Sri Lanka - Seventh (Mahaweli Transmission) Power Project

Document of The Woid Bank FOR OFFICIAL USE ONLY Report No. 9164 PROJECT COMPLETION REPORT SRI LANKA SEVENTH (MAHAWELI TRANSMISSION) POWER PROJECT (CREDIT 1210-CE) NOVEMBER 30, 1990 Industry and Energy Division Country Department I Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  LIST OP ABBREVIATIONS AMP Accelerated Mahaweli Program CEB Ceylon Electricity Board ERR Economic Rate of Return COSL Government of Sri Lanka IDA International Development Association PCR Project Completion Report SAR Staff Appraisal Report  THE WtORLD *A#K FOR OFFICIAL USE ONLY Waimanton. DC 20433 U.$ A Office of Direeto:-G.enral Opewattos a valuattos November 30, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Sri Lanka Seventh (Mahaweli Transmission) Power Proiect (Credit 1210-CE) Attached, for information, is a copy of a report entitled "Project Completion Report on Sri Lanka - Seventh (Mahaweli Transmission) Power Project (Credit 1210-CE)" prepared by the Asia Regional Office., No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This aacumen hs a mstund dgnbuuon and may be ed by t-u mnIs onlI w m h ffunmce of thelr offibsa duuL Its contmnts may not otfhwme be dXmmmed nthout Worw "ntau Uaumwzn.  FOR OFFICIAL USE ONLY SRILA SEVENTH (MAHAWELI TRANSMISSION) POWER PROJECT (CREDIT 1210-CE) PROJECT COMPLETION REPORI Table of Contents WPage No. Preface . ............................................................ i Evaluation Summary ................................................. ii PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Identity ................................................. 1 2. Background ...................................................... 1 3. Project Objectives and Description .............................. 2 4. Project Design and Organization ................................. 2 5. Project Implementation .......................................... 3 6. Project Results ................................................. 4 7. Project Sustainability .......................................... 4 8. Bank Performance ................................................ 5 9. Borrower Performance ............................................ 5 10. Project Relationship ............................................ 5 11. Consulting Services ............................................. 12. Project Documentation and Data .................................. 5 PART III Statistical Inforamtion 1. Related Bank Loans and/or Credits ............................... 6 2. Project Timetable ............................................... 7 3. Credit Disbursements ............................................ 8 4. Project Implementation ...... ....... ............................ 9 5. Project Costs and Financing ..................................... 10 6. Project Results ... .............................................. 12 7. Status of Covenants ............................................. 13 8. Use of Bank Resoruces ........................................... 15 ANNEX . .......................................................... 17 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - PROJECT COMPLETION REPORT SRI LANKA SEVE NT (HMAAWELI TRANSMISSION) POWER PROJECT (CR. 1210-CO) PREFACE This is the Project Completion Report (PCR) for the Seventh (Mahaweli Transmission) Power Project in Sri Lanka, for which Credit 1210-CE in the amount of SDR 31.3 million (US$36.0 million equivalent at the time of negotiations) was approved on February 3, 1982. The credit was closed on March 31, 1988, 34 months behind schedule. The project was cofinanced by OPEC Special Fund to the level of US$11.0 million. The last disbursement was on January 25, 1989, and the undisbursed balance of SDR 1.25 million was canceled. The PCR was prepared by the Industry and Energy Division, Country Department 1, of the Asia Region. Preparation of this PCR was started during IDA's supervision mission of the ongoing power projects in February 1989, and is based, inter alia, on the Staff Appraisal Report, the Development Credit and Project Agreements, supervision reports, and correspondence between IDA and the Borrower. The Borrower provided information required for the preparation of Part III of the PCR. The comments of the Borrower on Parts I and III of the PCR have been incorporated in the final report.  -iit- PROJECT COMPLETION REPORT SRI LANRA SEVEDN? (MABAWLLI TRANSMISSION) POWER PROJECT [CR. 1210-Cl) EVALUATION SUMMARY Oblective The project's main objective was to assist the Ceylon Electricity Board (CEB) to construct the transmission works that would deliver at least cost the output from hydropower stations in the Mahaweli basin to the principal load centers in the Colombo area. A secondary objective of the project was to improve the reliability of the existing 66 kV network (para. 3.1). The project was cofinanced by OPEC Special Fund to the level of US$11.0 million. Implementation Experience Project implementation experienced considerable delays due to one contractor's poor performance, compounded by the occurrence of civil disturbances (para. 5.3). CEB performed well during project implementation, and its effort in implementing an emergency plan to meet the commissioning date of the first unit at Victoria power station in August 1984 was commendable (para. 5.4). Project Results The project's main objectives were achieved. Apart from the physical benefits, the project had a significant human resources development impact as it provided CEB staff with the opportunity of wrrking closely with experienced foreign engineering consultants in successfully implementating, for the first time, a 220 kV transmission grid in the country (para. 6.1). Project Sustainability The pioject provided a least-cost linkage to vacate the energy output from all major hydro-generation developments in the Mahaweli basin to the load centers and is expected to provide a steady level of net benefits throughout its economic life (para. 7.1). Given the Government's commitment towards enabling CEB to achieve a minimum 8? rate of return on revalued net fixed assets, CEB is expected to maintain a sound financial position (para. 7.2). Findings and Lessons Learned The leading role of the foreign engineering consultants during project preparation and their active participation in construction supervision and contract management during implementation contributed greatly to the attainment of project objectives.  SRI LANKA SEVENTH (MAHAWELT TRANSMISSION) POWER PROJECT (CR. 1210-CE) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Identity Project Name: Seventh (Mahaweli Transmission) Power Pro,ect Credit No.: 1210-CE RVP Unit: Asia Country: Sri Lanka Sector: Energy 'ubsector: Power 2. Background 2.1 Sri Lanka has few indigenous resources, k.f which hydropower and fuelwood are tne most important. There re no knowr. hydrocarbon reserves. The hydropower potential is estimated to ' about 2,300 MW, with an energy potential of about 6,500 G'0h a year un-'er tverage hydrological conditions. In 1981, installed hydro-generdting capacity was 369 MW. Per capita energy con?"-f.ption in 1981 was about 238 kg of oil equivalent, 67Z of which was supp-ied by fuelwood and agricultural residues, 29Z by imported petroleum products and 4Z by hydropower. The country's substantial dependence on imported energy and its high cost since 1973 strongly influenced the Government of Sri Lanka's (GCS') energy sector policy, the principal objectives of which are to: (a) develop domestic hydropower resources to reduce the country's dependence on imported oil; an, (b) improve the access to, and quality of, electricity supply throughout the country. In accordance with this policy, GOSL has given high priority to the puwer subsector's development. The centerpiece of hydropower development was the Accelerated Mahaweli Program (AMP), which, during 1984-1988, added 533 MW generating capacity to the national grid (Victoria, 210 MW; Kotmale, 201 MW; and Randenigala, 122 MW). The Seventh Power Project fit in well with GOSL's energy sector strategy as it provided the vital link to vacate the energy output from the hydropower stations to be constructed in the Mahaweli basin to the principal load centers in and around Colombo. 2.2 The Ceylon Electricity Board (CEB), formed in 1969, is a statutory corporation with responsibility for the generation, transmission and, to a major extent, the distribution of electricity in Sri Lanka. In 1981, CEB's total installed generating capacity was 519 MW, comprising 369 MW hydroelectric plants and 150 MW thermal plants. In parallel with the development of hydropower plants constructed under the AMP, CEB is the executing agency for the complementary investments required to augment and reinforce its transmission and distribution systems in order to meet increasing demand for electricity. 2.3 The Bank Group's involvement in the power subsector started with a loan of US$19.1 million ('oan 101-CE) .- 1954 to helo finance a 25 MW expansion of the Laksapana hydroelectric scheme, To date, the Bank Group has financed ten operations in the power subsector, of which eight have been completed. The Seventh Power Project is cnnsistent with the Bank Group's  2 strategy for the Sri Lankan power subsector, aimed at supporting effottu to ensure the subsector's efficient development to meet demand at least cost. The project was cofinanced by the OPEC Special Fund. The project helped CEB to establish, for the first time, a 220 kV grid that will serve to vacate the energy outputs from all major hydropower stations planned to come into operation before the end of the century. 3. Project Objectives and Description 3.1 The project's main objective was to assist CEB to constr'xct transmission works that would deliver, at least cost, the output from hydro power stations in the Mahaweli basin to the principal load centers in the Colombo area. A secondary objective of the project was to improve the reliability of the existing 66 kV network. The key project components were: (a) 126 km of 220 kV double circuit transmission line from Kotmale to the load centers around Colombo and 38 km of 132 kV single circuit transmission line from Rantambe to Badulla; (b) one new 220/132 kV substation, extensions to three existing 132 kV substations, one new 132 kV switching station and extensions to an existing 66 kV substation; (c) replacement of circuit breakers with new ones of higher rupturing capacity; (d) equipment for power factor correction, power line carrier, and for a loss reduction cell; (e) vehicles and tools and buildings; and Cf) engineering consultancy services, technical assistance and training. 4. Project Design and Organization 4.1 The project had a clear conceptual foundation and the main project components, i.e., the 220 kV transmission lines and associated substations - (para. 3.1(a) and (b)), were well prepared. The selection of 220 kV as primary transmission voltage was based on the screening studies prepared by CEB and its engineering consultants in 1979 and 1981, which confirmed the 220 kV a'.ternative as the least-cost option. Also, the criteria for selecting the number and capacity of transmission circuits were sound. The project's timing was very appropriate in light of the objective of vacating power from the three hydropower stations under construction in the Mahaweli b.asin, commissioning of the first unit at Victoria power station being scheduled for mid-1984. 4.2 Since it was the first time that 220 kV voltage would be used in the country, experienced foreign engineering consultants were engaged from the conceptual design stage, and their services covered bid document preparation, bid evaluation, detailed design, supervision of turnkey contracts, inspection and testing, and construction supervision. Tl.e engineering consultants played an important role during project implementation in assisting CEB to identify and resolve implementation issues, thus minimizing project slippage.  3 5. Prolect Implementation 5.1 The project faced a very tight construction schedule between September 1982 and May 1984. Completion by this date was necessary to permit the first unit at Victoria to come on line as scheduled in mid-1984. The main project components were constructed through turnkey contracts which covered: (i) 220 kV and 132 kV transmission lines; (ii) 220 kV, 132 kV and 66 kV substations; (iii) transformers; (iv, replacement of circuit breakers; and (v) supply and installation of reactive power factor correction equipment. 5.2 The most notable variance between planned and actual project implementation was the delays associated with the two major project components: the 220 kV and 132 kV lines were completed in August 1986, and the associated substations and switching stations in March 1985. The delay was mainly caused by the poor performance of the first contractor for the 220 kV and 132 kV lines, compounded by the occurrence of civil disturbances since July 1983. 5.3 The supply and erection contract for the 220 kV and 132 kV lines was awarded to the lowest evaluated bidder on June 1, 1981, with a completion date of April 30, 1984. The contractcr mobilized on site in July 1982. Progress at site was slow due inadequate provision of manpower and material resources and poor site management. By December 1982, the contractor was 2-3 months behind schedule. Following the outbreak of civil disturbances in July 1983, the contractor evacuated its entire expatriate work-force and was unable to remobilize to complete the erection portion of the contract. Following protracted negotiations, it was agreed to delete the balance of the erection work from the original contract and award it to a second contractor on January 20, 1984. The first contractor remained responsible for t;.e design and supply of materials, since at that stage a change in tower design would have resulted in unacceptable delays. However, the second contractor's progress was ham}ered by late supply of construction drawings, late delivery of materials., shortages of critical tower members, and malfabrication of tower steel work, which led to a-i overall extension of the completion date of the second contract by 6.3 months. As a result, the Kotmale-Biyagama-Kelanitissa line was energized in September 1985, followed by Biyagama-Katunayake line (December 1985), Biyagama-Pannipiciya line (February 1986), and Rantambe- Badulla line (May 1986). 5.4 As it became evident that the 220 kV Kotmale-Biyagama line would not be completed on time to take power from the Victoria power station, CEB devis(.d a contingency plan by using one of the 220/13k kV transformers provided for Katunayake substation at Xotmale and constructing an emergency 132 kV line to connect the Laksapana-Chunnakam line to the Kotmale switchyard. The scheme'e feasibility was confirmed by load flow studies carried out by the engineering consultants. The emergency 132 kV line was constructed by CEB's force account. The first unit at Victoria was commissioned in July 1984, and power was transmitted over the 132 kV system via Polpitiya to Kolonnawa and Kelanitissa. 5.5 The contracts for the substations and transformers were satisfactorily completed by March 1985. The delay was due to: delay in contract award (7 months behind SAR schedule): civil disturbances in July 1983 which caused disruption of work at site; temporary use of one of the 220/132 kV transformer  4 provided for Latunayake at Kotmale; and additional 33 kV works at Blyagam and Katunayake. 5.6 Contracts for the replacement of circuit breakers and installation of reactive compensation equiipment were awarded in August 1984 ana January 1986, respectively. substantially later than the SAR schedule; however, this diL. not m.aterially affect the system's operation. 6. Project Results 6.1 Despite delays in project impleme.ntation, the project's main objectives were achieved. Apart from the physioal benefits, the project had a significant human resource development impact. CEB's engineers worked closely with experien^ed foreign engineering consultants on the conceptual design and specifications of the first elements of a 220 :V grid that will eventually cover much of the country. The project also contributed to the establishment of a system loss reduction unit in the planning group through provision of equipment and training. 6.2 Total project cost at completion, including additional works, amounted to US$60.4 million equivalent, 211 below the appraisal estimate of US$76.4 million. The principal reason for the cost reduction was the devaluation of the local currency against the USS over the project implementation period. Since the project constituted an integral part of CEB's 1982-1992 investment program, its benefits to consumers cannot be separated fro-. those generated by the rest of CEB's capital expenditure. The economic rate of return was therefore reassessed for .he entire investment program, as at appraisal. The ERR thus calculated is about 3.41 using the average tariff as a proxy cf economic benefit, or 12-2Z if consumers' willingness pay is used ab a measure of economic benefit. This compares with the appraisal estimates of 8.0Z (based on average tariff) and 13.8Z (based on cons=.ers' willingness to pay). The difference between the appraisal and completion ERR estimates was due to overestimation at appraisal of both the sales growth and the level of fuel surcharge. 7. Project Sustainability 7.1 The project provided a least-cost linkage to convey the energy output to the load centers from all major hydro-generation developments, including Victoria, Kotmale, and Randenigala commissioned during 1984-1988, Rantambe and Samanalawewa presently under construction ard hydropower projects under preparation. Based on the GDP growth projections prepared by the Bank for the Economic Restructuring Credit (Cr. 2128-CE) and the historical linkages between GDP and electricity consumptior, electricity sales are projected to grow at an, annual rate of 52 in 1990, 6Z in 199., 72 in 1992, and 7.82 thereafter. In this context, the project is expected to provide a steady level of net benefits throughout its economic life. 7.2 Under the Sixth Power Project financed by the Bank Group (Cr. 1048-CE), GOSL/CEB agreed to carry out a tariff study based on long-run marginal cost and to implement tariff adiustments to enable CEB to achieve a rate of return on revalued average net fixed assets of not less than 82. Tariff increases were introduced in 1982 (322). 1985 (75Z), 1988 (172) and 1990 (402). As a result, CEB met the rdte of return target during 1985-1988. In 1989, the rate of return was below 8Z, mainly due to depressed electricity sales. The tariff  5 study completed in 1981 was updated in 1984 and is now being updated under the IDA-financed Power Distribution and Transmission Project (Cr. 1933-CE). Given this record, it is expected that GOSL would continue to support CEB to meet its financial objective, CEB's financial performance during 1981-1989 is given in Annez 1. 8. Bank Performance 8.1 The main strengths of the Bank's performance were in assisting CEB to prepare the project in a timelv and efficient manner through engagement of foreign engineering consultants at an early stage. 9. Borrower's Performance 9.1 CEB's performance throughout the project cycle was satisfactory. To meet the comissioning date of the first unit at Victoria, the project was given top priority. An adequate numuer of counterpart staff were assigned to work with the foreign engineering consultants. In general, CEB's senior cmanagement responded very quickly to the implementation issues. CEB's initiative in formulating an emergency plan to vacate the power from Victoria station to the Colombo load center in 1984 was particularly commendable. 10. Project Relationship 10.1 The Bank's relationships with GO-L and CEB on the project were very good. 11. Consulting Services 11.1 The engineering consultants played an important role during project preparation, taking lead responsibility for project conceptual design and screening studies. During project implementation, the engineering consultants were responsible for the supervision of turnkey contracts and helped to ensure the quality of the project works and minimize implementation delays of the key project components. Except for the first contractor for the transmission lines, the performance of all other contractors and suppliers was satisfactory. 12. Ptoject Doct.unentation and Data 12.1 The ' gal documents for the project were adequate. The Staff Appraisal Report provided a useful framework to monitor pro,ect implementation. CEB's project cost accounting has improved since 1986 and is being strengther,ed. CEB provided relevant information for the preparation of the PCR.  -6- SRI LANKA SEVENTH (MAHAWELI TRANSMISSION) POWEP. PROJECI (CREDIT 1210-CE) PROvECT COMPLETION REPORT PART III: STATISTICAL DATA 1. Related Bank Loagis and/or Credis Loan/Credit Year of Title Purpose Approval Status Comnients LN 0101-CE To help finance the 25 MW expansion 1954 Completed Aberdeen-Laksaapana of the Lakeaapana hydroelectric sche ne LN 0209-CE To help finance co. istruction of a 25 MW Grandpass Thernal thcrmal plant at Kelanitissa. 1958 Completed LN 0283-CE Tu help finance a 25 MW expansion at 1961 Completed Norton Bridge Hydro. Kelanitissa. & Ti,ermal LN oe36-CE To help finance the 90 MW Maskeliyha 1969 Completed Fourth Power Project Oya Stage II project. CR 0372-CE For reinforcement and extension of CEE's 1973 Completed Fifth Power Project transmission and distribution systems. Cq 1048-DE To provide for further reinforcement 1980 Completed Sixth Power Project and Improvement of CEB's trsnsmission and distribution systems. LN 2187-CE 7o finance construction of 80 MW thermal 1982 Completed Eighth Power Project capacity at Sapugaskanda. CR 1736-CE For reinforcement and expansion of CEB's 1986 Undei implementation Ninth Power Project distribution systems. CR 1933-CE To help finance the rehabilitation and 1988 Under implementation Distribution & expansionb of about 130 local licensews' Transmission distribution systems to be taken over by CEB and reinforcement of CEB's transmission system.  -7- Power VII (CR 1210-CE) 2. Project Timetable Item Date Date Date Planned Revised Actual Identification 04/00/80 Preparation 10/00/80 Appraisal Mission 05/22/81 Loan/Credit Negotiations 11/16/81 Board Appi oval 02/23/82 Loan/Credit 04/08/82 Signature Loan/Credit 07/07/82 Effectiveness Loan/Credit Closing 05/31/85 05/31i86 03/31/87 03/31/88 03/31/88 Loan/Credit Completion 01/25/89  -8- Power VII (CR 1210-CE) 3. Credit Disbursements Bank Fiscal Estimated Actual Actual 4b of Year/Quarter CumIulative Cumuilative Estimated 1982 4 3.0 1983 1 5.0 0.969 18.6 2 8.0 1.705 21.6 3 11.0 2.336 22.0 4 18.0 6.440 30.6 1984 1 25.0 7.48a 29.7 2 33.0 7.845 24.1 3 33.0 10.555 32.5 4 34.0 12.708 37.4 1985 1 34.7 15.740 45.4 2 34.7 16.641 48.0 3 35.7 17.869 49.5 4 36.0 19.484 54.1 1986 1 20.704 57.5 2 22.037 61.2 3 22.827 63.4 4 23.748 66.0 1987 1 23.926 66.5 2 24.117 67.0 3 27.682 76.9 4 27.855 77.4 1988 1 27.868 77.4 2 28.328 78.7 3 28.U0 79.3 4 28.896 80.3 1989 1 30.188 83.9 2 32.313 89.8 3 33.320 92.6 Date of Final Disbursement 01/25/89  -9- 4. Project Implementation Date of Scheduled Planned Contract Contract Actual Project Components Completion Award Completion Competn Commentc Tranwmisujon Unes 04/84 O/82 04/34 08/86 Sub & Switching Stdions 04/84 11182 04134 03/86 Nol I Transformers 04/84 11/82 071/4 03/U Replacment of Circuit 12/83 08/84 12/U8 0317 Note 2 Breakers Installation of Reactive 04/84 O1l/8 08/87 031/8 Noes 3 Compensation Equipment Supply of Power Une Carrier, 04/84 09/83 01/86 Note 4 Telex & Protection Equipment; Supply & Installation of SCADA Equipment 1. including additional 33 kV works at Blyagama and Katunayake. 2. Including busbar protection added to the project scope. 3. due to civil disturbances, Installation of capacitors at Chunnakam and Trinoomalee was not undertaken. 4. installation of power line carrier, telex and protection equipment was completed by CEB staff.  -10- POWER VII (CR 1210-CE) 5 Project Costs and Financing A. Project Costs (USS million) --Appraisal Estimate ------- ----------Actual------------ Local Foreign Local Foreign Item Costs Costs Total Costs Costs Total Transmission Lines 6.370 19.851 26.221 4.349 19.217 23.566 Sub & Switching Station 1.427 4.702 6.129 1.094 6.496 7.590 Transformers 0.431 4.457 4.888 0.127 4.673 4.800 Circuit Breaker Rep. 0.520 2.945 3.465 0.102 3.223 3.325 Reactive Compensation 0.167 0.726 0.893 0.183 2.568 2.751 Power Line Carrier 1.100 1.100 0.026 2.140 2.166 Loss Reduction Program 0.541 0.541 1.082 0.215 0.035 0.250 Vehicles & Tools 0.022 0.216 0.238 0.018 2.918 2.936 Buildings 0.270 0.000 0.270 0.082 0.000 0.082 Consulting Servces & Traini g 0.261 1.546 1.807 0.072 3.487 3.559 CEB Supervision 0.541 0.000 0.541 0.15 0.000 0.150 Custom Duties 9.330 0.000 9.330 9.197 0.000 9.197 Total Base Costs 19.880 36.084 55.964 Physical Contingencies 1.854 3.400 5.254 Price Contingencies 7.791 7.353 15.144 Total Project Costs 29.525 46.837 76.362 15.615 44.757 60.372  -11- Pam Vil (Cm. 1210-CE) B. PPOJECT FIUIACIG (US$ miLLion) PLwd Credit S.aece Asreeent Final IDA Categories: (1) Equient, _terials & 31,46 29, 969 irstallation for the 220 kV & 132 kV syste (2) Other etqipent ,1.495 574 _terials, vehicles * service equipnt (3) Engineering & 1,495 2,342 conulting services C') TechnicaL assistance 495 435 and training (5) Unallocated 1.047 Subtotal 36,000 33,320 Cr. 104l-CE 960 OPEC Fund 11,000 10,531 CEB Contribution 29,362 15,615 Total 7636 60372 USSO.906 million equivalent disbrsed rder Cr. 1048CE.  Pwr Vi (CR 1210-CE 6. Proct Rewit A. Direct Berel B. Eoonomb I_ct Appralea Ecdmate at Appraisal Esimate at Indicators Etimate Ciodlna Dae Estima te Comdon Economic Rate of Retum 8.0% 3.4% Power Vacated fromr Mahawell Complex Average Tarif as a Proxy during 1984-1990 (GWh) 7.912 6.370 of Benefit Power Vacated fromn Combined TartiflConsumers' Mahl well CoMplex 1,700 1.900 Willingness to Pay. at Full Development (GWh) (1968) (1906) Stepped demand curve 10.4% 8.9% Concaved demand curve 13.86% 12.2% Addition of Consumere Straight-line demand curse 16.8% 15.3% during 1964-1969 167,500 250,000 Aseumptione I Timelice of Investment 1961-00 191112-42 Program Incremental Basis Yes Yes Exclusion of Dudes & Taxee Yes Yec Application of Standard Yes Yes Conversion Factor  Power VIl (CR 1210-CE) 7. Status of Covenants Section Sublect Stuc Remarks Credit Aareement 3.02 The Borrower shall ensure that: (a) the Board shall participate In the formu- In compliance lation of each Joint Scheme; (b) the Board shall participate In: the In compliance supervision and control of the design, construction and operation of the asets referred to In Section 3.02(d); and (d) transfer to the Board all assets relating In compliance to the generation, transmission or dis- tribution of electricity constructed in any Joint Scheme not later than at the coming Into operation of such assets. 3.03(a) The Borrower shall provide foreign exchange In compliance to enable CEB to maintain adequate inven- tories. 3.03(b) The Borrower shall take actions to enable In compliance CEB to impiment the agreed investment plan referred to in Section 3.06 of the P.A. 3.03(c) The Borrower shall take actions to enable In compliance CEB to implmenet tariff adjustments to achieve a minimum rate of return of 8%. 3.04 The Borrower shall ensure that each of the local authorities shall: (a) pay promptly its electricity dues to Not In full Collction of dues from CEB; and compliance ocal authorities In recent yeas reans a problem. The Borrower s taking acton to addres this Issue. (b) charge retail tarift sufficient to In complIance cover the cost of electricity purchase and its distribution costs.  Ptoil ctMr m*nt ~~~14- Prosect AareeMmet 3.03 CEB shalt furnish to IDA any propoaal for In compliance major changee in CEB a oqganizational aructure prior to impimeneting such propoalts 3.04 CEO shall imploment a #aff training pro- In compliance gram with a tImetable satisfactory to IDA. 3.05 In the evnt that electricial undertalings In compliance carried on by local authoritiee are to be transferred to CEB. CEB shall prepare and agree with IDA on a program for such trans- fer. 304(a) CEB shall by December 1982. furnish to In compliance IDA, a long-term power development plan for its review. 3 06(b) CEB rhatt, commencing by December 31. 1983, In compliance furnish to IDA for its review an annual up- date of the tong-term power development plan 3 O4(c) CEB shall implement the long-term, power In compliance development plan as agreed with the Borrower and IDA. 4.02 CEB shall furnish to IDA its unaudited In compliance annual accounts within four months from the end of each fiscal year and auditad accounts within ten months from the end ,f each such year. 4 03 Except as IDA shall otherwise agree. CEB In compliance shall maintain a long-term debt service coverage not less than 1 25 4 04(a) CEB shall before the stan of each fiscal In compliance year and adjust, if necessary, its tariffe to achieve an annual return on the current value of its net fisced assets in service of not les than 8%. 4 04(b) CEB shall not pay any dividend on the share In compliance capital ct the Board before CEB b self- financing capability reaches a level of not leos than 30%. 4.05 CEB shall ensure that total duee from con- Not in compliance. CEB is implementing measures to sumera for electricity supplied shall not bring the accounts receivable to exceed three months' billings, the covenanted level.  -15- 8. Use of Bank Resources A. Staff Inputs Stage of Project Cycle Planned Revised Final Through Appraisal 36.1 Appraisal through 13.2 Board Approval Board Approval through 5.0 Effectiveness Supervision 43.8 PCR 4.0 4.0 4.0 Total: 102.1  -16-. 3. U. of Bank Resources B. Mission Mod No of SW* In Special- Pertormance Tne of Stw Year Persons Field ization Ratlna Problems SUPERVISION 01/81 /a 1 1 FA N/A Delay in appointment of conwltants Technical uncertainties OI la 2 1 FA/PE N/A 10/32 la 2 1 FA/PE NA Procurement delays 03/W3 tb 1 0.5 PE 2/2 Procurement delays Disbursements behind schedule 07/13 1 1.5 PE 1/1 02o84 1 4 FA 2/1 10/84 4 3 FA(2), PE 2/2 EC (Cons) 07/U5 3 3 EE/PE/FA 2/1 Contractor performance unacceptable 12/85 1 1 2 Civil disturbances Procurement/contract delays ou3e 2 1 EE/FA 2 iO/8 3 2 EE/FA 2 Delay in installation of compensation equipment 10/87 3 2 Management weakness oV90 3 2 PEiFA (Cons) 2 /a Wlth supervision of Power a /b With supervision of Power a and a  Sri Lanka Seventh (Nahawali Transmission) Power tCr.1210-CE) Project Completion Report CEB-Income Statements 1981-1989 (SL Rs million) 1981 1982 1983 1984 1985 1966 1967 1968 1989 Energy Generatlon(GWh) 1872 2066 2114 2261 2464 2653 2701 2799 2857 System Loss(X) 20 19 15 17 16 16 16 15 18 Energy Sales(GUh) 1503 1679 1792 1877 2061 2232 2258 2370 2339 Sales Growth(C) 8.0 11.7 6.7 4.7 9.8 8.3 1.2 5.0 -1.3 Tariff Increase(%) Average Tariff(Rs/KWh) 0.59 0.77 0.84 0.78 1.36 1.48 1.47 1.68 1.67 Operating Revenue Electricity Sales 881 1302 1514 1464 2807 3306 3319 3985 3915 Fuel Surcharge 758 1140 2507 566 114 17 1259 268 65 Other Operating Revenues 224 146 117 166 141 131 Interest Earnings 169 366 364 229 275 Total Operating Revenue 1639 2442 4021 2254 3236 3806 5108 4623 4386 Operating ExpensesI . H~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- Fuel Cost 560 971 2311 489 111 17 1223 229 60 Operation 4 MaIntenane 132 167 207 288 341 481 528 724 942 Turnover Tax 31 51 46 20 88 116 137 128 119 Administration 101 110 255 187 172 166 24 345 409 Depreciation 256 329 371 460 641 922 802 1038 1308 Total Operating Expenses 1081 1628 3190 1444 1353 1702 2934 2464 2838 Operating Income 558 814 831 810 1683 2104 2174 2159 1547.9 Less: Interest Charged Operations 63 95 108 321 409 515 813 979 640.1 Expenditure Of Feasi. Studies 7 40 108 45 Not Income Before Tax 495 719 723 482 1434 1589 1253 1135 907.8 Income Tax 282 438 46 169 360 Not Income 495 437 285 436 1265 1229 1253 1135 907.8 s.. .. z.zz Zs... W s ... Zu= Usss. urns.. u... us.. OQ Return On Net Fixed AssetsCM) 11.4 8.7 5.6 7.4 10.7 8.6 9.4 7.9 5.1 c  Sri Lanka Seventh (Mahawali Transmission) Power (Cr.1210-CE) Project Completion Report CEB-Balance Sheets 1981-1989 (as of December 31, SLRs million) Assets ------ 1981 1982 1983 1984 1985 1986 1987 1988 1989 Fixed Assets ----- ----- ----- ----- ----- ---- Gross Fixed Assets In Use 8641 11006 12978 19722 27276 30901 35884 43221 49028 Less Ctu. Depreciation 2557 3310 3947 5009 6306 7248 8789 11368 13789 Net Fixed Assets 6085 7696 9032 14713 20970 23653 27095 31853 35239 ConstructVin In Progress 812 1033 1790 2462 1800 2872 4996 9534 15030 Investment In Subsidiaries 8 8 8 13 83 194 219 295 324 Insurance Escrow Account 105 148 182 188 Current Assets Cash 62 159 -3 777 2444 3870 2657 1397 841 Inventories 717 776 1045 822 922 1001 1178 165' 2183 Accounts Receivable 507 1317 1545 1604 1169 916 1093 1678 1498 Other Receivables 578 576 1319 346 452 360 2483 3435 2581 Total Current Assets 1864 2828 3906 3549 4987 6147 7411 8161 7103 Total Assets 8769 11565 14736 20737 27840 32971 39869 50025 57884 Equity Goverruent Equity 732 969 1065 2498 7035 7251 7333 8037 8047 Consumer Contribution 468 753 1400 1521 1776 1980 2125 2285 3080 Reva(uation SurpLus 3900 5067 5871 7352 8931 8249 10778 15641 18843 Retained Earnings 1563 1999 2814 3687 4033 5262 6473 7623 8512 Total Equity 6664 878 11150 15058 217m 22742 26709 33586 38482 Long Term Debt 1453 1539 2259 4820 4909 8537 10835 13636 16617 Current Liabilities 653 1237 1327 859 1156 1692 2325 2803 2785 F -----~ ~ --- --- --- - ---- -- - -- -- - -- -- - -- -- - -- 0,0 i Total Equity And Liabilities 8769 11564 14736 20737 27840 32971 39869 50025 57884 X1T1 ===S= =-zt == == =s 5S 5=X=z: X=*=m ttSt Current Ratio 2.9 2.3 2.9 4.1 4.3 3.6 3.2 2.9 2.6 0 Long Ter Debt 18 15 17 24 18 27 29 29 30 /Equity 82 85 83 76 82 73 71 71 70 I  Sri Lanka Seventh (MahawaLi Transmission) Power (Cr.1210-CE) Project CompIetion Report CEO-Funds Ftows Statements 1981-1988 ( in SLRs million) Sources 1981 1982 1983 1984 1985 1986 1987 1988 Net Income 495 437 285 436 1265 1229 1216 1175 Depre. ration 256 329 371 460 641 922 802 1038 Irn .rnrL Cash Generation 751 766 656 896 1906 2151 2018 2213 Goverrunent Equity 55 238 95 1434 4537 216 81 704 Consumer Contribution 121 285 647 121 255 204 145 159 Loan 292 161 1371 2948 433 4033 2693 3165 Total Sources 1219 1450 2769 5399 7131 6604 4937 6241 Applications Construction Program 941 982 1660 5133 4659 5359 4119 5470 Investment In Subsidiaries 70 111 25 76 Debt Repayment 97 86 120 155 344 405 396 364 Deposit To Escrow Account 105 42 34 Change In Reserve 917 4 24 Increase In Working Capital Cash Increase -159 98 -162 780 1667 1426 -1493 -1260 Other Than Cash Increase 340 284 1151 -669 -526 -802 1844 1533 Total Applications 1219 1450 2769 5399 7131 6604 4937 6241 1d