Philippines - Energy Sector Loan Project

Document of The World Bank FOR OFFICIAL USE ONLY jlAJ. 3/4.3 L ji J l r Report No. 8049-PH STAFF APPRAISAL REPORT PHILIPPINES ENERGY SECTOR PROJECT NOVEMBER 22, 1989 Industry and Energy Operations Division Country Department II Asia Region This doument has a resticted distibution and may be used by recipients only in the perforniuce of thekr officfd duti Its contents may not otherwise be didosed whout World Bnk sathorztion.  CURRENCY EQUIVALENTS Currency Unit - Philippine Peso (P) US$1.00 - P 21.5 P 1.00 - 100 Centavos (ctv.) (as of July 1989) WEIGHTS AND MEASUR!S MT - Million tons TOE = Tons of oil equivalent m , Meter (3.2808 feet) km = Kilometer (0.6214 mile) kV = Kilovolt (1,000 volts) kW K Kilowatt (1,000 watts) MW = Megawatt (1,000 kW) kWh K Kilowatt hour (1,030 watt-hours) GWh - Gijawatt hours (o:ue million kWh) MVA 8 Mega volt-ampere (one million volt-amperes) ABBREVIATIONS AND ACRONYMS ADB = Asian Development Bank AIC - Average Incremental Costs BOT = Build-Own-Transfer BOOT Build-Own-Operate-Transfer DENR Department of Environment and Natural Resou.ces DOF Department of Finance ECC = Energy Coordinating Council EMB = Environmental Management Bureau ERB = Energy Regulatory Board Eximbank = Export-Import Bank of Japan ICB = International Competitive Bidding IERR = Internal Economic Rate of Return LCB = Local Competitive Bidding LIB - Limited International Bidding LPG - Liquified Petroleum Gas LRMC = Long-run Marginal Cost MERALCO = Manila Electric Company MOE = Ministry of Energy NEA a National Electrification Administration NEDA - National Economic Development Authority NPC - National Power Corporation OEA - Office of Energy Affairs OECF = Overseas Economic Cooperation Fund of Japan PIC - Project Implementation Committee PNOC - Philippines National Oil Company PNOC-EDC = PNOC-Energy Development Corporation REC = Rural Electrification Cooperatives SOEs = Statements of Expenditures FISCAL YEAR January 1 - December 31  FOR OMCIAL USE ONLY PHILIPPINES ENERGY SECTOR PROJECT Table of Contents Paje No. LOAN AND PROJECT SUMMARY .... . . . . . . . . . . iii I. SECTORAL SETTING .... . . . . . ..1..... . . . . . . . . A. Background .1 B. Energy Resources .1... . . . . . . . . . . . . . . . . . . C. Energy Demand ..... . . . . . . . . . . . . . . . . . . . 2 D. Institutional Framework and Coordination . . . . . . . . . . 2 m E. Issues. 3 F. Sector Strategy. 5 G. Bank Strategy and Rationale for Bank Involvement . . . . . . 9 II. BENEFICIARY INSTITUTIONS .... . . . ...... . . . . . . . 11 A. Office of Energy Affairs .1.1.. . . . . . . . . . . . . . . 1 B. Energy Regulatory Board .... . . . . . . . . . . . . . . . 11 C. Environmental Management Bureau . . . . . . . . . . . . . . . 12 D. Philippines National Oil Company . . . . . . ... . . . . . . 12 E. National Power Corporation ........ .. .. .. .. . 15 F. National Electrification Administration . . . . . . . . . . . 17 III. THE PROPOSED LOAN ........................ 19 A. Origtn . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 B. Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 19 C. Action Plans and Investment Programs . . . . . .,. . . . . . 19 D. Investment Costs .... . . . . . . . . . . . . . . . . . . 26 E. Financing Arrangements .... . . . . . . . . . . . . . . . 27 F. Implementation Arrangements . . . . . . . . . . . . . . . . . 30 G. Procurement ..... . . . . . . . . . . . . . . . . . . . . 31 H. Disbursement ..... . . . . . . . . . . . . . . . . . . . 34 I. Monitoring, Reporting and Audit . . . . . . . . . . . . . . . 34 J. Environmental Concerns .... . . . . . . . . . . . . . . . 35 This report is based on the findings of the pre-appraisal and appraisal missions which visited the Philippines in December 1988 and July 1989, respectively. The members of the missions were Hossein Razavi (Mission Leader), Anil Malhotra (Senior Energy Specialist), Etienne Linard (Senior Power Engineer), Jamil Sopher (Senior Financial Analyst), Mihir Mitra (Power Engineer), Peter Pease (Pr-'urement Specialist), Vineet Nayyar (Consultant), Richard Schuler (Environmei.sal Specialist), and P. Venugopal (Consultant). Colin Rees (Environmental Specialist) and Ahmed Jehani (Lawyer) assisted the appraisel mission in the field and Patricia Brereton-Miller provided editorial assistance in Washington, D.C. I | ~~~This document has a restricted distribution and may be used by recipients only in the performance 0