Guinea - Power Project

The World Bank FOR OFF0MC1L USE ONLY Repot No. 7235 PROJECT COMPLETION REPORT REPUBLIC OF GUINEA FIRST P3WER PROJECT (CREDIT 1085-GUI) may 6, 1988 Industry and Energy Operations Division Central Africa Department Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank anthorization.  COUNTRY EXCHANGE R1TA At Appraisal Name of Currency - Syli Exchang3 Rate 1US$ - Syli 19.00 Current 1987 Name of Currency - Franc GuinEen (FG) Exchange Rate 1US$ F EG 355.00 MEASURES AND EQUIVALENTS Gram (g) = 0.0022 pounds Kilometer (km) = 0.62 mile Meter (m) = 39.3 inches Kilovolt (kV) = 1,000 volts Kilowatt (kW) = 1,000 watts Kilovolt-ampere (kVA) = 1,000 volt amperes Megawatt (MW) = 1,000 kilowatts (kW) Gigawatt hour (GWh) = 1 million kilowatt hours (kWh) ABREVIATIONS AND ACRONYMS CCCE = Caisse Centrale de Zoopdration Economique EdF = Electricite de France GOG = Government of Guinea HQI = Hydro Quebec International KfW = Kreditanstalt fUr Wiederaufbau MINEK = Ministere de l'Energie et du Konkoure MRNEE = Ministere des Ressources Naturtlles, de l'Energie et de l'Environnement MIP = Management Improvement Program SNE = Societe Nationale d'Electricite SGEEM = Societe Generale d'Electricite et d'Electro-Mecanique FISCAL. YEAR January 1 - December 31  Fom ONFICI4L U OLY TME WORLD StANK Washiton O.C. 20433 U.S A. Olke of OMcl'vGWi May 6, 1988 MEORANDUM TO THE EtECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Republio of Guinea First Power Project (Credit 1085-GUI) Attaohed, for information, is a copy of a report entitled "Project Completion Report on Republic of Guinea First Power Project (Credit 1085-GUI)" prepared by the Africa Regional Offioe. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restncted distribution and may be used by recipients only in the perormance of their o(fciui dutiesa Its contents muy not otherwic be disclosed witbout World Bak al uthoriztiont.  FOR OFFCIAL USE ONLY REPUBLIC OF GUINEA SOCIETE NATIONALE D'ELECTRICITE (SNE) FIRST POWER PROJECT, CREDIT 1085-GUI PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No. PREFACE ........................... i KEY PROJECT DATA .................................... ii HIf GHTS .. ..................... * *..... v I. INTRODUCTION .....1 II. PROJECT PREPARATION AND APPRAISAL ... 2 Origin and Preparation of Pro oje. 2 Project Objectives ....................., 3 Project Description.. 3 III. PROJECT IMPLEMENTATION AND COST.. 4 Loan Effectiveness and Project Startup ..... 4 Revisions to the Project Scope. . . 4 Implementation Schedulec h e d u le.. ... 5 Procurementot.. . ................... 6 Project Cost .....7 Project Financing ..... Disbursements ..... Project Execution........ 8 Performance of the Consults nts.... 10 Performance of the Contractors.... 10 Performance of the Beneficiary... . 10 Status of the KfW and CCCE Financed Program. . 10 KfW Component .....11 CCCE Component ..................................... 11 IV. OPERATING PERFORMANCE ..... .. 12 V. FINANCIAL PERFORMANCE ............. ....... 12 VI. INSTITUTIONAL PERFORMANCE ..14 Management.. ... 14 Personnel ..... 15 Training ......15 Covenants . .....15 This document has a restricted distribution and may be used by recipients only in the peirformance of their official duties. Its contents may not otherwis bedslsdwtotWrdBatatoiaion  Table of Contents (Cont.) VII. ECONOHIC JUSTIFICATION .. .. ................................. 15 Least Cost Solution for System Expansion ................ ** 15 Return on Investment . . ............ .. 16 VIII. IDA PERFORMANCE .. . .... . 16 Assessment of Beneficiary Capability ....................... 16 Supervision ................................................ 16 IDA's Role ...................................... ............ 16 IX. CONCLUSIONS. . . ............ 17 ANNEXES 1. List of Contracts and Actual Disbursemets .. ... 18 2. Comparative SNE Income Statements 1983-1985........... 19 3. Comparative SNE Balance Sheet Statements 1983-1985.... 20 4. Comparctive SNE Funds Flow Statements 1983-1985.. 21 5. Compliance with Credit Condst s . .. 22 6. Internal Rate of Return Analysis ............... ...... 24  - - ~ ~ ~ ~ ~ ~ 1 PROJECT COMPLETION REPORT FIRST POWER PROLECT, CREDIT 1085-GUI PREFACE This is a completion report of the First Power Project in Guinea (Credit 1085-GUI) for which an SDR 22.1 million (US$28.50 million) credit was approved on December 18, 1980. The Credit was made to the Republic of Guinea and its proceeds transferred as a grant to the Societe Nationale d'Electricite (SNE), a state-owned corporation responsible for generation, transmission, and distribution of electricity for public consumption throughout Guinea. The Credit was signed on February 10, 1981 and fully disbursed and closed by October 21, 1986. The Project Completion Report (PCR) was prepared by an IDA consultant based on the Staff Appraisal Report (No. 3055-GUI) of November 25, 1980, the President's Report ,. P-2895-GUI) of December 1, 1980, the Development Credit Agreement o& February 10, 1981, progress reports prepared by SNE and its consultants, correspondence with the Borrower and the Beneficiary, and internal IDA memoranda on the project issues contained in the IDA files, and a visit to Guinea in July 1986. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED), but the project was not audited by OED staff. OED sent copies of the draft report to the Borrower for comments, however none were received.  - il - PROJECT COMPLETION BASIC DATA SHEET REPUBLIC OF GUINEA - FIRST POWER PROJECT (Credit 1085-GUI) BASIC DATA SHEET Key Project Data Item Appraisal Actual Cost Total project cost (in US$ million) 32.50 30.09 Foreign exchange cost (in US$ million) 28.50 27.41 Credit amount (in SDR million) 22.10 22.10 (in US$ million) 28.50 23.68 Cost overrun in foreign exchange (US$ million) 3.73 (Cost over credit amount) (in 2) 16Z Completion of physical components - rehabilitation of Conakry II distribution 98? - training and maintenance centers 100? - housing facilities 1001 Proportion completed by completion date 99? Economic rate of return 202 Financial performance Poor Instituttonal performance No Progress  - iii - CUMULATIVI FORECAST AND ACTUAL DISBURSEHBNTS (SDR million) As of December 31 1981 1962 1983 1984 1985 October 31. 1986 (i) Appraisal estimvte 3.18 8.84 16.59 21.32 22.10 (ii) Actual 1.27 7.37 13.25 19.78 21.72 22.1 (iii) Actual as 2 of Appraisal 40 83 8o 93 98 100 OTHER PROJECT DATA Item Original Plan Actual First mention in file 4/77 Government application 6/77 Negotiations 7/80 11/80 Board approval 10/80 12/80 Credit agreement date 2/81 Effectiveness date 1/81 5/81 Closing date 12/85 7/86 Borrower: Republic of Guinea Beneficiary: Societe Nationale d'Electricite (SNE) Follow-on project: Second Power Engineering, and Technical Assistance Project, Credit 1595-GUI  - iv - MISSION DA Month/ No. of No. of Staff Date of Item Year Weeks Persons Week Report Project preparation 2/78 Pre-appraisal 5/79 Appraisal 12/79 Supervision I 5/81 1.3 2 2.6 5/18/81 Supervision II 3/82 1.3 2 2.6 4/6/82 Supervision III 12/82 1.6 2 3.2 1/21/83 Supervision IV 6/83 1.8 1 1.8 7/28/83 Supervision V 12/83 2.7 2 5.4 3/5/84 Supervision VI 6/84 1.0 2 2.0 6/25/84 Supervision VII 11/84 1.0 1 1.0 12/6/84 Supervision VIII 5/85 1.3 2 2.6 6118/85 Supervision IX 12/85 1.4 2 2.8 1/14/86 TOTAL 13.4 14.0 COUNTRY EXCHANGE RATES Years Appraisal Year Average (1980) US$1 - Sylis 20.93 Intervening Years Average (1981) US$l - Sylis 20.93 (1982) US$1 - Sylis 22.36 (1983) US$1 - Sylis 23.37 (1984) US$l - Sylis 24.29 (1985) US$1 - Sylis 25.00 (1986) US$1 - GF 360.00 The parallel market exchange rate from 1980 to 1985 has been estimated at between 10 to 15 times the official exchange i te.  - v GUINEA PROJECT COMPLETION REPORT FIRST POWER PROJECT, CREDIT 1085-GUI HIGHLIGHTS The project was conceived as a part of the Government's 1980- 1984 Program for the reinforcement, rehabilitation, and expansion of the power generation, transmission and distribution systems for the City of Conakry. The objectives of the projeet were: (i) to rehabilitate, reinforce and expand power distribution in Conakry II; apd (ii) to strengthen the Societe Nationale d'Electricite (SNE), the power sector entity. The physical part of the project was completed successfully, and the estimated Rate of Return on the investment was achieved, however, the project failed to strengthen the institutional set-up of SNE, and the power sector. Throughout the project implementation period, GOG constantly interferred with SNE's day-to-day operations and refused to give any autonomy to SNE's management. Recently, the new Government of Guinea showed interest in reforming the power sector and creating an autonomous power utility. It is expected that the dim picture presented of SNE in this report will be brightened in the foreseeable future. expected to be brighter in the foreseeable future.  REPUBLIC OF GUINEA FIRST POWER PROJECT. CREDIT 1085-GUI PROJECT COMPLETION REPORT I. INTRODUCTION 1.1 This report reviews the First Power Project which was aimed at rehabilitating the operations of Guinea's Soci4t6 Nationale d'Electricite (SNE), the public utility in charge of electricity supply. SNE was formed to take over responsibility for the operation of public power systems throughout Guinea in 1961 following the nationalization of the private company which operated the Conakry power system. During the project implementation period, SNE operated for all practical purposes as a department of the Ministry in charge of energy. This Ministry was first the Ministare de l'Energie et du Konkoure (MINEK), and later the Ministere des Ressources Naturelles, de l'Energie et de l'Environnement (MRNEE). 1.2 In 1978 SNE operated 65 MW of hydro and thermal generating capacity and about 170 km of related transmission lines. The Conakry system accounted for 45 MW of total installed capacity and consisted of: (i) two hydroelectric plants on the Samou river, namely, the Grandes Chutes plant (20 MW installed with four units of 5 MW each) and the Donkea plant (15 MW installed with 2 units of 7.5 MW each); (ii) the Tombo thermal power plant (10 MW installed with seven units); (iii) transmission lines interconnecting the hydropower plants with the thermal power station located in Conakry; and (iv) distribution systems in Conakry and nearby townships. 1.3 In 1977 SNE had about 23,000 billed customers nationwide, of which 12,000 were in Conakry; these represented electrical service to about 202 of the capital's 600,000 population. However, taking into account the many illegal connections, SNE was providing electricity to about 602 of the city's population. The Conakry system accounted for about 852 of public electricity consumption in Guinea. 1.4 In 1977, the Guinean economy was suffering from a scarcity of local expertise and lack of foreign exchange to pay for imports of equipment, spare parts, and foreign technical assistance. These factors had seriously harmed the power sector and a complete breakdown of the Conakry system was feared by the Government and the aid community. IDA's assistance was sought to strengthen SNE and rehabilitate the Conakry power system.  -2- II. PROJECT PREPARATION AND APPRAISAL Origin and Prelaration of Proiect 2.1 Early in 1977, the Government of Guinea (GOG) requested IDA's assistance in rehabilitating the Conakry system including the rehabilitation of the existing hydropower and diesel generating facilities, and the transmission and distribution systems. Following identification and preparation missions in April, July, and August 1977, IDA made an advance in February 1978 of US$220,000 (P035) under the Project Preparation Facility (PPF). This advance was to finance the services of engineering cons-ltants to carry out the technical studies for rehabilitation work and prepare the bidding documents, the financial audit of SNE, and the services of consultants to analyze the financial functions of SNE. In the course of this preparatory stage, it became obvious that urgent repairs were necessary to the Grandes Chutes dam, which was leaking badly and on the verge of collapse, in order to avoid a complete breakdown of power supply in the Conakry area. IDA agreed to finance these repairs under a US$1.14 million Engineering Credit (Power Engineering and Repair Project--Credit S- 22-GUI of January 12, 1979), while continuing preparation of the Power I project. 2.2 During preappraisal (mid-1979), it became clear that, given the precarious condition of the various generating, transmission and distribution facilities serving Conakry, and the abysmal situation of sNE, the project would be extensive and would require finance beyond the amount available from IDA. Cofinancing was sought and the Kreditanstalt far Wiederaufbau (KfW) and the Caisse Centrale de Cooperation Economique (CCCE) agreed to provide the needed additional financing. The overall Rehabilitation Program was divided into three packages: ti) the rehabilitation of Conakry's Tombo diesel power piant and related facilities, to be financed by R*W; (ii) the rehabilitation of the Grandes Chutes dam and power plant, consulting services for an optimization study of the Samou's hydro potential, and a tariff study to be financed by CCCE; and (iii) the rehabilitation and extension of power distribution in Conakry II1 a training center, workshop, housing for expatriate staff, as well as technical assistance and consulting services to improve the performance of the power sector, to be financed by IDA. 2.3 The main issue confronting IDA was SNE's organizational, operational, and financial deficiencies. SNE's organization was informal and was characterized by fragmented responsibilities ana inadeqlate communication between service functions. The operation of the Conakry system was carried out haphazardly by personnel with little training--SNE had no training facilities nor did it have any training program. 11 The City of Conakry comprises: Conakry I - an island attached to the mainland by a short causeway, which is the administrative and business center and original residential area; Conakry II and Conakry III - the industrial and new residential areas.  -3- Preventive maintenance did not exist. No internal information system existed for operational and financial performance measurement purposes. The audit of SNE's accounts for 1976 and 1977 revealed many serious deficiencies and the auditor's report called for extensive improvement in accounting systems and procedures. 2.4 In December 1979, the project was appraised by IDA, together with KfW and CCCE. During appraisal, additional studies were found necessary in order to address the many institutional issues facing SNE. An additional advance of US$300,000 under the PPF was approved in March 1980 to finance studies necessary to analyze the organizatiozn of the power sector, SNE's manpower training and maintenance requirements, and to prepare an institution-building component for the project. During negotiations in November 1980, assurances were obtained that a comprehensive Management Improvement Program (MIP) would be implemented by GOG and SNE. The MIP included agreed targets to be attained by the end of 1982 in the areas of investment planning, staffing, training, operations, organization, commercial, and financial management. Assurances were also obtained that adequate quarterly progress reports would be sent to IDA covering both project implementation and the MIP. GOG further agreed that the project would be executed directly by SNE. Project Obiectives 2.5 The project had the following objectives: (i) to improve the reliability of electricity service to SNE's custumers through the rehabilitation, reinforcement and expansion of the power distribution system of Conakry II; and (ii) to strengthen, over time, the institutions of the power sector by upgrading SNE's managerial, technical and financial capabilities through technical assistance and training. The project was a part of GOG's 1980-84 Power Sector Rehabilitation Program; the other parts of the program being the KfW and the CCCE financed projects (para. 2.2). It was expected at the time that the rehabilitation program would correct both the physical and the institutional deficiencies of the Guinean power sector. Project Description 2.6 The IDA project comprised: (a) rehabilitation, reinforcement and exter.sion of Conakry II distribution system, prcvisions of connection materials to about 2,000 three-phase customers and about 18,000 single- phase customers, and completion of the change-over to 20 kV of the primary distribution voltage from the existing 15 kV and 6.3 kV; (b) construction of, and equipment for a training center, a maintenance center and a relay and metor repair and calibration laboratory as well as the construction of, and furniture for 17 houses for staff;  (c) a training program for all levels of SNE personnel consisting of 64 staff-years equivalent of scholarships and overseas training, and training of lower level personnel at the new training center; (d) a three-year technical assistance program (36 staff-years); (e) consulting services for an organization study of the sector and a feasibility study for a possible second project; and (f) refinancing of the Power Engineering Credit (Cr. S-22-GUI) and of the PPF. III. PROJECT IMPLEMENTATION AND COST Loan Effectiveness and Proiect StartuR 3.1 The Development Credit Agreement of February 10, 1981. did not specify any special conditions of effectiveness other than the legal requirements. The Credit was declared effective on May 12, 1981. The project had already started with PPF financing for some of the studies (para. 2.4). Revisions to the Proiect Scone 3.2 A number of relatively modest revisions were made to the project scope during implementation: (i) the organization study carried out under the project addressed the manpower and training needs of SNE. During implementation, it was found necessary to broaden the study addressing the relations between Government and the utility, and proposing a legal framework for an autonomous entity. (ii) a Power Master Plan was included to determine the sequence of the power sector development and the first hydroelectric site to be developed on the basis of the UNDP-financed Water Resources Master Plan study completed in 1984 (UNDP 79/004), which had identified several potential hydroelectric sites. 3.3 Two factors affected the project cost and the Credit value as follows: (i) due to the strength of the US dollar, only US$23.68 million was disbursed, compared to US$28.50 million which was the equivalent credit amount at negotiations; and (ii) project implementation in general was delayed by more than a year which resulted in cost escalation of about 5I.  3.4 Faced with the increase in the project scope, the reduction in the dollar value of the Credit, and the increase in cost of the project components, the following measures were taken by GOG and SNE, in agreement with IDA: (i) reduction of the overseas training of SNE staff from 64 staff- years to 32 staff-years; (ii) reduction of the equipment for the maintenance center and meter calibration laboratory by about 30Z. This did not diminish the effectiveness of the center because quantities originally specified by the consultant were in excess of actual requirements; (iii) reduction of the scope of work for the distribution contractor by cancelling from the contract some 8,000 customer connections and the transfer of existing customer connections from the old network to the new network. These were to be completed by SNE before the end of 1987; and (iv) seeking other sources of financing (para. 3.17). Implementation Schedule 3.5 The following table gives a comparison of the construction schedule realized versus that estimated at the time of project appraisal. The starting date in both cases is that of the reception of bis. Actual and Expected Pro]ect Implomentation Contractor Percent of the Consultant D a t e a o 1 Works completed and Bid R-c ipt Contract Award Coj9lino Work by Expectod ProJect Component Nationality ActurlXDwCted Act Petd ACtual Expect Completion Date Conakry II DistriL,ution Various 8/80 8/es 6/82 1/81 7/85 6/84 70 Training A Maintenance Center Various 6/81 12/80 12/81 3/81 1/84 6/82 15 Housing Nord France 6/81 12/80 1/88 1/81 11/84 9/82 0 (France) Malson Evolutive (France) Technical Assistance H.Q.I. 6/82 9/81 9/85 6/85 (Canada) Scholarship 1/8 J4/81 6/86 6/85  -6- 3.6 The table shows that, although the receipt of bids was on schedule for the Conakry II Distribution, the contract was completed about one year late due to an 18-month delay in awarding and signing the various contracts involved in the work (para. 3.11). 3.7 The construction and equipping of the training and maintenance centers (including the relay and meter calibration laboratory) were completed with a delay of 18 months. This was mainly due to unanticipated delays in removing old structures existing at the sites and in shipping equipment and furniture. 3.8 The housing component was also completed, with a delay of 25 months. In this inbtance, the major problem that delayed the start of zonstruction was the protracted negotiations required to secure the site. 3.9 The main cause of delay in engaging the technical assistants was indecision in selecting the foreign public utility that would provide the team of experts to assist SNE. Several months were employed in discus:tions with the contenders. 3.10 It took over a year to define the scope of the program for training, including overseas scholarships, and to then convince GOG that overseas training was desirable. Finally, late in 1982 GOG gave its assent and contracts were signed with Tractebel, HQI and Price Waterhouse. Procurement 3.11 Rehabilitation of Conakry II Distribution. Supply and erection of the distribution work was divided into 12 lots. All bids were jointly evaluated by MINEK and Tecsult. They used a point system to rank the bidders. As a result, they proposed award to bidders who had not submitted the lowest evaluated bids. IDA accepted only four of the 12 awards proposed. Following consultation with IDA staff, bids were awarded in accordance with IDA's guidelines on procurement. Procurement for the Conakry II component would have been simplified if it had been let in a single lot for supply and erection of all works. 3.12 Training, Maintenance Centers, and Housing Compound. The bidding process for these two components developed without major incidents except for delays in awarding the contracts due to the withdrawal of the three lowest evaluated bidders. 3.13 Obtaining required technical assistance proved to be an unusually difficult task. This was due to the limited number of qualified franco- phone operating utilities who are willing to accept such types of assignments. Further, conditions in Guinea and particularly at SNE made for difficult and protracted contract negotiations. The TA team finally was fielded in October 1982.  - 7 - 3.14 ScholarshiPs. Consultants and operating utilities were requested to submit proposals for overseas training to SNE staff. SNE finally decided, with IDA agreement, to contract the trairring as follows: (i) 54 staff members with two operating utilities (a total of 260 staff- months); (ii) 4 accountants with a public accounting firm (12 staff- months); and (iii) Three engineers with Ecole Supdrieure Interafricaine d'Electricite (ESIE) in Bingerville, C6te d'Ivoire. Proiect Cost 3.iS The table below summarizes estimated and actual costs of the project. Annex 1 shows the detail of actual costs per contract. Local costs were calculated on the basis of the average exchange rates prevalent for the period 1981-1985 during which, except for minor aspects, the project was executed. Since the Syli was grossly overvalued during the project period, the values of local costs expressed in US$ may not accurately reflect real costs. For the foreign costs, the actual disbursements made by IDA have been converted into US$ on the basis of the average exchange rate during the project implementation period. This amounts to US$23.68 million as compared to 1lS$28.50 million at Le time of negotiations (November 1980). The total. amount of foreign cost component of the project is US$27.41 million, representing a cost overrun of US$3.73 million or about 16Z of the foreign cost of the project. Actual and Appraisal Estimates of Proiect Costs (Million US$) Appraisal Estimate Actual Costs Local Foreign Total Local Foreign Total Rehab/Ext. Conakry II Distribution 1.58 11.66 13.24 1.15 10.44 11.59 Training & Maintenance Centers & Housing 0.80 4.72 5.52 0.77 5.54 6.31 Training Scholarships - 1.39 1.39 - 0.99 0.99 Technical Assistance 1.31 6.94 8.25 0.35 6.91 7.26 Consulting Services 0.31 2.65 2.96 0.29 2.52 2.81 Refin. of Cr. 5-22-GUI - 1.14 1.14 - 1.01 1.01 Project Unit Expenses - - - 0.12 - 0.12 TOTAL PROJECT COSTS 4.00 28.50 32.50 2.68 27.41 30.09 Credit Amount in SDRs 22.10 22.10 in US$ 28.50 - 23.68 Cost Overrun 3.73  3.16 Total payments, under practically all contracts, exceeded the original base contract figures, mainly due to the application of price escalation clauses (Annex 1). However, in addition three-contracts suffered large overruns ($2.5 million) in excess of price increases. The contracts were for: the supply of concrete poles; the construction of Conakry II Distribution; and the foundations and infrastructure for expatriate houses . The overruns on the contracts for distribution material and installation occurred because the bidding documents had been prepared before the detailed design of the distribution system had been made. (For the same reason there was a large underrun on the contrac; for distribution transformer cabins.) The overrun on the foundation contract was caused essentially by a change in the location of the housing compound and rock foundation problems in the new location. Proiect Financing 3.17 The foreign cost of the project was financed by US$23.68 million from IDA Credit 1085-GUI, US$0.68 million from PPF (P299-GUI), about US$1.0 million from the Petroleum Exploration and Promotion Project (IDA Credit 1438-GUI), and about US$1.2 equivalent from CIDA (Canada) who cofinanced the technical assistance. In addition, about US$0.85 million for Technical Assistance were financed by the ongoing Second Engineering and Technical Assistance Project, Credit 1595-GUI. The local costs of the project (equivalent to US$2.68) were provided by GOG. Disbursements 3.18 Initially, disbursements of the IDA Credit fell behind schedule because of delays incurred in awarding contracts and in taking the decision to proceed with the overseas training of personnel. However, the disbursement ratio later improved, and reached 93Z of the appraisal estimate in 1984, the penultimate year of the project period. The dis- bursement profiles are compared in the Basic Data Sheet. Project Execution 3.19 Proiect Unit. The project execution was managed by SNE through a Project Unit, located in a building which was remodeled and furnished under the project. The Project Unit consisted of three engineers and one accountant: one engineer leading tie unit and responsible for the rehabilitation program and the IDA project, one engineer responsible for the KfW project and one engineer for the CCCE project. In view of the high volume of work, the large number of contracts to be supervised and the number of consultants to be followed-up, in June 1984 GOG assigned a new engineer, who was familiar with Bank procedures and procurement guidelines, to head the IDA project. Reporting procedures and project implementation then improved considerably. 3.20 Rehabilitation of Conakry II Distribution. Although some delays occurred in the production of the detailed designs, this component can be considered to have been satisfactorily executed. The construction has been done in a workmanlike fashion and actording to accepted practices and the equipment is performing satisfactorily. However, the masonry  -9- cabins which-house the distribution transformers and switching equipment were not provided with adequate ventilation, which may eventually cause overheating of the equipment. Still pending is the removdl of a large portion of the old distribution system and the completion of about 502 of the transfer of the consumer connections from the old network to the new network. 3.21 Training and Maintenance Centers. The design is functional and the quality of construction is good. Both centers are adequately equipped. Execution of this part of the project proceeded without major problems except those experienced in the removal of old structures at the sites. 3.22 Housing for Expatriate Personnel. Quality of the housing compound infrastructure (roadways and sidewalks) and of the prefabricated houses is satisfactory. Its execution proceeded normally. 3.23 Technical Assistance. The TA team arrived in Conakry before the signature of the housing contract and had to live in a local appartment building under difficult conditions (including lack of power and water). The TA team initially was faced with the absence of working tools and equipment, and had to use their own tools brought with them until materials purchased under the project were delivered. Nevertheless, the team has made worthwile efforts to introduce modern power utility practices into SNE, including proper planning, maintenance, operating and financial controls. In spite of the major efforts of the TA team to bring about changes, they had only minimal impact on SNE. The members of the team had only advisory functions and found themselves stymied by the absence of effective SNE management, Government apathy, the indiscipline of SNE's personnel, and the general disarray of the country. The TA team can be given credit for operational improvements including the discovery of the oil theft at Tombo, the repairs to the 110 kV and 66 kV towers, and the operation of Donkea hydroelectric plant under difficult conditions prior to its rehabilitation. 3.24 Studies. (i) Institutional Study. An organization and manpower study was carried out in 1981. The study was limited in scope and addressed only the organization of the operating departments of SNE and the training needs for the utility. It became apparent during project implementation that a more comprehensive study was needed, addressing the relations with the Government and the organizational structure of SNE. In October 1984, following the change in Government, a new study was commissioned by GOG and aiming at the creation of an autonomous power utility responsible for planning, financing, constructing and operating its facilities. The study has been completed.' GOG is now implementing the recommendations. (ii) Preparation of a Second Power Proiect. A Power Master Plan study to determine the least- cost expansion program was commissioned in September 1984, and was completed in May 1986 and recommended: (a) the installation of 88 MW of diesel capacity from 1986 to 1992 for a total cost of about US$150  - 10 - million (1986 dollars); and (b) the development of Fomi hydroelectric site approximately 450 km from Conak:y (87 MW, 374 GWh) for the period 1993 to 2000, at a-cost of US$350 million (1986 dollars). The financing of these recommendations and project implementation capability required, were judged to be beyond Guinea's capabilities. It was then decided by GOG and the institutions which lend to the power sector, that further reconnaissance investigations involving mapping at relatively larger scale and geophysical work were necessary to determine the possibilities of less costly alterna.ive hydro sites closer to Conakry, the load center. These investigations are now in progress. Performance of the Consultants 3.25 Five consulting firms were retained by SNE to prepare the feasibility study of the rehabilitation and extension of Conakry Distribution, supervise the SNE 1980-84 Rehabilitation Program, supervise the construction of all civil works, prepare the institutional restructuring plan and the power master plan studies. Performance of the consultants was generally good. Their performance could have improved had two or three appropriately qualified consulting firms been responsible for studies of larger scope and tasks and had they been retained in a more timely manner. Performance of the Contractors 3.26 The performance of the contractors involved in construction work and installation was generally good. Performance of the Beneficiary (SNE) 3.27 The Project Unit established at the start of the project (para. 3.19) performed commendably well in the face of an indifferent SNE management and MINEK's constant interference in SNE's operations, particularly in contract awards. Altogether, control from the Project Unit was highly beneficial both for the implementation of the physical part of the project and for SNE's overall.1980-84 Rehabilitation Program. Othet aspects of the Beneficiary's performance are treated in the following hapters. Status of the KfW and the CCCE Financed Program Components 3.28 The status of the KfW and the CCCE program components is as follows:  - 11 - RfW Component (i) Supply and installation of a third 5 MW Deutz diesel electric unit at Tombo. Completed in July 1983. (ii) Rehabilitation and extension of the 60/20 kV substation at Tombo. Completed in late 1986. (iii) Installation of a new control room for the Tombo thermal power station. Completed in July 1983. (iv) Rehabilitation of the Donk4a hydro plant. The work originally contemplated was completed in mid-1985, but important additional work remains to be done: (i) replacement of the stators of the two 7.65 MW units (the insulation of the windings of existing stators has aged and is unreliable); (ii) installation of an aspiration system to remove bearing oil mist from the air chamber between the upper and lower generator bearings (the oil mist injures the winding insulation); and (iii) construction of a spillway on the headrace canal below the intake at the Kale reservoir, to prevent water spilling over the canal lining which had seriously eroded the hillside and damaged the canal. RfW and their consultant are looking into this matter for financing the needed work. (v) Installation of a 60 kV single circuit 3 phase cable between Libraport and Tombo. Completed in August 1985. CCCE Component (i) Rehabilitation of the Grandes Chutes dam and headrace tunnel. Completed in April 1983. (ii) Rehabilitation of units 1 and 2 and the step-up substation at the Grandes Chutes plant. Completed in April 1983. (iii) Rehabilitation of the 60/20 kV substations at Kipe, Sonfonia, Maneah, Youssoulou and Matoto. Three substations were rehabilitated in November 1986 and the rest of the work was completed in June 1987. (iv) Rehabilitation of telecommunication equipment. This work was completed in December 1986. (v) Supply and irstallation of two 8.8 MW units at Grandes Chutes. Completed in November 1986.  - 12 - IV. OPERATING PERFORMANCE 4.1 SNE's expected operating performance was not achieved. Between 1978 and 1985: - the generation plunged by more than 252 during the period 1978-1982 from 126 Glh to 92 GWh; - performance considerably improved in 1983 and 1984 and production grew by 402 and 292 respectively. However, the 1985 production level of 152 GWh fell short of the 258 GWh forecast at appraisal; - due to the frequent service interruptions, private diesel electric sets with an estimated capacity of 25 MW have been installed in Conakry and are estimated to produce about 50 GWh annually; and - the financial situation of SNE remained about the same. 4.2 The main reason for SNE's poor operational performance is the poor management practices at all levels of SNE's organization. Preventive maintenance is non-existant, breakdowns are frequent on all SNE's facilities, and the problem of materials pilferage extends throughout SNE's activities. 4.3 The growth in generation in 1983 and beyond which is attributed directly to thc. rehabilitation of the generating plants and the distribution system indicates an improvement in the availability of power to the consumers. However, the distribution system in Conakry I (the lower tip of Conakry) has not been rehabilitated and reliability of supply in that area is still poor. The Conakry system continues to suffer from power shortages and service interruptions. These problems are exacerbated by the lack of a good disconnection system for overdue accounts, and the increase in illegal connections. V. FINANCIAL PERFORMANCE 5.1 The following discussion on the development of SNE's finances during project implementation is based on financial statements presented for years 1983-1985 as reviewed by the external auditors. They declined to certify the accounts principally because ccounting information was unreliable due to lack of internal controls. 5.2 Given the qualifications indicated above, comparisons between actual figures and project appraisal forecasts are only roughly indicative. SNE's comparative financial statements are given in Annexes 2. 3 and 4. In contrast with the positive income projected during appraisal, SNE shows consistent deficits through 1985. The main reasons were as follows:  - 13 - (i) much lower thaL anticipated sales figures due to both continued generation deficiencies and poor billing practices; and (ii) fuel expenses were higher than forecasted in 1983-84, because of theft of diesel oil. The improvement in 1985 reflects increased availability of hydroelectric plants after rehabilitation, and the reduction of specific fuel consumption at the diesel station as improved fuel handling practices were put in place. 5.3 Key financial indicators are as follows: 1983 1984 1985 Actual Forecast Actual Forecast Actual Forecast Operating Ratio (Z) 177 90 150 87 11,7 89 Rate of Return (Z) (17) 3 (14) 5 (6) 5 Current Ratio .24 2.3 .35 1.1 .32 2.2 Receivables (Months outstanding) 9.5 3 10.9 3 5.5 3 The key financial ratios illustrate the poor financial performance of SNE, although it shows some slight improvement by 1985. The decrease in the operating ratios as well as the small increase in rate of return can mostly be attributed to the reduction of fuel expenses and 55Z increase in revenues by 1985. In 1984, GOG cancelled all of SNE's debts for transactions prior to 12/31/84, and consequently SNE had no long term debts after this period. Accounts receivables improved over the three year period reducing from 9.5 months to 5.5 months. This reduction was mainly caused by the write-off of arrears. 5.4 Billing and collection continues to be a serious problem. In 1985 only 60? of the energy generated was billed, and of this only 602 was collected. SNE's total number of legally connected consumers is not known; the current estimate (1986) is 41,000 of which 23,000 are in Conakry. The technical assistance team is currently implementing an improved system for metering, billing and collection and for the control of accounts receivables.  - 14 - VI. INSTITUTIONAL PERFORMANCE General 6.1 SNE's performance throughout the implementation of the project has been affected by its lack of autonomy. As an example, all expenditures above GF 5,000 (equivalent to about US$13.00) had to be cleared by NRNEE. This often involved lengthy negotiations with Government bureaucrats, who were jealous of their own prerogatives and insensitive to the urgencies of public utility operations. 6.2 Some GOG actions concerning SNE have been irrational. In December 1981, IDA was informed that on November 17, 1981, the Government had issued Decrees 625, 626 and 627, reorganizing the Power Sector. Decree 625 transformed SNE into la company for the technical and financial coordination of autonomous electricity companies, with MINEK as its supervisory authority". Decree 626 created an autonomous company PRODULEC in Conakry, as a subsidiary of SNE under the supervision of MINEK. PRODULEC would be responsible for generation and transmission of electrical energy to 10 autonomous distribution companies in the districts of Conakiy (SORELEC's). Decree 627 created 20 regional autonomous electricity companies for the specified administrative regions, as distribution or generation and distribution entities. The new set-up would have fragmented the already fragile power sector, and negated the main objective of the IDA project which was to develop a strong SNE. It took almost a year of very strong representations from IDA, including the threat on August 3, 1982, of suspending disbursement on the IDA Credit, to have GOG reverse the decision. 6.3 However, after the change in Government in 1984, GOG agreed to give autonomy to SNE, and to implement the recommendations of the institutional study (para. 3.24) financed by IDA. Management 6.4 SNE was poorly managed throughout project implementation. Decisions were poorly thought out and are taken only when disaster hit. This is exemplified in two cases: (i) rather than tetke the necessary steps to correct the prob.lems arising from the theft of structural elements from the transmission towers, SNE's management waited until the lines collapsed, keeping Conakry in the dark, before making repairs; (ii) to protect the bearings, oil changes in hydro unit bearings have to be done at regular intervals; although requisitions for importing the required lubricating oil were made by the technical assistance teams, no action was taken by SNE's management until one of the bearings failed. By then, given the urgency of the situation, the lubricating oil had to be imported by air at high cost. 6.5 Nothing illustrates better the lack of effective management than the appearance of SNE's offices and operating facilities. Conditions are appalling, even elementary housekeeping has noc been done for years. The general impression is of total disarray.  - 15 - Personnel 6.6 Although SNE requires no more than 1,000 staff to efficiently conduct its activities, it currently Las 1,350. Salaries are meager, and to supplement them, the staff apply themselves more to outside activities than to their work with SNE. The precarious economic situation of SNE's personnel creates an atmosphere of indiscipline and lack of motivation within the utility. Absenteeism reaches 50Z, and is particularly high in the operatione department. Tra.;inig 6.7 It is too early to judge the results of the ambitious training effort undertaken urder the IDA project, although so far there appears to be little noticeable improvement either in the attitude and motivation of SNE personnel, or in SNE's operations. Overseas training for engineers and high level technicians may have given them a glimpse of how to do things properly, but has not corrected the poor basic education of the trainees. Undergraduate technical education in Guinea is not comparable to that imparted elsewhere at university-level technical colleges. These shortcomings, coupled with low pay and an environment of borruption and lack of discipline, cannot be expected to produce substantial results in the foreseeable future. Covenants 6.8 Annex 5 lists the principal covenants in the Development Credit Agreement. SNE did not fulfill any of the major financial covenants and only partially complied with the administrative covenants. The Guinean economy deteriorated drastically during the project implementation period, to such an extent that a monetary reform and structural adjustment had to be implemented in early 1986. It was unrealistic to expect SNE to meet the elaborate set of financial covenants of the project under these circumstances. VII. ECONOMIC JUSTIFICATION Least Cost Solution for S7stem Expansion 7.1 The rehabilitation of the existing hydro generation facilities on the Samou River (Grandes Chutes and Donkea) was clearly the least cost solution when compared with the cost of adding thermal generation. Without rehabilitation, the Grandes Chutes hydro facilities would have been limited to a 10 MW operating capacity, endangered by the precarious state of the equipment and the risk of collapse of the Grandes Chutes dam. The incremental cost of rehabilitation tas about US$0.015 per kWh versus a minimum of US$0.12 per kWh for thermal generation with new diesel units. 7.2 The voltage change-over from 15 kV to 20 kV for primary distribution throughout Conakry resulted from a comparison between investment cost and cost of losses. Voltage regulation has improved noticeably in Conakry II, and technical losses are expected to come down to acceptable levels.  - 16 - Return on Investment 7.3 The economic rate of return on the IDA financed project cannot be estimated in isolation from the total 1980-84 Rehabilitation Program. The internal economic rate of return has been, therefore, calculated as the discount rate that equates: (i) the present value of expenditures in constant 1985 prices of cap'tal rehabilitation and expansion works, technical assistance, and operation and maintenance; and (ii) the present value of revenues derived from the male of all incremental electricity distributed to final consumers in the Conakry interconnected system. Incremental sales are defined as the difference between total demand satisfied with and without the project. Without the project, it is assumed that SNE's ability to satisfy demand would have fallen to zero by end 1985. The valuation of benefits has been done at the current average tariff of GF 60 per kWh. On this basis, the return of the program is ibout 201 compared with 231 estimated at project appraisal. (See Annex 5.) VIII. IDA PERFORMANCE Assessment of the Beneficiary's Capability 8.1 The results of the project in the institutional area clearly signal that IDA's assessment at project appraisal was overly optimistic. In fact, given the political and economic climate in Guinea at that time, there was no way the institutional reforms in the power sector could be achieved as expected. Supervision 8.2 Supervision by IDA was not adequate, both in terms of frequency and duration of missions, and staff continuity. The average interval between supervison missions was six months over the five years of project implementation, and the average duration was 1.5 weeks. Two engineers, four financial analysts, one training expert, and one consultant participated in the supervision. Relations between IDA staff, Government and SNE officials were reasonable. IDA's Role 8.3 IDA played an important role in coordinating the intervention of the three lending agencies--IDA, CCCE ard KfW--in the context of the 1980-84 Rehabilitation Program. The fact that at least the physical part of the Program was completed successfully is in large measure the result of IDA's efforts. 8.4 The Power Master Plan Study was based on the results of the Water Resources Master Plan, which were weak and incomplete for power planning purposes. IDA failed to request the additional investigations (aerial photography, mapping and geophysical work) prior to the commencement of the study. On the oth6r hand, the Master Plan Study contributed to divert GOG's attention from the development of the Konkoure hydropower and aluminum smelter project (US$3 billion) which had inhibited the development of the power sector.  - 17 - 8.5 Also, with hindsight but on a more specific level, the technical assistance component of the project was ill conceived. IDA should have provided the technical assistants with the proper tools, equipment, and an operating budget rather than having them rely on an ill-equipped and poorly managed SNE. 8.6 IDA acted resDonsibly in insisting that GOG rescind the decrees to reorganize SNE into 30 utilities. IX. CONCLUSIONS 9.1 Although the physical components of the project have been successfully completed, the institutional objectives were not achieved during the life of the project. Over tte p;3ject period SNE was badly managed and its performance has been totally inadequate. The project was, nevertheless, partly successful in. prov,ding facilities important for the future development of Guinea's pove'. sector. 9.2 However, the Government has recently taken measures which should improve the institutional framework, including the appointment of a new management team and a management committee to oversee the creation of an autonomous utility. In addition a new electricity law, which will inter alia provide autonomy to SNE, is before the President for signature. Continued support to SNE's new management by the donor comtunity is essential in order to capitalize on recent gains. The Second Engineering and Technical Assistance project, which was made effective in June 1986, provides a good means to assist the Government in reaching its objectives. 9.3 The main lesson the Bank should draw from this proJect is that it is not possible to rehabilitate such a sector or a major public enterprise when the rest of the economy is not functioning. It was also unrealistic for the appraisal team to have expected to redress the institutional set-up of the sector and the personnel issues (motivation, compensation, etc.) of SNE in isolation of improvements in the overall Government policy towards public enterprises.  IEPUBLIC P GUINEA FIRST POIER PROJECT LIST OF CONIITRACTS AD ACTUAL DIStURSEENTS (all figures in thousands) Amount Contract Value ktual Disbursmnts Overrun ur (Iderril of Credit --------- ------ --------------- --- ------------- -- Allqcated Foreign Local Foreign Equivalent Lwal Foreip Equivalnt LoKal Object of Contract (SRs) Currency (Sylis) Curency Soft (S)lis) Currency Sls (Sylis) 1. Equipment and Materials 1.01 bork Vehicles 405 FF 405 Ff 49 0 FF 1.02 Concrete Poles 3,526 Ff 460 6,140 fF 747 797 2,614 FF 337 1.03 Transformer, Cables I Accessories 13,093 ff 13,660 ff 1,756 737 FF 1.04 Circuit Breaker Lou Voltage 5,352 FF 53,01 FF 720 6 FF 1.05 Meters 209,5 FF 3,047 FF 413 SW Ff .06 Insulators, Lightning Arrstors, SS7 SF 1,173 SF 510 161 SF Fuses Sectionalizers t.O7 Equipent i Tools ior Maintenance Center 65,570 P 94,431 f 1,468 (1,13213F 1.OB Frniture for Housn 6 Training 1,619 ff 1,543 fF 195 1751FP 6 laintenance Ctentrs 1.09 Transport Vehicles for SNE O0N Ff O0N FF 99 0 PF 1.10 Tansporeer Oil 121 I1 121 IN 47 0 M Suhtotal 5,590 6,002 422 2. Civil llrks and Installations 2.01 Construction Conakry 11 Distribution 733,917 CFA 6,734 1,431,643 CfA 3,445 12,216 697 726 CFA 5,42 2.02 Construction Distribution Transfor. Cabins 2,6" US 7,059 1,98 DIIS 1,891 13,607 W51lUt 6:,54 2.03 Construction Training and haint. Centers 3,760 SF 1,3" 4,369 SF 1,939 10,913 64 SF 2,515 2.04 Supply and Erection 17 HoRuse 5,202 PfF 0 6,011 Ff 746 1,716 80 Ff 63i 2.05 Foundtion for Hous and Infrstructure 4,058 FF 4,462 5,267 FF 626 5,201 1,20 Ff 739 Subtotal 5,150 9,667 3,517 3. Consultants Services and Training 3.01 Scholarships le 9" If 19 365 D 339 367 6P 3.02 TSchoicl sist nce 4,761 USS 2,000 3,394 US9 3,230 0,120 U,39)Ja 6,120 3.03 Solarships 31 USt 371 US$ 336 (20RlOD 3.04 Audit of SE s Financial Statents 252 US9 252 US$ 260 0 wt N 3.05 Schlarships for Accintants 22 US$ 25 Us$ 25 3 of 3.06 Scholarships 1,5S5 PF 1,595 PF 167 0 Ff 3.07 Construction Supervision Conairy listr. 9,047 FF 2,66O 9,492 FF 1,226 6,7U9 445 Ff 3,96 3.08 Construction Superviion Trining ad 3,45 Ff 3,458 FF 448 (1)ff Maintenance Centers, and Ibusing 3.09 Reeluation of Fixed ssts7 S 75 US$ 67 0 U Subtotal 6,200 6,116 (82) 4. Refunding of the First Credit and Advances 1,2S0 1,293 13 5. UnalloKated 3,990 3,69" 6. Project Unit Expenses 2,719 2,711 TOTAL COINITACIS 22,100 32,873 22,060 62,079 7,70 29,2M ~~~~~~~ 4_  -1\94- JuzAm-ex 2 1983 1984 1905 ctual Forecast Actual Forecast Actual Forecast Energy Sold (816) 126.1 209.5 93 244.5 107.0 264.3 Average Tariff (c/KWN) 6.01 3.80 6.01 4.35 6.01 5.01 it Revenues Sales of Energy 419 796 558 1064 643 1323 haterials and Services Charged 8 18 17 23 24 27 Miscellaneous Incoses 3 1 3 1 1 1 Total Revenues 430 815 577 1088 668 1351 Expenditures ____________ Fuel and Other Consumption 456 203 508 334 181 516 Personnel Expenses 66 140 71 157 83 174 Taxes 4 4 3 4 4 5 Bad Debt - - - - 174 - Other Expenses and Supplies 84 220 105 256 129 290 Depreciation 153 167 179 196 207 222 Total Operational Expenses 763 734 865 947 719 1,206 Operating Income (333) 79 (288) 142 fill) 145 Other 0 0 (56) 0 6 0 Net Income before Interest (333) 79 (343) 142 1105) 145 Interest 24 50 27 69 27 83 Net Surplus (Deficit) after Interest (356) 29 (371) 73 (132) 62 Income Tax 0 10 0 24 0 20 NET INCOME (3i6) 19 (371) 49 (132) 42 { =#=~~~~~~~~~~~~~~~~~C= S==== ==--_= ===== ===# =C=- Operating Ratio 177.3% 90.1% 149.8% 87.0Z 116.6% 99.3% Rate of Return % on Net Fixed Assets -17% 31 -141 5% -61 5%  -20- ANNEX 3 REPUBLIC OF GUINEA FIRST POWER PROJECT COMPARATIVE SNE BALANCE SHEET STATEMENTS 1980-1985 lIn Millions of Sylis) 1983 1984 1985 Actual Forecast Actual Forecast Actual Forecast ASSETS Net Fixed Assets Plant in Service 2,522 3,791 2,848 4,397 2,994 4,?19 Less: Depreciation (268) (289) (425) (405) (605) (706) 2,254 3,502 2,423 3,912 2,389 4,211 Dther Assets 63 -- 119 -- 153 -- Less: Depreciation (11) -- (50) -- (77) -- 51 0 69 0 76 0 2,305 3,502 2,491 3,912 2,465 4,211 9urrent Assets: Cash 51 8 25 9 222 9 Inventories 23 45 27 67 24 96 Receivables 342 203 522 272 304 338 Other Current Assets 2 - 3 - 7 - Total Current Asset 418 256 577 347 557 443 Total Assets 2,723 3,758 3,069 4,259 3,022 4,655 Equity and Liabilities Equity: Oovernsent Contributions. 2,264 2,851 2,489 ',0'5 2,462 3,213 Petained Earnings (1,260) 20 (11.072! 69 (1,204) 110 Revaluation Reserve 2ther 'htal Equity 1,005 2,871 1,418 3,083 1,259 3,323 :urrent Liabilities: Long and short-term libilities 1,71e 986.7 !,652 1,176 1.764 1,332 total Equity t Liabilities 2.723 ',759 't069 4,25Q 3.022 4,655 Receivables (Months) 9.54 N .00 10.95 3o.0 5.46 3.00 Current Ratio 0.24 2.26 0.3. 2.13 0.32 2.21  REPUBLIC OF GUINEA FIRST POWER PROJECT COMPARATIVE SHE FUNDS FLOW STATEMENTS 1983-1985 (In mlin fSls 198 1984 1@ Actual Forecast Actue-J-17racast Actutl For.cast Internal sources of funds Operating Income (356.4) 28.7 (370.6) 72.5 (151.6) 62.2 Depreciation 152 167 152 196 1t0 222 Consumer Contributions Total Internal Funds 1204) -1 N 2 i Operational Requireonts Change in Working Capital and Adjustments n/(U4B) (262) (337) (136) (867) (31) Interest Charged to Operations 24 so 27 69 27 63 Debt Repsyment - 136 173 163 Totsl Operational Requiremnts (324) (776) (310) 100 (339) 234 Internal Funds Available to invest 120 271 92 163 378 59 Capital Investment Total Construction 843 383 344 877 161 267 Interest During Construction Total Capital Investment liT JW 344 ~i7r 16lT Balance Financod 723 112 252 216 (226) 217 Financino Government Contributions 699 226 (27) Others - 11121 - 219 Total Capital Sources 699 1T 226 -15- (27) 21M Increase/D*crease In cash (24) (6) (27) e 198 1 */ Includes variation in working capital, cancellation of Sylis 728 million in GOC debt for transections prlor to 12/31/84 and depreciation adjustments.  -22- ANNEX 5 REPUBLIC OF GUINEA FIRST POWER PROJECT CREDIT 1085-GUI Compliance with Credit Conditions Credit Agreement Section Description Status 3.02 (a) Employment of consultants - complied with 3.05 Land acquisition - complied with but with delays 3.06 Borrower to (1) replenish -(i) SNE has not received SNE's petty cash fund as and all funds needed; and when needed; and (ii) allow (ii) 15,000 Sylis SNE to draw funds up to (equivalent to US$13) Sylis 15,000 without is insufficient for outside authority normal business activ- ities 3.07 Annual inspection of dams - complied with in 1985 3.08 SNE to carry out a Manage- - complied with ment Improvement Program 4.02 Audit of SNE's Annual - complied with up to 1985 Accounts 4.05 (a) SNE to operate and main- - not complied with; taim its equipment ane' maintenance is neglected property in accordance due to lack of effectivs with appropriate engi- management neering and public utility practices 4.05 (b)&(c) (M) Borrower to maintain a special - complied with account in DBque Guineenne du Commerce Exterieur (BGCE) for SNE; credit to such account necessary amounts for imports required for maintenance (ii) GOG to issue annually a global - not complied with license for SNE imports of not less than US$700,000  -23- ANNEX 5 Credit Agreement Section Description Status 4.06 (b) Assets to be revalued annually - assets were revalued by consultants and incor- porated in 1982 accounts but no further revalu- ation has been done 4.08 (b) SNE to earn rates of return - not complied with of 2% for 1983 and not less than 3% thereafter on average revalued net fixed assets in operation 4.09 (a) SNE to furnish three months - not complied with before the beginning of each year starting with 1981, proposed capital expenditures and related financing plan 4.09 (b) Borrower to make available - adequate funds have all funds necessary to meet not been provided in a requirements of investment timely fashion program, debt service and working capital 4.10 SNE to furnish to IDA - not complied with periodic reports on the adequately as reports were Rehabilitation Program not sent on time and usually including projects limited to those projects financed by CCCE and KfW financed by IDA  -REPUBC OF GINFA 1980 - 84 aOP A ANa D EA XINS P14AM Internial Rate of Return Mglsi (In riflm US dollars , 1986 Prices) Pmer Generatimx Benefits Costs Net Hydro 'hermal Total Inrntal Sales Investment Operatin & Maintenane Total Cash a a G ah ob %h S$ m& OOE aid IkfW Total Fuel Diesel ydro T & D Total Costs Flow Project Projects Iwest. Cost Units Units 0 & M US$ Year ____ - uS$ US$ US$ US$ US$UUS$S$US$ __ (B ()(B) (A-B) 1980 N 1981 1.5 2.2 3.7 3.7 (3.7) .1982 7.5 11.0 18.5 18.5 (18.5) 1983 7.3 10.6 17.9 17.9 (17.9) 1984 8.1 11.8 19.9 19.9 (19.9) 1985 2.4 3.6 6.0 6.0 (6.0) 1986 129 32 161 129 20.1 2.2 1.5 0.9 2.0 6.6 6.6 13.50 1987 169 - 169 135 21.6 - 0.5 0.9 2.0 3.4 3.4 18.20 1988 177 - 177 142 22.7 - 0.5 0.9 2.0 3.4 3.4 19.30 1989 186 - 186 149 24.9 - 0.5 0.9 2.0 3.4 3.4 21.50 1990/ 2016 195 - 195 156 25.9 - 0.5 0.9 2.0 3.4 3.4 22.50 Internal rate of return about 20%. Note: Figures between parentheses are neptive for cash flaw purposes.