages- accounted for less than 1% of the total popula- tion. According to NEDA, "the term 'rural' refers to areas outside of cities and progressive communities, more particularly to the geo- political subdivisions like municipalities and barangays" (PPAM, Attach- ment 1). While the definition of "towas, cities, municipalities and villages" in the context of the Philippines does not fully correspond to the definition used elsewhere, the SAR statistics make it obvious, that the project was aimed at large non-rural population segments. Bank staff participating in the project appraisal informed the audit that they proposed a project title more appropriate to the actual situation (such as -Regional Electrification Project"), but their proposal was turned down. Other Bank staff assume that the project title may have been chosen to make it consistent with that of the Government's long- range electrification program (Rural Electrification Program). Notwith- standing the desirability of consistency in nomenclature, the audit believes that Bank project titles should convey the proper message. 16/ There have been some recent attempts, however, by NEA, to measure the socio-economic impact of the electrification program. A more ambitious study by NEA of the subject is also under consideration, but funding has not yet materialized. -7- Project Definition 16. The SAR's project definition was vague, if not internally inconsis- tent, and the physical achievements were projected with considerable lack of precision. The PCR's actual physical achievements under the project were obviously determined arbitrarily, and the SAR and the PCR differed on what constituted the project. All this had a bearing on accounting for project cost and time spent on implementation. As noted earlier, the SAR defined the project cost as the cost of the 1979-80 electrification program, and this implied that the project itself was defined as the program of these two years. The SAR's project description referred to the construction of some 29,553 km of (transmission, primary and secondary) power lines,17/ and it thus could be concluded that these 29,553 km were the electric lines to be installed in 1979-80. whether this conclusion was correct and, indeed, intended by the appraisal, however, is in some doubt, as the SAR also referred to a total planned line construction in 1979-8018/ of 18,579 km only (backbone and lateral lines combined). In any case, either the entire electrification program of 1979-80, or the construction of 29,553 km of lines, or both combined (if they were compatible) seemed to serve as the appraisal's project definition. 17. Once the definition was chosen, it required careful preservation in the PCR for a meaningful comparison of projected and actual project cost and implementation periods, and if the PCR differed from the appraisal, a full reconciliation of differences was needed. Despite such considerations, the PCR declared the project cost to be the cost of the electrification program from October 1, 1979 to September 30, 1982 (instead of the program from January 1, 1979 to December 31, 1980), and it declared the actual physical achievements to be a total of 27,530 km of lines (instead of 29,553 km), of which 468 km were transmission lines, 17,708 km primary distribution lines and 9,404 km secondary transmission lines (instead of 476 km, 20,334 km and 8,743 km, respectively).19/ In the absence of further explanations, a direct and easy comparison between appraisal and post-evaluation was thus effectively prevented. The audit, therefore, is unable to agree with the PCR that the actual project cost was US$175.2 million and there was a cost over- run of 9% and time overrun of 37% and considers these key project data as not 17/ SAR, para. 4.10. Length of transmission lines, 476 km; of primary dis- tribution lines, 20,334 km; of secondary distribution lines, 8,743 km. 18/ SAR, para. 4.02. 19/ Primary and secondary transmission lines have widely diverging unit cost. However, neither the SAR nor the PCR established these costs. -8- properly established. At best, the PCR data serve as a very rough guide for the actual project performance.20/ Economic Evaluation 18. It is widely held that the Philippines' rural electrification program has immense and far-reaching economic benefits, with implications for rural education, health, security, productivity and sheer comfort of living. In the eyes of the actual and potential project beneficiaries, it ranks among the most important rural development programs initiated by the public sec- tor. Consistent with these views, rural communities and households in many instances support electrification investments in their areas through labor and materials provided free of charge. Because of its competence in program management, NEA has been successfully called upon for management of other rural development programs as well. The establishment of electric co-ops has contributed to the build-up of management capabilities at the local level. 19. Economic benefits of rural electrification programs are difficult to quantify and in this regard, the Philippines First Rural Electrification Project was no exception. Being among the very first Bank projects of its kind, the SAR struggled to transform non-quantified economic benefits into monetary values. To arrive at total project benefits, the SAR calculated the co-ops' total revenues attributable to the project investments as "a proxy for benefits",21/ but as a good measure and supposedly to capture part of the consumer surplus, it nonetheless added resource (kerosene) savings as additional project benefits. In doing so, the SAR arrived at an economic rate of return on investments (ERR) of 22%. The Bank's Loan Committee 20/ There was the suggestion in the PCR (para. 2.02) that the extension of the project period was required because of the initial savings in the loan account (USS1.3 million out of US$60 million), which were subse- quently reallocated to 1982 program expenditures. However, with this, the PCR introduced a new element into the project definition, which was not envisaged in the SAR. It should be clear that the project could have been implemented without full utilization of Bank loan funds, and that therefore, the project definition should not be linked to the ques- tion of loan disbursement. NEDA is inclined to agree with the PCR's estimate of actual project cost (PPAM, Attachment 1). NEA believes that materials financed by sources other than the Bank loan should have been excluded from the actual project cost and that after this correction, the actual cost would have been below the appraisal cost (PPAM, Attach- ment 2). In the audit's view, a meaningful comparison between projected and actual project cost could have been made on the basis of an actual power line construction of 29,553 km, the target set at appraisal. However, neither the cost nor the implementation time for this line length has been recorded. 21/ SAR, para. 6.03. - 9 - queried but sanctioned the adopted procedure for calculating the economic benefits.22/ The SAR's discussion of benefit calculation was sketchy and confusing, and there are indications that benefits could have been double-counted and the ERR could have been overestimated. However, it is not possible to establish clearly what happened at appraisal as neither the SAR nor available staff working papers provide the streams of benefits and costs and details about the calculation of resource (kerosene) savings.23/ 20. The PGR's economic analysis, producing an ERR of about 16%, largely replicates the SAR's analysis.24/ The reduction in the PCR's return, com- pared to the appraisal's forecast, is explained in the PCR by higher than expected cost of electricity supplied by NPC. This time, with full details made available about the benefit calculation, it is evident that benefits were double-counted.25/ However, other benefits (consumer surplus relating to the electricity demand induced by the project) were also omitted from the economic analysis. Bank staff agree that the methodology followed in the PCR's economic analysis is not fully adequate. But they note that under the PCR's set of data and assumptions, the ERR remains the same (16%) if the 22/ Minutes of the Loan Committee Meeting (LC/M/78-03), dated March 6, 1978. 23/ For a proper benefit analysis, the appraisal could have distinguished between the demand for power (lighting) without and with the project. Resource savings, as one category of benefits, would have been relevant for the demand which existed in the absence of the project. Consumer willingness to pay (or incremental revenue, as a proxy), as another cat- egory of benefits, could have been relevant for the demand induced by the project; in this case, incremental revenues would have referred only to the induced demand. In contrast to this format, the SAR mixed the benefits indiscriminately without regard to the distinction between existing and induced demand. Besides, if revenues attributable to the project were "a proxy for benefits", they should not have been supple- mented with additional benefits. 24/ PCR, paras. 6.05-6.07. 25/ PCR, Annex 9. The double counting refers to benefits from resource (fuel) savings. - 10 - required changes in the methodology are made.26/ From the foregoing, these lessons emerge: There should be adequate instructions issued for Bank staff on how to calculate benefits of rural electrification projects; and an appraisal should provide full documentation on the economic analysis. As correctly noted in the SAR and PCR, none of their respective returns is a complete yardstick of the project's value to the national economy, as they exclude, by definition, non-quantified economic benefits. Another lesson from this project would, therefore, be that research is needed into the iden- tification and quantification of rural electrification benefits. Sustainability 21. The SAR and PCR have brought out a number of factors which have a significant bearing on the sustainability of the project and the entire rural electrification program. Among the factors strengthening the sustainability are the strong support given by Government and the rural population to the electrification program, the high level of institutional development of NEA and the adoption and implementation of proven guidelines and policies for organizing the rural electrification sector. Among the factors weakening the sustainability are the declining profitability of co-ops and the NEA and the diminishing availability of capital for new investments. On the whole, all these factors combined are likely to protect the project investments. In contrast, largely influenced by the sector's financial difficulties, new sector investments and the sector's expansion are and could remain severely constrained. A resolution of the financial issues is essential for the resumption of the sector's momentum observed in the seventies. 26/ A critical assumption in the recalculation of the PCR's ERR is the demand for energy (electricity and kerosene, respectively) with and without the project. In the view of Bank staff, the demand for energy (electricity) with the project is about three to four times the estab- lished demand (as given in Annex 9, page 1 of the PCR) for energy with- out the project, and on this basis and using the correct methodology for the economic analysis, the recalculated ERR is also 16%. If the demand with the project was only two times the specified demand without the project, the return, in the audit's estimate, would be zero percent or negative. If the demand with the project was about five times the spec- ified demand without the project, the return would be 20% or more. This, of course, points out to the need to establish an adequate data base for calculation of the ERR, in addition to using the correct meth- odology. - The audit was not in a position to fully review the PCR's data base, but notes that the PCR's assumption, that in the absence of the project, all households and commercial enterprises would use kero- sene (for lighting) up to the turn of the century, is questionable. Presumably, without the project, there would or would have been alterna- tive generation of electricity, and in fact, the electric co-op system, in some urban areas, has replaced the electricity supply by local private utilities. - 11 - REPUBLIC OF THE PHILIPPINES ATTACHMENT 1 NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY NEDA sa Pasig. Amber Avenue Pa Metro Manila CaMe Address NEDAPHIL P.O. Box 419. Greenhils Tels. 67350-31 to 5D 7 May 1985 Mr. Yukinori Watanabe Director, Operations Evaluation Department International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 U.S.A. Dear Mr. Watanabe: Re: Project Performance Audit Report on the Philippine First Rural Electrification Project (Loan No. 1547-PHI) OED Comments We thank you for sending us a copy of the draft Project Performance Audit Report on the abovementioned project for our review and comment. While we concur in general with the findings of the audit mission, we have a few comments on the report with reference to the following paragraphs. On Financial Performance of Electric Cooperatives (Para. 8) The poor financial standing of some of the electric cooperatives may be a situation not solely confined to the power and electrification sector but could be reflective of the general state of the national Footnote 8 of economy during the period, specially during the second semester of 1983. Para. 8 in In addition to the sector-specific factors cited in para. 4.06 of the PPAM enlarged. Project Completion Report (PCR), the downward trend in the economy of the country during the early part of the decade, which affected not a few commercial and industrial establishments, may have contributed to the unprofitable operation of a number of the electric cooperatives. On Project Objectives (Paras. 14-15) We take exception to the audit mission's statement that "the project objective had little operational significance" and "to some extent,it was alsd misleading", apparently in allusion to the term "rural" in the project title. The term "rural" refers to areas out- Footnote 15 of side of cities and progressive communities, more particularly to the para. 15 in geo-political subdivisions like municipalities and barangays. In this PPAM enlarged. context, since majority of the provinces, municipalities, and barangays have been served with electricity through the cooperatives, then the project has achieved its primordial objective of bringing electricity to the rural areas. - 12 - OED Comments In the process of providing light and electricity to munici- palities and barangays, the project also achieves its objective of improving the standard of living of the rural poor directly through the provision of light and electricity and, indirectly, through PPAM, para. IR commercial and industrial firms that may be established as a result of the availability of electricity in the area, thereby generating employment and income. On Project Definition (Para. 16) The loan from the Bank was intended for the 1979-1980 rural electrification program which involved, among others, the supply and construction of 29,553 kilometers of transmission lines. However, Footnote 20 due to delays brought about by problems in procurement of materials of para. 17 in and equipment, and due to changes in project scope, the implementation PPAM enlarged. of the project took 12 months longer than expected and only 27,580 km. of transmission lines were constructed. On Project Cost Estimates (Para. 17) We are inclined to agree more with the PCR on the estimates of project cost. As the project was actually started only in October 1979 and completed in September 1982, the expenditures made during this implementation period reflect the actual project costs. The imple- Footnote 20 of mentation of the project deviated from its original schedule of para. 17 in 1 January 1979 to 31 December 1980 and this schedule could not, there- PPAM enlarged. fore, be used as reference in the determination of actual project costs. We appreciate this opportunity to comment on the aforementioned report and we hope that our comments will be helpful in its finalization. We would also welcome opportunities for us to assist you in your post- evaluation activities in the Philippines as part of our continuing liaison with your office. Best regards. Very truly yours, EDU G. CO Z Assista Director eneral -13- ATTACHMEN~T 2 REPUBLIC OF THE PHILIPPINES Nationa Eiectriication Administration 29 May 1985 Mr. Yukinari wktanabe irector Operations Evaluation Department Mhe W=d Bank 1818 H Street, NW Wishington DC 20433 U.S.A. RE: Project Perfanaace Audit Report (PPAR) on Philippines First Rural Electrification Project (Loan 1547 - PH) Sir : OED Comments Thank you for providing us with a cPy of the PPAR for our review and cmoents. In our opinion the PPAR presented fairly the strengths and weaknesses of the Project. Our canents will however focus on three areas: the conflicting cbjectives of the Project, the lack of Project definition, and the financial perfoumnce of NER and of electric cooperatives. As you have pointed out in the PPAR, the Project has as its objectives the recovery of econaic costs and the achievenent of 8% financial rate of return. These financial objectives are in conflict with the long-range cbjective of 11proving the standard of liVIg Of the rural poor and with the national goal of total electrification Para. 13 of within the century. It is our belief that in developing countries, PPAM enlarged. rural electrification is a necessary condition for ecomanic develqment. In this light, Project objectives should therefore be ware in terms of sociO-econnic benefits rather than financial returns. A more definitive measuranent of the socio-econanic benefits of rural electrification could probably be derived by the Bank in order to provide basis for future Bank Loan appraisal and perfamance audit. Due to delays encutered in the initial stages of Loan inplement- ation, the original project time estimate of early 1979 to late 1981 was actually undertaken fron October 1979 to Septanber 1982. In this Footnote 20 of regard we feel that a more meaningful analysis of the Project could have para. 17 in been made at the point wtere Bank materials uere irstalled (October 1979 PPAM enlarged. to September 1982) rather than at the time period as envisioned in the SAR (1979 to 1981). Similarly, cost analysis should exclude cost of D & E Building. Ouezon Avenue, Guawn City. Metro Manila. Philippines o TEL: NO. 094781 to S - 14 - OED Comments materials fran other financing institntians. Cost analysis of Bank materials would then correctly shoMr cost under-run rather than reported cost over-ran (which inchlues cost of materials fran other financing sources). 2he PPAR evaluation of perforM of N aod of electric cooperatives erinoeSour contentian that electric cooperatives are irreed the catalyst for rural deve1cbnethe analysis of financial perfamance of 1E and of electric co eratives on the other hand appears to be the dark shadow over the otherwise notearthy acCplish- ment of the Project. It appears that the bulk of the analysis is Footnote 8 pzanised on the 1983 financial perf nce. In o opinion, the series Qf para. 8 of =mnabral events that occ=rzed in the Pbilippines seemed to take in P its toll in the years 1981 - 1983 making analysis of these years as * "preseIents anapWropriate. We experienced an aspzeedented drought mtioaide in 1981 - 1983. In 1983 itself the Aquino asaination was accop~anied by flight of capital and by a near eoanmaLc collapse. We feel that with large indiusries and omercial et te going banknupt, the poor terfoMa of sane of the cocperatives could povide m outstanding exception to a mational pattern of econanic reverses. Generally we feel that the Project has created a narked inprove- ment in the lives of our people. Teere there was disenchantment with goenr ent projects, the rural electrification prograr has so touched the lives of people that the progran has been one of the most credible, and desired projects. 7be Project has likeise enjoyed trm-endous national and local sqlprt. As has been painted out, the electric cooperatives have successfully been the vehicles for rural deecment. Tocal talents and skills have been tapped and further enbane. It is for these reesos that we wish to canvey the gratitude of the men a:qd wanen of the rural electrification progran to the Mbrld Bnk for its assistance in expanding the program's coverage aid in erhancing the lives of the people in our rural areas. Very truly yours, PED G. IDMM AdmiistERtar -15- PUILIPPINES: FIRST RURAL ELECRIFICATION PROJECT (LOAN 1547-P) PROJECT COWLETION REPORT I. INTRODUCTION 1.01 In 1969 the Government of the Philippines (GDP) adopted as a national policy objective the total electrification of the country on an area coverage basis. This was to be achieved through electric cooperatives organized by consumers with technical and financial assistance provided by the National Electrification Administration (NEA) (Republic Act 6038). 1.02 NEA established a program to achieve this objective by 1987. After two pilot projects funded by USAID and with technical assistance provided by the National Rural Electric Cooperatives Association (NERECA) of the United States, the approach was changed from an area coverage basis to a "backbone" system, in which backbone distribution lines linking main population centers were to be constructed in all areas before the lateral and secondary lines were completed. 1980 was established as the target for the completion of all backbones and energizing of municipalities so served. 1.03 In 1976 GOP approached the Bank for a loan in support of the rural electrification (RE) program. The project was defined as a time slice of the program and is the subject of this report. The Bank Group has also made seven loans and a credit totalling US$218.2 million to the National Power Corporation (NPC) of the Philippines, supporting its program of generation and bulk power transmission development. IFC has committed US$12 million to MERAI.CO, the investor-owned utility serving the Metro Manila area. II. PHDJECT DESCRIPTION Original Project Description 2.01 The project was part of NEA's Rural Electrification Program for the years 1978-1980, and the loan was to finance part of NEA's foreign purchases of materials for the program in 1979-80. The original project description included the following items: (a) the supply and construction of 476 km of 69 kV transmission lines; (b) the supply and construction of 20,334 km of primary distribution line operating at 13.2/7.6 kV; (c) the supply and construction of 8,743 km of secondary distribution lines operating az 220 volts; (d) acquisition and utilization of electric motors, pumps and machinery for load promotion; (e) construction of headquarters facilities including warehouses for the Rural Electric Cooperatives; and (f) consultant services. - 16 - The facilities making up the project were to be constructed in various regions of the islands of Luzon, the Visayas and Mindanao. Changes to the Project 2.02 The scope of the project remained essentially the same as envisaged at appraisal with the exception of works for load promotion which were deleted owing to the availability of continued financing through USAID. However, as a result mainly of appreciation of the US dollar, some US$1.3 million was left in the loan account after the completion of the three bids planned under the loan; accordingly in December 1981 NEA requested, and the Bank agreed, the application of the remaining funds to NEA's 1982 RE program, which comprised further works of a similar nature. 2.03 A comparison between the original estimates and actual lengths of trans- mission and distribution lines is shown below: Transmission and distribution lines 69 (kV) 13.2/7.6 (kV) 220 (volt) Original (km) 476 20,334 8,743 Actual (km) 468 17,708 9,404 III. PROJECT IMPLEMENTATION AND COST Arrangements for Implementation 3.01 The Project was implemented by NEA through the Rural Electric Cooperatives. The Electric Cooperatives utilized the services of five expe- rienced and competent local architecture and engineering firms for engineering designs and construction supervision of physical faciliti-s. The firms were supervised by NEA, with the assistance of Stanley Consultants of the United States (the scope of services of the Consultant is given in Annex 1). The transmission lines and the backbone distribution system were generally built by independent contractors. The lateral lines from the backbone and the service drops to the consumer connections were undertaken by the cooperatives on force account. Procurement and Award of Main Contracts 3.02 NEA acted as the procurement agent for all goods and related services for the project, and allocated materials procured to the Cooperatives on the basis of cost plus handling and freight. Contracts for procurement of equipment and materials for $60,000,000 were awarded on the basis of inter- national competitive bidding in accordance with the Bank's guidelines for procurement, except for one procurement of special materials ($137,384) which were procured through a limited tender inquiry approved by the Bank. - 17 - 3.03 Delay was experienced at the outset in preparing acceptable bidding documents. NEA had previously been accustomed to receiving considerable practical assistance from USAID personnel in connection with procurement under USAID funding, and was unfamiliar with Bank procedures. The situation was male more difficult by NEA's loss of a number of experienced senior personnel around the time of project appraisal. The appraisal target that the first tender call would be made within one month of loan approval was not met and the first bid opening (IFB 13) did not take place until December 1978, some six months behind appraisal estimate. 3.04 Further delay took place between bid opening and award of con- tract. Management changes in NEA in the interim occasioned some review of work in process, and GOP procedures then in effect required the submission of contract award recommendations to the President's office for ratification. The first contracts were awarded in July 1979 and the first deliveries were received in October 1979, nine months behind appraisal estimate. 3.05 Once these initial difficulties were overcome, procurement proceeded smoothly. Four biddings for materials (Invitation for Bid Nos. 13, 16, 18, 25) were held during the project implementation period. A total of 80 companies from 17 different countries bid on the 27 schedules contained in IFB No. 13 on December 1978. 144 bid proposals (136 foreign, 5 domestic, and 3 combination) submitted in response to IFB No. 16 on January 1980. 45 bid proposals (43 foreign, I domestic, and 1 combination) submitted in response to IFB No. 18 on June 1980. 51 proposals (46 foreign, 5 domestic) submitted in response to IFB No. 25 on December 1981. 3.06 Each bid was reviewed by NEA and Stanley Consultants to see that it complied with the conditions of the Invitation for Bid. Each contract was then awarded to the lowest, most responsive and competent bidder. The results are detailed on the attached Annex 2. 3.07 A limited tender inquiry for materials and equipment was held by NEA in October 1980. Four bid proposals (3 USA, 1 Japan) were received and reviewed. Three contracts were awarded (see Annex 2). 3.08 Of the total 60 contracts awarded, three were not completed by the contractors. All three contractors were local manufacturers on IFB No, 13, as shown in Annex 2. The contracts were terminated due to nondeliveries. The major reason given by the contractors for nondeliveries was the lack of a letter of credit to finance the importation of foreign sourced materials. NEA had elected to use the reimbursement method of payment for domestic con- tractors, which did not allow them a letter of credit to use as a financing instrument as in the case of foreign contractors. NEA is now using the letters of credit method of payments for domestic contract and has not experienced any difficulties in subsequent domestic contracts. Project Execution 3.09 Construction was started in October 1979 and was completed in September 1982. This date was 12 months behind original schedule but reflects the extended scope of the project (para 2.02). Besides the delayed procure- - 18 - ment under the Bank loan, construction was also affected by a late start in procurement of counterpart materials financed by OECF. The OECF bid opening date of September 1980 was 21 months behind the first World Bank bid open- ing. These materials arrived during the period April 1981 through April 1982, extending the construction period through September 1982. Project Cost 3.10 The actual total project cost is US$175.21 million against the appraisal estimate of US$160.55 million. Following table shows a comparison of appraisal estimate and actual costs. The actual annual program expenditure is detailed in Annex 3. (US$ Million) Appraisal Actual Local Foreign Total Local Foreign Total Materials Distribution network 19.2 60.6 79.8 24.7 85.6 110.3 Transmission lines 1.0 - 1.0 0.2 5.7 5.8 Substations - - - - 4.8 4.8 Miscellaneous equipment - 0.7 0.7 3.5 0.7 4.2 Subtotal 20.2 61.3 81.5 28.4 96.8 125.1 Civil Works 41.1 4.0 45.1 34.5 2.1 36.6 Others (consultant fee, consolidation and miscellaneous) 0.3 0.8 1.1 11.6 1.8 13.5 Contingencies Physical 4.3 3.4 7.7 - - - Price 12.8 25.1 - - - - Total Cost 78.7 81.8 160.5 74.5 100.7 175.2 Local costs were quite close to appraisal estimates, foreign cost overruns amounts. to approximately $19 million. The major contributors to the overrun were: (a) the expenditure of approximately $10.5 million for transmission and substation materials which was not included in the appraisal estimates; and (b) $12 million in OECF material prices. OECF prices averaged nearly 50% higher than comparable materials purchased under World Bank procurement procedures. The foreign cost overrun was financed I- OECF and USAID. 3.11 In terms of cost per connection, the actual results in the project period were reasonably close to appraisal estimates. A precise comparison cannot be made, because program expenditure totals for specific time periods - 19 - do not exactly reflect the cost of connections completed in the same period owing to the lead time between procurement of materials and completion of construction. However, the rate of new connections was fairly constant during the period in question, and so the effect of construction work-in-progress at the beginning and end should not introduce a major distortion. With this proviso, the results were as follows: z Appraisal Actual Variance Program expenditures (US$ M) 160.5 175.2 Less: costs not wholly attributable to distribution system extension 19.9 11.5 140.6 163.7 +16.4 Number of connections 877,900 920,000 +4.8 Cost per connection ($) 160.10 177.89 +11.1 of which: foreign 88.00 109.41 +24.3 local 72.10 68.48 -5.0 Since project completion, the devaluation of the peso (currently P 11 = US$1) has still further reduced the local =urrency cost of each new connection in dollar terms. Foreign exchange elements of the unit cost are higher than appraisal estimate for the reasons given in para. 3.10 Disburs-ments 3.12 The loan of US$60.0 million was fully disbursed. The final payment from the loan was made on March 23, 1983, and the loan account was closed on that date, fifteen months behind schedule (but reflecting the extended scope of the project para 2.02). The appraisal forecasts and actual disbursements for each year are shown in Annex 4. IV. FINANCIAL PERFORMANCE NEA 4.01 In 1982 NEA, the chief source of finance for the cooperatives, had a net worth very close to the appraisal estimate, although financed rather differently: - 20 - NEA: Net Worth, December 31, 1982 P million Appraisal z Actual % Fixed assets, etc. 76 2 107 3 Loans receivable 3,963 94 3,819 94 Net working capital 168 4 141 3 Total Net Worth 4,207 100 4,067 100 Represented by: Capital and retained earnings 1,966 47 2,134 52 Long term debt 2,241 53 1,863 46 Deferred credits 70 2 4.02 NEA's financial performance targets had been set forth in April 1976 in Policy Statement 303. The text of this statement had been discussed with the Bank at negotiations of RE I, and its promulgation was a condition of effectiveness of the loan. The salient points were: (a) maintenance of adequate working capital and cash levels; (b) an operating ratio not exceeding 90%; and (c) debt service coverage at least 1.2. By these criteria NEA's financial results for the project period (1977-82) were fairly satisfactory. Debt service was covered 1.2 times for the period as a whole, although not in all individual years; a current ratio of 1.5 or above was maintained throughout the period; but the operating ratio was below 90% in only two of the six years. Summarized income statements, funds flow and balance sheets for NEA are at Annex 5 through 7. 4.03 Of more concern is the trend of delinquent loan payments from cooperatives which began to emerge in the most recent 2-3 years. At December 31, 1982 arrears amounted to more than one year's maturities and interest. With its cash flow so seriously reduced NEA made only partial payments on account of its debt service obligations in 1981 and 1982, which were assumed by GOP in NEA's behalf and which accounted for most of the sharp increase in NEA's current liabilities over those years. This is unloubtedly the most serious financial problem now confronting NEA. With budgetary constraints affecting the availability of government equity and with further borrowing becoming increasingly risky for NEA, the continuity of the RE program depends more than ever on a steady flow of funds from the cooperatives to generate new loans. - 21 - Cooperatives 4.04 In 1979 a consolidated report on the cooperatives' financial results was compiled for the first time. It showed that collectively they had posi- tive earnings from operations, but these were less than interest charges and hence net income was negative. This pattern has been repeated in each of the subsequent years. 4.05 Since the cooperatives have virtually no subscribed capital (apart from the purely nominal subscriptions paid by the members on joining), they have no cushion against a series of net losses, so the first recourse by those so affected is to default on debt service payments to NEA. NEA lends on soft terms and long maturities to cooperatives, especially for first loans (3% for 30 years); nevertheless, in 1982, the cooperatives paid NEA only 60% of the installments of principal and interest which were due in that year. This was a rather better performance than in the previous year, but even so at the end of 1982 over half the accumulated debt service payments due from cooperatives were in arrear. The consequences for NEA and for the RE program were described in para 4.3. A second recourse adopted by some of the cooperatives has been to fall into arrears in payments to NPC for bulk power. Although clearly undesirable this policy has less serious consequences since sales to cooperatives represent less than 10% of NPC's business. 4.06 The overall results quoted above obscure a considerable divergence of performance between cooperatives. For example, in 1982 although 23 cooper- atives were unable to make any debt service payments at all to NEA and a further 30 paid less than half of the amounts falling due, 45 cooperatives were able to reduce their accumulated arrears or even make advance payments of future installments. To some extent these differences of performance display a geographical pattern; for example the Mindanao cooperatives as a group have generally shown a better overall performance than those in the Visayas or in Luzon, presumably because of the lower cost of their service (which is pre- dominantly derived from hydropower). Nevertheless it is evident that the causes of poor financial performance must be sought on a case-by-case basis. Those frequently cited include: (a) high system losses, particularly in those cooperatives that took over old systems; (b) theft of energy; (c) poor collection of customers' bills; (d) reluctance to take timely and adequate tariff action. 4.07 NEA's Policy Statement No. 303 (para 4.2) also established guide- lines for the financial performance of cooperatives. The goal is that "cooperatives should achieve as soon as possible after the fifth and not later than the tenth year of commercial operations, an annual overall rate of return of 8% on revalued net fixed assets in operation." Six have achieved this. Forty-eight are earning a smaller positive return; of these 19 have less than 3 years and 29 have more than 3 years to reach 8%. The remainder are cur- -22 - rently unproftable. Consultants funded by ADB have recently completed a detailed review of the financial performance of the cooperatives and have proposed a series of measures designed to restore financial viability to the RE system. The initiation and consistent application of such remedial mea- sures and careful monitoring of progress is now critical to the continuity of the RE program. V. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT 5.01 The dimensions of the institutional framework established to support the RE program are impressive. By the end of the 1970's cooperatives had been formed in all the service areas into which the Philippines bad been divided for the purposes of rural electrification. NEA trained general managers, functional managers and technical staff as necessary and provided standard procedures for construction, operations, accounting, inventory control and other basic systems and closely assisted the entry of each cooperative into operational service. The mobilization of the personnel required to staff these cooperatives was a major achievement and generally the quality of managerial and senior staff is good, although naturally some inadequacies have appeared, which have partly contributed to the uneven financial results noted in chapter IV. In such cases NEA has frequently assisted by loaning its own personnel to act as managers until permanent replacements can be found, and it has used such assignments as career development opportunities for its own potential managers. 5.02 NEA itself showed steady growth in strength and competence during the period, despite the disturbance occasioned by several changes in its accountability. Having since 1973 been attached to the Office of the President, it was transferred in 1975 to the Department of Public Works, in 1978 to the Department of Energy, in 1979 to the Office of the President and finally in 1981 to the Ministry of Human Settlements. Since project appraisal in 1977 its staff numbers have grown by only 100 people despite a considerable expansion in its scope of work in terms of volume of loans administered and quantities of materials procured and allocated. Besides the activities directly related to the RE program it is also required by its parent ministry to undertake various functions associated with other aspects of rural development. 5.03 To assist its role in leading and coordinating nationwide planning for RE, NEA agreed with the Bank that it would establish a planning unit and, within it, an information section to gather and consolidate information and statistics relating to all cooperatives. This has been done, and a director of corporate planning has been appointed. However, the 5 and 10 year plans which were also envisioned (Annex 12) are not yet being produced routinely. The large volume of data which is involved means that a computer system is virtually essential, and this and the associated data base is being set up. The main undertakings in the loan documents are set forth in Annex 12. 5.04 The program of which the project forms a part has also been instru- mental in developing local consultancy capabilities. A number of architec- tural and engineering firms have been used to plan and design distribution -23 - systems and buildings, and to supervise the construction of both. At first the work of these firms was supervised by expatriate consultants retained by NEA and funded first by USAID, and later under this project. With the experience the local firms have gained, such supervision has been judged to be no longer necessary and it has been discontinued. VI. PROJECT JUSTIFICATION Progress of the RE Program 6.01 By the end of 1980 918 out of a total of 1230 municipalities (75%) had been energized and the target for completion of this phase of the program (para 1.02) was revised to 1982. The rate of house connections in the peak years 1980 and 1981 (part of the project period) was around 330,000 per year, about 25% short of the 430-440,000 anticipated at the time of appraisal. As a result of this experience the target for completion of the entire program was revised to 1990. 6.02 Despite the shortfall in the rate of house connections and energization of municipalities, the consumption of energy through the program has remained almost exactly on forecast. In 1981 the cooperatives sold 1,499 GWh of energy to their customers compared to an appraisal estimate for that year of 1,431 GWh (105%). Per-capita consumption is therefore clearly higher than had been estimated. One important reason is that the proportion of sales of electricity for industrial and commercial purposes compared to domestic use has been higher than expected; it is currently over 70% of total sales. Some of the electricity sold to domestic consumers is also in fact, used for productive purposes; this is discussed in para. 6.07 below. Economic Justification 6.03 The original economic justification of the project has been reviewed in the light of the actual costs and benefits to date, and current expecta- tions concerning future costs and benefits attributable to the project. The additional consumers supplied by the project, covering the rural electrifi- cation program for the period October 1979 through September 1982, are shown in Annex 8, togeLher with the corresponding incremental sales over the esti- mated economic life (30 years) of the transmission and distribution facilities provided by th project (the 1979-1982 figures are of actual sales, as provided by NEA, and the projected figures reflect NEA's estimate that the demand of the new consumers will grow at 5% p.a. on average as a result of rising incomes and continuing economic growth.) 6.04 As shown in Annex 8, the corresponding requirements in the form of purchased supplies from NPC assume that the present level of losses in the cooperative networks, ranging from 14% in Mindanao to 27% in Luzon, will be progressively reduced through rehabilitation programs until they stabilize at a projected level of 12%, as assumed in NEA's latest forecast. - 24 - Economic Rate of Return 6.05 The estimate costs and benefits of the project at 1979 border prices are shown in Annex 9, and their derivation is explained in the notes to that Annex. The investment costs comprise the actual construction expenditures over the construction period (October 1979 - September 1982), and the esti- mated additional investment required, e.g., for transmission and distribution transformers, to meet the projected growth in the demand of the consumers connected during the construction period. The costs of the electricity pur- chased by the cooperatives from NPC to supply the new customers were obtained by multiplying the requirements shown in Annex 8 by NPC's long-run marginal costs of supply.. Separate costs streams are shown for luzon, Viasayes and Nindanao, since these are separate grids, with different marginal costs of supply. The LRMC for each grid at 1979 border prices was reestimated on the basis of NPC's actual investment program and operating costs in the period 1979-82 and their current projections for 1983-87. Annex 10 shows the result- ing LRMC for each grid and how it was calculated. 6.06 The direct project benefits comprise the actual revenues from the attributable electricity sales in 1979-82 and the projected revenues over the remainder of the 20-year period considered. The prices used for the calcula- tion were the weighted average 1982 prices for each grid, as shown in Annex 11, adjusted to a 1979 basis. The indirect benefits comprise the oil savings resulting from the substitution of electricity for kerosene and diesel oil, as shown in Annex 9, and the incremental Government tax revenues from the sale of domestic electrical appliances, the prices of which include a sales tax. 6.07 The resulting internal economic rate of return is about 16%, compared with the appraisal estimate of 22%. The lower rate reflects mainly the higher than expected marginal costs of electricity supplied by NPC, because of higher investment and fuel costs and slower growth of demand. The calculated return of 16% takes account only of benefits which could be quanti- fied, and makes no allowance for increased productivity in industry and the home resulting from electrification. Sample studies by LEA suggest that about one-sixth of residential consumers make productive use of the electricity they consume, and about 8% of total residential electricity sales are for produc- tive purposes in the home. Sample surveys of industrial electricity consumers supplied by the cooperatives suggest that up to 75% of industrial consumers regard availability of electricity as a necessary factor in their decision to start their business. At least part of the resulting profits, therefore, are attributable to electricity, but this cannot be quantified for lack of data. VII. CONCLUSIONS 7.01 The project was the subject of the first lending operation between the Bank and NEA, and in these circumstances an initial unfamiliarity with each other's procedures is to be expected and is probably responsible for most of the delay in startup of the project. It also accounted for the adoption of an inappropriate method of payment of domestic contractors, which further complicated the procurement process. The overall apparent slippage of one year is any event reflects an extension to the scope of the project made possible by lower-than-expected dollar costs on the first three bids. - 25 - 7.02 Despite a project cost overrun of just under 1OZ and higher-than- expected costs of bulk power, the project remains fully justified on economic grounds, without taking into account secondary effects on industrial profits, or social considerations. 7.03 Institutionally, the establishment of over one hundred cooperatives throughout the Philippines represents a significant achievement. Although the pace of physical construction was somewhat less than had been hoped, coopera- tives sales of energy kept almost exactly on forecast. Systems losses - including theft - have remained an intractable problem in some areas, and in hindsight the loan covenant calling for a reduction to 12Z by 1982 was unrealistic and provided insufficient guidance as to how and where the reduction was to be achieved. 7.04 NEA itself grew substantially in strength throughout the project period; reduced its use of consultants for engineering; developed its data base and planning capability as agreed with the Bank; and maintained an effective and highly motivated staff. 7.05 Perhaps partly because of the workload on NEA's staff and management, the standards of financial performance required of the coopera- tives have not been consistently enforced. As a result about half the cooperatives have fallen into arrears with their payments of loan principal and interest to NEA. NEA's own financial position has thus in turn been placed in jeopardy. This now threatens the continuity of the RE program and is the most urgent problem now faced by NEA. ．一訪一遛回匹江 一信〔審 PHILIPPINES SECOND RURAL RLICTRIFICATION PROJECT Consumer coonectimt. sales and Stj lies by Rural Electric heragglILL M _LXLizM Award Comple- Final US$ Invitation for bid no./schedule supplier ,At@ tion date Contract value C14104 equivalent Remark@ 13 at Hardware Super Highway 07/07/79 07/05/40 P 8,903,295.00 P 102,294,96 1,004,034.0? 13 12 Hardware Super Highway 07/07/79 07/05/80 P 2,217,860.00 r 848,073.00 80,109.24 Not completed 13 53 Hardware Dan Woo Industrial 06/12/79 06/06/80 1215,943.86 - 2t5,943.66 13 54 Hardware Super Highway 07/07/79 07/05/80 P 5,597,464.00 P 38,850,76 708,022,20 13 95 Hardware Now World Research 06/12/79 06/06180 $1,309,629.00 $14s244*08 lo,495002 0,9 NO 13 Ci Insulator loya Corporation 06/12/19 06/06/60 $1,080,962,00 - 1,08 06 9t 13 C2 Insulator Now World Research 06/12/79 02/07/80 $34,596.48 - 34,596.48 13 Di conductor, bare Walsin Lthvm 06/12/79 06/06/00 $8,595,185.70 $2,959051 0,592,230,19 13 D2 Conductor, Insulated Bangkok Electric 06/12/79 06/06/80 13,492,000.00 $25,396.27 3,466,403,73 13 03 Conductor specialties Charoons Th&t Wire 06/12/79 0 1/08/40 $131,478000 - 131,478.00 13 2 Conductor accessories Performed Line Products 06/12/79 06/06/80 $793,678.20 $15,916.03 777,762.17 13 7 Distribution equipment Joslyn Mfg. A supply Co. 06112179 01/08/80 $566,512.42 3668612038 13 at Distribution tranot. General Electric 06112/79 06/06/80 $5,070,132.00 $16,188.34 5,053 943.66 13 02 Distribution transt. 11yosuns Corporation 60/12/79 03/09/80 $1,111,073,49 1,511:413.33 13 Cl Distribution transf. Philippine Electric Corp. 07/07/80 01/07/80 P 232133343 39 48431 13 R Oil circuit Toclosars Witt-Pop. Corporation 06112/79 06106180 $298,800.00 39:1548031 13 1 Connectors Surody Corp. 06/12/79 06/06/00 $4081630*00 $2,072.10 406,556.70 13 it Rotors (A-bass) Soler Industrial Corp. 07/07/79 07/05/80 f 19,37s,000,00 V $84,722.16 2,563,741.15 13 J2 Motors (socket type) Connell grog. Co. 06/12/79 06/06100 $447,280,98 $100543923 436,737.75 13 L Street tight equipment Urban Sales Ent. 07107/79 07105180 P, 5,505,000.00 P 4,660.370.00 147,465.46 Not completed 13 NJ kilo. guy wire Midland Metals Corp. 06/12/19 06/06/80 $294,136.00 13 M2 Miscellancoul Manhattan General Supply 07107/79 07/05/80 P 2,835,000.00 P 2,140,02047 281,21 $23 .93 Not completed 13 1 Voltage regulator Atlantic& IxFort Corp, 06/12/80 06/06/80 $837,072.00 - "':0"'00 .3 8 Substation equipment How World Research Corp. 06/12/79 06/06150 $295,796.55 $40,011.63 256 783.22 13 Ti Substation traost. Philippine Electric Corp. 07/07/79 07/05/50 V 4,140,945.30 - 503,026M 11 T2 Substation transt. Pas Woo Industrial 06/12/19 06/06/80 $746,370.00 $3,070,81 743,298.80 13 U Crounding materials Now World Research 06/12/79 03/07/50 $69,046.05 10 89,046005 16 11 Hardware Toy* Corporation 04/19/80 04/24/61 T 339,219,950.00 $53,790.52 16 82 Hardware Nichimen An., Ltd. 04/29/80 04/24/81 T 221,444,600.00 1$0510596.84 16 53 Hardware Toya Corporation 04/29/80 08/27/80 T 3 73 400 00 151,121.41 Insulators Toyo Corporation 04/29180 04/24/81 T 172 13 040:00 16 cl 5:1 : at 3.25 Insulators Tothet Co., Ltd. 05/06/60 11104/80 V 52,550,400.00 1 367,652980 16 Di Conductor China Wire 6 Cable 11/03/80 46,616,015.60 $9,751.66 6,604,312,23 16 D2 Conductor, Insulated Bangkok Electric Wire 06/17/80 4/12/61 81,587,200,00 $3,025.72 1,584,174.28 16 9 Conductor accessories Cosm dsx America Corp. 06/17/80 06/1 /111 $706,732.72 $597.27 706,028.00 16 F Protection equipment Joslyn HIS. Co. 06105/80 03/31/81 $535,594.44 535,549.44 to 01 Diet. transf. CSP Westinghouse Corp. 05/08/80 05/03/81 $1,212,523.60 031j416.93 lol$0,500.94 16 02 Dist. trans(. conv. Westinghouse Corp. 05/80/80 05/03/61 $359,150.42 $12,739.67 345,975.24 16 11 Connectors, compression comoodox America Corp. 06/17/80 06/12/81 $240,046,73 - 240,046.75 16 12 Connectors, bolted Now World Research 06/05/80 05/31/81 $835,872.83 412,920,00 6111604615 16 13 Clamps and connectors Cosmoodox America Corp. 06/17/80 10/15/80 $201,746.93 $1,303,83 200,444.10 16 it Watthour C. Itch 6 Co. 04129/80 04/24/81 Y 854,112,523,00 T 139,318.40 4,021,041.96 16 iv Watthour AtlantLea Export Corp. 06/17/80 06/12/81 $604,320.00 $1,650,31 602,937.74 16 L Street lighting equipment comodes America Corp. 06/17/60 06/12/81 $308,832.00 0458404 308,325.16 11 N1 Kl:c Midland Metals Corp 04/29/80 04/24/81 $794,40042 $265.00 794,115.00 1 M2 :11::::u 6 Ki 11 u: Midland Metals Corp: 05/08/80 11/04/80 $100,688.00 - 100,608.00 1 6 R Voltage regulator@ Atlantice Export Corp. 05108/80 05/03/81 $328,440.00 328,440oOO 16 U Tools and equipment OHN International 06117/80 06/12/81 3407,1a).00 400,704.77 Is 32 Hardware Allis Electric Co. 10/30/80 12/02/41 $51,643,75 51,920.50 18 C Insulator@ China Nations% Karchinery Corp. 10130/80 12/02/51 $375,055.00 275,291.26 is 0 C4nductor China National Machinery Crop. 10/30/80 12/02/01 62,733s500.00 $188j081.60 21544,235.69 18 1 Clamps and connectors Allis Electric Co. 10/30/80 12/02/61 1159,904,00 - 160,155.25 is M Miscellaneous Midland Metals co. 10130/80 12/02/61 $369,420.00 $11,044.95 3570574*96 LTI St connectors and fitttnas square 0 Co. 02/27/81 05/28/81 17,164.00 $545.56 7,210.43 LTI S2 Post insulators and supports Missal Sanyo cc. 02/27/81 05/28/81 $14,911.80 - 14,911.80 LTI 83 Power fuses sic Elect. Co. 02/27/81 10/25/81 $114,672.63 114,672.63 25 01 L547-PH-25 Ching Machine 6149. International 12/25/82 $415,160.00 234,514.99 Corp. 25 32 1547-PH-25 Po'kne Philippines, Inc. - 12/12/82 P 2,573,840.75 216,761.17 25 82 1547-PH-25 IN no Philippine@, Inc. 02/12/83 $320,761.60 188,886.60 25 iz 1547-PH-25 Connell Bras. Cc.j Ltd. 11/24/52 $50,807.30 43,634.00 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT National Electrification Administration Actual Annual Program Expenditure (tn US;o000) Fourth quarter 1979 1980 1981 1982 (Jan.-Sept.) Total program expenditures For- Sub- For- Sub- For- Sub- For- Sub- Local For- Local slan total Local eign total Local ai8n total Local aign total Le sign Total tfaterials Distribution Network Poles, X-arms, anchor logs 1,059 - 1,059 8,016 - 8,016 8,390 - 8,390 6,926 - 6,926 24,391 - 24,391 Hardware - 666 66A - 4,867 4,867 - 5,042 5,042 - 1,976 1,976 - 12,551 12,551 Insulators - 157 157 - 1,707 1,707 - 1,159 1,159 - 139 139 - 3,162 3,162 Conductors, grounds, guys, accessortes - 2,835 2,835 31 13,960 13,991 - 18,230 18,230 - 5,564 5,564 31 40,589 40,620 Tranaformers, cutouts, arresters - 565 565 71 9,471 9,542 45 3,706 3,753 - 3,168 3,168 116 16,912 17,028 Sectionaling devices - 101 101 - 864 864 - 123 123 - - - - 1,068 1,088 Hters - 486 486 44 4,832 4,876 - 4,214 4,214 7 379 386 51 9,911 9,911 Street ligh-a - 15 15 48 128 176 12 1,066 1,078 - 193 193 60 1,402 1,462 Subtotal 1,0OX 6,825 5.886 8210 35L829 46 039 8,447 33.562 19 6.933 11.469 18,352 2 5,615 110,26 Transmisaion Lines Poles, -ma etc. - - - 221 - 221 - 4,689 4,689 - 886 886 221 5,649 5,870 Substations - - - - 3,009 3,009 - 1,796 1,796 - - - - 4,796 4,796 Miscellaneous equipment 561 139 700 1,211 - 1,218 1,274 432 1,706 450 229 679 3,503 735 4,238 Total 1.620 4j964 6 9,649 38,838 48.487 9,721 0.L 01 7.383 19917 125,16 Ctvfl Works S --jinering (A&E) q99 - 899 1,975 1,000 2,975 1,476 1,000 2,476 999 - 999 5,349 2,000 7,349 Labor i.itribution/trans. 1,656 - 1,656 4,995 - 4,995 4,645 - 4,645, 4,395 - 4,395 15,691 - 15,691 Transportation & adm. fee 481 - 481 3,425 - 3,425 4,569 - 4,569 1,630 57 1,687 10,105 57 10,162 Headquarters facilities 855 - 855 1,062 - 1,08; 1,109 - 1,109 300 - 300 3,346 - 3,346 Subtotal ,3891 I1477 1,000 1247 11, 1,000 12,799 7,324 7 7.381 34.691 2.057 36548 Others Consultant fees - 212 212 - 522 522 - 787 787 - 318 318 - 1,839 1,839 Consolidation 3,353 - 3,353 2,301 - 2,301 953 - 953 1,539 - 1,539 8,146 - 8,146 miscellananus 248 - 248 1,666 - 1,666 1,007 - 1,007 592 - 592 3,513 - 3,513 Subtotal 3.601 212 3,813 3,IE 522 4,689 1.960 787 2.747 2.131 318 2.449 11.659 1,839 13,498 GRAND TOTAL 9,112 517U825L3 705360 653 23L410 212J9 175214 /a Exchange ratht US$ 1.00 f 7050. - 29 - ANNEX 4 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PR) PROJECT CDPLETION REPORT Accumulated Disbursements (US$ million) IBRD fiscal year Actual Appraisal Actual as Z and semester disbursements estimate of appraisal 1979 Dec 31, 1978 - 2.1 - Jun 30, 19 9 0.3 16.0 2 1980 Dec 31, 1q79 11.9 34.2 35 Jun 30, 1980 26.0 52.8 49 1981 Dec 31, 1980 40.2 58.2 69 Jun 30, 1981 54.2 60.0 90 1982 Dec 31, 1931 57.9 - 97 Jun 30, 1982 58.9 - 98 1983 Dec 31, 1982 59.1 - 99 Jun 30, 1983 60.0 - 100 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT NEA: Income Statements (f million) 1977 1970 1979 1980 1981 1982 Fore- Fore- Fore- Fore- Fore- Fore- cast Actual cast Actual cast Actual cast Actual cast Actual cast Actual Interest income 32 24 57 35 74 53 96 62 114 78 133 94 Othar income 2 1 3 2 4 - 4 1 5 - 6 - Total Income 34 25 60 37 78 53 100 63 119 78 139 94 o Less: Interest cost 13 1 27 11 40 20 59 37 80 47 104 56 Operating cost 13 16 15 21 16 26 18 32 19 34 20 37 Other income - 2 - 5 - 5 - 10 - 6 - 10 Net Income 8 10 18 10 22 12 23 4 20 3 15 11 Operartng ratio 78 68 70 97 72 87 77 109 83 104 89 100 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT NEAs Funds Flow Statements (P million) 1977 1978 1979 1980 1981 1982 Fore- Fore- Fore- Fore- Fore- Fore- cast Actual cast Actual cast Actual cast Actual cast Actual cast Actual Net income before interest 21 11 45 21 62 32 82 41 101 50 119 67 Depreciation 2 2 2 2 2 3 3 1 3 3 3. 5 Subtotal 23 13 47 23 64 35 85 42 104 53 122 72 Prior years' adjustments - - - 10 - (18) - (7) - 4 - 9 Loan repayments 1 - 9 - 23 - 48 8 72 14 95 32 Equity contributions 237 215 326 230 256 220 184 282 85 298 150 199 1 Donated capital - - - - - - - - - 2 - - Borrowing 322 - 276 117 334 174 304 269 390 567 343 289 MHS trust funds - - - - - 32 - 35 - 7 - 34 Exchange gain - - - - - - - - - - - 70 Total Sources 583 228 658 380 677 443 621 629 651 945 710 705 Capital expenditure/ development costs 11 22 13 18 13 12 8 24 8 26 8 5 Trust fund investment - - - - - 32 - 32 - 9 - - Loans 581 177 584 307 638 344 556 483 532 567 552 1,013 Debt service 13 1 37 31 50 32 71 56 93 66 117 64 Working capital /a (31) 9 24 5 (24) (1) (14) 15 10 223 (12) (296) Subtotal 574 209 658 361 677 419 621 611 643 891 665 786 Net funds flow 8 19 - 19 - 24 - 18 8 54 45 (81) Total Uses 583 228 658 380 677 443 621 629 651 945 710 705 Debt service cover 1.8 13.0 1.5 1.1 1.7 0.5 1.9 0.8 1.9 1.1 1.8 1.6 /a 1 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT NEA: Balance Sheets (P million) 1977 1978 1979 1980 1981 1982 Fore- Fore- Fore- Fore- Fore- Fore- cast Actual cast Actual cast Actual cast Actual cast Actual cast Actual Fixed assets and development costs at cost less deprecia- tion/amortization 46 47 55 61 60 70 66 74 71 101 76 100 Loans receivable 1,343 1,178 1,920 1,489 2,540 1,833 3,047 2,308 3,507 2,861 3,963 3,819 MH1S advances - - - - - 32 - 62 - 71 - 64 Other investments - 4 - - - - - 4 - 10 - 7 Current Asset. Cash 38 4 38 23 37 47 37 65 45 119 91 38 Loans and interest receivable 12 12 11 17 9 25 7 70 45 128 - 179 Inventory 86 107 115 165 96 191 89 169 105 411 99 974 Other - 56 - 30 - 14 - 22 6 17 6 11 Subtotal 136 179 164 235 143 277 133 326 157 676 196 502 Total Assets 5 1,408 2L139 1,785 2,74 21 3247 2,784 3,734 3,719 4.235 4,492 Paid-in capital 855 839 1,181 1,068 1,437 1,288 1,621 1,575 1,706 1,875 1,856 2,074 Retained earnings 12 13 30 38 51 31 74 29 95 36 110 60 Total Equity 867 852 1,211 1j106 1,8 1,319 1j695 1.604 1.801 1,911 1,966 2 134 Long-term debt 654 529 920 607 1,243 756 1,534 996 1,911 1,546 2,241 1,838 MHS trust funds - - - - - 32 - 64 - 71 - 89 Deferred credit - " - - - - - - 70 Current liabilities 5 27 8 72 12 105 17 120 22 191 28 361 Total Equity and Liabilities 1,526 1,408 2,139 1,785 2,743 2,212 3,247 28 3,734 3 719 4,235 4,492 Current ratio 27.0 6.6 18.8 3.3 12.1 2.6 8.0 2.7 7.1 3.5 7.0 1.5 Debt:equity ratio 43:57 38:62 43157 35:65 46:54 36:64 48:52 38s62 52:48 4456 53:47 46:54 PHILIPPINES: FIRST RURAL ELECTRIFICATTON PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT Consumer Connections, Sales and Supplies Attributable to Project 1. Luzon Consumers Sales, GWh Required Load Peak Residen- Commer- Indus- Total Residen- Commer- Indus- Total Losses supply factor demand Year tial cial trial Other consumers tial cial trial Other sales % GWh % MW 1979 36,686 2,045 79 - 38,810 7 2 4 - 13 23 17 32 6 1980 200,002 7,247 415 12,449 220,113 44 11 21 9 85 22 109 36 35 1.981 354,644 13,045 646 18,376 386,721 103 23 57 22 145 26 264 40 75 1982 448,103 18,270 825 22,837 490,035 150 36 67 30 283 27 388 40 111 1983 448,103 18,270 825 22,837 490,035 172 43 78 33 326 25 435 41 121 1984 448,103 18,270 825 22,837 490,035 181 45 82 35 343 23 445 42- 121 1985 448,103 18,270 825 22,837 490,035 190 48 86 36 360 21 456 43 121 1986 448,103 18,270 825 22,837 490,035 199 50 90 38 377 19 465 44 121 1987 448,103 18,270 825 22,837 490,035 209 53 95 40 397 17 478 44 124 w 1988 448,103 18,270 825 22,837 490,035 220 58 100 42 417 15 491 45 125 w 1989 448,103 18,270 825 22,837 490,035 231 55 105 44 438 13 503 45 128 1 1990 448,103 18,270 825 22,837 490,035 242 61 110 47 460 12 423 45 133 1991 448,103 18,270 825 22,837 490,035 254 64 115 49 482 12 548 46 136 1992 448,103 18,270 825 22,83, 490,035 267 67 121 51 506 12 575 46 143 1993 448,103 18,270 825 22,837 490,035 280 70 127 54 531 12 603 46 150 1994 448,103 18,270 825 22,837 490,035 294 74 133 57 558 12 634 46 157 1995 448,103 18,270 825 22,837 490,035 309 78 140 59 586 12 666 47 162 1996 448,103 18,270 825 22,837 490,035 324 82 147 62 615 12 699 47 170 1997 448,103 18,270 825 22,837 490,035 341 86 154 65 646 12 734 47 178 1998 448,103 18,270 825 22,837 490,035 358 90 162 69 679 12 772 48 184 1999 448,103 18,270 825 22,837 490,035 375 94 170 72 711 12 808 48 192 2000 448,103 18,270 825 22,837 490,035 394 99 179 76 748 12 850 48 202 2001 448,103 18,270 825 22,837 490,035 414 104 188 80 786 12 893 49 208 2002 448,103 18,270 825 22,837 490,035 435 109 197 84 825 12 938 49 219 2003 448,103 18,270 825 22,837 490,035 457 115 207 88 867 12 985 49 229 2004 448,103 18,270 825 22,837 490,035 480 120 217 92 909 12 1,033 49 241 2005 448,103 18,270 825 22,837 490,035 504 126 228 97 955 12 1,085 49 253 2006 448,103 18,270 825 22,837 490,035 529 133 240 102 1,004 12 1,141 50 261 2007 448,103 18,270 825 22,837 490,035 555 139 252 107 1,053 12 1,197 50 278 a 2008 448,103 18,270 825 22,837 490,035 583 146 264 112 1,105 12 1,256 51 281 0 c t Sources NEA data and misuion calculations.W 2. Visayas Consumera Sales, GWh Required Load Peak Residen- Commer- Indus- Total Residen- Commer- Indus- Total Losses supply factor demand Year tial eal trial Other consumers tial cial trial Other sales % GWh % MW 1979 11,552 889 33 643 13,117 2 1 1 1 5 17 6 32 2 1980 65,917 4,031 120 2,085 220,113 17 5 3 2 27 16 32 36 10 1981 133,177 8,807 538 4,981 147,503 43 12 19 8 82 20 102 40 29 1982 172,755 11,779 690 6,743 191,967 63 20 36 15 134 20 167 40 48 1983 172,755 11,779 690 6,743 191,967 72 23 42 17 154 18 188 41 52 1984 172,755 11,779 690 6,743 191,967 76 24 45 19 164 16 195 42 53 1985 172,755 11,779 690 6,743 191,967 60 25 47 20 172 14 200 43 53 1986 172,755 11,779 690 6,743 191,967 84 26 49 21 180 12 205 44 53 1987 172,755 11,779 690 6,743 191,967 88 28 52 22 190 12 216 44 56 1988 172,755 11,779 690 6,743 191,967 93 29 54 23 199 12 226 45 57 1989 172,755 11,779 690 6,743 191,967 97 31 57 24 209 12 237 45 60 1990 172,755 11,779 690 6,743 191,967 102 32 60 25 219 12 249 45 63 1991 172,755 11,779 690 6,743 191,967 107 34 63 26 230 12 261 46 65 w 1992 172,755 11,779 690 6,743 191,967 113 35 66 28 242 12 275 46 68 1993 172,755 11,779 690 6,743 191,9' 118 37 69 29 253 12 287 46 71 1994 172,755 11,779 690 6,743 191,967 124 39 73 31 267 12 303 46 75 1995 172,755 11,779 690 6,743 191,967 130 41 76 32 279 12 317 47 77 1996 172,755 11,779 690 6,743 191,967 137 43 80 34 294 12 335 47 81 1997 172,755 11,779 690 6,743 191,967 144 45 84 35 308 12 350 47 85 1998 172,755 11,779 690 6,743 191,967 151 48 88 37 324 12 368 48 88 1999 172,755 11,779 690 6,743 191,967 158 50 93 39 340 12 286 48 92 2000 172,755 11,779 690 6,743 191,967 166 52 97. 41 356 12 405 48 96 2001 172,755 11,779 690 6,743 191,967 175 55 102 43 375 12 426 49 99 2002 172,755 11,779 690 6,743 191,967 183 58 107 45 393 12 447 49 104 2003 172,735 11,779 690 6,743 191,967 193 61 113 48 415 12 472 49 110 2004 172,755 11,779 690 6,743 191,967 202 64 118 50 434 12 493 49 115 2005 172,755 11,779 690 6,743 191,967 212 67 124 52 455 12 517 49 120 2006 172,755 11,779 690 6,743 191,967 223 70 130 55 478 12 543 50 124 2007 172,755 11,779 690 6,743 191,967 234 74 137 58 503 12 572 50 131 2008 172,755 11,779 690 6,743 191,967 246 77 144 61 528 12 600 51 134 Source: NEA data and mission calculations. 0 3. Mindanao Consumers Sales, GWh Required Load Peak Residen- Commer- Indus- Total Residen- Commer- Indus- Total Losses supply factor demand Year tial cial trial Other consumers tial cial trial Other sales % GWh % MW 1979 12,462 1,136 21 474 14,093 2 1 1 - 4 18 5 32 2 1980 81,060 6,198 316 4,692 92,266 16 6 20 4 46 15 54 36 17 1981 151,460 16,010 651 5,657 173,778 40 20 65 9 134 12 152 40 43 1982 190,032 21,207 787 7,770 219,796 60 33 110 11 214 14 249 40 71 1983 190,032 21,207 787 7,770 219,796 70 39 132 16 257 14 299 41 83 1984 190,032 21,207 787 7,770 219,796 73 41 138 16 268 13 308 42 84 1985 190,032 21,207 787 7,770 219,796 77 43 145 16 281 12 319 43 85 1986 190,032 21,207 787 7,770 219,796 81 45 152 17 295 12 335 44 87 1987 190,032 21,207 787 7,770 219,796 85 48 160 18 311 12 353 44 92 1988 190,032 21,207 787 7,770 219,796 89 50 168 19 326 12 370 45 94 1989 190,032 21,207 787 7,770 219,796 93 52 176 20 341 12 387 45 98 1990 190,032 21,207 787 7,770 219,796 98 55 185 21 359 12 408 45 103 1991 190,032 21,207 787 7,770 219,796 103 58 194 22 377 12 428 46 106 1 1992 190,032 21,207 787 7,770 219,796 108 61 204 23 396 12 450 46 112 w 1993 190,032 21,207 787 7,770 219,796 114 64 214 24 416 12 473 46 117 1 1994 190,032 21,207 787 7,770 219,796 119 67 225 26 437 12 497 46 123 1995 190,032 21,207 787 7,770 219,796 125 70 236 27 458 12 520 47 126 1996 190,032 21,207 787 7,770 219,796 131 74 248 28 481 12 547 47 133 1997 190,032 21,207 787 7,770 219,796 138 77 260 30 505 12 574 47 139 1998 190,032 21,207 787 7,770 219,796 145 81 273 31 530 12 602 48 143 1999 190,032 21,207 787 7,770 219,796 152 85 287 33 557 12 633 48 151 2000 190,032 21,207 787 7,770 219,796 160 90 301 34 585 12 665 48 158 2001 190,032 21,207 787 7,770 219,796 168 94 317 36 615 12 699 49 163 2002 190,032 21,207 787 7,770 219,796 176 99 332 38 645 12 733 49 171 2003 190,032 21,207 787 7,770 219,796 185 104 349 40 678 12 770 49 179 2004 190,032 21,207 787 7,770 219,796 194 109 366 42 711 12 808 49 188 2005 190,032 21,207 787 7,770 219,796 204 115 384 44 747 12 849 49 198 2006 190,032 21,207 787 7,770 219,796 214 120 404 46 784 12 891 50 203 2007 190,032 21,207 787 7,770 219,796 225 126 424 48 823 12 935 50 213 2008 190,032 21,207 787 7,770 219,796 236 133 445 51 865 12 983 51 220 Source: NEA data and mission calculations. 0 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT Project Costs and Benefits and Economic Rate of Return (Millions of pesos at 1979 border prices) Costs Benefits Cost of NPC bulk supplies Other current costs Electricity sales Fuel savings Invest- Via- Min- Vis- Hin- Total Via- Hin- House- Comer- Indus- Taxes on Total Year ment Luson ays donao Total Luson syes danao Total costs Luson syas danso Total holds cial try Total appliances benefits 1979 96 10 3 2 15 1 1 1 3 114 6 3 1 10 12 8 1 19 2 31 1980 387 66 15 16 97 7 2 4 13 497 40 16 46 102 69 32 8 109 13 224 1981 347 159 49 46 254 17 9 8 34 635 91 49 37 177 128 68 25 221 22 420 1982 151 233 80 76 389 24 13 12 49 589 132 80 59 271 163 92 41 296 22 589 1983 78 261 90 91 442 27 15 15 57 577 152 92 71 315 166 92 49 307 17 639 1984 5 267 94 94 455 29 16 16 61 521 159 98 74 331 169 92 51 312 13 656 1985 2 274 96 97 467 30 17 16 63 532 167 102 77 346 171 92 54 317 13 676 1986 4 279 98 102 479 32 18 17 67 550 175 107 81 363 174 92 56 322 9 694 1987 23 287 104 107 498 33 19 18 70 591 185 113 86 384 177 92 60 329 6 719 1988 7 295 108 112 515 35 20 19 74 596 194 118 90 402 180 92 62 334 - 736 1989 18 302 114 118 534 37 21 20 78 630 204 124 94 422 183 92 65 340 - 762 1990 22 314 120 124 558 39 22 21 82 662 214 130 99 443 186 92 69 347 - 790 1991 13 329 125 130 584 40 23 22 85 682 224 137 104 465 189 92 72 353 - 818 1992 26 346 132 137 615 43 24 23 90 731 235 144 109 488 192 92 76 360 - 848 1993 24 362 138 144 644 45 25 24 94 762 247 151 114 512 196 92 80 368 - 880 1994 16 381 145 151 677 47 .7 25 99 792 259 159 120 538 199 92 84 375 - 913 1995 6 400 152 158 710 49 28 27 104 820 272 166 126 564 202 92 88 382 - 946 1996 19 420 160 166 746 52 29 28 109 874 286 175 132 593 206 92 92 390 - 983 1997 16 441 168 174 783 54 31 29 114 913 300 183 139 622 209 92 97 398 - 1,020 1998 12 464 177 183 824 57 32 31 120 956 316 193 146 655 213 92 101 406 - 1,061 1999 18 486 185 192 863 60 34 32 126 1,007 331 202 153 686 216 92 109 417 - 1,481 Internal economic rate of return * 15.6% Source NEA and NPC data and mission estimates. Owl - 37 - ANNEK 9 Pace 2 of 4 Notes on Table Investment Costs 1. The 1979-82 figures are the actual project investment expenditures, adjusted to a 1979 basis using the published general wholesale price index for Metro Manila. The foreign currency costs were converted to pesos at an exchange rate of 7.50 pesos per US$ for 1979-81 and 8.50 for 1982, the rates used by NPC and NEA. The local currency costs were adjusted to border prices by valuing the unskilled labor component at the shadow wage rate of 0.52 /1 and applying to the balance of the capital goods conversion factor for the Philippines of 0.865. /1 The figures for 1983-99 are the estimated costs of additional facilities, such as transmisison and distribution transformers and service meters, required to meet the projected demand growth of the consumers connected by the project. Cost of NPC Supplies 2. These are the costs of the electricity purchased by the cooperatives to supply the project customers. They are shown separately for each grid (Luzon, Visayas and Mindanao) because the long-run marginal costs (LRMC) of supply are different for the three systems (see Annex 3). The figures have been derived by multiplying the required supply for each year (see Annex 3) by the appropriate LRMC at 1979 border prices, as shown in Annex 4, i.e., 60.1 centavos/kWh for Luzon, 48 centavos/kWh for Visayas and 30.4 centavos/kWh for Mindanao. Other Current Costs 3. These cover the nonfuel operating costs of the cooperatives, i.e., operation and maintenance, customer billing and general administration. The figures for 1979-82 have been derived pro rata from the total actual nonfuel operating costs for these years and those for 1983-89 are based on the 1982 costs. The resulting figures have been adjusted to a 1979 basis using the general wholesale price index, and converted to border prices using the standard conversion factor of 0.82. /2 Electricity Sales 4. These are the incremental revenues accruing to the cooperatives from the electricity sales attributable to the project (see Annex 1) at the actual 1982 weighted average price for each grid (see Annex 4), adjusted to a 1979 basis using the published consumer price index for all income households in the philippines, and converted to border prices (46.5 centavos/kWh for Luzon, 59.5 centavos for Visayas and 27.5 centavos for Mindanao) using the estimated /1 See Mr. F. Stephen O'Brien's memo of April 2, 1981, "Estimates of National Parameters for Project Analysis." /2 See O'Brien memo of April 2, 1981. - 38 - AMNE 9 Page 3 of 4 consumption conversion factor of 0.84. /2 The projections for 1983-99 assume that the consumption of the consumers connected by the project in 1979-82 will grow at 5% p.a. with rising incomes and continued economic growth. Fuel Savings 5. The household fuel savings are the estimated value of the reduction in kerosene consumption resulting from the substitution of electricity for lighting. According to NEA data, low-income households consume on average 5 liters of kerosene/month for lighting, medium-income households 8 liters/month and high-income households 20 liters/month. From census data, low-income households account for 40% of electrified households, medium-income households for 47% and high-income households for 13%. This gives a weighted average consumption per household of 8.4 liters/month, or about 100 liters/year. The selling price of kerosene in the Philippines is 3.20 pesos/liter but the border price, taken as the Singapore market price, is 2.93 pesos/liter, equivalent to 2 pesos/liter at 1979 prices. In the absence of electricity, the average household consumption of 100 liters/yer may be expected to increase with rising incomes, and some allowance has been made for this in the projections, which imply an average consumption of about 115 liters by 1990, rising to 133 liters by 1999. 6. The commercial fuel savings are also of kerosene, relating to the kerosene used for lighting by commercial consumers, estimated by NEAL as about 75 liters/month on average or 900 liters/years. 7. The industrial fuel savings take account of diesel oil usage for diesel engines that is displaced by electricity. NEA estimates that 1 kWh displaces 0.42 liters of diesel oil with a border price (Singapore market) equivalent to 2.74 pesos/liter, or 1.85 pesos/liter at 1979 prices. However, it cannot be assumed that all the projected indnstrial electricity consumption displaces diesel oil, since many of the industrial establishments responsible for the electricity consumption would not be set up in the absence of electricity. There is no precise information on the extent to which the provision of electricity is a prerequisite for the start-up of industries. However, NEA samle surveys suggest that some three-quarters of new industrial consumers regard the availability of electricity as a necessary factor in their decision to start their business. It has been conservatively assumed, therefore, that only 25% of the projected industrial electricity consumption would displace diesel oil consumption by industrial diesel engines. Taxes on Appliances 8. The retail prices of domestic electr.cal appliances include sales taxes which vary according to the wholesale prices of the goods concerned. From sample surveys of domestic appliance use, NEA have estimated the rates of acquisition by households of domestic appliances, particularly TV sets, refrigerators, fans and irons. Using these data and representative current prices for these appliances, the tax yield to the Government of appliance purchases by the households connected by the project was calculated, as shown in the table. - 39 - ANE 9 Page 4 of 4 Total Benefits 9. The figure for 1999 includes an amount of 378 million pesos, representing the residual value in 1999 of the facilities financed by the project, which have an estimated eocnomic life of 30 years. - 40 - AMEX 10 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PR) PROJECT COMPLETION REPORT Long-Run Marginal Costs of NPC Supply to RE Cooperatives (19/9 border prices) Luzon Visayas Mindanao 1. Present Value of: /a 1.1 Incremental investment 1979-88, million pesos 13,826 2,194 3,3/9 1.2 Incremental fuel and operating costs 1979-88, million peso. 4,672 1,080 504 1.3 Incremental peak demand 1979-88, MW 3,841 1,384 1,614 1.4 Incremental electricity sales 1979-88, GWh 23,880 5,446 9,457 2. Average annual increase in peak demand 1979-88, MW /b 680 245 285 3. Unit Cost of Supply 3.1 Fuel and operating cost (1.2 -: 1.3), pesos/kW /c 1,216 180 312 3.2 Capital cost (1.1 x 0.124 t 2), pesosfkW 2,521 1,110 1,470 3.3 Marginal cost (3.1 + 3.2), pesos/kW 3,137 1,890 1,782 3.4 kWh sales per kW (1.4 e 1.3), kWh 6,217 3,935 5,859 3.5 Marginal cost (3.3 -: 3.4), centavos/kWh 60.1 48.0 30.4 /a At 12% discount rate, the estimated opportunity cost of capital. /b Annuitized value of 1.3 at 12% discount rate. /c The 30-year annuity factor at 12% discount rate (the generation and trans- mission facilities financed by NPC-s investment program have an economic life of 30 years). Source: NPC data and mission calculations. - 41 - ANE 11 Page 1 of 4 PHILEPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT Electricity Sales and Revenues by Cooperative, 1982 Average price Incremex- Z of total Region/cooperative Sales Sales revenue (centavos/ tal sales incremental (NWh) (-000 pesos) kWh) (Kwh) sales Luzon Region I 2U1914 169,916 84.2 15,634 11.3 ABRECO 5,219 5,654 108.3 528 0.4 BENECO 79,923 58,865 73.7 -Ia - INEC 26,282 24,608 93.6 1,512 1.1 ISECO 19,486 17,274 88.6 1,710 1.2 LUELCO 21,319 18,734 87.9 3,257 2.4 PANELCO 1 5,865 6,022 102.7 572 0.4 CENPELCO 0 24,971 22,650 90.7 2,237 1.6 PANELCO 3 18,849 16,109 85.5 5,818 4.2 Region II 702496 59,152 83.9 49,468 35.7 CAGELCO 1 13,110 12,491 95.3 4,483 3.2 CAGELCO 2 4,024 4,349 108.1 1,836 1.3 ISELCO 1 41,883 30,436 72.7 34,636 25.1 ISELCO 2 5,605 5,923 105.7 4,308 3.1 NUVELCO 5,874 5,953 101.3 4,205 3.0 Region III 282,414 225,605 79.9 55,909 40.5 BATELCO 46,870 36,784 78.5 8,577 6.2 BECO 1 32,790 27,116 82.7 4,263 3.1 BECO 2 15,877 14,278 89.9 600 0.4 NEECO 1 28,507 20,408 71.6 -Ia - NEECO 2 12,780 11,605 90.8 -Ta - NEECO 3 15,746 13,405 85.1 12,398 9.0 PELCO 1 12,288 10,300 83.8 -/a - PELCO 2 37,592 30,002 79.8 7,846 5.7 PELCO 3 19,572 16,525 84.4 9,359 6.8 TARELCO 1 16,651 15,505 93.1 -/a - TARELCO 2 3,574 2,830 65.2 3,574 2.6 ZAMECO 40,167 26,847 66.8 9,292 6.7 - 42 - A1f1Ex 11 Page 2 of 4 Average price Incremen- Z of total Region/cooperative Sales Sales revenue (centavos/ tal sales incremental (NMh) ('000 pesos) kWh) (ffh) sales Luzon (cont'd) Region IV 175,522 158,160 90.1 8,556 6.2 BATELEC 1 24,487 18,518 75.6 2,027 1.5 BATELEC 2 33,267 27,681 83.2 3,078 2.2 FCECI 62,633 51,523 82.3 2,187 1.5 FLECO 11,530 9,800 85.0 -/a - OMECO 1,784 3,928 220.2 -/a - ORMECO 1 5,958 10,573 177.5 99 0.1 ORMECO 2 1,404 2,712 193.2 -/a - PALECO 7,183 13,317 185.4 1,165 0.9 QUEZEICO 1 27,256 20,058 73.6 -/a - QUEZEICO 2 20 50 250.0 -7 - Region V 131,999 111,023 84.1 8,565 6.2 ALECO 47,271 37,175 78.6 -/a - CANORECO 12,801 11,345 88.6 1,192 0.9 9ASURECO I 9,509 8,219 86.4 1,864 1.3 CASUREC0 2 34,773 27,720 79.7 2,989 2.2 CASURECO 3 9,341 8,138 87.1 1,472 1.1 CASURECO 4 5,102 4,710 92.3 787 0.6 FICELCO 1,315 2,848 216.6 -la - MASELCO 312 765 245.2 64 - SORECO 1 3,355 3,158 94.1 -la - SORECO 2 8,220 6,945 84.5 197 0.1 Total Luzon 862,345 723,856 83.9 138,132 100.0 eighted average price of incremental sales: c. 82.3/kwh Visayas Region VI 178,302 199,652 112.0 29,269 51.3 AKELCO 7,995 11,190 140.0 927 1.6 AMTECO 1,966 3,778 192.2 548 1.0 CAPELCO 14,179 21,202 149.5 -/a - ILECO 1 17,199 15,886 92.4 5,012 8.8 ILECO 2 10,847 11,993 110.6 1,575 2.8 VRESCO 14,731 21,254 144.3 1,414 2.5 CENECO 103,960/b 103,087 99.2 17,036 29.8 NOCECO 7,425~ 11,262 151.7 2,757 4.8 - 43 - ANM Page 3 of 4 Average price Incremen- % of total Region/cooperative Sales Sales revenue (centavos/ tal sales incremental (Mh) ('000 pesos) kWh) (MWh) sales Visayas (cont-d Region VII 53,455 45,935 85.9 9,525 16.7 BOHECO 1 5,526 6,211 112.4 1,315 2.3 BOHECO 2 2,741 2,663 97.2 854 1.5 CEBECO 1 5,564 5,902 106.1 836 1.5 CEBECO 2 1,917 2,524 131.7 1,518 2.7 CEBECO 3 4,019 4,118 102.5 2,143 3.7 NORECO 1 14,774 10,184 68.9 567 1.0 NORECO 2 18,914 14,333 75.8 2,292 4.0 Region VIII 65V313 70,813 108.4 18,226 32.0 DORELCO 25,552 20,156 78.9 7,763 13.6 LETECO 2 16,060 19,366 120.6 4,443 7.8 LEYECO 3 1,367 1,943 142.3 508 0.9 LEYECO 4 906 1,612 177.9 371 0.7 LEYECO 5 10,619 8,933 84.1 2,849 5.0 SOLECO 1,089 1,621 148.9 132 0.2 EASAMELCO 506 1,053 208.1 287 0.5 NOSAMELCO 298 617 207.0 58 0.1 SAMELCO 1 2,718 5,391 198.3 307 0.5 SAELCO 2 6,198 10,121 163.3 1,508 2.7 Total Visayas 297,070 316P400 106.5 57,020 100.0 Weighted average price of incremental sales: c. 105.3/kWh Mindanao Region IX 101,655 567435 55.5 45,746 32.3 ALELCO 131 132 1.0 89 - BASELCO 550 1,334 242.5 -Ia - SULECO 1,481 2,782 187.8 1,294 0.9 ZANCELCO 63,919 33,015 51.7 34,841 24.6 ZAMECO 8,626 5,584 64.7 2,521 1.8 ZAMSUR 1 22,456 11,161 49.7 2,534 1.8 ZAMSUR 2 4,492 2,427 54.0 4,467 3.2 -44 - Page 4 of 4 Average price Incremen- Z of total Region/cooperative Sales Sales revenue (centavos/ tal sales incremental (MWh) (-000 pesos) kWh) (KWh) sales Mindanao (cont-d) Region I 346,125 9/,U5 Z.U 44,b3/ 31.5 ABECO 39,984 16,/81 42.0 2,104 1.5 ASECO 6,503 2,939 45.2 3,622 2.6 FIBECO 13,363 b,639 49.7 3,794 2.7 BUSECO 1,062 3,417 48.4 486 0.3 MOELCI 1 6,561 3,635 55.4 846 0.6 MOELCI 2 17,837 8,044 45.1 2,316 1.6 MORESCO 1 185,013 34,814 18.8 17,213 12.1 MORESCO 2 25,836 9,166 35.5 5,461 3.9 SURNECO 43,966 11,623 26.4 8,795 6.2 Region XI 124,U83 19,446 b4.0 2/,505 19.4 DANECO ZI,896 13,401 48.0 6,589 4.7 DORECO 14,839 5,356 36.1 8,183 5.7 DASURECO 30,690 12,121 39.5 5,026 3.6 SOCOTECO 1 8,710 10,190 117.0 1,307 0.9 SOCOTECO 2 34,344 31,434 91.5 6,305 4.5 SURSECO 1 /,509 b,b96 t9.2 -/a - SURSECO 2 95 248 261.1 95 - Region XII IU,35Z 44,/59 63.6 23,647 16.7 LANECO 13,839 6,733 48.7 -/a - LASURECO 36,457 18,408 50.5 17,085 12.1 MAGELCO 8,219 7,025 85.5 4,909 3.4 COTELCO 1,306 5,158 10.6 1,653 1.2 SUKELCO 4,531 1,435 164.1 -/a - Total Mindanao 642,215 ZII,698 43.2 141,535 100.0 Weighted average price of incremental sales: c. 48.6/kWh /a 1982 sales were lower than in 1981. /b Estimated (data not available). Source: NEA data and mission calculations. - 45 - ANNEX 12 PHILIPPINES FIRST RURAL ELECTRIFICATION PROJECT (LOAN 1547-PH) PROJECT COMPLETION REPORT Main Undertakings in Loan Documents Compliance Loan Agreement 3.05 Cooperatives' system losses to be reduced to Not met. 12% by December 31, 1982 4.03 Borrower to establish and maintain a plan- Planning unit and informa- ning unit; prepare five-year development and tion section established; financial plans for the cooperatives by Five- and ten-year plans December 31, 1978, and ten-year plans by not yet fully implemented. December 31, 1979, and update them annually; establish an information section to gather and consolidate information on cooperatives. Guarantee Agreement Guarantor to review procedures for auditing Review took place but Borrower's accounts. results inconclusive and no action ensued.